OptimizeRx Corp Q3 FY2024 earnings call

• Revenue fell short of expectations due to a shortfall in the DTC managed services business, but micro-neighborhood targeting in DTC is growing. - Acquired Medicx Health in Q4 2023, and while challenging to capture wallet share mid-year, commercial changes for 2025 are planned to address DTC softness. - Cross-selling and up-selling are seeing growth, with a top three pharmaceutical manufacturer showing interest in the solution. - Point-of-care network continues to grow with added EHR partners. - DAAP is driving next best action capabilities and AI work with customers, with confidence in capturing market share.

Third quarter revenue was $21.3 million, a 30% increase from the same period in 2023. Gross margin improved to 63.1% in Q3 2024 from 60% in Q3 2023, driven by higher DAAP-related revenue and a favorable channel partner mix. Key KPIs include: average revenue per top 20 pharmaceutical manufacturer stands at $2.8 million; net revenue retention rate improved to 127% from 93% in Q3 2023; revenue for FTE was $630,000, up from $568,000 in Q3 2023. The HCP business saw growth, while the DTC business faced a shortfall due to a shift away from managed services to self-service.

2024 annual revenue is expected to be between $88 million and $92 million, with adjusted EBITDA between $8 million and $10 million. High visibility on 2024 revenue guidance. Focus on securing self-service revenue streams in 2025, with confidence in pipeline growth and potential significant growth from a top pharmaceutical manufacturer in DTC.

• Macro shifts in the DTC business away from managed services to self-service have impacted revenue, with micro-neighborhood targeting not yet offsetting the decline in managed services. - Challenges in capturing customer wallet share mid-year post-Medicx Health acquisition. - Privacy regulations expanding nationwide pose challenges but also opportunities, as the company needs to ensure it meets evolving privacy demands.

Q: Maybe given some of the weakness you saw in the Medicx business during the quarter, I'm curious if you could talk 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 DAAP, are you shifting any more management or sales focus to that specific offer on a go-forward basis?

A: I'll start and then, Steve, you can add in if you want. Relative to Medicx, yeah, we, through Q2 into 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 as well as a group that's sophisticated enough to understand how DAAP is a real differentiator relative to DTC. So net-net, the go-to-market is the same, but enhanced team. 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 really as a way to get one true source of data to allow them to make quicker, more agile marketing decisions. And so go to market, same, enhance with team. And on the core, we continually invest in that team. It's a very experienced team, obviously, now with the years behind us. And what I've seen is a tremendous cross-sell effort between the two, which is why we reference pipeline just being up year-over-year. And I think it's attributable to that team. Steve, you want to add anything to that?

Q: 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.

A: We've kind of gotten away from pipeline as a metric, but we've basically doubled the sales force year-over-year with the addition of Medicx and then the continued investment in the team, both sales, marketing, account management and operations. And it's a higher percentage than the growth on the quarter. But pipeline for us is an indicator for the year and then having the visibility around the four at $10 million plus, we just haven't had that before. I think 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.

Q: Maybe I'll just start off 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, the $6 million contract. And then during Q3, we got an update talking about how that contract has increased to $10 million, which is great. But the DAAP portion of that was still kind of going through the internal review process. Is that the same program as the $15 million contract that you talked about in today's press release? Maybe I'll start there.

A: That's the in-year revenue expected from that particular contract.