OptimizeRx Corp

Previous wording

Results of Operations for the Three Months Ended March 31, 2024 and 2023

Current wording

Results of Operations for the Three and Six Months Ended June 30, 2024 and 2023

Previous wording

Our net revenue reported for the three months ended March 31, 2024 was approximately $19,690, an increase of 51% over the approximately $13,003 from the same period in 2023. The increase in revenue was as a result of the impact of the fourth quarter 2023 acquisition of Medicx Health, which was not included in the prior year numbers, plus growth of DAAP related sales. This increase was partially offset by a reduction of approximately $1,876 as a result of the disposal of our non-core Access solutions and the sale of certain non-core solutions-related contracts in the fourth quarter of 2023. Adjusting net revenues of $21,031 as shown in the pro-forma consolidated statement of operations data table in Note 1 to the condensed consolidated financial statements by the $1,876 of non-core solutions revenues included in 2023, the adjusted net revenues were $19,690 in 2024 versus $19,155 in 2023.

Current wording

Net revenue reported for the three months ended June 30, 2024 was approximately $18,812, an increase of approximately 36% over the approximately $13,818 from the same period in 2023. Our net revenue reported for the six months ended June 30, 2024 was approximately $38,502, an increase of approximately 44% over the approximately $26,821 from the same period in 2023. The increase in net revenue was as a result of the impact of the fourth quarter 2023 acquisition of Medicx Health, which was not included in the prior year numbers, plus growth of DAAP related sales, where the quarter benefited from an increase list delivery related revenue tied to new DAAP program launches. The increases in the three and six months ended June 30, 2024 were partially offset by a reduction of approximately $1,213 and $3,080, respectively, as a result of the disposal of our non-core Access solutions and the sale of certain non-core solutions-related contracts in the fourth quarter of 2023.

Previous wording

Our cost of revenues, composed primarily of revenue share expense paid to our network partners as well as costs associated with licensing data from third parties, was approximately $7,486 for the three months ended March 31, 2024 compared to $5,570 for the same period of 2023. Our cost of revenues as a percentage of revenue decreased to approximately 38% for the quarter ended March 31, 2024 from approximately 42.8% for the quarter ended March 31, 2023. This improvement in cost of revenues as a percentage of revenue was a result of solution and channel mix. Additional discussion is included in the Gross Margin section below.

Current wording

Our cost of revenues, comprised primarily of revenue share expense paid to our network partners as well as costs associated with licensing data from third parties, was approximately $7,108 or 37.8% of net revenues for the three months ended June 30, 2024 compared to $5,993 or 43.4% of net revenues for the three months ended June 30, 2023 and was approximately $14,595 or 38% of net revenues for the six months ended June 30, 2024, compared to $11,563 or 43% of net revenues for the six months ended June 30, 2023.

Previous wording

Our gross margin, which is the difference between our revenues and our cost of revenues, increased for three months ended March 31, 2024, as a result of solution and channel mix. During the three months ended March 31, 2024, we had higher revenues due to the fourth quarter acquisition of Medicx Health and growth in our DAAP related sales, leading to increased gross margin. Our overall margin percentage improved, compared with a year ago, as a result of an increased delivery of higher margin revenue solutions, such as DAAP, and using more cost-effective channel partnerships.

Current wording

We had higher second quarter revenues compared to the same year ago period due to the fourth quarter acquisition of Medicx Health and growth in our DAAP related sales, leading to increased gross margin. Our overall margin percentage improved, compared with a year ago, as a result of an increased delivery of higher margin revenue solutions, such as DAAP, and using more cost-effective channel partnerships.

Previous wording

Operating expenses increased to approximately $17,233 for the three months ended March 31, 2024 from approximately $14,496 for the same period in 2023, an increase of approximately 19%. The detail by major category is reflected in the table below (in thousands).

Current wording

Operating expenses increased to approximately $15,453 for the three months ended June 30, 2024 from approximately $12,674 for the same period in 2023, an increase of approximately 22%. For six months ended June 30, 2024 operating expenses were approximately $32,685 compared to approximately $27,137 for the six months ended June 30, 2023, a increase of 20%. The detail by major category is reflected in the table below (in thousands).

Previous wording

Stock-based compensation decreased from approximately $4,381 for the three months ended March 31, 2023, to approximately $3,024 for the three months ended March 31, 2024. The decrease was a result of the lower grant date fair value of awards due to declines in the Company’s stock price as well as fewer equity awards made in the first quarter of 2024.

Current wording

Stock-based compensation decreased from approximately $3,503 for the three months ended June 30, 2023, to approximately $2,903 for the three months ended June 30, 2024, and decreased from approximately $7,884 for the six months ended June 30, 2023, to approximately $5,926 for the six months ended June 30, 2024. The decrease in both periods was a result of the lower grant date fair value of awards due to declines in the Company’s stock price as well as fewer equity awards made in such periods.

