OptimizeRx Q1 2025 Earnings Call Transcript

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Provided by Quartr
May 12, 2025

Key Takeaways

  • In Q1 2025, revenues rose 11% year‐over‐year to $21.9 M and adjusted EBITDA improved by nearly $2 M to $1.5 M, defying a typically weak seasonal quarter.
  • The company’s contracted revenue increased over 20% year‐over‐year, with committed backlog exceeding $70 M—a 25% increase that provides more than 80% visibility into 2025.
  • Management raised full‐year 2025 guidance to $101 M–$106 M in revenue and $13 M–$15 M in adjusted EBITDA, citing disciplined cost management and targeted upselling.
  • Early progress in the subscription‐based model has secured over 5% of projected 2025 revenue in subscription contracts, smoothing revenue recognition and enhancing margins.
  • Gross margin declined to 60.9% from 62% due to a shift in product and channel mix, as higher-volume DTC managed services diluted overall margins.
AI Generated. May Contain Errors.
Earnings Conference Call
OptimizeRx Q1 2025
00:00 / 00:00

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Operator

Good afternoon, everyone, and thank you for joining OptimizeRx First Quarter Fiscal twenty twenty five Earnings Conference Call. With us today is Chief Executive Officer, Steve Silvestro. He is joined by chief financial officer, Ed Stelmark, chief legal officer, Maureen Odens Ford, and senior vice president of corporate finance, Andrew DeSilva. At the conclusion of today's call, I will provide some important cautions regarding the forward looking statements made by management during today's call. The company will also be discussing certain non GAAP financial measures, which it believes are useful in evaluating the company's operating results.

Operator

A reconciliation of such non GAAP financial measures is included in the earnings release the company issued this afternoon as well as in the Investor Relations section of the company's website. I would like to remind everyone that today's call is being recorded and will be made available for replay as an audio recording of this conference call on the Investor Relations section of the company's website. I would now like to turn the conference over to OptimizeRx CEO, Steve Silvestro. Mr. Silvestro, please go ahead.

Steve Silvestro
Steve Silvestro
CEO at OptimizeRx

Thank you, operator, and good afternoon to everyone joining today's first quarter twenty twenty five call. I'm delighted to share our first quarter twenty twenty five results, which came in ahead of both consensus estimates and our internal expectations. Momentum from Q4 has continued into 2025 with Q1 revenues increasing 11% year over year to $21,900,000 with adjusted EBITDA coming in at $1,500,000 an improvement of nearly $2,000,000 year over year during what is typically our seasonally weakest quarter. Moreover, our contracted revenue continues to increase to more than 20% year over year, which positions us favorably going to the back half of the year. I believe this is a clear indicator that our focus on operational excellence while ensuring we delight our customers and forge stronger relationships with valued business partners is bearing fruit.

Steve Silvestro
Steve Silvestro
CEO at OptimizeRx

In addition, despite media coverage in the market related to initiatives being implemented by the new administration, we are not seeing significant headwinds directly impacting our business at this time, and we are closely monitoring pharma leading indicators by continuously engaging with our clients. With that said, I'm happy to say we are increasing our guidance for the year and are looking for revenue to come in between $101,000,000 and $106,000,000 with an adjusted EBITDA to be between 13,000,000 and $15,000,000 We believe that the combination of disciplined cost management and targeted upselling strategies, centered around educating customers on budget allocation approaches that drive script lift, has positioned us strongly for success in 2025 and beyond. This progress is bringing our goal of achieving rule of 40 performance in the coming years well within reach. Additionally, we're seeing early momentum in our transition to a subscription based model, with over 5% of our projected annual revenue already converted to subscription contracts for 2025. Before moving on, I want to take a moment and thank our market leading team.

Steve Silvestro
Steve Silvestro
CEO at OptimizeRx

We deeply appreciate the dedication and hard work of everyone at OptimizeRx as we navigate an increasingly complex, dynamic, and the still emerging digital pharma marketing landscape. The industry is undergoing a significant shift and our products and services are poised to fundamentally reshape how pharmaceutical companies, patients, and prescribers engage. Our mission driven culture not only fuels this transformation, but also positions us to attract, retain, and strengthen the critical relationships a leading technology company needs to be a trusted and enduring partner. We believe OptimizeRx is uniquely positioned to drive significant value creation and deliver long term sustainable shareholder growth. By leveraging one of the largest point of care networks in the country, we enable pharmaceutical manufacturers to reach healthcare providers directly at the point of care.

