OptimizeRx - Q4 2025

Transcript

Operator (participant)

Good afternoon, everyone, thank you for joining OptimizeRx's fourth quarter and fiscal 2025 earnings conference call. With us today is Chief Executive Officer, Steve Silvestro. He is joined by Chief Financial and Strategic Officer, Ed Stelmakh, Chief Legal and Administrative Officer, Marion Odence-Ford, Chief Business Officer, Andrew D'Silva. At the conclusion of today's call, I will provide some important cautions regarding the forward-looking statements made by management during today's call. The company will also be discussing certain Non-GAAP financial measures, which it believes are useful in evaluating the company's operating results. A reconciliation of such Non-GAAP financial measures is included in the earnings release the company issued this afternoon, as well as in the investor relations section of the company's website.

I would like to remind everyone that today's call is being recorded and will be made available for replay as an audio recording of this conference call on the investor relations section of the company's website. Now, I would like to turn the call over to OptimizeRx CEO, Steve Silvestro. Mr. Silvestro, you may begin.

Steve Silvestro (CEO)

Thank you, operator. Good afternoon to everyone joining us for today's fourth quarter and fiscal year 2025 earnings call. We delivered a strong fourth quarter, exceeding both consensus estimates and our internal expectations. Revenue for the fourth quarter was $32.2 million, and adjusted EBITDA was $12 million. For the full year, revenue totaled $109.4 million, with adjusted EBITDA of $24.3 million. Our full year 2025 results clearly demonstrate the strength of our operating model and the significant opportunity within our market. We delivered solid top-line performance across both our largest and most established clients and a growing cohort of newer customers, particularly in the mid-tier and long-tail life science companies. We view this segment as highly attractive, providing a meaningful runway to expand our customer base and deepen our relationships over time.

At the same time, improvements in our product mix and channel partner strategy contributed to higher gross margins in 2025. When combined with cost optimization initiatives following the Medicx acquisition and the benefits of our largely fixed cost, highly scalable operating model, we more than doubled both adjusted EBITDA and free cash flow year-over-year. While we're pleased with our fourth quarter results, we are seeing softness in our year-to-date contracted revenue numbers as compared to last year. This is mostly driven by a previously communicated market shift away from managed services, which contributed a material portion of our contracted revenue in the first half of 2025. In addition, we believe some of our clients are adopting a more conservative spending tone in the early stages of 2026 as they adjust their portfolios to Most-Favored-Nation pricing.

We feel confident that the latter is a temporary phenomenon that will start to normalize in the course of the coming few months. Given this backdrop, we are updating our 2026 guidance and are taking a more conservative view on revenue while continuing to stay focused on profitability. For 2026, we expect revenue in the range of $109 million-$114 million and adjusted EBITDA between $21 million and $25 million. I also want to be clear. Management and our board believe there is still significant opportunity for value creation, particularly when examining the demand and operating leverage we saw in 2025. Fiscal 2025 demonstrated the strength of our profitable growth model. We achieved Rule of 40 performance, delivered adjusted EBITDA margins above 20% for the year, and generated nearly $19 million in free cash flow from operations.

Reflecting our confidence in the long-term value of the business, our board has authorized a $10 million share repurchase program. We intend to finance the repurchase using our available cash and cash equivalents in open market or privately negotiated transactions. I'd also like to address some of the speculation and questions we've received regarding artificial intelligence. Our business has experienced minimal disruption from AI. We do not expect to be disrupted in the future. We are not a commoditized software solution. We're a strategic partner to life science companies, supported by a proprietary and highly valuable communications network that connects pharmaceutical manufacturers with healthcare professionals and patients at critical moments of care. In fact, AI may serve as a tailwind. We are hearing from customers that historically up to 50% of marketing budgets were allocated to content creation.

As AI drives efficiencies within our client base, that allocation of spend is likely to be redeployed to both expand reach and improve execution of marketing efforts, areas where OptimizeRx is particularly well-positioned. We believe we are strongly positioned for long-term outperformance on both the top and bottom line. We address key pain points for our customers, including enhancing brand visibility, reducing script abandonment, improving interoperability between disparate point-of-care platforms, and supporting the transition to more complex and specialty medications. A strong example of our impact comes from one of our largest customers, a top 10 pharmaceutical manufacturer that engaged OptimizeRx to support specific oncology initiatives through our point-of-care and point-of-prescribe-based marketing solutions. While early programs were focused on targeted use cases, the results demonstrated measurable impact in reaching prescribers within a clinical workflow and influencing engagement at key decision points.

