Earnings Call Transcript - OPRX Q4 2022

Operator, Operator

Good afternoon everyone and thank you for joining OptimizeRx’s Fourth Quarter Fiscal 2022 Earnings Discussion. With us today is the Chief Executive Officer of OptimizeRx, Will Febbo. He is joined by company Chief Financial and Operating Officer, Ed Stelmakh; Chief Commercial Officer, Steve Silvestro; General Counsel and Chief Compliance Officer, Marion Odence-Ford; and Senior Vice President of Corporate Finance, Andrew D’Silva. At the conclusion of today’s earnings call, I will provide some important cautions regarding the forward-looking statements made by management during today’s call. I would like to remind everyone that today’s call is being recorded and will be made available for replay via webcast-only. Instructions are included in today’s press release and in the Investors section of the company’s website. In addition, management will discuss certain non-GAAP financial measures today that they believe aid in the understanding of the company's financial results. A reconciliation to comparable GAAP financial measures can be found in today's press release. Now, with that, I’d like to turn the call over to OptimizeRx CEO, William Febbo. Sir, please go ahead.

Will Febbo, CEO

Thank you, operator. Good afternoon everyone and thank you for joining us today for our fiscal 2022 earnings call. 2022 has been a year of great challenges and new opportunities for much of our industry and OptimizeRx. During the year, we saw an enormous amount of market volatility, temporary headwinds, and a consolidation within our sector. While headwinds impacted our topline results, we also saw the resilience of our business and its ability to continue to maintain strong financial footing as the pharmaceutical industry continued to accelerate its digital evolution. This created unprecedented interest in our company from clients, partners, and multiple strategic parties, aligning with the opportunity and OptimizeRx's platform. I believe this is directly correlated to the tectonic shift in the adoption towards the use of digital health technologies by clients, doctors, and patients. 2022's revenue of $62.5 million fell within our revenue guidance range. Our gross margin of 62.4% surpassed the high end of our guidance, and we were able to generate nearly $11 million in operating cash flow during the year. Ed will go into more of the financial details shortly, but I maintain we are well-positioned for growth given the health of the business, the team, and the limited number of players who can scale, measure and report in our industry. More importantly, despite the macro headwinds that we've outlined in previous calls, we were still able to win six deals that utilize our AI-driven Real-World data or RWD-AI offering. We expect to have additional RWD-AI wins this year and continue to believe revenue from this solution will increase at least 100% year-over-year and approach 20% of our total revenue in 2023. As a result, we are favorably positioned to see revenue growth and are looking for our topline in 2023 to increase at least 10%, which should also drive improvements to our KPIs by year's end. While we are optimistic that the macro headwinds will begin to subside this year, then there have been positive trends since the mid-2022 trough, we are taking a more conservative approach to guidance this year given the macroeconomic backdrop despite having a higher revenue backlog at the start of the year as compared to previous years. Operationally, our technology investments, partnerships, and small tuck-in acquisitions have created a robust single-stop omnichannel offering that's driving a superior ROI for the brands that we serve. We've also made tremendous progress in building on our industry reputation and expanding awareness of our solutions. Part of what makes our business model special is the fact that we continue to manage the largest in workflow point of care network in the US and are able to deliver digital solutions via this connectivity to prescribers. To complement this, we have been expanding service offerings outside of the EHR, which we believe will result in us capturing a greater portion of the available industry white space over the next three to five years. With total industry digital spend at more than $10 billion and growing, the white space in which we sell into remains fast, even for the brands with which we are currently working. From a competitive intelligence perspective, we are well aware of new entrants. And what we have witnessed has been brand managers being willing to test out the functionality of new vendors. While this did create a longer sales cycle in 2022, the end result is that after a short trial period, new entrants are being quickly weeded out from the ecosystem in which we compete. Initial solution evaluations of new entrants have been less than stellar due to offerings lacking meaningful connectivity and interoperability, which is really the foundation of our platform and enables us to address fundamental prescription issues facing HCPs and patients. As market demands continue to grow in complexity, along with continuous adoption of point-of-care solutions, coupled with actionable insights, our investment priorities shifted to provide our clients with enhanced reporting capabilities as supported by a recently established exclusive partnership with MMSI, an industry-leading data-enabled agency. Meanwhile, pharma is moving a greater portion of their commercial spend toward omnichannel digital solutions. While looking for these solutions to deliver more impactful results by not only identifying patients known to HCPs, but also pinpointing new patients for the therapies. We believe smarter solutions, such as our RWD-AI offering, will capture the lion's share of the pharma spend, particularly with legacy commercial dollars that are reallocated to digital. We believe early proof of this trend is clearly highlighted by our ability to win six RWD-AI deals during the time when pharma was tightening its purse strings to preserve their year-end bottom line. RWD-AI has the added benefit of moving us from being a tactical player with pharma to a bigger strategic partner where we can benefit from a top-down push by decision-makers while obtaining stickier revenue streams with stronger margins and a greater overall growth potential. That is why I've never been more excited about our strategic positioning than I am today. I expect the combined impact of what I've outlined today to pay significant dividends over the next three to five years and result in our revenue increasing to multiples of where it currently sits. For now, we are following through with our land-and-expand strategy. We continue to benefit from our delivery of superior return on investment, which continues to stand at well over a ratio of 10:1. This is significant considering pharma has traditionally sought ROIs of the two to three times spend. With that, I'd like to turn the call over to our CFO and COO, Ed Stelmakh, who will walk us through the financial details for Q4.

