Earnings Labs

OptimizeRx Corporation (OPRX)

Q4 2016 Earnings Call· Wed, Mar 8, 2017

$6.39

-0.39%

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Transcript

Operator

Operator

Good afternoon and thank you for joining us today to discuss OptimizeRX's Fourth Quarter and Full Year Ended December 31, 2016. With us today are the Company's Chief Executive Officer, William Febbo; and its Chief Financial Officer, Doug Baker. Following their remarks, we will open up the call to your questions. Before we begin, I would like to provide the Company's Safe Harbor statement. Statements made by management during today's call may contain forward-looking statements within the definition of Section 27A of 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 an investment decision. The words estimate, possible, and seeking and similar expressions identifying forward-looking statements and they speak only to the date the statement was made. 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 in and contemplated by or underlying the forward-looking statements. The risks and uncertainties to which forward-looking statements are subject and could affect our business and financial results are included in the Company's Annual Report on Form 10-K for the fiscal year-ended December 31, 2016. This form is available on the Company's website and on the SEC website at sec.gov. I would like to remind everyone that today's call is being recorded and it will be available for replay through March 29, starting later this evening. Please see today's press release for replay instructions. And with that, I would like to turn the call over to Chief Financial Officer of OptimizeRX, Mr. Doug Baker. Please, sir, proceed.

Doug Baker

Management

Thanks, John. Good afternoon everyone and thank you for joining today's call to discuss our results for the fourth quarter and full-year 2016. Following my financial review, Will is going to comment on the large market opportunity and our key accomplishments thus far in 2017. Now, turning to our financial results for the fourth quarter of 2016, net revenue increased 13% to a record $2.3 million from $2.0 million in the same year ago quarter. The increase was due to increased distribution of pharmaceutical brands and expanded distribution channel. For the full-year 2016, net revenue increased 7% to a record $7.8 million versus $7.2 million in 2015. Financial messages, such as eCoupons, were distributed for 95 brands in 2016 versus 85 brands in 2015. For the fourth quarter of 2016, our operating expenses were $1.8 million, increasing from $1.5 million in the same year ago period. The increase was primarily due to an increase in expenses related to growth initiatives, including investments in people as well as related marketing and travel. Operating expenses for the full-year 2016 increased to $5.9 million as compared to $4.2 million in 2015. The increase was primarily due to the previously mentioned growth initiatives and we believe was necessary to start to scale the business. For the fourth quarter of 2016, our net loss for the quarter was $253,000 or $0.01 per basic share improving from a net loss of $415,000 or 1% per share in the same year ago quarter. Our net loss for the full-year 2016 totaled $1.5 million or $0.05 per share as compared to a loss of $0.6 million or $0.02 per share in 2015. We expect to see continued losses in the short run as we focus our revenue growth and expected channel growth. Turning to our balance sheet, cash and cash equivalents totaled $7.0 million at December 31 as compared to $7.6 million at September 30. The drop in cash was primarily the result of our purchase of ALLscripts, LoggerX inventory and incentive payments to new channel partners. We expect to use our balance sheet and cash to scale the business. We continue to operate debt free. I would now like to turn the call over to Will.

William Febbo

Management

Hey, thanks, Doug. Thanks to everyone for joining us today. I'm going to work through my comments fairly quickly so we can get into Q&A where we find that's where I think we have the best dialogue on this call. So, as Doug stated, our revenue growth in 2016, was primarily driven by our core products, financial messaging, previously known as coupons. The growth was attributed to our expanded point of prescribed promotional networks that now include more than 307 EHRs that's Electronic Health Records to our partners reaching more than half a million physicians which is the largest network in the industry. During 2016, we acquired some traditional pharmaceutical manufacturers, more pharma clients and brands that go with it for distributions through this channel. Those channel partners and I think this is important for the investors to here our very large companies, they include ALLscripts, Practice Fusion, Quest, Care360, and then of course our e-prescription platform partners DrFirst and NewCrop. We're integrated directly or indirectly into eight of the top 20 EHRs and actively working on the remaining 12. In addition to adding new brands and expanding our network, in 2017, we are going to really work intensively on increasing the physician utilization of our partner networks. To this end, we are working with our partners on a individual basis and we're really working hard to get prescribers to have more access and should be more aware through the workflow of the eCoupon. This obviously will drive revenue with existing brands and existing channels and that is our goal. Want to talk about WPP; the largest marketing service company in the world as one of our largest shareholders continue to support us in within its family of companies in 2016. As a result, we realized a significant increase in…

Operator

Operator

Thank you. [Operator Instructions]. We do have a first question. We will go to Bernd Hartmann, a Private Investor.

