Q3 2020 OPTIMIZERx Corp Earnings Call

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You are currently on hold for the optimize Rx Corporation third quarter 2020 conference call. At this time, you know somebody chase audience and soon to be underway. Shortly we appreciate your patience companies I mean on the line.

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Good afternoon. Thank you for joining us today to discuss optimized our IMAX Corporation third quarter ended September 30 up 20 Twond.

I heard the company's Chief Executive Officer, well, you've got the company President Mary I'm sure I'm. One she started initial officer, Doug Baker, Chief commercial officer seating product show following management's remarks today well open the call to questions. Then before we conclude the call today I'll provide some important cautions regarding forward looking statements made by management during the call I'd like to remind you.

You are not today's call is being recorded and will be made available for telephone replay instructions in today's press release in the Investor section of the company's website now I'd like to turn the call over to optimize our Exi Oh William for though please go ahead Sir.

Thanks, Sarah and good afternoon, everyone. Thanks for joining us on the call today.

The team at Oaktree, our actions healthy focus very grateful to have as many opportunities. He should we do to scale our business. She said in this environment as a digital health platform focused on affordability and the parents for life science clients doctors and patients stay.

I started the previous conference call thanking all the healthcare professionals for their commitment Gregory I'll say it again. Thank you very much increase in cases in Europe is its going up we are again, putting big burden on our health care providers.

We had optimize arrest consider ourselves very fortunate during the pandemic to be an instrumental conduit of communication between industry doctors and patients we are focused on delivering value for all our stakeholders.

To support the statement with results varied.

Very proud to announce we accelerated our revenue was 110% quarter over quarter quarter over quarter growth as well as a year to date growth rates, 56%.

The return to delivering strong non-GAAP income.

Line is currently at more than 140 million, which is almost two times. What it was this time last year and we're still not finished with the R.P.C.S.

We expanded our network to reach patients within retail setting as well as mobile appointment check in and checkout as we continue to build out additional channels, we fine tuned our patient engagement market strategy at a time when demand has never been greater.

We secured multiple clients for new solutions borne out of our innovation lab.

Where we collaborate and select partners to drive more effective solutions for doctors and patients in short we have delivered on every growth driver of the business. We have discussed in the past.

We continue to build the highly impactful company situated in the middle of all its stakeholders.

We are early in our journey our opportunity continues to grow at impressive rates with very little headwind now and we have a team and technology that's aligned to scale, our digital communication platform helps doctors patients in industry do what we're all in it for that is to improve health and affordable way.

In a transparent way now before I go further I would like to turn the call over to our CFO, Doug Baker will walk us through the financial details for the third quarter and I'll return to discuss more about how we are winning business and our outlook for the rest of the year in 2021.

Once again, we'll have a full executive team Merryman 10, Steve on the call today to help address any of your questions Doug.

Okay.

Thanks, Phil and good afternoon, everyone earlier.

Earlier today, we issued a press release with results of our third quarter that ended September 32020, a copy is available for viewing and may be downloaded from the Investor Relations section of our website.

So while the copy of our 10-Q with the FCC, a short time ago and that is available. So you see that go.

That's why I mentioned, our revenue for the quarter was a record 10.5 million up 110% compared with the year ago quarter.

Gross profit was 6 million about double that of a year ago, our gross margin percentage declined to 57.1% in the third quarter of 2020 versus 60.4% a year ago, but it's similar to our margins for this for the first two quarters of this year.

The decline from last year was a result of product mix pretty darn, primarily a heavier mix of messaging through higher cost channels. This year.

We expect to achieve gross margin of 58% or higher for the calendar year based on a strong fourth quarter.

Operating expenses increased to 6.2 million in the third quarter 2020, compared with the same quarter of 2019. The decrease from 6.6 million in the first quarter of this year and were virtually the same as the second quarter of this year.

The decrease from Q1, largely reflects a reduction in travel as well as other related expenses given the stay at home policy.

Our investment in our commercial organization led to the 110% increase in revenue and a shift towards enterprise contracts ended <unk> decreased sales cycle.

Investment in our marketing and product teams gave us the ability to be nimble and quickly respond to some of the operational items will is going to discuss later in the call.

Non-GAAP income net income was $1.1 billion in the third quarter. This is our second straight quarter of non-GAAP net income and we expect it to increase further in the fourth quarter.

Our balance sheet remains strong.

<unk> equivalence totaled 12 million down from 14.1 billion on June Thirtyth. This.

This decrease resulted from the earn out payment related to a remedy acquisition, but we were basically operational cash flow breakeven tricor.

I receivables are very high quality because of our customer base, while they are increasing because of our strong revenue growth and customer payment terms are custer mers continue to pay regularly and predictably in our day sales outstanding remains relatively constant.

Expect to generate positive cash flow from operations in the fourth quarter of this year.

We have continued to operate debt free can do not anticipate needing to raise additional capital over the foreseeable future either for operating purposes or to fund our growth plans.

I also want to take this opportunity to point out that we have remediated the weaknesses in our internal control that were considered material sales of December 31 2002.

This wraps up the discussion of our financial results I'd like to turn the call back over to roll.

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Thanks, Doug what a great start to the second half of the year I'll speak shortly to our growth drivers, but rest assured there are firing on all cylinders delivering a year a year year over year growth rate of 110% on top of that we see no disruption in the last quarter of the year to continue the strong annual growth.

Sales rate, along with non-GAAP income and positive cash flow operationally.