Steve Silvestro
Steve Silvestro
CEO at OptimizeRx

Building on this foundation, we have combined our unmatched network with a purpose built omni channel technology platform with leading patient finding capabilities through DAP and micro neighborhood targeting that is redefining how pharmaceutical companies, physicians, and patients engage, receive, and digest information, ultimately helping to improve patient outcomes. These advantages give us a distinct and durable competitive edge. With unrivaled reach at the point of care and directly to consumers, we believe we are the only company in the industry capable of effectively connecting with both doctors and patients at scale. This unique position has allowed us to develop the broadest suite of solutions in the market, empowering us to meet the diverse and evolving needs of our customers across every stage of the product lifecycle. As mentioned on our last call, our business continues to evolve.

Steve Silvestro
Steve Silvestro
CEO at OptimizeRx

A key focus for the company will be drawing greater attention to our reach and scalability, while positioning ourselves as a strategic partner in addressing some of the most critical commercialization challenges facing pharma today. These include improving brand visibility, reducing script abandonment, enhancing interoperability, and supporting growing shift toward more complex and costly specialty medications. I'm confident that success in these areas combined with the strong performance we are already delivering, including ROI exceeding 10 to one and script lifts of 25% on programs running just six months, will drive significant short and long term shareholder value. Moreover, this momentum will position us to capture greater market share while also expanding the overall size of pharma's digital spend, which already exceeds $10,000,000,000 annually. Our customers remain deeply embedded within our ecosystem of offerings, and it remains our goal to help them stay present throughout the patient care journey across the integrated HCP and DTC business at OptimizeRx.

Steve Silvestro
Steve Silvestro
CEO at OptimizeRx

And with that, I'd like to turn the time over to our CFO, Ed Stelmak, who will walk us through our financial details. Ed?

Edward Stelmakh
Edward Stelmakh
CFO & COO at OptimizeRx

Thanks, Steve, and good afternoon, everyone. As with all our calls, the press release was issued this afternoon with the results of our first quarter ended 03/31/2025. A copy is available for viewing and may be downloaded from the Investor Relations section of our website, and additional information can be obtained through our forthcoming 10 Q. First quarter twenty twenty five revenue was $21,900,000 an increase of 11% from the $19,700,000 we recognized during the same period in 2024. Gross margin for the quarter decreased from 62% in the quarter ended 03/31/2024, to 60.9 percent in quarter ended 03/31/2025.

Edward Stelmakh
Edward Stelmakh
CFO & COO at OptimizeRx

Year on year change in gross margin was primarily due to product and channel partner mix, as we did see an increase in DTC related managed service revenue. Our operating expenses for the quarter ended 03/31/2025 decreased $1,800,000 year over year, primarily driven by stock based compensation and cost savings implemented last year. The company had a net loss of $2,200,000 or $0.12 per basic and diluted share for the three months ended 03/31/2025, as compared to a net loss of $6,900,000 or $0.38 per basic and diluted share for the three months during the same period in 2024. On a non GAAP basis, the company's net loss for the first quarter of twenty twenty five was $1,500,000 or $08 per diluted share, as compared to a non GAAP net loss of $2,000,000 or $0.11 per diluted share in the same year ago period. Meanwhile, our adjusted EBITDA came in at $1,500,000 for the quarter compared to $300,000 loss during the first quarter of twenty twenty four.

Edward Stelmakh
Edward Stelmakh
CFO & COO at OptimizeRx

Operating cash flow came in at $3,900,000 for the first quarter, and the cash balance at the end of the quarter was $16,600,000 as compared to $13,400,000 on 12/31/2024. Our debt balance currently stands at $33,800,000 and we paid off $6,200,000 of principal through first quarter of twenty twenty five. Given our strong working capital position and operating cash flow, we are confident in our ability to fund our operating needs, as well as key strategic priorities to achieve the Rule of 40. Our committed contracted revenue as of the end of the first quarter of twenty twenty five exceeded $70,000,000 which is a greater than 25% improvement over the same period last year. This is a testament to all the investments that have been made in building market leading solutions that meet and exceed our clients' expectations, and positions us well to continue our march toward becoming a Rule of 40 company.

Edward Stelmakh
Edward Stelmakh
CFO & COO at OptimizeRx

Now, let's turn to our KPIs for the first quarter of twenty twenty five. Average revenue per top 20 pharmaceutical manufacturer now stands at approximately $3,000,000 with these top 20 companies representing 63% of our business in Q1 twenty twenty five. Net revenue retention rate remains a strong 114%. Meanwhile, revenue per FTE came in at $710,000 topping the $641,000 we posted in Q1 twenty twenty four. We are encouraged by our continuous improvement in our KPIs and the overall progress in the business performance so far.

