OptimizeRx Corporation Stock

Good afternoon, everyone, and thank you for joining OptimizeRx's Second Quarter Fiscal 2026 Earnings Conference Call. With us today is Chief Executive Officer, Stephen Silvestro. He is joined by Chief Financial and Strategy Officer, Edward Stelmakh; Chief Legal and Administrative Officer, Marion Odence-Ford; and Chief Business Officer, Andy 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 discuss certain non-GAAP financial measures that it believes are useful in evaluating operating performance. A reconciliation of these non-GAAP measures can be found in today's earnings release as well as in the Investor Relations section on the company's website. I'd also like to remind everyone that today's call is being recorded and will be available for replay on the Investor Relations section of the company's website.

With that, I'll turn the call over to OptimizeRx's Chief Executive Officer, Stephen Silvestro. Mr. Silvestro?

Thank you, operator, and good afternoon, everyone. Thank you for joining us for our second quarter 2026 earnings call. We're pleased to report second quarter revenue of $20.5 million and adjusted EBITDA of $4.9 million, both of which exceeded consensus expectations. Our results reflect continued margin expansion, disciplined operational execution and the resilience of our operating model despite a health care marketing environment that remains dynamic.

While revenue declined year-over-year and contracted revenue remains below prior year levels, these declines remain limited to a small number of large customers, including the one customer we discussed last quarter that again did not generate revenue this quarter as well as customers that have made heavier use of lower-margin managed service offerings in prior-year periods, services from which we have been transitioning away since the acquisition of Medicx in 2023. Outside the business with these limited customers and across the remainder of the business, we are encouraged by improving engagement and growth.

At the same time, our continued investment in platform capabilities, including recent product launches and expanded programmatic initiatives, is strengthening customer engagement and our competitive position as we move into the 2027 planning cycle. Although the timing and mix of second half revenue remains subject to some variability, our first half performance, encouraging commercial momentum and current outlook support our decision to reiterate full year 2026 revenue guidance of $95 million to $100 million and adjusted EBITDA guidance of $21 million to $25 million. Ed will provide additional details during his prepared remarks.

Over the past several quarters, we've remained focused on executing against the initiatives within our control, improving profitability, strengthening our balance sheet, expanding our technology platform and creating new avenues for long-term growth. I believe our second quarter results demonstrate the progress we've made across each of these priorities. While portions of the pharmaceutical marketing landscape continue to experience some budget timing variability and cautious spending behavior, we are encouraged by the continued stabilization we're seeing across many of our largest customers.

More importantly, the long-term secular trends driving our business remain firmly intact. Life science organizations continue shifting toward more measurable data-driven engagement that delivers value at the point of clinical decision-making. Health care marketers increasingly expect AI-enabled planning, authenticated health care audiences, measurable outcomes and seamless programmatic execution. These are precisely the areas in which OptimizeRx has invested for years and where we believe we maintain a meaningful competitive advantage.

Our existing customers continue expanding their use of our platform across additional brands, therapeutic areas and commercial use cases. During the quarter, we saw continued adoption of our AI-enabled Dynamic Audience Activation Platform, or DAAP, which increased over 30% year-over-year, while also expanding our point-of-prescribe capabilities across both pharmaceutical and med tech customers. These solutions are powered by OptimizeRx's proprietary foundational data asset, which continues to grow as more engagement transpires across our ecosystem.

We're also continuing to make progress expanding our footprint among midsized and emerging life science companies, which we believe represent one of the largest untapped opportunities within our commercial business. As these organizations increasingly seek enterprise-grade technology solutions without enterprise scale or infrastructure investments, we believe our platform is uniquely positioned to meet the demand by bridging the technology gap for them and leveling the playing field for them to be able to compete with top-tier companies.

Just as important, we continue making progress transitioning more of our business towards recurring subscription revenue, particularly within our AI-enabled software offerings, which grew 25% year-over-year. Over time, we believe this transition will further improve revenue visibility while strengthening the durability and predictability of our financial model. Taken together, these trends reinforce our confidence that the underlying fundamentals of our business remain very strong.

Meanwhile, during the second quarter, we announced 3 significant product innovations that further strengthen our competitive position while expanding our long-term opportunities at OptimizeRx. First, we announced that DeepIntent become the first health care demand-side platform to integrate directly with our authenticated EHR network. This represents an important milestone in our strategy of making point-of-care media easier to access through the programmatic platforms health care marketers already rely on. As media buying continues shifting toward programmatic workflows, we're positioning OptimizeRx as the trusted infrastructure connecting premium point-of-care inventory with the industry's leading buying platforms. The implementation is now live.

Second, we introduced our patent-pending Natural Language Audience Builder, or NLAB. This AI-powered capability enables pharmaceutical marketers and agencies to build highly customized health care provider audiences using simple natural language prompts directly within DSPs and media planning platforms. By combining our proprietary health care intelligence with intuitive AI-driven workflows, we're making it significantly easier for marketers to build targeted audiences while further embedding OptimizeRx technology into the planning tools of our customers that they're already using today.

Finally, we launched CopayCue, our next-generation co-pay activation solution powered by real-time prescribing intent. Medication affordability remains one of the largest barriers to patient adherence, and CopayCue delivers savings information directly within the prescribing workflow at the exact moment physicians are making treatment decisions. By combining real-time intent signals with our industry-leading point-of-care and point-of-prescribe capabilities, we're helping life science organizations improve patient access while delivering stronger commercial outcomes for their brands.

Individually, each of these launches represents an important advancement for our platform. Collectively, they demonstrate something even more significant, that we have entered a new phase of innovation as a company. We are evolving beyond being solely a point-of-care marketing company into being the operating system for pharmaceutical marketers. Our technology infrastructure is connecting pharmaceutical marketers, media agencies, demand-side platforms, health care providers and patients at scale through authenticated clinical workflows.

As AI becomes increasingly integrated into commercial planning and as health care advertising continues migrating toward privacy-safe programmatic execution, we believe our combination of proprietary health care data, authenticated clinical inventory and workflow integration creates a highly differentiated platform with significant long-term growth potential. This strategic evolution not only expands our addressable market but also creates additional recurring revenue opportunities that we believe will become increasingly meaningful over time.

Before turning the call over to Ed, I'd like to share an important leadership announcement regarding our finance organization. Over nearly 5 years as Chief Financial Officer, including previously as our Chief Operations Officer and most recently as our Chief Strategy Officer, Ed Stelmakh and the Board of Directors have mutually agreed on a planned leadership transition effective December 31, 2026, that reflects both the depth of talent within our organization and our commitment to prudent financial stewardship.

Over the past 5 years, Ed has played an instrumental role in transforming our financial foundation and positioning OptimizeRx for long-term success. Under his leadership, we've significantly expanded our gross margins and operating margins, strengthened our operating discipline, successfully refinanced our debt to materially improve our cost of capital, completed the acquisition and integration of Medicx, executed the divestiture of noncore assets to sharpen our strategic focus and built a deep, highly capable finance and strategy organization that positions the company well for the future. Just as importantly, Ed has helped establish the financial discipline and operational rigor that support our long-term strategy and our commitment to sustainable shareholder value creation.

As part of our long-term succession planning process, we're pleased to announce that Andy D'Silva will succeed Ed as our Chief Financial Officer, effective January 1 of 2027. Andy has most recently served as our Chief Business Officer and has worked closely with Ed and the Board of Directors and our executive leadership team on our financial strategy, capital allocation, Investor Relations, corporate development and long-range planning. He's been deeply involved in many of the strategic initiatives that have helped transform the business over the past several years, making him well prepared to lead our finance organization as CFO.

We're also pleased to announce that Heather Favazza will be promoted to Chief Accounting Officer, effective January 1 of 2027. Heather has been an outstanding leader with our financial organization and played an instrumental role as our Corporate Controller for the last 8 years, strengthening our accounting operations, financial reporting, internal controls and overall finance infrastructure. Her promotion reflects both the strength of our accounting organization and the deep bench of leadership that we've built over the past several years.

To ensure a seamless transition, Ed will remain our Chief Financial and Strategy Officer through the end of 2026. Ed has also agreed to remain in the role of strategic adviser in 2027 to ensure ample time for thoughtful and seamless transfer of responsibilities while allowing Andy and Heather to continue working closely with him as they assume their expanded leadership roles.

Transitions like these are strongest when they're the result of thoughtful planning rather than necessity, and that's exactly what this represents. We have tremendous confidence in Andy and Heather, and we're equally grateful that Ed will continue supporting the company throughout the transition. On behalf of our Board of Directors and everyone at OptimizeRx, I want to thank Ed for his outstanding leadership and the many contributions he's made during his tenure.

With that, I'll turn the call over to Ed.

Thanks, Steve, and thank you for the kind words. While this is certainly a bittersweet moment, it is also one I approach with clarity, confidence and optimism for the company's future. I look forward to continuing to drive our strategic priorities through the back half of 2026 and contributing to the company's mission in an advisory role in 2027.

I want to extend my appreciation to the Board, our leadership team, all our employees and shareholders of this company for giving me this amazing opportunity for the last 5 years. It's been a true privilege to serve as your Chief Financial and Strategy Officer, and I'm excited to see what the future brings. Now let's turn to our financial results for Q2 2026.

