Q4 2023 OPTIMIZERx Corp Earnings Call
Participants
William Febbo; Chief Executive Officer, Director; OPTIMIZERx Corp
Edward Stelmakh; Chief Financial Officer, Chief Operating Officer; OPTIMIZERx Corp
Steve Silvestro; President; OPTIMIZERx Corp
Sean Dodge; Analyst; RBC Capital Markets
Stephanie Davis; Analyst; Barclays
William Wood; Analyst; B. Riley Securities
Presentation
Operator
Good morning, everyone, and thank you for joining optimize our exit Q4 fiscal 2023 conference call. With us today is the Chief Executive Officer of Optimized Rx, William Febbo. He's joined by Chief Financial Officer, Ed Stelmakh; President, Steve Silvestro; General Counsel, Marion Odence-Ford; and Senior Vice President of Corporate Finance, Andrew D'Silva.
At the conclusion of today's call, I will provide some important cautions regarding forward-looking statements made by management management during today's call. I would like to remind everyone that today's call is being recorded and will be made a vailable for replay via webcast and a transcript and a link to the audio recording of this conference call will be provided on the Investors section of the come website.
Now I would like to turn the call over to Optimized Rx CEO, William Febbo . Sir, please go ahead.
William Febbo
Good morning, and thank you for joining our conference call to discuss fourth quarter 2023, the preliminary unaudited financials. As already communicated, our audit is taking longer than previous years due to the October 2023 acquisition of healthy offers Inc., which does business under the name of Medix health.
The November 2023 solutions portfolio streamlining around core business clients in the validation and testing of certain third party vendors, internal processes that are part of our previously disclosed material weakness, remediation plan, the auditors in the final stages, and we are confident that we will be in a position to file our 10-K and audited financials no later than April 15.
I'm pleased to note that Q4 represented a strong end to 2023 and has favorably positioned us to start 2024 for the quarter's financial results came in better than our initial expectations and top analyst estimates. With Q4, our revenue growing 44% year over year to $28.4 million.
The improvement was driven by strong organic growth in messaging led by our dynamic audience activation platform or DAC. for short, as well as from approximately two months of contribution from our acquisition of Medix house.
Notably, our legacy core HCP business grew over 30% when compared to fourth quarter of 2022. We're excited about the many business highlights from the fourth quarter. We continued to validate our thesis on debt as we increase the number of deals in 2023 to 24 deals, providing us with a significant revenue launch pad this year.
Progress coming in ahead of what we had anticipated is very favorable as by their nature, these debt deals are larger, stickier and more strategically target in our client base. We also acquired an X health resulting in a combination of a leading direct to consumer audience activation and messaging execution business with our HCD focused omnichannel digital point of care marketing business.
This acquisition unlocks significant adjacent market with an extremely large whitespace and co cross-sell opportunity. The integration of Medmix health is tracking ahead of schedule, and the majority of integration activities have been completed. Furthermore, we have optimized our operation by trimming our legacy, optimize our costs by over 10% and simultaneously realigning our focus on core business lines and moving away from non-core business.
As noted in our March 11, 2024 press release, we are reiterating our guidance for 2024 by revising our original 2024 revenue target. This revision is due to a change in revenue accounting treatment for certain revenue streams for messaging executed through Medix helps channel partners that were historically recognized on a gross basis, but now will be recognized on a net basis.
As a consequence of this gross to net accounting treatment, we adjusted our revenue target and anticipate revenue to reach at least $100 million for 2024. Importantly, this adjustment maintains our bottom line and in fact, enhances our margin profile.
Therefore, our adjusted EBITDA guidance remains unchanged, standing at at least $11 million for 2024. We believe the macroeconomic and competitive challenges we identified in 2022 and 2023. We are returning to normal.
In particular, we're witnessing encouraging momentum as our clients that had initiated pilot programs with newly established entrants in our field of in the past two years are concluding the assessments of these programs and as anticipated, are finding that these perceived competitive solutions like scalability and the ability to adequately report information back to customers for office.
