OptimizeRx Corporation (OPRX) Q4 2018 Earnings Report, Transcript and Summary

Good afternoon and thank you for joining us today to discuss OptimizeRx’s Fourth Quarter and Full Year Ended December 31, 2018. With us today is the Chief Executive Officer of OptimizeRx, William Febbo. He is joined by the company’s President, Miriam Paramore; and Chief Financial Officer, Doug Baker. Following their remarks we will open the call to questions. Then before we conclude today’s call, I will provide some important cautions regarding the forward-looking statements made by management during the call. I’d like to remind everyone that today’s call is being recorded and will be made available for telephone replay via instructions in today’s press release in the Investors section of the company’s website. Now, I’d like to turn the call over to OptimizeRx CEO, William Febbo. Please go ahead, sir.

Thank you, Justin. Good afternoon everyone. Thanks for joining us on the call today. As you all saw from the earnings release, we issued earlier today, we’ve made a lot of progress in growing our digital health messaging platform in 2018. On the call today, I’d like to talk about what went into this record quarter and the foundation we’ve continued to lay in support of our future growth and expansion. We saw continued improvement across the board in Q4 in fact we realized our ninth consecutive quarter-over-quarter revenue growth and our first year of profitability. Revenue was up 65% from a year ago quarter and up 21% sequentially to a record $6.6 million. These results reflect strong client demand and expanding budgets, which we believe is due to the high return on investment or ROI as you’ll hear today on marketing dollars that we consistently deliver for our clients as well as a mix of messaging solutions we provide. As the largest digital health network of its kind OptimizeRx provides patient access to savings and adherence directly through the doctor managed electronic health records, EHRs, and electronic prescribing e-prescribing systems. Taking the perspective of the investor, I would pay attention to OPRX for three principle reasons, the size of the market opportunity with a lot of market share yet to capture. We’re at the center of all the stakeholders, Pharma, physicians and patients, and we have a platform which can enable multiple revenue streams, which help all the stakeholders, particularly focused on affordability and adherence to topics we’re hearing about daily. These days the point of care presence has become increasingly essential given how EHR has now dominate the time and attention of healthcare providers. Most physicians now spend more than five hours a day interacting with patient health records through an EHR interface, whether it’d be viewing test results and documenting physician notes for issuing e-prescriptions. If 2018 was anything like 2017, more than 2 billion e-prescriptions were transmitted from doctor to pharmacy. This phenomenally high number reflects on 90% of the ambulatory care providers now use the EHRs and that e-prescribing now exceeds 85% of all prescriptions written, according to a 2018 Surescripts report. In fact, most hospital systems now require that all medications to be e-prescribed. The reason for this increasing trend is due to how e-prescribing enhances the safety of patients and the quality of care, since there is no manual writing involved and therefore less probability of prescription errors. E-prescribing also helps with security checks and maintaining the complete historical data for a patient. According to a market studies published earlier this month, the e-prescribing system market will register a 32.5 CAGR in terms of revenue growth and the global market size will reach 2.1 trillion by 2024, up from 510 million in 2019. Of those two billion e-prescriptions transmitted annually in the U.S., 10% of these transactions involve brands with copay savings programs. This means we have a potential to deliver more than 200 million transactions annually. Given the escalating costs of healthcare and especially the cost of prescriptions being shifted increasingly to patients, the need for copay saving programs is expected to increase. In anticipation, the pharma industry has reportedly set aside more than $8 billion to cover copay programs. Based on these factors related to e-prescribing, and copays and indications from our clients, agencies and partners, we estimate that the total addressable market for patient savings via copay is worth well north of a $1 billion once the market fully adopts this channel. This TAM, total available market, is augmented by the other types of messages we are developing between pharma and the point-of-care. Sufficed to say, we believe there is ample TAM to grow this business. We believe we’re still very much in the early days of this opportunity and we enjoy a first mover advantage, certainly as any public company goes, we are truly a pure play in this space. We now have a technology infrastructure in place at the right time for this industry to see change. We are able to connect the pharmaceutical manufacturers and physicians in a seamless, efficient way as we generate high ROI for our clients all while benefiting patients. For certain, we have an amazing direct reach into health care providers through our EHR network. In fact, we have direct access to more than half of all providers. And to say we’ve only just begun our expansion into the hospital market. But next, I’d like to turn our call over to our CFO, Doug Baker, who will walk us through the financials for Q4 and the full year. Then Miriam Paramore, our President, will discuss the latest with our platform development product roadmap and channel strategy. I’ll then return to talk more about our results and outlook for the remainder of the year. And then we’ll take some questions. Doug?