We focus on three main drivers for gross and optimize our ECS our clients are.

Our partner network and digital health solutions.

[noise] digitally enable communication, which benefits patients and doctors around therapeutic awareness affordability and adherence.

Even prior to the current pandemic, we were feeling tailwinds that support growth in all three areas.

First let's talk about our clients, we're seeing terrific traction on multiple levels.

We've spoken to enterprise deals for some time now we define these as an engagement with which involves two or more solutions on a given brand enterprise agreements are going exceedingly well with a total of 21 million of annualized revenue within 2020. This is all highly renewable and we anticipate many more.

Our enterprise engagements as we enter 2021.

Land and expand strategy.

This is driven by strong return on investment for our clients.

We're also seeing increased internal referrals, which allow for additional tactical selling to build the pathway and pipeline for enterprise deals.

Given we only had six enterprise deals and 2020 and we are engaged with over 100 brands. It is clear how early we are in terms of building a much larger business.

We'll see an additional 60 brands added within 2020, and we expect that to continue to grow in 2021.

Our pipeline is tracking to be over double that of last year currently sitting at a 140 million.

We still anticipate a close rate of between 35 and 50% sales prospects for 21 are looking terrific.

Our new solutions like patient engagement hub enrollment tele rep. They are all generating interest in revenue within our client base and have shown our clients. We are an innovator among our peers and no longer dependent upon a single solution for gross.

In fact, we see little or no competition, who can do what we do given our shift to multi solution and multi modal delivery.

Most of our growth for the year is coming from organic activities as we see our pharma clients leaning into the point of care as a critical piece of their marketing strategy. We.

We continue to come in ahead of our internal budget year to date, and we expect to far exceed our goals. We had set earlier to finish 2020.

Office visits were less challenging in Q3, but we expect to see downward pressure on visits in hot spots around the country through the winter months, which are peak flu seasons for many of our markets.

However, regarding the impact on our business the doctors will still use their year charters from home to treat patients with several tele health solutions along side.

In fact, according to a recent Mckinsey study on closing digital gap in pharma nearly 70% of U.S. consumers use an online channel to manage health and wellness and more than 50% of U.S. health care providers are digital omnivores, using three or more connected devices professionally.

It's also important to remember that we focus on essential medications not elected so similar to Q2, we did not see a material drop in E. Prescribing in Q3, nor do we anticipate one in Q4.

We also believe we have some strong tailwinds at our back in terms of our client base.

Most of our clients have decided to proceed with new launches this.

This is due to the complexities and cost around preparation and as part of the overall strategy is designed to prevent any substantial disruption metal.

Medical conferences, and medical liaisons and live advisory boards continued to be disrupted or have gone as virtual. So we expect this will drive an increase in demand for digital communication that delivers mission critical information at point of care.

Course, we're thrilled by 110% increase in revenue growth for the quarter, but perhaps more importantly, we are seeing higher than expected spending in the current fourth quarter.

The second driver for growth because our network of partners.

We spent considerable time assessing their network and additional channels to reach doctors and patients given our focus on specialty therapeutics. We have turned our expansion plans to cloud based technology companies, which allow us to reach those populations, which are delivering essential medications.

Due to the recent pandemic related disruptions to the delivery of care, we are seeing more rapid adoption of digital tools by doctors and patients for these macro trends in our favor we expect to enable highly targeted strategy for our clients to reach the most essential doctors and patients.

In Q3, we had some terrific new partners, which connect us digitally to millions of patients of note, we integrated with HIG health engagement platform that empowers consumers to measure track and act on their health data.

They have over 10000 stations nationwide 303 million biometric screenings to date and one in seven people have used to hit you station.

We are focused on helping them deliver care at a lower cost. This is the beginning of our expansion into retail or point of dispense as another channel to enable affordability and the Terence We also partnered with at the unhealthy.

Patient engagement platform, which makes it easier than ever for patients to access care.

At the end at the ons provider search and online scheduling tools help patients find the right provider and care setting at the right time.

Then we enable access to affordability prior to and after the office visit.

This partner is also connected into the Athenahealth network, which is a new partner network. So we're thrilled to reach that new cloud based community.

Both of these partnerships are very timely as we are looking for greater waste the digitally reach patients into care, Jeremy maximizing their access to care while.

While many of our yet your channel partners already had tell health solutions. The adoption had been relatively low the recent increase in demand for these types of service has been fantastic for all involved for US. It has the implied benefit that our channel partners are increasing their attention on the essential tools that doctors can use to better care for patients.

The third driver of gross 'cause enhancements to tech knowledge, our technology platform and client solutions.

The L. Prs technology team is world Class every day, we use stated the R Tech engineering tools and techniques to build new products as we simultaneously evolve our technology.

Plug in to plug into the entire digital health World, We will unlock the revenue potential for Opie Rx <unk>.

Our newest product telegraphed as a result of our flip the script breakthrough mentality, we have over eyes, the communication between pharma reps and providers by allowing the providers to initiate the conversation with the rep on their timeline from within their workflow.

In addition to the above we are truly innovative we have launched patient engagement products that have embedded AI driven chat bots and these products are fully functional in the market not just prototypes.

On that we have continuously incubate and iterate new things in our innovation. This year alone we've demonstrated the ability to use AI and machine learning to intake static information I eat PDF offers and then parse and translate into machine readable data that can be consumed this capability will allow.

Catalyst to consume and convert pharma driven content soda can become digitally liquid further unlocking revenues.