Before proceeding, I'd like to express my sincere gratitude to the optimized Rx team for their unwavering dedication and relentless pursuit of our mission. Over the past few years, our collective efforts have led to the development for one of the most scalable solutions in the industry tailored specifically for pharmaceutical marketers.
We've reached recently expanded this initiative to include a highly impactful PTC component. This journey hasn't been without its challenges navigating through the dynamic landscape of the industry shifts and embracing early, the digital advancements has been no small task, yes, optimizer axes achievements and as a testament to our resilience and foresight, fundamentally reshaping the dynamics of engagement between pharma patients and prescribers.
As previously mentioned, in September of last year, we introduced a significant enhancement to our omnichannel healthcare engagement platform. I noticed that pioneering a I driven capability seamlessly integrates point of care and traditional digital media offering a holistic solution for pharmaceutical marketing.
The unveiling marked the culmination of years dedicated to the understanding of how AI can augment optimize our access customer use cases, resulting in a transformative journey for our HCP engagement platform.
Building upon our existing technology, we have extended the AI driven platform reach, Campos, social media, web display channels, and CRM alerts, which fosters greater efficiency to collaborations with our customer sales forces.
Since then, we've expanded these capabilities to now also encompass the DTC channels utilized by Medix help that includes streaming and connected TV as well as various digital channels such as display, audio, online video and mobile, among others.
We're encouraged by this timeline enhancement as we've already witnessed early initial cross-selling success with that in the short time since we've consummated the acquisition. We will update everyone regarding our debt cross-selling efforts in our Q1 earnings call in early.
Debt death advances our land-and-expand strategy, enabling clients to gain maximum market penetration through the scaling of outreach in real time across the company's network of over [2 million HCPs and 240 million] major digital media channels and at point of care via EHRs, e-prescribing and telehealth platforms.
With this Optimizer X has evolved into one of the most comprehensive digital health care marketing platforms in the nation. This evolution firmly aligned with current pharma trends as the industry is moving the greater portion of their commercial spend towards omnichannel digital solutions, while looking for these solutions to deliver more impactful results by not only identifying patients known to HCPs, but also pinpointing new patients for them therapies.
We continue to believe smarter solutions such as our data offering, will capture the lion's share of the pharma spend, particularly with legacy commercial dollars that are reallocated to digital. We believe early proof of this trend is clearly highlighted by the 4x year over year increase in debt deal seen in 2023.
Data represents a transformative lead for us transitioning us from being a mere tactical player within the pharmaceutical industry to a formal strategic partner. This shift affords us the invaluable advantage of garnering top-down support decision-makers while also securing revenue streams with greater durability, enhanced margin and amplified growth prospects.
These pivotal developments are reinforcing my level of excitement regarding our strategic positioning. I anticipate that the collective impact of our initiatives outlined today in yield substantial dividends over the next three to five years, catapulting our revenue multiples of its current standing as we diligently pursue our lead and and expand strategy.
We continue to reap the rewards of delivering superior return on investment, maintaining our impressive ROIs of over [10 to 1] for A2P messaging. This achievement holds particular significance with the pharmaceutical landscape.
We're achieving our ROIs of two to three times patent has traditionally been the benchmark. We believe we've turned a significant corner in recent months and have incredible momentum going into 2024. And with that, I'd like to turn the call over to our CFO, Ed Stelmakh, who will walk us through our financial details.
Edward Stelmakh
Thanks, Will, and good morning, everyone. As noted previously, and a transcript and owing to an audio recording of this conference call will be provided to the Investors section of the company already came in at $28.4 million, an increase of 44% from $19.7 million were recognized during the same period in 2022.
This included revenues from our legacy core and non-core business line, as well as from approximately two months of medical IT related revenue streams. Going forward, we will be reporting both GAAP and the Mazor X and Medix health one consolidated business.