Thanks, Will, and good afternoon everyone. Prior to the call, we issued a press release with the results of our fourth quarter and year ended December 31, 2018. A copy of that release is available on the Investor Relations section of our website. We expect to file our complete 10-K on March 11. We reported net revenue in the fourth quarter increased 64% to a record $6.6 million. For the full year net revenue increased 75% to a record $21.2 million. The increases in both periods resulted from any increased number of pharmaceutical brands in our network, distribution points in our network also increasing and strong growth with our brand messaging product. We expect continued strong growth in 2019 as a result of the foundation we laid over in the last two years in terms of technology, personnel, partnerships, and the healthy balance sheet. As a result of our strong revenue growth, our gross margin percentage increased from about 49% in 2017 to 58% in 2018. This increase in gross margin was due to the substantial increase in our brand messaging revenue, which in 2018 had a significant associated fixed cost component. In the fourth quarter of 2018 our gross margin was 62.2%, as compared with 63% in the same year ago quarter. We anticipate this to decline slightly in 2019, but we are focused on maintaining gross margins of at least 55% for the year. Our operating expenses in the fourth quarter of 2018 were $4.2 million, up from $2.8 million in the same year ago quarter. This increase is primarily due to expenses related to our acquisition of CareSpeak Communications in October 2018, which was approximately $560,000 and additional expenses related to our growth initiatives. It is important to note however, that our operating expense as a percentage of revenue decreased to 64% and without the acquisition expenses would be approximately 57%. That was an improvement over the 69% of revenue in the same year ago quarter. We expect our operating expenses to gradually increase over time as we pursue our growth plans and expand our operations to support a growing customer base and partner network. However, for the foreseeable future, we expect to see operating expense as a percentage of revenue continuing to decline with this supporting improvement in profitability. Naturally, this means controlling our operating expenses they don’t increase as fast as revenue. We’ve built out a strong team in 2018, so going forward we should see slower growth in related operating expenses. Also, there are no significant technology investments we currently plan to make in 2019 and as we can now focus on leveraging the powerful platform we’ve already built. For the fourth quarter, we also saw improvement in our bottom line versus last year. On a GAAP basis net loss totaled $110,000 or $0.01 per share as compared to a net loss of $237,000 or $0.02 per share in the year ago quarter. This 2018 loss included approximately $560,000 of acquisition related costs. So without these expenses we would have had approximately $450,000 in net income in the quarter. This smaller loss allowed us to achieve full your profitability in 2018 of $226,000 as opposed to the loss of $2.1 million we had in 2017. We expect to continue to achieve quarterly profitability on a GAAP basis in 2019, although one-time expenses related to investments in growth initiatives could result in a loss in any quarter such as the expenses we incurred related to our acquisition in Q4. Starting this quarter, we have introduced two non-GAAP financial measures. Non-GAAP financial measures include a net income or loss and non-GAAP earnings per share. We believe the use of these non-GAAP measures can be helpful in assessing the company’s financial performance. We defined non-GAAP net income or loss as the net income or loss with an adjustment to add-back depreciation, amortization and stock-based compensation expense. So rather than non-GAAP EPS, we take that non-GAAP net income or loss and divide by the number of weighted average shares outstanding on a basic and diluted basis. In the fourth quarter of 2018, our non-GAAP net income totaled $842,000 or $0.06 per diluted share, which compares with non-GAAP net income of $280,000 or $0.03 per diluted share in the same year ago period. For the full year, non-GAAP net income was $3.1 million or $0.26 per diluted share which compared to the non-GAAP net loss of $877,000 or $0.09 per basic share in 2017. For further information about our use of these non-GAAP measures and the reconciliation to GAAP, please see today’s press release. Now turning to the balance sheet, our cash and cash equivalents totaled $8.9 million at December 31, 2018. This compares with $5.1 million at December 31, 2017. The increase in cash was primarily due to the equity we’ve raised in May that generated net proceeds of about $8.2 million. We also have positive cash flow from operations in 2018 of $696,000. One major change to our balance sheet at December 31, 2018 is the existence of intangible assets resulting from the CareSpeak acquisition. As a result of that transaction, we now have approximately $8.9 million on intangible assets, which are composed of goodwill, customer relationships, trade name, patent rights and covenants not to compete. We expect our amortization of intangible assets to be approximately $600,000 per year. The intangible assets are being carried at fair value as determined by an independent third-party valuation method and we continue to operate debt-free. Given the capital we raised earlier last year and passed the cash flow for the foreseeable future, we don’t see needing to raise any additional capital solely for operating purposes and we are focused on growing our revenue channel and partner networks organically. However, is it a company in the market that is active with merger and acquisition activities; attractive opportunities may arise such as for acquisitions or strategic relationships. We will assess these as they arise with a view to maximizing shareholder value. That wraps up our financial results. Now I’d like to turn the call over to Miriam.

