Q4 2019 Earnings Call
Ladies and gentleman, you're currently standing by for the optimize Rx Corporation fourth quarter and full year 2019 conference call. At this time, you're still with many additional participant standpoint it'd be underway. Shortly we do appreciate your patience and reach me on the line.
[music].
Good afternoon, everyone and thank you for joining us today to discuss optimize Rx Corporation's fourth quarter and your ended December 31st 2019.
With us today or the company's Chief Executive Officer, Williams said, though the president very apparent Lord <unk>, Chief Financial Officer, Doug Baker, Our Chief Commercial officer, Steven So that's true following their remarks today, we'll open the call. The questions. Then before we conclude today's call. All provides important cautions regarding forward looking statements made by manner.
During the call I'd like to remind everyone that today's call is being recorded and will be made available for a telephone replay the instructions in today's press release any investor section of the company's website now I'd like to turn the call over to optimize our ex cel William said about please go ahead.
Thank you Christian good afternoon, everyone. Thanks for joining us on the call today.
We're going to tell you we are widely our Korean group company you do some context the back that up.
And of course, we keep talking like gene optimize Rx continued to evolve into a leading digital platform.
Hey, billing affordability and adherence to all the P. players and helps true.
Patients providers pharmaceutical manufacturers.
Hospitals and no payers.
Become important their clients digital communication with physicians and patients helping deliver relevant information.
The point of care clinical decisions are being made.
We get meaningful study should reach over the years, some measure which should be.
Rating or platform into the leading DHR Easter structures.
Early we've invested in our partners I believe nations created a meaningful buried entry.
Well, there's an opinion entered this change.
We've also become deeply entrenched with Arclight years, you work can be top 20 pharmaceutical companies.
The other clients all of which had multiple solid businesses in need of our services.
Given the Trustmark line tragic loss, you're starting to shift more recurring revenue model enterprise engagements are true such contracts.
Also exclude one of the fastest growing segments in health technology.
It's care communications.
Well, there's a tremendous client demand for greater connectivity, which is effective transparent measurable.
Lastly, our addressable market is much loved your teenage years.
With this expansion given by our ability to land and expand it each quarter.
They should also coupled with our new patient engagement services now that they multibillion dollar addressable market.
As you saw from our press release issued earlier today, even turned to gross in the quarter. Following the stuff that we experienced in Q3.
The major clients undergoing the merger.
While we still generated double digit growth for the quarter and year. He was below our original expectations.
We believe we're now pass this type of disruption.
Given the much greater diversification of our client base and revenue stream student innovative products.
<unk>.
You also continues like sticks that some of the estimated 3 million in loss revenue coming into 2020.
Layering on top.
Already strong growth trajectory.
Like segment in 2020 is also based on having better visibility and confidence in the future important areas.
Laser focus on becoming the preferred digital health partner with our clients.
Focusing on the hundreds of millions of dollars in short term revenue opportunities.
Listing solution so.
The do this by closing enterprise deals.
Pending practically into the white space around our current clients Eagle get into this.
We continue to be a meaningful shares of innovation than revenue with our partners, that's helping them develop additional solutions to our collective stakeholders.
We're getting great.
Things for Martin you sounded innovation lab as Walsh's some key partnerships to extend our reach with important scare.
Myriad will get themselves.
Later.
Now live into digital age so we strive to be the best digital.
Class platform.
We won't be work, but then you have scalable and secure technology to support and projected growth.
So in the doctors and patients are working together to salt health issues you can be there.
Oh, it's appropriate time and place to help that discretion.
We expect to keep benefit of this focused a little bit more predictable recurring revenue stream deeper relationships with our clients molten lead people to innovate with our partners in a way to keep US ahead of changes good opportunities in the market.
Our platform is designed to address the emerging trends in our industry, particularly reach further close communication.
Between pharma payers physicians and patients.
It wasn't just gap has become increasingly important.
Especially with the way the new specialty medications coming onto the market as well as the increasing value being placed on the patients.
Consumer himself wanting transparency choice and tools to manage their health.
Along with it becomes better outcomes for patients lower cost for payers like for pharma more engaged doctors and patients.
Rocky Michael that's all integrated platform approach allows us to adjust it needs a much larger potential enterprise clients and expand within existing cars.
Just become evident.
The grossed up our average deal size, which increased from around 130000 any team to more than 300000 coming into 202 2020.
These deals increasingly include recurring SaaS revenue streams and stickier enterprise engagements.
For now I'd like to hand, the call over the dog different God the financial details in the quarter in here, Steve will then give us a view into our pipelines and the client segments, followed by Miriam Lumpiness in our product innovation and technology products.
Afterwards, I'll return to wrap up.
Two questions.
Actual and good afternoon, everyone.
Earlier today, we issued a press release with results of our fourth quarter and full year ended December 31, 2019 copies are available for viewing and maybe you don't want it from the Investor Relations section of our web site.
Went to trial or cenci with a complete financial results by mid March.
Fourth quarter of 2019, or total revenue increased 12% to 7.4 million.
For the full year increased 16% to 24.6, Mike.
Gross margin for the year was 62.8%, which was up from 57.6% in 2018.
Improvement was due to favorable shifting product mix, including the full year effect of the care speak acquisition, which group, which occurred in the fourth quarter 2018, as well as from a remedy acquisition completed in the fourth quarter 2019.
We expect to continued to maintain gross margins of at least 60, plus 2%, but a quarterly basis in 2020.
Operating expenses totaled 19.1 billion for 2019.
From 12 million in the previous year. This increase was due to additional expenses related to our Gulf initiatives, including our acquisition of remedy itself in October and before your pure speak as well as new players within the last year to help drive growth.
2020.
For the near a bottom line in 2019 that I get basis was a net loss of 3.1 billion or 23 cents per share.
This compares to net income of 225000 or two cents per share in 2018.
Well, we expect to remain cash flow positive return to profitability isn't really the girls, sometimes expenses related to investments and growth initiatives or non cash charges could result in a GAAP loss in any given quarter.
Starting in the fourth quarter of 2018, you began reporting to non-GAAP financial measures non-GAAP net income or loss and the non-GAAP earnings per share or E. B S.