That's our core messaging solution continue to scale, we are seeing an increase in demand for not only financial messaging, but also Brandon therapeutic support messaging as we enter the final quarter of 2020.

Given the unemployment levels cost as again surface as a major problems for patients and we expect these trends to continue.

In the third quarter, we also finalized their integration and go forward plan for patient engagement.

Given the difficulties around travel.

I've decided to double down on life science clients for this solution and spend less time and money on payers. We acquired two great technology companies and have finalized our commercial plans as we approach the 2021 planting season.

Our patient engagement solution will allow for more scale to drive topline growth with recurring revenue it will enable access to additional budgets within client base and lastly, it will improve gross margin overtime.

We will report more on this after we complete 2020, but we're very encouraged by the progress relevance and scale potential.

Lastly, I want to talk about how optimizer X has a strong sustainable competitive advantage.

And then we'll get to you and we have a digital health platform that brings together a very fragmented market of health information technology connecting patients doctors and manufacturers, we have the ability to connect all stakeholders in health care in a way that fits into their daily lives and touches on the pain points, we have all experienced which include awareness affordability and adherence.

To our medications to stay healthy.

We are well positioned to position to bring frequent measurable and very impressive ROI for our clients.

We've built meaningful physician reach over the years with some measure of exclusivity by integrating our platform into leading each ours he prescribe systems.

Today, we reach over 60% of the ambulatory market that is where most of the prescribing happens we are deeply entrenched in our client base as we work with 65% of the top 20 brands.

By revenue with into the increased interest for the remaining 35%.

If you recall in Q2, we were at 45% a dramatic increase in just one quarter, but trust me of gain from our clients at a time when digital communication is absolutely needed is supporting our two continued shift to an enterprise level recurring revenue model.

Accordingly.

A recent study by Veeva by the end of 2020, nearly 70% of all health care providers will be digital natives their experience with mobile social and digital technologies and their personal lives are shifting their expectations for business interaction.

We sit squarely in one of the fastest growing segments of health technology that is point of care communications, where there's tremendous client demand for greater conductivity that is effective transparent measurable with more than half of the HCP is in the U.S. under the age of 45, the expectation is for efficient digital tools to enable their work flow.

We leverage the power of our position to make health care data actionable and further enable timely care and better outcomes for patients.

With every quarter the value of our addressable market continues to expand in the multi billions and a clear shift is emerging in client markets marketing spend transitioning from traditional sales reps and industry conferences towards more digital communications.

We now live in a digital age so we strive to be the best in class digital platform for everyone. We work with today, we have scaled and secure technology to support and protect our growth. So in the doctor and the patient are working together to solve health issues, we can be there when impactful.

Now with that we'd like to open it up to the questions Sir.

Thank you Sir you I'd like to ask a question. Please signal by pressing star one on your telephone keypad.

You are using a speakerphone. Please make sure your new function at turned off to allow your signal to reach our equipment I.

Again that is star one I ask a question.

Hi, good morning to all an opportunity for questions.

Well go ahead and take our first question.

Well the answer to sell in the United Kingdom.

Good afternoon. Thank you very much for taking my questions I mean really congrats on the progress year to date.

Just to start can you just discuss 2020 as a whole do you believe that much of the revenue growth that you've experienced with you to initiatives that were already in place and would have been fairly similar say the pandemic hadn't taken place or do you think the majority of the benefit was related to the.

And then make as you kind of consider year over year growth and then on the enterprise side of the business or where are you seeing traction right now is it more with new or existing brands.

Great I'll take the first one that I'm going to pass the other over Steve.

No I think we're pretty consistent Q2 pharma does not move quickly when it comes to pivots, you know really what we said in Q2 was there.

They're assessing the change looking at how to reposition content.

Really wouldn't see a lot of revenue in this year, what we have seen.

Is more internal referrals, a more focused from the top down.

And really looking how to leverage.

All the content and frankly, the people with knowledge into the market at a time when it's been disrupted so for 2020, we don't anticipate specifically up to Q3, a big increase I will say that Q4, we might see a greater than normal by up to just because there would be excess budget.

But year to date, the pandemic is not influenced that but it has does it's just gotten deeper into clients with more touch points, Steve you want to talk to the enterprise.

Yeah happy to Hi, Andy Thanks for the question.

Regarding the enterprise deals of what we are seeing with a blended do both new and existing clients coming into this sort of dialogue dialogue of bringing in more than one solution.

This new client base, which has been just tremendous and.

Wonderful to work with has come back to the table and ask for additional solution that they can use to implement drive more communication with existing piece and subsequently with patients. So we've seen that scale up very nicely. Our point of care team has done a wonderful job of penetrating into those accounts and expanding.

In the financials on the new side, new clients are coming to the table is you will say that I mentioned in the number of new brands, let's see new clients come in and what they typically will do they come in and pick one or two solutions, we'll do maybe a four to six month engagement measure the return on investment measured the impact and then scale to something.

On the enterprise level, we've been fortunate enough to see that within the 2024 years, so far year to date, so far we've seen several programs come in as leasing programs at the beginning of the year that perform that initial return on investment in very quickly make the decision to scale. So I think that's the that's the yeah.

The trends that we're seeing across the board hopefully that answers the question.

No very very helpful. Thank you and then my last question, maybe you can just give us an idea of what the cadence of the pipeline our teeth typically looks like.

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How much does it typically grow into the end of the year or beyond.

I remember last year in late December you have over 80 million Sofia.