Edward Stelmakh
Edward Stelmakh
CFO & COO at OptimizeRx

And with that, I would like to turn the call back over to Steve. Steve?

Steve Silvestro
Steve Silvestro
CEO at OptimizeRx

Thank you, Ed. Operator, let's go ahead and move to Q and A.

Operator

Thank you. We will now begin the question and answer session. The first question comes from Ryan Daniels with William Blair. Please go ahead.

Ryan Daniels
Group Head–Healthcare Technology and Services at William Blair & Company, L.L.C

Guys, did you hear the question?

Steve Silvestro
Steve Silvestro
CEO at OptimizeRx

No, we couldn't hear the question. Sorry.

Edward Stelmakh
Edward Stelmakh
CFO & COO at OptimizeRx

We didn't hear anything.

Ryan Daniels
Group Head–Healthcare Technology and Services at William Blair & Company, L.L.C

Sorry about that. Thanks for taking the question and congrats on the strong performance. And I hate to ask this because you increased your guidance and said you're not seeing anything. But by far the biggest question we keep getting is just all the noise in end market with tariffs and with price negotiations, etcetera. I'm curious how real time your feedback is from your sales team?

Ryan Daniels
Group Head–Healthcare Technology and Services at William Blair & Company, L.L.C

And number two, if you've seen any hesitation in any of your customers or if they're just not at this point making any changes because it's so uncertain in the marketplace today? Thanks.

Steve Silvestro
Steve Silvestro
CEO at OptimizeRx

Thanks for the question. We've we've not seen really any pullback from our clients. We are getting real time information and updates as we're kind of daily dealing with them. What we have seen really is just a leaning in and trying to drive a little bit harder at these markets. Jury is still out on how things will be impactful going forward into the future and how things will be rolled out.

Steve Silvestro
Steve Silvestro
CEO at OptimizeRx

But right now, no indication of any sort of pullback in the business at all. We actually see the opposite people leaning in trying to leverage digital channels a little bit more than before. And I think that the other thing to look for is just, I would say the cost effectiveness of digital versus some of the other channels that they use to promote. If they get in a cost cutting sort of state, we'll probably see some of the other things ratchet back faster than digital. You may see even more acceleration in our favor if they go down that road. Yeah, to date, no, nothing really to panic about.

Ryan Daniels
Group Head–Healthcare Technology and Services at William Blair & Company, L.L.C

Okay. No, that's super helpful color actually. And then can you remind us when you move to subscription based revenue, upon removal, how does that impact kind of the revenue recognition over a twelve month period in the margins? Does that just I'll leave it there. How does it really impact margins in rev rec if we think about the total revenue?

Steve Silvestro
Steve Silvestro
CEO at OptimizeRx

It'd be

Edward Stelmakh
Edward Stelmakh
CFO & COO at OptimizeRx

more I'll take it and

Steve Silvestro
Steve Silvestro
CEO at OptimizeRx

grab it and ask oh, go ahead Ed, you take it. Go ahead.

Edward Stelmakh
Edward Stelmakh
CFO & COO at OptimizeRx

Yes, no problem. Hey, Ryan. Yeah. Basically, I mean, it's really simple. Kind of spreads your revenue over the twelve month period.

Edward Stelmakh
Edward Stelmakh
CFO & COO at OptimizeRx

It takes the dollars associated with subscription related solutions and services and spreads spreads those over the course of the year.

Ryan Daniels
Group Head–Healthcare Technology and Services at William Blair & Company, L.L.C

Okay. But it's

Edward Stelmakh
Edward Stelmakh
CFO & COO at OptimizeRx

You're not giving it to actually accretive to us because of the revenue share perspective. We kind of keep most of that revenue to ourselves and the cost of sales for that revenue is pretty low.

Ryan Daniels
Group Head–Healthcare Technology and Services at William Blair & Company, L.L.C

Okay. Okay. Just want to confirm. And then you mentioned, I think, Ed, that the direct to consumer managed services kind of mix is diluting gross margins a little bit. How should we think about the gross margin profile of the company going forward?

Ryan Daniels
Group Head–Healthcare Technology and Services at William Blair & Company, L.L.C

Is that kind of low 60% range still the right target? Or might you see more growth there that pushes it slightly below that? Thanks.