As performance validated the DAP model, the manufacturer expanded their investment with OptimizeRx in 2025 to support multiple oncology brands across various indications. This expansion across brands and tumor types drove meaningful year-over-year revenue growth, evolving from initial pilot programs into a scaled multi-brand oncology engagement strategy. When we talk about enterprise engagements, this is the momentum we're looking for. We're also seeing strong momentum in the med tech sector. One flagship client first partnered with us post-COVID to expand prescriber reach to our legacy point-of-care marketing solutions. Consistent script lift in 2024 prompted the client to adopt DAP, our AI-enabled dynamic audience activation platform, which facilitated precise, timely outreach to prescribers, including many previously untapped new prescribers, exactly when it mattered most in the patient journey. This continues to be a major differentiator for the company and for our clients.

By activating and leveraging these high-value HCP audiences identified through DAP, the client rapidly scaled deployment to additional brands and channels. This multi-brand, multi-channel scaling is delivering substantial impact in a highly competitive and rapidly growing landscape. The success of this program resulted in the customer drastically increasing its investment in OptimizeRx solutions from pilot dollars in 2022 to several million dollars in 2025. This pattern, starting with targeted POC engagement, progressing to DAP adoption, and then accelerating across the portfolio, highlights the repeatable path to accelerated growth and stronger ROI that we see across dozens of similar pharma and med tech companies. OptimizeRx is uniquely positioned to drive sustainable long-term growth and shareholder value. The key word here is sustainable.

With one of the nation's largest point-of-care networks and the only true point-of-prescribe network, we enable pharmaceutical manufacturers to engage healthcare providers directly at the moments that matter most, when actual decisions are being considered and made. Building on this foundation, we've developed a purpose-built omnichannel platform that integrates advanced patient-finding capabilities such as DAAP and Micro-Neighborhood Targeting. These tools are redefining how pharmaceutical companies, physicians, and patients connect, improving patient outcomes and transforming engagement across the healthcare ecosystem. Our reach across both point-of-care and direct-to-consumer channels provides a durable competitive advantage. We believe OptimizeRx is the only company with the scale, technology, and data integration required to seamlessly engage providers and patients across all channels. This positions us as a comprehensive commercialization partner, supporting customers throughout the full product life cycle, deepening relationships, and expanding long-term value capture.

As we have discussed on prior calls, a key focus moving forward is to further demonstrate our reach, scalability, and value as a trusted strategic partner. Our ability to consistently expand relationships with our largest customers underscores the value we deliver and the impact we have on script lift in the commercialization process. I'm confident that continued focus on execution, notwithstanding some of the near-term headwinds seen in our space, combined with our differentiated platform and strong customer outcomes, will translate into meaningful long-term shareholder value. We believe our momentum positions us to capture additional market share and expand our role within the pharma industry's multi-billion dollar digital ecosystem. Our customers remain deeply integrated across our HCP and DTC offerings, and our objective is to support them seamlessly across the full patient care journey.

With that, I'd like to turn the call over to our CFSO, Ed Stelmakh, who will walk us through the financials. Ed?

Edward Stelmakh (Chief Financial and Strategic Officer)

Thanks, Steve. Good afternoon, everyone. A press release was issued with the financial results for our fourth quarter and fiscal year ended December 31st, 2025. 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 Form 10-K. Fourth quarter revenue came in at $32.2 million. This was largely in line with our previously communicated expectations as we continued to convert more of our DAAP agreements into subscription revenue that spread more evenly over the course of the year. In addition, buy-ups came in at a more moderate level than in 2024. Gross margin increased from 68.1% in the quarter ending December 31st, 2024 to 74.8% in the quarter ending December 31st, 2025.

Year-over-year gross margin expansion is tied to a favorable solution and channel partner mix. While the fourth quarter was a record gross margin quarter, we don't anticipate gross margins to be at this level in 2026 and continue to believe we'll be in the mid 60% range as the fourth quarter saw an unusually high amount of specialty messaging in higher margin channels, which was a favorable but uncommon mix for us. Our operating expenses for the quarter ending December 31st, 2025 decreased by $2.9 million year-over-year, largely due to lower cash OpEx as we saw benefits from the post-acquisition cost reduction measures we implemented in 2024.