As always, we issued our earnings release this afternoon detailing our financial results for the second quarter ended June 30, 2026. A copy of the release is available in the Investor Relations section of our website, and additional information will be included in our upcoming Form 10-Q.

Second quarter revenue was $20.5 million, a decrease of 30% from the $29.2 million we recognized during the same period in 2025. The revenue reduction was largely contained to a limited number of large customers that utilized the lower-margin managed services in 2025, an offering from which we have been transitioning away since acquiring Medicx in 2023, and one of our large customers in 2025 that has not generated revenue this quarter as well as a decrease in demand due to macroeconomic factors, including MFN pricing dynamics.

Our expenses for the quarter ended June 30, 2026, decreased $5.4 million year-over-year to $20.6 million, primarily driven by lower cost of revenue despite being impacted by $1.7 million in severance expense associated with our previously announced reduction in force. The decrease in cost of revenue was primarily attributed to a favorable product mix resulting from not having any DTC managed service revenue this quarter and a favorable channel partner mix.

We believe various margin optimization strategies we implemented over the last 18 months continue to yield meaningful benefits. As a result, we now expect gross margins to normalize into the high 60% to low 70% range for full year 2026.

Meanwhile, we had a net loss of $0.7 million or $0.04 per basic and diluted share for the 3 months ended June 30, 2026, as compared to a net income of $1.5 million or $0.08 per basic and diluted share for the same 3-month period in 2025. On a non-GAAP basis, our net income for the second quarter of 2026 was $3.1 million or $0.16 per diluted share as compared to a non-GAAP net income of $3.7 million or $0.19 per diluted share in the same year-ago period.

Our adjusted EBITDA was $4.10 million for the second quarter of 2026 compared to $5.8 million during the second quarter of 2025. Operating cash flow was $8.1 million for the first half of 2026, and we ended the quarter with a $24.1 million cash balance as compared to $23.4 million on December 31, 2025.

As we highlighted in May, our term loan with Blue Torch Capital was refinanced with Fifth Third Bank for which we fully drew down the $25 million term loan and have access to a $10 million revolver. Our current interest rate on the term loan with Fifth Third Bank is SOFR plus 2.25%. With that said, we paid $5.3 million in principal during the quarter, which was $5 million ahead of our payment schedule, leaving our outstanding debt at the end of June at $19.7 million.

Furthermore, subsequent to the quarter end, we paid off an additional $3 million in debt. At this time, we intend to deploy at least a portion of our free cash flow to pay down the principal on our loan faster as we look to continuously lower our cost of capital. With that said, we continue to believe that our healthy balance sheet will help us execute against our operational goals.

Now let's turn to our KPIs for the second quarter of 2026. Average revenue per top-20 pharmaceutical manufacturer now stands at $2.7 million. Net revenue retention rate dipped below prior-period levels to 90%. The dip was driven primarily by a small number of large accounts optimizing spend rather than a broad-based churn. Additionally, revenue per FTE came in at $750,000. While our KPIs showed decline compared to previous quarters, we have made meaningful progress on margin expansion and operating expense management, consistent with our strategy of driving profitable growth in our space.

Based on our first-half performance and the visibility we have into the remainder of the year, we are reaffirming our previously issued full year 2026 guidance. We continue to expect revenue in the range of $95 million to $100 million and adjusted EBITDA between $21 million and $25 million.

While portions of the health care marketing environment remain dynamic, our execution year-to-date, continued product innovation, expanding book of business with select clients and disciplined expense management give us confidence in our outlook for the balance of the year. As we noted previously, we continue to expect revenue to be weighted towards the second half of the year, consistent with the seasonal purchasing patterns of many of our customers with Q4 coming in significantly higher than Q3 and likely representing 35% to 40% of our full year revenues.

With that, I'll turn the call back over to Steve. Steve?

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

[Operator Instructions] Question comes from Ryan Daniels from William Blair.

This is Dustin on the call for Ryan. Maybe just first, wondering if there's an update on the larger client you've spoken about previously. I know you probably can't get into too many specifics, but wondering at a high level, what's the update there? And what are the expectations that are baked into the back half in relation to that client?

Dustin, thanks for the question. We, right now, don't have any expectation baked into the back half for that large client coming back, but we are starting to see some progress around it that will definitely positively impact the back half. How much, we're not really prepared to say at this point. But discussions are open, and we're actively engaging there.

We also just announced -- you may have seen the announcement of our Chief Marketing Officer. That Chief Marketing Officer is coming from that client as well. So I think is prepared to kind of help us bridge the gap there and get some things right where we had the missteps that we talked about last quarter on the commercial front.

Okay. Great. Understood. So you've talked about the strategic importance of DSP. Just wondering if you can talk more about the progress with DeepIntent and if you're making any inroads with other DSPs that are out there. I think you've said that also that DSP could double your business over the next 2 years. Just what does the growth curve look like for the DSP opportunity there over the next 24 months?

You got it. So we've got great news. We've gone live with DeepIntent as of this last week. And so that's pretty exciting for us as a business. We're now starting to see bid flow happen over the platform. I don't really think we're ready to say what the uptick looks like in terms of the next couple of weeks and months, but we do think it will be very, very meaningful. And I would also say, right now, in terms of just the broader programmatic environment, 60% of the buys out in this specific space are occurring now through these programmatic channels.

And so our comment around sort of the ability to scale the business through that ecosystem is directly tied to the number of buys that we know are happening through these DSPs. And it's not a place -- those aren't funds that we've had access to in the past. So we are expanding our near-term accessible market, and that's kind of a little bit more color around the commentary. So more to come around that. We do have other DSPs that we're speaking with, but nothing that we're ready to announce on this call. But stay tuned.

Okay. Got it. And then just lastly for us, there's been some discussion with the FDA and HHS about eliminating the adequate provision framework for pharma advertising. And you know that require more disclosures with the DTC ads. How are you thinking about that potential impact on the pharma marketing budgets and channel allocation? Could that lead to some shift in TV and potentially create some incremental demand for your digital and point-of-care engagements?

Yes. No problem, Dustin. Yes, we see those moves as favorable for our business per your last comment there. Anything that would sort of limit the ability to execute across other DTC channels where we may not be engaged at scale will automatically push funds into some of the HCP-focused marketing channels where we are connected and that are sort of our bread and butter. So we have been waiting on that with bated breath.

We're not forecasting it because it's impossible for us to predict what the FDA and HHS are or are not going to do. But we're well positioned that if they do make that decision, we will benefit. It won't just be us. Everybody in our space that's focused on HCP will disproportionately benefit also. Great question.

The next question comes from Richard Baldry from ROTH Capital Partners.

If we look at your adjusted EBITDA guidance, the implication is the second half would be somewhere between $13 million to $17 million. Can you talk about, under that backdrop, what your capital allocation strategy might start to evolve to? Do you still see pretty much an exclusive focus on reducing debt? Or do you think more of a balance between that and share buybacks at current depressed levels?

Yes. Ed, I'll let you take that one.

No problem. Yes, I think our strategy, as we said in the prepared remarks, will be, first, pay down the debt. We're down to $16.7 million of outstanding principal. And then, secondly, if the price of the stock continues to drop, we have a 10b5-1 in place to trigger buying with a $10 million approved stock buyback.

Then, in terms of the second half rebound to revenue that's implied in guidance, how much of that is visible, contracted? Or how much of that is really just assuming seasonal patterns you've seen in the past sort of repeat themselves?

Yes. I mean, I think, Rich, first of all, it's good to hear your voice. We, right now, are seeing, as we've shared sort of in the previous calls, still trending more towards '24 contracted revenue seasonality versus '25, just in our progress. And that's why we're reiterating the guide that we've got out there right now versus increasing the guide.

We do think the seasonality that we've experienced in previous years is pretty much what we should anticipate for the back half of this year. We're starting to already see that. But sort of the visibility that we've given is what we've put out there. That's what we've got visibility to. And anything that's incremental above and beyond that, obviously, on the next earnings call, if we have more visibility with contracted revenue, we'll be happy to provide an update around that. But no changes right now to that. We've got to sort of iron out the one major client disruption that we've got and sort of take a look at what Q3, Q4 is going to put out before we do any updates. So good -- I would say good, solid progress as we approach the back half now.

And maybe looking at, call it, top of the funnel, can you talk a little bit about non-top 20 opportunities, whether that's new logos or existing? How are they acting sort of by contrast to the top 20 who've seen obvious issues with MFN, et cetera?

Yes. They're growing at an accelerated rate is what I think we would tell you. The -- outside of the top 20 are some of our fastest growers, both in size and percentage growth. And so that's really encouraging. We had another mid-tier account enter sort of our top 10 list just this last couple of months. And so we're really excited to see that. We'll have more to announce around that in the future, but that the mid-tier, long-tail strategy is really proving out, and we're really excited with the progress we're seeing there. Got a gap to fill on that -- one of those top accounts that -- where the disruption was, and that's going to take a little bit of time. But with the comeback of that plus the mid-tier, we think we're entering the back half of this year and then setting ourselves up for 2027 really, really nicely.