Ed Stelmakh, CFO and COO

Thanks Will and good afternoon everyone. As with all our calls, the press release was issued with the results of our fourth quarter ended December 31st, 2022. A copy is available for viewing and may be downloaded from the Investor Relations section of our website, and additional information can be obtained to our forthcoming 10-K, which will be filed in the coming days. Turning to our financial results for the fourth quarter ended December 31st, 2022. Our reported revenue for the period was $19.7 million, a decrease of 3% from the $20.3 million we recognized during the same period in 2021 as pharma tightened its purse strings around end-of-year biopsies. Gross margin for the quarter increased from 61% in the year-ago period to 63% in the current reporting period. The gross margin increase is the result of a favorable solution and channel partner mix. We continue to expect solid gross margins in 2023 and our guidance calls for our full-year 2023 gross margin coming between 58% and 62%. Operating expenses increased to approximately $13.3 million in the fourth quarter of fiscal year 2022 as compared to approximately $11.8 million in the same year-ago period. This increase in expense is primarily due to the investment in the OptimizeRx team to enable future growth, which also includes our April acquisition of EvinceMed. Providing more color around our year-over-year increase of OpEx, $1.4 million of the $1.5 million year-over-year increase was tied to stock-based compensation and non-cash expense, with the remaining amount being primarily related to the EvinceMed acquisition. We had a net loss of $325,000 in the fourth quarter of fiscal 2022 as compared to a net income of approximately $623,000 during the same period in 2021. For further details on our fiscal 2022 results, you can refer to the MD&A section of our upcoming 10-K. On a non-GAAP basis, net income for the fourth quarter of 2022 was approximately $4.4 million or $0.25 per fully diluted share as compared to a non-GAAP net income of approximately $4 million or $0.22 on a fully diluted basis in the same year-ago period. We also generated $10.7 million in cash flow from operations during 2022 and $2.8 million during the fourth quarter. Our balance sheet remains strong with cash, cash equivalents, and short-term investments totaling $74.1 million as of December 31st, 2022, as compared to $78.8 million as of September 30th, 2022. The sequential decline in our cash, cash equivalents, and short-term investments was tied to our buyback. As a reminder, we announced a $20 million share repurchase program during the second quarter and during the fourth quarter, we bought back 508,000 shares for $7.5 million at an average price of $14.68. In total, we repurchased 1.2 million shares at an average price of $16.49 per share. This amounts to a nearly 7% reduction in our total outstanding shares from 18.3 million to 17.1 million, a net positive for our shareholders. In terms of our revenue outlook for the full year of 2023, the company expects revenue to increase at least 10% year-over-year and we expect first quarter revenue to come in between $11.5 million and $13 million. Now, let's turn to our KPIs for 2022. Our average revenue for top 20 pharmaceutical manufacturer declined year-over-year by nearly 14% to $2.1 million as a result of extended deal closing timelines as well as the higher turnover rates and pharma decision-maker ranks in the post-pandemic world. Our adoption within the most meaningful pool of global commercial pharma remains strong with 18 of the top 20 pharma companies continuing to be our clients. Net revenue retention rate also declined to 90% due to the macroeconomic factors already mentioned and the resulting impact on several client programs. Our operating model has remained resilient in the face of 2022 challenges with the revenue per FTE coming in at $606,000. Our KPIs continue to capture and communicate the results of OPRX's land-and-expand strategy in a consistently transparent manner. We intend to continue to report our progress to our stakeholders in a similar fashion in 2023. And now with that, I would like to turn the call back over to Will.