Edward Stelmakh
Edward Stelmakh
CFO & COO at OptimizeRx

Yeah, we're certainly working on trying to increase that above the low 60% mark. But right now, our kind of makeup for our portfolio is such that when we do have some solutions that are a little bit lower on the margin side, you'll see that sort of a dilution. The good news is we're diversified enough where none of our solutions really will have an impact that material at this point, so we feel pretty comfortable with the current range.

Ryan Daniels
Group Head–Healthcare Technology and Services at William Blair & Company, L.L.C

Okay.

Andrew D’silva
Andrew D’silva
SVP - Corporate Finance at OptimizeRx

Yes. Ryan, so what we've historically talked about is high 50% range to the low to mid-sixty percent range for gross margins. And so first quarter was well within that range.

Ryan Daniels
Group Head–Healthcare Technology and Services at William Blair & Company, L.L.C

Okay, perfect. Thanks a lot guys. Appreciate it.

Steve Silvestro
Steve Silvestro
CEO at OptimizeRx

Yes. Good to hear your voice, Ryan. Thanks for the questions.

Operator

Thank you. The next question comes from David Grossman with Stifel. Please go ahead.

David Grossman
David Grossman
Managing Director at Stifel Financial Corp

Thank you very much. I think in your prepared remarks, you know, I think Steve you said that or maybe it was that that you had $70,000,000 in committed revenue and I assume you're speaking to visibility on the year and that was up 25. So just back the envelope math, does that suggest that you've got a little over 70% or about 70% visibility today at this point in the year versus 60% last year? Did I get that right?

Steve Silvestro
Steve Silvestro
CEO at OptimizeRx

Yeah, it's north of 80%.

David Grossman
David Grossman
Managing Director at Stifel Financial Corp

Yeah,

Steve Silvestro
Steve Silvestro
CEO at OptimizeRx

yeah, you're in the ballpark. It's north of 80% where we currently sit. That's what's in the prepared remarks. You're in the ballpark, David.

David Grossman
David Grossman
Managing Director at Stifel Financial Corp

Okay.

Andrew D’silva
Andrew D’silva
SVP - Corporate Finance at OptimizeRx

So what was being said in the prepared remarks was at the end of the first quarter, so March, that's where we said. So What Steve just said was where we're at right now.

Steve Silvestro
Steve Silvestro
CEO at OptimizeRx

Was the release.

David Grossman
David Grossman
Managing Director at Stifel Financial Corp

But just on an apples to apples basis, it sounds like you're up about 10 points at the March in terms of visibility on the year, right?

Edward Stelmakh
Edward Stelmakh
CFO & COO at OptimizeRx

Well, we're actually up about 25% from last year on the committed backlog as of the end of Q1, which is what's given us so much optimism by the year.

David Grossman
David Grossman
Managing Director at Stifel Financial Corp

Gotcha. And then in terms of the amount or how much more revenue we can convert to subscription, know, kind of just think about it over the balance of the year, How should we think of how that 5% may migrate?

Steve Silvestro
Steve Silvestro
CEO at OptimizeRx

Yeah, I mean, if

Edward Stelmakh
Edward Stelmakh
CFO & COO at OptimizeRx

ahead, Steve. Go ahead, Ed.

Steve Silvestro
Steve Silvestro
CEO at OptimizeRx

Yeah, if you think about it,

Steve Silvestro
Steve Silvestro
CEO at OptimizeRx

Sorry. I've got a delay. Go ahead, Ed. No, no, you go. Go ahead.

Edward Stelmakh
Edward Stelmakh
CFO & COO at OptimizeRx

Yeah. Basically, if this works out the way we're planning and the way we hope, the the the subscription revenue will convert into next year, and we'll have some legs in the following several years. So versus what we've had in the past, where most of our revenue was one year in tenure or less, Hopefully subscription will have a little bit more of a life cycle to it. We're hoping current percentage will continue to grow and expand, and it will smooth out our revenue recognition over time.

David Grossman
David Grossman
Managing Director at Stifel Financial Corp

As we think

Steve Silvestro
Steve Silvestro
CEO at OptimizeRx

could think about it in terms of all of the DAP business and the audience business. So all of the components of data, both from the legacy Medix business that's producing audiences as well as the data business, coming out of DApp. So those two components, are what have the potential for subscription based revenue. So that's that's the component that we can push on. The transactional components of the business will continue to be transactional over time.