So if you continue to read it effectively doubling from where you are with or would it be reasonable to think that he could get close to a $161 million to $180 million.

<unk> pipeline.

[noise] really picked up well.

Yeah go for it.

Yeah, I think that's reasonable and what we're seeing now is just an acceleration of interest. So you know we spoke earlier and you heard little mention it again in the script today the referral business that we're getting from existing clients is it's just a real wonderful thing to see and that is driving the acceleration in the pipeline. So we are you know we anticipate being well.

For the 141 46 market probably closer to 160 Mark.

By December this time.

RFP there are still coming in as everyone knows we're right smack Dab in the middle of RFP season, So still early to call, but we are certainly trending that way and feel very positive both about the quantity and the quality of the RFP is that we're getting it seems like they're being written.

For us, which is which is a nice thing to see there they're not not as many are filed a request for information much more RFP and there is a distinction there between the two.

Folks it from there.

Well, that's a that's incredible here I'm very very happy for you guys. Thank you very much taking the question can a I'll catch it catch up on.

Thank goodness.

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Well take our next question from Ryan Daniels with William Blair.

Yeah. Thanks for taking the question and thanks for all the information so far well I'm, hoping you can discuss any potential from the vaccine obviously a lot of noise.

Oh, it's today on that positive news for all of US I guess, but I'm curious for your organization kind of what your thoughts are.

On that strategically not simply the ability to return to conferences and keeping digital before front of pharma marketing dollars, but maybe even more importantly, the ability to engage consumers to try to get the vaccine out there I'm going to drive utilization of that thanks.

Yeah, Thanks, Ryan Yeah.

We obviously as people, we all hear that and this collective sigh of relief clearly the market loved it and it's needed right for a lot of things to get back to the way we want <unk>.

Yeah, we do know that that still you know a it's still not in the market. It's still a six to 12 month process for normalcy, but I think you know putting that aside.

I think that we clearly have the network to help in getting to the correct communication out to a very large portion of the H.C. piece that are out there in the field with patient. So first off I don't see any material change on our business if anything with our network can be used to help facilitate.

That communication and also just on the client side do you know if you think of what's happened. This year I would say, we you know this internal referral that we've seen.

Generally our clients are using conferences and meetings to meet new solution providers and without that in place. They really relied on each other so that kind of peer to peer referrals, great and frankly, I think once people get a sense of the power of this network, it's pretty hard to leave it.

I think also doctors aren't going to revert to if using different methods I think even the raptor is gonna be rethought going forward by pharma as a way to leverage both a person and technology and I feel like we're well situated there.

But Steve why don't you add your color to your in the frontline more with the clients. That's just my view.

Sure happy to I mean, I think Ron when we contemplated any any drug launch that happens from its always about identifying the correct patient population identifying each treating their population and then contemplating looking up the curve will look like because of 19 vaccine won't be any different than that they're going to take a look at.

Prioritization of outlets populations like genocide weapons patients are they going to bucket co morbid studies and things that would say hey, this population at risk they might be overweight diabetic all the co morbidities that we've been hearing about.

Got it and then they're going to communicate with the physicians that are treating those patients and find ways to distribute accordingly, so while we are.

Definitely exciting about it.

I don't want to mitigate the mix up because I think it's a tremendous it's a day to celebrate for sure.

I think about things in terms of tactical execution, and actually we are positioned strategically very well as a business to be able to help Pfizer and frankly other businesses to be able to identify those pockets of population where patients are at risk identify where those positions are and help get the messaging out to this position.

And subsequently to those patients and then validated the patients receiving therapy and that a critical part of what frightens launch plans will look like it certainly will be a critical part of anyone trying to step into the frame provider solutions, so feeling pretty good about that works for them.

Okay. Thank you very helpful color and then.

In regards to Q4, you know I know you're always typically season by Apple leftover marketing dollars will I think you mentioned that that could be higher this year, because there's probably a lot of leftover dollars due to lack of conferences and promotional materials or spend another area that I'm curious.

How large of a year over year increase if that's something you can actually track it as an external partner to those firms number one and number two do you have any capacity constraints with that if certain brands come to you and want to.

Just spending more digital marketing campaigns reserve limit of what you can distribute per se within one quarter.

So second question first there there certainly is but we're far from it so it would not be an issue inside of that.

The next year or so at all.

Lots of capacity.

There could be some bottleneck in particular therapeutic area, but even that that I'm going to say that's in the out years as well.

And it's you know, it's it's too early to call because it sort of real time and.

We're just in early November but.

But we did want to signal to the to everybody, but we're encouraged by what we're seeing we have the capacity to execute it and that should help us really deliver a terrific year.

Yes.

That's helpful. And then one quick housekeeping issue just from the.

Press release, I know the gross margins were down a little bit year over year, just due to product mix, but you said you expect to get back to that 60% level should we be thinking about that 60% level by year end and 60% for the fourth quarter or 60% for the full year, because the latter would take a pretty enormous jumping up and the quarterly profit to get to 60%.

For the year. Thanks.

Yeah, and I would just be 60% for Q4, so you could be slightly under that for the year.

And we're you know we're in terms of gross margin are really focused on.

You know that is a product mix issue. We think we've got a great long term fix if you want to call. It a fixed us because it even at 58% it's pretty impressive next to our peers.

But as patient engagement scales that will certainly improve that gross margin number.

Yeah.

I just want to get clarity because I wasn't sure. If remember we've got so thank you congrats on the very strong quarter. Thanks, so much.

Thanks Ryan.

Yes.