Will Febbo, CEO

Thanks Ed. Operator, now let's move to Q&A.

Operator, Operator

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Your first question comes from Ryan Daniels with William Blair. Please go ahead.

Ryan Daniels, Analyst

Thank you for taking the questions. Ed, I'll start with a question for you regarding the revenue outlook. Based on the Q1 guidance and the full year, it appears you anticipate a decline in revenue of about 11% year-over-year in Q1, but you're still aiming for 10% year-over-year growth. Could you elaborate on the revenue trends throughout the year and the expected ramp-up? Additionally, how confident are you in achieving that over 10% growth considering the slower start to the year? Any comments on backlog or visibility that can help us gauge this would be appreciated. Thank you.

Ed Stelmakh, CFO and COO

Yes, thanks Ryan. Great question. So, as far as the cadence of concerns, as you know, the vast majority of our revenue comes in, in the second half of the year. So, yes, Q1 is definitely a little bit weaker than we had hoped for. But we're coming out of the RFP season with a backlog that's stronger than we had in the past, as Will had mentioned. So, our plan and our desire right now is to really continue to build on their backlog. We do have a line of sight to opportunities that we feel will get us to at least 10% growth rate this year, but it will definitely see more towards the back end of the year.

Ryan Daniels, Analyst

How much of that 10% growth is kind of already contracted or in the backlog versus something you have to go out and win such that there could be volatility on the market on a macro basis worsens. I'm just trying to get a view for how much is really contracted.

Ed Stelmakh, CFO and COO

Yes. So, we don't disclose specific numbers. Typically, where we sit every year and looking forward in Q1 every year is between, I would call it, between 40% and 60% range of line of sight for the rest of the year. So, somewhere within that range is our line of sight for 10% growth rate going into this year.

Ryan Daniels, Analyst

Okay. Thank you. And then on the KPIs, I know as one of the partners dropped out, is that an actual lost partnership or is it just the timing where there's still a partner, but they weren't actively engaged during the period, but could be on a go forward basis?

Ed Stelmakh, CFO and COO

Yes, we had one client not really drop out, but it's a part of normal churn within the smaller portfolios of certain clients. So, we had one client that was generating a small amount of revenue that's just part of the normal cycle. Sometimes clients will come in, sometimes they will come out, but there's no real drop in of our services and solutions within any declines.

Ryan Daniels, Analyst

Okay. That's what I thought. And maybe a macro question for Will. Just what do you see in the market in regards to pharma's view on engaging providers at the point-of-care, you know, with digital solutions. You mentioned the 10:1 ROI. I know pharma's shrinking their own sales force, but what's the view broadly on care marketing?

