Q3 2024 OptimizeRx Corp Earnings Call
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Speaker Change: Good afternoon, everyone, and thank you for joining OptimizeRx's third quarter fiscal 2024 earnings call. With us today is OptimizeRx's Chief Executive Officer, William Febbo. He is joined by Chief Financial Officer Ed Stelmakh, President Steve Silvestro, General Counsel Marion Odens-Ford, and Senior Vice President of Corporate Finance, Andrew DaSilva.
Speaker Change: I would like to remind everyone that today's call is being recorded and will be made available for replay via webcast only. Instructions are included in today's press release and in the investors section of the company's website.
Speaker Change: Now, I would like to turn the call over to OptimizeRx CEO, William Febbo. Sir, please go ahead.
William Febbo: Thank you, operator, and good afternoon to everyone joining today's third quarter 2024 earnings call.
William Febbo: To get started, while our year-over-year top-line revenue grew 30% and came in at $21.3 million, it fell short of our expectations for the quarter.
William Febbo: This is largely due to a shortfall with the DTC side of the business, which we acquired last year.
William Febbo: However, we are pleased with our legacy HCP business growth, bottom line performance, and cash flow generation in the quarter.
William Febbo: We were able to realize incremental savings during the year as we completed the integrations of the combined commercial businesses and found operating efficiencies on top of what we had initially expected at the time of the acquisition.
William Febbo: As a result, we're updating our guidance and are now expecting 2024 annual revenue to come in between $88 and $92 million for 2024, with a modest change to the adjusted EBITDA landing between $8 and $10 million.
William Febbo: Given we are well into November, we have high visibility on this revenue guidance.
William Febbo: Regarding the revenue shortfall, we encountered macro shifts at the DTC business, specifically the market trend away from managed services, where we create compliant audiences and manage media buying for the clients, towards a self-service model.
William Febbo: In this self-service model, we provide audiences to clients who then use them to run their own messaging campaigns. Self-service is specific to the DTC business and less common on the HCP side of the business.
Thank you very much.
in this self-service model, which has become our primary focus.
William Febbo: We built compliant audiences in 50 states for customers to purchase for their own digital media.
William Febbo: This patent-protected solution is our micro-neighborhood targeting and is experiencing strong growth, with a notable percentage increase in customer engagements during the year. However, despite the growth in micro-neighborhood targeting, it has not yet offset the decline in our managed services.
William Febbo: Acquiring Medix Health during the fourth quarter of 2023 made it challenging to capture customer wallet share in the middle of the calendar year sales cycle.
William Febbo: However, we have implemented commercial changes going into 2025 that we believe will resolve the softness we saw in our DTC business this year as we focus a greater portion of our efforts on securing self-service revenue streams.
William Febbo: With one year as an expanded team, we are seeing continued cross-selling and up-selling, which should have a very positive impact on 2025, given the year-over-year growth in our pipeline build thus far.
William Febbo: A top three pharmaceutical manufacturer is leaning into this solution, especially as they navigate an increasingly complex regulatory environment spreading across multiple states.
William Febbo: This client alone could mean significant growth in 2025 in DTC. With privacy regulations expected to expand nationwide, we are well positioned to meet the market's evolving privacy demands.
William Febbo: We remain very bullish on our business and our industry thesis around the combination of DTC and HCP under one platform and our customers are experiencing meaningful value-add through the marriage of HCP and DTC.
William Febbo: In fact, we recently held a panel discussion with the top five pharmaceutical company at Digital Pharma East, where they confirmed this market need and value.
William Febbo: I would encourage everyone to go to our website and listen to the panel. It's a harbinger of where the market is going and how far ahead we are with a scalable technology-enabled solution. We continue to be the only company among our peers providing this union at scale.
William Febbo: We are seeing progress with growing our total wallet share with our largest customers, still dominated by our HCP business.
William Febbo: We now have one client expected to surpass $15 million of in-year revenue and see at least four customers for 2025, which are expected to generate over $10 million in revenue.
William Febbo: All this gives us confidence in the business, its trajectory, and the value proposition to our client base. This is how Pharma scales with their partners, and we are thrilled they trust us to help them with commercialization.
William Febbo: Our point of care network continues to grow, and we recently added several EHR partners to our network, incrementally adding thousands of HCPs.
William Febbo: Our channel partner network continues to be our largest moat, and we have seen potential competitors attempt to get into the space, but have not seen anyone show the ability to succeed with scale.
