OptimizeRx Corporation (OPRX) Q4 2016 Earnings Call Transcript
Published at 2017-03-08 20:59:07
Doug Baker - CFO William Febbo - CEO
Bernd Hartmann - Private Investor Ron Chez - Private Investor Randy Rageth - Private investor
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.
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.
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 activity in Q4 of 2016 that was related to more than 25 new brands added to our platform. We've been talking about this relationship for a while, so I thought that was a meaningful number to mention. We expect our strategic relationship with WPP to help add additional manufacturers' brands and products to our platform ultimately delivering a much higher percentage of our overall revenue in 2017. While new brands tends to start with smaller budgets as they test this channel, we've shown we can grow them as they test it and we can prove return on investments on their marketing spend. We spend a considerable amount of time with the agencies really educating the market as to the power of this channel, in other words the ability for pharmaceutical companies to communicate directly with physicians and patients at point-of-care. To that end, we doubled the company's sales force in 2016, and added -- recently added another executive in January to accelerate revenue growth, brand expansion, and bringing out new product sales. We expanded OptimizeRX's leadership team and support teams during 2016 as you all know, we have talked about that in previous quarters and now we are focused on executing on a much, much stronger platform. It was critical that these quality systems and compliance in place for our market to maintain our thought leadership and as I've said now we are focused on execution and growth of the business. As our investors would recall, we signed an agreement in 2015 with ALLscripts to become their exclusive provider of financial messaging and obtain access to their Touchworks EHR product which is primarily used by large health systems. We are glad to say that it went live in early March and we expect to see a material impact to revenue starting in the second quarter this year as they onboard the 45,000 additional physicians. We also signed an additional channel partner Eye Care Partners who have a dominant position in ophthalmology. Aside for more reach it's the first partner to integrate our full suite of services, financial, and brand messaging technology is in best. We also expect to see an increase in distribution starting in the second quarter alongside Touchworks. In Q4 of last year we also acquired all available messaging inventory in in the ALLscripts, LoggerX messaging platform for not only 2016, Q4 but for 2017 effectively providing us exclusive sales rights to the platform and the opportunity to substantially increase our brand messaging revenue. We’re actively marketing this service and our in-roads with media companies has been terrific. We expect this product to negatively impact our gross margins in 2017 as we build it out what we believe it is scalable and complimentary service to sell to our core clients. In the last 12 months we’ve also seen some interesting activity within our highly fragmented market while we are not seeing the larger EHRs consolidate in the market like ALLscripts and FA Concerner we don't expect to see that anytime soon but there has been ample opportunity within the health tech service business similar to where we sit. Recently CoverMyMeds was acquired by McKesson for over a $1 billion. Everyday Health was acquired by j2 Global for just under $0.5 billion and there have been multiple private equity and venture investments in and around our space. These large acquirers are clearly buying into the networks and physician communities which can be leveraged by their extensive client base. With a partner like WPP and having enhanced our board I can ensure the investors we have our eye in the market and are constantly looking for ways to accelerate growth, enhance shareholder value, and of course delight our clients. As most of you who have seen we recently received the letter from one of our investors highlighting what we all believe is the valuation far too low given the activity in the space our extensive network for channel partners and clear endorsements of service from both clients and agencies. We will continue to keep our eye on the market and formed a strategic committee to access any and off strategic alternatives, but continue to be focused on building value. 12 months in I feel like I'm just getting started but given the activity within the EHR ecosphere, we must be ready for all opportunities, while we continue to scale the business. In 2017 we're going to be focused on five critical areas of the business we've talked about this before expand our EHR and ePrescription network, we expect to add an additional 200,000 physicians and increase the utilization of our existing partners to include more hospital systems. Roll our pharma base with -- as we talked about last year with the aggressive ROI studies we conducted just anecdotally we had one pharma client that did about a $1 million last year is already on track to do $2 million this year based on that data so we feel very good about that. We will grow our channel partners. We talked about several efforts over the last year now that I feel like have my arms around the business we really focused on our core products and how to enhance and accelerate revenue there. I expect to launch at least three new channel partnerships between Q1 and Q2 which will deliver revenue inside of 2017, stay tuned for an announcement very soon in all those spaces but were focusing in both prior authorization pharmacy partnerships and various others. We will continue to build-out our sales and marketing for us and we really focused on moving up to the enterprise level pricing with pharma by using our strong return on investment data to create more stickiness and we take business. We're also going to look to improve miscibility working with our partners' products and points of distributions to improve our margins which is key to truly scaling the business. As Doug mentioned, we are focused on top-line growth while being very careful with our expenses and managing cash but we feel like it's both a land graph right now on the channel side and it's a good opportunity to invest and educating the market, this should be a place to spend more money. Given the recent additions of channel partners and pharma clients as well as the mentioned critical areas above we expect to significantly accelerate revenue growth 2017 and beyond. With that, I want to open it up to questions. We have a record number of people on the call and so I'll hand it off to our moderator to bring in the first question.
Thank you. [Operator Instructions]. We do have a first question. We will go to Bernd Hartmann, a Private Investor.
Yes, Will, how are you doing?
Hi, Bernd. Good to hear your voice.
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?
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.
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.
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.
Okay. I think their number was like north of 2 bucks. So okay well that's great.
[Operator Instructions]. We will take our next question from Ron Chez with 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.
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.
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?
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.
Take that 25 leading brands and make them all 2 million.
Or more and one more question, how will you increase physician utilization?
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 Instructions]. And we will go next to Randy Rageth, who is a Private investor.
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?
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.
Did you see growth; you see revenue growth hopefully surpassing expense growth this year?
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?
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.
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?
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.
Great. Appreciate your help.
Yes thanks for calling, appreciate it. Appreciate your support.
[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.
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.
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.