OptimizeRx Corporation

OptimizeRx Corporation

$4.94
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NASDAQ Capital Market
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Medical - Healthcare Information Services

OptimizeRx Corporation (OPRX) Q3 2013 Earnings Call Transcript

Published at 2013-11-20 11:11:07
Executives
David A. Harrell – Chief Executive Officer, Director and Founder David Lester – Chief Operating Officer
Analysts
Neil Nicholas Cataldi – Blueprint Capital Management, LLC Jason Revland – Blueprint Capital Management, LLC Brian Marckx – Zack’s Investment Research
Operator
Good day everyone and welcome to the OptimizeRx Corporation Third Quarter 2013 Earnings Conference Call. Just as a reminder, today’s conference is being recorded. This will be a 30 minute call with a potential for questions after the discussions. A transcript will be available for 90 days for those interested parties who want a copy. Please contact Ms. Gabrielle Sabatini in our Rochester, Michigan headquarters. Now, for opening remarks and introduction, I would like to turn the conference over to Mr. David Lester, Chief Operating Officer of OptimizeRx.
David Lester
Thank you, operator and welcome everybody, good morning, good afternoon from wherever you may be calling in hope you are having a great day. To start our OptimizeRx Q3 2013 earnings call are as required I’m going to read the Safe Harbor language to begin with. This conference may contain certain forward-looking statements within the definition of Section 27A of the Securities Act of 1933 as amended in subsection 20(1)(e) of the Securities Act of 1934, amended. These forward-looking statements should not be used to make any investment decisions, the words potentially estimate possible and seeking and similar expressions identified forward-looking statements which speak only as of the date the statement was made. The company undertakes no obligation to publicly update or revise any forward-looking statements only 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. Further events and natural results could differ materially from set forth and contemplated buy or underlying the forward-looking statements, the risks and uncertainties to which forward-looking statements are subject to include but are not limited to the effective government regulation, competition and other material risk. With that being said, let me just take a moment to share with you the financial highlights of our third quarter of 2013. OptimizeRx Corporation finished the third quarter of 2013 with revenues of $1,373,029 brining revenue for the first nine months of 2013 to $3,146,406. Additionally we achieved net income during the second quarter – during the third quarter of 10,776,000 in net income of $260,109 for the first nine months of 2013. During the same period of 2012 revenue was $453,154 from the third quarter while the company had a net loss of 106,174 a great improvement year-over-year. Our record revenues were driven by SampleMD solution which generated approximately 327,150 new ePrescriptions with co-pay coupons and free sample vouchers during the third quarter of 2013 helping patients more affordably start and stay under prescribed medications. This is the substantial increase from 90,135 distributions in the third quarter of 2012 the year prior. Additionally, we have generated a 139,027 new ePrescriptions in October a record month for OptimizeRx and SampleMD. Going forward we are really excited to have a number of things that were accomplished during this particular quarter. From a technology front, we have launched a major effort to rewrite and to update the SampleMD solution with the SampleMD 2.0. Really encompassing within that solution and the update we are building a number of enhancements for speed, so that we are better responsive to doctors workflow into our channels, we are enhancing the ability to integrate more solutions easily modulated into the core solution. We’re updating a number of our reporting in our admin sections to make it more user-friendly and to make it more versatile to be more dynamic to the changing market needs and as we continue to look at new solutions for our product portfolio and our technology roadmap. So we’re really excited not only that, we are also in process of rebuilding the architecture infrastructure which this will reside on. We are looking at a whole new computer architecture that is the latest with memory, with latest speed, with the latest securities, with the redundancy, disaster recovery. So we’ve launched a major effort to upgrade and be more responsive to the market with our SampleMD 2.0 solution, which we anticipated to launching at the end of the first quarter of 2014. So we are really excited with all that activity going on and we’re making great progress and strive from that technological front. Potentially as many of you maybe aware, early in the quarter, we announced our OPTIMIZ – EHR consultant practice. Many of our clients have been coming to us and as we’ve gain market strength and market presence within this industry. More and more of our clients are looking into us to assist us with building out their strategies on how they should leverage this new frontier of marketing, this new digital marketing front EHR. With that we initiated our two initial pilot projects that we are very, very successful. The first one was Lilly, and as you know Lilly has been a very good partner and customer of ours, but even going beyond and helping them build their strategy Lilly now as a result promoted SampleMD to other major pharmaceutical manufacturers, saying that