Thanks, Doug. Hi, everybody. We have been executing on our growth plan as you can see and I’m happy to share some details about our achievements this quarter. First, I would like to provide an update on our product roadmap and new services; next, I’ll give a brief update on our operational improvements; and finally I’ll talk about our broadening breach to healthcare providers or HCPs through the expansion of our points of care network focusing on our health system strategy. First, let’s talk about our product roadmap and new services. As Doug mentioned, investments in our growth initiatives may result in quarterly fluctuations and profitability that our shareholders can expect such investment to drive further strong top line growth and margin expansion and help us to sustain our position as the clear market leader. We have developed our own proprietary clinical messaging system designed to expand our ability to deliver key clinical messages in addition to patient financial support messages. We plan to integrate this within EHR’s that currently don’t offer this value product to their providers. We launched this system in 2018 with one channel partner and expect to expand with additional partners in 2019. An example of such an investment is the recently announced formation of OptimizeMDs, a multispecialty physician’s panel with a mission of improving the effectiveness of digital communication delivered across the continuum of care. The OptimizeMDs panel provides the critical voice of the physician in support of our mission to streamline and improve communications between pharma providers and patients. OptimizeMDs provides us the way together timely information about the challenges physicians face with prescribing physicians, medication affordability and patient support. We expect the lessons we’ll learn from OptimizeMDs will help us to further bridge the communication gaps between pharma and provider and patients and ultimately improve affordability and adherence. Notably, more than 1200 healthcare providers have already joined the panel. They represent a broad range of practice sizes and settings, allowing OptimizeMDs to provide strategically – statistically valid insights into key questions that pharma help IT and others are looking to address. In our first OptimizeMDs survey, we had a whopping 50% response rate, clearly demonstrating that physicians want to be heard. That data show that nearly all physicians believe they have a role to play in discussing the cost of healthcare with patients and are comfortable doing so. It also showed that patients raise the issue of prescription drug costs with their doctors nearly 40% of the time. And for the vast majority of doctors, prescription drug costs are considered very important or extremely important and they impact their prescribing physicians. So this makes it pretty clear that patients and providers want to discuss the cost of prescription and providers want to help patients look for savings opportunities like through copay coupons and other patient assistance program. Now let’s turn the discussion to operational improvement. As we continue to grow, our technology infrastructure and tech team expand. As a result of our acquisition of CareSpeak, we now have a highly cost efficient tech team based in Croatia. They focus on enhancing and supporting the patient engagement solutions and also help develop new products and services. Further, we are cross training our tech personnel on all product lines via organized knowledge capture and knowledge transfer. As you all understand, it’s very important to create redundancy and succession planning within a technical workforce or any workforce to that matter. In Q3, we announced the OptimizeRx channel partner portal, a tool that streamlines the implementation of Pharma to EHR programs. I’m happy to share that most of our channel partners are now using the portal resulting in faster and easier program launches. We want to make it easy for our EHR partners to do business with us and we will continue to evolve this tool with their input. Lastly, I’ll touch on the expansion of our HCP network through channel partners. We continue to build our reach through partnership with ambulatory EHRs, those vendors who are primarily focused on office based physicians. But in today’s environment, it is critical that we create a strong presence in health systems and hospitals as well. Since 60% of physicians are employed by health systems and integrated technology is used in both the inpatient and outpatient settings, it is important that OptimizeRx at health systems to our network. Last quarter, we mentioned that our health system or hospital strategy includes third-party hospital technology vendors as well as direct connections to the major hospitals focus EHRs including Epic and Cerner. Last quarter, we announced our partnership with Medicom and initial health systems are in the process of launching. To increase our health system reach, we recently joined forces with LumaCare a pioneer in point of care health information technology that saves hospital lots of money. LumaCare’s smart ribbon platform will feature a new app from OptimizeRx designed to present drug savings opportunities such as copay offers and vouchers that providers and the clinical care team can distribute to patients upon hospital discharge or office checkout. With the potential to reach 120 hospitals in the U.S., we expect the initial LumaCare hospitals to launch in Q2 of 2019. LumaCare integrates directly with Epic and Cerner providing the critical last mile to the majority of health systems. The partnerships with both Medicom and LumaCare are examples of our commitment to bringing financial conversations to the forefront, which not only helps affordability adherence, but improves overall outcomes. In summary, our tech platform is state-of-the-art and our solutions have tremendous market potential. This potential is being realized more and more everyday as we expand our client base and channel reach and integrate deeper within various EHR workflows at the point of care. With that, I’d like to turn the call back over to Will.