Last for me then, back to the top 20, excluding the one challenging customer. Can you talk about just activity levels within there, whether it's discussions, pipeline, again, new opportunities? How is that activity level nonquantifiable versus what it had been sort of at the depth of MFN?

The activity level has definitely increased. I would say the strategic discussions are starting to flow a lot more than they were previously. Beginning of the year, particularly, I would say, late Q4 coming into Q1 and, to a degree, a little bit of Q2, and we talked about this already, there was a lot of consternation around MFN. I think, just we talked about it, everybody in our space talked about it just because people weren't sure what to expect.

I think for the most part, manufacturers are in a place where they sort of know what the new normal looks like and they're prepared for that. And so we're starting to see engagement happen across the board. Mid-tier, long tail engaging faster because they've not really been the targets of the administration, and they've been able to kind of skate by and just business as usual and accelerate, and viewed it almost as a time to kind of skip ahead and compete more effectively with the top 20. So that's been good for them.

But we're starting to see specifically people within our top 10, 20 really reengage in meaningful ways. I'm not ready to say yet that Q4 is going to be a lightning in a bottle of buy-ups like we talk about from time to time, that happens. But we're getting some really positive buying signals going into the back half of the year that look very good.

The next question comes from Eric Martinuzzi from Lake Street.

Yes. Your comments on Most Favored Nation, it sounds like we've worked through the disruption. The other issues that you talked about, at least last quarter, were macro issues weighing on budgets, and that was everything from inflation to oil, geopolitical uncertainty. Is that still an overhang on spending by top 20?

Eric, thank you for the question. It's still a little bit of an overhang. I think there's still some consternation around macro, and pharma has been one of the largest targets of the administration, not just for MFN, but a whole myriad of reasons. So they've been a little bit conservative with budgets. But, again, per my response to Rich, we're starting to see a lot of that normalize now in the back half. And they're starting to spend more just sort of across the board to drive patient capture for the back half of the year. And I think we will benefit from that.

I do think we are -- we didn't talk about LOE at all, but we're looking at a couple of different strategic things going on in the marketplace right now, potential acquisitions, some mergers happening, a few LOE events, but they'll navigate those things. But by and large, I think the macro stuff that we discussed last quarter is starting to normalize in their approach to spend, starting.

Okay. And then, Ed, certainly enjoyed working with you. I know we've got you for another 5 months. And, Andy, congratulations on the pending promotion here. I wanted to ask about the operating expense. I know you guys went through a bit of -- some cost moves in the second quarter. Is that all behind us? In other words, is this kind of a normalized operating expense that we should use for the third quarter?

Yes. I think the current run rate from a cash OpEx to stay kind of around this rate. The only variable there may be things like bonus accruals depending on where we commence versus budget. But generally speaking, I think we'll be in that range.

The next question comes from Constantine Davides from Citizens.

Just a question on the margin profile of the business. It looks like you've lifted that outlook. So I guess a couple of questions on that. First, is that a sustainable level of profitability? Or is it more of a 2026 profile that you're talking about? Number one.

Number two, what drove the upside in the second quarter? I think you said channel mix, but I just wanted to drill into that a little bit more. And then third point on this, just your latest thinking around how profitability changes as you layer in more -- as you tap into the DSP market over time? And I guess, more specifically, the economics of those arrangements compared to traditional engagements?

Sure. Happy to chime in. It's good to hear from you, Constantine. Appreciate the question. I think we're setting the new level of profitability for the business and making sure that we're communicating that clearly. It's not episodic, that really will be the new normal. You'll see -- we may outperform that a little bit from time to time, but that should be sort of the baseline expectation of the business going forward.

And going into the macro DSP ecosystem, we don't expect that the level of profitability will drop. It will sustain that same level that we're kind of guiding to and talking about now. Most of that is being driven by favorable channel mix. As I've shared on previous calls and Ed and Andy have done the same, we've been able to bring on additional channel partners that have helped us manage our gross margin, and that's been really, I think, transformational for the business. Even with the disruption in top line revenue, we've been able to continue to generate good, solid EBITDA and cash flow and pay down the debt, all the things that we've been talking about on these calls. We're feeling pretty bullish around profitability in general and our ability to continue to generate cash and pay down the debt and do the things that we'd like to do.

So [ depending ] we get the top line back in line, Constantine, like we talked about, and we all firmly believe we will, the profitability of the business will continue to follow suit. So we think -- we're excited about that. Ed, Andy, anything else you'd add to that...

Yes. I'll add one quick thing to that. So Constantine, when we think about our business, we're really managing the business to a high 60% gross margin. We're going to have favorable quarters like you saw last 2 quarters. But that's how we think about it internally, and that's how we're going to manage the business. So when you're looking at your models, just keep that kind of stuff in mind.

Got it. And I guess not to sort of belabor the point, but in the past, you've talked about becoming a sustainable Rule of 40 company. And Steve and I guess, Andy, Ed, all of you guys, I'm just wondering what your latest view is in terms of is that still an objective? Do you think you -- as you look out, maybe you'll prioritize growth a little bit more than you had in your prior thinking? Just any kind of comments there would be helpful.

I mean, look -- go ahead, Ed.

Yes, okay. Thanks, Steve. Yes, I would say absolutely, mainly because, I mean, this year is definitely a bit of an anomaly for us. So the profitability threshold has been set. You can see that this business can be highly profitable even in a soft year. So once growth returns, which we are confident it will certainly do in 2027, it's not going to take much to get back to Rule of 40. So my view is, absolutely, we're going to be right back at it in 2027.

Constantine, does that conclude your question?

I'm all set.

That does conclude our Q&A session. Mr. Silvestro, I'd like to hand over to you, sir.

Thank you, operator. As we close today's call, I'd like to leave you with 3 thoughts. First, we continue to execute our strategy while delivering disciplined financial performance. Our second quarter results demonstrate the strength of our operating model and our team's ability to balance profitability, even in years where headwinds are present, with continued investment and innovation.

Second, we believe OptimizeRx is uniquely positioned at the intersection of several powerful long-term trends that are reshaping the life sciences commercialization environment. Health care marketers are increasingly demanding AI-enabled planning, authenticated health care audiences, measurable outcomes and programmatic activation across clinical workflows. We've spent years building the infrastructure to support exactly this moment of change in the industry. We are best positioned to be the operating system for pharma marketers because of the data-driven technology that we've built.

The announcements we made this quarter from our DeepIntent partnership to the launch of NLAB, our Natural Language Audience Builder, and CopayCue, are all examples of how we're prioritizing a culture of innovation and expanding our platform to create additional opportunities for sustainable recurring growth. Importantly, these innovations don't represent isolated product launches. Together, they further strengthen the network effects within our platform while increasing the value we deliver to pharmaceutical manufacturers, agency partners, health care providers and ultimately to patients.

Third, we remain committed to disciplined execution and long-term shareholder value creation. Our priorities remain clear: continue expanding our AI-enabled platform capabilities, increase utilization of our proprietary HCP and DTC networks, accelerate adoption of our recurring software solutions, expand programmatic access through additional strategic partnerships, deliver profitable, sustainable growth while maintaining disciplined capital allocation.

We believe the investments we've made over the past several years have positioned OptimizeRx to capitalize on the continued digital transformation occurring across health care. While the market environment may continue to experience periods of variability, our long-term opportunity has never been more compelling. It's an exciting time to be a part of the OPRX story.

Before we conclude, I'd like to again recognize Ed for his tremendous leadership and contributions to OptimizeRx over the past 5 years. He's been an outstanding partner, trusted adviser and leader, helping transform our financial foundation while positioning the company for its next phase of growth. On behalf of our Board, our employees, our shareholders, Ed, thank you very much for everything that you've done for OptimizeRx.

Finally, I'd like to thank our employees for their continued dedication and execution, our customers for their partnership and trust and our shareholders for their ongoing support. We appreciate you joining us today and look forward to updating you on the continued progress of the quarter. Operator, back to you.

Thank you, Mr. Silvestro. 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.

Forward-looking statements in this call include statements regarding orderly transition of finance leader responsibilities; the company's financial and growth strategy, including continued margin expansion, disciplined operational execution and resilience of its operating model; company's revenue decline being limited to a small number of large customers; company's product innovation, strengthening company engagement, competitive position and expansion of long-term opportunities; company improving its profitability, strengthening its balance sheet, expanding its technology platforms and creating new avenues for long-term growth; company maintaining meaningful competitive advantages; company's expansion into midsized and emerging life sciences companies representing one of the largest untapped opportunities; company platform being uniquely positioned to meet the demands of customers; company's ability to create a highly differentiated platform with significant long-term growth potential; company's strategy of driving profitable growth; company being well positioned to capitalize on significant opportunities and company's ability to create long-term value for its shareholders.

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 networks -- other material risks. Apologies.

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 31, 2025, 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's 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 Relations section on the company's website.

Thank you very much for joining us today. This concludes today's conference call, and you may now disconnect your

Good afternoon, everyone and thank you for joining OptimizeRx's First Quarter Fiscal 2026 Earnings Conference Call. With us today is Chief Executive Officer, Stephen Silvestro. He is joined by Chief Financial and Strategy Officer, Edward Stelmakh; Chief Legal and Administrative Officer, Marion Odence-Ford; and 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, Stephen Silvestro. Mr. Silvestro, please go ahead.