William Febbo: In a similar vein, on the DTC side of the business, we continue to expand our direct integrations with leading publishers and media partners, which allow us to extend our reach to support both direct and indirect go-to-market execution.
William Febbo: This enables us to sell the publishers and media partners or sell through them as they approve use of our audience data in their publishing networks.
William Febbo: We believe we have the right solutions, and the right people, to execute on our strategic roadmap.
William Febbo: with the addition of GAP to optimize our X omni-channel network.
We have a pioneering and foundational AI-directed capability.
William Febbo: which removes the mystique of seamlessly integrating point-of-care and traditional digital media, offering a transparent and measurable solution for pharmaceutical marketing that is able to reach nearly 240 million U.S. adult lives and 2 million HCPs.
William Febbo: DAP coupled with our proprietary EHR network and channels outside of the EHRs are driving powerful next best action capabilities based on dynamic real-world data.
William Febbo: As a result, the app is now used to power CRM alerts, as well as social media, web display, and other mass digital communication channels, which fosters greater efficiency in collaboration with our customer sales forces.
William Febbo: Optimizer X is expanding its AI solution work with customers, while others in our space are still trying to figure out how to apply AI.
William Febbo: As a result, I believe we have an opportunity to capture a significant market share in the coming quarters and years to drive highly profitable growth.
Speaker Change: And with that, I would like to turn the call over to our CFO, Ed Stelmakh, who will walk us through our financial details. Ed?
Thank you for watching!
Ed Stelmakh: Thank you, Will, and good afternoon, everyone. A press release was issued with the financial results of our third quarter, and it's September 30th, 2024. A copy of it is available for viewing, and may be downloaded from the investigation section of our website, and additional information can be obtained through our forthcoming 10Q.
Ed Stelmakh: Their quarter revenue came in at $21.3 million, an increase of 30% from the $16.3 million we recognized during the same period in 2023.
Ed Stelmakh: Gross margin for the quarter increased to 60% in the quarter ended September 30th, 2023, 63.1% in the quarter ended September 30th, 2024.
Ed Stelmakh: Year-over-year gross margin expansion is tied to higher debt-related revenue, as well as a favorable channel-partner mix.
Ed Stelmakh: Our operating expenses for the quarter ended September 30, 2024, increased by $8.7 million year-over-year, largely due to the Medic's Health acquisition and a $7.5 million goodwill impairment charge.
Ed Stelmakh: And we saw significant benefits from cost-cutting initiatives that approach $5 million annually, tied to the integration efforts with acquisition.
Ed Stelmakh: We had a net loss of $9.1 million, or $0.50 per basic and fully diluted share, for the three months ended September 30, 2024.
Ed Stelmakh: as compared to a net loss of $2.9 million or $0.17 for basic and fully delivered share for the same three-month period in 2023.
Ed Stelmakh: On a non-GAAP basis, our net income for the third quarter of 2024 was $2.3 million, or $0.12, per fully diluted shares outstanding.
Ed Stelmakh: as compared to a non-GAAP net income of $1.6 million or $0.09 per fully delivered share outstanding in the same year-ago period. Our adjusted EBITDA came at $2.7 million.
Ed Stelmakh: We're happy to see that this came in ahead of our expectations and highlights our improving margins and cost-cutting initiatives.
Ed Stelmakh: Operating cash flow came in at $4.7 million for the first three quarters of 2024, and we ended the quarter with $16.1 million cash balance, as compared to $13.9 million on December 31, 2023.
Ed Stelmakh: At the end of the third quarter, the principal of our debt financing stood at $36.8 million.
Ed Stelmakh: If you recall, to help fund the $84.5 million cash portion of last October's Medix Health acquisition, companies took on $40 million in debt financing, and we paid off $3.2 million in principal through the third quarter of 2024.
Ed Stelmakh: In addition, we made an incremental $2 million pay down in October. We have paid down $5.2 million in the first 12 months since the acquisition was consummated, way ahead of the required schedule from our operational cash flow.
Ed Stelmakh: We continue to believe we are well-funded to execute against their operational goals.
Now let's turn to our KPIs.
for the third quarter of 2024.
Ed Stelmakh: Average revenue for TAPS 20 pharmaceutical manufacturers now stands at $2.8 million and we work with all TAPS 20 largest pharma companies in the world.
Ed Stelmakh: Net revenue retention rate is showing an improvement at 127% up from 93% in Q3 2023.
Ed Stelmakh: Meanwhile, revenue for FTE came in at $630,000, topping the $568,000 we posted in Q3 2023.
William Febbo: And with that, I'll turn the call back over to Will. Will. Thank you, Ed. Operator, now let's move to Q&A.