As a reminder, they got it sorry wanted me to ask a question and if you find that your question Anthony in thinking you mean, the vehicle from the Q five.

Well go or how did you go next question Richard Baldry <unk> capital.

Thanks.

If I look at sort of your booking implied by the RFP.

That you're talking about it could be as high as $60 million to $80 million and using last year.

You know sort of as a comparison you know your bookings translate it pretty much directly into revenue so that could imply something upwards of 75% to 100% growth.

Against that backdrop could you maybe talk about any disconnects, we should be keeping in mind between booking and an actual revenues and.

Maybe lay out what a typical cadence would be for that next level of revenue. It 2020, maybe started a little bit slower on a sequential dollars and then the last two quarters sequentially.

Very very strong.

Is that what we should also expect to sort of whats is there anything missing in that math, we need to be very careful about.

Sure Hey, rich so there is seasonality to the business.

As if you can just you can just look back at past years, we expect that seasonality to be consistent for 2021, just because that's really how pharma works.

Being said when we when we look at pipeline last year was the first year, we share at sort of our close rate, 35% to 50%. We did see in early in the year it edging towards the 50%.

We're not ready to handicap that but when we report Q4, we will talk to where we think its its heading.

And generally though the seasonality is second half usually trumps first half I do think we'll see a little bit smoother growth through next year because of how we are repositioning with both enterprise plus patient engagement.

As well as different types of relationships with different channel partners.

So we expect it to smoothed out, but seasonality will win because it's just a rhythm to how far but works.

And we.

We do not expect to go below that 35% that but we're not ready to sort of get the percentage of where we think it will be for next year, but very encouraged by the pipeline and and as Steve said, we're not we're not done that yet so.

Very very positive.

Okay and her with a view to some of the RFP seeming more targeted is there a way to think about the potential for colds rates against that backdrop that it would seem like they're more likely to be one.

Or maybe frame it around how much of the increase in RFP, that's from existing customers, who might be simpler because they understand that have used the value proposition in the past versus new or.

Different brands, even within a similar customer that might be more challenging.

Yeah, Paul excellent question, we a big chunk of this is from existing clients right. So that's why we've seen no disruption and expected to expect that growth to continue into next year.

I, we did get internal referrals, even though you get an internal or fewer this referral. They still test you, it's that would seem odd but they do it.

We'll say the cycle there would be faster the test might be slightly bigger.

But.

Steve I don't know if you want to add anything to that.

Yeah, I mean, I think it's it's still early which for US that you know for Indians milestone for us to be able to speak to it I do think though that because of the nature of them being do losses like we said previously there.

They're coming in with a sort of a better awareness of what we do and we're seeing the nature of the RFP being inclusive of more of what we do which I think is indicative of good success. So more to come on that I think as we can as we proceed but as I sort of feeling fairly optimistic about the about the pipeline and about the amount of keep coming.

It's still more to come.

Thanks, then hey, two very smaller things there was some discussion from what I would call less informed analysts out there or confusion, maybe said another way to think about it about your dsos versus a very consumer driven business that recently IPO.

Dsos are more credit card driven maybe talk about just very quickly went to one on you know the quality of your Dsos with your pharma companies normal aging for an enterprise versus consumer business.

Doug do you want to take that one.

Sure. So so I guess, there's two parts to it you know we sell both direct to pharma and sometimes it goes through an agency. So the pharma companies you know pretty much dictate a payment terms, which are usually 60 to 90 days and you can get paid earlier, if you want but it just involve substantial discounts. So he can get paid.

In 15 days, but you know you know things annualized up 40, 40% to 50% interest rate. So we just basically except our term because we don't need the cash and then the second part with agencies you know so agencies wait to pay us until they get paid by pharma. So it's kinda.

Compounds that a little bit so our days, we usually have one quarter of revenue on average in receivables at the end of a quarter and that's it's been relatively consistent over the years. So you know it may look like.

We have a lot of Oh, no old receivables, but we really don't system consistent.

Number based on how far of operates.

And in turn to back office operation or or or contraband add yeah. They did some connotation that you're running the business on quickbooks.

No. It was wrong that you're I think you're running sage system in a bad but on the company you've acquired there are obviously pretty small you talk about how well do you feel about integrating the back offices and those aren't getting them onto your system. Thanks.

Sure sure NZ, so you're right we do in this stuff.

We do use sage intact, which is ER and the number one rated cloud software by the Ace Ace HIPAA used by large companies and when we do an acquisition, we immediately integrate them and because usually you know whether they are small so oh there.

They are using quickbooks or something else, where we just you know take their customers and vendors and modem into our system and it's you know relatively seamless.

Right.

Congrats on the impressive or P., a pipeline and good luck.

Thanks Rich.

Well take one more question from Aaron Martin you think it's like <unk>.

Yeah I was wondering if you could kind of pull back the current a little bit.

Efforts going on under the innovation Labs is there anything you can tell us about it and I'm anticipating this is more of a 2021 impact but we're.

Okay. So the innovation labs these days.

[noise] mirror and you want to grab that one.

Sure Hey, Eric.

Oh, we're working with our partner in the innovation lab to a rollout tele rep. So where we've got a good pipeline there and that's a brand new product that they remember six months ago that didn't even exist said it gives US an example of a.

Pretty quickly building something and getting it deployed and actually purchased you know end market and purchased a pretty quickly.

So expect to see some activity with tele rep and when we think others will jump on that innovation lab out if you will in Colorado. So more focused there. We're also working on have enrollment that we mentioned I think maybe the top of the call. It mid call and we expect to see we've got again.

