OptimizeRx - Q4 2022
March 8, 2023
Transcript
Operator (participant)
Good afternoon, everyone, and thank you for joining OptimizeRx's Q4 fiscal 2022 earnings discussion. With us today is the Chief Executive Officer of OptimizeRx, William 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. With that, I'd like to turn the call over to OptimizeRx CEO William Febbo. Sir, please go ahead.
William 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 top line 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 toward 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. 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 top line 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 and 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 U.S. 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 vast, even for the brands with which we are currently working.
From a competitive intelligence perspective, we are well aware of new entrants. 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 recently established exclusive partnership with MMFI, 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 a 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 to 1. This is significant considering pharma has traditionally sought out ROIs of the 2 to 3 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?
Ed Stelmakh (CFO and COO)
Thanks, Will, and good afternoon, everyone. As with all our calls, the press release was issued with results of our Q4 ended December 31st, 2022. A copy is available for viewing and may be downloaded from the investor relations section of our website. Additional information can be obtained through our forthcoming 10-K, which will be filed in the coming days. Turning to our financial results for the Q4 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 buyups. 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 a result of a favorable solution and channel partner mix. We continue to expect solid gross margins in 2023, our guidance calls for our full year 2023 gross margin to come in between 58% and 62%. Operating expenses increased to approximately $13.3 million in the Q4 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 in non-cash expense, with the remaining amount being primarily related to the EvinceMed acquisition.
We had a net loss of $325,000 in the Q4 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 Q4 of 2022 was approximately $4.4 million or $0.25 per fully diluted share, as compared to 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 Q4.
Our balance sheet remains strong with cash equivalents and short-term investments totaling $74.1 million as of December 31st, 2022, as compared to $78.8 million as of September 30, 2022. The sequential decline in our 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. During the Q4, 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 Q1 revenue to come in between $11.5 million-$13 million. Let's turn to our KPIs for 2022. Our average revenue per 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 high turnover rates in 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 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's challenges with 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. Now with that, I would like to turn the call back over to Will. Will?
William Febbo (CEO)
Thanks, Ed. Operator, now let's move to Q&A.
Operator (participant)
Thank you, ladies and gentlemen. We will now begin the question-and-answer session. Should you have a question, please press star followed by the one on your touch tone phone. You will hear a three-tone prompt acknowledging your request, and your questions will be polled in the order they are received. Should you wish to decline from the polling process, please press star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. one moment please for your first question. Your first question comes from Ryan Daniels with William Blair. Please go ahead.
Ryan Daniels (Head of Healthcare Technology and Services)
For taking the questions. Maybe, Ed, I'll start with a question for you on the revenue outlook. It looks like based on the Q1 guidance in the full year, you expect a drop in revenue of about 11% year-over-year in Q1, but still looking for 10% year-over-year growth. Can you speak a little bit to the cadence of revenue throughout the year and the ramp and then, you know, the level of conviction you have in giving getting that 10%+ growth, you know, kind of given the slower start to the year and maybe some commentary on backlog getting you there, kind of what sign to be implemented or any visibility to help us kind of triangulate in there. Thanks.
Ed Stelmakh (CFO and COO)
Yeah. Thanks, Ryan. Yeah, great question. As far as the cadence is concerned, as you know, the vast majority of our revenue comes in the Q2 of the year. Yes, Q1 is definitely a little bit weaker than we had hoped for. We're coming out of the RFP season with a backlog that's stronger than we had in the past, as Will had mentioned. Our plan and our desire right now is to really continue to build on that 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 phase more towards the back end of the year.
Ryan Daniels (Head of Healthcare Technology and Services)
Well, 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, you know, volatility if 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)
Yeah. We don't disclose specific numbers. Typically where we sit every year looking forward in Q1 of every year is between, I would call it within 40% and 60% range of the line of sight for the rest of the year. Somewhere within that range is our line of sight for the 10% growth rate going into this year.