We will now begin the question and answer session.
Speaker Change: To ask a question, you may press star then 1 on your telephone keypad.
Speaker Change: If you are using a speakerphone, please pick up the handset before pressing the keys.
Speaker Change: To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster.
Speaker Change: The first question is from Ryan Daniels with William Blair. Please go ahead.
Speaker Change: Yeah guys, thanks for taking the questions. Maybe given some of the weakness you saw in the medics business during the quarter, I'm curious if you could talk
Speaker Change: about any go-to-market changes you're making specific to that asset, number one, and then number two, given the strength you're seeing in kind of the legacy core business with DAP, are you shifting any more management or sales focus to that specific offering on a go-forward basis?
Speaker Change: Hey, Ryan. Yeah, great question. So, relative to MedEx, I'll start and then Steve you can add in if you want.
relative to Medicare. We, through
Speaker Change: Q2 and the Q3 finalized the enhancement of that sales team And obviously we had a sense of this shift materializing and feel like we have absolutely the right team to go after this shift to self-service model
Speaker Change: as well as a group that's sophisticated enough to understand how DAP is a real differentiator relative to DTC.
So NetNet, the go-to-market, is the same but enhanced team.
Speaker Change: And we also made a lot of progress coordinating the marketing efforts, which just allow that message to get out there. And if you remember, and as we talked about in the prepared remarks, we really believe that pharma is going to lean towards combining DTC and HCP.
Speaker Change: really as a way to get one true source of data to allow them to make quicker, more agile marketing decisions.
Speaker Change: And so go-to-market, same, enhanced with team. And on the core, you know, we continually invest in that team. It's a very experienced team, obviously, now with the years behind us.
Speaker Change: and what I've seen is just a tremendous cross-out effort between the two which is why we reference pipeline just being up year over year and I think it's tributal to that team. Steve you want to add anything to that?
bringing DAPT into that audience creation.
Speaker Change: is really going to be a game-changer, we think, in that space. I mean, this space, DTC specifically, is largely a...
Speaker Change: a space that operates with static audiences, meaning they pull an audience one time and execute messages.
Speaker Change: throughout the course of the program and as you know from leaning way into DAP, DAP is real-time update and so there is a massive first mover advantage by bringing DAP into that and we're you know well down the road there with a couple of already
Speaker Change: I think we're encouraged by that, wish it was moving faster to fill the gap for the managed service shift.
Speaker Change: But the good news is, is I think the overall business profile, in terms of margin and execution, the renewability, all of those things improve by moving away from managed service and into self-service.
Speaker Change: which is where that business needed to go so I think we're encouraged by the change but yeah unfortunately it gives us a bit of a hiccup on the quarter.
Yeah, yeah, understood.
Speaker Change: All right, and then it sounds like, you know, sales pipeline is good, new DAP contracts good, the metric you provided on the four clients for next year over 10 million, great. So, question there, is that...
Speaker Change: I know you don't want to provide an outlook for 2025, but maybe, you know, assuming you end the year at that 90 million mark, what type of growth would you be satisfied with or comfortable with for 2025? Thanks.
Speaker Change: Yeah, thanks Ryan. Yeah, it's a little early. We'll be back to the market on 25, but to answer your direct question, yes, that's all in-year revenue.
Speaker Change: And what's really been encouraging is just seeing multiple enterprise-like discussions, not just those four, but others that are also climbing up. As you saw, you know, our average KPI for manufacturer keeps moving up.
I think we'll keep seeing that trend.
Speaker Change: and what that really means on the four that we have visibility on is there's just more opportunity to for others to follow and and generally that is how pharma will work you've got a couple you know early believers and you start to scale and prove it out and have the right return on marketing investment
Speaker Change: and then the others come. And I think between our time at some of the conferences and also just seeing that kind of visibility this time last year, we did not have that visibility.
So.
Yeah
Speaker Change: Okay, and then maybe one more if I could. I apologize for doing three instead of one in the follow-up.
Speaker Change: If I do look at your key performance indicators, you know, the average revenue per top 20.
Speaker Change: is up about almost 50% year over year, which is great to see, versus the revenue growth at 30. So does that mean exactly what you just said, that the bigger companies are kind of latching on to this being a little bit more innovative and some of the smaller pharma manufacturers are a little bit harder to move towards DAP or some of these integrated programs? Is that a fair thought?
Speaker Change: It's a mix of things. I think there's some truth in that and then there's also just some of the transitional way for managed service.
that's going to impact it as well.
is they are buying into the more precision-based
Speaker Change: And we have an incredible position in there, and adding DTC...