Thank you, operator and good afternoon to everyone joining us for today's first quarter 2026 earnings call.

We delivered a solid start to the year, which exceeded consensus estimates on the top and bottom line. Revenue for the first quarter was $19.8 million and adjusted EBITDA was $3.3 million. While we're pleased with our performance in the quarter, the broader health care technology operating environment continues to evolve. We're seeing ongoing softness in our contracted revenue base relative to prior year levels, largely driven by what appears to be short to intermediate-term disruption from last year's most favored nation pricing dynamics and other macroeconomic factors, which are resulting in more cautious budget allocations, contract durations and in some cases, the delaying of campaign timing and scope. That said, we want to be clear, we do not view these pressures to endure. In fact, we've made good progress with several large manufacturers at this point, getting spend levels back up and the issue is more limited in scope than it previously was.

The long-term shift within life sciences toward digital data-driven engagement is accelerating and OptimizeRx is well positioned to capitalize on this growth. Moreover, we continue to see encouraging signs of long-term adoption and expansion by our customers. Our AI-enabled DAAP solution grew 60% in the first quarter, which highlights continued product market fit and customer adoption. In addition, another one of our top pharmaceutical clients has continued to broaden its use of point-of-prescribe solutions across multiple oncology brands. What began as targeted engagement within specific indications has evolved into a scaled multi-brand deployment driven by measurable improvements in prescriber engagement and campaign performance. This type of expansion underscores our ability to grow within large enterprise accounts.

We are seeing similar momentum in medtech, where we are driving increased adoption of DAAP to identify and activate high-value prescriber audiences. Initial pilot programs are expanding into multimillion-dollar engagements, further reinforcing the repeatability of our growth model. From an operational standpoint, our business remains very strong as we continue to see consistent validation of our platform across both pharma and med tech customers. At the same time, we are expanding our presence with mid-tier and long-tail life science companies, which we believe represent a significant and underpenetrated growth opportunity for OptimizeRx. We are also making continued progress in shifting a greater portion of our revenue mix towards subscription-based models, particularly within DAAP. Tied to our AI-enabled DAAP solution, which showed growth in the first quarter, our DAAP subscription revenue also grew by 45%. This transition is an important step in improving revenue visibility and building a more durable and predictable financial model over time.

Despite seeing measurable growth within our business, macro headwinds are still present and we have less visibility on our full year. Given this, we are updating our full year 2026 guidance to reflect a more conservative revenue outlook. We now expect revenue to be in the range of $95 million to $100 million. Importantly, we're maintaining our adjusted EBITDA guidance of $21 million to $25 million. This reflects both the strength of our operating model and the proactive cost optimization initiatives we have implemented. We've taken steps to align our cost structure with the current environment by prioritizing strategic investments, optimizing discretionary spend, deploying new agentic technology tools within our own business for better efficiency and leveraging the scalability of our largely fixed cost platform.

These actions are expected to reduce cash operating expenses by approximately $3 million on an annualized basis, including savings of approximately $1 million in 2026 for an in-year benefit, excluding any severance-related impacts. In addition, our gross margin optimization initiatives are continuing to deliver positive results and we now expect full year gross margin to be in the high 60% range. We've also strengthened our financial position through the recent refinancing of our term loan. Ed will provide more details later in our presentation but suffice it to say that the new term loan is expected to lower our interest expense by approximately 625 basis points. We want to thank Blue Torch for being a good partner over the last 2 years.

As we recently announced, we continue to take the important steps to expand our platform capabilities and connectivity into the broader ecosystem. We are now enabling demand-side platforms that control more than 80% of digital promotional dollars to connect directly into OptimizeRx proprietary EHR network. This technical evolution of our platform and expansion in our go-to-market strategy marks a significant opportunity for the business and we anticipate it will drive outsized growth through the planning season and into 2027, providing programmatic access to DSPs through our network enables media buyers to activate scalable point-of-care and point-of-prescribe campaigns within their existing programmatic workflows, effectively positioning OptimizeRx as a supply-side platform for marketers looking to engage health care providers directly within the clinical workflow.

Today, we estimate that we are utilizing less than 10% of our available inventory across the network through traditional HCP marketing initiatives. We believe programmatic activation, the preferred way for pharma media agencies to buy these solutions has the potential to significantly increase utilization over time. Given that programmatic has captured the majority of media spend across other verticals, we see a meaningful opportunity for this channel to scale and potentially become comparable in size to our current HCP business over the long term.

As the question has been raised before, I want to briefly address artificial intelligence and reiterate that we do not view AI as a disruptor to our business. Rather, we see it as a potential accelerant. As our customers realize efficiencies in areas like content creation, we expect those savings to be redeployed into execution and engagement, areas where OptimizeRx is particularly well positioned. Finally, while we are navigating short-term pressures, our core value proposition remains unchanged and our long-term outlook remains highly optimistic. We are deeply embedded in our customers' workflows. We're delivering both meaningful and measurable ROI and we are operating in a large, dynamic and growing market with significant long-term opportunities.

And with that, I'd like to turn the time over to our CSFO, Ed Stelmakh, who will walk us through the financial details. Ed?

Thanks, Steve and good afternoon, everyone. As with all our calls, a press release was issued this afternoon with the results of our first quarter ended March 31, 2026. A copy is available for viewing and may be downloaded from the Investor Relations section of our website and additional information can be obtained through our forthcoming 10-Q.

First quarter 2026 revenue was $19.8 million, a decrease of 10% from the $21.9 million we recognized during the same period in 2025. We believe this decrease was driven in part by a decline in low-margin managed services revenue, revenue reduction on a major client account and a more cautious budget allocation and shorter program duration commitments, driven by most favored nations pricing and other macroeconomic challenges. Our expenses for the quarter ended March 31, 2026, decreased $4.6 million year-over-year, primarily driven by lower cost of revenue and G&A. The decrease in cost of revenue was related to a favorable product mix as we didn't have any DTC managed service revenue this quarter as well as favorable channel partner mix.

We believe various margin optimization strategies we implemented over the last 12 months continue to yield significant benefits. As a result, we now expect gross margins to normalize into the high 60% range for the full year 2026. GAAP net loss narrowed to $0.5 million or $0.03 per basic and diluted share for the 3 months ended March 31, 2026, as compared to a net loss of $2.2 million or $0.12 per basic and diluted share for the 3 months during the same period in 2025. On a non-GAAP basis, the company's net income for the first quarter of 2026 increased to $2.7 million or $0.14 per diluted share as compared to a non-GAAP net income of $1.5 million or $0.08 per diluted share in the same year ago period. Meanwhile, our adjusted EBITDA increased to $3.3 million for the quarter compared to $1.5 million during the first quarter of 2025. Operating cash flow came in at a negative $0.5 million for the first quarter, which was primarily due to the payout of 2025 bonuses and fourth quarter 2025 sales commissions during the first quarter of 2026.

Meanwhile, our cash balance at the end of the quarter was $20.2 million as compared to $23.4 million on December 31, 2025. Our debt balance at the end of the first quarter was $23.6 million and we paid off $2.7 million of principal during the first quarter. Meanwhile, subsequent to the first quarter, our term loan with Blue Torch Capital was refinanced with Fifth Third Bank, through which we have a fully drawn $25 million term loan and have access to a $10 million revolver. Our current interest rate on the term loan with Fifth Third Bank is SOFR plus 2.25% versus SOFR plus 8.5% we had with Blue Torch Capital, which represents approximately $1.5 million in annual interest expense savings. With that said, given our strong working capital position, we are confident in our ability to fund our operating needs as well as key strategic priorities as we continue to strive to become a sustained Rule of 40 company.

Now let's turn to our KPIs for the first quarter of 2026. Average revenue per top 20 pharmaceutical manufacturer now stands at approximately $2.8 million, with these top 20 companies representing 52% of our business in Q1 2026. Net revenue retention rate remains a strong 110%. Meanwhile, revenue per FTE came in at $801,000, topping the $710,000 we had posted in Q1 2025. These metrics reflect the stickiness of our solutions with existing accounts as well as our highly leverageable operating model. As Steve mentioned, despite seeing measurable growth within our business, macro headwinds are still present and we have less visibility on our full year.

Given this and as Steve stated before, we're updating our full year 2026 guidance to reflect a more conservative revenue outlook. We now expect revenue to be in the range of $95 million to $100 million but continue to believe our operating leverage will result in our adjusted EBITDA being between $21 million and $25 million. Finally, we continue to expect revenue to be weighted towards the second half of the year at close to 40-60 split.

Now with that, I would like to turn the call back over to Steve. Steve?

Thank you, Ed. Operator, could we now please move to Q&A?

[Operator Instructions] Our first question comes from the line of Jared Haase with William Blair.

I guess I'll just start with the updated outlook here. I guess I just wanted to put a fine point on things. Like what specifically changed in terms of how you were thinking about the shape of the year relative to when you last reported back in March? And I'm curious how much of the revised revenue guidance here would you attribute to just still seeing delays in decision-making with pharma clients? Or if it's more that these decisions are coming through and you're just seeing less spend commitment here in 2026 compared to maybe what you anticipated back then? And then, I guess, with that in mind, is there any way to contextualize your level of visibility at this point in terms of the new guidance?