Meanwhile, our net income came in at $5 million, or $0.26 on a fully diluted basis for the fourth quarter of 2025, compared to a net loss of $0.1 million during the fourth quarter of 2024. On a Non-GAAP basis, our net income for the fourth quarter of 2025 was $9.9 million or $0.51 per diluted share outstanding as compared to a Non-GAAP net income of $5.5 million or $0.30 per diluted share outstanding in the same year-ago period. Our adjusted EBITDA came in at $12 million for the fourth quarter of 2025, compared to $8.8 million during the fourth quarter of 2024.

We ended the year with cash and short-term investments totaling $23.4 million as of December 31st, 2025, as compared to $13.4 million on December 31st, 2024. We were able to increase our cash balance throughout the year despite paying off $8 million of principal during 2025, including $6 million ahead of our prepayment schedule. Our operating cash flow was $18.7 million for 2025 versus $4.9 million in 2024. As a result, our current debt balance stands at $26.3 million. We continue to believe we're well-funded to execute against our strategic and operational goals and we'll look to utilize free cash flow to pay down debt at an accelerated rate and opportunistically look to repurchase shares.

I'd like to turn to our KPIs for the 12 months ended December 31st, 2025. Average revenue per top 20 pharmaceutical manufacturer was $2.8 million, which declined slightly from $3 million in 2024 and was directly tied to lower buy-ups and data-related revenue that I highlighted earlier. Meanwhile, net revenue retention rate remains strong at 116%, and revenue per FTE came in at $839,000, topping the $701,000 we posted during the 12 months ended December 31, 2024. Finally, I'd like to provide additional color around our guidance, which now calls for 2026 revenue to come in between $109 million-$114 million and adjusted EBITDA between $21 million-$25 million.

As you may recall, our first half 2025 revenue was positively impacted by managed service revenues, which contributed to approximately $9 million in the first half of 2025. Since we don't expect a similar revenue mix in 2026, our revenue phasing is likely to fall in line with historical 40%-60% attribution between first and second half of the year. With that, I'll turn the call back over to Steve. Steve?

Steve Silvestro (CEO)

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

Operator (participant)

We will now begin the question-and-answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Ryan Daniels with William Blair. Please go ahead.

Ryan Daniels (Group Head–Healthcare Technology and Services)

Guys, thanks for taking the questions. Curious, in your commentary on some of the end market weakness, a few points there. one. Are you really just seeing the conservatism with the, you know, 17 companies that are in MFN negotiations, or is it broader across the entire client base? That's number one.

Steve Silvestro (CEO)

Sure. Thanks, Ryan. Good to hear from you. We're seeing a broader pause across all of the clients as they're trying to just digest what it's going to mean for them. The contracting duration has started to shorten a little bit from maybe six months -12 months down to quarter pulses or even half-year pulses as they're sort of contemplating how they're going to deploy spend. I think that'll normalize over time, or we think it's going to normalize over time as they get through it. Outside of those that are I think it's really just over conservatism for the first quarter. That's sort of our stance, and that's what we're hearing. Is people are just being cautious.

Ryan Daniels (Group Head–Healthcare Technology and Services)

Okay. Are you seeing any nuances between DTC and HCP marketing, or are you seeing pressure on both of those from your partners?

Steve Silvestro (CEO)

Yeah, it's about the same across the board. They're not being viewed differently at this point by any of the manufacturers. Everybody's got the same view of both DTC and HCP, spend as a whole.

Ryan Daniels (Group Head–Healthcare Technology and Services)

Okay. Okay, that's helpful. Then maybe one for Ed. You mentioned during the quarter, gross margins were obviously great and drove a lot of upside to the bottom line. I think you said there was some specialty messaging and higher margin channels. Can you go into a little bit more detail on, you know, what that was or what drove that and then why you don't think that could be sustainable? Is it just something that you don't want to model but, you know, maybe in a given quarter you might be able to to do that again and drive margins through those specialty messages?

Edward Stelmakh (Chief Financial and Strategic Officer)

Hey, Ryan. Yeah, thanks for the question. Yeah. I guess two parts here. First of all, what happened in fourth quarter 2025. There we did have a very positive, very favorable mix of channel partners that we utilized to drive our messages. As you know, we can pick and choose which channel partners we can drive messages to, but we're clearly going to be running those messages through channel partners where we can reach the best audience under DAAP. That's what happened there in terms of our ability to drive higher margins for that quarter. As far as 2026 is concerned, we are guiding to mid-60% gross margin range.