Speaker Change: In the last six months, I've seen just our profile as a company within the client base being taken much more seriously.
and, frankly, the whole team has been fully trained up.
Speaker Change: It really adds a lot of punch to it, so I would anticipate others are going to start moving towards the bigger enterprise discussions. And with DTC and HCP together, that can move faster than if we were just doing HCP. So, very encouraging.
Okay, great. Thanks, guys.
Thanks, Ryan.
Speaker Change: The next question is from Sean Dodge with RBC Capital Markets. Please go ahead.
Speaker Change: Yeah, thanks. Maybe just going back to pipeline and backdrop. Will, you mentioned some significant progress with the pipeline and seeing pharma continuing to lean into digital. Is there any quantification or kind of other bookends you can share with us just to give kind of some sense of how much bigger or how much more advanced the value of your pipeline is now versus maybe this time last year?
Speaker Change: Yeah, we've kind of gotten away from pipeline as a metric, but we've basically doubled the sales force right year-over-year with the addition of medics and then the continued investment in the team, both sales, marketing, account management, and operations.
Speaker Change: And it's, you know, it's a higher percentage than the growth on the quarter, but we, you know, pipeline for us is
Speaker Change: an indicator for the year and then having the visibility around the 4 at 10 million plus.
Speaker Change: You know, we just haven't had that before. So I think the, I'll ask Steve to comment, but the pipeline is just cleaner, smarter, and the market really understands what we do now in terms of the clients.
Yeah, hey Sean, good to hear your voice.
Speaker Change: In addition to that, I would say, you know, one of the challenges with the medics business sort of acquiring it, you heard Will in his prepared remarks, during the actual RFP cycle, just smack dab in the middle of it.
I do think there was some disruption around that.
Speaker Change: And what we've learned from now having that business for a little over a year is that it's heavily dependent on the RFP cycle more so than our core HCP business. We've got
Speaker Change: levers in here to be able to accelerate there and close deals, you know, with a with a pretty good velocity.
Speaker Change: on the DTC business, we're more reliant on the annual cycle. And right now, because that team is leaning in so well on the annual cycle, as Will said, the pipeline is building very, very nicely. So I think that we're encouraged by that.
Okay, that's good color.
Speaker Change: The 24 guidance for the full year continues to apply a pretty significant step up in Q4 revenue. Will, you alluded to it, but anything you can share just on visibility you have into that? It's mid-November now. Is there any go-get left in the guidance? Is, I guess, everything in need?
for that in in backlog at this point.
Yeah, very minimal go-get, correct.
Yeah, high visibility.
Okay.
Speaker Change: You're great and then just last one for me since you talked about sales cycle before on some of these larger deals being a little bit
Speaker Change: Longer up front, but ultimately they're larger deals, so well worth the effort. I guess any change you've seen since then in terms of sales cycles? Are these still taking a little bit longer? Are you seeing anything kind of accelerate or drawing out more heading into next year?
Yes, you do. Thanks for the question.
Speaker Change: probably a probably 20% improvement which I think is you know largely a credit to two things one we've got a more mature sales force which is doing an excellent job of driving that business and two our legal team and contracts team have done an absolutely spectacular job of streamlining all of the contractual stuff with our clients which has just made it easier to do business with us
Speaker Change: So I think that's helping on the sales cycle. On the DPC side, like I said earlier, we're really relying on that RFP cycle. So sales cycle is still about the same, but I think it's within the bands of what's appropriate for that. But again, I think we're encouraged, you know, early days, but encouraged by the pipeline growth.
Speaker Change: and you know have a ton of confidence in the new hires and folks that we've brought on from all the key competitors in that space. So excited to see what what the rest of Q4 looks like and what Q1 will bring for that business specifically and I think we've got a great deal of faith and confidence in it at this point.
Thank you.
Okay, great. Thanks again.
Speaker Change: The next question is from Kyle Bowser with B Reilly. Please go ahead.
Speaker Change: Hi, great, thanks for taking my questions. Maybe I'll just start off...
Speaker Change: on some housekeeping things. So last quarter, I think there was a slight miss just based on that one contract that kind of slipped through.
Speaker Change: a $6 million contract, and then during Q3, we got an update.
Speaker Change: talking about how that contract has increased to $10 million, which is great, but the DAP portion of that was still kind of going through.
Speaker Change: Is that the same program as the $15 million contract that you talked about in today's press release?