A product that's pretty news that has some good uptick in terms of actual rather that were recognized this year and then a pretty good pipeline for that next year then.

The next step beyond that is really about getting.

Data moving from our Tele rep like functionality, so I call it the smart, but that the ability to.

I have a lot of essentially a life sciences smart, but buried within on the HR the appropriate points in workflow. So anything we can arise out of the HR experience that will be at the physician that advantage at their time on their earn out on their own schedule from their own work flow, we expect to see north and why.

Like that.

From the innovation lab, that's coming there.

Okay and then.

Related here I'm curious and maybe this is more for wheel or Steve but on the pipeline as we look at the 140, which could be potentially much bigger than that.

We make our way through the far end of our peak season.

Your your revenue mix has long been kind of insertion order dependent because some of the acquisition what are the I guess, he certainly a year ago to remedy.

To it.

We're still looking at a relatively similar mix here as far as that if we drill down the pipeline is it.

90, 95% I O or is there an element of that we should be thinking about as you.

The win rate translates.

Yeah, I think I think we'll see a nice shifting 2021 with a higher percentage of fast in particular around patient engagement.

And also parts of the recurring revenue model connected to enterprise.

Yeah, we we can't dictate to pharma, how they want it to be designed but we're starting to see they're starting to see the benefits of the combined message solution set that we have which to my point earlier in prepared remarks, there aren't many competitors with with this type of suite delivered this way.

As efficiently and so yes.

Yes to your question, we should start to see more substantial.

Contribution from that piece and and we have the team in place to do it and feel really good about how its position with the focus in particular as I said on life science companies, which is the client we understand the best and have the most traction with.

And then Doug on the Opex side were pretty consistent here Q3 versus Q2, paving we need to look out for in Q4.

Seasonal expenses.

No not really I'd say, <unk>, where it will be pretty consistent maybe slightly up in Q4, but not anything significant.

Thanks, and congrats on the quarter.

Thanks, Eric.

Well take our next question comes and goes there.

Yes.

Hey, guys, Thanks, a great numbers and.

Any success I I have two questions. I guess first is obviously you guys have had leaned in here post coded and really have shown.

How sticky are product is and I'm. Just curious if you can kind of people who are newer to the story you know how many years you've been preparing for really just this sort of penetration of your products as part of this advertising pie for many of these key.

Care companies and then I have a follow up.

Sure I can start and Steve, killing if I forget something but.

Hey, Josh So the yeah, you know when I came in to the business five years ago. They had already been working with pharma and yeah charters on delivering just the one solution financial messaging.

At that time, you probably had to explain the value of the HR, what any HR was versus the DMR lots of confusion. The market has been educated we've gotten appears in our space that have digitized other aspects like cover my meds and for each Oh I'm not to mention Teladoc love on go.

Sure you know many others. So what's what's really transpired here is a tremendous education of the market relevance of the space. This the actual channel of Kinder care, becoming strategic.

And while the pandemic certainly will accelerate adoption.

As we've said before we saw that adoption coming it's going to come a little faster, which is great but.

But you know it takes years I'm now if you think about where we are you need a lot of tactical clients to get to enterprise, but you need enterprise at some point and this year I think if I were going to say what I'm. Most proud of the team is securing and delivering for those six that we've talked about because it sets us up for those conversations.

Revenue for next year among the other 80, plus that we work with in a tactical.

So even just brought out into that Oh, Yeah go ahead, Steve.

Mississippi.

No I think you hit the nail on well with what you said and I think Josh one of them. So maybe just to mention.

You mentioned in the script breed since we are definitely seeing a change in demographic of consumer on needs inside People's willingness over the last 12 24 months to consume digital digitally tools that they might have not done previously and we decided to take.

Study.

Surgeons coming up but deliberately because it's not just to optimize our exits.

Many companies that are seems to be the nation of tools be.

Be brought to the table I think our preparation over the last.

Five to six years since gotten us to a point, where we are now primed to take advantage of that and work through that as a company as will said, but I just thought I'd ask that.

D. Do you just so I'm clear the the 21 million that you booked is that on top of what the pipeline could be if you close. It. So you have 21 million kind of annualize revenue kind of going into the year and then everything else is well you could close from there is that the right way to look I know the pipeline. The pipeline includes it would include any.

He renewable off for this year is 21 million of enterprise business, Yeah. It was considered.

And I know you just it's new but how often as an enterprise not renew their contract.

Well I'd say, we've got a perfect right.

Right because we had you know I'm joking aside we had you know probably one in 19 that a client is certainly back in bigger we had five others now and and after we close Q4, we'll talk to the sort of the profile of these because you know what what is really terrific is that.

Internal referral try us method because.

Once they try it it's hard to give it up in my opinion and then they start connecting other.

Solutions and you work your way into enterprise, so it could be that our HCV actually goes down but our enterprise.

Number of enterprise deals goes can sit considerably up right, which just makes it all more sticky more recurring and you.

The last thing I would add on the existing enterprises, the our allies been spectacular so that certainly helps you going into the end of the year.

The team last one for me do you think that.

You know as you look at the next sort of year or two is there any products that you feel like you still need to get to that sort of platform sales I mean, obviously your balance sheet has gotten stronger you know who your cash this quarter.

But still a small amount do you feel like you need to buy versus build going forward or should investors feel comfortable that you have is where you're going to be in there would be no need for.

