OptimizeRx Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 6, 2023

There are 10 speakers on the call.

Operator

Morning, everyone, and thank you for joining OptimizeRx Third Quarter Fiscal 2023 Earnings Discussion. With us today is the Chief Executive Officer of OptimizeRx, William Febbo. He is joined by Chief Financial Officer, Ed Stelmarck President, Steve Silvestro General Counsel, Marion Odense Ford and Senior Vice President of Corporate Finance, Andrew D'Silva. At the conclusion of today's earnings call, I will provide some important cautions regarding the forward looking statements made by the management during today's call. I would like to remind everyone that today's call is being recorded and will be available For replay via webcast only, instructions are included in today's press release and in the Investors section of the company's website.

Operator

Now, I would like to turn the call over to OptimizeRx CEO, William Febbo. Sir, please go ahead.

Speaker 1

Good afternoon. Thank you for joining our 3rd quarter earnings call. I'm pleased to note that Q3 has been an Citing fiscal and operational turning point for OptimizeRx. As noted in today's press release, the quarter's financial results came in better than initially expected, with revenue growing 8% year over year to $16,300,000 which is a record Q3 for the company. The improvement was driven by strong organic growth in messaging led by our DAF enhancement.

Speaker 1

All said, our total RWD deals for the year now stands 16, ahead of our original 2023 expectation of approximately 10 deals and a clear sign of client adoption. We're also increasing our guidance for 2023 and introducing preliminary guidance for 2024. Ed will go into more detail, but for 2023, we're now looking for revenue to come in between $68,000,000 $70,000,000 with an adjusted EBITDA between $3,000,000 $4,000,000 $63,000,000 to $65,000,000 of the 2023 revenue guidance expected to come through OptimizeRx business and the remainder is expected to come through our acquisition of Medex. For 2024, we believe our revenue will be at least $110,000,000 with an adjusted EBITDA margin of at least 10%. Before we go further, I want to thank the OptimizeRx team for their tireless commitment and continuous effort to put into advancing our mission.

Speaker 1

In recent years, our efforts have created one of the most scalable industry solutions available to pharmaceutical marketers. Directionally, this has been no easy feat As OptimizeRx results have come about through the shifting sands of both the industry changes as well as the early of advancements related to the digital shift, which has permanently altered the way pharma, patients and prescribers engage with one another. With that being said, we're seeing very encouraging momentum heading into the end of the year and going into 2024. The macro headwinds that we identified last year have begun to normalize. Moreover, our clients that had started initial pilot programs with companies that had newly entered the space over the last 12 to 18 months are now completing the measurement of these programs and as we expected have learned that these solutions are not scalable and are beginning to drive Bend back our way.

Speaker 1

Progress here is pacing ahead of what we anticipated, which is best evidenced by the strong DAP or RWE momentum we've seen during the second half 2023, these deals by their nature are larger, stickier and more strategically targeted, making us a more relevant partner with our client base. In September, we unveiled a significant enhancement to our omni channel healthcare engagement platform. This new AI directed capability unites point of care and traditional digital media to provide a comprehensive solution for pharmaceutical marketing. This announcement was the culmination of years of learning how to integrate AI into OptimizeRx's customer use cases, subsequently transforming our HCP engagement platform along the way. The new AI driven platform expands on our Patent pending HCP engagement technology do now include social, web display channel and CRM alerts, which create more efficiencies directly with sales forces.

Speaker 1

With this development, OptimizeRx has renamed the HCP engagement platform the Dynamic Audience Activation Platform or DAP for short, to mark the merger of our former RWE DAI capability with our full omnichannel network and new proprietary position engagement data set. The new DAP solution advances our land and expand strategy, enabling clients to gain maximum market penetration through scaling of outreach in real time across the company's network of over 2,000,000 HCPs across multiple major digital media channels and a point of care via electric health records, EHRs, e prescribing and the telehealth platforms. DAP helps our clients find patients best suited for their medications. As noted in multiple independent studies, this is one of the top challenges in today's specialty medication driven market. In a recent engagement, the company reported a 19% script lift among AI identified HCP seeing relevant patients, including early impact physicians who had historically high script writing behaviors.

Speaker 1

In other words, we helped our client grow their business by enabling alignment of HCP and patient awareness when clinical decisions are being made. Customers who have been exposed to DAP Quickly become our strongest advocates and this success is quickly moving us up the decision maker hierarchy with our larger customers. This is increasing our visibility cross functionally and across brands and we currently have 100% renewal rate. Given the improving macro environment and the recent customer traction we're seeing with the DAP enhancement, we believe last month's acquisition of Medex was perfect timing. Both business lines are showing growth, are seeing significant client engagement and we are moving forward as planned on executing against the numerous technological and operational synergies we mapped out during the due diligence period.

