OptimizeRx Corp
For the period ended Sep 30, 2024. Filed Nov 14, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 14, 2024
OPRX$8.76+1.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-15.
0001213900-24-069700
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-14.
0001213900-24-098319
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 65 previous paragraphs and 70 current paragraphs.
39 unchanged; 26 reworded; 5 added; 0 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 11 previous and 11 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (5)
Current report
The Company recorded goodwill impairment in the amount of $7.5 million in the three months ended September 30, 2024. This amount represents the excess of the book value of the Company’s equity over the estimated fair value.
Current report
Goodwill
Current report
We evaluate goodwill for impairment during our fiscal fourth quarter, or more frequently if an event occurs or circumstances change.
Current report
The use of different assumptions, estimates, or judgments in the goodwill impairment testing process may significantly increase or decrease the estimated fair value of a reporting unit. Generally, changes in DCF estimates would have a similar effect on the estimated fair value of the reporting unit.
Current report
During the third quarter of 2024, the Company experienced sustained decreases in its stock price and market capitalization. Accordingly, the Company conducted a quantitative impairment test of its goodwill as of September 30, 2024. The Company estimated fair value by weighting the results from a market approach and an income approach. Significant assumptions inherent in the valuation methodologies included, but are not limited to, prospective financial information, discount rate, and comparable multiples from publicly traded companies in the same industry. The assessment resulted in a non-cash impairment charge of $7.5 million.
Reworded paragraphs (26)
Previous wording
Historically, our revenue was generated primarily through the facilitation of various types of messages to health care providers via their EHR systems and ERx platforms using the OptimizeRx proprietary network to solve the ever-increasing communication barriers between pharmaceutical representatives and healthcare providers that have presented in the rapidly changing healthcare industry. Over time, the demand for different types of communication and marketing solutions among life sciences organizations, healthcare providers, and patients led us toexpand upon our initial solutions to increase the variety of health-related information we deliver, as well as the platforms, technology, media distribution channels, and audiences through and to which we deliver. In addition, the October 2023 acquisition of Medicx Health provided the Company with a significant footprint for direct-to-consumer healthcare marketing. Today, we offer diverse tech-enabled marketing solutions through our AI-generated DAAP, using sophisticated machine-learning algorithms to find the best audiences in the correct channels at the right time. Customers are able to execute traditional marketing campaigns on our proprietary digital point-of-care network, as well as dynamic marketing campaigns that optimize audiences in real time to increase the value of treatment information for healthcare professionals and patients in response to clinical care events. We employ a “land and expand” strategy focused on growing our existing client base and generating greater and more consistent revenues in part through the continued shift in our business model toward enterprise level engagements, while also broadening our omnichannel network. Our strategy for driving revenue growth is also expected to work in tandem with our efforts to increase margin and profitability as revenue drivers such as DAAP have inherently higher margins than most other messaging solutions we offer.
Current wording
Historically, our revenue was generated primarily through the facilitation of various types of messages to health care providers via their EHR systems and ERx platforms using the OptimizeRx proprietary network to solve the ever-increasing communication barriers between pharmaceutical representatives and healthcare providers that have presented in the rapidly changing healthcare industry. Over time, the demand for different types of communication and marketing solutions among life sciences organizations, healthcare providers, and patients led us to expand upon our initial solutions to increase the variety of health-related information we deliver, as well as the platforms, technology, media distribution channels, and audiences through and to which we deliver. In addition, the October 2023 acquisition of Medicx Health provided the Company with a significant footprint for direct-to-consumer healthcare marketing. Today, we offer diverse tech-enabled marketing solutions through our AI-generated DAAP, using sophisticated machine-learning algorithms to find the best audiences in the correct channels at the right time. Customers are able to execute traditional marketing campaigns on our proprietary digital point-of-care network, as well as dynamic marketing campaigns that optimize audiences in real time to increase the value of treatment information for healthcare professionals and patients in response to clinical care events. We employ a “land and expand” strategy focused on growing our existing client base and generating greater and more consistent revenues in part through the continued shift in our business model toward enterprise level engagements, while also broadening our omnichannel network. Our strategy for driving revenue growth is also expected to work in tandem with our efforts to increase margin and profitability as revenue drivers such as DAAP have inherently higher margins than most other messaging solutions we offer.