Will Febbo, CEO

Hey Ryan. Thanks for the questions. Whenever you start to see people use the term legal review MLR in pharma services or marketing, that means that whatever you are selling is being taken very seriously. It just means the infrastructure within pharma. And I think you've heard it from other companies as well that that can sometimes delay sales cycle or launch. But I would say that is a very positive sign. That's one. Two, there's just been so much awareness built over the last 18 months, a lot of piloting, a lot of trying and pharma is very good at getting to the companies that can scale and leading in heavy there. So, just based on the conversations we have, based on the relationships we have, the trust we've built, well, yes, we said it got cluttered for the last 18 months post-COVID. That clutter is going to start to fade away because if you can't report, scale, and do it with the type of team that delivers it in a way that is at par excellence for pharma, you just won't be at the table. So, I would say, net-net, those conversations are all going really well, and anything we've done at that table to-date has performed and they're back with us for more. So, net-net, good macro still have the headwinds internally, their turnover is slowing, FDA is still getting back on their feet, and obviously, the macro world we're still dealing with interest rate hikes.

Ryan Daniels, Analyst

Yes. And then final question. You mentioned the competitive front increasing and elongating the vision cycle. I'm curious if there was any specific product you offer a solution that was impacted? And then as a follow-up, if we think of your 10:1 ROI, have you heard anything anecdotally about the competitive environment and what they've been able to produce, it sounds like perhaps they haven't been able to validate that level of savings so that that could flip back to you in the future? I don't know if that's a fair statement, but love to hear on those two. Thanks.

Will Febbo, CEO

Thank you, Ryan. In terms of competition, most players, aside from those we've mentioned, are connecting in various limited ways and lack the comprehensive network we offer. Their relationships tend to be indirect, which hampers their ability to measure effectively, as going through intermediaries can lead to data loss or gaps. We've noticed this dynamic. It's important to note that the pharmaceutical sector relies heavily on agencies, which are constantly seeking new solutions. Over the past 18 months, many options have emerged, and they are eager to experiment with them. While the market was quite competitive last year and is still evolving, we see a clear opportunity to establish ourselves as a unique data source, especially with our integration of RWD-AI, something none of our competitors can replicate. The response from clients has been incredibly positive, which I believe will enhance our ROI. Companies with scale, including those you cover, typically achieve a solid ROI and can measure it effectively. However, our integrated approach makes it much simpler for us to do the same.

Ryan Daniels, Analyst

Okay. Perfect. Thank you for the comments.

Will Febbo, CEO

Thanks Ryan.

Operator, Operator

Your next question comes from Sean Dodge with RBC Capital Markets. Please go ahead.

Sean Dodge, Analyst

Thank you. Good afternoon. Referring back to the guidance, could you clarify the statements from the Q3 call? You mentioned then that you were focusing on the RWE opportunity to achieve over 20% growth in 2023. Now, it seems you are executing that strategy but are guiding for less than 20%. Is this difference due to the conservatism you spoke about? Is it related to the ongoing challenging macro environment, or are there factors like cannibalization or attrition that are impacting the positive developments in the RWE area?

Will Febbo, CEO

Yes. No, it's mostly conservatism. We report late enough that we can listen to enough other executives and across the board, people are being conservative. And I think that's why it's in the macro economy we have. And also, as we said, the headwinds aren't completely gone, right? So, you put the two together and I think it's a lot better to be conservative and work real hard to exceed, and that's our goal.

Sean Dodge, Analyst

Okay. And then the comments you made about the RWE pipeline, you said now contains several dozen deals. Can you give us a sense of maybe what that pipeline looked like this time last year? And then those several dozen opportunities, are these largely existing clients looking to upgrade to RWE or are these, I guess, net new prospects?

Will Febbo, CEO

Yes, I'll start, and then I'll let Steve answer as well. But just remember, we didn't have a pipeline this time last year. So, we had done two projects in 2020. We were measuring in 2021 largely and had those players come back and then generated another four. And this pipeline we talk about is all either existing clients getting into the ROI or new clients doing RWD-AI. But Steve, do you want to give a little bit more color to that?

Steve Silvestro, CCO

Yes, happy to. Hey Sean. I think one of the things that's driving this for us is, we've got a really solid team of clinicians, people who've got clinical experience and have practice, two of which are MDs that are driving the patient architecture. So, that's a really unique differentiator. And so these are people that are involved with existing clients. So, most of this work is being done in the top 20 and so they're taking work that we're doing and then adding on to it. So, it is enhancing the land-and-expand strategy that we implemented early on and driving it. So, same sort of logos on the clients, maybe some different brands, but much larger opportunities and no cannibalization, right? This is completely additive to the portfolio solutions that are already implemented.