Meanwhile, our previous non-core business, while we have been have called access and patient engagement, will no longer be revenue streams for the company and we have eliminated associated costs the business lines.
On a pro forma basis, stripping out these non-core business line from our 2023 results, accounting for the full year benefit of Medix Coke financial results in our 2023 actuals, our revenue for calendar year 2023, with have been approximately menu $91.8 million, which we are utilizing our comparison point which our progress going forward.
Meanwhile, our net loss came in at $7.2 million for the fourth quarter of 2023 compared to a loss of $0.3 million during Q4 of 2022. Our adjusted EBITDA came in at $5.8 million for the fourth quarter of 2023 comparison, $3.9 million during the fourth quarter of 2022.
GAAP to non-GAAP reconciliation tables have been included in the Investor Relations section of our website and investors that optimizer ex.com may Events and Presentations folder. We ended the year with cash and short-term investments totaling $13.9 million as of December 31, 2023, as compared to $74.1 million on December 31, 2022.
A majority of the year over year decline was due to our traditional medical health and share repurchase program, which we bought back 526,999 shares of common stock for $7.5 million during 2023. Our current debt balance that help $38.3 million recall fund the $83.9 million cash portion of the metrics transaction. The Company took on $40 million in debt financing, and we've paid off $1.7 million of principal during fourth quarter.
We'll continue to believe we're well funded to execute against our operational goals. And with that, I would like to turn the call back over to Will.
William Febbo
Well, thanks, Ed. Operator, now let's move to Q&A.
Question and Answer Session
Operator
Thank you. We'll now be conducting a question and answer session. (Operator Instructions)
Sean Dodge, RBC Capital Markets.
Sean Dodge
Thanks, guys. Good morning and congratulations on the strong finish to the year. You signed or will you said '24 jet fuels and '23 that was up four times four times versus the previous year. A lot of momentum there. I guess anything you can share on how demand or activity around those have carried into this year. You had mentioned some macro headwinds for reform and those continue to dissipate.
William Febbo
Hey, Sean. Yes, thanks. Is just yet on macro, for sure. We're seeing sort of return to what we saw in '21 in terms of our clients, making decisions, flow, seasonality, all that good stuff, FDA approvals all the and are tracking towards any yet. And we'll obviously talk up to Q1 and May, but it's really resonating with clients. I think we talked a lot about it after the Q3 report that clients are really the adoption of digital has also forced the adoption of accuracy reporting.
Data-driven outreach out less is more effective and them were in the right place at the right time there with this innovative approach. So yes, continued due to continued adoption. And Steve, just to say a couple top-level words on this sales training and such, but very, very positive momentum and really encouraged by the team's ability to deliver in a way that the clients respond to it in a way that's efficient around digital. Steve, you want to just chime in limit.
Steve Silvestro
Yeah. Happy to host Don Duda here yet. I think one of the other things that's been really encouraging is that the initial set of GAAP deals that we did previously have renewed and those same set of clients have expanded.
So I think that's also a positive confirmation on value prop and what we're delivering to those clients, Sean, so that land and expand strategy that we talked about previously, he is really coming to fruition. And and I think as we've highlighted, the team's ability to get a little bit more technical and approach decline and different way that the sales slightly different, right.
It's more of a much more of a strategic sale in that you're having a conversation around patient profiles and strategies a little bit more mature than we would have had in times past. So really encouraged by that and sort of new supply.
Sean Dodge
In your prepared remarks, talked about omnichannel and kind of trends within big pharma. You've done the Medic acquisition that adds a lot of nice surprise for you. When we think about kind of omnichannel, the did you have everything in need there now, are there other areas are capabilities you think that could make sense to bolt on the future?