Mainly due to the fact that, we don't feel comfortable taking the high end of that equation and running it through the year. We can do it periodically, but I don't see us doing this on a regular basis throughout the year.

Ryan Daniels (Group Head–Healthcare Technology and Services)

Okay. I appreciate that. Maybe last question, I'll go back to Steve. You mentioned you're not seeing any disruption from AI, would love to hear your purview on how it's actually helping your operations. I know you have used AI in some of your kind of real-time analytics and product deployment in the past. Just curious, you know, what AI has meant to you maybe over the last quarter or two and what you're investing in as we look forward over the next few years to enhance your offering or your ROI for clients. Thanks.

Steve Silvestro (CEO)

Yeah, no problem, Ryan. Happy to talk to it. It's actually an extension of what Ed just mentioned, which is, you know, everyone's pretty hyped up on the Agentic AI deployment across the board. As you know, we've been doing this now for years, so it's not anything new for OptimizeRx. What it does is creates efficiency and speed within organizations. You still need human input to get things to actually move. What it will enable us to do is get clients to stop spending money on things like content creation or other stuff where they were just very people-heavy and start to deploy AI in a way that enables them to spend more money on commercial execution, and that's where we're particularly strong. We're excited about the AI piece.

We don't see it as disruptive to us at all. We see us as an enabler of people adopting more AI. Then just to piggyback on Ed's comment around sort of channel partner selection and deployment of messages that impacts the profile, I think that is a great example of what AI could do for OptimizeRx as more people adopt the Agentic and other components of AI that are getting out there. It allows us to be more efficient with channel partner distribution, message distribution, and physician identification. We are welcoming it. I think it's not broad enough yet, Ryan, where we're willing to reset the profile of the business from a margin perspective, but we were able to flash that publicly and show what the potential is within this business as we continue to grow it.

You know, for me, I'm very excited about it. I'm trying not to overhype it, but it's a positive, net positive for us. Appreciate you calling it out.

Ryan Daniels (Group Head–Healthcare Technology and Services)

Okay. Thanks for all the color, guys. Appreciate it.

Steve Silvestro (CEO)

You got it. Thanks for the good questions.

Edward Stelmakh (Chief Financial and Strategic Officer)

Yeah, thanks, Ryan.

Operator (participant)

The next question is from Eric Martinuzzi with Lake Street. Please go ahead.

Eric Martinuzzi (Senior Research Analyst)

Yeah. Historically, you've been able to give some color on the percent of revenue that's under contract. I would guess, given the duration color that you gave, Steve, that maybe that number is not in, you know, what I would say, a 30% number is what you've talked about in the past. Can you give us any color on percent under contract?

Steve Silvestro (CEO)

Yeah, we can give a little bit of color. I mean, right now we're roughly... If we take out the managed service component, Eric, that we talked about, which is predominantly first half contracted, we're running roughly 15%-20% off of where we normally would be. That's mostly due to the timing of the contract and the duration of the contracts. When you take out the managed service component, it's mostly contract duration, meaning shorter-term contracts than we would've seen same time last year or years previous. We think that's, we're not panicking about that. We think that's gonna adjust over time, and we think as we get to the mid-year, you know, we'll start to see that the contracted revenue numbers will take care of themselves and, you know, normalize themselves.

Ed, you can feel free to chime in if you want. I know you and Andy are also tracking it very closely.

Edward Stelmakh (Chief Financial and Strategic Officer)

I think you got it right, Steve. You know, 15%-20% behind last year's numbers. We typically don't disclose the exact percentage of revenue that's already under contract, but we will give you a gauge for whether or not we're running, you know, ahead or behind. Just to give you a little more color, as Steve said, there was an impact of managed services playing a pretty big material role last year in the first half around the same time. That's missing from the equation this year to a large extent. Also shorter duration contracts are also hitting us a little bit out of the gates.

We are kind of reading the market, and we are very positive and very optimistic about pharma once they get through the first quarter or two of this year, normalizing their spending within the year and coming back strong in the back half of the year.

Eric Martinuzzi (Senior Research Analyst)

Following up on the managed services comment, I think you said there was. Was it $9 million in the first half, or was it $9 million for 2025?