The use of these measures can be helpful and assessing the Companys financial performance.
In the fourth quarter 2019, or non-GAAP net loss was three cents for sure. This compares to not yet net income 11 cents per diluted share. The same your goal quarter sort of full year. Our non-GAAP net loss was zero for share compared to net income of 51 cents per diluted share the same your goal period.
For additional information about our use of these not yet measures and the reconciliation to GAAP. Please see the related section in today's press release.
Turning to our balance sheet cash and cash equivalents totaled 18.9 million at December 31st. This compares with 29.8 billion at the end of September the decrease was primarily related to our acquisition of somebody else during the quarter.
They've continued to operate get free we expect our net income or loss adjusted for non cash expenses reason of us any of your breakeven or higher a coordinated basis for the foreseeable future. So we do not anticipate needing to raise additional capital in the short or long term for operating purposes or to fund growth plans.
From a very clean simple capital structure void of any warrants or any other structured elements.
We remain focused on growing our revenue general partner network as well as he said you know product portfolio.
Our recent company in a market. This active with M&A activity, we may have opportunities such as requisitions for strategic partnerships that may require additional capital.
We'll assess these opportunities actually rise, but always with a view of maximizing shareholder value.
Yes, that's a discussion of our financial results and now I'd like to turn the call over to Steve.
Thanks, Doug Good afternoon, all looking first at the numbers, we were happy to see growth of the journey in Q4, driven largely by some of our messaging solutions and patient engagement revenues as discussed earlier, we had a $3 million push from 2019, 2020, which limited our topline growth.
This quite merger and concentration issue behind us and with the strong pipeline coming into your we feel great about our outlook for 2020.
Our aggregate pipelines, which is comprised of outstanding RFP submitted at the end of 2019 coming into two important.
Showed sustained expansion into the first quarter.
As we've shared the Josh you historically achieved 35% to 50% for your close rate. All these RFP, Japan, we're feeling very good coming very good about where we sit topics from Q1.
In addition to the continued pipeline goes we've already close to multi million dollar bill probably deals and have several more in contract negotiations regarding enterprise deals I believe.
Talking about conversion rate, if not above and do have more to share in coming months. This is a significant support for our business as it transforms our agreed with model from the tactical option nice to have products for brands to reach the teachers salt partner, we must have solution.
This transformation also creates a token base of recurring revenue for the business at a time when our competition continues to struggle with repeat business and product Commoditization.
He's enterprise deals for the represent the company's ability to intervene Lynch <unk> solutions to market the Todd value to our platform approach, which Miriam will discuss later during our call.
Our commercial organization continues to come together nicely such that we're able to address increasing demands of our core customers within pharma industry and service or new client segment, just payers med Tech and medical institutions. We have made sizable investments starting this year and they'll have 10 full time salespeople with quotas ranging from $10 million.
That's what we have several frontline generals will also driving sales.
You get our team the machine several with your ability to exceed their food from twin goals.
Our focus continues to delivering solutions at the point of care to empower health care providers with the tools necessary to care for patients and ensure best plausible outcomes. According to market Research company circles, where you each RB solutions, our best position to capitalize on provider energy given your connection to.
Be workflow.
This regard optimizer action is well positioned with its unique ability to reach and educate physicians at the point of care. So they can have more informed conversations with their patients about treatment options.
Every patient presents a challenge and optimizer ex husband tools and solutions.
To help our pharma customers and the physicians that are network to navigate complexities.
Our integrated platform approach further allows us to address the needs of the much larger group of manufacturers. So far we have identified 29 manufacturers, who wants to do exactly default platform solution many of them of existing customers purchased one or more tactical solutions them optimizer that's.
Previously touched on our progress against those efforts, but it is worth highlighting the benefits of this integrated solution had begun to fuel the growth of our aggregate pipeline as will mentioned, including an increase of our average deal size from $130000 in 2018 to a much more robust size. It's 300000.
2019 coming into 2020.
To be clear each manufacturer has anywhere between 10 to 20 lies brands in the market.
Each of those brands Optblue <unk> business. So when we say because identified 20 documents options you're them looking at multiple brands within each manufacturer, where our solution set provides value.
This equates to the hundreds of millions of dollars in white space will mentioned earlier in the call.
Following our recent acquisition of remedy we reorganized our patient engagement jeans and centralized leadership. We've also created to sales teams focused on pharma and payers. The secondly, we see growth in demand for the body care management platform across a wide range of payer.
Ranging from but if you it's too specific condition care management across wellness and prevention.
[noise] to be clear user Sox contracts, which will also help our recurring revenue priority.
A couple of notable highlights in Q4, we lost a digital hospice care management solution for the pair emblemhealth.
We're also thrilled to learn that our client better health. This feature as one of two successful body control programs that she'll be California.
These and other recent wins you from our confidence in our diversification strategy.
Let's move forward, we're seeing a broader appeal for our patient engagement solution.
Based on an Android market Research study published in Q4 2019, the digital transformation in health care market, well hit $210 billion by 2020 Foss.
Our SaaS solutions were designed to capitalize on such a transformation across a wide range <unk> stakeholders, and we're investing and building our patient engagement team well poised to play a significant role in this historic market transformation.
RP shouldn't use in type one shows fantastic promise and we anticipate having more exciting news to share with you later this year the body patient engagement.
I'd now like to turn the time over the Morgan.
Okay.
Thank you speed hi, everyone I'd like to address two areas today quickly first I want to share three new product innovation and second I'll talk about our continued focus on technical excellence.
Typically the evolution of our unified a dozen U.S. cloud platform Amazon Web services.
So first of all our product innovation update but personally product and solution that we have is referred to as hub enrollment.
Last quarter, we announced the formation of the optimize Iraq innovation lab, which we created to accelerate innovation between life Sciences and the optimize our at Chr Network. You saw recent press release regarding our first new offering from these efforts the hub enrollment form solution.
We completed the technical development work in January and we plan to watch with major manufacturers in Q2.
Solution to help solve the problem.
That's a specialty drugs and enhance the speed to therapy. It does so by ensuring that electronic prescription that must be filled by specialty pharmacies are appropriately directed there instead of being sent to retail pharmacy or they will be rejected it's an important step toward we're moving.