Jared, thanks for the question. I'll take this one and then Ed and Andy can chime in. So I think what we had in March was initial visibility on where we thought the year would possibly turn around after Q1, where we'd have more visibility into the back half of the year and specifically with a handful of clients that were reacting to sort of the administration's position around MFN, how they were operating with budgets, sort of post their initial reaction, some of those have actually come back and come back stronger even though the contract duration periods have been shorter. And I think we've articulated that kind of publicly.

We said it in the last earnings call and we said it again this time. But we've got one specifically larger client where there's continued disruption. And I think that when we're talking about asynchronous disruption at a client level, one of this size, we've got to work through it. So it just gives us less visibility on full year guide, which is why we're being a little bit more conservative in getting it back around to where we think we're going to land for certain. I don't expect that we'll need to adjust again but we're giving the best view that we've got right now.

Ed, do you have anything?

No, I think you've got it covered. Yes.

Okay. That's helpful. And then I guess you characterized it as short to intermediate-term pressure. And I guess I don't know if there's any way to clarify exactly what you mean behind that. And as we think about sort of the end of year here, is this something that maybe persists in '27? Or do you think of it as sort of contained to this year?

No. We think it's contained to this year. And look, the reality is, we could see in -- later in the third quarter and the fourth quarter, increased buying from these set of clients and particularly one client where there was disruption. But our best view right now is that there's going to be disruption through the end of 2026. Looking into 2027, there's nothing mechanical wrong in any of these businesses and certainly in our business, as you've seen from the expanded gross margins and just the way we're operating the business with increased leverage and drop-through, getting the debt paid, refi-ing it, lowering the interest expense. Operationally, it's never been stronger. So we are communicating what's going on with the top line as one -- as we should.

But we have every confidence that 2027 is going to be pretty spectacular. And I think the connection to the DSPs, you saw the announcement around that. That is a very big deal for this business. It's something we've been working on for a number of years. We're the first ones to really connect at scale to this ecosystem. And so we're pretty excited about what it means both for the top line and for our clients who are moving in the direction of buying this way. So we're pumped for the whole team.

Our next question comes from the line of Jeff Garro with Stephens.

Wanted to follow up a little bit on the MFN disruption and maybe more specifically your comments that you've made around contract duration. And I guess that relates to kind of overall visibility. I think last quarter, you said contracted revenue was around 15% to 20% behind where you were in the prior year, excluding the managed services piece. And that was mainly because of customers moving to shorter contract duration. So curious what you saw in the first quarter and even through April and into May here about that client renewal behavior and interest in extending duration, renewal behavior and your expectations for the back half of the year?

Yes. Thanks, Jeff. Good to hear your voice. Yes, we -- first half of the year, we were off 15%, 20% in contracted revenue. We're still right in that same area, that same zone. And most of that is being driven by the shorter contract duration that's outside of the initial managed service sunset. So typically, what's happening is the commitments are just shorter than they would be. They normally would be 6 to 12 months and our contracted revenue methodologies we're calculating the full value of the contract against the backlog, as I think everyone knows. And so when you've got a shorter contract duration, it gives you less visibility. It means you've got to be on the hook for the next quarter, renewing that and then the next quarter renewing it again. And so it is a little bit less visibility, although what I will say is that people are continuing to renew. We are seeing the flow of business continue to move. And we've had 2 or 3 accounts that have really accelerated between the time we had the first earnings call and the time we're doing this call.

And so that is really good news. The challenging news, Jeff, is I think still we have one major client that's still working through some challenges. Part of those are MFN related. Part of them, honestly, is just we didn't execute well in that account and we need to improve. We sort of know what's -- where we fumbled the ball a little bit there. We've had great conversations with their leadership team and there's a plan to get things back on track. And our team has taken good ownership of that and is moving forward. So I think we feel very confident it's short term. We're excited about the innovation and all of our partners are very excited about the innovation announcements that we've just made. So we're looking forward to pressing ahead. But yes, contracted revenue is still the challenge until we pull through that.

Understood. I appreciate all those comments. And one more for me. Did want to ask about demand activity by customer size, kind of thinking about the top 20 pharma versus that kind of mid-tier long-tail cohort. And the top 20 pharma through your KPI has been declining as a percentage of revenue over the last year. Where does that trend go from here? And how should we think about kind of sales cycle, renewal rates and budget behavior from that mid-tier long-tail cohort?

Yes. No problem. Thanks for the questions. We are very excited internally about the mid-tier long tail. We've seen tremendous progress in that cohort of clients. We've got a team that's now focused on that. And so we're starting to see some really encouraging growth there. We're also seeing it, I think I shared previously in the med tech sector, it was in my prepared remarks as well, where clients that basically weren't clients previously weren't even in the market that we were speaking to are coming to the table with multiple million dollar investments in the platform. And so we're very, very encouraged by that.

On the top 20, we still continue to see great engagement and we are so, I would say, underpenetrated in terms of the brands that we're servicing in the top 20. We do have sort of a footprint in each one of the accounts but the ability to expand where we've landed still remains a tremendous opportunity for this business. And we've got an excellent, excellent sales team that have my full faith and trust and they continue to push and execute well. I have every belief it will be a solid finish from them and prep for 2027, which is really what we're focused on right now.

Our next question comes from the line of David Grossman with Stifel.

Steve, I'm wondering if you just -- it sounds like there's one particular client that may be off more or having kind of an outsized impact on your growth rate this year. Is there anything unique about the issues that client is having? Or was that the same client that there were some execution issues on your end?

No, that's the same client. I mean, oftentimes, David, we're -- and by the way, it's great to hear your voice. I can't wait to see you next week or week after next. Oftentimes, we have these sort of asynchronous events that happen at a client level where a client will change an agency or the team will be swapped out. There'll be turnover, people are making decisions and we've been chatting long enough for you to know that, that happens often in this space and that's just sort of what you need to deal with. The DAAP's -- the DAAP growth at 60% and particularly the 45% growth on the subscriptive basis is designed to help get rid of that lumpiness and it's definitely helping. This was not a DAAP client where the disruption was in place. And so that was sort of bimodal buys even at scale.

But when there is disruption amongst the ranks, turnover in employees, making decisions, et cetera, it is challenging and we didn't execute as well as we needed to in that area and we need to improve it. The good news that I -- we will share is that, we since visited with that leadership group, had very open conversations, great feedback. And I think that, that relationship has been revindicated and we'll be in a pretty good spot. But again, too early to count it as part of our forecast and guide. We've got to work with that group and make sure that we deliver.

So just kind of assuming it takes its ordinary course is that the headwind for the next 3 quarters and once you comp it next -- in March of next year, we're kind of beyond that? Or could it [indiscernible]

No. I think we will address it in the renewal cycle of this year. I think we'll probably see some buying here in the second half of the year and that's the hope and goal with that group. And then I think into 2027, we'll be well positioned. But we needed to take a few lumps, I think, in the first half and correct a little bit of the way we were engaging with them and bring it back in the second half.

Got it. Well, thanks for the transparency on that one. And then on the DSP side, the connection to the DSPs, what's the sales cycle? What does it -- how long does it take for that kind of flywheel to start with these media buyers where that actually can start contributing to revenue growth in a meaningful enough way that we would see it?

Yes. I think we'll start to see early innings of this probably towards the later part of the back half of this year. Q4, we should start to see some revenue start to flow. Going into the renewal cycle for 2020 -- in '27, we will see it really flow. And the way the DSPs operate is once there's a connection there, right, it starts a bidding system where agencies -- and agencies are the principal ones that are buying in these ecosystems through the demand-side platforms. So it will follow that typical brand plan RFP process but they have the ability to accelerate, set the parameters within these DSP platforms and start-to-action buys really. I would call them passive buys because it's -- you're not really engaging directly with the company other than setting up the pricing, setting up the bids, asking the questions of the sales team around it.

And then the job of our sales team really is to continue to engage with those clients and make sure they're utilizing those [ modices ] of acquisition, right, make sure they're buying through those DSPs. They know it's available. It's in their favorite DSP of choice and they can go in and action those buys.

And what -- can you just give us some examples of what the revenue could look like, whether it's by -- I assume it's by individual drug, right, or by buyer? I'm not quite sure how to think about what [indiscernible]

Yes. Revenue could be fairly huge. I'm not ready to share projections on it yet. In the prepared remarks, we shared that it's 80% of the total digital spend in the space. So that gives you a number. I know you know the TAM like the back of your head in the space, back of your hand rather. And so it is very large, David, potential. But it's too early for us to call a potential revenue on it because we're the first ones that are doing it at scale. There are other companies that have connected maybe a piece of the network or one EHR provider and sort of played with it. But at scale and our size, we're the first to actually go all in. And so there will be subsequent announcements that we'll share as we roll out the partnership agreements and we'll have more to say around that but I don't want to jump the gun here.

Sure. And just one -- if I could just one other -- sneak one in here. Is there any managed service -- was it 0 managed services in the quarter and in the guide? Did I hear that right?