Edward Stelmakh (Chief Financial and Strategic Officer)

it was $9 million of revenue in the first half of 2025.

Eric Martinuzzi (Senior Research Analyst)

is there-- have you-- does the guide for 2026, does that include any amount for managed services?

Edward Stelmakh (Chief Financial and Strategic Officer)

It includes very little. As we said last year, managed services is a very episodic solution for us. It comes and goes. We're not counting on much of it coming in this year.

Eric Martinuzzi (Senior Research Analyst)

Got it. Thanks for taking my questions.

Edward Stelmakh (Chief Financial and Strategic Officer)

You got it.

Steve Silvestro (CEO)

You got it, Eric. Good questions. Thanks.

Operator (participant)

The next question is from Constantine Davides with Citizens. Please go ahead.

Constantine Davides (Managing Director and Senior Equity Analyst)

Great. Steve, you highlighted in your prepared remarks, performance from mid-tier and smaller manufacturers. Just wondering what exactly you're doing to attack that portion of the market and what's been driving that success?

Steve Silvestro (CEO)

Hey, Constantine. Really what it is we have an ability to supplement a lot of what those mid-tier and long-tail clients don't have infrastructurally within their own businesses. If you think about what OptimizeRx is evolving into as a commercialization partner for a lot of these assets, taking new, you know, a lot of these companies, taking new assets to market, launching them, trying to drive sales. We can fill a lot of the empty space where they may not have big budgets for big marketing teams, Cadillac budgets for, you know, agencies, hundreds of sales reps out on the street. We're able to fill that gap very seamlessly in a cost-efficient, you know, effective way. The growth in the mid-tier and the long tail has exceeded our expectations.

That the uptick there is faster than we were even initially anticipating, which is a really, really good sign. You know, coming back to one of the questions that Ryan had around, you know, with the people that are negotiating on the MFN front, all of those are top, you know, the top 10 manufacturers, right? It's the Lillys of the world and the Pfizers and everybody else that people are familiar with household names. The volume of specialty pharmaceuticals is actually still coming out of the mid-tier and the long tail, the biotech sector. It's a particularly interesting opportunity for our business, so we're honing in on it. Appreciate it. It's a great question.

Constantine Davides (Managing Director and Senior Equity Analyst)

Great. Just in terms of capital deployment, I saw you guys announced a share repurchase plan, and just trying to think about, you know, how or understand how you're thinking about paying down debt versus deploying it towards buybacks. Just, you know, what we should be expecting there.

Steve Silvestro (CEO)

Sure. Ed, I'll let you handle that one.

Edward Stelmakh (Chief Financial and Strategic Officer)

All right. Thanks, Steve. Hey, Constantine. Yeah. We're gonna look at every opportunity as it comes to us. As you know, historically, we've paid down debt with all of our excess cash flow. The plan is to continue to do that as much as possible this year as well. Also we'll gauge it against the opportunity to come in and buy back our stock at the right price point. I guess the easy answer to your question is, it depends. In most cases, I think you can expect us to spend that money on paying down the debt.

Constantine Davides (Managing Director and Senior Equity Analyst)

Got it. Then maybe one last one for you, Ed. What have you contemplated in guidance in terms of approximate NRR for the year?

Edward Stelmakh (Chief Financial and Strategic Officer)

NRR, in our case, as I said, consistently, we're shooting for anything above 100% as a good marker. We haven't really unpacked our guidance based on specific NRR numbers, but I think if you look at where we're guiding now, there's probably some room for slight excess above 100%.

Constantine Davides (Managing Director and Senior Equity Analyst)

Got it. Thank you.

Steve Silvestro (CEO)

Thanks, Constantine.

Operator (participant)

Again, if you have a question, please press star then one. The next question is from Jeff Garro with Stephens. Please go ahead.

Jeff Garro (Managing Director)

Yeah, good afternoon, and thanks for taking the questions. Well, I wanted to ask a few more follow-ups on the end market dynamics. Throw a couple out to start, you know, really focused around customer behavior and curious if any comments you can give on what January and February bookings looked like versus December when, you know, those large pharma companies were still in the middle of negotiating those Most-Favored-Nation pricing agreements. Then as we think about lower spend early here in 2026, is that likely to result in increased catch-up spend in the back half of the year? Or is there a possibility that, you know, that piece of the budget is just unlikely to be recaptured this year?

Any particular feedback or anecdotes you're hearing from your customers to support what the likely back half behavior is?