William Febbo
So yes, I would say, look, we have no major CapEx and we've got the tech that can enable what we're doing. We're constantly looking at different types of channel partners. And I think, Sean, that will be an evolution pretty much every year because there's so much changing so fast the way doctors and patients interact with their own medical records with their own doctors with their caregivers. And so luckily, for us, we have the team and that was enhanced with a part of medical teams.
Well, that's completely focused on channel. And our omnichannel is really something that that shifts with the needs, right? It's not a stagnant thing sort of get there and you're done. It's constantly evolving. But the good news is we've got a lot of rate gives us the growth, and we've got the team to be keeping their eye on the ball on on what's next in terms of enablement for communication with both HCPs and patients and consumers health.
Sean Dodge
Okay. That's great color. Thanks. And congrats again.
William Febbo
Thanks, Sean.
Operator
Stephanie Davis, Barclays.
Stephanie Davis
Hi, guys. Thanks for taking my question on. You're talking about trimming costs further, but you're talking about the diversity of different initiatives. I wouldn't normally require some headcount investments such as in Gap brand and the Walmart partnership as block as you know, how they think about that?
William Febbo
Yes, sure. He's definitely good to hear your voice. So no, we don't know, Dan, just Sysmex. Yes, that's right. Great conference by the way. Thank you. So no, we're not looking at additional costs, right that was just all message last year. And we're just reminding everyone that we completed at the beauty of this model. Stephanie is where it's a technology platform, right.
And we don't we're not an agency. We don't generate content to help our cloud clients get the content that they've already generated to the right people at the right time month. That's a doctor and patient. So where we beat our additional people this year will be commercially focused. And also just as a public company have been more than half of this, we get over $100 million in revenue.
And then as we've messaged before on the reporting side, that's a key piece. Now that something, you know, pharmaceutical companies have adopted point of care digitally as a channel. All the standards go up and transparency. He needs to go with that as well as measurement. So now this is a very scalable model. We've shown it before in past years, even a smaller company that invests just go back and look. And I think you'll see that as from year.
Stephanie Davis
I do have to ask because we have seen a public peer Gauthier submissions planned rain that reporting. How should we think about the cost associated with that? Because you usually have to look more on accounting costs on some management attention thinking about when that happens?
William Febbo
Yes, no problem. Yes, we did a lot last year. And again, as I said in my prepared remarks, I'm super proud of the team because for a small company has no small feat to buy one, out-license some tax and simultaneously see your core starting to grow, which you believe it's when it happens, it happens fast.
And as we said, all that coupled with reviewing material weakness, that we have a remediation plan for 2024 for everything just taking longer. So yes, there will be some incremental costs for third party assistance on the acquisition stuff. A lot of the cost has already rolled into the acquisition costs. And once we once were actually file, people will see that. So I wouldn't anticipate a ton, but there will be some additional from Delta here.
Stephanie Davis
Good luck with the Sprint.
William Febbo
Thank you.
Operator
(Operator Instructions)
William Wood with B. Riley Securities.
William Wood
Thanks so much and congratulations on a nice fourth quarter of just a couple from us. And we just kind of curious, wanted to dig in a little bit more to the DAB expectations, how the debt growth expectations for this year. You obviously noted '24 at the close of next year. Should we how she should we be thinking about this growth for this year in terms of the number of deals on as well as, you know, mid maybe potentially commenting on on a farmer partners that you already sort of have in the queue to sign up for the year?
William Febbo
I want to get too far ahead because we're going to report in a basically a number. So in Q1, but very positive momentum will give an update on the other closes we've seen in Q1. And but we don't want to get ahead of that. But I just I think what's telling and what Steve mentioned is we went from [2 to 6 to 24, 100% of which renewed from the two and into the six to six went into the '24].
And that we're really seeing cases across multiple therapeutic areas and also different needs by the client. And I think what's going to be most encouraging when we talk about it is just seeing how this can now apply to the DTC part of our business because their message was is back tech spectacular around creating micro neighborhoods.