they definitely have to go us, as we are the market leaders and they would be out of their minds if they didn’t engage with us. Having said that, we did a second major pilot project, a consulting project with a group called Astellas, the net result of that is Astellas has made a very large commitment to continue with their programs and looking at our ability to deliver sales force training in the field, our ability to do because they would like to follow integration and a number of other messaging programs and those kind of things. With that, we’re looking at a pretty substantial commitment into 2014. Additionally, we have also begin to engage with the project with Roco [ph] a brand new client that we’re starting out with on the consultant side of the equation as well to build out their strategy, their eCoupon, messaging and really their EHR marketing strategy. So we’ve very excited with the announcement, we’ve been very excited with the progress of it and we continue to further look to built that deliverables out to the point where we’ve now had some strategic partners approach us to help engage or being engage within that practice and leverage it even further. So stay tuned through the next few quarters, we’ll be updating you with additional information on the consulting practices as we’ve been taking off as well. With that to talk about more about this record performing quarter, I would like to now turn the call over to David Harrell, Chairman and Chief Executive Officer of OptimizeRx. David A. Harrell: Hello everybody, David, outlined here business is continuing to scale very nicely and we certainly anticipate these trends continuing through 2014 and beyond. I think Dave talked about our strength in terms of working with pharmaceutical companies and I think our drug inventory really looks strong for certainly our core base of eCoupon as well as moving into more patient education, which reside a long of the coupon and then finally getting into more even messaging technology to alert pharmaceutical clients or excuse me healthcare providers of new information from the drug company about their drug. Additionally, last week I was out and I met with the Pfizer teams both their medical/legal review as well as the whole digital strategy team and we’ve been approved now by their medical/legal review team for all brands, which is very exciting, not just a matter of securing the finalized budget et cetera, but its a huge victory, its speaks to our expertise in resolving any issues that they had and again puts us continually in the leadership position with one of the largest pharmaceutical companies. Additionally, our direct outreach to physicians and healthcare providers continues to be not only strong, but we are very excited that its going to be stronger in first quarter of 2014, as you know we are rolling out with our partnership with PDR the NextGen, which is a 55,000 physician practices that’s going to have our eCouponing solution as the platform. But I also have good news to share that after further meetings and discussion with Allscripts, they have elected based on our ability to demonstrate the value to both physicians and patients to expand Allscripts’ PRO to be an opt-out versus opt-in basis by physician emphasis. : And one of the challenges with some of our financial partners that we’re working with is that we see the opportunity to leverage the valuation at a point of a higher valuation in the near-term. So again, this is what’s stopping us from securing immediately the opportunity to take Vicis out, because we believe that there is more favorable terms either with our strategic partners, that we’re in active discussions with or utilizing our financial partner in the near-term at a higher valuation. However, if the deal does not get done by the exploration, we’ve had very positive discussions with Vicis about extending the timeframe out six-months at more favorable terms. So in essence,, we did not feel at the opportunity is going to go away and we’re extremely confident upon the extended timeframe, we will be able to take Vicis out at very favorable terms versus taking at sub-optimal deal for the company and shareholders currently. Additionally, we’re seeking to expand our Board with top industry leaders, as well as continue to pursue the opportunity to find a top-notch CEO that can bring additional value to the Board and our current management team. Both however, couldn’t involve the strategic partners influence. So beyond that we really don’t any much more comments beside the fact that Dave and I are continuing to run the company’s daily business as we have been together for over five years. In summary, we’ve delivered consecutive record quarters throughout 2013 and we expect this to continue in fourth quarter and beyond. We continue to advance our leadership in the marketplace and are expanding both our listed brand clients, as well as delivering the largest promotional reach to doctors at point of prescribe. We’ve also strengthened our relationships with our existing platform partners and are confident all those partnerships will occur within first quarter and beyond to further expand our reach and our capabilities to impact care at point of prescribe. We see a huge opportunity not only in the pharmaceutical market, but other healthcare services, medical supplies and even over-the-counter medication too. So we will continue to represent both our company’s interest and of course our shareholders to get the best possible valuation for any capital rise and look forward to a great 2014. At this point, we are happy to answer any questions.