Speaker 1

The transaction further expands our omnichannel reach beyond HCPs to patients while adding multiple channels we haven't accessed previously, which includes streaming and connected TV as well as various digital channels such as play, audio, online video and mobile among others. Medex Technology is not only proven, but profitable and we are transforming our organization into the most comprehensive healthcare marketing platform in the nation. As we highlighted last month, the majority of Medex revenue similar to that of OPRX is generated through the world's Largest pharmaceutical manufacturer, but focused on patient marketing where OptimizeRx has historically focused on HCPs. The combination provides a significant unlock for brands within this pharma customer base by seamlessly connecting the brand's patient and HEP marketing team. I believe this aligns strongly with our land and expand strategy and enables significant up selling and cross selling opportunities, Particular, when you couple this fact that over 80% of the brands our respective companies support do not overlap.

Speaker 1

We've already seen success with the combined team and secured our 1st cross sell deal with the top 5 pharma manufacturer and have numerous others deals in sight. With the closing of the Medex acquisition, we have expanded our executive team with the addition of Medex's President, Teresa Greco, who is now our new Chief Commercial Officer. He will lead the commercial strategy and execution for the company and report directly to Steve Silvestro. As a result, Steve has been promoted to President and will lead all aspects of corporate strategy and daily business management. This will be a very natural transition For both Steve and the company, Steve's leadership style has always extended organizationally.

Speaker 1

And in my eyes, this is a testament to his commitment strategically positioning us with our customers and partners, which has been transformative to our go to market over the last 4 years. Finally, I'd like to give an update on our cost cutting measures. I'm happy to report we're ahead of schedule and we have already completed over half are planned cost reductions and have identified the remaining cuts and are in the final stages of executing against our objective. While some of this benefit will be seen in 2023, the full benefits of these cost cuts will be seen in our P and L in 2024. We believe we turned a significant corner since the start of the second half of the year and have incredible momentum going into 2024.

Speaker 1

And with that, I'd like to turn the call over to our CFO, Ed Stelmach, who will walk us through the financial details for Q3 as well as the Medex transaction. Ed?

Speaker 2

Thanks, Will. As with all our calls, a press release was issued with results of our Q3 ended September 30, 2023. A copy is available for viewing and may be downloaded from the Investor Relations section of our website and additional information can be obtained through our forthcoming 10 Q. 3rd quarter revenue was $16,300,000 an increase of 8% from the $15,100,000 we generated in the period in 2022. Meanwhile, our gross margin decreased slightly from 62.4% in the quarter ended September 30, 2022 to 60% in quarter ended September 30, 2023.

Speaker 2

With the difference being largely tied to solution and channel partner mix. We're encouraged by the quarter over quarter improvement in gross margin and reflects the increase in the business associated with DAP. Our operating expenses remained relatively consistent year over year and came in at $13,400,000 for the 3 months ended September 30, 2023. We had a net loss of $2,900,000 or dollars0.17 per basic and fully diluted share for the 3 months ended September 30, 2023, as compared to a net loss of 3,500,000 during the same period in 2022. On a non GAAP basis, net income for the Q3 of 2020 was $1,600,000 or $0.09 per fully diluted share outstanding as compared to non GAAP net income of 1,300,000 or $0.07 per fully diluted share in the same year ago period.

Speaker 2

Meanwhile, our adjusted EBITDA came in at 9 $900,000 for the quarter and was effectively flat year over year. Operating cash flow came in at a positive $1,500,000 for the quarter. We ended the quarter with a strong balance sheet and cash and short term investments totaling $63,500,000 on September 30, 2023, compared to $74,100,000 on December 31, 2022. The majority of the decline was due to our share repurchase program, to which we bought back 526,999 shares of common stock for 7,500,000 Subsequent to the quarter's end, we acquired Medex for $95,000,000 The cash portion of the transaction was approximately 84 We currently have over $13,000,000 in the bank, and we're well funded to execute against our operational goals. We remain confident in our long term growth outlook and are happy to say we're increasing our guidance for 2023 and are now expecting revenue to come in between $68,000,000 $70,000,000 with an adjusted EBITDA between $3,000,000 $4,000,000 In addition, our preliminary 2024 guidance for revenue is expected to be at least 110,000,000 with an adjusted EBITDA margin of at least 10%.