Thanks, Miriam. Thanks, Doug. I’m proud of you two and our whole team for what we’ve accomplished in 2018, it was such a great moment standing with everyone while we rang the bell in New York. Something I personally will never forget. Overall, I believe our performance in 2018, the uplisting to NASDAQ additional research coverage and the continued positive outlook for 2019 and beyond. Support us focus – our focusing on building a company which benefits all our stakeholders. Pharma manufacturers with essential platform for acquisition and maintenance of their clients, physicians by helping them deliver the best medication plans and making them affordable and understandable investors by continuing to grow highly relevant business and therefore a sound investment. And patients with affordability and adherence programs to get and stay healthy. Our patient savings solution checks eligibility and delivers an offer to the prescribing physician all in real time. The voucher or coupon can then be printed for the patient, who can then present it to their pharmacist or very better yet send it along with the prescription electronically to the pharmacist. By delivering patient savings and clinical content from pharmaceutical manufacturers directly through the EHRs and at the point of care, doctors are alerted compliantly the opportunities during the e-prescribing process as a natural part of their workflow, which is important. Physicians can search the brand name drug within the EHR and be instantly alerted to alternatives or potential savings for a specific patient. The content is delivered, tracked and reported across a large point of prescribed promotional network. This technology not only helps improved patient adherence to medications and clinical outcomes, it also allows healthcare providers to extract greater value from their EHR investments by streamlining the process of identifying cost savings for patients. Now, looking ahead and perhaps a little bit to the past, last year, Q1 beat the traditional downturn, it would typically take for a previous Q4, with this mainly due to seasonal client budgetary trends. Q1 of 2017 demonstrated what could be accomplished during a period where there is little distraction and we are operationally solid and we could kick the year off faster. As we launched into this New Year, there was noise both with the federal government and corporate level and procurement at pharma woke up a little later. So for Q1 2019, we don’t expect to repeat the same extreme revenue lift from the previous quarter, but more along the lines of a traditional seasonal start and for the momentum to then build throughout the year. I remained very confident in our growth for 2019 for all the reasons we spoke about today. In 2019, we will continue to look for non-organic opportunities or bolt-on opportunities in the adherence in our affordability space, which would enable additional access to physicians or patients. We are also assessing our strategic position in the market constantly and are grateful to have a tremendously deep knowledge and experience that at the board of directors. I was encouraged at HIMSS recently the largest HIT conference in the market, by several big players on ambulatory side taking a keen interest in our platform. Our goal is to win them this year. We plan to continue to raise awareness for OptimizeRx and the investment community and look forward to presenting at the B. Riley, Roth, Oppenheimer and William Blair conferences this year. Again, I’ll remind everyone I meet with the following, the size of the market opportunity with a lot of room a share to grab. We’re at the center of all the stakeholders, pharma, physician and patient and we have a platform which can enable multiple revenue streams which help all stakeholders with a focus on affordability and adherence. For 2019, we’ll remain focused on revenue growth from our core solutions and expanding our channel network to include the hospital market now. And we’ve continued to demonstrate our high ROI from our marketing spend for our pharma clients. We expect increased adoption of our health platform with clients. Now with that, let’s get to the fun part and open it up for questions. Operator?