Ryan Daniels (Head of Healthcare Technology and Services)
Okay. Thank you. On the KPIs, I noticed one of the partners dropped out. Is that an actual lost partnership or is it just the timing where, you know, they're 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)
Yeah. We had one client not really drop out, but it's just a part of normal churn within the smaller portfolios of certain clients. We had one client that was generating a small amount of revenue, that's just part of the normal cycle. You know, sometimes a client will come in, sometimes they'll come out, but there's no real dropping of our services and solutions within any of the clients.
Ryan Daniels (Head of Healthcare Technology and Services)
Okay. Okay. That's what I thought. Maybe a macro question for Will. Just, you know, what are you seeing 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-to-1 ROI. I know pharma is shrinking their own sales force, but what's the view broadly on care marketing?
William Febbo (CEO)
You know, Hey, Ryan. Thanks for the questions. You know, whenever you start to see people use the term legal review, MLR, in pharma services or marketing, that means that, you know, 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 can sometimes delay sales cycle or launch. 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, you know, pharma's very good at getting to the companies that can scale and leaning in heavy there.
Just based on the conversations we have, based on the relationships we have, the trust we've built, while yes, we said it got cluttered for the last, you know, 18 months post-COVID, that clutter is gonna 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, you know, at par and, you know, excellent for pharma, you just won't be at the table. I would say net-net, those conversations are all going really well. Anything we've done at that table to date has performed and, you know, they're back with us for more. Net-net, good macro. Still have the headwinds internally. Their turnover is slowing. FDA is still getting back on their feet.
Obviously, the macro world is still dealing with interest rate hikes.
Ryan Daniels (Head of Healthcare Technology and Services)
Yeah. Final question. You mentioned the, you know, competitive front increasing and elongating the decision cycle. I'm curious if there was any specific product you offer or solution that was impacted. As a follow-up, if we think of your 10-to-1 ROI, you know, have you heard anything anecdotally about the competitive environment and what they've been able to produce? It sounds like, you know, perhaps they haven't been able to validate that level of savings so that that could, you know, 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.
William Febbo (CEO)
Yeah, sure. Thanks, Ryan. Yeah. On the competitive front, you know, the most of the competition, other than the ones that we've talked about, have come in by connecting to various different pieces, but really don't have the reach of the full network like we do. They're not directly integrated. It's always a Tier 2 relationship. That's gonna do two things. That's gonna, to your second question, that's gonna really limit them on measurement, just because when you're going through someone who's going through someone, you're gonna lose some of that data and/or you may not get it at all. I think that's what we've seen. That's been the noise. You have to remember that pharma relies pretty heavily on agencies, and agencies are looking for new solutions all the time.
In the last 18 months, a lot has hit the market, and they wanna try it. Net-net, while it was crowded last year, still working itself through, we see a pretty clear path to being a unique data set, especially since we've layered on our RWD-AI, which none of the others can do. That's response from the client has just been tremendous. I think that will help us on our ROI. Those that do have scale, some of the other ones, the companies that you cover, they generally have a pretty strong ROI, and they can actually measure it. Given how we are integrated, it's very straightforward for us to do.
Ryan Daniels (Head of Healthcare Technology and Services)
Okay, perfect. Thank Thank you for the comments.
William Febbo (CEO)
Thanks, Ryan.
Operator (participant)
Your next question comes from Sean Dodge with RBC Capital Markets. Please go ahead.
Sean Dodge (Equity Research Analyst)
Yep. Thanks. Good afternoon. Just going back to the guidance, maybe if you could just give us some help reconciling the statements from the Q3 call. Will, you said then just executing on the RWD opportunity to position you to grow over 20% in 2023. It appears based on what you've announced you're executing on it but guiding to less than 20%. Is the difference, is this just the conservatism you mentioned? Is it kind of the ongoing challenging macro situation, or is there cannibalization or attrition that's happening else that's offsetting some of the kind of the positivity on the RWD front?
William Febbo (CEO)
Yeah. No, it's mostly conservatism. You know, we report late enough that we can listen to enough other executives and, you know, across the board, people are being conservative, and I think that's wise in the macro economy we have. Also, as we said, the headwinds aren't completely gone, right? You put the two together, and I think it's a lot better to be conservative and work real hard to exceed and, you know, that's our goal.