Speaker Change: Maybe I'll start there. Yes. Yes. Yeah. Yeah, that's that's the in-year revenue expected from that particular contract
Speaker Change: Okay, so that went through and is expected to be captured both on the DTC and the DAP side.
That's one client. No, it's all HTTP, yeah.
Speaker Change: okay so it's all the HCP and it was approved and yeah it's all rolling in here
Yes, that's all in here.
Speaker Change: Got it. Got it. Excellent. And then, so EBITDA came in better than expected despite the lower sales. Can you talk a little bit more about the reasoning here? I didn't quite catch it. So, with the cost-cutting initiative?
Speaker Change: or the lower sales. Just curious how we were able to kind of capture that much margin expansion.
Speaker Change: Yes, there are a couple of components here, and obviously we have the expansion in gross margin.
Speaker Change: that's driven by channel partnership mix as well as product mix.
Speaker Change: And then secondly, we do have some nice tailwinds in Upper New Spence Runway.
Speaker Change: driven by the riff we did earlier in the quarter last quarter and then also just you know
savings across the board in terms of spend.
Okay, and I guess going forward...
Speaker Change: What are some expectations for how we should look at kind of that GNA line item? You know, we obviously have guidance for the balance of the year, but heading into next year with the strong pipeline, how should we be thinking about that?
Speaker Change: I mean, G&E, essentially, most of what we typically would dig into our run read has to do with merit increases and relatively small headcount growth.
Speaker Change: and any other incidentals or kind of one-off types of expenses related to expansion in the channel partnership.
ecosystem.
Outside of that, there's really not much anticipated.
Speaker Change: Okay, so I guess in terms of, you know, looking at how it should grow off of kind of 2024 levels, should it be similar to what we saw?
Thank you.
Speaker Change: You know, so are you saying 25 could be similar kind of growth of the OPEX or GNA line to what we're seeing in 24?
Speaker Change: You'll be in the ballpark. We'll come back with more precise numbers once we get the budget finalized.
but if you're looking for some directional kind of guidance.
If you add, you know, 5-6% married,
and there's a relatively small amount for head count growth.
Speaker Change: Plus, like I said before, some additional potential expansion in channel partnership realm. We should be pretty close.
Speaker Change: We'll come back with more precise numbers in a couple of months.
Speaker Change: Got it. I actually appreciate the color and I'll jump back in queue. Thank you.
Speaker Change: The next question is from David Grossman with Stiefel Financial. Please go ahead.
David Grossman: Good afternoon, thank you. I'm wondering, you know, you talked about these four contracts that could do over ten million dollars each next year. Can you give us a better sense of, you know, kind of what they may look like in terms of
You know, how much is HP versus, you know, DTC? I assume they're on, you know, dapped contracts.
David Grossman: and how did they perform from a margin profile, particularly the cadence over the year. There's some upfront implementation costs, just trying to get a sense for what this bundle may look like.
Sure. Steve, do you want to dive into those?
Steve Silvestro: Yeah, happy to take it. Hey, David, good to hear your voice. It so it's not for contracts for for clients, just want to be clear on that. So it's total client spend. The majority of that the lion's share of that will be the HCP business, it'll be let out by significant investment in gap.
Steve Silvestro: and in rules-based messaging, so things that are sort of the preempter to GAP and transitioning over there. They're definitively, for each of those, will have, you know,
Steve Silvestro: sort of upfront costs, similar to our normal GAP model of where you've got model costs, and then you have transaction revenues that are tied to messages.
Steve Silvestro: The gap components themselves being more subscriptive in nature, so a monthly data fee that's feeding in, and then a transactional price for messages that are being deployed. The idea there is to, number one, make it stickier, more recurring-like.
Steve Silvestro: And number two is to sort of smooth the revenue over time, just make it more predictable and easier to manage, so I get a cold.
Steve Silvestro: But that's sort of where we're headed. And good visibility there. We're talking, as Will said earlier, we're talking largely redoubles.
Steve Silvestro: and then the fourth one is sort of a new entrant, a different use case and one that we'll talk about as we get closer to it but again good pretty good visibility at this point as much as we've had.
Speaker Change: And just getting to that subscriptive, you know, comment that you made, you know, Steve, be sure.
Speaker Change: have better visibility? You said, I think if I heard you right, three of the four are renewals, right? Did I hear that right? Yeah, yeah, it's an important law.
Speaker Change: to get us to, you know, to the north of the $10 million mark, but...
Speaker Change: The renewability of those is high. As you know, our client net revenue retention is very high for our sector. And then secondly, the migration component is we're moving the DAP pieces from being sort of an upfront one-time.
