OptimizeRx(OPRX) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Q1 2025 revenues increased by 11% year over year to $21.9 million, with adjusted EBITDA improving to$ 1.5 million, a nearly $2 million increase year over year [3][10] - Gross margin decreased from 62% in Q1 2024 to 60.9% in Q1 2025, primarily due to product and channel partner mix [9][10] - The company reported a net loss of$ 2.2 million or $0.12 per share for Q1 2025, compared to a net loss of$ 6.9 million or $0.38 per share in Q1 2024 [10] - Operating cash flow was$ 3.9 million, with a cash balance of $16.6 million at the end of Q1 2025 [11] Business Line Data and Key Metrics Changes - Contracted revenue increased by over 25% year over year, exceeding$ 70 million as of the end of Q1 2025 [11] - Average revenue per top 20 pharmaceutical manufacturer is approximately $3 million, representing 63% of business in Q1 2025 [12] - Net revenue retention rate remains strong at 114%, with revenue per FTE increasing to$ 710,000 from $641,000 in Q1 2024 [12] Market Data and Key Metrics Changes - The company is experiencing early momentum in transitioning to a subscription-based model, with over 5% of projected annual revenue already converted to subscription contracts for 2025 [4][5] - The digital pharma marketing landscape is undergoing significant shifts, with the company positioned to reshape engagement between pharmaceutical companies, patients, and prescribers [5][6] Company Strategy and Development Direction - The company aims to address critical commercialization challenges in the pharma industry, including improving brand visibility and supporting the shift towards specialty medications [8] - Focus on operational excellence and customer relationships is expected to drive significant shareholder value [5][8] - The company is targeting Rule of 40 performance in the coming years, emphasizing disciplined cost management and targeted upselling strategies [4][5] Management's Comments on Operating Environment and Future Outlook - Management has not observed significant headwinds impacting the business despite market noise related to tariffs and price negotiations [4][18] - There is confidence in the ability to fund operating needs and strategic priorities, with a strong working capital position [11] - The company anticipates continued growth and is optimistic about achieving revenue guidance of$ 101 million to $106 million for the year [4][11] Other Important Information - The company is leveraging one of the largest point of care networks in the country to connect pharmaceutical manufacturers with healthcare providers [5][6] - The transition to subscription-based revenue is expected to smooth revenue recognition over time, enhancing financial stability [21][37] Q&A Session Summary Question: Concerns about market noise and customer hesitation - Management has not seen any pullback from clients and reports that customers are leaning into digital channels more than before [18][19] Question: Impact of subscription-based revenue on revenue recognition and margins - Subscription revenue spreads over a twelve-month period, but it is expected to be accretive due to low cost of sales [21][24] Question: Gross margin outlook - Current gross margin is expected to remain in the low 60% range, with efforts to increase it above that level [25][27] Question: Visibility on revenue and backlog - Committed revenue is north of 80%, indicating strong visibility for the year [31][32] Question: New business and RFP season performance - Both DTC and DAP components of the business are performing well, contributing to increased guidance [57][58] Question: Pipeline growth and win rates - The pipeline continues to grow steadily, with improved conversion ratios, particularly in data and subscription components [70][71] Question: Subscription deal structure - Current subscription deals are one-year evergreen arrangements, with plans to transition to multi-year deals in the future [73] Question: Guidance correlation between revenue and EBITDA - High-end revenue guidance correlates with high-end EBITDA, with a focus on gross margin mix being a key factor [75]