Steve Silvestro
Steve Silvestro
CEO at OptimizeRx

And so that's that's kind of the target. That'd be the high watermark.

David Grossman
David Grossman
Managing Director at Stifel Financial Corp

Got it.

Steve Silvestro
Steve Silvestro
CEO at OptimizeRx

Yeah, what you're seeing what you're seeing now is early signs of good progress against the conversion and prosecuting that work, but we still have a lot of work to do on that. We did wanna report out on it because it's substantial considering that we've been at it for a little bit more than a quarter and made some good progress on it, but lots more work to do there. Lots of them to chop.

David Grossman
David Grossman
Managing Director at Stifel Financial Corp

So thanks for that. Steve, can you just remind us how what percentage of revenue is represented by the data business?

Steve Silvestro
Steve Silvestro
CEO at OptimizeRx

We don't break it out that way. We were breaking out sort of adapt and core stuff for a bit, but we can we can circle back and give you a little bit better view. We haven't broken it out to date that way.

David Grossman
David Grossman
Managing Director at Stifel Financial Corp

Got it. And then just one last one for me. I know it's a modest kind of decline there, but anything to call out on what may be impacting the NRR sequentially?

Andrew D’silva
Andrew D’silva
SVP - Corporate Finance at OptimizeRx

Yeah, I can take that question. We talked about this on the last call, it's a trailing twelve month look.

Andrew D’silva
Andrew D’silva
SVP - Corporate Finance at OptimizeRx

So, now we're running into trailing twelve month comps year over year that have the the benefit of, Medix, the acquisition. And so as you go more into time, there's just more Medix revenue in the year over year comp. So it becomes less favorable of a year over year comp on NRR. That's all.

David Grossman
David Grossman
Managing Director at Stifel Financial Corp

Got it. Alright, guys. Nice job. Thanks very much.

Steve Silvestro
Steve Silvestro
CEO at OptimizeRx

Thanks, David. Great to talk to you.

Operator

Thank you. The next question comes from Richard Baldry with ROTH Capital. Please go ahead.

Richard Baldry
MD & Senior Research Analyst at Roth Capital Partners, LLC

Thanks. Just back to the NRR. I'm sort of curious, is there any further headwinds in the second half? And the reason I ask is the top line guide at the high end would be 15% growth and your NRR is 114%. So essentially accounts for the upper end of revenue guide.

Richard Baldry
MD & Senior Research Analyst at Roth Capital Partners, LLC

So I just want to make sure I know there's Nothing else has an incremental headwind in the second half?

Andrew D’silva
Andrew D’silva
SVP - Corporate Finance at OptimizeRx

Well, NRR, we said on the last call, back of the envelope would end up around 100 by the end of the year, right? Based on our guidance. So call it 5% to 15% of our business every year comes from new logos. And so obviously NRR, the maximum we grow, if you went through 15% would be an NRR of 115%. So if five to 10% or 15% of our business comes from new logos, by the end of the year, you'll be about a %.

Andrew D’silva
Andrew D’silva
SVP - Corporate Finance at OptimizeRx

So there the we we made the acquisition in October of twenty twenty three of Medix, so it's a trailing twelve month look back comparison. So even at the first quarter of twenty twenty four, the trailing twelve months there, you know, we we didn't have a full year of Medix as a as a reported entity.

Richard Baldry
MD & Senior Research Analyst at Roth Capital Partners, LLC

Got it. When we look at the OpEx side now, it come down pretty substantially. So is this a pretty good run rate on a go forward basis? How do you think about your leverage on OpEx as the top line grows?

Steve Silvestro
Steve Silvestro
CEO at OptimizeRx

Yeah, I can take that.

Edward Stelmakh
Edward Stelmakh
CFO & COO at OptimizeRx

Yeah.

Steve Silvestro
Steve Silvestro
CEO at OptimizeRx

I think we had about

Steve Silvestro
Steve Silvestro
CEO at OptimizeRx

5,000,000 out of it last year, as you know, about the fourth quarter, right? So we're at a good, I think run rate now. We don't really need to take more out and I don't think we'll need to add more. So I think what we've demonstrated here is. Do you feel free to add anything else?

Edward Stelmakh
Edward Stelmakh
CFO & COO at OptimizeRx

Yeah, that's Richard. I think Steve was breaking up a bit on my end.

Richard Baldry
MD & Senior Research Analyst at Roth Capital Partners, LLC

Yeah, broke up a little at the end. I think I got it.