Any financing series for additional acquisitions. Thanks.

Sure Josh Thanks, Yeah, No I I believe we've got the solution set in the network and the team to scale our business.

That doesn't mean, we won't be looking and we're very entrepreneurial as a company. We've got that culture. So we will always be looking at more connectivity to patients and doctors, particularly specialists.

Because that's where the majority of the spend is from pharma and life science companies, but to date, yes, we've got the capital to grow sufficiently and.

Well, we will we'll explore things we really wanted to do partnering for the second half of this year and not be distracted by M&A really just heads down focused on growth and the team has just done a spectacular job delivering on that.

Thanks, guys.

Thanks, Josh.

Our next question comes from mines have a private investor.

Please go ahead.

Good afternoon.

Hey, Ron how are you.

Fine. Thank you I think you should not get carried away.

By the good quarter, and so far good results and that you'll work harder going into the ore in the fourth quarter and next year and Oh I liked your comment about keep your head down instead of searching for additional acquisitions, which sometimes are a distraction.

Mm Hmm, we will I can assure you. This is a group of athletes that likes to keep running [laughter]. So we're we're in good shape there.

Two questions.

Could you without name.

Provide an example, or do you want to provide an example of land and expand.

You want to provide go ahead I'm sorry.

Yeah, Steve you want to talk to some without mentioning you manufacture your brands just some examples of the some of the internal referral leasing yeah sure happy to.

Hi, Ron good good good economic.

Earlier in the year, we to manufacture that team into an RFP marginally interested some financial system distribution of point of care some financial messaging.

You know sales rep reach out beating the conversation.

We're able to consummate an initial deal that was for four months.

And he wanted to do financial messaging.

We're able to get them to try therapeutic support messaging at the same time to get accommodation financial messaging therapeutic support messaging, we've worked with their internal analytics team.

Structure and ROI measurement. So after the four month period of time, we would be able to go back look at the return on investment and make sure. The program was working when it was initially anticipated it structured it.

I'm happy to report that or a line came back very positively from their internal analytics team to boss and not that deal has ER and generate a day you know enterprise level deal, which will be comprised of six different solutions on the platform.

Which will see post so very very positive outcome.

Again talking but you know our sales leader for point of care carry Hamilton.

And our leader for pension de surge wildcard it seems to follow that same archetype run of getting in starting small indoor having a referral and then scaling up on the expansion side and we continue to see that time and time again.

Which is very encouraging very encouraging given the current penetration rate in Canada client level not so much of the brand level lots of one space.

That's a good business one off example, but could you address if you would.

An example of an existing client and they had expanded and now they have more than one brand and they refer you to another is that been very successful or not.

Yeah, I'll see you in one.

Oh I was just going to say why don't you refer to you know that the brand with multiple indications. That's a great example of an internal referral and scale.

Sure. So so we have one brand that's been a customer now for three years Ron on same brand. This brand is in oncology brands. It was initially approved for one of these they they went in applied for indication extrapolation, which is essentially getting approval for more than one disease.

And so each one of those do you does create separate with.

Within pharma to work on that brand and so the initial brand was so pleased with the work that we did in the one solution. They referred us to the second disease team and then they refer to subsequently into the third and the fourth disease team. We now have seven diseases live with not one brand on that team.

And that gives you kind of an idea of the ability to scale. That's all internal referral for long standing customer. That's now just decided to scale up.

Thank you. Good example won one of the thing for context, perhaps where you mentioned a retail do you want to provide any context on that.

[noise], yeah as as people, who know our story nowhere, we're very connected at point of care when doctors and with patients we have technology to connect directly to patients.

But we really haven't done much at point of dispense today.

Q3 was really exciting because we brought in a couple of things we brought on a board member who is former CEO Walgreens, Greg Watson just to help us understand really understand that stays true thought leader and an entrepreneur post CEO of that company.

Just great energy and we also partnered with Hedgie, which is that that that cherry used to see in retail reinvented to be you know a real communication tool for patients on managing their health and we did that because patients. It's just part of the journey right. You don't want to you can be with them on their.

But the doctor that as a stressful atmosphere for most people unless they're healthy we generally go to some form of pharmacy afterwards, and then you're at home and so we saw that as a gap and so from top down Weve brought in the knowledge and obviously focused on partnering.

To start.

And we'll continue to look at it because it's really the third leg of the story as far as I'm concerned and unlocking value for pharma for the Doctor for the pharmacist and for the patient.

To a degree that could really affect the outcome. So we're excited about it it's early days, but I'm definitely a focus.

The third like that you mentioned is the direct.

Connection to the patient.

Yes, I pointed out there yeah. Okay. Thank you you got it thanks.

Thanks for your questions.

Yep.

So let's take our next question from Harvey Poppel Coptic Okay.

Thank you very much will a super quarter amazing.

Even improved on your prerelease pre announcement, we said 10 million.

Reported 10, and a half that's not a small number going back in time. Thank you one question about the profitability.

And if I did the math correctly.

You flipped about $2 million or.

The loss to a gain in non gas.

Earnings on what is about a five and a half million dollars level of revenue on a year over year basis. So you know so.

Matt says that's 36%.

He said.

Indicative I know, it's only a single point in time is that indicative of the green down potential of his economic model or or is it too high or is it alone.

Thanks, sorry, great to hear your voice [noise], Yeah, very proud of the corridor I think it's early days on that I think we can improve on that.

We have a if you think about our model. We've got the network major investments have been made we've got a team that can scale to topline.