The complexity and friction of specialty medication for patients and providers.
The second product innovation I want to share is around oncology.
Happy to share that we're collaborating a number of health I T companies to illustrate how technical interoperability, it's possible today and specifically how supports the journey of an oncology patients are in multiple care setting procedures and medication.
As part of the interoperability showcased at the helm annual conference in Orlando next month or 45000 people are expected to attend.
Demonstrate how optimize our at integrate with a major oncology E H R.
Well show, our real time integration, but the winners clinically relevant messages from pharma to the HCP, while the patients being treated by clearly demonstrating value to the oncology sector. We hope to further grow our oncology provider reach.
The third innovation is around artificial intelligence.
Our remedy patient engagement and care management solution. It's staying ahead of the car I really think high powered Cieslok features this quarter our customers have asked for a more efficient tech savvy way for health coaches and patient to communicate but then they yeah.
We're excited to announce this new proactive chat bots feature which is our artificial.
Intelligence or AI.
Remedy looks at the patient data and usage pattern and proactively provocation to take action that will increase their health.
By using the chat bots patients have a quick and easy user experience and at the same time that health coaches working to call Center RF, our access lie only when such a phone call. It's helpful.
Now I'll turn to my second topic, which is technical excellence and optimize our at.
We have a world class technical team.
Our unified platform of solutions was on the Amazon Web services for a ws cloud.
We are well I trust GDPR and TCPA compliance.
If you're not familiar with this alphabet soup that means that we take privacy and security very seriously why we innovate and evolve our solutions in the cloud.
At the same time that we grow our solution set and create new products. We are continually improving the excellent of our technology infrastructure.
It's not we successfully completed the conversion of the care speak product line to the optimize our at a w. as well.
It has yielded significant cost savings and better and faster performance across all metrics.
I have already started the migration of the remedy product line to argue that thought I guess, you as well and expect them where performance results.
By continuing to listen to our customer focus on product innovation and ensure technical excellence, we will drive new revenues and stay ahead of our competition.
Now I'd like to turn the call back over to will.
Thanks, Marion Thanks, Steve.
I had to stand up to listen to that is a lotta.
Really positive energy team did a lot of work in 19 to set us up for what I think will be a very strong gross run over the next few years.
As you look ahead, though it's clear that we're addressing a large market with a significant opportunity.
And as you heard from Stephen mirroring our digital platform addresses all the pain points to those involved like we said the patient provider payers pharma.
And and it has the potential to use the yard to drive revenue.
More efficient communications that is just very cool and very relevant and very monetizable.
Without calling solution set will not only better able to address or existing dr. messaging market.
Now all sub markets and patient engagement digital therapeutics and care management, all of which we will work towards through the year, but ultimately they extend our addressable market.
A lot of room for growth this year, and we continue to attract and would change the most capable team to do it.
I do want to mention that while we are all very concerned about the core.
Corona virus and its impact on People's lives businesses.
I want to assure everyone because we do not see any disruption come this in terms of the supply of our clients products to the market and nearly all are manufactured in U.S.. However, like all companies were very aware of how the should be disruptive People's lives.
And we're paying attention and hoping contained in the sports content.
So in summary, we continue to enjoy tremendous market opportunity with increased addressable and accessible market. We're also seeing better client penetration aside from the increase in various people clients, we expect or enterprise engagements to build greater reliance interest we're focused.
Repositioned between all the stakeholders, so far most physicians patients and payers to be highly relevant.
<unk> platform also now supports multiple revenue streams, while delivering greater affordability adherence and care management.
We remain focused on driving revenue growth from our core solutions expanding our network.
You can solid M&A in partnership opportunities as long as they drive revenue.
We expect the results from these athletes to support the continued adoption of our health platform across our entire appliances <unk> 2020.
Yes. This resulted in another year of tremendous gross and market expansion.
I have to say see now what is happening with expanded commercial to the new solutions, we announced last year and most recently with her husband role, but I'm very excited about her business in the value we can create correctly this year.
Now with that let's open up to questions operator.
Thank you if he would like to ask your question. Please signal by pressing star and the <unk> number one on your telephone keypad, if you're using its speakerphone. Please make sure getting function is turned off the like your signal to reach our equipment again press star one to ask a question.
And it looks like first we will go to Ryan Daniels from William Blair. Your line is open.
Thanks, a lot for taking my questions, we'll just a recurrence.
50% sequential sales onto that would you attribute it to strengthen the core business.
Some catch up.
Washington.
Americans.
The.
As we said back then we knew that.
The loss revenue would really be more into 2020, so I would say it was a sum on some of our newer solutions had a nice up tick in Q4.
And and patient engagement as well.
Okay.
[noise] tremendous 20 Twond.
Let me frame work on that or talk a little bit more involved.
Cadence.
What we might see sequentially as well.
Sure.
Maybe.
Kind of ROE.
Just to give us.
No.
Yes so.
Obviously at this stage, we're not giving guidance and.
We have there is a cadence to our year, though in terms into the way. The clients then we're not fully up to speed on the recurring revenue path. We're heading there. So we'll be smoother generally Q1 starts are pretty well and so Q2 does better.
Q3 has some incremental gross adds in Q4 is generally that's the biggest quarter I take this year, we'll see a little bit better start mainly because it's a setback second half and coming back and into 2020. So.
I I wouldn't I don't want to get percentages Blessed I think when I look at.
The consensus out there I feel like our job is to beat that and I feel like weekend.
[noise] strategic.
Given our size.
[noise] anymore.
It's important.
Leader with your partners.
Yes.
Hello.
That was.
Yeah.
Yeah, I'll start and then Mary maybe you could kick in as well.
Yeah.
If you think about.
The chart there today in the life of those companies and suddenly servicing hospital systems or physicians and keeping up to date on all the regulations and you know it's a pretty intense situation. So they don't have a lot of time just think about these other strategic.
Revenue opportunities that are actually affected for doctors and patients and so.
Innovation lab is tremendous because we can take cases that have been successful with other partners.
And share them and show how we can enable a hub enrollment for a partner who may not be thinking about it right now I'm going to check the not even sure.