Thank you, sir. [Operator Instructions] And we’ll go first to Andrew D’Silva with B. Riley FBR. Andrew D’Silva: Hey, good afternoon. Thanks for taking my questions. Good progress last year. Just a couple really quick bookkeeping questions to start off with. The acquisition related expenses that the non-reoccurring fees associated with the due diligence and consultants excluded from the adjusted net income during the quarter. And then when you were noting being profitable on a quarterly basis where you assuming that to be on an adjusted basis or a GAAP basis?

That’s on a GAAP basis.

So, it was on a GAAP basis. And then just to clarify the other question, we did not take acquisition costs out of the non-GAAP measures. So the non-GAAP measures only depreciation, amortization and stock comp. Andrew D’Silva: Okay. And so it’s fair to assume about $500,000 should not be a re-occurring going into the first quarter.

Correct. Andrew D’Silva: Okay, great. And then, just more of a broader topic. When you look back at where you were when you finish 2017 versus where you are now. Can you quantify or help us think about some of the key drivers that took place? Was it more related to brands becoming more aggressive after a strong ROI studies? Was it related to better physician access to the EHR partners? And then can you carry that over on a forward basis and let us know what core fundamental drivers similar to those you see pushing this forward this year?

Yes. Andy, thanks. Good to hear your voice. It’s been pretty consistent. There’s three ways of this company can grow. We get more business from our manufacturers, we get more access to physicians and then we layer in additional services between the two. And for 2018, we hit our goals and really exceeded some in all three areas. They are the three areas that will drive our growth in 2019 as well. And I feel very confident in the team we have, it is hyper focused on all three of those. And it had been very encouraged with the ability to layer in additional solutions and get some synergies from both sales operations and technology. So row in the same boat focused on the same core principles to grow the business. Andrew D’Silva: Okay. Perfect. And with CareSpeak, if you were to give it a grade thus far with the integration, are you seeing things progressing the way you would think in cross-selling momentum the way you anticipated?

Actually I think, I’ll brag a little bit for Miriam, she clearly had a lot of integration experience from her past. And I feel like we were integrated while we were announcing the close to the market. And I think, you always want to do more. I always every – all of us. But I would be – I think we’re very happy with the integration, the progress, the cross-selling. And really look forward everyone seems to be working well together. So very, very happy. Andrew D’Silva: Good to hear, good to hear. And just a final question. How should we think about OptimizeMDs from a – like in monetary standpoint benefiting your top line or margins or any detail like that would be somewhat useful, when we think about 2019 projections?

I wouldn’t view that as a material revenue item. I think what it will do is bring tremendous credibility buy-in and allow us to share the physician’s perspective, which remarkably is often not listened too and even though they are the point of the sphere. And so we think it’s going to be a very valuable asset, if anywhere it will give additional support – the brand support area, where we’re doing drug file integrations and checking formulary within the EHR workflow. Having a large panel of physicians with access to that kind of knowledge only helps that service. Andrew D’Silva: Wonderful. Thank you so much for the time. Good job last year and good luck going forward.