Previous wording
Unfavorable conditions in the economy may negatively affect the growth of our business and our results of operations. For example, macroeconomic events including rising inflation and high interest rates have led to economic uncertainty. In addition, high levels of employee turnover across the pharmaceutical industry as well as a fewer number of U.S. drug approvals could create additional uncertainty within our target customer markets. Historically, during periods of economic uncertainty and downturns, businesses may slow spending, which may impact our business and our customers’ businesses. Adverse changes in demand could impact our business, collection of accounts receivable and our expected cash flow generation, which may adversely impact our financial condition and results of operations.
Current wording
Unfavorable conditions in the economy may negatively affect the growth of our business and our results of operations. For example, macroeconomic events including volatility of inflation and interest rates have led to economic uncertainty. In addition, high levels of employee turnover across the pharmaceutical industry as well as a fewer number of U.S. drug approvals could create additional uncertainty within our target customer markets. Historically, during periods of economic uncertainty and downturns, businesses may slow spending, which may impact our business and our customers’ businesses. Adverse changes in demand could impact our business, collection of accounts receivable and our expected cash flow generation, which may adversely impact our financial condition and results of operations.
Previous wording
Net revenue retention. Net revenue retention is a comparison of revenue generated from all customers in the previous twelve-month period to total revenue generated from the same customers in the following twelve-month period (i.e., excludes new customer relationships for the most recent twelve-month period). The Company uses this metric to monitor its ability to improve its penetration with existing customers and believes it also provides investors with a metric to chart our ability to increase our year-over-year penetration and revenue with existing customers. The retention rate in the twelve months ended June 30, 2024 was higher due to stronger DAAP related revenue and the acquisition of Medicx Health in the fourth quarter of 2023.
Current wording
Net revenue retention. Net revenue retention is a comparison of revenue generated from all customers in the previous twelve-month period to total revenue generated from the same customers in the following twelve-month period (i.e., excludes new customer relationships for the most recent twelve-month period). The Company uses this metric to monitor its ability to improve its penetration with existing customers and believes it also provides investors with a metric to chart our ability to increase our year-over-year penetration and revenue with existing customers. The retention rate in the twelve months ended September 30, 2024 was higher due to increased adoption of DAAP year over year as well as the acquisition of Medicx Health in the fourth quarter of 2023.
Previous wording
Results of Operations for the Three and Six Months Ended June 30, 2024 and 2023
Current wording
Results of Operations for the Three and Nine Months Ended September 30, 2024 and 2023
Previous 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.
Current wording
Net revenue reported for the three months ended September 30, 2024 was approximately $21,309, an increase of approximately 30% over the approximately $16,331 from the same period in 2023. Our net revenue reported for the nine months ended September 30, 2024 was approximately $59,811, an increase of approximately 39% over the approximately $43,153 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. The increases in the three and nine months ended September 30, 2024 were partially offset by a reduction of approximately $1,088 and $4,169, 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
Net revenues of $22,408 and $43,439, as shown in the pro forma financial consolidated statement of operations data table in Note 1 above, includes $1,213 and $3,080 related to the Access and other non-core solutions revenues for the three and six months ended June 30, 2023, compared to $18,812 and $38,502 for the three and six months ended June 30, 2024, for which no Access or other non-core solutions revenue was recorded.
Current wording
Net revenues of $23,852 and $68,603, as shown in the pro forma financial consolidated statement of operations data table in Note 1 above, includes $1,088 and $4,169 related to the Access and other non-core solutions revenues for the three and nine months ended September 30, 2023, compared to $21,309 and $59,811 for the three and nine months ended September 30, 2024, for which no Access or other non-core solutions revenue was recorded.
Previous 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.
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 $7,862 or 36.9% of net revenues for the three months ended September 30, 2024 compared to $6,531 or 40.0% of net revenues for the three months ended September 30, 2023 and was approximately $22,456 or 38% of net revenues for the nine months ended September 30, 2024, compared to $18,094 or 42% of net revenues for the nine months ended September 30, 2023.
Previous wording
Our gross margin, which is the difference between our revenues and our cost of revenues, was approximately $11,704 or 62.2% of net revenues for the three months ended June 30, 2024 compared to $5,993 or 56.6% of net revenues for the three months ended June 30, 2023 and was approximately $14,595 or 38% of net revenues for six months ended June 30, 2024 compared to $11,563 or 43% of net revenues for the six months ended June 30, 2023.
Current wording
Our gross margin, which is the difference between our revenues and our cost of revenues, was approximately $13,447 or 63.1% of net revenues for the three months ended September 30, 2024 compared to $9,800 or 60.0% of net revenues for the three months ended September 30, 2023 and was approximately $37,355 or 62.5% of net revenues for the nine months ended September 30, 2024 compared to $25,059 or 58.1% of net revenues for the nine months ended September 30, 2023.
