Prepared remarks
Good afternoon, everyone, and thank you for joining OptimizeRx First Quarter Fiscal 26 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 are useful in evaluating the company's operating results. A reconciliation of such non-GAAP financial measures is included in the earnings release that 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's CEO, Stephen Silvestro. Mr. Silvestro, please go ahead.
Thank you, operator, and good afternoon to everyone joining us for today's first quarter 26 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 are pleased with our performance in the quarter, the broader healthcare technology operating environment continues to evolve. We are 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, shorter 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 have 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 DAP solution grew 60% in the first quarter, which highlights continued product-market fit and customer adoption. In addition, 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 DAP 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 medtech 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 growth opportunity for OptimizeRx. We are also making continued progress in shifting a greater portion of our revenue mix toward subscription-based models, particularly within DAP. Tied to our AI-enabled DAP solution, which showed growth in the first quarter, our DAP 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 are 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 have 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 have also strengthened our financial position through the recent refinancing of our term loan. Edward 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 25 basis points. We want to thank Blue Torch for being a good partner over the last two 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's 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 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 healthcare 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 are 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 would like to turn the time over to our CFO, Edward Stelmakh, who will walk us through the financial details. Edward?
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 03/31/2026. A copy is available for viewing and may be downloaded from the 10-Q. First quarter 26 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 reduction on a major client account, and more cautious budget allocation and shorter program duration commitments driven by Most Favored Nation pricing and other macroeconomic challenges. Our expenses for the quarter ended 03/31/2026 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 did not have any DTC managed service revenue this quarter, as well as a 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 three months ended 03/31/2026, as compared to a net loss of $2.2 million or $0.12 per basic and diluted share for the three months during the same period in 2025. On a non-GAAP basis, the company's net income for 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 year-ago period. Meanwhile, our adjusted EBITDA increased to $3.3 million for the quarter, compared to $1.5 million during 2025. Operating cash flow came in at a negative $500 thousand for the first quarter, which was primarily due to the payout of 2025 bonuses and fourth-quarter 2025 sales commissions during 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. The current interest rate on the term loan with Fifth Third Bank is SOFR plus 2.25% versus SOFR plus 8.5% 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 2026. Average revenue per top 20 pharmaceutical manufacturer now stands at $2.8 million, with these top 20 companies representing 52% of our business in Q1 26. Net revenue retention rate remains a strong 110%. Meanwhile, revenue per FTE came in at $801 thousand, topping the $710 thousand we posted in Q1 25. 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 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 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 toward the second half of the year at close to a 40/60 split. Now with that, I would like to turn the call back over to Steve. Steve?
Thank you, Edward. Operator, could we now please move to Q&A?
Questions and answers
Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 to remove yourself from the queue. The participant is using speaker equipment. It may be necessary to pick up the handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from the line of Jared Haas with William Blair. Please proceed with your question.
Hey, guys. Thanks for taking the questions. I guess I will just start with the updated outlook here. 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 am 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 is more that these decisions are coming through and you are just seeing less spend commitment here in 2026 compared to maybe what you anticipated back then. And then 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 will take this one, and then 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 would have more visibility into the back half of the year. Specifically, with a handful of clients that were reacting to the administration's position around MFN, how they were operating with budgets—post their initial reaction, some of those have actually come back and come back stronger even though the contract duration periods have been shorter. I think we have articulated that publicly. You heard it in the last earnings call and we said it again this time. But we have got one specific larger client where there is continued disruption. When you have asynchronous disruption at a client level, one client of this size, you have got to work through it. So it just gives us less visibility on full-year guidance, which is why we are being a little more conservative in getting it back around to where we think we are going to land. I do not expect that we will need to adjust again, but we are giving the best view that we have right now.
So I think you got it covered. Yeah.
Okay. That is helpful. And you characterized it as short- to intermediate-term pressure. Is there any way to clarify exactly what you mean by that? As we think about the end of the year here, is this something that maybe persists into 2027, or do you think of it as contained to this year?
No. We think it is contained to this year. The reality is we could see, later in the third quarter and the fourth quarter, increased buying from this set of clients, in particular one client where there was disruption. Our best view right now is that there will be disruption through 2026. Looking into 2027, there is nothing mechanically wrong in any of these businesses, certainly in our business, as you have seen from the expanded gross margin and just the way we are operating the business with increased leverage and drop-through, getting the debt paid and refinancing it, lowering the interest expense. Operationally, it has never been stronger. So we are communicating what is going on with the top line as we should, but we have every confidence that 2027 is going to be pretty spectacular. I think the connection to the DSPs—you saw the announcement around that—that is a very big deal for this business. It is something we have been working on for a number of years. We are the first ones to really connect at scale to this ecosystem, and so we are 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 are pumped for the whole team.
That is good to hear. I will go ahead and leave it there and hop back in queue.
Thanks, Jared.
Thank you. Our next question comes from the line of Jeffrey Garro with Stephens. Please proceed with your question.
Yeah. Good afternoon. Thanks for taking the question. I wanted to follow up a little bit on the MFN disruption and maybe more specifically on comments that you have made around contract duration. That relates to overall visibility. I think last 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 customers were moving to shorter contract duration. So curious what you saw in the first quarter and even through April and into May about that client renewal behavior and interest in extending duration, renewal behavior, and your expectations for the back half of the year?
Yeah. Thanks, Jeffrey. Good to hear your voice.
