Release Date: November 13, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• OptimizeRx Corp (NASDAQ:OPRX) reported a 30% year-over-year increase in revenue, reaching $21.3 million for the third quarter.
• The company achieved significant cost savings and operational efficiencies following the integration of acquired businesses.
• Strong growth was observed in the legacy HCP business, contributing positively to the company's bottom line and cash flow.
• The company's micro-neighborhood targeting solution is experiencing strong growth, with increased customer engagements.
• OptimizeRx Corp (NASDAQ:OPRX) has expanded its AI capabilities, enhancing its ability to integrate point-of-care and digital media solutions, which positions it well for future market share capture.

Negative Points

• Despite revenue growth, the company fell short of its expectations for the quarter due to a shortfall in the DTC side of the business.
• The transition from managed services to a self-service model in the DTC business has not yet offset the decline in managed services revenue.
• The acquisition of MediHealth posed challenges in capturing customer wallet share during the sales cycle.
• The company reported a net loss of $9.1 million for the quarter, impacted by a $7.5 million goodwill impairment charge.
• There is a reliance on the annual RFP cycle for the DTC business, which can lead to disruptions and dependency on successful cycles.

Q & A Highlights

• Warning! GuruFocus has detected 3 Warning Signs with OPRX.

Q: Given the weakness in the Medex business during the quarter, are there any go-to-market changes being made specific to that asset? Also, are you shifting more management or sales focus to the legacy core business?A: (William Febbo, CEO) We have enhanced the Medex sales team to address the shift to a self-service model and coordinated marketing efforts to communicate this change. We believe that combining DTC and HCP will allow for more agile marketing decisions. The core business continues to receive investment, and we are seeing strong cross-sell efforts between the two segments.

Q: The sales pipeline appears strong with new DAP contracts and significant client engagements. Does this provide over $40 million in visibility for 2025? What type of growth would you be satisfied with for 2025?A: (William Febbo, CEO) Yes, the visibility is strong, and we have multiple enterprise-level discussions ongoing. We are not ready to provide specific 2025 guidance yet, but the visibility and pipeline growth are encouraging.

Q: Can you provide more details on the four clients expected to generate over $10 million each next year? How do these contracts perform from a margin perspective, and are there upfront costs?A: (Steve Silvestro, President) These are client-level spends, not single contracts, with the majority being HCP business. They involve upfront costs similar to our DAP model, with a shift towards more subscription-based components to smooth revenue and make it more predictable.

Q: With the shift to a self-service model in the DTC business, should we expect headwinds in revenue growth for 2025? How will this impact margins?A: (William Febbo, CEO) The self-service model offers better margins than managed services, though it may not fully offset the decline in managed services in the short term. We believe this is a better business model, especially as DTC and HCP converge, and we are well-positioned for future growth.

Q: Regarding the self-service model, who are you competing against, and do you need to invest further to scale this business?A: (William Febbo, CEO) We have already made the necessary investments in team and technology. Our focus is on execution. We stand out with dynamic, compliant audiences and the integration of DTC and HCP, which gives us a competitive edge.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.