Edward Stelmakh
Edward Stelmakh
CFO & COO at OptimizeRx

You got it. Okay.

Richard Baldry
MD & Senior Research Analyst at Roth Capital Partners, LLC

I'm curious. Then in terms of new business, can you talk about sort of how RFP season played out on the DTC side and how you view new wins on that side of the table? And then I think you gave the number last quarter of paying DAP deals was 48 versus 24 starting the year. I'm not sure if you're willing to update that number or just talk generically about new wins in the DAP side.

Andrew D’silva
Andrew D’silva
SVP - Corporate Finance at OptimizeRx

Yes. I can take the DAP question. So we're just given it's such a large percent of our business right now, for competitive purposes, we're no longer breaking out, like how many deals we're getting or anything like that. That was just really to show initial adoption. And then, I mean, Steve can give a little bit more detail on the DTC side of the business, but both parts of the business have been performing well this year and are contributing to our increased guidance.

Steve Silvestro
Steve Silvestro
CEO at OptimizeRx

Yes, just to sort of double down on that, Rich, hopefully you can hear me okay. I'm not sure why the signal was cutting there for a second, but GAAP continues to perform at the same speed as it was before. So everything's sort of in line. As Andy said, we're not going to count the number of deals just because competitively, we're not wanting to disclose that. But in addition to that, I think what we can safely say is we've seen a strong DTC recovery in the fourth quarter and into the first quarter of this year.

Steve Silvestro
Steve Silvestro
CEO at OptimizeRx

And we anticipate that that acceleration will continue for the DTC component of the business.

Richard Baldry
MD & Senior Research Analyst at Roth Capital Partners, LLC

Great. Thanks.

Operator

Thank you. The next question comes from Maxwell Michalis with Lake Street Capital Markets. Please go ahead.

Max Michaelis
Equity Research Associate at Lake Street Capital Markets, LLC

Hey, guys. Thanks for taking my Great job on the quarter. When we look at Q2, now we're about halfway through now. Should we expect typical seasonality Q1 to Q2 pretty much flat? Are you seeing demand here more outsized demand here in Q2 and we should expect sequential growth?

Max Michaelis
Equity Research Associate at Lake Street Capital Markets, LLC

I know you guys didn't give quarterly guidance, but maybe directionally you can help. Thanks for taking my question.

Steve Silvestro
Steve Silvestro
CEO at OptimizeRx

Yes, sure. Happy to do it, Maxim. Thanks. Andy, why don't you take that one?

Andrew D’silva
Andrew D’silva
SVP - Corporate Finance at OptimizeRx

Yes. We would expect a small step up sequentially. You know, first half of the year revenue is typically between 35 and 45 percent of full year revenue. So the I I I think we're we're in a pretty pretty good pace compared to historicals.

Operator

Nicholas, I hope that answers your question.

Max Michaelis
Equity Research Associate at Lake Street Capital Markets, LLC

Yep. That would be the same.

Steve Silvestro
Steve Silvestro
CEO at OptimizeRx

There we go. Great.

Max Michaelis
Equity Research Associate at Lake Street Capital Markets, LLC

Okay.

Steve Silvestro
Steve Silvestro
CEO at OptimizeRx

Sure thing.

Operator

Thank you. The next question comes from Constantine Davides with Credit Suisse. Please go ahead.

Constantine Davides
Managing Director at Citizens JMP Securities, LLC

Thanks. I just wanted to maybe drill into the pipeline a little bit more and kind of what you're seeing there. Is it bigger on an absolute basis year over year? Maybe talk a little bit about are your win rates changing relative to what they were last year? And then, maybe just some commentary on average deal size and if you're having any success with double barreled sales.

Constantine Davides
Managing Director at Citizens JMP Securities, LLC

I know I just threw a lot at you, but just kind of curious if we can get a little more color on kind of what's in the pipe.

Steve Silvestro
Steve Silvestro
CEO at OptimizeRx

Hey, Constantine. Good to hear from you. I'll give the first couple of answers and ask Andy and I to chime in. But basically pipeline continues to grow at a steady rate. I think we feel confident with where it is.

Steve Silvestro
Steve Silvestro
CEO at OptimizeRx

We continue to convert, I think at a good pace, but our conversion ratio has become better. We're finding that we're winning particularly with the data and subscriptive component of our business. We're winning more as our audience quality has improved and our data has been better. So that's been helpful. And we've seen those pieces of the business go.