That's correct.

Yes. Thanks, Andy.

And we have reached the end of the question-and-answer session. I would like to turn the floor back to Steve Silvestro for closing remarks.

Thank you, operator. I want to close by reiterating our confidence in the long-term opportunity ahead of us. While we are navigating near-term pressure, we're excited about the transformation within life science towards digital data-driven engagement, which remains a powerful and durable trend. OptimizeRx is uniquely positioned at the center of that transformation. Our point-of-care and point-of-prescribe network, combined with our data-driven targeting capabilities allow us to deliver value at critical moments in the patient journey, all of which will now be available to customers programmatically to buy the way they like to buy.

Our priorities remain consistent. We're focused on increasing utilization of DAAP, continuing on our transition toward a more predictable subscription-based revenue model and driving sustainable, profitable growth over time. I would also like to thank our employees for their continued dedication and our customers for their partnership as we navigate this evolving landscape. Thank you again for your time today. We look forward to speaking with you at the upcoming investor conferences and on our next earnings call. Thank you.

Good afternoon, everyone, and thank you for joining OptimizeRx' 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; and 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.

Thank you, operator, and 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 Medix 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 to $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.

Indeed, 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 received regarding artificial intelligence. Our business has experienced minimal disruption from AI and we do not expect to be disrupted in the future. We are not a commoditized software solution or a strategic partner to life science companies, supported by a proprietary and highly valuable communications network that connects pharmaceutical manufacturers with health care 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 1 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 that 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 a 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, multichannel 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 and optimize Rx 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 health care 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 DAP and micro neighborhood targeting.

These tools are redefining how pharmaceutical companies, physicians and patients connect improving patient outcomes and transforming engagement across the health care ecosystem. Our reach across both point-of-care and direct-to-consumer channels provides a durable competitive advantage. We believe OptimizeRx as 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 multibillion-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.

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

Thanks, Steve, and good afternoon, everyone. A press release was issued with the financial results for our fourth quarter and fiscal year ended December 31, 2025. A copy is available for viewing and may be downloaded from the Investor Relations section of our website and additional information can be obtained through our forthcoming Form 10-K. Fourth quarter revenue came in at $32.2 million, and this was largely in line with our previously communicated expectations as we continue to convert more of our DAP agreements into subscription revenue is spread more evenly over the course of the year.

In addition, [indiscernible] came in at a more moderate level than in 2024. Gross margin increased from 68.1% in the quarter ended December 31, 2024, and 74.8% in the quarter ended December 31, 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 will 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 ended December 31, 2025, and decreased by $2.9 million year-over-year, largely due to lower cash OpEx as we saw benefits from the positive position cost reduction measures be 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 31, 2025. as compared to $13.4 million on December 31, 2024.

We were able to increase our cash balance throughout the year despite paying off $8 million of principal during 2025, and 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 look to utilize free cash flow to pay down debt at an accelerated rate and opportunistically look to repurchase shares. Now I'd like to turn to our KPIs for the 12 months ended December 31, 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 remained strong at 116% and revenue per FTE came in at $839,000, stopping 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 and $114 million and adjusted EBITDA between $21 million and $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.

And with that, I'll turn the call back over to Steve. Steve?

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

[Operator Instructions] The first question comes from Ryan Daniels with William Blair.

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 17 companies that are in MFM negotiations? Or is it broader across the entire client base. That's number one.

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's going to mean for them. So the contracting duration has started to shorten a little bit from maybe 6 to 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 will normalize over time, and we think it's going to normalize over time as they get through it. And outside of those that I think it's really just over conservatism to the first quarter. That's sort of our stance. And that's what we're hearing people are just being cautious. .

Okay. And are you seeing any nuances between D2C and HCP marketing? Are you seeing pressure on both of those from your partners?

Yes, 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.

Okay. Okay. That's helpful. And 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 were some specialty messaging and higher-margin channels. Can you go into a little bit more detail on 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 maybe in a given quarter, you might be able to do that again and drive margins through those specialty messages.

Ryan, yes, thanks for the question. Yes, so I guess 2 parts here. First of all, what happened in Q4 2025. So we did have a very positive very favorable mix of channel partners that we utilize to drive our messages. And as you know, we can pick and choose which channel partners 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 DAP. So 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 the equation, and running it through the year. We can do it theoretically, but I don't see us doing this on a regular basis throughout the year.

Okay. I appreciate that. And then maybe last question, I'll go back to Steve. You mentioned you're not seeing any disruption from AI. But would love to hear your purview on how it's actually helping your operations. I know you have used AI and some of your kind of real-time analytics and product deployment in the past. So just curious what AI has meant to you maybe over the last quarter or 2 and what you're investing in as we look forward over the next few years to enhance your offering your ROI for clients.

Yes. No problem, and happy to talk to it. And it's actually an extension of what Ed just mentioned, which is everyone's pretty high up on the agent AI deployment across the board. As you know, we've been is now for years. So it's not anything new for OptimizeRx. But what it does is create efficiency and speed with an organization, you still need human input to get things to actually move, but what it will enable us to do is get clients to stop spending money on things like content creation or other stuff where they weren't 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.

And so we're excited about the IP. We don't see it as disruptive to us at all. We see us as an enabler of people adopting more AI. And 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 due for OptimizeRx as more people adopt the genetic and other components as they either are getting out there. It allows us to be more efficient with channel partner distribution, message distribution and physician identification. And so we are welcome 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. And so for me, I'm very excited about it. I'm trying not to overhype it, but it's a positive not positive for us. I appreciate you calling it out.

The next question is from Eric Martinuzzi with Lake Street.

Yes. 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 is not in, 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?

Yes, 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% to 20% off of where we normally would be. And that's mostly due to the timing of the contracting, 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 have seen the same time last year or years previous. And we think that's -- we're not panicking about that. We think that's going to adjust over time, and we think as we get to the midyear, we'll start to see that the contracted revenue numbers will take care of themselves and normalize themselves.

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

Yes. I think you got it right, Steve, 15% to 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 ahead or behind. But you should give you a little bit 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.

So that's missing from the equation this year to a large extent. And also shorter duration contracts are also hitting us a little bit out of the gates, but 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 2 of this year, normalizing their spending within the year and coming back strong in the back half of the year.

And 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?

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

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

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

The next question is from Constantine Davides with Citizens.

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?

Really, what it is, 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. So if you think about what OptimizeRx is evolving into is a commercialization partner for a lot of these assets, taking new -- 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 agencies, hundreds of sales reps out on the street and we're able to fill that gap very seamlessly in a cost-efficient, effective way. .

And the growth in the mid-tier and the long tail is, I would say, has exceeded our expectations the uptick there is faster than we were even initially anticipating, which is a really, really good sign. And coming back to one of the questions that Ryan had around the people that are negotiating on the MSN front, all of those are top -- the top 10 manufacturers, right? It's the [indiscernible] of the world and the Pfizers and everybody else that people are familiar with household names, but the volume of specialty pharmaceuticals is actually still coming out of the mid-tier and the long tail, the biotech sector. And so it's a particularly interesting opportunity for our business. So we're honing in on. That's a great question.

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

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

Thanks, Steve. Yes, so we're going to look at every opportunity as it comes to us. As you know, historically, we've paid down debt with all our excess cash flow. And the plan is to continue to do that as much as possible this year as well, but also we'll gauge it against the opportunity to come in and buy back our stock at the right price point. So I guess the easy answer to your question is it depends. But in most cases, I think you can expect us to spend that money on being down the debt.

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

So NRR in that case, as I said, consistently, we're shooting for anything above 100% as a good marker. So we can't really unpack 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%.

[Operator Instructions] The next question is from Jeff Garro with Stephens.

I want to ask a few more follow-ups on the end market dynamics. I throw a couple out to start really focused around customer behavior. And curious any comments you can give on what January and February bookings look like versus December when those large pharma companies were still in the middle of negotiating those most favorite nation pricing agreements. And 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 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?

Yes. Jeff, good to hear from you. So 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 are aware of 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 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 -- and so that would tell you that the back half will probably be a little bit stronger than the first half. In terms of 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 have to pull that out because we know it's not repeatable and then we told you sort of where we were year-to-date. So that should give you the info that you're looking for. 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.

And 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. But 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. And 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 [indiscernible].

All right. All super helpful. And maybe just kind of probe a little bit more on visibility and the business shifts to drive more consistent results. Maybe you could update us on converting some of your DAP arrangements to subscription. I think at 1 point, in 2025, it was greater than 5% of annual revenue would assume for 2025 and a later update you talked about a line of sight into moving that to 10%. So any color you could give on where that subscription mix ended exiting 2025 and how you see that progressing in 2026 would be helpful?

Andy, why don't I have you talk to just the conversion factor, if you'd like. And I don't know if we're going to disclose a number yet, Jeff, but 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? .

Yes. So we got pretty close to 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, if we continue to increase DAP as a percent of our overall business, I believe you start to see a continued increase in the subscription side of the business and GAAP is a key focus area for our growth.

Next question is from David Grossman with Stifel.

So just to kind of level set on maybe the macro assumptions underlying the revised guide for '26. Are you thinking that 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. .

