Q2 2023 OptimizeRx Corporation Earnings Call
Speaker 1: You
Three months ended June 32020.
Care to a net loss of $3 9 million during the same period in 2022.
non-GAAP basis net loss for the second quarter of 2000 21.2 million or one.
For basic and fully diluted shares outstanding.
As compared to a non-GAAP net income of <unk> <unk>.
$7 million or <unk>.
<unk> <unk> per basic and fully diluted share same year ago period.
Operating cash flow came in at a loss of $2 4 million for the quarter.
Materially impacted by upfront integration fees paid to our channel partners, which are being amortized on our P&L over the life of the contract.
Our balance sheet remains strong with cash and cash equivalents totaling 62 7 million.
And when you see compared.
Compared to $74 1 million on December 31, 2022.
The majority of the decline was due to our share repurchase program, which we bought back 526999 shares of common stock for $7 5 million during the quarter.
We remain well capitalized to execute against our growth strategy and believe our balance sheet positions us to further invest in our core business, while driving profitable growth.
In addition, we are actively looking at M&A opportunities that fit within our strategic priorities.
Attractive valuations look compared to last year.
We remain confident in our long term growth outlook, however, given current market.
The market conditions.
<unk>, our 2023 full year revenue projections to come in between the mid 50% low $60 million range.
Our new range is both around the reasonable expectations for existing backlog midyear Upsells and new program of works opportunities.
Now, let's turn to our EPS for the second quarter 2023.
Do you have largely stabilized compared to the prior quarter.
Average revenue per cap 20th pharmaceutical manufacturer.
Table at $2 million.
We continue to work with the top 20 largest pharma companies in the world and 100% of the top 20 are going to have the majority of their sales tied to COVID-19 vaccines.
Net revenue retention rate is showing improvement at 89% from 86% in.
In Q1 2023.
Meanwhile, revenues per FTE came in at 560000.
Slightly below 5000 in Q1 2023.
As you can see if a market, yes sequential quarterly metrics are starting to show signs of stability and in some cases modest improvements.
Continue to work our way through the external market dynamics.
And that would that I would like to turn the call back over to Wil will.
Great operator, let's go to Q&A.
Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star followed by the one on your telephone keypad.
Rob acknowledging your request.
<unk> will be taking undue risk.
And should you wish to cancel your request. Please press the star followed later to one woman. Please first question.
Okay.
Your first question comes from the line of Ryan Daniels from William Blair.
Please go ahead.
Taking the questions and for the update will can you go into a little bit more detail regarding the guidance reduction specifically, if we look at the three areas you highlighted which are medical legal reviews, pushing business out which is a timing issue.
Macro headwinds and then the non core business weakness kind of how did each of those contribute to the lower outlook.
Yes, Thanks, Ryan good to hear your voice.
Yes, I would say, it's about a third a third a third spread out pretty evenly.
On the medical legal review, obviously theirs.
Yes, it's not it's not new to the space.
Like I said frustrating and impactful but.
It's just part of the current dynamic.
Relative to the other pieces.
I would say they represent about a third as well.
Inside the <unk>.
The adjustment on non core we had some.
Non core when you think about access and patient engagement.
We just had some disruption there and it's an evolving space. It's also less than 10% of our revenue so not not as impactful, but you put the three together and you've got yourself this slight pipeline mis.
But the team is focused on it the clients are there and luckily that basis pretty solid. So we think we can bring.
Bringing some of it back but not enough in this market, we want to be conservative.
Okay.
Then.
The biggest variables now for the remainder of the year, we're sitting here in less than four months left and you still have a pretty broad range. If we think of.
The new range you provided tonight. So what are some of the things that would need to hit or Miss to get you towards the upper and lower end of that range you provided.
I think there's two things and I'll, let Steve comment as well the two things that come to my mind are.
Jess Swift or decision, making.
Think.
The noise is dying down it's still exist, but a quick dying down and were given our focus and some of the recent attention too.