Thanks, Andrew.

We’ll move on to Ryan Daniels with William Blair.

Yes. Good evening. And thanks for taking the question and my congrats on the strong year. Let me start just with CareSpeak, it sounds like the integration is progressing very well there. Can you talk a little bit about early client feedback or any cross-sell success you’ve have working with Pharma companies as they look to more broader forms of direct patient engagement?

Yes, absolutely. So I’m not specifically, because we’re not allowed to address client names, but this is a company that was mostly sold by the founder into the market. The founder is now daily working with our team of salespeople and recently looked at several opportunities that have come on both his own, let’s say organic, which he had prior and then the team’s contribution very encouraged to see a couple of things. One, increased business in his own base, which is all of good, that means what we saw was true. And also new clients coming to the table and the thing that I really happy with is just the collaboration. So much so that we’ve actually opened an office in New Jersey, and there’s frequent meetings there between the CareSpeak team and the sales team. And so I think we are rolling together on that and starting to see a nice pipeline billed. Remember, we missed the full cycle of budget for 2019 for that acquisition, that we finished it late Q4. So this year, it’s about growing the revenue, which we’re focused on. But it’s really about getting a lot of new clients to try it, test it, learn about it. So when we go into the next budget cycle, we can go after some bigger dollars.

Okay. That’s helpful color. And then question for you, just in regards to the end market, it sounds like some of the larger manufacturers, maybe one or two, in particular got a little bit more aggressive on audits and looking at ROI following some of the issues that outcomes health. But I know that it’s an extremely different business than yours, but I’m curious if that had one any near term impact on the pipeline. And number two, if you think that can open up kind of a broader opportunity for you as Pharma looks to other vehicles like yours that do have such a strong return on investment for the dollars spent?

Yes, great question. So see others – there is – you know a channel is starting to become a real channel when you start to get into transparency and enterprise pricing and ROI, true ROI and good news, bad news. Good news is that it’s clearly becoming a real channel. Outcome health did have some issues which always raises questions in procurement. We did see some – a few clients in particular ask for some more reporting, luckily, we were able to put that together for them to a satisfying degree. But as I mentioned that all happened, year-end in January. So we’re looking forward to that being behind us. And I think if you can’t be transparent, you really are going to have trouble in this space. And because of our relationship with the EHRs, we have extreme transparency here. So we feel very confident as an opportunity, as we educate Pharma how good our solution is.

Okay. That’s very helpful. Maybe a final one and it kind of relates to that as well, but I know you launched a two to one ROI guarantee in some of your products and I’m curious how that was received in the market given some of that is, it seems like they are pretty unique guarantee that you can offer to your clients and again, shows the value proposition. So to that you got help with more market demand, help with win rates or closures, anything of that nature that you could share with us. Thanks.

Sure. Thanks Ryan. I think it was very helpful for those clients that were testing us still. Some of the bigger clients we have there, they’re in a, they know they’re going to get greater than that. So it probably didn’t move the needle there mopped at all. But for these, some of these smaller clients that we really want to work up a to larger annual engagements, it was very helpful. Sales team has given me good feedback and maybe next quarter we can report back a little bit more quantitatively what kind of impact it had.

Okay, great. Thanks again for all the color.

Thank you.

The next question will come from Richard Baldry with Roth Capital.

Thanks. When you look at the 4Q upside, which was pretty strong, could you maybe break it into buckets, how you feel about that. Was it for care speak, maybe contributing more million budget flush or some clients adding, on beyond just a budget flush for adding different brands or things like that.

Hey Rich, it is seasonally up, there’s always additional budget. We also have more channel. So, what will happen is if we added anything during the year, that’s a great opportunity to go after more budget. And so we were able to do that for some new partners that came on last year. CareSpeak, certainly contributed some of it, although I think we pre-messaged that that would be a big amount. But no, just the traditional seasonal the same way I think Q1 in 2019 we’ll see and then we’ll start to see that similar pitch to the year.