Sure. Ed, do you want to take that one? .

Yes. I can take. Yes. So I would say, 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. And those are the signals we're getting back from the market, they've taken a bit of a pause, trying to digest what MFN means to their individual portfolios. So they're signing up for shorter duration contracts out of the gates, but eventually, they will open up their wallets and continue to market the kind of industry, they have been for many, many years.

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

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

Got it. And 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 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. I'm just wondering if that's really tied to the managed service dynamic or if there are other things that play that like to reduce spending.

Yes, I mean, it's partially that, especially also the quarters, the buy-ups and the conversion to a subscription model that happened just smoothed out to 11 year revenues are recognized. So those 2 factors contributed to the drop. .

And I guess, Steve, just on kind of your AI commentary, what -- when you're talking to these large pharmaceutical companies, what what are they sharing with you in terms of their own internal efforts and where they want you to fill in in terms of how they're kind of deploying AI on the marketing side of the house.

Yes, sure, happy to comment on it. And then I know we're looking to see you here next week, so we can chat some more on it. But 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, large language models, looking to train on those large language models. Looking to use data that they've got from places like IQVIA Surescripts or any of the other providers that they've been masked over the years and start to deploy some of that in a more, I think, a direct way and create some efficiencies around that.

So those are the big things that they can do, and I already shared the content creation comment there, which is a huge one. The amount of content, as everybody knows on the call, that pharma creates is enormous. And if they can leverage some of these tools that are coming out to 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 going to be an unbelievable unlock for the industry.

The biggest frustration for pharmaceutical marketers is going through the medical legal and regulatory process. And 1 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. So you can think about like medical simulations, you could think about legal, obviously, legal is a huge place that could be disruptive with us, right? And then 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.

And so pharma is successful in the deployment of what really is being called by McKinsey and others a genetic AI. They'll be able to speed their time to get things to market. So drugs getting through approval and getting launched and getting deployed and all that will be rapidly be significantly faster than it currently is, and that will give them way more marketing opportunity and more marketing budget to focus on execution, which is what they really want to start. And that's where we sit. We sit on the execution side.

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

One more. Steve, at the end of '26, you guys announced a few new partnerships and transitioned -- it looks like transitioned a couple to exclusivity arrangements. So just wondering if you can talk about your ongoing efforts there. I think the exception that, that world was pretty well canvas, but just how much more room to run is there in both the EHR world but also the stand-alone prescribing describing arena

Yes. Thanks for the question, Constantine. It's a great one. So it's important for the group to now for everybody to know, EHR and e-prescribe are 2 different animals. And every EHR has an e-prescribe module that's bolted into it. In some cases, the EHR owns that you prescribe, and it's native. In other cases, they've integrated and you prescribe into it. So those are 2 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. And the reason for that is we want to 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 is going to go to after the real-time benefit check and so on and so forth. So 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, be able to perform, didn't deliver on what they said they were going to deliver. And so those channel partners proactively approach to OptimizeRx through our channel lead who does a phenomenal job relationships and wanted to become part of the network. And 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. So 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 join statements from me and those additional channel partners coming in the not-too-distant future.

Yes, you got it. Did that answer the question? I just want to make sure I got it. .

Absolutely.

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

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, and our products and services are uniquely positioned to redefine our 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, solution 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 hyperlocal 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 and GAAP 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.

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 reoccurring 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 med tech sector, ability to improve patient outcome and to transform engagement across the health care 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, gross 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 31, 2023, and 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 a recording of this conference call will be available for replay starting later this evening running through for a year on the Investors section of the company's website. Thank you for joining us today.

This concludes today's conference call. You may now disconnect your lines.

[Audio Gap] The Street and also to our clients and investors that we're going to give more visibility on our visibility into the future as we've been migrating more toward a predictive model we've quoted in the past, subscripted momentum. And so we're going to continue to push that throughout the remainder of the year. And as a result of that, we're now getting more visibility into the out years, including 2026.

In terms of the RFP situation, Ryan, RFP season has been very strong for the business. We do see more people coming into the digital space and making investments on the client side. And we're seeing equal parts, HCP and DTC at this point, interest in the RFP cycle I would say the parts of [ DTC that we cover at OptimizeRx are CTV, ATV, the pieces that you're aware of. And in the event that we have a linear television ban or reduction or any of those pieces our view and thesis is that our solutions that will continue to benefit disproportionately from those types of moves. So I would say, at this point, both DTC and HCP are looking very healthy. I appreciate the question.

And the next question comes from Richard Baldry with ROTH Capital.

When you look at the implied guidance for fourth quarter revenue, it'd be actually slightly down year-over-year at the top end of guidance. you talk about either any onetime year-ago issues or listen because your net retention would argue that, that's sort of difficult to do.

Yes. Thanks for the question, Rich. Good to hear from you. So I mean, what we're looking at is really a full year guide at this point and trying to give a good range of what we believe will come in at. We moved away from quoting pipeline as everybody on the call knows and have moved principally towards contracted revenue what our real visibility is. And so the new guidance that we've updated with is truly what our visibility is. It doesn't count bluebirds that might happen, buy-ups that might happen that are not accounted for right now where we don't have visibility in years past, we would have thought about that more in terms of on pipeline and probabilities.

But what you're seeing in the guidance now is, I think, reflective of our true visibility that we know we can deliver on. Again, we're going to continue to be very transparent, very conservative, not sandbagging, but look to beat the numbers that we put out there every time. So hopefully, you appreciate the transparency and conservatism.

Just that -- Yes, sorry. Just to add a little bit. As Steve said, I think we do need to look at it on a full year basis rather than quarter-by-quarter. As you know, Q1, 2 and 3 have been extremely strong. So it is more of a smoother sort of leasing this year than it was in the past. So again, I would just encourage you to look at the full year performance versus last year.

And part of it is the enhancement to the revenue model, right, Rich, part of it is we've been successful at migrating away from periodic revenue drops and getting to a more smooth revenue model. And so that's what Ed is referring to there.

Got it. It's just implicitly a little hard to look at it as a full year, you only have 90 days left. So same question I think I'm going to get a similar answer. But if you look at the adjusted EBITDA guidance, you'd have an up revenue quarter, maybe 10% plus sequentially, but the adjusted EBITDA either be slightly down to narrowly possibly up Again, is there any like onetime expenses year-end things that true up higher that create more of a headwind because it wouldn't -- it'd still be down year-over-year as well.

Sure. Ed, do you want to take that one?

Yes, I can take that one. Yes, look, I mean, we're assuming a conservative gross margin number. There's nothing really in the operating expense line that's going to pop. So it's more of just being a little bit more conservative on what you think is going to happen with the channel and product mix we do believe that we were shooting for hitting or beating the top end of the range.

And the next question comes from David Grossman with Stifel Financial.

Maybe we could just expand a little bit on the line of questioning you just went through. And maybe, Steve take a minute just to remind us fundamentally, what may be going on in the business that maybe smoothing out the quarters or maybe giving you better visibility? And then I have another question after that, but just curious, again, fundamentally, some of the changes that you guys have made that may be creating a little better visibility and again, giving you the confidence, for example, to guide to 2026 at this point.

Sure. Yes, happy to talk to it and then Andy and Ed can chime in also. But I mean, if you think about our business data the way that we've talked about it over time, you've got our audience businesses, which is GAAP principally, and then you've got micro neighborhood Audience, which is that targeting capability for DTC. Both of those are data-driven technologies that are -- lend themselves to becoming more subscriptive in nature. Then you've got our execution functions, both at point of care and the other omnichannel components for HCP and you've got that for DTC. And those are obviously going to be transactional largely because that's the way that component of not just our business, but the ecosystem operates.

And so what we've seen is outsized growth in DAAP let we've talked about in months past, and we've seen a resurgence of micro neighborhood audience growth. And so those pieces not only give us a smoothing of the revenue because of the revenue models, but they also give us a renewable view into what 2026 will look like and those contracts start earlier than we would normally do for transaction level transaction level contracting. So that's the big part of it. Andy, Ed, feel free to chime in if you want to add more.

No, I was going to say, I mean, as you guys know, I mean, vast majority of our business comes from renewals. So if you take that into account and then add some of the successes that drove this year, on top of it with more visibility into next year in terms of sand contracts as we sit here today, we feel like we're in a position to say, right, looking at next year, can start to make at least a general guide around book ends that we're going to shoot for. And as things progress forward, we'll continue to tighten that range. Yes, go ahead, Andy, you can add to that.

No, you got it. You both you nailed it.

About? All right. So thanks for all those details. So if I recall, like last quarter, we talked about these managed services type of contracts that come in. How much of that was present in the third quarter? And are you kind of making the same assumption that you did last quarter where you're not assuming any of that comes to bear in the fourth quarter in terms of the guidance that you provided as well as the outlook for '26. Is that the way to think about it?

Yes. And you take that one?

Yes. So it went back to more of a normalized rate in the third quarter as it relates to that managed services business. The only thing that we're including in the forecast period for Managed Services business is stuff that we've already won and is starting to burn into revenue right now. We're not really including anything that's in pipeline and we don't have visibility to. So again, we're taking a very conservative approach to providing guidance with bookings that we feel very comfortable with.