Bernd Hartmann

Analyst

Yes, Will, how are you doing?

William Febbo

Management

Hi, Bernd. Good to hear your voice.

Bernd Hartmann

Analyst

Okay great, just wondering in Lego [ph] Wolverine's analysis you know that our stock is way undervalued. What are our plans to try to address the stock being at almost historic lows at this point, you know what the plan is for our IR firm to try to do something about that?

William Febbo

Management

Sure, Bernd, thanks for the question. Obviously we are always focused on shareholder value and from my experience as you execute that's the first priority, just execute on the business grow it. I think similar to some of the investors in the market we've been frustrated with the lack of growth over the last two years and I think last year was really the year we needed to make some foundational investment in the firm, realign the marketing, really move from a product company to a company that offers full service to the pharmaceutical industry and really leverage the WPP relationship. I think all those things have been accomplished last year. I can't speak highly enough of our team; our day-to-day team is really I think best-in-class to great work culture and everyone on the call knows without a good team you can't do much. So I'm pretty encouraged by where we are. I'm encouraged by the return to growth in Q4 and we plan to do pretty active Road Show albeit at ROTH next week, we will be at the B. Riley Conference and most likely at the Liolios Conference. So we will continue to do what we do but the key thing is to grow the business Bernd, as you know results get people's attention. Thanks for the question.

Bernd Hartmann

Analyst

Okay. Well just a little follow-up, I totally agree with you, I think you got a great team from what I hear in place, we are doing all the right things, I thought that the -- I drilled into the posting with the FTC there, the Wolverine put in and it took me a while to drill down and find out what they were talking about but it sounded very positive to me, I guess that is all I'm going with that and it would be nice to get more of that message out from their perspective.

William Febbo

Management

Yes I agree with you, it's together someone other than us telling us we are worth more is always good. Wolverine has a great reputation in the industry, they are very serious fund almost $2 billion fund. And so I appreciated that endorsement. I also don't disagree with their thesis. Obviously I can't comment on their numbers because it is forward thinking but looking but I think they understand the space, they assess some comparables and we are squarely focused on getting that message out there.

Bernd Hartmann

Analyst

Okay. I think their number was like north of 2 bucks. So okay well that's great.

William Febbo

Management

Thanks.

Bernd Hartmann

Analyst

Thank you.

William Febbo

Management

Take care, yes. Bye-bye.

Operator

Operator

[Operator Instructions]. We will take our next question from Ron Chez with a Private Investor.

Ron Chez

Analyst · a Private Investor.

I know you're not providing guidance but would – I would assume you would not be satisfied this year with the 13% growth if you would just comment on that? It's progress but not enough.

William Febbo

Management

Agreed, no I agree with you the growth has been lackluster and I think it's on us now to show a much greater growth than we've seen over the last two years and you know me Ron I will be disappointed with even a great growth rate because there is always more you can do. But no I feel like we've got a core product back on track with growth, great alignment with the agencies who make really help pharmaceutical companies make these decisions. I also think we will have considerable growth in our other product brand messaging in relation to our -- relation to the ALLscripts and others and then I can't say enough about the team closing additional channel, I think that's going to really provide us a lift. And as other investors have pointed out in the past, we really need to work hard on taking our existing partners and just making the utilization better, in other words letting the content get to physicians in a smoother way so that we can increase on our base. But no I would not be content with 13% growth; I think it needs to be far greater than that.

Ron Chez

Analyst · a Private Investor.

In terms of utilization, how would you enhance given the large numbers here, it would seem with that many pharma clients 95 and one client doing 2 million, scheduled to do 2 million this year, that the opportunity to expand pharma budgets and the number of pharma companies ought to be terrific right now or is that an overstatement?

