OptimizeRx Corporation Q1 FY2026 earnings call

• Core Business Performance & Market Context: The company delivered a solid Q1 2026 that beat consensus top and bottom line estimates. Ongoing short-to-intermediate term softness in contracted revenue is driven by MFN (most favored nation) pricing disruptions and macroeconomic factors that have led to more cautious pharma customer budget allocations, shorter contract durations, and delayed campaign timing. Management expects these pressures to be temporary, and notes long-term growth from the industry shift to digital data-driven life sciences engagement remains intact. The company is already seeing large manufacturers restore spend levels, and the scope of disruption has narrowed from prior periods.
• Product & Customer Expansion: DAP (AI-enabled Digital Activation Platform) is seeing strong customer adoption and product-market fit, with DAP pilots in MedTech expanding into multi-million-dollar engagements. Mid-tier and long-tail life sciences customers, an underpenetrated market, are a key growth focus, and the company sees continued expansion opportunities within existing large enterprise top 20 pharma accounts. The company has enabled connectivity for demand-side platforms (DSPs) that control over 80% of digital promotional spend to access its proprietary EHR network, positioning OptimizeRx as a supply-side platform for programmatic point-of-care and point-of-prescribe campaigns. Currently, less than 10% of available network inventory is utilized via traditional marketing, so programmatic access has significant long-term growth potential to match the size of the company's existing HCP business.
• Financial & Operational Improvements: The company is actively shifting its revenue mix to higher-visibility subscription-based models, primarily for DAP, to build a more durable and predictable financial model. Proactive cost optimization initiatives have been implemented to align costs with the current operating environment, including prioritizing strategic investments, cutting discretionary spend, and using internal agentic AI tools to improve efficiency, expected to deliver $3 million in annualized cash operating expense savings, with $1 million of benefit in 2026. The company recently refinanced its term loan from Blue Torch Capital to Fifth Third Bank, lowering interest rates by 625 basis points for approximately $1.5 million in annual interest expense savings, and strengthened its balance sheet with $20.2 million in cash at quarter-end. Key performance metrics remained strong: net revenue retention was 110%, revenue per FTE rose to $801,000 from $710,000 year-over-year, highlighting operating leverage and customer stickiness. Gross margin optimization initiatives have delivered positive results, driven by favorable product mix after the wind-down of low-margin DTC managed services.

OptimizeRx does not break out formal product segment financials in this call, but key product-level performance is provided: 1) AI-enabled Digital Activation Platform (DAP): Total DAP revenue grew 60% year-over-year in Q1 2026, and DAP subscription revenue grew 45% year-over-year. 2) Point-of-prescribe solutions: A top 20 pharma client expanded usage from targeted single-indication engagement to scaled multi-brand oncology deployment. 3) Managed services: Low-margin managed services revenue hit $0 in Q1 2026, which contributed to the 10% overall year-over-year revenue decline and improved gross margins. For overall customer concentration, the top 20 pharmaceutical manufacturers generated an average of $2.8 million in revenue each, and accounted for 52% of total Q1 2026 revenue. Overall Q1 2026 total revenue was $19.8 million, down 10% from $21.9 million in Q1 2025. Adjusted EBITDA was $3.3 million, up from $1.5 million in Q1 2025.

• Full year 2026 revenue guidance was revised downward to a range of $95 million to $100 million, from prior higher estimates, to reflect a more conservative outlook due to reduced full-year visibility from near-term client disruptions. Revenue is still expected to be weighted toward the second half of 2026, with a 40%/60% first half/second half split.
• Full year 2026 adjusted EBITDA guidance is maintained at $21 million to $25 million, reflecting proactive cost optimization and the operating leverage of the company's scalable platform.
• Full year 2026 gross margin is now expected to land in the high 60% range, an improvement from prior expectations driven by ongoing margin optimization work and favorable product mix.
• Management expects the current top-line headwinds to be contained to 2026, and anticipates strong performance in 2027. Initial revenue from the new DSP programmatic connectivity initiative is expected to start flowing in Q4 2026, with meaningful contribution during the 2027 planning and renewal cycle.

• Near-term macroeconomic and regulatory pressures: Most favored nation pricing dynamics and broader macroeconomic conditions have led to cautious customer budgeting, shorter contract durations, delayed campaign spending, and reduced full-year revenue visibility.
• Client concentration risk: Disruption at a single large client is a material contributor to the 2026 revenue headwind, driven by internal client team turnover and internal execution missteps from OptimizeRx on the account.
• General forward-looking statement risks: Risks include negative impacts from government regulation, industry competition, customer concentration, cybersecurity incidents that disrupt operations, the need to keep pace with evolving technology, and the ability to maintain critical contracts with electronic prescription platforms and EHR networks.

Q: What specifically changed to prompt the downward revenue guidance revision, and how much of the change is due to client spending delays versus lower committed spend? Is the current pressure expected to persist into 2027? / A: Initial guidance assumed turnaround visibility after Q1 for clients reacting to MFN pricing. While most clients have restored spending, one large client continues to experience disruption, leading to reduced full-year visibility that prompted the more conservative guidance. Management expects the disruption to be contained to 2026, and anticipates a strong 2027, supported by the long-term opportunity from the new DSP connectivity initiative.

Q: How has client contract duration behavior evolved in Q1 and early 2026, and what is the trend in revenue share between top 20 pharma and mid-tier/long tail clients? / A: Contracted revenue remains 15-20% behind prior year levels (exiting the managed services wind-down), driven primarily by shorter contract durations that reduce visibility, though clients continue to renew, and some accounts have accelerated spending. The company has seen strong encouraging growth from the focused mid-tier/long tail client cohort, while the top 20 pharma segment still holds significant underpenetrated expansion opportunity across un serviced brands.

Q: Is the single large client dragging on 2026 revenue the same client with prior execution issues, and when will DSP connectivity start contributing meaningful revenue? / A: Yes, it is the same client; disruption stemmed from internal client team turnover and OptimizeRx execution missteps, but the relationship has been repaired, and some spending is expected to resume in the second half of 2026, with full recovery in 2027. Early revenue from DSP is expected in Q4 2026, with material contribution during the 2027 planning cycle; the long-term revenue opportunity is very large, matching 80% of total digital promotional spend in the space, but it is too early to give specific projections as OptimizeRx is the first to launch this at scale.