Steve Silvestro (CEO)

Hey, Jeff, good to hear from you. Just the dynamics right now that we're seeing out in the marketplace, which is pretty consistent with everybody in our peer group that I think you guys are all either following or aware of, it is exactly what we said, right? Everyone is a little bit distracted with the MFN negotiations. Even if they're not directly in those negotiations, they're sort of in a wait and see what's going on with it. We do think that that's disruptive in the first, you know, first half of the year. That's why we've adjusted the guide to accommodate for that. We do think the business will be back to its 40/60 traditional performance in terms of revenue flow.

That would tell you that the back half will probably be a little bit stronger than the first half. In terms of, you know, how January, February, et cetera, are looking, we've already shared a contracted revenue number and told you that we did $9 million in the first half. So you'd have to, you'd have to pull that out because we know it's not repeatable. We told you sort of where we were year to date. That should give you the, you know, the info that you're looking for. You know, we feel pretty confident in the way that we're going to get to the first half and we feel more confident in the back half.

The conversations we're currently having with clients, the client satisfaction that we're hearing back from our chief commercial officer, has us feeling bullish on the back half of the year. Again, we've dropped the guide a little bit on the top line just to adjust for some of the things that we've already mentioned. We've reiterated and raised the guide on EBITDA, so that should be, I think, a pretty good signal on how we feel about the year. Happy to answer more questions around the dynamics, but I think that probably addresses what you're getting at.

Jeff Garro (Managing Director)

All right. All super helpful. Maybe to just kind of probe a little bit more on visibility and, you know, business shifts to drive more consistent results. Maybe you could update us on converting some of your DAAP arrangements to subscription. You know, I think at one point in 2025, it was greater than 5% of annual revenue, I would assume for 2025. A later update, you talked about a line of sight into moving that to 10%. Any color you could give on where that subscription mix ended exiting 2025 and how you see that progressing in 2026 would be helpful.

Steve Silvestro (CEO)

Sure. Andy, why don't I have you talk to just the conversion factor, if you'd like? I don't know if we're gonna disclose a number yet, Jeff, Andy can talk to you about the trend we're seeing, and we feel really good about it, is what I would say. Andy, why don't you take that?

Andy D'Silva (Chief Business Officer)

Yeah. We got pretty close to, you know, 10% as it relates to exiting the year on that run rate. Obviously, not for the full year. We were between 5% and 10% for the full year. As you think about it in 2026 and going forward, you know, if we continue to increase DAAP as a percent of our overall business, I believe you'd start to see a continued increase in the subscription side of the business, and DAAP is a key focus area for our growth.

Jeff Garro (Managing Director)

Great. Thanks for taking the questions.

Steve Silvestro (CEO)

Thanks, Jeff.

Andy D'Silva (Chief Business Officer)

Thanks, Andy.

Operator (participant)

The next question is from David Grossman with Stifel. Please go ahead.

David Grossman (Managing Director)

Good afternoon, guys. Thanks for taking my question. Just to kind of level set on maybe the macro assumptions underlying the revised guide for 26. You know, are you thinking that, you know, we've kind of stabilized at a level and it should be flat to up from these levels? Are you contemplating incremental degradation? Maybe you could just give us some incremental insight into how you're thinking about that and how that was embedded in the guide, the revised guidance.

Steve Silvestro (CEO)

Sure. Ed, do you wanna take that one?

Edward Stelmakh (Chief Financial and Strategic Officer)

Yeah, I can take it, yeah. Yeah. I would say, yeah, definitely a slower start to the year than we had hoped for. Our current thinking is that, as the year goes forward, these things will start to improve. Hoping Q2, Q3 is when we really see that come to fruition. Those are the signals we're getting back from the markets, that they're taking a bit of a pause, trying to digest what MFN means to their individual portfolios. They're signing up for shorter duration contracts out of the gates, but eventually they'll open up their wallets and continue to market like the kind of industry they've been for many, many years.

David Grossman (Managing Director)

Is your sense that we'll have a more of a fourth quarter, a back-end loaded year than we typically have in the fourth quarter or do you expect it'll be similar?

Edward Stelmakh (Chief Financial and Strategic Officer)

It's tough to predict, but it's kinda. I look at it in a similar way we had a few years ago, a slowdown in FDA approvals. Pharma watches certain factors like that very closely. Anytime there's any kind of disruption or change in course, they'll usually hit the pause button or pump the brakes a bit, come back strong in the back half of the year.

