Good afternoon, everyone. And thank you for joining OptimizeRx’s First Quarter Fiscal 2023 Earnings Discussion. With us today is the Chief Executive Officer of OptimizeRx, Will Febbo. He is joined by company Chief Financial and Operating Officer, Ed Stelmakh; Chief Commercial Officer, Steve Silvestro; General Counsel and Chief Compliance Officer; Marion Odence-Ford; and Senior Vice President of Corporate Finance, Andrew D’Silva. At the conclusion of today’s earnings call, some important cautions regarding the forward-looking statements made by management during today’s call will be provided. I would like to remind everyone that today’s call is being recorded and will be made available for replay via webcast only. Instructions are included in today’s press release and in the Investors section of the company’s website. In addition, management will discuss certain non-GAAP financial measures today that they believe aid in the understanding of the company’s financial results. A reconciliation to comparable GAAP financial measures can be found in today’s press release. Now I’d like to turn the call over to OptimizeRx CEO, Will Febbo. Sir, please go ahead.

Thank you, Operator. Good afternoon, everyone. And thank you for joining our first quarter fiscal 2023 earnings call. Our first quarter results were in line with our expectations and revenue came in at $13 million, which was at the top end of our Q1 revenue guidance range of $11.5 million to $13 million. As a result, we are maintaining our full year revenue outlook, which calls for our topline to increase at least 10% year-over-year. We believe executing against our guidance will also result in year-over-year improvements to our KPIs by the end of 2023. While the macro environment hasn’t fully normalized, the industry trough appears to be behind us now and we continue to return to normalcy. This is the case despite the banking crisis that began to emerge at the end of Q1 and while there was some short-term disruption with our customer base as top-down focus moved towards understanding the potential macro overhang, that was short-lived. And by early in the second quarter, pharma gained comfort by the resolutions that were implemented to address the fallout. We are seeing modest improvements to tactical sales, which, if you recall, was the portion of our business that was most impacted by the transitory macro headwinds we’ve discussed. We expect this part of our business to continue to improve as the macros work themselves out and believe our reach, focus on accessing physicians across multiple landing pads and ability to efficiently scale, while being able to report back data provides us with a significant competitive edge. More importantly, our AI-Driven Real-World Data or RWD-AI offering continues to gain momentum and we are in late-stage discussions for multiple deals and continue to believe revenue from this solution will increase at least 100% year-over-year and approach 20% of our total revenue for…

Thanks, Will, and good afternoon, everyone. As with all our calls, a press release was issued with the results of our first quarter ended March 31, 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, which will be filed in the coming days. Turning to our financial results for the period. Our revenue for the quarter was $13 million, a slight decrease from $13.7 million recognized during the same period in 2022. The decrease in Q1 year-on-year revenues was due to the macro headwinds we have been communicating since they started toehold in Q2 2022. Meanwhile, our gross margin decreased slightly from 59% in the quarter ended March 31, 2022, to 57.2% in quarter ended March 31, 2023, slightly below the lower end of our annual gross margin range. The decrease was due to solution and channel partner mix. We continue to expect gross margin to come in between 58% and 62% in 2023. Our operating expenses increased from $11.9 million for the three months ended March 31, 2022, to $14.5 million for the same period in 2023, an increase of 22%. Nearly 50% of the increase was tied to higher stock-based compensation and the remaining increase was primarily due to the full year impact of a few 2022 hires and the EvinceMed acquisition, combined with annual merit increases and normalized bonus payouts for the year. We had a net loss of $6.4 million or $0.37 per basic and fully diluted share for the three months ended March 31, 2023, as compared to a net loss of $3.8 million during the same period in 2022. On a non-GAAP basis, net loss for the first quarter of 2023 was $1.6 million…

Thanks, Ed. Operator, now let’s move to Q&A.

Thank you. [Operator Instructions] Your first question comes from Ryan Daniels with William Blair. Please go ahead.

Hey. Good afternoon. This is Jared Haase in for Ryan. Thanks for taking my questions. First one from us, we were just hoping to get some color regarding the Data Financial Assistance programs in pharma. I know there was a recent report highlighting some of the tension between pharma and payers and maybe some manufacturers starting to pull back these programs, which obviously can have an impact on patient access. So just curious if you could speak a little bit to what you’re seeing in the market overall? And then I guess just as a related point, could you maybe tie in sort of what percentage of your revenue comes from these programs today?