Operator
(Operator Instructions). We will pause for just a moment to compile the Q&A roster. (Operator Instructions). Your first question comes from the line of Neil Cataldi from Blueprint Capital. Neil Nicholas Cataldi – Blueprint Capital Management, LLC: Hi. David A. Harrell: Hi Neil. Neil Nicholas Cataldi – Blueprint Capital Management, LLC: I think when the call started you stated a number of distributions for October. I missed that could you repeat it?
David Lester
Yes, for October we had generated 139,027. Neil Nicholas Cataldi – Blueprint Capital Management, LLC: Okay great. It’s a great number. A couple of other questions, it sounded like there is a – there might be a third pilot in the mix on the EHR opportunity, can you confirm that or did I hear that wrong?
David Lester
No, you’re heard that correctly. There is a third-party that we are at in the early phases of that EHR consulting practice. Neil Nicholas Cataldi – Blueprint Capital Management, LLC: Okay. Okay, great. To backtrack for a second the 139,000 in October could you tell us what part of that were legacy distributions?
David Lester
I don’t have that information available right now, no. Neil Nicholas Cataldi – Blueprint Capital Management, LLC: Okay. And then as for as Allscripts is concerned that’s great news has it been turned on already and if not when do you expect it to be turned on and finally how many doctors did that sort of bring into the system, is it 25,000 or so? David A. Harrell: Yes. I think it’s going to be 25,000. It’s a difficult question, it could start as earlier December, but they are going to do it in phases they have different versioning. So I would like to say and most likely to be completed in January. Neil Nicholas Cataldi – Blueprint Capital Management, LLC: Okay, great. Okay, and then my last question. Just to clarify the strategy we are taking out Vicis, I hear this a lot, so just to make it clear my interpretation is that one, is that you are not doing it now, but one you might if something where to hit in the near-term before year-end and if it doesn’t you think that you can extend it at favorable terms which will allow you time to increase valuation of the company next year before maybe pursing other means of capital? David A. Harrell: That’s exactly correct. Neil Nicholas Cataldi – Blueprint Capital Management, LLC: Okay. Okay, great. Thanks guys. I appreciate it.
Operator
Your next question comes from the line of Jason Revland from Blueprint Capital. Jason your line is open. Jason Revland – Blueprint Capital Management, LLC: Good day, gentlemen. Thanks for taking the call. David A. Harrell: Hi, Jason. Jason Revland – Blueprint Capital Management, LLC: Question regarding the 30% increase in distribution rates can you clarify that is this just with Allscripts or was that sort of the companywide comments about overall distribution rates?
David Lester
It’s really about overall distributions through all of our channels. Jason Revland – Blueprint Capital Management, LLC: Would be able to quantify that, I guess I can – maybe you can just go back and do the math on, are you guys to quantify that cost further or should we do that math ourselves?
David Lester
Yes. I don’t think we have the actual numbers right now but again we’re continuing to scale up quarter-after-quarter it looks like certainly a very favorable diagonal and escalating line. So significantly it’s a record quarter – month certainly. Jason Revland – Blueprint Capital Management, LLC: Excellent, excellent. Next question relates to the Investor Relations strategy as for as being more visible with conferences or engaging with somebody who could maybe do some of the work, can you comment on that generally?