And our cost as a Rev share, which is known so.

I think what's good about Q3 is it's just a true corridor. So there's no aberration no no blip in revenue and that's artificial no costs, that's a stand out and I think as investors. That's a good line to look at as we improve the top line you should see improvement on the <unk> the non-GAAP EBITDA line.

Which which we've been talking about so I would imagine there's some relief among our shareholder base and it just gives us more flexibility to grow the business. So very excited about that outcome, but yet we would expect aspirationally.

Do you know, if we're above 60% to 25% plus EBITDA number.

Right.

Secondly on <unk> you mentioned the pipeline its been discussed very nicely on this call a lot of new information.

Do you consider the pipeline to be essentially in terms of timeframe.

The business for the fourth quarter and 21 in other words is it basically at this point in the year, a 15 month kind of horizon or is yours different horizons is that shift during the course of year.

No I think 15 to 18 months is a safe horizon I, probably go to 18, just because we do have some engagements that.

Kick all kicked off in Q3, or Q4, which would go into 21 22 sites I'd say, it's safer to look at it as an 18 month horizon.

The third facility would you agree with that.

I'm sorry.

Yes, that's correct.

Okay and third just shifting gears totally during the quarter of course, there was a very splashy IPO with the GT Rx good Rx.

And I.

I think for some who arent familiar with the space Oh.

Might regard that and in a couple of different ways first what's your thought on them being in any way a competitor either currently in the future.

And secondly, what does their IPO imply about the valuation of opioids.

Great questions. Obviously, we are we like good Rx, we don't view them as competition their model is a direct to consumer.

They've done a really nice job, putting this the type of technology in place to to help people understand.

See price the way it can be and digitally enabled that so don't view them as competition. We do you feel like their presence in the market increases awareness across the board that money consumers patients doctors nurses pharmacies pharma.

Just about the importance of price and affordability. So net net we think that tide did rise all boats.

As you know we do have a generic partner that helps with a cash cards, we've been working with them for years there.

Different stripes and get our X, but same mission is to help people afford medication. So we totally believe in the space and we are not surprised by the reaction to them because they are they do they have a brand that's really known to consumers.

And if anyone was able to see the non deal road. The deal Road show they did as part of their IPO.

IPO you I think you'd walk away really impressed with that company.

Mary do you have anything more you want to add on Ttrx Mena, we've been known them for a while but you've got some good thoughts too.

Yeah, I think here he Harvey I think that the low income.

One thing to remember is that we are primarily have been communicating to provide everything into patient three providers now weve added our direct to patient based engagement solutions that we've talked about and we are primarily branded.

In our FERC, I said branded medications and the patient support programs affordability programs for branded solutions, whereas good Rx started and it's still and only a direct to consumer they're not a direct to provider company. So their direct to consumer and they're focused on generics. So.

They're really in many ways the inverse upfront we are what they don't do it they don't do really push that we push the situation like anything affordability or adherence are both you push them to providers in workflow, we push them to patients via SMS text and it's just a different model.

They're pole model, so, they're very complimentary, but not competitive.

Thank you very much.

Thanks, Harvey the Great night.

That concludes our call opinions detection and.

I'd now like to turn the call back over to you pick out though please go ahead.

Thanks, Sarah and thanks, everyone for joining the call today, if he can take just one thing away from our discussion I hope, it's the understanding of our view to very strong growth this year and believe generate tremendous value for our shareholders because of our sustainable strategic advantage and these market tailwinds and beyond all the numbers I hope you can see that grow.

We ended the unique culture dedicated to do something truly valuable in which makes a difference in people's lives from patients to physicians and beyond.

We do not give guidance as an early stage public company and especially in this current environment, but given everything you've heard today and what we can see we are very optimistic for a very strong finish to 2020 now with that let's wrap up the call I don't have a good evening. Thanks for your time.

Yes.

Before we conclude today's call I would like to provide the company public statement that includes important cautions regarding forward looking statements during todays call.

Made by management during todays call may contain forward looking statements within the definition of section 27, eight and the Securities Act of my team definitely I've amended and section 21 E. I think you can do that I was making 34 as amended.

<unk> looking statements should not be making an investment decision words anticipate estimate expect possibly taking into more expressions identify forward looking statements and they speak only to the date.

That's it for me such forward looking statements in this call I'm quick Fitments regarding estimation of Carl just don't like it ties market penetration revenue growth gross margin operating.

Profitability cash flow technology investment proposition.

Property acquisition upcoming announcement and the need for raising additional capital. They also include the management's expectations for the rest of the year and the adoption of the Companys digital health platform.

The company undertakes no obligation to publicly update or revise any forward looking statement.

Whether because of new information future them, but otherwise forward looking statements are inherently subject to risks and uncertainty, which cannot be predicted or quantified future events and actual results could differ materially from both set forth in contemplated by or underlying before I'm Lucky statement.

Well, that's an uncertainty to us of course looking statements are subject to include but are not limited to the impact of government regulation competition and other material that well.

Yes, and uncertainty too much forward looking statements I forget it could affect your business in financial results were included in the company's annual report on form 10-K, but at the school year ended December 31st 2014 form is available on the company's website and on the FCC last I I think you talked about before we end todays conference I would like to.

And everyone that this call will be available for replay starting later this evening running through November Thirtyth. Please.

Please refer to todays press release for violent replay instructions they'll they'll about via the company's website at www dot optimize <unk> dot com. Thank you for joining us today that concludes the call you may now disconnect.

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