Speaker 2

We will have more details to share once we get through the RFP season, But early indicators are very encouraging as we bring our combined value prop to the market. Now let's turn to the KPIs for the quarter of 2023, which have largely stabilized and have started to show improvements when compared to the prior quarter. Average revenue per top 20 pharmaceutical manufacturer now stands at $2,100,000 We continue to work with 18 of the top 20 largest pharma companies in the world and 100 percent of the top 20 that don't have the majority of their sales tied to COVID-nineteen vaccines. Net revenue retention rate is showing improvement at 93%, up from 89% in Q2 2023. Meanwhile, revenue per FTE came in at 571,000 topping the $560,000 we posted in Q2 2023.

Speaker 2

It's also worth mentioning that Medex has a net revenue retention rate of 130% and an average revenue per FTE of 851,000. We're encouraged by the continued improvement in our KPIs as we move past the external market challenges and return to growth and profitability as a leader in our space. Now with that, I'd like to turn the call back over to Will. Will?

Speaker 1

Thank you, Ed. Operator, let's move to Q and A.

Operator

Thank you. Ladies and gentlemen, we will now be conducting a question and answer from the queue. Ladies and gentlemen, we will wait for a moment while we poll for questions. Our first question is from Sean Dodge with RBC Capital Markets. Please go ahead.

Speaker 3

Hey, good morning. This is Thomas Keller on for Sean. Thanks for taking the questions and congrats on strong results.

Speaker 1

Thanks, Alex.

Speaker 3

On the preliminary 'twenty four outlook, looking for somewhat of a bridge from 'twenty three, are you all able to share of any of the expected revenue contribution for Medex or any sort of general growth rate assumptions that are kind of embedded within that? And then maybe just generally anything you can share The visibility on the low end of that range. Thanks.

Speaker 1

You're talking about 24, Tom, that's your question, not 23? Yes. Okay. Preliminary growth. Yes.

Speaker 1

It's a little early. That's why we said up to 110% and up to EBITDA of 10%. We just did the full integration all of a few weeks ago. So want to get our hands around that more, get a sense of RFP season in full Swing and also how the year is going to end with open contracts into the next year. But feel fairly encouraged, feel like we'll be able to do that early in the year next year.

Speaker 1

Ed, do you want to add anything to that?

Speaker 2

No, I think you've got it. Yes. I mean once we get through our season, we close the year, we'll get you a lot more details around visibility.

Speaker 3

All right, understood. Thank you.

Speaker 2

And then you all have obviously announced quite

Speaker 3

a few new deals recently. How should we think about the average Size of those, are those still sort of hovering that $1,000,000 to $2,000,000 I think on an annualized basis? And then I guess how might that average sort of change if we think about a combined offering with Medex, kind of in the future? Thank you.

Speaker 4

Tom, hey, this is Steve. Yes, the deals are still in the same range that $1,000,000 to $2,000,000 range. Although what we're seeing is On the deals that are renewing that have been in place, the scale is larger simply because they're finding more patients. So it's tied to the dynamic audience finding patients over time. So that build happens, which means every time we renew the deal, it's not starting from 0, it's starting from an existing patient base.

Speaker 4

So as we march on into 'twenty four, you'll see that deal size trickle up northward. And then with the addition of Medex, what that does is enables Direct to patient communication in addition to direct to HCP communication. So it's the other side of that transaction between the HCP and the patient. So you could think of it as almost a near double over time as we start the communication between both sides.

Speaker 3

All right, great. Appreciate the color. Congrats again.

Speaker 1

You got it. Thanks, Tom. Say hi to Sean.

Operator

Thank you. Our next question is from Jared Hasse with William Blair. Please go ahead.

Speaker 5

Yes. Good morning, guys. This is Jared on for Ryan Daniels. Thank you for taking our questions. Will, maybe Nice to see the rebound in the performance after last quarter.

Speaker 5

So maybe a 2 part question on some of the recent trends. I guess number 1, in about $1,000,000 ahead of that original preliminary outlook. So we'd love to hear any specifics around that. And then 2nd part here, it's nice to hear the macro headwinds are alleviating for you guys. Excuse me, would be curious to hear a bit more of what you're seeing with Client base, maybe what's driving that underlying improvement because it seems like others in this space are certainly still calling out some of those headwinds with That have been in place last year for the quarter.