Sean Dodge, Analyst

Okay, that’s great. And then just last one, maybe for Ed. The RWE deals you've signed and I presume we're in the process of implementing now, was there any revenue associated with those, maybe like architecture fees that were captured in Q4 or is all of this kind of net new or incremental beginning in Q1 of 2023?

Ed Stelmakh, CFO and COO

Yes. So, there was some revenue from architecture and design that fell into Q4 but again, there were six projects that are signed. So, it wasn't all captured before, so there's more that will get converted within this year.

Sean Dodge, Analyst

Okay, great. Thanks again.

Will Febbo, CEO

Thanks Sean.

Operator, Operator

Your next question comes from Stephanie Davis with SVB. Please go ahead.

Stephanie Davis, Analyst

Hey guys. Thank you for taking my question. Will, last quarter, you pointed to a 20% revenue growth fueled by that RWD-AI wins alone. So, obviously, we're a little surprised by the 2023 outlook. So, talk to me about the drivers of this implied kind of decline in the quarter, is that client attrition? Is that pricing and market wallet shrinkage, or is that something else? And you called out a conservative approach to the guidance. Can we kind of just walk through what you faked in assumptions-wise?

Will Febbo, CEO

Sure, Stephanie. It's great to hear from you. In Q3, we indicated that we could achieve up to 20% growth if conditions were favorable. However, we've encountered ongoing challenges that we've previously discussed, and others are experiencing similar issues. This situation leads us to adopt a more cautious outlook. We're not losing clients; instead, we're securing new deals with improved solutions, which enhance our strategic relationships with clients. While clients are taking more time to make decisions, those decisions are likely to be more significant, and we find ourselves among a select few contenders. I view our position as that of a younger brother who is more agile and perhaps quicker. This perspective seems accurate when considering insights from my interactions with clients and peers. Our clients still face difficulties, particularly in connecting with healthcare professionals and facilitating patient support programs, and we have the capabilities to address those challenges. We are approaching this conservatively, aiming to end the year positively, and we are confident in our ability to do so.

Stephanie Davis, Analyst

All right. Understood. Let me put this a different way. You did a massive buyback ahead of this guidance. Should we read that as a more hopeful view on the macro than what's implied in the guidance or is there something else we should consider in that move?

Will Febbo, CEO

Yes, we not only executed a buyback with the company’s funds, but the senior team also participated in a buyback. This demonstrates our commitment to the business. It’s important to note that everyone has choices in this market, given the current unemployment rates and the demand for strong leadership in new solutions. We’ve experienced no turnover in our company. This doesn't imply that everyone is leaving or sharing their plans with us, but it does signify that we have a strong level of conviction and are making informed decisions in a market that necessitates caution. We will focus on our growth drivers throughout the year and keep everyone informed. That is what investors should watch for. You will see growth in other solutions as we gain traction in assisting different client sets, and we are in no financial distress at all, generating cash in this size business. In fact, when you look at my peers, none are in a similar position. We feel confident about our circumstances.

Stephanie Davis, Analyst

All good. Thanks. Appreciate it.

Will Febbo, CEO

Yes, talk to you soon.

Operator, Operator

Your next question comes from David Grossman with Stifel. Please go ahead.

David Grossman, Analyst

Good afternoon and thank you very much. So, I think this has been coming out a few other questions. So, sorry just to revisit this. But I was hoping maybe just to get a better sense of just the architecture of 2023, and it's just not financially, but I'm thinking fundamentally as well. It looks like with your retention rate being down this year. I guess the first question is fundamentally just helping us better understand what the underlying dynamic was? And sorry if you covered this in one of the other questions, but I didn't quite get it, in terms of why there was such a big drop in retention, what were the underlying drivers? And then as you kind of roll that forward, if you apply that to your base, it looks like you got to add about $15 million or so to hit your revenue guide for at least 10%. And how do you want us to think about how much of that would fall in kind of to the ordinary cadence of the business in terms of new bookings and fees that you're going to get from architecture fees from the RWD-AI deals that you've already signed, et cetera.