How they would do it but yet we had that technology into the integration. So ultimately it allows us to have business relationships, where we're helping them dropped their businesses.
And I just I know that's up the Marianne much I was a great idea and.
It's off to a strong start from there and do you want to add to that.
Yeah. So thank you Ryan that's in a really good question. So it allows us to give a fast acceleration sandbach two things that pharma is ready for that each arc may not yet be unable to work.
They're doing we announced that crosses our first participant in the innovation lab and other RPH Arthur coming on.
This year because they are looking for growth you know, it's a flat market. It's a replacement market isn't your chart world and that's sort of a baseline set of solutions. So they need.
The decision support or other patient affordability patient adherence solutions and then they're trying to build out patient engagement patient attraction solutions for their their existing customer base and that they have layered on revenue.
So this innovation lab gives us a defined say it looks likes to say, we believe there's a revenue opportunity news service line available, let's do a proof of concept and and then proof of value in the market quickly with the find a pharma brands, where we already had begun.
Sales in place at least they were going to partner on there so get that solution out quickly and then once we've done that they don't really care and you know scale. It across other DHR partners. The lab environment gives us a chance to do you know me product line, a with a certain lab partner innovation partner and let me.
Product line be with another innovation partner that they have different strength so ex that.
Great. Thank you.
Oh I'm sorry.
Yes.
Thanks.
Thank you.
[noise] and against Star one if he'd like to ask a question next we'll take Andrew Dsilva from B. Riley FBR.
Yeah, good afternoon, and thanks for taking my questions to Us I just have a you really quick ones and also just glad to see that the minister sequentially. We bounce off a Q3, so they get to start off as it relates to be.
<unk> business can you give a little bit color of what percent of your because.
No shipped so do you have currently would be a reasonable portion that we should get year world transition a cat enterprise solution, but by the end of the a and then on average just how should we think about gross margins.
For enterprise deal should be fairly similar to what.
Margins have been historically.
Hey, Andy its will yeah. So to your second question you had gross margin should be similar.
And Doug gave it sort of an annual number we're looking at around 62%. So.
Made great progress last year on that and we want to keep it.
And the way that gets better is mainly a patient engagement scale faster right because there's less cost.
Sales against that revenue, but in terms of you know breaking out percentages on percentages I tend to want to avoid that I mean, we gave you gave a little bit of a view [laughter] last year, we said we had.
80 million and pipeline close rate is 35 to 50.
Enterprise was about 20 million of it and and so and we're saying we're on the top side of our conversion. So you can kind of draw. The mouse. It's this is our first year going into it so.
It's not going to be the dominant share of our revenue, but it'll be a solid piece and it really sets us up for going after a lot more for 21.
No that was actually useful color and and I just want to make sure I'm thinking about the business correctly going forward, but when you see very focused on how.
Advanced or how how how long worried and integration with large hospital, you drugs like Cerner and epic a and particularly after you started that partnerships like them on the medical should we still think about that being a driver or how would you see how do you think street really should think about some your legacy channel partnerships as a business continues to evolve.
Okay.
Well you know as we've talked about before most of the activity prescription activity. The majority is in the ambulatory setting so that will always be our driver, but we're really looking to scale. This business and if you don't have a hospital system strategy and beginnings of conductivity than you know.
You can't really be in the space. So we.
We made some progress last year, so through partnerships and we're making more progress already this year.
It's not going to be the accelerator of growth this year, but it would be a piece of.
What we have it's it's baked into several the enterprise deals and also some of the tactical deal. So.
Remember when you when you open up a new channel for pharma. They also want to test it right. So if it's a new hospital system that they haven't communicated to the patients discharge and getting some information that they want to see if they want to measure and know how to do all that and we're in the process of it so.
So I wouldn't view it as the key driver, but it's definitely PC deposits that we need to help.
Okay.
And then.
Last question.
More philosophical question and eight yourself.
Looking back at the company's history, Yeah, the business really began to break out and show strong growth color around a 2016 timeframe.
Looking back at it around the same time, there was a significant change or in the way. We're investing in it appeared that really helped drive that <unk> that stops for the <unk> King and all 19, you've been investing heavily again.
Fair to assume that we should see a similar breakout or section or with the more recent investments and then the publishing.
The last thing stuff, but.
Yeah, Andy It's really you know some you get perspective, yeah. In 16, we had 10 people and well run 5 million revenue, but we had cash we're lucky.
I'm going to the board said lets spend we did and we sell 17 grow 45%, making your 75% Yeah I really view 19 doesn't another investment here again, we had cash we made some acquisitions we against the team.
And I believe we've set ourselves up for very good growth in 20 and 21.
I'm not going to commit to a few though those big percentages on the phone, but it is absolutely a set up to be a breakout year and very similar dynamic we went to the board and said look we can we can have some bps and.
But we're still early and there's so much to get and we really need to team in place to get to it.
And do not Boyd said, let's go out we can do we were very good managing cash. So I think we've built a lot of credibility.
I guess comments from investors you know, even after Q3, but I'm sure all get them now you know look your question is huge while we bought two companies and we're not going to burn much cash operationally and we're setting ourselves up to grow so a year from now which we haven't grown the were wrong, but I believe strongly we will be.
Right.
Thanks to this question.
Good.
Okay. Thank you very much a best of luck funds lightly.
Thanks.
And again, if you like ask your question. Please press Star One next well go to Eric Martinuzzi from Lake Street. Your line is open.
You talked about the topline growth in Q4 and the full year.
Largely by your messaging solutions. So you know such as a patient engagement. So I'm wondering if the counter to that is maybe the financial messaging wasn't where we thought it would be maybe it was flat.
Just wondering.
Is that sort of.
Upside down logic appropriate way to characterize the financial messaging.
Secondly, just there.
Assuming that it.
Maybe not growing as much as it used to visit the demand side issue, it's a competitive landscapes issue.
And that.
Yeah, I'll start and then and then Steve maybe you can kick in on the.
You know the whole idea behind getting are causing how that protects all our solutions but.
So that the customer merger concentration issue that was predominantly in the in the financial message things sites. So that one in particular took it took a hit but Ah that's about all the other solutions grew quite a bit.