Speaker Change: be to more of a subscriptive component where when a client subscribes to that there's a data piece that drops every single month.
Speaker Change: across the agreement. And that's really what we want to get to. It just behaves better.
Speaker Change: and it's easier to renew with the clients when we're engaging with them. There's not a pause to measure ROI. It takes away all of that sort of stop and start dynamic that we've been trying to overcome and I think we've got a good way to do that this time.
Speaker Change: Right. And then, you know, maybe in a similar context but a different question, just thinking about, you know, this mixed shift, you know, to self-service.
in the DTC business.
Speaker Change: How do you want us to think about that, you know, how...
Speaker Change: In terms of year-over-year revenue growth, because we're going to anniversary, you know, the acquisition in the fourth quarter, so
Speaker Change: You know, just wondering, are we going to have headwinds? Should we expect to see headwinds from this next shift?
going into 2025.
Speaker Change: And I think you made a reference to the margins maybe being better without the managed service components. So maybe you could just help us better understand what impact this mixed shift may have on both growth and margin.
Speaker Change: Yeah, I can start, Steve. Oh, go ahead. Go ahead. Go ahead. No, no, no. No, you first. I'll go after you.
Speaker Change: So I was just going to say, look, when you have managed services and media, right, it's chunkier revenue at the top, but the margins are lower, right?
Speaker Change: you're placing media. It's a lower-margin business and largely agencies live off that business, right? But the audiences and your data are really what's valuable and and Steve highlighted the two differences. He highlighted one of them, which is just having a dynamic audience.
Speaker Change: But we're not going to go forward and say that'll make up the complete difference in managed services going down. We will get more clarity on that, obviously, over the next couple of months. But it's actually it's a better business to be in, especially when the two start to come together.
Speaker Change: And so you've got a patient profile, a dynamic audience, both for HCPs and consumers. We think that's the future, and we're in a good place to do it. So I just wanted to get that out there. Steve, feel free to jump in.
Steve Silvestro: No, I think you nailed it. I mean, it's massively differentiated.
David Grossman: the ability to bring self-service with dynamicity, David, to it, so taking the dynamic nature of DAP.
turning that into the self-serve audience.
David Grossman: which has already now been done, and then deploying that similar to kind of Ryan's question. It's just a, it's a massive differentiator in the space, and I think right now we're in the middle of...
David Grossman: The RFP cycle, and as I shared earlier, this is a business, DTC, is a business that's dependent, much more dependent than HCP, on a successful RFP cycle. And so we are laser focused as a team on making sure that we execute well there.
David Grossman: The last piece, just to add though, there's really just two pieces, right? Dynamic audience, we're going to continue to see self-service micro-neighborhood targeting grow through Q4 into 25. It won't outpace managed services.
David Grossman: So we don't expect that to be a big top-line driver for the next 18 months.
Thank you.
David Grossman: but it'll be, it contributes and it brings the stories together and it's highly valuable and the other piece that is is still taking shape is and this is one of the reasons why we really like Medix and the methodology and their patented methodology is it's a more compliant
Solution.
David Grossman: and, you know, on a state-by-state basis, right, regardless of what's happening in the country, these states are moving this way, right, to this standard.
David Grossman: and we have a compliant method, and we're seeing our clients take notice to that. So a lot will depend on how fast they take notice to that. That will be a growth driver, and we'll talk to that each quarter next year.
Speaker Change: All right, got it. Thanks very much. Very helpful incremental context. Appreciate that.
Thanks, David.
Speaker Change: The next question is from Konstantin Davidoff with Citizens JMP. Please go ahead. Yeah, just a follow-up on self-service. Who are you competing against for those kind of opportunities?
Speaker Change: I guess a related question, for you to really scale that business up from here, do you have to, you know, do anything to invest in or sort of, you know, add resources to really, you know, take advantage of some of the growth potential in that part of your pipeline?
Thank you.
Speaker Change: Yeah, I'll start. We don't need to, we've done the investing, we've got the team, the tech, the data, platform, no incremental CapEx there. If anything, we've gotten smarter with data and how to use it in lots of different ways.
Speaker Change: As Steve said, we've been very focused internally on the product.
Speaker Change: and operations team have done a sensational job just leveraging data with tech and transparency and operationalizing it so that it helps our clients. I think that's a key takeaway there. I don't know, Steve, do you want to add anything to that?
