OptimizeRx Corporation Third Quarter 2026 Conference Call - OPTIMIZERX CORP

Explicit Guidance:

• FY2026 Revenue: Updated range of $87 million to $93 million (previously lower; revised due to contracted revenue tracking ~20% below prior year levels and timing of Q4 customer spend).
• FY2026 Adjusted EBITDA: Maintained guidance of $21 million to $25 million.
• FY2026 Gross Margin: Expected to be in the "low 70% range."
• FY2027 Contracted Revenue: Tracking approximately 20% ahead of comparable prior-year levels, signaling expected growth rates closer to FY2025 performance.
• Capital Allocation: Intention to continue paying down outstanding loan principal ahead of schedule (debt reduced from $13.4M to $10.4M post-quarter; additional $3M paid subsequent to quarter end) and increased focus on share repurchase activity in Q4 2026.
• Long-term Margin Target: Reiterated objective to achieve 30%+ gross margins as revenue grows, with a path to 40% margins in the "not-too-distant future," though no specific FY2027 margin guidance is committed.

Business-Segment Outlook:

• Top 20 Clients: Recovery expected as one displaced top-five client returned in Q4 2026 (generating revenue off non-budgeted dollars); full normalization of spend levels expected in 2027 to align with 2025 historicals.
• Mid-Tier & Long-Tail: "Exceptionally good play" with mid-tier and long-tail life science customers; one mid-tier client recently joined the top-10 pool; non-top-20 growth described as "well into double digits."
• New Logos: New business contribution expected to remain steady at 5–15% of total revenue annually.
• Programmatic Distribution: Inventory expected to become available to PulsePoint advertisers throughout November 2026; integration with The Trade Desk (Open Path) providing access to 800,000 verified healthcare professionals; DeepIntent, The Trade Desk, and PulsePoint represent ~60–70% of the programmatic volume opportunity.
• Product Expansion: Natural Language Audience Builder (NLAB) extended to include privacy-safe direct-to-consumer audiences; COPEQ solution recently introduced; platform evolving toward recurring revenue and improved retention via AI-enabled audience intelligence and omni-channel planning.

Market and Competitive Outlook:

• Demand Trends: Management identifies "pent-up demand" within the customer base as pharma manufacturers evaluate remaining marketing budgets; Q4 expected to benefit from "use it or lose it" dollar deployment.
• RFP Season: 2027 RFP season showing encouraging momentum; contracted revenue tracking 20% ahead indicates a "very strong" start to the season.
• Competitive Position: OptimizeRx positions itself as the only tech company with an AI-enabled operating system integrating proprietary EHR data; competitive advantages cited as scalable AI platform, proprietary data (1.1M verified HCPs across 450+ systems), and high barriers to entry via existing integrations.
• Shift in Spend Dynamics: Customers seeking measurable returns, targeting precision, and AI-enabled engagement; industry moving toward programmatic healthcare advertising rather than traditional direct EHR sales.

Macro / Industry Outlook:

• Budget Scrutiny: Pharma manufacturers navigating evolving spending priorities and heightened focus on ROI; "MFN pricing uncertainty" and regulatory shifts (Congress shift to Democrat) creating hesitation on long-term planning.
• Regulatory Impact: Clients uncertain regarding the impact of the new Congress on drug pricing policy (MFN, 5,000 other things); historical "frothy" period for Big Pharma under previous administration did not materialize, forcing recalibration.
• Pricing/Spending: No specific guidance on pricing inflation; management notes revenue recognition challenges due to the time required to contract, deliver, and measure campaigns within short timeframes.

Strategic Initiatives:

• Commercial Organization: Appointment of Sarah Bass as Chief Marketing Officer (Q3) to deepen pharma/agency relationships and accelerate adoption of expanding product portfolio.
• Leadership Transition: Andy DeSilva assumes CFO role and Heather Favaza becomes Chief Accounting Officer effective January 1, 2027; Ed Stelmach steps down but remains strategic advisor through year-end.
• Partnerships: Active expansion of programmatic distribution via DeepIntent, The Trade Desk, and PulsePoint to integrate point-of-care advertising into omni-channel strategies.
• Technology Development: Continued investment in DAP (Data Analytics Platform) and NLAB to simplify HCP/DTC campaign planning and identify future treatment eligibility.

Risks and Headwinds to Outlook:

• Revenue Recognition Risk: Significant execution risk in Q4 2026 required to achieve updated revenue guidance due to lack of visibility on "buy-up" activity and timing of customer spending decisions.
• Customer Concentration: Continued dependence on a limited number of large customers; NRR dipped to 83% driven by one client's pullback (representing ~10% of previous year's business).
• Pent-Up Demand Uncertainty: While pent-up demand is identified, management cannot guarantee conversion to recognized revenue within Q4 2026; visibility on "buy-up" growth remains limited.
• Macro/Regulatory Volatility: Potential impacts from government regulation, drug pricing policies, and uncertainty surrounding the new political administration's approach to pharma spending.
• Operational Risks: Dependence on maintaining contracts with EHR/e-prescribing platforms, cybersecurity incidents, and the ability to keep pace with evolving technology and competition.

Management Tone on the Future:

• Confidence Level: Cautiously optimistic regarding long-term fundamentals and 2027 outlook ("best it's been in a very long time" regarding culture and sentiment); firm on financial discipline and margin expansion.
• Forward-Looking Sentiment: Management views current revenue decline as a timing/conversion issue rather than a fundamental market opportunity change; expects a significant "turn" in KPIs (including NRR) for 2027 as the large client spend normalizes.
• Hedges/Qualifiers: Explicitly avoiding 2027 guidance numbers to maintain credibility given lack of visibility; emphasizes "over-communicating" to manage expectations rather than risking "roll the dice" on Q4 misses.

Miscellaneous:

• Debt Status: Total debt reduced to $10.4 million (from $23.4M cash balance); term loan at SOFR + 2.25%; $10M revolver available.
• Operating Leverage: Adjusted EBITDA margin reached 29% in Q3 2026 (up 900 bps YoY) despite 17% revenue decline; management expects stronger operating leverage as top-line growth resumes.
• Cash Flow: Operating cash flow of $12.9 million for the first nine months of 2026.