David Grossman (Managing Director)

Got it. On the net revenue retention, how much is the decline in the fourth quarter related to managed services or was managed services in the fourth quarter similar, you know, to what you saw in the fourth quarter last year? Just trying to get a sense because it looks like NRR dipped a little bit in the fourth quarter, and just wondering if that's really tied to the managed services dynamic or if there are other things at play there, like the reduced spending.

Edward Stelmakh (Chief Financial and Strategic Officer)

Yeah, I mean, it's partially that. It's partially also the quarters, you know, the buy-ups and the conversion to a subscription model that happened in 2025. It just smoothed out the way revenues are recognized. Those two factors contribute to the drop.

David Grossman (Managing Director)

Got it. I guess, you know, Steve, just on kind of your AI commentary, you know, when you're talking to these large pharmaceutical companies, what are they sharing with you in terms of their own internal efforts and where they want you to fill in terms of?

Steve Silvestro (CEO)

Yeah

David Grossman (Managing Director)

how they're, you know, kind of deploying AI on the marketing side of the house?

Steve Silvestro (CEO)

Yeah, sure. Happy to comment on it. I know we're looking, we're looking to see you here next week, so we can, we can chat some more on it. The large part of what they're trying to do right now is look at it for, basically internally, the way that they're structuring clinical trials, making that more efficient. You know, large language models, looking to train on those large language models. Looking to use data that they've got from places like IQVIA or Surescripts or any of the other providers that they've amassed over the years and start to deploy some of that in a more, you know, I think a direct way, and create some efficiencies around that. Those are the big things that they're looking to do.

I already shared the content creation comment data, which is a huge one. The amount of content, as everybody knows on the call, that pharma creates is enormous. If they can leverage some of these tools that are coming out to, you know, basically eliminate the manual labor associated with building all of that content and the approval process that is constrains that content from getting deployed in a timely manner, that is gonna be an unbelievable unlock for the industry. You know, the biggest frustration for pharmaceutical marketers is going through the medical, legal, and regulatory process. One of the areas that they're really looking at is trying to use AI to eliminate the need to go through that entire process the way that it's currently constituted. You could think about, like, medical simulations.

You could think about, you know, legal. Obviously, legal is a huge place that could be disrupted with this, right? On the regulatory front, same thing. Those are all places where large language models and AI can absolutely disrupt or replace what's going on in those spaces. If pharma is successful in the deployment of what really is being called by McKinsey and others Agentic AI, they'll be able to speed their time to get things to market. Drugs, you know, getting through approval and getting launched and getting deployed and all that will be rapidly, it'll be significantly faster than it currently is. That will give them way more marketing opportunity and more marketing budget to focus on execution, which is what they really wanna spend money on. That's where we sit.

We sit on the execution side, not on the-

Constantine Davides (Managing Director and Senior Equity Analyst)

Right. Yeah, it is. Thank you very much.

Steve Silvestro (CEO)

Yeah, you bet.

Operator (participant)

The next question is a follow-up from Constantine Davides with Citizens. Please go ahead.

Constantine Davides (Managing Director and Senior Equity Analyst)

Thanks for letting me ask one more. Steve, at the end of 2026, you guys announced a few new partnerships and transitioned a couple to exclusivity arrangements. Just wondering if you can talk about your ongoing efforts there. I think, you know, had an exception that that world was pretty well canvassed, but just how much more room to run is there in both, the EHR world, but also the standalone, ePrescribe arena?

Steve Silvestro (CEO)

Yeah. Thanks for the question, Constantine. It's a great one. It's important for the group to know, for everybody to know, EHR and ePrescribe are two different animals, and every EHR has an ePrescribe module that's bolted into it. In some cases, the EHR owns the ePrescribe, and it's native. In other cases, they've integrated an ePrescribe into it. Those are two different points of connectivity that we have. What we're really focused on is expanding not just our EHR footprint, but what we call our point-of-prescribe footprint as well.

The reason for that is we wanna make sure that we are actively engaging in the digital conversation with the prescriber when they are contemplating the diagnosis and prescription therapy selection and subsequently transmitting that prescription to whatever pharmacy it's going to go to after the Real-Time Benefit Check and so on and so forth. It's less about platforms that we don't have. It's more about further integrations into those platforms and making sure that we're consistently embedded in every part of the workflow that we can be. We did sign, just on your question around the exclusivity, we were able to peel back a few channel partners from competitors who had signed agreements with these specific channel partners and either failed to pay the channel partner, failed to perform, didn't deliver on what they said they were going to deliver.