Speaker 5

So, we'd love to just get any more kind of specific details as to what you're seeing on that side of things. Thanks.

Speaker 1

Yes, Jared. No problem. So on the first question around coming in beyond the pre release, All attributed to DAP and successfully pulling through many more deals than anticipated towards the end of the quarter and getting that work done inside of the quarter. We got more work done than we thought we would, which is good. It shows Starting to show scale there.

Speaker 1

Really thrilled on the client reaction. I think we're finally hitting that tipping point where clients understand The value, enough of them have tried it. We have 100 percent renewal rate on it. Tacular job marketing it, real thought leadership. We had people on the team up on stages talking about real world examples of why this is a Powerful tool and it was presented in a way I have to call out the marketing team just spectacular presentation of information It was digested, understood and people acted on.

Speaker 1

I also will say that we internal to one of our clients, which we can't disclose, we were able to win And awards and recognition around an innovative solution, which is DAP basically. And that got us in year dollars that was not And so again hats off to the team and the gang. And Steve anything to add on that from a client perspective?

Speaker 4

No, I think you covered it. I mean, the only thing that I would say in terms of headwinds, which was the second part of your question was The market headwinds are still there in terms of prevailing issues in the industry, although we've highlighted some of the stuff that we've seen subside. I think the more important thing to probably note here is to put punctuation around the fact that our return on investment measurements have happened. And so we've been clear about we would start to see those that were over promising, under delivering in the competitive landscape to start to get sifted out of the market. That definitely happened in the first half of this year.

Speaker 4

And so now in Q3, we're starting to see investment come back based on the fact that we have delivered an honest ROI and are a proven partner. And I think that's a real key indication for scale going into the second half of the year and into 'twenty four.

Speaker 1

Yes, I'd say I'd just add to the headwinds. We have seen normalization on the FDA approval rate to back to 21. I think given the economy, the turnover rate in general, if you track LinkedIn, you can see people are jumping around

Speaker 2

a lot

Speaker 1

less. And all those things were headwinds. And as Steve said, there are still headwinds for a lot of firms. And If you're a boater, it all depends where your boat is when you have the headwind. So I think we're in a good place.

Speaker 1

We're in that harbor where We have something that's needed. It works and we're starting to see that come back. Really happy to see it.

Speaker 5

Okay, great. I think that all makes sense and nice to hear the good execution on the marketing side of things as well. One quick follow-up and this is sort of a related question To the first one, just around 2024 visibility. Given some of the moving parts here with the acquisition and some of the changes that you've made on the product side, Can you just level set with us as we think about the pro form a business in 2024, that $110,000,000 or so target, how much of that is Sort of a pure transactional or volume based revenue stream and how much of it is more of a subscription revenue recognized over time where you'd have kind of a backlog of visibility

Speaker 1

Actual fees and then transaction fees related to DAP programs or tactical programs. We are not a SaaS business, right. But what we are is a highly recurring revenue rate because what we do works and it's been tried and trued and it has scale. And I think ultimately that's what's going to make the difference here and you've seen it in other companies out there that are 3 or 4 years ahead of us. Once you can prove that, Be reliable, get the data back to the client, have the measurement in place and the compliance in place and basically do what you say, say what you do constantly, That pharma really starts to invest in you and we feel like we're at that place.

Speaker 1

So we don't foresee a substantial shift in the P and L model. And but we do expect to have a better visibility. One of the things we liked about Medex when they go into the year, Again, not going to comment on it now, but as we get into Q1, we will. So they just had more visibility on their year. Given the increase in DAP and some of these wins that we're seeing in Q3 and Q4, we'll have better visibility as well.

Speaker 1

So the 2 will come together nicely. And ultimately, if you think of that size business, now we've got lots of seats at the table. And as we've mentioned, there's Fairly limited overlap and that just gives us a lot of opportunity to go in land and expand And team is pretty fired up about that.

Speaker 5

Okay, perfect. Congrats again on momentum and I'll go ahead and hop back in the queue.

Speaker 1

Thanks. Thanks.

Operator

Thank you. Our next question is from David Grossman with Stifel. Please go ahead.

Speaker 6

Good morning. Thank you. I want to go back to the comments that were made about clients coming back after kind of experimenting with some other vendors in the marketplace. Can you perhaps just drill down a little bit into that, maybe give us some data points that would maybe help us better understand that dynamic? And when they do come back, what's the cadence of spending when they come back?