Previous wording

Depreciation and amortization increased from approximately $464 for the three months ended March 31, 2023, to approximately $1,067 for the three months ended March 31, 2024. The increase was a result of the additional amortization from associated with the identifiable intangibles arising from the Medicx Health acquisition.

Current wording

Depreciation and amortization increased from approximately $465 for the three months ended June 30, 2023, to approximately $1,073 for the three months ended June 30, 2024, and increased from approximately $929 for the six months ended June 30, 2023, to approximately $2,140 for the six months ended June 30, 2024. The increase in both periods was a result of the additional amortization associated with the identifiable intangibles arising from the Medicx Health acquisition.

Previous wording

Other general and administrative expenses increased from approximately $9,651 for the three months ended March 31, 2023 to approximately $13,142 for the same period in 2024. This increase is primarily as a result of increases in compensation expense, due to additional headcount as a result of the Medicx Health acquisition, professional fees, primarily audit and accounting fees, and partner integration incentives.

Current wording

Other general and administrative expenses increased from approximately $8,706 for the three months ended June 30, 2023 to approximately $11,477 for the three months ended June 30, 2024, and increased from approximately $18,325 for the six months ended June 30, 2023, to approximately $24,619 for the six months ended June 30, 2024. This increase in both periods is primarily a result of increases in compensation expense, due to additional headcount as a result of the Medicx Health acquisition therefore causing a related increase in bonus and commission expense, professional fees, primarily audit and accounting fees, insurance costs and partner integration incentives.

Previous wording

Interest expense was approximately$1,546 for the three months ended March 31, 2024 andrepresents interest charges on our Term Loan, which was raised to partially fund the acquisition of Medicx Health in the fourth quarter of 2023, together with the amortization of the related issuance costs.

Current wording

Interest expense was approximately$1,528 and$3,074 for the three and six months ended June 30, 2024 andrepresents interest charges on our Term Loan, which was raised to partially fund the acquisition of Medicx Health in the fourth quarter of 2023, together with the amortization of the related issuance costs.

Previous wording

Interest income decreased from approximately $665 forthe three months ended March 31, 2023, to approximately$20 for the three months ended March 31, 2024. The decrease was a result of lower invested balances as we realized short-term investments during 2023 in order to partially fund the acquisition of Medicx Health.

Current wording

Interest income decreased from approximately $721 forthe three months ended June 30, 2023, to approximately$106 for the three months ended June 30, 2024, and from approximately $1,386 forthe six months ended June 30, 2023, to approximately$125 for the six months ended June 30, 2024. The decrease was a result of lower invested balances as we realized short-term investments during 2023 in order to partially fund the acquisition of Medicx Health.

Previous wording

Income taxexpense was approximately $344, or an effective rate of 5.2%, for the three months ended March 31, 2024. For further information, see Part I, Item I. Financial Statements; Note 11 — Income Taxes in the Condensed Consolidated Financial Statements.

Current wording

Income taxbenefit was approximately $1,088, or an effective rate of 21.4%, and $744, or an effective rate of 6.4%for the three and six months ended June 30, 2024, respectively. For further information, see Part I, Item I. Financial Statements; Note 12 — Income Taxes in the Condensed Consolidated Financial Statements.

Previous wording

We had a net loss of approximately $6,899 for the three months ended March 31, 2024, as compared to a net loss of approximately $6,398 during the same period in 2023. The reasons and specific components associated with the change are discussed above.

Current wording

We had a net loss of approximately $4,008 for the three months ended June 30, 2024, as compared to a net loss of approximately $4,161 during the three months ended June 30, 2023 and approximately $10,908 for the six months ended June 30, 2024 as compared to $10,559 forthe six months ended June 30, 2023. The reasons and specific components associated with the change are discussed above.

Previous wording

Historically, our primary sources of liquidity have been cash receipts from customers and proceeds from equity offerings, in addition, during the year ended December 31, 2023, the Company entered into a Term loan of $40.0 million in order to partially fund the acquisition of Medicx Health. As of March 31, 2024, the total principal balance outstanding on the Term loan was approximately $37.8 million and we were in compliance with all of the financial covenants of the Term loan.

Current wording

Historically, our primary sources of liquidity have been cash receipts from customers and proceeds from equity offerings, in addition, during the year ended December 31, 2023, the Company entered into a Term loan of $40.0 million in order to partially fund the acquisition of Medicx Health. As of June 30, 2024, the total principal balance outstanding on the Term loan was approximately $37.3 million and we were in compliance with all of the financial covenants of the Term loan.

Previous wording

As of March 31, 2024, we had total current assets of approximately $48.4 million, compared with current liabilities of approximately $16.8 million, resulting in working capital of approximately $31.6 million and a current ratio of approximately 2.9 to 1. This represents a decrease from our working capital of approximately $36.4 million and an decrease from the current ratio of 3.0 to 1 at December 31, 2023. This decrease in our working capital is discussed in more detail below.