Will Febbo, CEO

Okay. A couple of questions in there. Ed, do you want to tackle the retention one first.

Ed Stelmakh, CFO and COO

Yes. Yes, that's a great question, David. The key performance indicators are based on the previous 12 months. Given the challenging year in 2022, we are now reflecting the full impact of that compared to 2021, which was a strong year. This year-over-year comparison is affected by that situation. As 2023 improves, we expect to see a positive effect on those metrics and a recovery in that area.

David Grossman, Analyst

Ed, before I move on to the next question, how much of the retention was influenced by events from earlier in the year compared to the latter half? I'm curious if you've considered this, especially since you experienced some losses at the start of the year. Did your perspective on that number change as you thought about next year throughout 2021?

Ed Stelmakh, CFO and COO

Yes, I don't know if we really kind of get to that level of detail in terms of the underlying good quarters. I mean there were several dynamics that occurred last year that we already disclosed. It was probably just a confluence of all those factors that played a role in driving revenues down within that top 20 pool of clients. We did grow, as you can see, outside of the pool to some degree. But since that metric hits the top 20, you’ll see the bulk of that decline driven within that portfolio of clients.

Will Febbo, CEO

Yes, David. To address the second part of your question about the nature of the additional revenue for growth this year, RWD-AI will certainly contribute to that growth. However, we also have projects from last year that were moved into this year, which will factor into the revenue as well and are already in progress. Additionally, due to the unique qualities of RWD-AI, we implemented some strong marketing strategies targeted at pharmaceutical agencies and direct-to-pharma. We are observing a significant increase in our pipeline. While we don't disclose the specifics, we didn't have a pipeline last year, which gives us more confidence this year in closing deals related to this offering, as we now have measurable metrics to support it. It's not just a new concept; it's integrated into our available tools now. Combining these factors should help us achieve the additional revenue needed for at least 10% growth.

David Grossman, Analyst

Got it. And just one last question. I can't remember if you provided this information, but could you give a qualitative view on whether there are any year-over-year patents or drugs coming off patent that might affect your business, either positively or negatively?

Will Febbo, CEO

This year, we don't have any significant issues affecting our revenue. Steve, do you have any additional comments on this? It's not a challenge for us this year.

Steve Silvestro, CCO

Yes, nothing this year to impact us negatively on current programs at all, a couple next year, but they're sort of latter part of next year and not larger programs. And we're expecting several launches that will be more significant than the patent expiry. So, great question, something we're always looking at.

David Grossman, Analyst

Great. All right, guys. Thanks very much, good luck.

Will Febbo, CEO

Thank you.

Operator, Operator

Your next question comes from Neil Chatterji with B. Riley. Please go ahead.

Neil Chatterji, Analyst

Hi everyone, good afternoon and thank you for your questions. I know you’ve addressed many inquiries about the guidance, but I have one more. As we consider the timing of potential additional RWE deals, should we expect them more in the first half or the second half? Can you provide any insights on your expectations for this and how it factors into the guidance? Could this lead to some acceleration in topline growth or perhaps some upside in the latter half of the year?

Will Febbo, CEO

Yes, I'll start and then I'll pass it to Steve. But the good news on the growth is it's not overdependent on that either, right? We're not going all in on something that's new and obviously showing traction. So, there's some potential upside there from my view. But Steve, do you want to talk to the sort of the cadence of it through the year.

Steve Silvestro, CCO

Yes, happy to. As you've heard from Will and Ed, the pipeline is pretty robust for this particular portion of our portfolio. And so the sooner we close these deals, the quicker we can recognize the architecture. So, the component is architecture first and the messaging driven by the model. So, the sooner they launch, the more revenue that we can recognize. In terms of clocking of the deals, I think the first half will look pretty good in terms of closing out some additional RWE deals. And you've heard from that, we already have six live. So, those will continue to generate revenue throughout the remainder of the year. And of course, because they're being driven by the models, the messaging will be more frequent higher volume, but more targeted. So, hopefully, that gives you a little bit more insight of two components.