A piece of the strategy to reach physicians and patients, we're really well positioned for that.
Also believe we've got a nice <unk>.
<unk> into the agency World, which obviously managed a lot of the media dollars and have.
It continued expanding landing pads to capture some of those dollars Ed.
Steve anything else you want to add to that.
Yes, Ryan So just a couple of things I mentioned.
So kind of the bookends right now for the range as far as.
Commit commitments signed.
Right to go.
We're between 80 and 90% in the bank.
We basically have between 10 and 20% of our total revenue for the year there is still outstanding.
So we feel we've got enough good line of site tour.
Current opportunities in the pipeline as well as expected RFP season.
To fill that gap.
Okay, and then last one I'll hop off.
Talk about the 10%.
Reduction in the operating expenses, obviously, good operating expense control this quarter to have in line bottom line, despite the revenue mix, but what.
Is that is that going to be a workforce restructuring is it just keeping expenses in check. Despite the fact that you will start growing again.
Our refocus on go to market efforts with specific products, just a little bit more color there on what's going to be driving that thanks.
Yes, Ryan. So obviously this is a people business and we love our entire team and that comes first so we're not going to rush into any decisions were physically very strong and have always been very responsible with that part of the business.
But we're really going to hone in and focus on what's working well.
And.
And if something is not been will sunset. It we'll look to to move past it and so I think it was a combination of we're just going to hold off on hiring right. We're going to have some attrition.
And we're going to shift shift the focus into the sort of core business. They built this up today I think if you add.
Add all those things up you get there, but again I want to emphasize we're not in a rush to do that.
We will take a very very.
Good approach to handling it.
Okay.
Thank you. Thanks Ryan's question.
Thank you and your next question comes from the line of Sean Dodge from RBC capital markets. Please go ahead.
Yes, Thanks will you mentioned.
Another three RWD deal.
Which I think brings the total to nine now the three new ones is there any more detail you can give us on.
What those entail similar dissimilar are they to the first 60 Psi, maybe some sense of how big they could be and when they should start to ramp.
Sure I'm going to ask Steve Sylvester the to answer that one thanks, Steve.
Yeah happy to Hey, Sean good to hear from you.
So we are up to nine deals, which is I think a pretty good accomplishment as you heard will say earlier in the call. We're far ahead of anyone that would be trying to compete in this space in terms of bringing something to market that actually is executing.
The deals are pretty consistent in terms of composition. They all follow a very similar sort of.
Setup structure execution function.
And size wise, they're all sort of sort of similar as well I think one of the things that's noteworthy.
Would probably call out here is in several of the manufacturers will be early work last year and sort of generated rois, we've expanded to other assets within the scene manufacturers, meaning we're supporting other disease states for those same manufacturers based on all the good work and performance with the team did with the prior efforts and I think Sean that gives.
Kind of an idea.
Future opportunity as you've heard us talk a lot about cross sell up sell in the last I would say 12 months to 18 months for our audio Edr solution, which was extremely novel to the market.
Took a little bit for pharma to be able to understand it to get it through MLR is incurred will not already talk about now that it's through we're now starting to see a more rapid adoption.
Pretty exciting.
Okay, Great and then.
Doug.
Deals that are active now.
Any of those approaches.
Any type of renewal I guess is your expectation still deeply can renew pretty quickly relative to what has been the case in the past and then how are you.
Handling that are handicapping that when it comes to the guidance is there some assumption that some of these existing active ones renew within the year or are you just assuming they just kind of run out.
And don't.
Yes, I can tell <unk> go ahead go ahead go ahead, Steve Yeah, great. Thank you.
What we've seen what we've seen Sean is that these of all of the solutions. We have these are the most sticky.
And the reason why they are is because you're doing that basically creating an audience, meaning identifying a patient profile. There is work that goes into that build and windows execution functions performed it's very easy for the manufacturer to just carry on so our view on the renewals is very optimistic it's fast.
<unk> into our current thinking on guidance.