Yeah. Hey, Jared. It’s Will. Good to hear your voice and I’ll hand it over to Ed in a second. We don’t break out revenue by solution, because we’re really moving towards that enterprise approach where it’s multiple solutions and multiple pieces and they all have a relevant play in the patient journey. So not going to break that out. But it’s not a material percentage of our business. It hasn’t been, we’ve spoken to that over the last few years. It’s just a piece of the business that’s important and basically making affordability accessible will always be important. I think where it’s heading is it’s going to become more specific to specialty medications, where it really has the largest impact for the patient and the HCP to have a patient who’s adherent. But let me hand it over to Ed and then maybe Steve can kick in too.

Yeah. Thanks, Will. Hey, Jared. Great question. Yeah. So I would agree with what Will just said, financial messaging has been a declining slice of the overall pipe for us for a while. But I think these trends driven by pharma trying to be much more targeted in financial messaging, specifically due to the fact that copay program just need to be a lot more -- again, a lot more targeted. It really bodes well for our RWE and AI solution mix that really kind of helps us identify the right steps of patients at the right time at the point-of-care. So I don’t know if, Steve, anything else you want to add to that?

Yeah. I mean, I would just say, Jared, it’s consistent also with the shift from sort of small molecule drugs in the marketplace to sort of those massive name brands, household brands to the shift to specialty, you’ve got that exchange from volume to value occurring. And consistent with that, the financial assistance programs need to evolve. So it -- whether or not there was friction between payers and pharma that friction has always existed, but just the general dynamics in the marketplace and the ecosystem changing from small molecule to more biologics, and specific as Ed highlighted, would necessitate the change in copay programs or financial assistance anyway. So it’s -- as Ed said, I think, it’s a net benefit to us given our focus on our technology with RWD-AI, we’re positioned really well to capitalize on that. So, great question though. Thank you.

Got it. Yeah. That makes sense. And yeah, I can appreciate the ability to target is certainly a differentiator. So I guess just as a follow-up here. Will, I think, you alluded to the sort of tactical sales, that being kind of the area of the business that’s been most impacted by these transitory headwinds. I’m wondering how quickly can those sales come back? I mean do you feel like these budgets are largely set for the year at this point or do you think if we get maybe a little bit more stability that those types of things can maybe swing back in the second half of the year?

Yeah. Absolutely. So on the tactical side, it is the one that can be dialed up and down the fastest, right? They’re largely going through media companies who are managing those budgets for pharma. Good news is we’ve worked with over 50 agencies. We work with, obviously, a lot of brands over the last year. So as the macro does get better, that’s the one they will dial up the fastest. So, yeah, we’re not calling that call yet, but that is the one that would be dialed up in the second half. The good news is we’re just seeing improvement in the first half and I think that’s largely due to some efforts we made last year to really double down on marketing and education of what we’re doing with the agencies and really being a partner that helps them differentiate with pharma and we’re seeing very good early signs of that. So stand still hope for the second half.

Okay. Great. Appreciate all the color. Thanks.

Thank you.

Your next question comes from Sean Dodge with RBC. Please go ahead.

Thanks. Maybe, Will, just staying on tactical for a moment. Your comments there around that improving. Is there anything you can share to give us a sense of the magnitude of change there, maybe like pipeline for tactical, I guess, compared to Q4? How much is that? I don’t know progressed or grown?

Well, Ed would get mad at me if I stray from our KPIs.

Yeah.

So I’m not going to give you a pipeline numbers. He is strong than I am. But the -- but we are seeing mark-to-mark year-over-year, year-to-date or year-over-year, just more active business already. And Sean, we’ve talked about this, we really doubled down probably August, September last year around training, marketing, holding events, speaking at conferences and that brought a lot of awareness up for -- within the agency sector. So I think, net-net, they’re all catching up, pharma’s catching up to digital and I think we’ve supplied a really clear message of what we can enable and in helping our clients find patients through HCP access and drive script lift and ROI.

Okay. Great. And then on the guidance, it continues to imply a pretty steep revenue ramp into the back half of the year. Maybe is there any update you can share on visibility you have into that, I guess, as we progress deeper into the year, I’d imagine a greater proportion of that is now visible kind of via being under contract. Anything you can kind of share or quantify for us there?

Sure. Ed, do you want to start?

I can take that.

Yeah. Sure.

Yeah. So, hey, Sean, how are you? So right now, basically, we would typically see between, I would say, 55% to 70% of our backlog already signed and committed. And we’re tracking well within that range. So that gives us a nice kind of view on the back half of the year from where we sit today. So we really feel like it’s a pretty healthy backlog and looks pretty salad to at least meet our current guidance.