Steve Silvestro: I think you said it. I mean at this point really, Konstantin, it's about focus and making sure that we execute well, but the investments have already been made. Great product team, excellent salespeople. I just think we've got to lean in and stay focused on it, but investments have been made.
Speaker Change: Yeah, and relative to the competition, you know, I'm not going to give them free airtime on the call, but I think how we stand out, there are people, there are clients, I mean customers.
Sorry, there are competitors on the DTC side.
Most of those competitors do not have the HCP component.
Speaker Change: and then we believe those two elements of being dynamic audiences and compliant.
Speaker Change: you know get get us sort of those three legs to stand above above the market and we're very focused on audience quality and bringing those together and We're seeing really nice progress there. So if these things all come together that will accelerate growth
Speaker Change: of renewals, number one. Number two, what are you seeing on maybe some of the earlier DAP clients as they come up for renewal in terms of either revenue or scope lift or anything else you'd call out? Thanks.
Thank you.
Speaker Change: Happy to talk to it. So, you know, basically from last year to this year, we've doubled the number of DAPT deals, Constantine, that we've done. So we've got accrete happening. We're also doing renewals at the same time.
Speaker Change: The renewal rate is very high for DAP, just for all the reasons that you mentioned.
articulated earlier and several other folks have done.
It still is dependent.
Speaker Change: to where drugs are in their life cycle and where people are prioritizing spend. So we anticipate that while we'll have a good renewal rate,
Speaker Change: when things go LOE or there are shifts in marketing spend, et cetera.
Speaker Change: It'll still be subject to those shifts and changes, but so far the renewal rate is very
Solid.
Speaker Change: I think we're encouraged by that. We won't know the full renewal rate, obviously we'll share that till the end of the year once we've had all of the programs pause, measure, and renew.
Speaker Change: and we'll be, you know, happy to share that. But I think we're all encouraged by the progress. And, you know, if we can, if we continue to march on this sort of double, then double, then double again, it's, you know, it's going to have a very meaningful impact on revenue.
Speaker Change: Again, if you have a question, please press star then 1. The next question is from Stephanie Davis with Barclays. Please go ahead.
Stephanie Davis: Hey guys, I hate to be a dead horse, but I got more questions on the self-service model.
Stephanie Davis: two quick ones before I kind of go and pivot. The first.
Speaker Change: Yes, the self-service model is more attractive than some of the managed services, but are there any concerns that MAC remains tough? It could create challenges since it makes buying activity, or rather a lack of buying activity, a little bit easier to do in a more real-time basis?
Speaker Change: I guess, secondly, what has kept you from expanding this in a more meaningful way into HCP?
Let's tackle the first one.
Speaker Change: Look, I think the dynamic nature, what we're seeing and Pipeline is sort of telling us this, is pharma believes in DTC, they believe in precision, they like dynamic, and they will require compliance, a compliant method over time. How fast that happens will drive growth.
Speaker Change: and I think we're in the perfect position for it. I think at our stage and where we are, the macro, we're not fully mature baked business, right? So the macro is relative on that. I think there's still plenty of spend.
Speaker Change: And you're still seeing allocations going that way, and I think it'll continue. On the HDP side, you know, we've invested heavily. We're obviously deep into
Speaker Change: the more predictive AI-enabled dApp, and we're seeing adoption there. But rules-based messaging is still a real piece of our business, and we think it will continue to be a real piece of our business, because...
Speaker Change: all along the cycle of large, pharma, mid, small, they're all coming to digital, right? It's one of the most efficient ways to spend your money. You've seen it scale in other businesses in the market.
Speaker Change: and so I think we're viewed as an honest broker and a good player in the business and and that's going to attract more pharma.
Speaker Change: and other sectors. For example, medtech is now a real space for us and we're in all the top medtech companies.
Speaker Change: We continue to see that expand. Could we do it faster?
Speaker Change: You can't force pharma to do more. I think we're getting to that place where our name is really well known. For the first time in our history, a client sat with us on a stage and actually talked about what we do together. I think that's a sign.
Speaker Change: Well, I think that the takeaway, Stephanie, is, yeah, this is an early business. And so we think we're in a great place to capture more over time and, you know, we'll continue to invest as we need to.
Speaker Change: And on the HGP front, we've heard of PhRMA really leaning into marketing the HGPs, or GOP ones specifically. That's becoming a bit more of a crowded field. I was hoping you could give us your view from the ground of that, also what you're seeing.
Speaker Change: And I do think they're going to, you know, there's a lot of different strategies going on with the approach to the consumer and the HCP, and got a couple that are out there ahead of the rest, and I think the spend will continue to get larger.