David Lester
Sure. I think as you know, we’ve been working with predominantly with Taglich Brothers and so we’ve been – Chris has head us on multiple calls and I think we’ve done a – have had some great discussion with many new investors who are very excited about the story. We are planning on being at the HEG [ph] Conference and further more Chris and his team is going to be actively pursing our current investors to make sure that they have a clear understanding that of our story and the fact that management continues to be on a daily basis, very stable and in terms of our growth – the business continuing to grow. So I think that’s going to be much more accelerated and we anticipate that upon people understanding our story and the continued growth that we’re having that that will be very effective in terms of updating each individual investor. Jason Revland – Blueprint Capital Management, LLC: That’s great. And one of my takeaways from your comments about the CEO replacement search being somewhat contingent, potentially on our strategic investor, is that something that you expect to have resolved in the next three months, you might be able to announce a new CEO in combination with the strategic partner. Can you not put timeline on that as far the new leadership?
David Lester
In case of timeline, I can tell you we are having discussions, but the key is that we want – we think that our company is one of the hardest companies in the industry and we really want to spend the right time in leveraging, understanding who can play the best role, I think there’s a lot of interest in the position, it’s just a matter of making sure that we get the right person and I think the input of some of our strategic partners that have expressed a strong interest in partnership could be very, very helpful for us running the business. David A. Harrell: I think that’s an interesting confluence of strategic partners who could potentially give you good guidance and if not potential bench strength as far as how to guide their own investment with somebody who they know and trust. So, I think that presents an opportunity for you to bring in a CEO of a caliber that will be much higher than somebody, if you worked in this situation. So I think that’s the way I read it.
David Lester
We agree. Jason Revland – Blueprint Capital Management, LLC: Thanks, guys, best of luck. Appreciate the time you’re making for the call.
David Lester
Thank you, with pleasure.
Operator
Your next question comes from the line of Mark Rosen [ph] from OptimizeRx.
Unidentified Analyst
Congratulations on doing a great job of doing the business. David A. Harrell: Thank you, Mark.
Unidentified Analyst
As a longtime shareholder, I’m just wondering if there’s any thought to enhancing shareholder value either through a stock buyback or Directors buying stock, which would show confidence and as usually met with a accretion to the stock price? David A. Harrell: Yes. I mean let me just put it this way, 90% of my equity portfolio was currently OptimizeRx. So clearly, this is my life, this is my focus, and for me to buy another X amount of shares. Again, I don’t know what message that would send, I can tell you that like I said, my network is extremely tied to OptimizeRx most likely 90% and I’ll state that. and I think we’re watching our salaries and bonus to be quite frank with you very – like we’re all under market valuation in terms of our compensation. And so that’s kind of our position on it and it certainly doesn’t mean that we don’t see this as very attractive current valuation at just kind of personal level that’s where I stand, in terms of buyback that is something that is of interest and all options are being pursued.
Unidentified Analyst
Well, just that if you are trying to drive more favorable terms on – in other situation, there was just actually – there was just study done that came out the financial press release today showing that insider buying is in – none of favorable dispositions of the stock. So I appreciate your other remarks and I think that’s all well and good, but for all shareholders concerns whether its your or another Director I’m just making the observation that… David A. Harrell: Yes.
Unidentified Analyst
Upright is not where it should be given the progress of the companies. David A. Harrell: Right.
Unidentified Analyst
And I’m just trying to sort of as just catalyst… David A. Harrell: Yes.
Unidentified Analyst
For getting to stock price to where it should be in view of the excellent work management has done in promoting the... David A. Harrell: Sure, sure and again, I do certainly recognize that is one catalyst, we think that the groups that were talking to certainly recognize the scalability of this, the fact that we’re already spinning off cash and I see that being one catalyst, but I see multiple catalysts just on the strength to your point of the business the scalability the current partnerships that we’ve been able to leverage the 22 pharmaceutical companies that we’re in and so we certainly think the stock decline has not reflective of certainly what were doing on a day-to-day business, but again I think that as we tell the story and likely look at the options to take Vicis out, I see that that’s a much stronger catalyst, but again do appreciate and will do further reflection on your recommendation.
Unidentified Analyst
Thank you very much. David A. Harrell: Sure.
Operator
Your next question comes from the line of Randy [indiscernible] of Private Investor.
Unidentified Analyst
Hi, good morning gentlemen. David A. Harrell: Good morning.