Those channel partners proactively approached OptimizeRx through our channel lead, who's done a phenomenal job of building these relationships and wanted to become part of the network. To me, that is a huge positive signal that we are doing good by our partners and striving to be the best partner that we can for them, and that's why we have more people coming. I'm excited to share more about that. I'm not going to share names on this call, Constantine, but at some point, you're going to see press releases with the names and joint statements from me and those additional channel partners coming in the not-too-distant future.

Constantine Davides (Managing Director and Senior Equity Analyst)

Thanks for the additional color.

Steve Silvestro (CEO)

Did that... Yeah, you got it. Did that answer the question? Just to make sure I got it.

Constantine Davides (Managing Director and Senior Equity Analyst)

Absolutely. Yeah.

Steve Silvestro (CEO)

Okay. Thanks, man.

Operator (participant)

This concludes our question and answer session. I would like to turn the conference back over to Steve Silvestro for any closing remarks.

Steve Silvestro (CEO)

Thank you, operator. Thank you all for joining us today. I'd like to end by congratulating and thanking the entire OptimizeRx team for a tremendous 2025. We deeply appreciate their dedication and hard work as we navigate an increasingly complex and rapidly evolving digital pharma marketing landscape. Our industry is undergoing significant transformation. Our products and services are uniquely positioned to redefine how pharmaceutical brands, patients, and prescribers connect. Our mission-driven culture continues to fuel innovation and execution, enabling us to attract and retain strong partnerships while reinforcing our role as a trusted and long-term technology partner. While we remain in the early stages of what is still a relatively nascent industry, we are confident that our proven business model, solutions, and technology platform are directly addressing the evolving needs of our customers.

Our synchronized HCP and DTC marketing capabilities, powered by real-time brand eligibility signals combined with expanded functionality such as Micro-Neighborhood Targeting, allow us to deliver hyper-local, privacy-safe audiences across both patients and prescribers. These differentiated capabilities continue to expand our competitive moat and strengthen our market leadership. For the remainder of the year, our priorities are clear. We are intensely focused on increasing customer utilization of DAAP and building greater revenue predictability by transitioning more customers to a subscription-based model. Establishing a consistent recurring revenue component is a critical step as we advance toward becoming a sustained Rule of 40 company. We believe these initiatives will be transformative and central to driving long-term shareholder value for OptimizeRx. Thank you again for your time today. I look forward to speaking with you on our next earnings call and connecting with many of you at the upcoming industry conferences.

Operator, please proceed with OptimizeRx's Safe Harbor Statement.

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 of 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 were made.

Forward-looking statements in this call include statements regarding our plans to drive sustainable long-term growth, plans for shareholder value creation, converting more customers to our recurring model, becoming a sustained Rule of 40 company, strength of our operating model, experiencing minimal disruption from AI, unlocking new opportunities for profitable revenue growth, plans to make our revenue streams more predictable, plans to drive substantial operating leverage, estimated 2026 revenue and adjusted EBITDA ranges, long-term outperformance on both the top and bottom lines, continued strong momentum in the medtech sector, ability to improve patient outcome and to transform engagement across the healthcare ecosystem, ability to consistently expand relationships with our largest customers, estimation of total addressable market size, ability to capture additional market share and expand our role within the pharma digital ecosystem, market penetration, revenue growth margin, operating expenses, profitability, cash flow, technology, investments, growth opportunities, acquisitions, and upcoming announcements.

Forward-looking statements 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 in, 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, dependence on a concentrated group of customers, cybersecurity incidents that could disrupt operations, the ability to keep pace with growing and evolving technology, the ability to maintain contracts with electronic prescription platforms and electronic health records networks, and other material risks.

Risks and uncertainties to which forward-looking statements are subject could affect business and financial results are included in the company's annual report on Form 10-K for the year ended December 31st, 2023, and in other filings the company has made and may make with the SEC in the future. These filings, when made, are 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 an audio recording of this conference call will be available for replay starting later this evening, running through for a year on the investor section of the company's website. Thank you for joining us today. This concludes today's conference call. You may now disconnect your lines.