Sean Dodge (Equity Research Analyst)
Okay. Then the comments you made about the RWD 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 RWD or are these, I guess, net new prospects?
William Febbo (CEO)
Yeah, I'll start, and then I'll let Steve answer as well. Just remember, we didn't have a pipeline this time last year. You know, we had done two projects in 2020. We were measuring in 2021 largely and had those players come back and then generated another four. This pipeline we talk about is all either existing clients getting into the ROI or new clients doing RWD AI. Steve, you wanna give a little bit more color to that?
Steve Silvestro (Chief Commercial Officer)
Yeah, happy to. Hey, Sean. I think one of the things that's driving this for us is, you know, we've got a really solid team of clinicians, people that have got clinical experience and have practiced, two of which are MDs, that are driving the patient architecture. That's a really unique differentiator. These are people that are involved with existing clients, so most of this work is being done in the top 20. They're taking work that we're doing and then adding onto it. It is enhancing the land and expand strategy that we implemented early on.
Driving it. The 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 (Equity Research Analyst)
Okay. That's great. Just last one maybe for Ed. The RWD deals you've signed and I presume are in the process of implementing now. Was there any revenue associated with those, maybe like architecture fees that were captured in Q4? Is all of this kind of net new or incremental beginning in Q1 of 2023?
Ed Stelmakh (CFO and COO)
There was some revenue from architecture and design that fell into Q4. Again, you know, there were six projects that are signed. It wasn't all captured Q4. There's more that will get converted within this year.
Sean Dodge (Equity Research Analyst)
Okay. Great. Thanks again.
Ed Stelmakh (CFO and COO)
Thanks, Sean.
Operator (participant)
Your next question comes from Stephanie Davis with SVB. Please go ahead.
Stephanie Davis (Senior Managing Director)
Hey, guys. Thank you for taking my question. Will, Last quarter, you pointed to 20% revenue growth fueled by that RWD-AI win alone. Obviously, we're a little surprised by the 2023 outlook. Talk to me about the drivers of this implied kind of decline in the quarter. Is that client attrition? Is that pricing, end market wallet shrinkage, or is that something else? You also call that a conservative approach to the guidance. Can we kind of just walk through what you've baked in assumptions-wise?
William Febbo (CEO)
Sure, Stephanie. Hey, good to hear your voice. yeah, in Q3
Stephanie Davis (Senior Managing Director)
I'm back, right? Should I leave? Am I bad luck?
William Febbo (CEO)
No. No way. No way. You bring, you bring it. We'll have a great year together. No, Look, with Q3, we said we could get up to 20% growth if everything went our way. you know, we've seen continued headwinds, which we've talked about, and frankly, we're not the only ones talking about it, so it's not like it's a new thing. That's going to make us more conservative, right? We're not losing clients. We're closing new deals on better solutions, which basically pull in the other solutions, which make for a more strategic relationship with the client. The clients digest it, you know. It's taken longer for them to make decisions, but their decisions are gonna be bigger.
We're one of a few at the table, and I like to think of us as the, you know, the younger brother that's more agile and a little smarter, maybe a little faster. I think it's true, actually, from what I'm learning when I'm with the clients and with the peers. You know, the pain points still exist for our clients. They have a hard time reaching HCPs, they have a hard time enabling patient support programs, and we have a network that can do that. No drama here. Being conservative, want to be able to build up the year in a good way, and, we think we have a lot of confidence that we can do that.
Stephanie Davis (Senior Managing Director)
All right. Understood. Let me put this a different way. You did a massive buyback ahead of this guidance.
William Febbo (CEO)
Yeah.
Stephanie Davis (Senior Managing Director)
Should we read that as a more hopeful view on the macro than what's implied in the guidance? There's something else we should consider in that move?
William Febbo (CEO)
Yeah. I think we did not only a buyback with the company's money, but also the senior team did a buyback too. We obviously believe in the business. Look, I, you know, I should highlight everyone has choice in this market with unemployment where it is and the amount of new solutions that need good leaders, and we've had no turnover in our company. Not that doesn't mean that everyone's hitting on everyone, which they share with us. I think that's a tell-tale, Stephanie, that we've got a lot of conviction, and we're being smart in a market that requires you to be a lot smarter and a lot more careful with what you tell the world you're gonna do. We're gonna focus on our growth drivers through the year. We're gonna keep everyone updated on that.