Unidentified Analyst
So I saw on the10-Q there was a one-time settlement to Shad Stastney the former CEO. Can you tell us how much that was? David A. Harrell: Yes, we have entered an agreement with him that as previously mentioned on our last call that in little of his stock options and his continued services that we would be issuing in 500,000 shares. First the 2 million stock options that we had given up.
Unidentified Analyst
Yes. And so, did that affect the quarterly earnings? David A. Harrell: Yes, yes it certainly did in and it’s interesting if we looked at a – do you have any comments that would have affected in terms of the cash, non-cash impact?
David Lester
Yes, certainly if you would take non-cash portion out of the P&L if you will, for how we structured the pay out with Shad; net income at the end of the quarter if you would have taken the – again removed those non-cash it would have been well $360,376. So obviously from that aspect it did have a pretty significant impact on the net income for the quarter. David A. Harrell: Right.
David Lester
I think it’s important to takeaway though that as we’ve talked about this and we’ve kind of talked about the management discussion of the K or the Q. Understand that Shad’s departure and although we’ve had some hurdles to overcome relative to stock prices and some things, it didn’t inhibit the company from performing, it didn’t inhibit us from extending our partnerships with our partners as we’ve alluded to. We still – it really didn’t inhibit us to do bringing on more clients and getting client commitment into 2014, so we have a strong pipeline.
Unidentified Analyst
Let me just interrupt. So I totally agree with you. So X items you would have – the company made about what $0.03 a share? David A. Harrell: You know what, we…
David Lester
Whatever the… David A. Harrell: Yes, whatever, but I’m glad you asked that point, because I think it’s a very good point though.
Unidentified Analyst
Well I think that’s how you should think about announcing the earnings is that hey we had a one-time thing, companies do that all the time right? They have extraordinary item X items, we still made X amount of dollars. David A. Harrell: Fair point.
David Lester
Good point. David A. Harrell: And good point.
Unidentified Analyst
Yes. The second question I had is so 2013 revenues are going to be somewhere in the neighborhood of what $4.5 million, $5 million?
David Lester
I think that we see if we did $1.3 million and we see a more successful quarter next. It’s all we can say, so yes, if that’s the case it’s in that range certainly.
Unidentified Analyst
Can you say anything about projected 2014? David A. Harrell: At this point, we don’t, but we see the scale continuing and the trend continuing. We see nothing to stop that. We see our expansion of our distribution, expansion of our offerings and we think 2014 is going to a great year for us.
Unidentified Analyst
Yes, so really the critical thing at the company today it’s seems like is this Vicis getting their stock bought back and getting the CEO in place, those are really the things that are kind of holding the stock price down probably? David A. Harrell: Well. I can’t comment. I would assume that’s having a big impact, but the realty is I just want everybody to know that we see this is an opportunity and we don’t want – we want to leverage as to clean up the cap structure and make sure that the dilution is at minimal opportunity. So we are very aware that the easy thing would be just it take and raise stock at a reduced price currently just to kind of resolve and say we move down. But we see this as a significant opportunity to either bring in a key strategic or do a little bit higher valuation so that we don’t have to give up as much common stock to buy them out. So the fact is, we have a good relationship with Vicis, again we can’t formally state they will extend our time, but I think that we are working together and that – there is – as one investors stated again it sound like this is an opportunity versus a negative situation and I would absolutely tend to agree with them. I don’t want anybody to think that we don’t see the benefits of cleaning that up, we absolutely do, but we don’t see it at any price right now. So…
Unidentified Analyst
So, I appreciate that and I think that’s – I appreciate you looking out for the investors on that front. And I like you say being the largest investors you are looking out for yourself too, so I think it all goes together. So good work, I think at the end of the day the core business is by far kind of the most important that’s going well, so hopefully in due time it will take care of itself. David A. Harrell: Thank you.
Unidentified Analyst
Thanks a lot.
Operator
Your next question comes from the line of Brian Marckx from Zack’s Investment. Brian Marckx – Zack’s Investment: Hi guys, I just wanted to clarify the previous caller’s question about the one-time expense related to Shad, is it all of the stock-based compensation in the quarter? Does that all relate to Shad’s departure?