Steve Silvestro
Steve Silvestro
CEO at OptimizeRx

And then Andy, Ed, feel free to chime in on the other components. But I just wanted to call those out and sorry guys for the quality of the audio notes. Not sure what's going on on the call side. Andy, you had anything else to add in there for Constantine?

Andrew D’silva
Andrew D’silva
SVP - Corporate Finance at OptimizeRx

Yeah. We're we're not gonna break out average deal size or anything like that anymore. But I think I think Steve hit the nail on the head.

Constantine Davides
Managing Director at Citizens JMP Securities, LLC

Okay. And then just one more follow-up on the subscription. Are those are the subscription deals multi year? Are they just sort of one year evergreen arrangements?

Steve Silvestro
Steve Silvestro
CEO at OptimizeRx

Right now they're one year evergreen arrangements. The goal would be to get them to multi year status, but that's kind of difficult to do Constantine in this space because marketing basically ascribes dollars on a yearly and an annual basis based on previous year's full year performance. So it's gonna be difficult to do three year, four year, five year deals. So for right now, we're looking at twelve months and scaling as many of those as we can. As time progresses, if we can get that data component of the business to two and three year deals, that'll be an enormous win for the business.

Constantine Davides
Managing Director at Citizens JMP Securities, LLC

Understood. And then I guess this last one for Ed on the guidance, should we assume that the high end of revenue correlates with the high end of EBITDA or does it sort of is there some dynamic here where you're investing more to get to the top end? Just trying to understand that. Thanks.

Edward Stelmakh
Edward Stelmakh
CFO & COO at OptimizeRx

Yeah. So it's less about investing more to get to the top end. We feel pretty confident that with the backlog build up and some of the tailwinds we're experiencing now, that we'll get to that number. Really the hedge there is around gross margin. The mix of solutions is one thing that is not as predictable.

Edward Stelmakh
Edward Stelmakh
CFO & COO at OptimizeRx

So we're probably betting on a little bit of a more conservative number on the gross margin side of the business, with OpEx more or less being kind of set for the year.

Operator

Thank you. The next question comes from Jeff Garo with Stephens. Please go ahead.

Jeff Garro
Managing Director at Stephens Inc

Yeah, good afternoon. Thanks for taking the questions. Wanted to follow-up on the visibility topic and the roughly remaining 20% of revenue that you need to land for the year. Could you discuss what needs to be landed in terms of renewals or upsells or adding new logos? Thanks.

Steve Silvestro
Steve Silvestro
CEO at OptimizeRx

Yeah, I'm happy to take that one and then let Ed and Andy chime in as well. But and thanks for the question, Jeff. So as Ed said, we've got greater than 80% contracted revenue on the backlog for the full year. So that gives us good visibility into where we're headed. Basically for what we need to do for that component, the Delta is really just delivery over time, which will happen organically as we prosecute these programs.

Steve Silvestro
Steve Silvestro
CEO at OptimizeRx

The Delta between what we've contracted and where we need to go is sort of the difference between the guidance and the visibility that we've got, or the top end of that guidance and the visibility that we've got. And so what needs to happen there is just conversion of the pipeline, very simple. And the pipeline like we, like response to Constantine is very healthy right now. So I think we're feeling confident in that. Eddie, Andy, anything else you'd wanna chime in on?

Edward Stelmakh
Edward Stelmakh
CFO & COO at OptimizeRx

No, I think you've got the gist of it. I would just say again, pipeline is building, we're constantly dealing with the quality of the pipeline. We're staying on top of operational execution, as we said at the beginning of the year. So there's definitely a very strong hyper focus on making sure that we have conversion that takes place within the quarter to drive that revenue earlier. So we feel pretty confident that we'll be able to get that remaining 20% and some this year.

Jeff Garro
Managing Director at Stephens Inc

Understood. I appreciate that. And one more for me, maybe back to the topic of gross margins and the mix involved there. I was hoping you could help us understand a little bit further the progress you've made on conversion to data subscriptions and the benefits there and the comment about the gross margin percentage in the quarter being down a little bit year over year from an increase in managed services. So maybe it's really around the appetite for customers to kind of rebound demand for that managed service offering versus it going one way towards data subscriptions. Thanks.

Andrew D’silva
Andrew D’silva
SVP - Corporate Finance at OptimizeRx

Yeah. Go ahead, Ed.

Edward Stelmakh
Edward Stelmakh
CFO & COO at OptimizeRx

Yeah. Look, we have a portfolio right now that's diversified enough that was built around meeting and exceeding customer needs. In some cases, we'll need to take some business that is lower margin. But really, the focus for us as a company is to continue to build out the higher margin side of the business.