Speaker 4

David, hey, good to hear your voice. This is Steve. I mean, just analogously speaking, I'll just give you some key data points as you said. I mean, the experimentation was around return on investment. And so it takes a couple of quarters for Clients to be able to run programs, measure them, see how effective they were, what the impact was and then make a subsequent decision.

Speaker 4

I I think in most cases, those decisions are being made on a couple of things. One is the reach and the execution. The other is the ability to report back on what actually happened. We call that in the industry level data for the HCP side, there are other DTC components for measurement. Universally, what we're hearing is that ability to measure effectively, accurately and timely is really lacking.

Speaker 4

And so for brands that's problematic because The measurement of the first half determines and dictates the amount of spend they have for the second half. And so when a competitor didn't deliver On what they articulated they would in the first half, it actually caused the brand to lose funds for marketing in the second half of the year, which is a big problem. And so that's the pivot back and that's what you're seeing. They know that our solution is really tried and true. They know that we've delivered a consistent return on investment.

Speaker 4

Actually the return on investments have improved with the addition of DAP because the audiences are dynamic, so real time. And they've seen that and that's really what This contributed to that scale from 2 deals to 16 very rapidly and all of the 100% renewals that you heard Will state earlier.

Speaker 6

So, Steve, the funding can be shifted to you that quickly in the sense that They're not satisfied with the results. They can shift that funding immediately to you to spend in the back half of the year. Is that pretty much how the dynamic

Speaker 3

works?

Speaker 4

It is how the dynamic works. I wouldn't say I would caution you to say they can shift it immediately Like a buy up. It's not a buy up scenario, okay. What it is, is a strategic decision to pivot away from someone who can't deliver on the reporting, Meaning they can't measure the programs. They have no ability to tell whether or not their spend was effective over to a solution where they know they're going to have a Solid reporting capability by the end of the year and be able to deliver back up to their senior management.

Speaker 4

Here's what we spent. Here's what our return on investment was. And here's what we're plugging in for 2024. And right now, as you know, David, everybody's in the middle of brand planning season. So it couldn't be more critical to have accurate reports that project 2024 and the potential for them to have success as they're building their budgets.

Speaker 4

So that those migrations are happening.

Speaker 6

Got it. Great. Thanks for that, Sue. That's actually really helpful. Thank you for looking for that.

Speaker 6

And then the second question is back to the Medex acquisition. And it sounds like there's some pretty exciting opportunities now that you're operating as a combined company. And maybe if you could explain a little more detail just how the decision making works in their model versus you? And when I mean So you're making any at the brand. So for example, are we leveraging the same types of contacts?

Speaker 6

Are they different? And also maybe explain a little bit about their channels versus your channels and how they compare and contrast And how that impacts the growth of the business going forward?

Speaker 1

Okay. This is Will. I'll start on the channels and I'll it over to Steve on the first part of the question. Yes, so because they're focused exclusively on the consumer or the patient And where they come across content digitally, right? So think digital TV, think social, think screens in pharmacies, Screens and waiting rooms wherever they will be, we know we basically can target content.

Speaker 1

The content It's like us. It's generated by agencies for pharma. It goes through the same approval process. It's more consumer oriented. And they've done a spectacular job.

Speaker 1

So with our model, they have a cost on their P and L to the partnerships And then they have a team that measures that effectiveness and manages it. Again, like us, they do not generate So again, the true tech play, tech enablement of helping pharma connect directly to consumers. And what we love about this is we've been as you know, David, we've been working on the consumer patient side for a while. We haven't figured it out right. We met this company and saw how well they did and thought, okay, channel partnership enabled, we know that kind of business.

Speaker 1

We really like that kind of business. They can measure it. Stroke connectivity, we know that's a key variable. They also have a patent on the process, which as we'll get into in subsequent quarters, Very relevant relative to the reliance on the cookie going down or away into next year in 2025. I think we're going to have a competitive advantage there.

Speaker 1

So think about what pharma is dealing with, it's very hard to get to the consumer. It always has been a challenge. Adherence is one of the largest challenges they have, but our hope is we will be is one of the largest challenges they have, but our hope is we will be messaging to the doctors, we will be messaging to the patients and when the 2 come together, you get a higher Outcome, you get a good communication path between the two, which just means the patient's more likely to start and stay on therapy. Let me hand it over to Steve relative to the first part.