Research
Hi guys, I just wanted to clarify the previous caller’s question about the one-time expense related to Shad, is it all of the stock-based compensation in the quarter? Does that all relate to Shad’s departure? David A. Harrell: Dave is it all of the $250,000? Yes.
David Lester
Yes. Brian Marckx – Zack’s Investment: So $250,000 is basically the one-time charge in the quarter?
Research
So $250,000 is basically the one-time charge in the quarter? David A. Harrell: For the quarter, yes. Brian Marckx – Zack’s Investment: Okay.
Research
Okay.
David Lester
There is also salary and some others... David A. Harrell: Yes, we also paid a salary as deferred salary that’s another interesting point.
David Lester
Yes I mean to your point Brian, we also paid a deferred salary and some expenses. David A. Harrell: That was accrued over the year.
David Lester
Yes, yes that was accrued but the pay out was in the third quarter. David A. Harrell: Yes. Brian Marckx – Zack’s Investment: So, totally it was about $360,000, is that what you said?
Research
So, totally it was about $360,000, is that what you said?
David Lester
On something like that. Brian Marckx – Zack’s Investment: Okay $360,000, okay. And another one, kind of income statement related has to do with the revenue share expense that looks pretty variable kind of quarter-to-quarter. In fact it looked like it was about 2% through the first nine-months of last year and now it's running about 20% through the same period this year. Can you kind to provide a little insight into what’s kind of causing the variability?
Research
Okay $360,000, okay. And another one, kind of income statement related has to do with the revenue share expense that looks pretty variable kind of quarter-to-quarter. In fact it looked like it was about 2% through the first nine-months of last year and now it's running about 20% through the same period this year. Can you kind to provide a little insight into what’s kind of causing the variability?
David Lester
Well remember on revenue share there is a couple of things that going to the equation right. It's always based upon when we receive payment from our clients that we then pay the channel partners on the particular programs that we got the agreement placed for. There are some programs that were grandfathers that again we have no charge for; there are some programs that as apposed to paying a distribution, we pay a redemption. And so that is a little bit of variability in that way as well. But as we continue to see activities ramping up obviously very rapidly, we'll see greater revenue shares being paid out quarter-to-quarter for our channel partners. Brian Marckx – Zack’s Investment: I understand on an absolute basis. But kind of on a percentage of a revenue basis can we kind of ballpark on where we should expect that to be going forward?
Research
I understand on an absolute basis. But kind of on a percentage of a revenue basis can we kind of ballpark on where we should expect that to be going forward? David A. Harrell: I mean, I think, you should expect that in the future getting to roughly a 50%, 40%... Brian Marckx – Zack’s Investment: 50%?
Research
50%? David A. Harrell: 40%.
David Lester
I would say 40%. David A. Harrell: Yes 40% to 50%. Brian Marckx – Zack’s Investment: Okay. And one on the Pfizer business, any kind of estimate on when you think their products will come into the pipeline?
Research
Okay. And one on the Pfizer business, any kind of estimate on when you think their products will come into the pipeline? David A. Harrell: Well we already have key products like Lipitor; Viagra is going to approval, CHANTIX, for smoking cessation. But they have upwards of 15 to 20 promoted brands. So that was a huge victory every brand Director was made aware that they can now participate SampleMD and it’s just a matter of us going out there and meeting with them on individual brand level. So very excited about it, I can’t give you exact amounts of number of brands right now, but it looks very favorable. These organizations like to work much more in an enterprise wide level. So, I think it’s going to be a significant great opportunity for us to work much more closer with Pfizer and much more inclusive of all their portfolio. Brian Marckx – Zack’s Investment: Okay. All right thank you guys.
Research
Okay. All right thank you guys. David A. Harrell: Thank you.
David Lester
So at this time, it looks we’ve concluded all questions. I do appreciate everybody’s continued support and strong interest in the company and hopefully the message you got here was that our business is thriving and that we remain very, very committed not only the management team but all of our hardworking staff and are very thankful for our shareholders and the opportunity to speak to you. Thank you.
Operator
This concludes today's conference call.