I think that's a thing to watch as an investor. You're gonna see the growth in other solutions because we're getting some good traction there, around helping different types of client sets. You know, we're in no financial trouble at all. Generating cash at this size business, I mean, if you look back at any of my peers, none of them are doing that. We feel like we're in a great spot. Lots of conviction.
Stephanie Davis (Senior Managing Director)
All right. Sounds good. Thanks. Appreciate it.
William Febbo (CEO)
Thanks. Yeah. Talk to you soon.
Operator (participant)
Your next question comes from David Grossman with Stifel. Please go ahead.
David Grossman (Managing Director)
Good afternoon. Thank you very much. I think this has been coming out in 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. It's just not financially, but I'm thinking fundamentally as well. You know, 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. 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?
As you kind of roll that forward, you know, if you apply that to your base, you know, it looks like you got to add about $15 million or so to hit your revenue guide for at least 10%? How do you want us to think about, you know, 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 gonna get from architecture fees from the RWD-AI deals that you've already signed, et cetera?
William Febbo (CEO)
Okay. A couple questions in there. Ed, do you wanna tackle the retention one first.
Ed Stelmakh (CFO and COO)
Yeah
William Febbo (CEO)
the KPI?
Ed Stelmakh (CFO and COO)
Yeah, great question, David. The KPIs, as you know, are three year, 12 months look back. Obviously with the less than stellar year in 2022, we're now capturing the full year impact of that versus 2021, which had a very strong year. You know, year-on-year comparison basically is skewed by that dynamic. As the year, you know, as 2023 gets better, obviously you should see an impact on those metrics, and you should see a recovery in that metric.
David Grossman (Managing Director)
Ed, just before-
Ed Stelmakh (CFO and COO)
Yeah
David Grossman (Managing Director)
We move on to the next one. How much of the retention, you know, was kind of driven by things that happened earlier than in the year versus, you know, the back half of the year? I don't know if you think about it in those terms at all, but just wondering if. 'Cause I think you had some losses right towards the beginning of the year, and just wondering if that number changed much in your mind as you were thinking about next year, as the year went on, as 2022 went on.
Ed Stelmakh (CFO and COO)
Yeah, I don't know if we really kind of get to that level of detail in terms of underlying root causes. I mean, there was several dynamics that occurred in the last year that we already disclosed. It was probably just a confluence of all of those factors that played a role in driving revenues down within that, you know, top 20 pool of clients. We did grow, as you can see, you know, outside of that 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.
David Grossman (Managing Director)
Gotcha.
William Febbo (CEO)
David, to your second part of the question, you know, how much of the additional revenue for growth this year is sort of ordinary? You know, it's clearly our RWD-AI is gonna be a piece of that growth. We also had projects last year that were pushed into this year, so that is part of that as well. That's already rolling. We've also, just given the differentiation of our RWD-AI, and we did some pretty aggressive marketing, among the agencies that advise pharma as well as direct to pharma. We're just seeing, as we said, a big pipeline there building. We don't talk about the number, but it's. We didn't have one last year.
That gives us more confidence in year of closing on this kind of offering 'cause we now have measurement to put against it. It's not just a shiny object. It's actually part of the tool shed now. Those things combined should give us that additional revenue needed for the at least 10% growth.
David Grossman (Managing Director)
Got it. Just one last one. I can't remember if you provide this information, but just some qualitative look at, you know, whether we've got year-over-year patents, you know, drugs coming off, you know, patent that may impact your business at all, either favorably or unfavorably.
William Febbo (CEO)
Yeah. This year, we do not have one we're dealing with, that is material to our revenue. Steve, do you have any other comment on that? I know it's not, it's not something we... It's not a headwind this year.
Steve Silvestro (Chief Commercial Officer)
Yeah. Nothing this year to impact us negatively on current programs at all. Couple next year, but they're sort of latter part of next year and not larger programs. We're expecting several launches that will be more significant than the patent expiry. Great, great question, though. Something we're always looking at.