Speaker 4

Yes, I mean some of the synergy that we saw immediately in terms of revenue potential was Medex sort of a jewel in the crown of the Medex business is the audience creation component. So they're using a methodology very similar to ours that's tech enabled to Create the audiences of patients that they want to subsequently target and message. What we've done on our side, David, as you know, with DAP As we've done that same creation of audiences, but it's dynamic, meaning it's real time, it's refreshing on a real time basis. So bringing those two methodologies of audience creation together with disparate execution capabilities is really the unlock in the business. And so I think that's where we see it.

Speaker 4

On the pharma side, the DTC spend, so the patient marketing dollars generally are 4 to 5 times that of HCP. And so we see that we're getting that growth back now on the HCP front. We're encouraged by the capability and the opportunity we see on the DTC front. And as you heard Will say, really now we're communicating in a closed loop fashion, meaning we're communicating from the same audience structure technology to the HCP, to the patient and then measuring the transaction between those individuals in a feedback loop that enables us to optimize the communication going forward and again in real time. So I think it's really an exciting time for the business on the product front, the marketing front and the revenue potential growth is really

Speaker 6

And just to be clear, Steve, so are the decision makers on the DTC versus the HEP side within the brand, are they Different infrastructure or same organization or different?

Speaker 4

Yes. So within a brand, you've got an HCP marketing lead and you've got a Patient marketing lead both report generally to the owner of the brand. And so at a high level, as you know, we've been dealing mostly Brand managers, not HCP marketers. That's been a deliberate choice on the OptimizeRx front. We've seen obviously the growth from that.

Speaker 4

The good news is that's the same decision maker that would make the decision on the patient front, albeit they've got a delegate in the Patient marketing spot, but it's those 3 folks that you want to engage in the conversation.

Speaker 6

Got it. And just one, sorry to ask one more But just for Ed, just on the cost side, I think maybe, Will, you had said that you were halfway through the cuts. You need to mention at all what kind of cost tailwind we have in 2024 versus 2023?

Speaker 2

Yes. So as Will said, we're more than halfway done with the cost cutting initiatives. We've got the rest of it figured out and well on its way to be pulled through this year. So I mean, it's all baked into our current projections for next year. So the guidance of being at the 10% or better adjusted EBITDA has that baked in.

Speaker 2

Got it. Okay, guys. Thanks again. Thanks, David. Thanks, David.

Operator

Thank you. Our next question is from the line of Neil Chatterjee with B. Riley. Please go ahead.

Speaker 7

Good morning, guys. Thanks for taking the questions. I think a lot of mine were already asked. But just in terms of gross margins, we saw some improvement there in Quarter, maybe just how should we think about gross margins kind of closing out the year and into 2024 post the acquisition?

Speaker 1

Yes. So we because of the hey, Neil, good to hear your voice. Because of the pickup on the DAP, which has some architectural work upfront. We had a nice positive impact on gross margin. We should see that through the end of the year.

Speaker 1

And I would say we will stay within our current ranges on gross margin just because At this stage when we're starting to see growth come back, it's going to be important to do what the clients need. But if we look at the seasonality, I think You're going to see a very similar trend. We'll have a lot started going into Q1, which is great. And then we'll probably Start more in Q2 on new clients that come out of the RFP season. But really happy with the improvement The range we're in with gross margin and obviously see it drops right down.

Speaker 1

We also think on EnMedix should have a positive impact As well, but we're still as it's still early on that one.

Speaker 7

Got it. And you might have answered My follow-up, but just in terms of the seasonality of the business, I mean, just given the growing DAB pipeline and the Medex acquisition, how should we think about that in terms of is that in line with historic seasonality or would that perhaps change a little bit next year?

Speaker 1

Yes, I think Andy can give you the percentages by quarter. We're going to probably stick with seasonality just because pharma operates that way. We obviously hope to do better in that seasonality, but let's it's probably safer for modeling to keep the seasonality. Andy, you want to share the percentages just to have them on record?

Speaker 5

Yes, I would say just roughly 35% to 40% of the business will be in the first half of the year And 60% to 65% of the business will be in the second half of the year. And I think that's a fair way to think about in 2024. We're still getting our hands around the acquisition, but they seem to follow

Operator

Thank you. Our next question is from the line of Eric Martinuzzi with Lake Street. Please go ahead.

Speaker 8

Yes. I wanted to tease out the Medex revenue for 2023 here. I think when you talked about it on the acquisition that it was about a $37,000,000 business growing better than 20%. What is implied in 2023 for revenue from Medex on a full year basis?

Speaker 1

Ed Nian, do you want to take that one?

Speaker 3

I can take it.