Neil Chatterji, Analyst

Got it. That’s helpful. I was just curious if you could give us an update on the overall platform's capacity at this time.

Will Febbo, CEO

Yes, no problem. We've spent the last five or six years developing our channel to target the physician healthcare providers that pharmaceutical companies find most challenging to reach, especially those that deal with specialty medications, which can be complicated and costly for patients. We've made significant progress in accessing that market. Currently, our capacity far exceeds our utilization, which is below 30%. The positive aspect is that this year focuses on commercial execution without the need to rely heavily on any single partner. While we will consider bringing on additional partners, their impact is expected to be less dramatic than in previous years. Additionally, we're broadening our attention to other channels. We're adopting an omnichannel approach to engage with physicians not just at point-of-care but also via social platforms and other locations where we can monitor and measure engagement. Overall, we're operating at under 30% capacity in terms of utilization, and we have many new channels in our omnichannel strategy launching this year.

Neil Chatterji, Analyst

Great. And then maybe just one last one here for me. Maybe if you can just kind of give us a sense of how you're thinking or how you expect marketing and digital spend to kind of trend here in the year with the COVID headwinds kind of in our rearview mostly?

Will Febbo, CEO

Yes, Steve, do you want to talk to that one?

Steve Silvestro, CCO

Yes, happy to. Thanks. Good question Neil. So, look, I think that everybody across the board manufacturing university is leaning into more digital spend. I think we've seen a ratcheting back of field force investment. Most of those announcements have started to hit or will hit. I'm sure you guys have been tracking them. As Will said, the environment of digital spend is a little bit more cluttered this year, meaning 2022, coming into 2023 than it has been in years past. I think that's largely because everyone saw it is such an attractive space. We had a lot of sort of small new entrants jumping in trying to get on board. The good news for OptimizeRx and other sort of established players is that those reporting requirements are now hitting. And so the programs that are not delivering are getting turned off in these smaller competitors. And so that's, I think, good news for the stable companies like OptimizeRx and others. And then I think in terms of leaning into this general point-of-care, I think it's expanding a lot more in terms of what point-of-care the definition is. We see now more companies leaning into following the doctor, which is not just in the EHR, but as Will as said, and you heard Ed say as well, giving the doctor the information that they need, where they are, wherever they are. And so that omnichannel play is something that every manufacturer is focused on. You'll probably hear the phrase next best action used pretty frequently. And that really is a module that's looking at where manufacturers should communicate with the physician as a next action and it's data-driven. We're in a really good place in terms of that because right now, we're the only business that's got the ability to use an RWD-AI model at the point-of-care that's integrated to drive that and expect action in a real way. So, it's a good position to be in, but excellent question. Thank you for it.

Neil Chatterji, Analyst

Thanks. That’s it for me.

Operator, Operator

Your next question comes from Eric Martinuzzi with Lake Street. Please go ahead.

Eric Martinuzzi, Analyst

I wanted to discuss the Q1 outlook, noting that the midpoint is down about 11% for the quarter, indicating a third consecutive contraction. I'm particularly interested in comparing January and February this year to the same months a year ago. Given how we concluded the last year, it seems that Q4 performance aligned with your expectations for revenue. As we enter the new year, are there any notable differences in buyer behavior for January and February compared to last year?

Will Febbo, CEO

Steve, do you want to start?

Steve Silvestro, CCO

Yes, no problem. Hey Eric, it's great to hear from you. We noticed some initial slowing in RFP issuance, as manufacturers were aligning on their submissions. However, we received a significant number of RFPs, more than in previous years. The early signs of buying are very encouraging, which leads us to have a positive outlook for the full year, even though the timing is a bit delayed. We discussed our backlog, which reflects a shared sense of optimism about our current position. We're considering not just our projected performance for the first quarter, but the entire year, which is guiding our approach moving forward.