Patient engagement, obviously still small piece of our business, even though it's something versus nothing last year, we don't break all those out but I would say that was the setback.
Because it was dominant in that one solution and dominant in that one client.
And you know the whole idea of moving to enterprise is to bundle. These services together not only because they work better together from a return on investment because but because it's more of a holistic offering to the clients up and see if maybe you want to itself.
Yeah, Thanks, well [noise], Eric I think what we see is.
Well the financial messaging has several players that are competing against that's when we bring the solution set together as a whole we don't truly have direct competitors. It is capable of bringing all of that value Claudia the line directly with the patient journey in the same way that would so that's that's a portion of our value proposition there has been.
We'll move mentioned today is what we discovered as we brought the solution set together when we looked at the mathematical models of sort of the interdependency between the solution. So.
Do is X the mentioned the turn from connecting all of those pieces, so going back to millions comments around Wides innovation lab is important why did you start to connect different pieces of the puzzle and the patient journey together.
Mm interdependency between those puzzle pieces creates a positive.
Exponentially positive impact on the ROI and the fact of the outcomes for the patients. So hopefully that answers. The question is strategically that's why we've done that way I'm, just so happens but the.
ROI is also really aligned with what our initial vision was we weren't sure that was going to be the kids incident, we didnt started pushing that way we've been pleasantly surprised.
Okay, and then you talked a little bit about I guess questions for you Steve.
The.
I got on the White space revenue opportunities can you explain that then secondly, you have the sales force that you need to execute that push.
Yeah, I mean, it's it's fairly simple, we think about Eric or or revenue opportunity in terms of the checkerboard something not literally get back all of our crop our customers are clients across one next season across the whole axis is really all of the individual solutions that make up our solution. So.
Cousin, largely been a tactical boost business over the news we've got lot of white space moving a lot of clients who are buying won two tactical solutions when the business, but now with a complete solution set.
There was a significant opportunity to go and settling all of those white spaces for up sell those clients that are already happened existing.
Clients. So they've already said yesterday optimizer exclusion, we've been happy with the solution to the mood that they've been doing now there's an opportunity to introduce them to added solutions and that provides a robust opportunity I've been for like come into the year.
Okay, and then the sales force to pursue.
Salesforce to pursue it you heard me say, we've got 10 full time salaries with quotas between three and 5 million. So I believe we have got like sales team well also just echo the folks that we put all the team are tremendously talented.
Knowledge of health care knowledge of the stays wonderful Contactors and I've, just said prove themselves and that deliver great values.
Really positive confidence in this group that we've assembled at this point.
Thanks for taking my question.
Got it ends or.
And again I want to ask a question next we'll go to Richard Baldry from Roth Capital. Your line is open.
Thanks.
It does any of the for Q.
Thanks and revenue.
Non repeatable for fourth quarter budget, Flushing, I'm, referring to give us a feel for how tough the sequential comparison is for Q1.
HM there was a little bit it wasn't.
Wasn't that much I think we'll have.
You know, we what we did as we looked at where we were what we had.
I'm really focused to clients on.
These are the ones with enterprise deals have been focus on.
2020, and really getting them most of their dollars, but no. There there wasn't as big a pop there there wasn't anything systemically wrong, just didnt see as much.
And.
Yep.
Answers your question.
Okay, and how how do you view.
Hi, dealers ramping or think about you know when you sign.
Farm at a yearlong deal they start up.
The little phone Q1 kind of run study three year will this be different because they'll be for layering on different products and different.
On the et cetera, or the year period or.
Is there a big name because they can turn things on a relatively rapidly or.
Yeah, well be at spectrum.
Yeah, it's pretty unique and making them steep soft or we live in for sure but.
There are some that are very simple and you don't just gets turned on after a kick off.
And there are others to take a little bit of.
Coordination of content based on the type of message and how it's being delivered.
Particularly on the patient gauging size, but that takes a little bit more time to get to the user.
In terms of messaging with and point of care. That's it's much faster. So I don't Steve do you want to add any more of the ball.
Yeah. Thanks for the question, which I think he.
You know your questions around how quickly will see impact deals going right and so part of it anyway. So you know what the what the model bones transpose or.
Revenue recognition model away from a transaction base.
Model over to more of a subscription based model, which is going to SaaS platform and so if you envision revenue in terms of the SAS based recurring revenue model pretty close to movie transactional business model, where distributions you impressions are driving revenue recognition got probably helps.
But as well so each of these enterprise deals will operate up himself with a joint application design session, where we'll have a proper session sit with our customer.
Sure. The two correctly, we'll get a business requirements document is having a normal sauce business process and the launch would take place from there.
On the patient engagement side. There are a lot there are few more boxes to check because of the moochers engaging directly with the patient as opposed to do in each our system.
I think it would be enough positive impact on revenue.
In terms of scalability given.
GAAP.
County.
Almost two X. I will say in the last one for some acquisition things put in.
How much do you think that that sort of hold steady at the current levels are absorbed or anything else sort of throughout the year. If you keep winning the enterprise deals.
Building on top of that can make sure that you don't.
Find yourself capacity constrained in anyway I made the same question rider.
The back office side and also on the quota side.
Like.
2020%, starting it on that side. Thanks.
Yes, sure rich. Thanks, So we're going to be pretty we actually think well. We know we have a commercial team to do what we want to do this year.
On the operational side certainly in core messaging, we have that team when it comes to patient engagement, there's a little bit more people needed and we got you want that especially if it's connected to enterprise. So.
We feel like we've got the space, we need and I'm really going to focus on leveraging its really a very similar like like India task.
Very similar to 16 to 17, we went from 10 to 22.
People and.
Made a lot a critical investments and and that'll paid off we expect that can happen again here in 2020.
Thanks.
Yeah. Thanks rich.
And next well go to Josh Goldberg from GE to your line is open.
Hey, guys.
Hey, Josh.
Just had a few questions a couple of for oil and then one for Steve that's okay, well I guess first you know, obviously R&D RV why health.
Acquisition do you guys made during the last year.
Any sense of how much he was either accretive or dilutive or the on the year, what kind of revenue do you expect it to be next year, I know, you're not going to break out the results and whats getting your initial kind of sense and how it's integrated with pure with your business.