As you've heard both will and I'd say, we've been conservative with that with that guidance I think with that covers also what we're looking at on the <unk> front.
But we have every reason to be very optimistic with this specific line of our business.
We're pretty positive about it.
Okay, Alright, great. Thanks, again for taking the questions.
Thanks, Sean.
Thanks, Steve Thank you.
Once again should you have a question. Please press Star then the number one on your telephone keypad and your next question comes from the line of Eric <unk> from Lake Street. Please go ahead.
Yes, I wanted to focus on the guidance here mid 56 shoes, I'm coming up with roughly.
$58 5 million for the year, which would be down about $10 million versus your prior guidance.
Given the $27 million that we've done in the front half of the year, it's looking like.
And no debt.
We get to kind of a I don't know $31 million to $32 million across the back half of the year, how should we be thinking about the weighting of that 31 32 million across Q3, and Q4 will we see traditional seasonality, where Q4 is a big step up or is it just more prudent.
To model it flat across the two quarters.
Yeah, do you want to take that one.
Yes, Sir.
Hey, Eric how are you.
I would say.
Nowadays.
In the past nothing different we are being conservative as I said before.
It is 9% to 90% is the range right now for us as far as the commit commitments of concern.
So our plan of course is too.
Okay.
Hopefully exceed guidance the same.
Mhm.
Okay and then.
I thought I understood, but noncore was in now I'm not so sure when.
Will you referred to it as less than 10%. So I mean, if we just take Q3.
Round number sorry, Q2 in round numbers.
This strength was looking for 14, eight and you guys delivered 13 eight.
Let's start with that 13 eight.
Saying that non core is less than $1 million for <unk>.
Yes.
Okay.
I mean, we don't we don't.
We don't break things out but.
Just noncore, what they did contribute to the mix as well as the MLR that we referenced.
Okay, and then I.
Percent.
RWD AI have you given an actual revenue number.
RWD AI.
We have not broken that out yet, but as we fine tune. This model to really be driven by that is our key differentiator and value proposition, we'll get closer to that.
Yes.
It's going to be a combination of AI and enterprise that's what's the stickiest the best margin that's actually the most valuable client the doctor and the patient.
Youll see as we get through.
The next two quarters, we'll fine tune that more and more because thats at the end of the day, obviously, we've all read about AI endlessly.
When you actually try to apply it in healthcare, it's very tricky, but when youre working with these data sets that we are in your platform is connected the way we are the perfect application for machine learning to help our clients find and get patients on vacations that needs. So yes, we're going to we're going to get more and more for.
<unk> on that.
I referenced the three years in because I do not want the market to think we're just being opportunistic here.
Something we've been working on for the as I said a couple of years got a team. That's now really good at working with the clients.
And our partners and data providers. So that's.
That's a really unique skill set that's all tech enabled so.
Excited about it but we will get more specific about that Eric over the next couple of quarters.
Got it thanks for taking my questions.
Thanks, Eric.
Thank you and your next question comes from the line of Neil Chatterji from B Riley Securities. Please go ahead.
Hi, This is William on for Neil today, Thanks for taking my questions.
Just kind of curious if you could provide any additional color on the expected cadence of these.
RW deals throughout 2023, and and how things sort of shaped up in <unk> and then four.
How we should expect for second half.
I'll start and then I'll hand, it over to Steve we're.
We're in that part of the year, where RFP season is kicking in a lot of strategic discussions with clients around 2004.
So we wouldn't anticipate a lot of big arguably closing between now and the end of the year, but a lot of planning going on.
And that part has been very encouraging.
But I'll, let Steve talks.
<unk> disease in the trenches day to day.
Yeah, Hey, William Thanks for the question.
Yes, it's exactly what will said we're in the midst of the RFP season, right now and most of the conversations that we're having are larger strategic conversations where they are crossing franchises in the manufacturer I think that's an incredibly positive sign where we're having discussions now of not just can you support this drug for three.
Six months or 12 months can you support the entire portfolio of immunology and your support the entire portfolio of oncology and so forth.