Speaker 2

Yes. So I mean,

Speaker 3

as we said, dollars 63,000,000 to 65,000,000

Speaker 2

On full year projection will be coming from Optimizer X. So the rest is basically the Q4 impact of Medex acquisition. The new guidance we initiated $68,000,000 to $70,000,000 Yes, dollars 5,000,000 or so in Q4. Right.

Speaker 8

I was asking what was standalone Medex for the 12 months 2023?

Speaker 2

Stand alone. We're not doing full carve out guidance. Yes. So basically the Q4 impact is what I just mentioned, but we're not going to I reported on 2 entities separately going forward. We plan to combine the 2 and basically operate as one company.

Speaker 8

Okay. And then regarding the competitors sort of, is there Are they being turned off completely? Is there a scale back that's happening? And then secondarily, why are they is it a situation where they're Immeasurable ROI or is it just not scalable enough to meet the demands of the brands?

Speaker 1

I'll take that one.

Speaker 4

Yes, it's a little bit of both, Eric. I mean, outside of us and Connective as you know, there's not really a meaningful marketing network Out there right now, so it's really just onesie, twosies. So the scale is an issue, scale meaning reach of physicians. Marketers are deciding To go with people who've got a proper network because they get a much broader reach. So every time they deploy a program, it just simplifies things for them.

Speaker 4

And then in terms of measurement, if they don't have the ability to actually deliver that physician level data, which is the ultimate success metric Of the campaigns that they're running, they don't have an ability to justify the investment going forward. They found that to be a huge problem. We invested luckily, we had the foresight at the beginning of really the end of middle of last year to invest and double down on the physician level data exercise. And that's enabled us to be able to report back to these brands in an accurate timely way on how the And also to partner with other companies that do measurement that are 3rd party independent providers to validate the findings that we're providing.

Speaker 8

Got it. And then Ed, one last one for you, a housekeeping item here. Post the close of Medex, What was kind of the post closing cash balance and then what share count post close?

Speaker 2

Yes. So the post close cash balance, like we said, we have about $30,000,000 in the bank. Number of shares, I'm going to have to ask Andy to help me with that one.

Speaker 5

Just under 18,000,000

Operator

Thank you. Our next question is from the line of Richard Baldry with ROTH Capital Partners. Please go ahead.

Speaker 9

Thanks. I'm sort of curious your early initial takeaways, it's probably been pretty brief, about how it's The acquisitions affecting your RFP season, there's 2 schools of thought, right? You want less noise to just have things run smooth. Yes, there would be it looks like you'd be a bigger, more important combined entity. So how quick can Pharma react To the fact that you are now a unified company, do you think have you seen any even anecdotal evidence that that's been helpful?

Speaker 9

Do you think the real benefit will probably come next year when they've had a year of seeing sort of side by side integrated and your win rates change, to ASP's ARPU step up? Thanks.

Speaker 4

Rich, it's Steve. Great to hear your voice. Glad you're on. It's interesting. The minute the announcement came out, we got sort of an immediate response of, hey, this is great guys, what does it mean?

Speaker 4

And so there's already a pretty good groundswell of interest coming in during the RFP season to connect these two solutions and to deploy them Together in the marketplace, I think the market sees the synergy that we see and why we executed the acquisition. We'll take a little bit of time, I think, to Scale it going into 2024. But having said that, Will mentioned earlier a couple of the wins that we've had. Both of those wins included both the HCP side and the patient side, meaning the Medex side being connected and using the DAP model to drive the messaging across the ecosystem for these programs. So some early wins that are meaningful and sizable and really exciting and I think a good telltale what 2024 will look like?

Speaker 1

Yes. And Rich, this is Will. Just to add to that. We've cut our teeth on patient, right. So our clients already think of us as someone who can engage with patients at a highly engaging level, with SMS and adherence type work.

Speaker 1

So a lot of the RFPs in that process you have to check a bunch of boxes and one of those boxes is patient. So just keep in mind that everything we've been checking The last 3, 4 months has included patient. Now we didn't have anywhere near this capability and now we do. So Yes, I agree with everything Steve said. I just wanted to put on that it isn't a completely new thing for our clients to think of us for patients.

Speaker 5

And just one point of clarification really quickly, sorry, I said on the share count, it's actually just under 17,000,000 not just under 18,000,000.

Speaker 1

Great. Thanks, Andy. Better.