David Grossman (Managing Director)
Okay. Great. All right, guys. Thanks very much. Good luck.
William Febbo (CEO)
Thanks, Dave.
Ed Stelmakh (CFO and COO)
Thank you.
Operator (participant)
Your next question comes from Neil Chatterji with B. Riley. Please go ahead.
Neil Chatterji (Senior Equity Research Analyst)
Hi, guys. Good afternoon, thanks for taking our questions. I guess you've already fielded a lot of questions on the guidance, maybe just one more here. Just as we think about the, you know, just the cadence of potential kind of incremental RWD deals, you know, I guess either through the H1 or into the Q2, you know, any color you can provide on your expectations for that and how that's contemplated in the guidance, you know, and if that could present some top line, you know, growth acceleration or maybe upside in the back half.
William Febbo (CEO)
I'll start, and then I'll pass it to Steve. The good news on the growth is it's not over-dependent on that either, right? We're not going all in on something that's new and obviously showing traction. There's some potential upside there from my view. Steve, you wanna talk to the sort of the cadence of it through the year?
Steve Silvestro (Chief Commercial Officer)
Yeah. Happy to. As you've heard from Will and Ed, you know, the pipeline is pretty robust for this particular portion of our portfolio. The sooner we close these deals, the quicker we can recognize the architecture. The component is architecture first, and then messaging driven by the model. The sooner they launch, the more revenue that we can recognize. In terms of clocking of the deals, you know, I think that the H1 will look pretty good in terms of closing out some additional, you know, some additional RWD deals. You've heard from Ed, we already have six live. Those will continue to generate revenue throughout the remainder of the year.
Of course, because they're being driven by the models, you know, the messaging will be, more frequent, higher volume, but more targeted. Hopefully that gives you a little bit more insight. Two components.
Neil Chatterji (Senior Equity Research Analyst)
Got it. That's helpful. Maybe if just curious if you just give us an update on kind of just the overall platform's, you know, capacity at this time?
William Febbo (CEO)
Yeah, no problem. You know, obviously, we've talked a lot about channel. We spent the last five, six years building it out to really focus on the physician HCP that pharma finds it hardest to reach, that connects and overlaps with specialty medications, which are complicated and expensive for patients. We've done a tremendous job reaching that. Now, we have far more capacity than utilization right now. It is underutilized still. You know, it's probably less than 30% is actually used in terms of our access. The good news on this is it's a commercial execution year. We don't have to bet any one big play on any one partner. That doesn't mean we're not gonna add more partners, but incrementally, they won't be as dramatic as years past.
We're also expanding our focus on the other channels. Omnichannel, right? Let's not just deliver information to physicians when they're at point-of-care, but let's think of social, let's think of all the other places where physicians are, and we can actually see them and track and measure. Net-net, it's just under 30% capacity and or utilization rather, and lots of new channels in terms of the omnichannel approach coming to market this year.
Neil Chatterji (Senior Equity Research Analyst)
Great. Then maybe just one last one here for me. Maybe if you just kind of give us a sense of how you're thinking, you know, or how you expect, you know, marketing and digital spend to kind of trend here in the year, with, you know, the COVID headwinds kind of in our rearview, mostly.
William Febbo (CEO)
Yeah. Steve, do you wanna talk to that one?
Steve Silvestro (Chief Commercial Officer)
Yeah, happy to. Thanks, Will. Good question, Neil. Look, I think that everybody across the board in manufacturing universally 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, you know, meaning 2022 coming into 2023 than it has been in years past. I think that's largely because everyone saw it as 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.
The programs that are not delivering are getting turned off in these smaller competitors. That's, I think, you know, good news for the stable companies like OptimizeRx and others. I think in terms of leaning in to this general point-of-care, I think it's expanding a lot more, you know, in terms of what point-of-care the definition is. We see now more companies leaning into following the doctor, which is, you know, not just in the EHR, but as Will has said, and you heard Ed say as well, giving the doctor the information that they need, where they are, wherever they are. That omnichannel play is something that every manufacturer is focused on. You'll probably hear the phrase next best action used pretty frequently.
