OptimizeRx Corporation — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021. OptimizeRx is a digital health company providing communications and patient-support solutions to life sciences companies, healthcare providers, and patients. Financial statements are unaudited.
Financial performance
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $16.12 million | $10.52 million | $40.98 million | $26.89 million |
| Gross margin | $9.08 million; 56.3% | $6.01 million; 57.2% | $23.25 million; 56.7% | $15.50 million; 57.7% |
| Operating expenses | $9.04 million | $6.19 million | $23.51 million | $18.99 million |
| Operating income (loss) | $38,190 | $(176,722) | $(259,980) | $(3.49) million |
| Net income (loss) | $39,894 | $(282,894) | $(245,383) | $(3.56) million |
| Basic earnings (loss) per share | $0.00 | $(0.02) | $(0.01) | $(0.24) |
| Operating cash flow | Not presented by quarter | $2.06 million | $(3.72) million |
Life sciences companies generated $15.95 million of Q3 revenue and $40.06 million for the nine-month period; the balance came from other sources.
Liquidity, cash flow, and capital
- Cash and cash equivalents were $85.06 million at September 30, 2021, versus $10.52 million at December 31, 2020. Working capital was approximately $100.8 million, with a 14.8-to-1 current ratio, compared with approximately $23 million and 3-to-1 at year-end 2020.
- Investing activities used $387,000 in the first nine months, mainly for equipment and intangible assets.
- Financing activities provided $72.87 million, including $70.67 million net proceeds from a public offering and $3.81 million from option exercises, partly offset by $1.61 million in acquisition earnout payments. The company said no earnout payments remain due.
- Total liabilities were $7.83 million, including $362,000 of lease obligations; the filing reports no other borrowing debt. Cash rose primarily due to the equity offering.
Changes, outlook, and risks
- Revenue increased 53% in Q3 and 52% year to date. Management attributed growth to increased sales across solutions. Operating expenses grew more slowly than revenue, supporting improved operating results.
- Gross margin declined modestly due to a greater share of activity in higher-cost channels, partly offset by the higher-margin program-design component of the new Real World Evidence solution. Management expected gross margin to remain relatively constant for the rest of 2021.
- Management expected operating expenses to rise quarter over quarter through year-end, with further hiring and the full-period impact of recent hires; salaries and benefits were expected to increase in Q4. It did not anticipate needing additional capital for operating needs or growth plans, though acquisitions or strategic opportunities could require funding.
- Initiatives included expanding the Real World Evidence pipeline, partnering with Demandbase to extend personalized engagement, and implementing a therapy-initiation workflow solution. The company reported completing integration work for two prior acquisitions.
- COVID-19 impacts remained uncertain. Management noted that customers’ advertising and marketing budgets could be reduced in a sustained downturn. Other stated risks include economic, regulatory, capital-availability, interest-rate, and competitive factors. The filing reported no material changes to previously disclosed risk factors.
- There were no material pending legal proceedings or off-balance-sheet arrangements. A board member’s company generated $150,000 of revenue in 2021, with contracts expected to generate another $160,000; the company said these were ordinary-course contracts at market rates.
Important facts for investors to verify
- Whether rapid revenue growth can continue while gross margin remains under pressure from solution and channel mix.
- Whether hiring and other planned spending translate into sustained operating profitability and positive cash generation.
- Customer and revenue concentration: life sciences companies accounted for the substantial majority of revenue.
- Potential share dilution: shares outstanding increased from 15.22 million at December 31, 2020 to 17.73 million at September 30, 2021, principally following the offering and option exercises; stock-based compensation also remains significant.
- Accounts receivable rose to $20.75 million from $17.89 million at year-end; monitor collections as sales expand.
- The company stated it had no current federal income tax expense, citing $19.3 million of federal net operating loss carryforwards at December 31, 2020.