And those are good places to be I think also one of the other <unk>.
Pieces that feels like pretty good tailwind in terms of margin.
In most cases, where we've done and implemented.
Programmable solutions, we've gotten strong C level support within the manufacturers based on the results.
Really good when you have C level executives is annualizing. This solution to other parts of the organization. So we fully anticipate a successful second half in terms of getting things up and running and then programs deploying in the first part of 2024.
It set us up for a really good year next year.
Got it I appreciate that extra color there one last one additional loan.
You mentioned in originally that you had basically 33% and 30 on what drove sort of the weakness during the second quarter in terms of macro headwinds impacting the second quarter.
Do we expect the same level of macro headwinds to continue into the second half and do we have any new strategies that we might be expecting to mitigate those headwinds.
Yes, I think look where you still see an FDA behind 21.
'twenty one approvals, that's still a real headwind thats for everybody in the industry.
Folks that's focused on specialty medications in marketing dollars.
While we're not seeing people jump to other companies. If you just pay attention to Linkedin Youre also seeing these companies not growing in terms of people if anything they may be doing the opposite at the manufacturer level, So theres still disruption there.
And then obviously the headwinds of just noise in the market that we've talked about but I think the noise is going to start to subside through RFP season.
I think the way we the way we are addressing this issue is really to double down on what's working and what's stickier and really it's the most exciting part of the business, where the growth is and I think just by doing that by simplifying the entire team focused on that we'll see an uptick in.
In productivity across the board so stay tuned on that we're pretty excited about it and.
We're very focused.
Got it.
I appreciate you, taking my questions and I'll jump back into queue. Thanks.
Thank you.
Thank you once again should you have a question. Please press Star then the number one on your telephone keypad.
As we have no further questions at this time I will now turn the call over to Mr. <unk> for closing comments. Thank you.
Thank you operator, thank you everyone for joining us on the call today.
As we work through these near term disruptions, we remain active in addressing farmers digital needs with.
With the current pharma digital Tam spend at greater than $10 billion and continuing to grow.
Working towards fortifying our position as the most complete AI powered digital point of care engagement partner for pharma in the marketplace.
We hope that the trends that have disrupted our historical growth.
Upside over the next coming quarters.
Lastly, we are being very proactive in our efforts to reverse current results due to headwinds and return our business to its historical growth trajectory.
We're greatly aware of the responsibility with which can be trusted to shoulder by our shareholders to this end we are aggressively hunting for accretive assets. In addition to strategic alternatives. So long as the value proposition to our stakeholders makes the decision an obvious one.
Thank to announce today, but we are very active in the market.
We also plan to have additional communication with investors prior to our third quarter earnings call with that I'd like to say, thanks, and I look forward to talking to you soon.
Bye.
Thank you Sir before we conclude today's call I would like to provide the company's safe Harbor statement that includes important cautions regarding forward looking statements made during today's call statements made by management. During today's call may contain forward looking statements with the diminution of sections with <unk> and <unk>.
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Such forward looking statements in this call including statements regarding estimation.
The addressable market size market penetration revenue growth gross margin operating expenses profitability cash flow technology investments growth.
Bush entities.
Nation upcoming announcements and the need for raising additional capital. They also include the management's expectations for the rest of the year and adoption of the company's digital health platform. The company undertakes no obligation to publicly update or revise any forward looking statements.
Because of new information future events or otherwise for getting statements are inherently subject to risks and uncertainties some of which cannot be predicted or quantified.
Future events and actual results could differ materially from those set forth in contemplated by or underlying these forward looking statements the risks and uncertainties to which forward looking statements are subject to include but are not limited to the effects of government regulation competition and other material.
Risks.
Risks and uncertainties to which forward looking statements are subject to could affect business and financial results.
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Later this evening regarding two four a year. Please refer to today's press release for replay instructions available via the company's website at www dot optimize our X dot com. Thank you for joining US today. This concludes today's conference call you may now disconnect.