OptimizeRx(OPRX) - 2025 Q1 - Quarterly Report

PART I PART I – FINANCIAL INFORMATION This section covers unaudited financial statements, management's discussion and analysis, market risk, and internal controls Item 1: Financial Statements (unaudited) This section presents the unaudited condensed consolidated financial statements for the three months ended March 31, 2025, and 2024, including balance sheets, statements of operations, changes in stockholders' equity, and cash flows, along with notes, for the company operating as a single reportable segment in digital healthcare technology Condensed Consolidated Statements of Operations (in thousands) | | For the Three Months Ended March 31, | | | :--- | :--- | :--- | | | 2025 | 2024 | | Net revenue | $21,928 | $19,690 | | Gross profit | $13,344 | $12,204 | | Loss from operations | $(2,114) | $(5,029) | | Net loss | $(2,199) | $(6,899) | | Loss per share – basic & diluted | $(0.12) | $(0.38) | Condensed Consolidated Balance Sheets (in thousands) | | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $16,573 | $13,380 | | Total current assets | $51,711 | $53,971 | | Total assets | $167,768 | $171,168 | | Total current liabilities | $18,351 | $18,654 | | Total liabilities | $51,498 | $54,170 | | Total stockholders' equity | $116,270 | $116,998 | Condensed Consolidated Statements of Cash Flows (in thousands) | | For the Three Months Ended March 31, | | | :--- | :--- | :--- | | | 2025 | 2024 | | Net cash provided by operating activities | $3,864 | $2,118 | | Net cash used in investing activities | $(84) | $(153) | | Net cash used in financing activities | $(587) | $(640) | | Net increase in cash and cash equivalents | $3,193 | $1,325 | - The company operates as a digital healthcare technology company connecting life science organizations with over two million healthcare professionals (HCPs) and their patients, operating as a single reportable segment[22][26] Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the financial results for Q1 2025, highlighting an 11% increase in net revenue to $21.9 million, driven by growth in DTC and DAAP sales, a significant reduction in operating loss to $2.1 million from $5.0 million, and an improved net loss to $2.2 million from $6.9 million, with liquidity deemed sufficient for the next 12 months Overview The company is a digital healthcare technology platform connecting life sciences with HCPs and patients, employing a "land and expand" model to grow its customer base through enterprise-level engagements and innovative, higher-margin solutions like its AI-powered DAAP and patented Micro-Neighborhood Targeting, while noting business seasonality and concentration among a small number of large pharmaceutical companies - The company employs a "land and expand" strategy, focusing on growing existing customer accounts and shifting towards enterprise-level engagements[107] - Strategic focus is on driving revenue and increasing margins through innovative proprietary solutions like the AI-powered DAAP (Dynamic Audience Activation Platform) and Micro-Neighborhood Targeting[107][108] - Revenue is concentrated, with the top five customers representing approximately 49% of revenue for the year ended December 31, 2024[109] - The business experiences seasonality, with the first quarter typically having lower revenue and activity levels[110] Key Performance Indicators The company monitors several key performance indicators, showing an increase in average revenue per top 20 pharmaceutical manufacturer to $2.96 million and revenue per employee to $710,000 for the twelve months ended March 31, 2025, while net revenue retention slightly decreased to 114% and the percentage of revenue from top 20 manufacturers fell to 63%, indicating growth from customers outside this top cohort Key Performance Indicators (Rolling Twelve Months Ended March 31) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Average revenue per top 20 pharma manufacturer (in thousands) | $2,960 | $2,592 | | Percent of total revenue from top 20 pharma manufacturers | 63% | 66% | | Net revenue retention | 114% | 116% | | Revenue per average full-time employee (in thousands) | $710 | $641 | Results of Operations For the three months ended March 31, 2025, net revenue increased by 11% to $21.9 million compared to the same period in 2024, driven by DTC and DAAP sales, while gross margin slightly decreased to 60.9% from 62.0% due to solution and channel partner mix, and operating expenses decreased by 10% to $15.5 million largely due to lower stock-based compensation, resulting in a significantly reduced loss from operations of $2.1 million and a net loss of $2.2 million, compared to losses of $5.0 million and $6.9 million, respectively, in Q1 2024 - Net revenue increased 11% to $21.9 million for Q1 2025 from $19.7 million in Q1 2024, driven by growth in DTC and DAAP related sales[120] - Gross margin decreased slightly from 62.0% to 60.9% YoY, primarily due to product and channel partner mix[122] - Operating expenses decreased 10% to $15.5 million, mainly due to a $1.5 million reduction in stock-based compensation expense[123][124] - Net loss for Q1 2025 was $(2.2) million, a significant improvement from the $(6.9) million net loss in Q1 2024[130] Liquidity and Capital Resources As of March 31, 2025, the company had $33.3 million in working capital, including $16.6 million in cash and cash equivalents, with net cash provided by operating activities of $3.9 million for the quarter, was in compliance with all financial covenants of its term loan with an outstanding principal balance of $33.8 million, and management believes existing cash and funds from operations will be sufficient to finance operations for at least the next twelve months - As of March 31, 2025, working capital was $33.3 million with a current ratio of 2.8 to 1[132] - The company had an outstanding principal balance of approximately $33.8 million on its Term Loan and was in compliance with all financial covenants[131] Cash Flow Summary (in thousands) | | Three Months Ended March 31, | | | :--- | :--- | :--- | | | 2025 | 2024 | | Net cash provided by operating activities | $3,864 | $2,118 | | Net cash used in investing activities | $(84) | $(153) | | Net cash used in financing activities | $(587) | $(640) | - Management believes that funds from operations and existing cash will be sufficient to finance operations for the next twelve months[133] Item 3: Quantitative and Qualitative Disclosures About Market Risk This section is not applicable to the company for this reporting period - The company has indicated that this item is not applicable[144] Item 4: Controls and Procedures Management concluded that the company's disclosure controls and procedures were not effective as of March 31, 2025, due to a previously identified material weakness in internal control over financial reporting related to the completeness and accuracy of data from third-party service organizations, with active remediation measures underway including enhancing the third-party assessment framework and hiring a Senior Vice President of internal controls - Management concluded that disclosure controls and procedures were not effective as of the end of the period covered by the report[146] - The ineffectiveness is due to a previously identified material weakness related to controls over the completeness and accuracy of data received from third-party service organizations[146][148] - Remediation efforts are in progress, including requiring SOC-1 Type 2 reports from vendors, performing direct testing, and hiring a Senior VP of internal controls[155][150] PART II PART II — OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, defaults, and other miscellaneous information Item 1: Legal Proceedings The company reports that it is not currently a party to any material legal or administrative proceedings, nor is it aware of any pending or threatened material proceedings - The company is not currently a party to any material legal proceedings[157] Item 1A: Risk Factors There have been no material changes to the risk factors from those previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes have occurred in the company's risk factors since the filing of its 2024 Annual Report on Form 10-K[158] Item 2: Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None Item 3: Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - None Item 4: Mine Safety Disclosure This item is not applicable to the company - N/A Item 5: Other Information During the first quarter of 2025, none of the company's directors or executive officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement - No directors or executive officers adopted or terminated any Rule 10b5-1 trading arrangements in Q1 2025[161] Item 6: Exhibits This section lists the exhibits filed with the Form 10-Q, which include various agreements, CEO and CFO certifications pursuant to the Sarbanes-Oxley Act, and Inline XBRL documents - The report includes exhibits such as the Amended Executive Severance Plan, amendments to the Financing Agreement, and CEO/CFO certifications[162]