Okay. The six RWD deals you all signed thus far, are those all up and running now or is there some expectation that those will begin to flow in Q2 and beyond that kind of help when we think about like the incremental kind of revenue cadence over the year?

Yeah. They are all active now. And I think a key piece of the second half being heavier or at least reliant on growth there. At this time last year, we didn’t really have a pipeline for RWD-AI and we have a very robust pipeline right now in that. So that’s a -- we’ve talked about it as a growth driver, but that’s what gives us even more confidence on the second half. And then the seasonality, Sean, as you know, that’s -- it’s typical that second half is higher anyway. But, yeah, this year, there’s a little bit more reliance on the pop then.

Okay. Thanks again.

Thanks, Sean. See you next week.

Your next question comes from Stephanie Davis with SVB. Please go ahead.

Hey, guys. Thanks for taking my question. First, I just -- I know we’ve asked a lot of questions about the market, but one of your peers has called out some pipeline elongation across large pharma clients. So I was hoping we can get your view and your take on why some of this is happening beyond the macro?

Sure. Well, Steve is in the thick of it. I’ll let him talk to sales cycle and elongation.

Hey, Stephanie. Good to hear from you. Thanks for the question. So, I mean, I think, what we saw there was a little bit of this sort of pause with the financial situation that went on a little bit in the four -- in the first quarter, frankly, sort of waiting to see what was going on. What we’ve seen post that is actually an acceleration on the pipeline. So we’re seeing close time shrink at this point and marketing team is scrambling to try to get programs live faster and that pause is sort of relinquish, so we’re kind of thrilled to see that. We’re waiting to see what the actual shakeout will look like here post Q2 in terms of sales cycles, again, but we’re already back in line with what our typical sales cycle looks like and so I don’t have any reason to believe at this point that there’ll be disruption in that. In fact, the sales cycle on some of our more sort of sophisticated targeting products is also starting to shorten as people are kind of scrambling to catch up. A very interesting dynamic. Good -- great -- good question.

So if you’re seeing the backdrop a little bit better and you announced a giant buyback authorization intra-quarter. Why are we not going to buy shares handover this?

Well, there are these things called blackout periods. We have to follow the rules. So we obviously believe in our stock and we have one authorized, and when we can, we will.

It’s in clause...

Yeah. Absolutely…

Right.

Yeah. But we were in a blackout period when we actually announced that, so.

Okay.

Yeah. We have five days a quarter, as you know, and that was announced after that. So…

Make sense.

Yeah. I would just add, Stephanie, that I think the sales cycle for peers as they also are shifting to sort of bigger enterprise deals, this is just more decision-makers. That’s one aspect of it. The other thing is, when you’re doing something that may be close to another company that’s claiming they can do it, well, pharma wants to see if that’s true. And so sometimes that slows them down to test. We certainly saw that last year. We talked about it sort of cluttered market landscape. And as Steve said, and we believe that’s going to declutter pretty quickly, because if you can’t measure it and you can’t present it transparently and show effectiveness, you’re going to fade pretty quickly.

Hey. Very helpful. Thank you.

Sure.

Your next question comes from David Grossman with Stifel. Please go ahead.

Thank you. I just wanted to go back to a couple of comments you made in your prepared remarks. And one of those was that, you said, you were beginning to expand more aggressively outside the EHR. And I’m wondering, could you just elaborate on what you’re doing and strategically what you’re trying to accomplish?

Absolutely. Hey, Dave. It’s Will. So when you think about where we are within our client base and how we track to the patient journey and helping them stay connected to that patient journey via HCP access. Doctors are not just on their EHR all day, right? They’re on their cell phones. They’re in care team technology meetings. There’s a lot of different touch points. They’re using telehealth depending on the therapeutic area. So from our perspective, because we’re a tech company and we know how to API really well, it makes sense to go beyond EHR as a landing pad. And so when we sit down with our clients, we can show them a much more holistic plan around HCP access. And the key piece to this is you have to do all that while being transparent on physician level data. So, Steve, maybe you want to add to that a little bit, but I think that’s the rationale and the early signs is it’s a pretty good strategy, clients are responding pretty well to that.

Yeah. Hey, David. I think you highlighted it will. I mean it’s essentially meeting the physicians where they’re at. And the key differentiating point for us is the ability to report back physician little data in terms of those interactions. So unlike sort of generalized endemic website advertisements, the ability to provide back PLD and show at a physician level, what’s going on, I think is going to be the key differentiator for us. And as you heard from, Will, it’s not just in the EHR that we can do that, but it’s every other platform that we’re looking at in making that a focal point. So it’s going to give us a key differentiating point from anybody in our peer set, frankly.