William Febbo

Management

No, the opportunity is terrific and I think that like I've said in the past, pharmaceutical companies don't shift spend at record speeds. They shift test and they shift in small pockets than test and then once they have been secured, they feel secure with the channel from a compliance standpoint, regulatory standpoint and then obviously return on investment then they start going deeper. And I think we've seen that with a couple of our enterprise network clients. And so our goal is that sales team is really to take our core 25 clients with those 100 or so brands and leverage them up as well put on additional but we will spend considerable time just leveraging the existing base because it's a lot from there.

Ron Chez

Analyst · a Private Investor.

Take that 25 leading brands and make them all 2 million.

William Febbo

Management

You got it.

Ron Chez

Analyst · a Private Investor.

Or more and one more question, how will you increase physician utilization?

William Febbo

Management

So there is a couple of ways, there are we talked about it gets in the leads a little bit but there are several legacy issues -- legacy systems in the market and they are all working hard to get additional capability out to all their users. And our integration team works closely with the partners to make sure that our content is in that workflow and that's really part of our IP as a company, the relationships we have with these partners because they are really not taking on additional partners there, so consumed with keeping up with the regulatory environment and servicing their physicians. So we are going to work, we have a really good tech team, we brought on a VP of Technology who has been with the firm in a consultative way for a long time now as full-time person and we have a great integration team working with our partners.

Operator

Operator

[Operator Instructions]. And we will go next to Randy Rageth, who is a Private investor.

Randy Rageth

Analyst

Hi Will, question for you. So year-over-year revenue growth was about 7% and best I can calculate it expense growth was about 40%, do you see those expenses kind of leveling off or how do you see that?

William Febbo

Management

Yes I think yes that we -- last year was a heavy investment year. We will continue as I mentioned in my opening comments on the brand messaging side, we are getting into that business really for us this year, so we will have a little margin contraction there but from a SG&A standpoint we have a, not a large app needed for 2017 to get better growth.

Randy Rageth

Analyst

Did you see growth; you see revenue growth hopefully surpassing expense growth this year?

William Febbo

Management

Absolutely.

Randy Rageth

Analyst

Yes. How about in terms of the revenue composite, so you've got the financial messaging what we used to call eCouponing brand messaging, how do those breakdown in terms of percentage of revenues?

William Febbo

Management

You know, right now, we don't separate our revenue, we've got three buckets, we have got financial revenue brand, messaging revenue, and then also brand support which I've talked about in previous calls. And financial revenue is still a dominant percentage and we don't break it apart. We are looking at doing that later in the year once we have, once brand messaging is more meaningful but to-date we haven't broken it.

Randy Rageth

Analyst

And then lastly on the brands, it looks like you added 25 brands but you must lost 15 because we netted 10 new ones is that fair?

William Febbo

Management

Yes it's a tough way to judge the business in number of brands, I mean it's telling in respect that we are convincing pharmaceutical companies to work with us to a large degree that's about a seventh of the market. So it gives investors a sense of how much more we can grow. But in the course of the year, yes you've some brands come off patent, some use up their budget in the first half of the year and decide not to renew. So it's a mixed bag there. But our plan is to continue to leverage these different products on the existing brands, so as we've talked about before our revenue per brand can go up, that's our focus.

Randy Rageth

Analyst

Great. Appreciate your help.

William Febbo

Management

Yes thanks for calling, appreciate it. Appreciate your support.

Operator

Operator

[Operator Instructions]. And that does conclude our question-and-answer session. I would now like to turn the call back to Mr. Febbo for any final remarks. Sir, please proceed.

William Febbo

Management

Thanks, John. As I said earlier, we are really building a valuable platform with our increasingly broad reach into the physician community and obviously leveraging our recently proven very high return on investment with pharma clients. I very much believe 2017 is the year that this platform will accelerate value creation for our shareholders and again thanks for participating. We did have a record number of people call in and as everyone knows I'm very accessible, feel free to call me at any point, I look forward to talking. Thanks and have a good day.

Operator

Operator

Thank you. Before we end today's presentation, I would like to remind everyone that this call will be available for replay starting later today. Please refer to today's press release for dial-in replay instructions. A webcast replay will also be available via the Company's website at www.optimizerxcorp.com. Thank you for joining us today. This concludes today's conference. You may now disconnect.