Yeah sure. So you know it's it's interesting we you came in after we did so diversified our solution set but when we started we had you're basically a products not a company we had a financial messaging, which is co pay and the workflow.
And.
We invested down brought a new things and we really had to break out of that you know one pharmacies you're good at one thing they tend to watch it just stay there and knowing we needed to diversify and handle full solution. So we got into some brand messaging clinical messaging.
And then patient engagement care speak and what we saw with remedy remedy was a tech company with some early commercialization.
That has really best in class Tech enabled us to complete that solution set so I almost view it as startup within the company now we're a company and Roland So we can't necessarily treated that way. So what we've done is a the day we closed it was fully integrated.
Aligned leadership on it both commercial and operational and technical and so while yes. The cost went up for good people and we do think it's going to monetize itself pretty quickly.
He said on the but you did say it was going to be 3 million injured or we press release.
Did they floor liability.
They were they were a little short of 3 million.
Okay, and we used some of that well with some of that it's yeah. Some of that was missed some of that was changing from.
Israeli based gap to U.S., but Scott do you expect them to continue to grow at a similar pace to what you guys are doing in 20.
Oh, Yeah, I expect them to to grow nicely you know there's.
When I look at how we did with care speak we're able to sort of double that business inside the first year I think we should be able to do close to that.
We are building out a commercial team for them. They really have basically one person and so you know when you go from one to five centers. It takes some time, but.
What gives me.
It's actually.
Even more valuable actually.
That particular number is the ability to go to clients with a complete solution set so I actually think we're going to uncover more revenue on the pharma side than we anticipated.
But again, we're very close that enough in November.
You know these things take time.
Okay I have another warm for will I'm, just going like Codell, even though you know Steve you guys announced on November 5th.
Type almost 70 million he doesn't have a press release and settles at that you're preparing up to 79 million.
On November 4th you said there were five enterprise deals that would be early stage on December 15 seconds trying to move to contract.
Can you talk a bit about what you're seeing in terms of pipeline today and how many those type of enterprise deals have been side.
2000, yeah.
Yeah. Thanks for the question, Josh So you've heard me say, Oh, let's call them well sign to multimillion dollar deals those are 2020 deals with several other city in contracts and probably not going into how many we haven't contract which is failing that helps at this point I think as we've been pretty public about those deals will make up.
<unk> portion of our ready mix for 2020 seem them.
No we've seen the progress against the machine overwhelming well received by our client base I think what it does is it provides cost synergy opportunities for them. There is a different investment or pockets of investment that we've been making outside of the investments, we've been making with us and sort of where the centralized that's a great claim for pharma.
Clients saves them money, then I'll, sometimes revenue so that's happened some very positive impact.
But Steve just said if you don't pipeline number.
<unk> is it up from December 5th.
He is our overall pipeline number up for the simplicity from December but.
I would say it is slightly up from December four.
What I cant shares obviously, what's been close Josh from Q1, So I'm, giving you may recall overall, but I would say its itself from December.
Understanding a portion of that.
Sure. It shows our Q1 progresses obviously.
Okay, and then you know just in terms of just the adoption of the product you know obviously Steve.
I think probably or to do a 35 or $40 million year, you came here that really.
You know.
You know make this company into a into a much bigger company and I think another one on the call is not focused on whether you do 30 33 35 is here.
More importantly, why isn't it growing faster why are you just and 16% growth you know in an acquisition with so much demand coming from this area why would they push outs and at least for me I have not gotten comfortable yet the your visibility on why the push outs happen because it doesn't seem like you know.
Oh 20 is gonna be this bounce back in doing any dramatic way, especially thinking about it was a 4 million.
You know, there's 4 million Miss in the back half of your you're supposed to do something happened nine to five in second half.
You know that's 4 million that's got pushed it says here yet R&D why.
Doesn't feel like the business is really turning on and I just wanted to hear from either one of your both of you just give us some comfort that we made this investment through on a call. We know that this is a massive opportunity in front deal.
With you guys being such a key player marketshare will either.
No, there's some pricing pressure, but the ability for you guys tickets isn't good everything how can they.
Your your small companies should be able to be positioned to grow sizable growth rates over the next few years I just want to hear from both of you really don't see enough already.
Yeah, just like they'll start to intercept where it should be bought so so just part of what you said just you know there's a disconnect from what we just said but.
But I get what you're trying to say is why aren't we just Rick in it you know 50, 75% because it's such a big opportunity and we're so grace that we've got all this access so.
Pharma.
Is you know I'm I wish they moved faster with.
All in type attitude, especially given the return on invested numbers, we can present, the frustration we share, but frankly, everyone in the space does who sells to pharma.
What I think you're hearing on this call is a lot of confidence that we can return to growth.
We have the network to access we now have a more meaningful dialogue with the client.
In terms of just bigger engagements more dollars, which which actually become stickier and we've got the full solution set. So I don't know, we're we're we're actually not thinking of like optimize versus remedy versus care stick, we're thinking of the patient journey getting enterprise deals with pharma.
Expanding the clients that include payers and life science companies.
And feel like we got the team for that we've got the capital we need to build it and we will get back to growth that sort of expected of size.
Our.
So I you know I know on these calls it would be kind of read a lot of stuff and you can miss it but I think if you look back at the what we said in Q3 and what we're saying now you'll see some you'll see a pattern and a tough does to show the credibility.
Good growth in Q1 to start the year.
These claims I don't know that Miss anything.
Yes, Josh and I'll, just comment on that as well I mean within pharma that I've been out that's a very long time typically we don't have moved your consolidations between two businesses inside of one year and this year the sort of <unk> crossing would be a of the wires in terms of massive consolidation with two large clients who.
I happened to have franchises like with the business I.
I think it was something that we probably could as planned for little bit better we've taken steps to plan for those types of issues in the future that that's the big won't happen again.
But no consolidation is an unpredictable piece, we just have to drive forward as well says like now our best indicator of our revenue growth is what we've seen contracts and bookings as we feel very strong about that will be very open it up all but you know that that's the best probably Oh.
We should guidance, we can provide on the call.