But when you can layer in that with the algorithm, it really the two together, first of all, simplify life for our clients that we think increases quality of outreach and will certainly drive better by prescription like So stay tuned. Can't give you any hard numbers, but but really positive momentum year over year. And certainly what we're seeing initially.
William Wood
Appreciate that. That's very helpful. In terms of your met of our metrics on, you mentioned that it was almost complete or near completion. Just curious when we should be expecting for that to complete? Or is it month time line? Or is it six you no longer hold fairly longer term? And then how should we think about that is actually is adding to the growth on the expectations for 2024 coming?
William Febbo
Yes. So we've got a pretty seasoned team with add, Steve, Marion and myself. And then the whole team allow us a lot of us have done acquisitions. We tend to be pretty conservative on the first year. And I will say the process of integration was really well run ads at Stylemark. Our CFO of zero set up a particular office to do that.
And all of them, the major stuff is done and now it's fine tuning. And then it's just operations, the part that on the commercial side, which is where the growth can come from to your question, we did a great training in January of both teams together. How is there as well? We have the entire senior team has there been brought together.
First of all, people that already worked together. They've gone through the knife fight of digital spend before for school and and then also got their head around what the gap is. So we're really excited about that. In Q1 we can give a little bit more color in terms of gaps, contribution growth, percentage of overall revenue, that kind of thing. But to be there soon enough.
William Wood
Got it. Appreciate that. And one last quick one on. Could you remind me what the weather metrics gross margins were and or historically have been? And then how you would expect those to sort of integrate in and to optimize Rx's and outlook? We drew on how we should expect those to integrate. Thank you.
William Febbo
Sure, Ed, you want to take them yet.
Edward Stelmakh
Yes. So the margins for Medix, I think during the slower for Q1, Q2, if they can deliver those filings, I sort of full year margin is concerned. As I said before, we're not going to us winning out. Their numbers were pretty much now fully integrated business. So margins are all big. And so our current guidance as one company.
William Wood
Understood. Thank you for taking our questions.
Edward Stelmakh
Yes, no problem thinking.
Operator
There are no further questions at this time. I'd like to hand the floor back over to William Febbo for any closing comments.
William Febbo
All right. Thank you, operator, and thank you, everyone, for joining us today. They trust you share and our excitement and can perceive the positive momentum we built throughout the second half of 2023 and now into '24.
As we embark on our financial and operational journey for the year ahead, I'm pleased to say that we are stepping into this new chapter on solid ground. Our reach with healthcare professionals and patients has undergone a remarkable expansion, thanks to our proprietary AI models. This has allowed us to overcome many of the challenges we faced previously.
Today, we proudly offer a comprehensive solution that seamlessly integrates the various elements into the powerful agile strategies. These strategies address critical challenges such as brand awareness and education, affordability and the recruitment of hard to find patients. These are the very issues our clients, doctors and patients encountered daily in today's healthcare landscape, and we are honored to be part of the solution commitment to generally aging doctors and patients in aligning on care is what truly drives us as a team.
Thank you for your time to discuss on next quarter's earnings call. Wishing you all fantastic remainder of the day. 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 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 27 A of the Securities Act of 1933 as amended, and Section 21 E of the Securities Act of 1934 as amended.
Forward looking statements and should not be made should not be used to make investment decisions, the words anticipate, estimate, expect, possible, and thinking and similar expressions identify forward-looking statements that may speak only to the date such statements are made.
Looking statements in this call includes statements regarding estimates and our 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 management's expectations for the rest of the year.
The Company undertakes no 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.
The risks and uncertainties, which forward-looking statements are subject to include, but are not limited to, the effects of Governor regulation, competition and other material risks, risks and uncertainties which forward-looking statements are subject 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, 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 four year and a transcript and they're linked to an audio recording of this company of this conference call will be provided on the Investors section of the company's website. Thank you for joining us today for this con cludes today's call. This call. You may now disconnect your lines.