Given the new products you’ve added internally and via acquisition now, how do you feel about the size, maybe the bandwidth of the existing sales team? Maybe talk about the thoughts for hiring in 2019, 2020 domestic international just to get an idea for expansion plans.

Yes. So, we are actively building our sales team up and we will do that throughout the year and next year. Kind of a philosophy not to rush into that. If you do, you tend to get things wrong. We’ve got an excellent team and what we’re learning, because this is a new channel, what we’re learning is sort of threshold for a salesperson and the threshold in our view is higher. It’s higher than other businesses I’ve seen in this space just given the nature of the scale of the network. So we’re going to keep hiring. That’s the clear message and we’re going to do it prudently and just stay on it. We’re actively doing that now.

Obviously the CareSpeak acquisitions is pretty recent but given the early feedback you’ve had about from customers and even internally for integration, how do you feel about that and maybe a thought on the M&A landscape, sort of the cost or strategically, do you see other things you’d want to look at from either a tuck-in or transformative perspective? Thanks.

Sure. So yes, very happy with CareSpeak, in particular it just feels like a more complete value proposition to the client, to the doctor and the patient, principally our business was connecting information to doctors to help patients, but then we couldn’t stay with the patient or at least help them past being in the hospital. Now, I feel like we can, so, I think it’s a bigger story and it gets some more valuable story and you know, it’s obviously very fresh to bake in, but I’m very excited about that. On the M&A front, obviously there are a lot of companies focused on adherence and we are actively looking in that space. We feel like it’s a good place to invest capital to accelerate growth and become more relevant. Remember our clients like to spend more money with less people. So the more size we get, the bigger potential we can go after in terms of budget.

Thanks.

[Operator Instructions] The next question comes from Eric Martinuzzi with Lake Street.

Hey, congrats on the 75% growth in 2018, I think also the first full year of GAAP profitability that’s, that’s also a nice accomplishment. Hey, I want to dive in on the guidance for Q1. I think, if we jump back to a year ago, you were thinking the same thing, anticipating kind of Q1 down from Q4, but a year ago you were able to, I think right out of the gate you were sort of locked and loaded with Big Pharma, I’m wondering what was different about entering Q1 2019 versus Q1 2018?

Hi Eric, thanks for the notes and support. Yes, Q1 was different on lots of fronts. We were coming off of a ferry disrupted market. The government shut down, while we don’t sell to the government, our clients deal with the government every day. And I think just the combination of those two just got a slower start. We were certainly ready. There was – it was not an operational issue. And so we anticipate it coming back, but feel via more [indiscernible] Q1 is not sequentially up and builds throughout the year as is difficult.

Okay. I would say that the changing of the guard in Congress, if Big Pharma, have you seen any change in their behavior? You know, are they were historically, maybe they would do a six or nine month order there. They’re doing insertion, IO for three to six months or was it kind of similar behavior for the commit?

Yes, similar behavior. Their space – that regardless of the noise that the issues are still the same. Right? Reaching their clients, helping patients, affordability, adherence still are the very big issues and technology is becoming the accepted enabler. We’re seeing all the fans get into healthcare. Amazon bought PillPack, there’s just so much a need for firms that make things easier from a health IT perspective. And we’re such in a good place for that. So very confident in the spend a pharma will continue to grow. And keep in mind, even if it starts late, they still do the year as the ends in December. So, they’ll just put more pressure on speeding things up.

Back to the financial projections, if I look at 2018, you guys, in the end, you came – the thoughts are going to do, but this seasonally, we sowed her march tire sequentially and the gross margins throughout the year. Given that we’re going to have a little bit of a revenue reset in current Q1, are you anticipating something for 2019?

No, I think we do original messaging that will maintain sort of a 55% gross margin. And the reason why that will change is if we’re going after additional channel partners, different types of [indiscernible] product mix. He has a lot of things that influenced that. But our focus is on top-line growth and continuing to go get more and more adoption from Pharma and reaching more physicians. I think that’s the better indicator of this business over the course of the year.