That really is a, you know, 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 point-of-care that's integrated to drive that next best action in a real way. It's a good position to be in. Excellent question. Thank you for it.
Neil Chatterji (Senior Equity Research Analyst)
Thanks. That's it for me.
Operator (participant)
Your next question comes from Eric Martinuzzi with Lake Street. Please go ahead.
Eric Martinuzzi (Senior Research Analyst)
Yeah. I wanted to focus on the Q1 outlook here with the midpoint down about 11% for the quarter. That would be your 3rd quarter in a row contracting. I just wanted to focus on kinda January, February versus January, February a year ago. anything, you know, because I think. Well, just the how we finished out the year, obviously the Q4 was, you know, you guys came in pretty much what you thought you would do on the top line. Entering the year, anything different about those buyer behaviors in January and February maybe versus a year ago?
William Febbo (CEO)
Steve, do you wanna start?
Steve Silvestro (Chief Commercial Officer)
Yep, no problem. Hey, Eric, good to hear your voice. We did see a little bit of slowing out of the gate in terms of RFP issuance. I think manufacturers were sort of aligning on where they wanted to submit RFPs. Having said that, we saw a plethora of RFPs come in more than we've seen in years past. The initial buying signs, as you've heard on this call, are very positive, leading us to kind of an optimistic full year view. The clocking of that is a little bit pushed out. You heard us talk about the backlog, which, you know, I think we've probably shared that's a degree of optimism that we universally feel given where we're at.
We're not looking at it just in terms of Q1 projected performance, but, full year, and using that as our, sort of, our guiding beacon here on the year.
Eric Martinuzzi (Senior Research Analyst)
Okay. like the January, February, is there any kind of an uptick, as of the end of February or beginning of March that's baked into this -11% for the quarter?
William Febbo (CEO)
Uh, we-
Steve Silvestro (Chief Commercial Officer)
I think.
William Febbo (CEO)
Yeah, we
Steve Silvestro (Chief Commercial Officer)
Go ahead.
William Febbo (CEO)
Go ahead. No, go ahead, Steve. It's okay.
Steve Silvestro (Chief Commercial Officer)
Yeah, I mean, we're not gonna 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 then the backlog in terms of forward-looking success. You know, I think what we can say, we've said on that. Will, I don't know if you wanna add anything else?
William Febbo (CEO)
Yeah, no, that's right. I think it doesn't surprise me that pharma's not rushing the year just given everything going on. I will say they've the lean we're seeing. We're seeing it through RFPs. We're seeing it through what we have in backlog. We're seeing it through conversations and seriousness of some of our partners at the agency level looking at much bigger engagements. Yeah, the telltales are there for a good year. Again, just trying to really be conservative on this one, Eric.
Eric Martinuzzi (Senior Research Analyst)
Okay. Ed, you talked about, I think the Q4 GAAP operating expense was $13.3. What should we think about for operating expense for Q1?
William Febbo (CEO)
Yeah.
Ed Stelmakh (CFO and COO)
Yes, I got it. Thanks, Eric. Obviously we don't, we don't guide on our operating expenses, but what I can tell you is There will probably be an uptick just given the fact that, you know, we are re-resetting our bonuses for the year. There will be a full year impact of a few FTEs that we hired in 2022. I think those two factors probably will give us a bit of an uptick. Generally speaking, the run rate will be pretty contained. We're not expecting any major investments, certainly in the early part of the year.
Eric Martinuzzi (Senior Research Analyst)
Got it. Thanks for taking my questions.
William Febbo (CEO)
Sure. Thanks, Eric.
Operator (participant)
Ladies and gentlemen, as a reminder, should you have a question, please press star followed by the one. There are no further questions at this time. Please proceed.
William Febbo (CEO)
Thank you, operator. 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 runway for closing deals are now 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 our 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 a 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 U.S. We look forward to making a positive impact across our pharma, prescriber, and patient stakeholder base for the years to come. We wanna 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 (participant)
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 in the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange 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 effects 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 S.E.C. 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 line.