Right. And one thing that’s come up, I think, in the digital ad space at least or media buying on those things is the potential impact of generative AI and I know this is a big buzzword kind of media thing going on right now. But that being said, I’m just wondering if -- how much you’ve thought about the impact on your business and how it can help you and where it could potentially hurt you if others kind of get into it before you?

Yeah. It’s interesting. We, obviously, like everyone is watching that, but the truth is we’ve been doing machine learning for the last two and a half years through -- that’s RWD-AI, right? So we have that implemented active. We have revenue against it in the pipeline. So it’s not a dream. We’re hoping that someday makes our company more efficient. It already has. And I think you heard in the prepared remarks that we’re going to have our platform to a place where we can enable that service for any brand, any size campaign for the entire network. And that’s material, because if you think of the space, like all marketing, it gets more and more transparent and sophisticated, and to avoid commoditization, you need to make it better. You need to innovate. And so we’ve really doubled down in that over the last couple of years. And I think that’s going to be something that people really remember this company for. I think we’re way ahead of the pack. And I spent two days last week with our team of data scientists, and I could tell you, it’s very much in the DNA of the company already. So I obviously have seen other companies looking at it, using it from anywhere from note -- simplifying notetaking to clinical decision support. These things have been in the workflow for a while and they’re going to get better faster. And the reason why I am -- we’re watching it but not totally paranoid that someone could come in who’s faster, smarter, smaller or whatever is -- they’re not in the workflow. And as we’ve talked about, the EHRs are already full with people there and aren’t really looking for more. So I think we’re in a good place to be their partner with this and just deliver great innovative solutions for the doctor and the patient.

But have the use cases for the RWE product, if you look back to the first couple of deals you signed a year ago or so and what you’re doing now, has there been any big change?

Yeah. They’re unbelievably effective, Dave. It’s like we’re finding patients that our clients otherwise wouldn’t find who need the medications that are out there. So it’s impactful for outcomes. It’s impactful for the patient, the doctor and obviously, for our clients. So, yeah, there’s some -- it’s really -- it’s actually really firing us up because it’s a smarter message and it’s based on some good intel we have patent pending. We’re really focused on building that out. And I think we’ll have more and more cases to share, but in the prepared remarks, we certainly talk to one.

Right. And just one financial question maybe for Ed. It looks like stock-based comps stayed relatively flat, but your GAAP operating expenses sequentially, I think, went up, quite more than we would have expected. So I’m just trying to think through, given what’s going on with the topline, what’s going on in the operating expense, maybe these are expenses that are just fixed cost. But I was just surprised at how much the expenses went up sequentially?

Yeah. Yeah. So on the OpEx side, if you just look at the cash comp, a few things at play. First of all, you’re right, compensation has gone up and that’s really [inaudible] a couple of things. Merit increases, we made a few -- we have very few hires last year. We also reset our bonuses for this year. As you know, last year, we missed our numbers. So we pay out full bonuses. So they’re just a reset of bonuses for this year back to 100%. And then, secondly, it’s really the investments related to expansion of our channel footprint, as well as some of the reporting capabilities that, Will, had mentioned. So, I would say, if you look at OpEx run rate, you can expect a slight increase in subsequent quarters, not in the millions, it’s more $100,000 per quarter just to continue to capture those points you just need.

So you would expect sequential increase in the balance of the year?

Yes. But we also expect growth in the topline.

Right. Very good. All right. Thanks very much. Appreciate it.

Yeah.

Your next question comes from Neil Chatterji with B. Riley. Please go ahead.

Hey, guys. Good afternoon and thanks for taking the questions. Maybe just first, just curious if you could just give us maybe more color on that, I guess, the smart targeting enhancement you were talking about for the platform?

Well, so we’ve been talking about RWD-AI for a while. Why don’t I let Steve, why don’t you give just a quick overview of really the simple message to why this works for doctors, clients and patients.

Yeah. Happy too. Hey, Neil. I mean, essentially, what we’re doing is we -- that allows us to look at it for individual patient profiles across the ecosystem of patients in the U.S. So we have an intake function for data, a machine learning platform that enables us to clearly interrogate that data and identify potential candidates for a specific therapy and then we have an execution function to go out and take an action with an HCP regarding the patient panel that they’ve got. And so I think that’s one of the key differentiators for this business. Neil as you’ve got businesses out there that are analytics businesses, you’ve got data businesses and you have other businesses that execute. But this business is unique in that it’s got all three of those components now solely connected together to be able to go out, find, identify, execute and pull through and that’s the key differentiator. I think that’s the simplest way I could really describe it. And that’s why it’s so effective, right, because you’ve just got this linear plug-in that’s very efficient and can scale. Helpful.