Speaker 9

And just when I think about The metrics you kind of call out and focus on, you talk a lot about top 20 pharma, somewhere close to 60% of revenues. When you put the 2 companies together, let's say, 1 +1 equals 2 on the revenue side, does it become far more cost effective to really go after that next of group in the top 100 because you can drive a better ARPU out of it, does it become more sales efficient to kind of dig into that middle market more attractive, however you want

Speaker 1

to think about it? Thanks. Thanks, Rich. I'll start and Steve can add. I think Still most of the money is in the top 20, right, and the top 20 partners with a lot of the others to supply the commercial and marketing strength.

Speaker 1

But because of DAPT and because of the way it's designed, there will be a day when we have turnkey solutions for One product companies because they're not going to be able to afford the traditional models. They're not even as effective. And so I would say in the short term, our focus is absolutely the top 20, top 30 manufacturers, top 200 brands, especially focused on specialty medications. But there is a day where we'll be able to have a model for companies that can't afford what the top 20 can afford, but they need it. And we have some of those clients today that actually use our solution to drive their business and they only work with us.

Speaker 1

I can't use names, but it's been highly effective. But yes, now that we'll have more scale, Steve and his team can put that together.

Speaker 4

Yes, I think you covered it. I mean, 2 of those DAP deals are outside of the top 20, Rich, just to give you an idea. And actually what they decided to do was replaced their sales force to a large degree with the execution and the deployment of the DAP model. It's just way more efficient from a cost perspective.

Speaker 9

Great. Thanks.

Speaker 1

Yes. Thanks, Ritch.

Operator

Thank you. As there are no further questions, I would now hand the conference over to William J. Febbo, CEO, for closing comments.

Speaker 1

Thank you, operator, and thank you, everyone, for joining us this morning. I'm sure you could sense Our excitement and see our positive momentum from the second half of twenty twenty three and into 2024. As I say internally, we are back. As we move forward in our financial and operational planning for 2024, We are transitioning into a new year on firm ground, having significantly enhanced our reach with HCPs and patients, enabled by proprietary AI models. The headwinds have largely subsided and we now offer a very focused and holistic solution that pulls everything together into powerful agile solutions that solve pressing everyday challenges such as brand awareness, adherence, to access, affordability and onboarding hard to find patients for HCPs.

Speaker 1

These are the challenges our clients, doctors and patients face in today's and we are thrilled to play our part. The Medex transaction not only positions OptimizeRx To profitably expand our market opportunity, we are also further enhancing our position as a leading player in the digital pharma marketing landscape by meaningfully expanding our channels and reach to unlock value for our customers. Moreover, the transaction is accretive to earnings, Asemedex is highly profitable company and is expected to contribute meaningful to revenue, revenue growth, EBITDA and earnings per share. On a combined basis, revenues are expected to quickly surpass $100,000,000 while generating significant profitability and cash flow. We will be working hard to finish the year strong, conduct multiple non deal roadshows and continue to fine tune our focus to maximize impact.

Speaker 1

5 years ago this month, we rang the NASDAQ bell as part of our uplift from the OTC, and today we will do so again at the close of the markets. It has been an exciting journey up to this point, but we are just getting started as it relates to scale with our clients. That combined with actually helping doctors and patients align on care is what motivates us as a team. And with that, thank you for your time. I look forward to discussing the full year in our Q4 earnings call.

Speaker 1

Have a great rest of your day, everyone. Thank you, operator.

Operator

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 definition of Section 27A and the Securities Act of 1933 as amended and Section 21E of the Securities Act of 1934 as amended. These forward looking statements should not be used to make Investment decisions, the words anticipate, estimate, expect, possible and seeking and similar expressions identify forward looking statements. They may speak only to the date that such statements are made.

Operator

Such forward looking statements in this call include statements regarding estimation of total addressable market size, market penetration, revenue growth, gross margin, operating expenses, profitability, cash flow, technology, investments, growth opportunities, acquisitions, 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, whether because of new information, future events or otherwise. Forward looking 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.

Operator

The risks and uncertainties to which forward looking statements are subject to include, but are not limited to the effects of government regulations, competition and other material risks, risks and uncertainties to which forward looking statements are subject 2 could affect business and financial results included in the company's annual report on Form 10 ks for the quarter ended 31 December, 2022. This form is available on the company's website and on the SEC website atsec.gov. 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. Please refer to today's press release for replay instructions available via the company's website at www. Optimizerx.com.

Operator

Thank you for joining us today. This concludes today's conference call. You may now disconnect your lines.

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Earnings Conference Call
OptimizeRx Q3 2023
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