Okay.
Okay. Thanks.
Thanks, John strike.
Next I'll go to Harvey Poppel from Poptech. Your line is open.
Yes. Thank you very much just going to cover a couple of things.
The pipeline a I would just suggest going forward now that you introduce that door.
There to be part of the quarterly reports as an indicator of where the companies.
In the future.
Ah you did say isn't it.
Last time, you updated your pipeline that your historical closure rate was 35% to 50%.
And is there any reason to.
Modify that at this point.
No no and Harvey you know, we [laughter], there's always it's hard to introduce numbers because we're so limited in what we can really talk about with our client base, but what we said in Q3 was yeah. The pipeline numbers really relevant in Q4.
If we're doing our job with pipeline revenues going down precipitously right because that means its closing them and we're recognizing it as revenue. So if we just do the walk down each quarter you could triangulate revenue for them. So what we really wanted to show last year was it was three.
Excellent once a year before I think that's it in a great indicator of the investment and that you know now it's about closing it or we can we did you know in January we talked a little bit about one enterprise deals would be close and others. We can announce those it's hard to takes them and too much context, because we just say multimillion.
I wish client, which solutions, but it does show progress towards this so I think ultimately it's going to be hard to talk to pipeline, but.
It will work towards another type of metrics I think the best one is just performance and growth and that speaks for itself.
But I appreciate the comments.
Good let me move back to a good old financial Michigan.
You know the old age or you had a revenue share on that too was up around the 50% engine I recall on in.
Is that a number still about where it is on the financial messaging product.
There's no. It's it's come down off that you know, it's it really depends on the partner and we don't you know they don't like to talk too much about it but I think as part of the gross margin improvement you've seen is just better Rev share agreements.
We had some legacy agreements that were really.
Really not the best and work through most of those and Ah, Yes, great improvement in gross margin.
And the improvement in gross margin overall, five points and show year over year.
Or is that due to the change in financial messaging or should it just due to the reduction of financial messaging, which at a higher revenue share them you know the tonnage.
There's probably a little bit isn't isn't that concentration issue, we've talked about earlier, but keep in mind. These agreements that we've been really done we're re done for all the Rev share solutions, so whether it's a brand or a clinical message. So its not just that it would be a just a better better agreement.
And some offset those expenses and then obviously and then patient engagement being in the mix for my team.
Right.
A final comment and more of an observation is that I think you sense in the needs from a lot of each questions because with the lack of any kind of from them or guidance.
True.
Last year.
Finally chain.
The company group, which I recall by more than 70% from the year before.
This past year 16 person.
And it's a difficult for any of us to really gauge the new normal or what.
You know it's somewhere in between that's a huge difference it's not not talking about just five or 10 points of growth difference can you give us any sense of.
What.
We can be looking at.
Ah, yes, so I I think the best to the due from the Investor side as you know, it's pretty rare to have.
Oh for banks like we do at our size.
With the credibility that they have and we've got a very good relationship with the banks and analysts and the street.
And so I feel comfortable with consensus and you know I do my philosophy as consensus is much need to be as a management team and so if you're if you're looking for a number.
I would look to consensus.
Okay. Thank you very much.
Thanks, sorry.
And next we'll go to Russia from private he's a private investor Your line is open.
To that laughs, they're good afternoon.
To that last question what percentage growth is there and consensus.
Its about 30.
Between 30, 35% I believe a does it.
Topline, 33%, yeah, Yeah tossed top line correct yeah.
And that's a number that is in the hunger promise over pro forma mode.
Absolutely.
There was some difficulty with trends mission show me I've touched on some of this.
The you touched on backlog, though again not being a meaningful number now is looking to current sales right.
That's right Yeah 'cause it you know your pipeline should just keeps going down as you're closing business and.
If we if we gave those specific numbers you could back into revenue.
So that's correct, but I think you know I think what we what we've tried to do today is say 19 investment year 20, we're set up to scale more.
And and get back to that top line growth it that the market once and expects and as a team. We think we've got the people we need the tech we need and the capital we have in hand, so very focused on leveraging our.
Our opportunity our expertise and.
I never unsafe and us.
Somebody a at should something about 50% to 75% growth which of course.
You would like or maybe that's not good enough. But is 50 is 50 on the low end of that in terms of.
Probability expectation.
No we didn't say any either there were lots of percentages thrown around what the percentages, we said or.
Of our clothes annual close rate range of 35 to 50, we felt we are gonna be towards the top side of that range.
Against the <unk>, that's a different that's a different question somebody machine growth, but as I said, how come you are not back to.
How come you can't get to 50 to 75, you said rely on consensus for growth and that's plus 30 and that's under promise over performed does that mean that it's without being specific to harbes point isn't that attainable, giving back.
For those kinds of brokerage.
There are certainly enough white space that we've talked about we've got the relationships in place the team to execute.
So, let's let's hope so there is but you know me I won't I won't over promise and under I don't want him to deliver so I do it's but is there for the taking I think we've got the right solution set.
As we've talked about it all the stakeholders right patients doctors providers pharma.
And payers Who's got the team got the tech.
So I think you know that you've got perspective, Rondi binion with us for a long time some of the new people don't Didnt see the the very heavy investment we made in 16 to build 17 18, but we did that again in 90 so.
We didn't want to debt, we understand why it.
And as Steve said, you can always do better. So we're we're learning from that but we think we've got a really nice forward toward looking past 2020.
21 <unk>.
<unk> one more question on for context.
As to the way you shoot the business on February 27, you, obviously have a plan for 20 and one would assume that has a modest degree or may be more expectation with regard to growth.
Good.
Being your own.
Estimates are you beaten the heck onto the plane.
Well, it's pretty early in the year, but I think the excitement we're trying to convey here is one we do set pretty aggressive grows goals internally.
And my view is I do think we can beat them I, we had a anecdotally we had a commercial meeting annual kick off meeting and it was really impressive to see the the different teams coming together focused on different segments sharing accounts.
Really working towards a solid book of business lot of collaboration.
It's just a it's a new wave and then behind that we've built an unbelievably strong execution team account management team Tac.
And obviously.