Got it. Okay. I might have misinterpreted that. So there’s not something new for later this year.

Okay.

That just…

No. No.

No.

It’s just -- it -- that’s right. Go ahead. Go ahead, Steve.

Got it.

No. Go ahead, Will.

I was just going to say, it’s just expanding it to be available to our entire network for all brands that we work with. So just a more sophisticated trigger mechanism, which gives better targeting and better ROI.

Great. Great. Thanks for that clarification. And then just -- another just follow-up here. Just on the hub service agreement that you got. Just curious on the kind of the expected impact from that?

Yeah. It’s about $1 million a year spread out pretty evenly through each year and that’s one brand, one hub. And so it’s pretty easy to see how that could scale pretty nicely. And we’re proud of that. It’s a good win. The team did a great job. And it’s -- we’ve got a solution that can really help the hubs, and therefore, the patient and those programs are patient assistance programs around eligibility and affordability. So it’s right place, right time, but we got into it early enough to have it ready. So we’re very excited about that. We’ll keep everyone posted on others that we’re able to bring across the line.

Great. Thanks. That’s it for me.

Thanks, Neil.

[Operator Instructions] Your next question comes from Max Michaels with Lake Street Capital Markets. Please go ahead.

Hey, guys. Thanks for taking my question. I know last quarter conference call you had mentioned that you weren’t seeing any major investments in the first half of the year. I’m wondering now that we approach the midpoint of 2023, if that thought process has changed at all?

Yeah. Max, would you mean investments from the client’s perspective or investments from pharma?

I mean, with healthy balance sheet, it could be technology improvement, M&A, if you’re seeing anything out in the market, just more broader investment, I guess?

Yeah. Sure. So, as Ed said, we are very actively looking at M&A targets. We think through this year, valuations will be more achievable for someone in our size and situation. Obviously, we’ll be highly selective in that process, but have several really great active discussions going on. We’re investing in ourselves. We’re really good at that. We’ve got unbelievably good ROI when we invest in ourselves, probably, our best ROI to-date. So we continue to invest in reporting, in best-in-class technology and then, obviously, solution expansion. And if you think of, Max, our growth drivers, it’s land and expand with the client, it add additional solutions or improvement, so we can maintain price or improve price and then reach more physicians or patients wherever they are. So we’re investing in all three of those.

All right. That’s it for me guys. Thanks.

Thank you. Have a good night.

There are no further questions at this time. Please proceed.

Thanks, Operator. Once again, thank you, everyone, for joining us on our update call this afternoon. We continue to work through the opportunities before us with the expectation that growth will come in the coming quarters. We are maintaining our focus on product execution to continue to deliver superior ROIs on behalf of our customers, which has and will continue to pay dividends as we execute against the opportunity within the vast white space that we continue to sell into. Our valuation doesn’t effectively represent the current value of our company and I believe we can provide venture-type returns off our current trading price as we execute against the opportunity at hand. As a result, we intend to set up our trading plan for our recently authorized share repurchase program once our next trading window opens. I want to remind everyone of our key strengths, which we expect will continue to propel OPRX’s story in 2023 and beyond. We have the largest in workflow network in the U.S. that reaches more than 60% of the active prescribers. Our landing pads outside the EHR, substantially increased our prescriber reach and enables us to build cutting-edge solutions. Finally, our AI enablement, which identifies HCPs whose patients are most in need of our customer’s resources and therapies is catching a toehold and we believe favorably positions us to grow for the foreseeable future. We are firmly positioned to execute against our 2023 financial and operational goals, which we believe will be bolstered by our strong balance sheet, which is something I’m very proud of, given the current capital markets backdrop. As such, we look forward to making a positive impact across our pharma, prescriber and patient stakeholder base for years to come. Thanks again for joining us on our call today and we look forward to everyone joining us at the upcoming conferences in our next earnings call. 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 within 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. 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 and upcoming announcements. They also include the management’s expectations for the rest of the year. 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 and contemplated by or underlying these forward-looking statements. The risks and uncertainties to which forward-looking statements are subject to include, but are not limited to, the effect of government regulation, competition and other material risks. Risks and uncertainties to which forward-looking statements are subject to could affect business and financial results are included in the company’s annual report on Form 10-K for the quarter ended December 31, 2022. This Form is available on the company’s website and on the SEC website at sec.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. Thank you for joining us today. This concludes today’s conference call. You may now disconnect your lines.