Current wording

As of June 30, 2024, we had total current assets of approximately $46.0 million, compared with current liabilities of approximately $15.0 million, resulting in working capital of approximately $31.0 million and a current ratio of approximately 3.1 to 1. This represents a decrease from our working capital of approximately $36.4 million, whilst maintaining the same current ratio at 3.0 to 1 when compared to December 31, 2023. This decrease in our working capital is discussed in more detail below.

Previous wording

Following is a table with summary data from the consolidated statements of cash flows for the three months ended March 31, 2024 and 2023, as presented (in thousands).

Current wording

Following is a table with summary data from the consolidated statements of cash flows for the six months ended June 30, 2024 and 2023, as presented (in thousands).

Previous wording

We generated approximately $2,118 from operating activities during the three months ended March 31, 2024, compared with $86 used in operating activities in the same period in 2023. We had a net loss of $6,899 for the first three months of 2024, which included non-cash expenses of $4,273. This was offset by cash generated by the collection of receivables.

Current wording

We generated approximately $2,900 from operating activities during the six months ended June 30, 2024, compared with $2,455 used in operating activities in the same period in 2023. We had a net loss of $10,908 for the first six months of 2024, which included non-cash expenses of $8,431. This was offset by cash generated by the collection of receivables.

Previous wording

Cash used by investing activities was approximately $153 for the three months ended March 31, 2024. We invested in internally developed software in the amount of $121 and spent $32 on property and equipment. Cash used in investing activities for the same period in the prior year was $1,550 as we made a net investment of $1,326 in treasury bills and invested $194 in internally developed software.

Current wording

Cash used by investing activities was approximately $238 for the six months ended June 30, 2024. We invested in internally developed software in the amount of $161 and spent $77 on property and equipment. Cash used in investing activities for the same period in the prior year was $1,674 as we made a net investment of $3,000 in treasury bills and invested $1,274 in internally developed software.

Previous wording

Cash used for financing activities was approximately $640, during the three months ended March 31, 2024. We used $140 to pay withholding taxes on behalf of employees vesting in restricted stock units and $500 was related to repayments on our Term loan. Cash used for financing activities for the same period in prior year was $131, primarily related to paying withholding taxes on behalf of employees vesting in restricted stock units.

Current wording

Cash used for financing activities was approximately $1,555, during the six months ended June 30, 2024. We used $555 to pay withholding taxes on behalf of employees vesting in restricted stock units and made repayments totaling $1,000 on our Term loan. Cash used for financing activities for the same period in prior year was $7,621, primarily related to the repurchase of 526,999 shares of our common stock for approximately $7,522. The remaining amount arose from paying withholding taxes on behalf of employees vesting in restricted stock units, partially offset by receipt of funds from the exercise of stock options.

Previous wording

We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”). The preparation of these financial statements requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the periods presented. Actual results could differ from those estimates and assumptions. Our significant accounting policies are described in Note 2 to the Consolidated Financial Statements in the Annual Report on Form 10-K for the year ended December 31, 2023 (2023 Annual Report on Form 10-K). The accounting policies we used in preparing these financial statements are substantially consistent with those we applied in our 2023 Annual Report on Form 10-K. Our critical accounting estimates are described in Management’s Discussion and Analysis included in the 2023 Annual Report on Form 10-K.

Current wording

We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”). The preparation of these financial statements requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the periods presented. Estimates and assumptions have been made in determining the allowance for credit losses, carrying value of assets, fair values assigned to acquired long-lived assets, depreciable and amortizable lives of tangible and intangible assets, the carrying value of liabilities, the valuation allowance for deferred tax assets, the timing of revenue recognition and related revenue-share expenses, and inputs used in the calculation of stock based compensation. Actual results could differ from those estimates and assumptions.

Previous wording

The Company has contracts with various electronic health records systems and ePrescribe platforms, whereby we agree to share a portion of the revenue we generate for eCoupons or banners through their network. From time to time the Company enters into arrangements with a partner to acquire minimum amounts of media, data or messaging capabilities. As of March 31, 2024, the Company had commitments for future minimum payments of approximately $22.6 million that will be reflected in cost of revenues during the remainder of 2024 and years 2025 through 2028.

Current wording

The Company has contracts with various electronic health records systems and ePrescribe platforms, whereby we agree to share a portion of the revenue we generate for eCoupons or banners through their network. From time to time, the Company enters into arrangements with a partner to acquire minimum amounts of media, data or messaging capabilities. As of June 30, 2024, the Company had commitments for future minimum payments of approximately $18.5 million that will be reflected in cost of revenues during the remainder of 2024 and years 2025 through 2028.