And then lastly, one for Miriam, you talked about the Q2 2019 launch, LumaCare with the smart ribbon offering. Is this in your mind as if going to be material in 2019 or is it really going to be more testing, try before you really make a big commit or could have ring the register big time?

I think it is a try before you really commit. What we’ve learned and see in practice is that Pharma likes to pilot. They like to pilot and test and then roll out. So it’s possible that we could have something bigger, but I anticipate a steady, but maybe, slower rapping than some of our incumbent offerings. There’s also just sort of the newness of the hospital sector to a pharma in terms of point-of-care communication. So there’s both, where you want to be there, but we’re not quite sure how, as well as we’re not quite sure about this particular mechanism. So it’s kind of macro and micro.

Understand. Congrats again on a year on the quarter. That’s it from me.

Thanks, Eric.

Thanks, Eric.

[Operator Instructions] Our next question comes from Ron Chez [ph], a private investor.

Good afternoon. And this is just a tactical question with regard to the question about the first quarter, you talked about, um difficulties or clutter early on, are you pleased with how you’re itching now? You’re seeing the kinds of business you would expect to see?

Yes.

And yes. And you would expect, you’ve got to get access to hospital systems and more doctors, uh, that that’s going to directly relate to – should directly correlate with growth from Pharma, correct?

That’s correct. I think what the point, Miriam, it was, um, this is a new – basically, Pharma hasn’t been able to reach this group, so that’s very attractive for long-term growth. Pharma will always test it before they go in deep. So, it’s a good point to moderate the adoption rate for this year, but it’s an essential piece to our growth. It will help top line and bottom line. And I’m very excited about the progress we’re making, because it was just a year ago we decided to focus on it, we made a lot of headway there.

Well you were talking about the access to hospital systems?

Correct.

And you want to spend a little bit or – or offer a little bit more information on platform’s strategic value in terms of generating revenue given your position.

Sure. Thanks Ron. So, we, we’ve been using the platform work for awhile and obviously we are in the sense that we’re connected to multiple parties on each side and we make things easy for everyone to work with us. I think – are going into the hospital system just makes that platform more valuable. And because we’re in this point of care atmosphere, I can foresee lots of people who want to try to communicate into that point of care market. And so as we scale it’s a great way to basically find the ancillary revenue streams come up with other solutions. Again, always focused on adherence and affordability and there are a lot of companies that can’t get to that last mile to the physician or the patient. And we hope that our platform is the platform that becomes preferred, transparent, you can measure it and we’re good people to work with so very excited to keep building this platform Ron, thank you.

Yes. Given that one more thing, given the data with regard to the impact on the healthcare cost within adherence, that would seem to be a major target of opportunity.

Absolutely, you are right Ron.

Good job. Don’t let it slow you down this year.

Absolutely. We’re very focused. Thanks Ron, thanks for your help.

All right. At this time, that concludes our question and answer session. I’d now like to turn the call back over to Mr. Febbo Please go ahead, sir.

Thanks everyone for joining us today. I believe our potential delivers strong growth is right in front of us, improve the margin and have a broader industry profile. I believe we have a culture dedicated to do something that makes a difference, that has positive impact and that frankly is a company that can be scalable, profitable and we’re early enough in that process that it’s very exciting to be part of. I thank everyone for their support. We have a very active shareholder base and look forward to catching up with everyone at the upcoming conferences. Now Justin, thanks we can go ahead and wrap up this call.

Thank you, ladies and gentlemen. And now 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 in 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, anticipate, estimate, expect, possible, seeking and similar expressions identify forward-looking statements, and they speak only to date the statement was made. Such forward-looking statements in this presentation include statements regarding estimation of total addressable market size, revenue growth, gross margin, operating expenses, profitability; technology, investments and the need for raising additional capital. They also include the management’s expectation for the first quarter and the rest of the year and adoption of the company’s digital health platform. 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 or contemplated by underlying forward-looking statements. 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 fiscal year ending December 31, 2017. 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 starting later this evening and running through March 19. Please refer to today’s press release for dial-in and 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.