Speaker Change: in that sector. And that does two things. One, they're going to pick people to scale with, and we have scale, so we think we'll win there. And secondly, it puts pressure on the other brands in other sectors, right, because this is a space that goes across multiple therapeutic areas.
Speaker Change: And so we think it will actually increase the spend in other therapeutic areas as well, just to get mindshare and to be in the thoughts when decisions are being made on therapeutics. Steve, do you want to add anything to that space in particular?
Steve Silvestro: Yeah, I mean, I would just add two things that sort of support exactly what you said Well, one is, you know, we're seeing a significant push, Stephanie, from all of these massive manufacturers that have got these GLP-1 franchises to communicate directly with the patients in a more meaningful way given that these are behaving a little bit like lifestyle drugs
Steve Silvestro: and then secondly, so we're seeing massive investment there, secondly on the HCP side because they are all basically, there's very little differentiation between these GLP ones with the exception of one that has a cardiology indication also approved for it.
The timing element and the pricing elements are really critical.
Steve Silvestro: for Pharma to be able to capture patients via the HCP.
Steve Silvestro: and so we are seeing much more of a lean-in to consideration of those dynamics.
Steve Silvestro: and they're just easy to get the GLP-1. And it's a little bit more than that. There are prior requisites and so forth, as you know. So I would say we do a really good job of tackling both of those pieces and enabling those messages to get to the right folks at the right time.
Thank you much.
Speaker Change: This concludes our question and answer session. I would like to turn the conference back over to William Febbo for any closing remarks.
William Febbo: Thank You operator and thank you everyone for joining us today. As we approach the close of the fiscal year we want to extend our heartfelt gratitude to our shareholders for staying the course with us on this journey.
William Febbo: I would especially like to thank the team at OptimizeRx. They are amazing. They work tirelessly to integrate these businesses and bring our platform to life.
William Febbo: benefiting our rapidly growing base of pharmaceutical clients and brands during this pivotal time in the technological landscape.
William Febbo: We remain a relatively young company with our dynamic audience activation platform, GAP, still in its infancy, and an evolving DTC business acquired just last year.
William Febbo: We remain ever-present serving our clients' needs as they continue to buy in to the adoption of our integrated HCP DTC businesses.
William Febbo: Well, it may take a little longer than we thought. There's a clear large market opportunity and we are squarely focused on it as one of the early leads at the table.
William Febbo: This has elevated our presence in the market among our clients, partners, and peers, and many have taken notice. It's not a matter of if, but when this company gets back to solid, organic growth. I encourage everyone to stay the course and believe in this team, as I do.
William Febbo: We'll be attending the conferences later this month, and I hope to provide some insights into the year ahead prior to our next earnings call.
William Febbo: Until then, thank you for your time and belief in the OptimizeRx team. Have a good night.
Speaker Change: Thank you, sir. Before we conclude today's call, I would like to provide this company's safe harbor statement that includes important cautions regarding forward-looking statements made during today's call.
Speaker Change: Statements made by management during today's call may contain forward-looking statements within the definition of Section 27A and the Securities Act of 1933, as amended, and Section 21E of the Securities Act of 1934, as amended.
Speaker Change: These forward-looking statements should not be used to make investment decisions.
Speaker Change: The words anticipate, estimate, expect, possible, and seeking, and similar expressions identify forward-looking statements.
Speaker Change: They may speak only to the date that such statements are made.
Speaker Change: Revenue growth, gross margin, operating expenses, profitability, cash flow, technology, investments, growth opportunities, acquisitions, upcoming announcements, and the need for raising additional capital.
Speaker Change: 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, whether because of new information, future events, or otherwise.
Speaker Change: Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified.
Speaker Change: Future events and actual results could differ materially from those set forth in, contemplated by, or underlying these forward-looking statements.
Speaker Change: 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.
Speaker Change: Risks and uncertainties to which forward-looking statements are subject to could affect business and financial results are included in the company's annual report on Form 10-K for the quarter ended December 31, 2023, its subsequent quarterly reports on Form 10-Q,
and his other filings with the Securities and Exchange Commission.
Speaker Change: These forms and filings are available on the company's website and on the SEC website at sec.gov
Speaker Change: Before we end today's conference, I would like to remind everyone that this call will be available for replay via webcast only starting later this evening, running through for a year.
Speaker Change: Please refer to today's press release for replay instructions available via the company's website at www.optimizerx.com
Speaker Change: Thank you for joining us today. This concludes today's conference call. You may now disconnect your lines.
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