Eric Martinuzzi, Analyst

Okay. But like the January, February, is there any kind of an uptick as of the end of February or beginning of March that baked into this minus 11% in the quarter?

Will Febbo, CEO

We generally feel a degree of optimism regarding the backlog, which informs our outlook not just for Q1 but for the entire year.

Steve Silvestro, CCO

Go ahead.

Will Febbo, CEO

No, go ahead, Steve. It's okay.

Steve Silvestro, CCO

Yes, I mean we're not going to give sort of guidance on the quarter outside of what we've already done, Eric. But I think we can say we've got two components that we're looking at, right, recognized revenue as a form of what we report and the backlog in terms of forward-looking success. And so I think what we can say we said on that, Will, I don't know if you want to add anything else?

Will Febbo, CEO

Yes, that's correct. It doesn't surprise me that the pharmaceutical sector isn't moving quickly this year given everything happening. However, I do see positive signs through our revenue plans, our backlog, and discussions with our agency partners who are considering larger engagements. So, there are indications for a strong year ahead. I just want to remain conservative about it, Eric.

Ed Stelmakh, CFO and COO

Yes, I understand. Thank you, Eric. While we don't provide guidance on operating expenses, I can indicate that we might see an increase due to the bonuses being set for the year and the ongoing impact of the full year for a few full-time employees we hired in 2022. These two factors are likely to contribute to a slight uptick. Overall, we expect the run rate to remain relatively stable, and we do not anticipate any significant investments, especially in the early part of the year.

Eric Martinuzzi, Analyst

Got it. Thanks for taking my questions.

Will Febbo, CEO

Thanks Eric.

Operator, Operator

There are no further questions at this time. Please proceed.

Will Febbo, CEO

Thank you, operator. So, we're in an industry that is truly entering a generational paradigm shift in the way technology enables and drives better patient care and outcomes. I say this as a backdrop, given the importance of our business's move from tactical to strategic deals, which are growing increasingly larger in value. In line with this industry change, the run rate for closing deals are no longer and require additional buy-in from our stakeholders. That said, we truly believe that we have the right platform in place to deliver on the promise of improved outcomes, utilizing our solutions, in particular, RWD-AI. Moreover, our robust portfolio of omnichannel services are expanding outside of the EHR, and we continue to improve patient outcomes while driving our strong ROIs for our customers. We've also built the team and a culture as a company, which gives us a distinct competitive advantage as we focus on our clients, partners, and investors. In 2023, we have our financial and operational goals firmly underpinned by our best-in-class platform and the ability to access distribute and use the next generation of real-world data-enabled insights across the largest in workflow point-of-care network in the US. As such, we look forward to making a positive impact across our pharma prescriber and patient stakeholder base for the years to come. We want to thank everyone, employees, shareholders, customers, and partners alike as we continue to build out our solutions on a one unified omnichannel platform and look forward to reporting on our progress on our next earnings call and several investor conferences. Thank you.

Operator, Operator

Thank you, sir. Before we conclude today's call, I would like to provide the company's safe harbor statement that includes important cautions 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 the Securities Act of 1934 as amended. These forward-looking statements should not be used to make investment decisions. The words anticipate, estimate, expect, possible and seeking and similar expressions identify forward-looking statements. They may speak only to the date that such statements are made. Such forward-looking statements in this call include statements regarding estimation of total addressable market size, market penetration, revenue growth, gross margin, operating expenses, profitability, cash flow, technology, investments, growth opportunities, acquisitions and upcoming announcements. They 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 forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Future events and actual results could differ materially from those set forth and 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 effect of government regulation, competition, and other material risks. Risks and uncertainties to which forward-looking statements are subject to could affect business and financial results are included in the company's annual report on Form 10-K for the quarter ended December 31st, 2022. This Form is available on the company's website and on the SEC website at sec.gov. Before we end today's conference, I would like to remind everyone that this call will be available for replay via webcast only starting later this evening, running through for a year. Please refer to today's press release for replay instructions available via the company's website at www.optimizerx.com. Thank you for joining us today. This concludes today's conference call. You may now disconnect your lines.