Finance and HR to keep keep everyone in line. So yes, Ron I think we're we're pretty aggressive on ourselves and.
I think last year.
You know you those kind of yours or tests for management team right. The elite again or do you could give up and we're not to give up kind of people.
So I think we're pretty excited at the show that we can bring growth back.
So on February 20 himself or 27.
Better than just a little bit satisfied with how you're starting the year.
Yes, okay, and shouldn't large and as you do more enterprise deals less financial.
Messaging as a percentage of revenue <unk> margins would be going higher as a result of.
Cloud based delivery subscription deliberate.
Well the I think we'll see some efficiencies below gross margin on the cloud certainly a lot less expensive to scale I mean, the numbers are incredible but in terms of gross margin enterprise, we lead the only way that alters itself beyond what we've said around 62%.
That would be if patient engagement was the dominant piece and yeah. That's still a growing piece for business. So we don't expect that to have.
A big material impact beyond what we're saying of around 62% for gross margins this year, but shouldn't an enterprise deals have the bigger margin.
No no there still still executed through our partnership so those rideshare success.
If you could there James there just.
Okay. That's just a longer term, it's just a longer term commitment with a full suite of services. So it's a higher revenue number for sure.
And a better relationship with the client, but I'm not necessarily a.
Radically different gross margin profile.
You talked about average deal size, if you're in Stan just a couple of short question.
You talked about how it grew from 18 to 19 300000 or something like that 19 do you have an expectation for average deal size now.
2020, not not yet I think for when we talk to Q1.
Results will be able to.
Talk to that little bit more.
You expect that early.
Oh, Yeah, I would think it's you know it's it's yes, you. If you if we do everything we thinking we include enterprise deals as an S.P. then, yes, I would expect us to do better.
And.
<unk>.
With regard to the acquisitions quickly.
On a scale of one to 10.
That can being the best would you tell us how satisfied you are with those acquisitions.
As they relate to the topline and getting to the bottom line.
I'd break it into two camps strategically I can give us a 10, because it's just really put us into place with the potential for a much.
Much more revenue much higher valuation and a more complete solution for our clients operationally I, probably give it a seven to eight on the revenue.
I think parts of it are great parts of the our medium in parts of it just aren't what we thought.
And I'm not terribly surprised start up because they were more tech companies and commercial companies and we're turning them into commercial.
As Steve said very excited about the team there.
Horsepower is high.
And fall really really good people committed to grow in that segment of our business.
Well go through acquisitions, you would not want to get out of today, if you could.
No.
No.
I wouldn't have done.
We didn't have any read it we were they went we weren't force. It was a clear strategic path that actually we worked you know quite a ways before we did anything to think through so.
Yeah no.
One more question, it's not where they did for right now, but when you're modeling or thinking about the future what kind of aspirationally goal. If that's the right way to say it do you have for pretax operating margin by you're going to let's say.
We are doing 50 or $60 million.
Everybody would like to see that quickly what kind of pretax operating income would that produce percentage. Yeah. That's yes, it's like 20 to 25, depending on the mix is highest 30, but that's the range. It's.
That is the place you know around 50 million in revenue and you should really start being very profitable.
In this segment and.
That's what we're inventories.
I remember asking that before and there were some place in the fit there you talked about $50 million someplace in the 25 to 30 operating income margins. So that's still.
Reasonably aspirationally.
Yeah. The last time, we talk desperation no.
Was 30 million not 50, and you know is really.
Just massive their financial messaging. So I think if you broke a certain segments out a they would already be there you know, but because we're building a complete you know a company with a meaningful solution set.
We're seeing more flow break even on the bottom until we get to a certain points. So yeah, I think yeah, 20% to 30% is a safe range.
Do really well, it's 30 for in the Middle It's 25.
And a 20 would be kinda price to be in the game at that read that size.
Well I'm done with questions is on trigger happy you're going to get us shopper the penalty box.
That's right, Yeah, I hope so and.
We are.
Very focused on delivering.
Thank you, but thanks, Ron I appreciate your questions. Good night. Thank you.
And at this time that concludes our question and answer session I now like to kind of call back over to Mr. favour. Please go ahead Sir.
Oh, thanks, everyone well record long call lots of questions I view that as good dialogue is always good and I appreciate everyone paid attention and staying in there I didn't give you could just take one thing away from this discussion. We hope you understand we've got great potential strong growth ability to generate a lot of value.
Our shareholders beyond the numbers, we think we created a really valuable company a great you need corporate culture, you know really dedicated do something valuable.
And I look forward to seeing our investors at the upcoming conferences in March April may, but as always feel free to call me jump directly with any questions or concerns.
With that let's wrap up the call. Thanks Christy.
Thank you, ladies and gentlemen, before we conclude today's call I'd like to provide the company Safe Harbor statement that includes important cautions regarding forward looking statements made during today's call.
No I know when I talked during today's call may contain forward looking statement, but then the definition of section 27, <unk> and the Securities Act of 1933 as amended a section 21 at the Securities Act as 1934 element that these forward looking statements should not be used to make that decision. The words anticipate estimate expect pop.
The bulk of seeking and similar expressions identify forward looking statements and they speak only to the date that statements were made such forward looking statements. In this presentation include statements regarding estimation of total addressable market size market penetration revenue growth gross margin operating expenses profitability.
Cash for technology investment growth opportunities acquisition.
Coming announcement and any for raising additional capital. They also include the managements expectations for the rest of here and adoption of the company digital health platform that company undertakes no obligation to publicly update or revise any forward looking statement, whether because of their information future events or otherwise forward looking statements.
Inherently subject to risks and uncertainty some of which cannot be predicted or quantified feature events and actual results could differ materially from those set forth at our contemplated but underlying forward looking statements risks and uncertainties too much forward looking statements are subject.
Could affect business and financial results are included in the Companys annual report on form 10-K for the fiscal year ended December 31st 2014 as far as available on the company's website and on the FCC website at <unk> Dot Gov. Before we end today's conference I would like to remind everyone that the call will be available for.
Replay starting later this evening and running through March 19th please refer to today's press release for dial in replay instructions available via the company's website at Www optimize our act dot com.
You for joining US today. This concludes todays conference call you may now disconnect.