Edward Stelmakh
Edward Stelmakh
CFO & COO at OptimizeRx

And that's exactly what's happening. Our current gross margin profile is right there where it needs to be. And we feel like as the year goes on, we should see more and more of the expansion take place. And certainly, as part of the Rule of 40 kind of ramp up margin expansion as part of the equation.

Steve Silvestro
Steve Silvestro
CEO at OptimizeRx

Jeff, I'd also add to that. Part of what we're trying to capitalize on is a flywheel effect within the business, right? So in order for us to be able to do that, we've got to grow that subscriptive data component of the business, which as Ed said, it will positively impact the gross margin over time. There's no rev share with that. It's intellectual property that we own.

Steve Silvestro
Steve Silvestro
CEO at OptimizeRx

But in addition to that, it will unlock the ability to distribute more messages and transactions across the entire network as we plug into that. And so we're laser focused on driving audiences and that data as a key component of our business. So you'll expect to hear more updates from us on that as we go.

Jeff Garro
Managing Director at Stephens Inc

Great. Thanks again for taking the questions.

Andrew D’silva
Andrew D’silva
SVP - Corporate Finance at OptimizeRx

Yeah, great questions.

Jeff Garro
Managing Director at Stephens Inc

Thank you.

Operator

Thank you. This concludes our question and answer session. I would like to turn the conference back over to Mr. Silvestro for any closing remarks.

Steve Silvestro
Steve Silvestro
CEO at OptimizeRx

Yep. Thank you, guys. No closing remarks. We can go ahead and close out the call.

Operator

Thank you, mister Silvestro. Before we conclude today's call, I would like to provide the company's safe harbor statement that includes caution 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 and the Securities Act of 1933 as amended and Section 21E of Securities Act of 1934 as amended. These forward looking statements should not be used to make investment decisions. The words anticipate, estimate, expects, possible, and seeking, and similar expression identify forward looking statements.

Operator

They may speak only to the date that such statements are made. Forward looking statements in this call include statements regarding our growth plans, plans for shareholder value creation, becoming a rule of 40 company, transitioning to a subscription based model, achieving our goals to help patients stay present throughout the patient care journey across our integrated HCP and DTC businesses. Initiative biz being implemented by the new administration, cost management, targeted upselling, estimated 2025 revenue, and adjusted EBITDA range, estimation of total addressable market size, market penetration, technology, investment, growth opportunities, acquisition, and upcoming announcements. Forward looking statements also include the management's expectations for the rest of the year. The company undertakes no obligation to publicly update or revise any forward looking statements, whether because of new information, future events, or otherwise.

Operator

Forward looking statements are inherently subject to risk and uncertainties, some of which cannot be predicted or quantified. Future events and actual results could differ materially from those set forth in contemplated by or underlying these forward looking statements. The risks and uncertainties to which forward looking statements are subject to include, but are not limited to, the effects of government regulation, competition, dependence on a concentrated group of customers, cybersecurity incidents that could disrupt operations, the ability to keep pace with growing and evolving technology, the ability to maintain contracts with electronic prescription platforms and electronic health records networks, and other material risk. Risks and uncertainties to which forward looking statements are subject could affect business and financial results are included in the company's annual report on Form 10 k for the year end 12/31/2024 and in other filings the company has made and may take with the SEC in the future. These filings when available on the company's website and on the SEC website at sec.g0v.

Operator

Before we end today's conference, I would like to remind everyone that an audio recording of this conference call will be available for replay starting later this evening running through for a year on the investor section of the company's website. Thank you for joining us today. This concludes today's conference call. You may now disconnect your lines.

Executives
    • Steve Silvestro
      Steve Silvestro
      CEO
    • Edward Stelmakh
      Edward Stelmakh
      CFO & COO
    • Andrew D’silva
      Andrew D’silva
      SVP - Corporate Finance
Analysts
    • Ryan Daniels
      Group Head–Healthcare Technology and Services at William Blair & Company, L.L.C
    • David Grossman
      Managing Director at Stifel Financial Corp
    • Richard Baldry
      MD & Senior Research Analyst at Roth Capital Partners, LLC
    • Max Michaelis
      Equity Research Associate at Lake Street Capital Markets, LLC
    • Constantine Davides
      Managing Director at Citizens JMP Securities, LLC
    • Jeff Garro
      Managing Director at Stephens Inc
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