Right. So as we kind of think of your guidance for '26, can you help us kind of bracket the kind of retention that is the baseline, if you will, to achieve that range?

Yes. So historically, between 5% and 15% of our business comes from new logos every year. So the remaining would be what you would consider net revenue retention on a normalized basis?

Okay. And that's the same assumption underlying your '26 guidance?

It is.

Yes. We don't really guide based on net revenue retention, right, but that's kind of how it just shakes out as every year progresses.

Got it. Great. And then on the...

And David, on that note, just one other quick bullet for you. Just -- and you and I spoke about this last time we were together, we are seeing good growth in the mid-tier segment of our business, meaning the mid-tier segment of clients coming to the table who may not be in that top 20, 25, 30 manufacturers that are coming in with outsized spend, mostly because we're able to provide capabilities that can supplement not just supplement, frankly, replace a lot of the stuff that they can't afford to do internally. Whereas the big manufacturers might have kind of Cadillac support, so to speak, the mid-tier businesses do not. But using the technology that we've got allows them to compete on level ground. And so that's why we're seeing such a drive there. In our commercial organization, that Theresa is leading has done a wonderful job of driving that. So I just wanted to call that out as a key point.

And the next question comes from Eric Martinuzzi with Lake Street.

I wanted to dive in on the RFP trends. You talked about their I was just curious, though, is that your win rate is the same and the number of RFPs has improved? Or is your win rate improving on a flat RFP trend? What can you tell us there?

Yes, I'll start, and then I'll have Andy chime in, too. But all of the above, we're seeing the RFPs are more directly pointed at what we want them to be, which I think is good. The market is seeing what we are shifting the business model to over time. So the RFPs are definitely reflective of what we're providing the market, providing our clients. And I would say our win rate as a result of that is getting better.

Again, I want to give some credit to our commercial team. They're doing an excellent job of getting out ahead of all of this stuff and engaging with clients. And when you're engaging with clients more intimately, you can tend to drive the crafting of the so that they get written at an appropriate level to something that you can respond versus a just a random spray and pray request for information, right? And when we get those, the hit rate will be lower because there was no prior engagement. So hats off to Jen Dwyer, Theresa Greco and the entire commercial team for doing a great job there.

Right. And then you talked about the smoothing of the business. maybe I could use a brief tutorial on the transactional where you said that those started later in the year as opposed to the DAAP and the micro neighborhood that are more sort of level loaded that kicks off to each of those types of campaigns.

Sure. Yes, happy to talk about it. I mean you think about what DAAP and what M&T or M&A does it's principally audience creation and it's the data that drives all of the campaigns, right? It's the technology that's producing, finding those patients wherever they're going to be. And so because that is more of a software-like play that lends itself to a normal planning cycle where renewals are going to happen earlier. That's the way pharma manages that segment of their budget and then the transactional components, which is typically message distribution, whether it's at an HCP level or if it's something that's going through like a trade desk or some other way, typically is budget and accounted for on a quarterly basis, and it's based on performance and driven that way.

So bringing gap to the table and getting it more mature, which we've been working very hard on, as you know, over the last several years since we launched it, and now bringing in what we acquired through the Medicx acquisition with M&T, that has really started to transform the profile of the business. and that's what you're seeing reflected in the performance of this year as well. You're seeing it front and center, but it will reflect into 2026 as well. That's given us great visibility. I think everyone feels better about what we're doing there or significantly up year-over-year on visibility for next year.

Is there -- what's the right way to think about the percentage of the revenue in 2025 versus the percentage of the revenue in 2026? Between those two buckets.

We don't break it out. We don't break it out at a product level.

Your next question comes from Anderson Schock, B. Riley Securities.

Congratulations on another really strong quarter. So first, could you provide some color on the partnership with Lamar Advertising and on the size of the opportunity here? And I guess, will this gradually roll out in specific regions? Or is this going live across their entire national inventory?

Yes. Happy to talk about it. Great to hear from you. So the whole idea with Lamar is they're looking to transform their business model, right? And their current business model is billboards.

One of the things that OptimizeRx does really well, which you're acutely aware of is patient finding and an ability to be more precise in the way that we deploy messages across our omnichannel ecosystem.

So think about the capability of doing that to enable a screen that's in a desperate location that might move from a random billboard to maybe a digital screen that's large, right? And that's really what Lamar is after there.

The size of the opportunity is very large. I'm not going to take a stab at the because it's not might take a stab at, it's really theirs. But the partnership is going to start rolling out pretty rapidly, I would say. And it's still early for us to start quoting projections on what we think it will do. It's really piloting at this point, but we're feeling pretty optimistic about the initial testing that we've done. And we'll release more information on it as we get some more results. But early stages look pretty encouraging.

Got it. And then I guess this current guidance that you've provided for 2026 factoring any contributions from this partnership?

No, zero, nothing. Too early for us to start factoring into forecast, we not going to do it yet.

And then could you talk about the gross margin expansion in the third quarter? What really drove this? And how should we be thinking about margins going forward in the fourth quarter and also into 2026?

Sure. Ed, do you want to take that one?

Yes, sure. Yes. So okay, it's typically driven by our product mix or solution mix and the channel partner mix. As we said before, as we scale the business, we have much more ability to negotiate more favorable deals with our channel partners, so that's reflecting yourself in the numbers. as well as growth in DAAP and the DTC platform. So those two things together contributed to where we are right now for the year in Q4. Going forward, I would say we're kind of stabilizing in that upper 50s to low 60s range from a guidance perspective. But you can see there's certainly upside to that number as the year progresses.

I'll add just one quick thing to that there, Anderson. So we also, in the third quarter had a lot more -- or the second quarter had a lot more managed services revenue. and we did not have nearly as much in the third quarter and managed services revenue is our lowest margin product.

[Operator Instructions] And the next question comes from Jeff Garro with Stephens.

I want to ask on the 2026 guide and the profitability side. if I calculate it right, at the midpoint, I see about 60 basis points of EBITDA margin expansion. I was hoping you could talk about the mix of gross margin expansion may be dependent on channel mix versus operating operating leverage? And then any areas of potential variability that could lead to more or less margin expansion than what we see at the midpoint there?

Jeff, I'm happy to answer it topically, and we won't get too deep into 2026, but happy to answer it topically. And what Andy just said is really a clear articulation of the dynamics of the business that really govern it, right? So as we continue to see our audiences grow over time through the DAAP and M&T products, margin expansion will continue to be front and center we will also manage the channel partner mix on the other side. Is that looking for optimal margin and that gives us the dynamic of being able to continue to improve over time. execution will be what it's going to be, as you know, from this business, and that's fairly predictable on the highs and lows. But those are the dynamics that are sort of shaping how we're thinking about 2026 gross margin expansion opportunities and where we've landed. Hopefully, that's helpful.

Maybe a follow-up on the operating leverage side of things. You have certainly seen I think, a quarter-over-quarter decline in adjusted operating expenses this quarter seen really good leverage. And maybe not expecting that to be the persistent trend over the next 5 or so quarters, but just a little more color commentary on your ability to drive additional operating leverage in the business would be helpful.

Yes, no problem. We're going to consistently -- go ahead, Ed. Yes, why don't you take it?

Yes. So OpEx, as we said before, I mean, we currently leverageable business model as it is now. So as I said, on a cash basis, that was actually a bit of an increase, about $2 million versus last year. And that most of that is driven by the fact that our bonuses and variable comp are tracking our overperformance on the top line this year. So once you dial that back, you can pretty much assume a relatively stable operating expense run rate on a cash basis.

And this concludes our question-and-answer session. I will turn the conference back over to Stephen Silvestro for any closing comments.

Thank you, operator, and thank you all for joining us today. We're pleased to be building on a strong operational and financial momentum. Our foundation is solid, our patient-focused strategy is working, and we're confident in the path ahead. What you heard today reinforces our belief in our ability to achieve both our near-term goals and our long-term growth objectives.

I remain deeply optimistic about the future of our business and the opportunities before us. We look forward to speaking with all of you again on the next earnings call and meeting many of you in the upcoming investor conferences and one-on-one meetings in the coming weeks. Wishing everyone a wonderful rest of your day and a wonderful holiday season with your families and friends.

Thank you, Mr. Silvestro. 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 include forward-looking statements within the definition of Section 27A and the Securities Act of 1993 as amended and Section 21E of the Securities Act of 1934 as amended.

These forward-looking statements would not be used -- 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. Forward-looking statements in this call include statements made defining how pharmaceutical companies, patients and prescribers connect, our value or growth plans, creating shareholder value, becoming a Rule of 40 company, estimated 2025 revenue and adjusted EBITDA ranges, capturing greater market share, expanding our participation in the pharma industry's digital ecosystem, our technology and growth opportunities and building a strong operational and financial momentum.

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 as a result of new information, future events or otherwise. Forward-looking statements are inherently subject to risks and uncertainties, which cannot be predicted or qualified Future events and actual results could differ materially from those set forth and completed 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, compensation, 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 contact with electronic prescription platforms and electronic health records networks and the material risks discussed in the company's annual report Form 10-K for the year ended December 31, 2024, and other companies 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, and you may now disconnect your lines.