Previous 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.
Current wording
We had higher third quarter revenues compared to the same year ago period due to the fourth quarter 2023 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 Medicx Audience Activation (“MAA”), and using more cost-effective channel partnerships.
Previous 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).
Current wording
Operating expenses increased to approximately $22,009 for the three months ended September 30, 2024 from approximately $13,353 for the same period in 2023, an increase of approximately 65%. For the nine months ended September 30, 2024 operating expenses were approximately $54,695 compared to approximately $40,557 for the nine months ended September 30, 2023, an increase of 35%. The detail by major category is reflected in the table below (in thousands).
Previous 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.
Current wording
Stock-based compensation decreased from approximately $3,206 for the three months ended September 30, 2023, to approximately $2,604 for the three months ended September 30, 2024, and decreased from approximately $11,090 for the nine months ended September 30, 2023, to approximately $8,530 for the nine months ended September 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 $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.
Current wording
Depreciation and amortization increased from approximately $467 for the three months ended September 30, 2023, to approximately $1,095 for the three months ended September 30, 2024, and increased from approximately $1,395 for the nine months ended September 30, 2023, to approximately $3,235 for the nine months ended September 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 $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.
Current wording
Other general and administrative expenses increased from approximately $9,680 for the three months ended September 30, 2023 to approximately $10,821 for the three months ended September 30, 2024, and increased from approximately $28,072 for the nine months ended September 30, 2023, to approximately $35,441 for the nine months ended September 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, increasing salary, bonus, and commission expense. There was also an increase in contractors and consultants.
Previous 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.
Current wording
Interest expense was approximately $1,524 and $4,597 for the three and nine months ended September 30, 2024 and represents 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
Other income was$75 for the three and six months ended June 30, 2024 andrepresents a reduction in the estimated amount due as a result of a supplier related payment contingency.
Current wording
Other income was $38 and $113 for the three and nine months ended September 30, 2024 and represents a reduction in the estimated amount due as a result of a supplier related payment contingency.
Previous 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.
Current wording
Interest income decreased from approximately $688 for the three months ended September 30, 2023, to approximately $107 for the three months ended September 30, 2024, and from approximately $2,074 for the nine months ended September 30, 2023, to approximately $231 for the nine months ended September 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 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.
Current wording
Income tax benefit was approximately $817, or an effective rate of 8.2%, and $1,561, or an effective rate of 7.2% for the three and nine months ended September 30, 2024, respectively. For further information, see Part I, Item I. Financial Statements; Note 13 — Income Taxes in the Condensed Consolidated Financial Statements.
Previous 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.
Current wording
We had a net loss of approximately $9,124 for the three months ended September 30, 2024, as compared to a net loss of approximately $2,865 during the three months ended September 30, 2023 and approximately $20,032 for the nine months ended September 30, 2024 as compared to $13,424 for the nine months ended September 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 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.
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 September 30, 2024, the total principal balance outstanding on the Term loan was approximately $36.8 million and we were in compliance with all of the financial covenants of the Term loan.
Previous 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.
Current wording
As of September 30, 2024, we had total current assets of approximately $46.9 million, compared with current liabilities of approximately $14.5 million, resulting in working capital of approximately $32.4 million and a current ratio of approximately 3.2 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 six months ended June 30, 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 nine months ended September 30, 2024 and 2023, as presented (in thousands).
Previous 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.
Current wording
We generated approximately $4,691 from operating activities during the nine months ended September 30, 2024, compared with $982 used in operating activities in the same period in 2023. We had a net loss of $20,032 for the first nine months of 2024, which included non-cash expenses of $18,176. This was offset by cash generated through improved working capital management.
Previous 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.
Current wording
Cash used by investing activities was approximately $330 for the nine months ended September 30, 2024. We invested in internally developed software in the amount of $235 and spent $95 on property and equipment. Cash provided by investing activities for the same period in the prior year was $664 as we made a net investment of $2,311 in treasury bills and invested $1,561 in internally developed software.
Previous 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.
Current wording
Cash used for financing activities was approximately $2,087, during the nine months ended September 30, 2024. We used $587 to pay withholding taxes on behalf of employees vesting in restricted stock units and made repayments totaling $1,500 on our Term loan. Cash used for financing activities for the same period in prior year was $7,969, 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 the 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. 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.
Current wording
We prepare our condensed 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 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.
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 September 30, 2024, the Company had commitments for future minimum payments of approximately $16.7 million that will be reflected in cost of revenues during the remainder of 2024 and years 2025 through 2028.