In the first half of the year, we were off 15% to 20% in contracted revenue. We are still right in that same area, that same zone. Most of that is being driven by the shorter contract duration that is outside of the initial managed services sunset. Typically, what is happening is the commitments are just shorter than they would normally be to 12 months, and our contracted revenue methodologies were calculating the full contract against the backlog, as I think everyone knows. When you have a shorter contract duration, it gives you less visibility. It means you have to be on the hook for the next quarter renewing that and the next quarter renewing it again. So it is a little bit less visibility. Although people are continuing to renew. We are seeing the flow of business continue to move. We have had two or three accounts that have really accelerated between the time we had the first earnings call and the time we are doing this call.
That is really good news. The challenging news, Jeffrey, is we still have one major client that is working through some challenges. Part of those are MFN-related. Part of them, honestly, is we did not execute well in that account and we need to improve. We know where we fumbled the ball a little bit there. We have had great conversations with their leadership team, and there is a plan to get things back on track. Our team has taken ownership and is moving forward. So I think we feel very confident it is short-term. We are excited about the innovation and all of our partners are very excited about the innovation announcements that we have just made. So we are looking forward to pressing ahead. But contracted revenue is still the challenge until we poke through that.
Understood. I appreciate all those comments. One more for me: did want to ask about demand activity by customer size, thinking about the top 20 pharma versus that mid-tier, long-tail cohort. 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 sales cycle renewal rates and budget behavior from that mid-tier, long-tail cohort?
Thanks. We are very excited internally about the mid-tier, long-tail. We have seen tremendous progress in that cohort of clients. We have a team now focused on that, and so we are starting to see some really encouraging growth there. Also seeing it in the medtech sector, which I shared in my prepared remarks, where clients that previously were not a market we were speaking to are coming to the table with multiple million dollars in the platform. So we are very, very encouraged by that. On the top 20, we continue to see great engagement, and we remain underpenetrated in terms of the brands that we are servicing in the top 20. We have a footprint in each one of the accounts, but the ability to expand where we have landed still remains a tremendous opportunity for this business. We have an excellent sales team that continue to push and execute well. I have every belief it will be a solid finish from them as they prep for 2027, which is really what we are focused on right now. Thanks, Jeffrey. Thank you, guys.
Our next question comes from the line of David Grossman with Stifel. Please proceed with your question.
Thanks. Good afternoon. Steve, it sounds like there is one particular client that may be off more or having 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 where there were some execution issues on your end?
No, that is the same client. Oftentimes we have these asynchronous events that happen at a client level where they change an agency, the team is swapped out, there is turnover, or people are making decisions. That happens often in this space and it is what you need to deal with. The growth in DAP at 60% and particularly the 45% growth on the subscription basis is designed to help get rid of that lumpiness, and it is definitely helping. This was not a DAP client where the disruption was in place, so it was bimodal even at scale. When there is disruption among the ranks—turnover and employees making decisions—it is challenging. We did not execute as well as we needed to in that area and we need to improve. The good news is that we have visited with that leadership group, had very open conversations, received great feedback, and I think that relationship has been re-invigorated. We will be in a pretty good spot, but it is too early to count it as part of our forecasting guide. We have to work with that group and make sure we deliver.
So assuming it takes its ordinary course, is that the headwind for the next three quarters and once you comp it next March year we are kind of beyond that? Or could it potentially ...
I think we will address it in the renewal cycle of this year. I think we will probably see some buying in the second half of the year with that group, and then into 2027 we will be well positioned. But we needed to take a few lumps 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. Thanks for the transparency on that one. And then on the DSP side, with the connection to the DSPs, what is the sales cycle? How long does it take for that flywheel with media buyers to start contributing to revenue growth in a meaningful enough way that we would see it?
I think we will start to see early innings of this toward the later part of the back half of this year. In Q4 we should start to see some revenue begin to flow. Going into the renewal cycle for 2027, we will see it really flow. The way DSPs operate is once there is a connection, it starts a bidding system where agencies are the principal ones buying in these ecosystems through the demand-side platforms. That will follow the typical brand plan RFP process, but they have the ability to accelerate, set the parameters within these DSP platforms, and start to action buys. I would call them passive buys because you are not really engaging directly with the company other than setting up the pricing and the bids and asking questions of the sales team. The job of our sales team is to continue to engage with those clients and make sure they are utilizing those capabilities, make sure they are buying through those DSPs and know it is available.
It is in their favorite DSP of choice and they can go in and action those buys. Can you give some examples of what the revenue could look like? I assume it is by individual drug or by buyer; I am not quite sure how to think about what the revenue could be.
The revenue potential is going to be fairly large.
I am not ready to share projections on it yet. In the prepared remarks, we shared that DSPs control about 80% of the total digital spend in the space, which gives you a sense of the TAM. It is very large potential. It is too early for us to quantify potential revenue because we are the first ones doing it at scale. There are other companies that have connected a piece of the network or one EHR provider and played with it, but at our scale we are the first to go all in. There will be subsequent announcements as we roll out partnership agreements and we will have more to say around that, but I do not want to jump the gun.
Sure. And just one other quick one: was there any managed service revenue this quarter, and is that reflected in the guide?
That is correct. We had zero managed services in the quarter.
Okay.
Alright, guys. Thanks very much for the time. Thanks, David. Look forward to seeing you.
Thank you. And we have reached the end of the question-and-answer session. I would like to turn the floor back to Stephen 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 are excited about the transformation within life science toward 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 are focused on increasing utilization of DAP, continuing 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.
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 Exchange Act of 1934, as amended. These forward-looking statements should not be used to make investment decisions. Words like anticipate, estimate, expect, possible, seek, 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 our future performance, plans and market penetration; macroeconomic factors and disruptions not enduring; digital and data-driven engagement remaining intact and continuing to be a meaningful driver for the business; plans for shareholder value creation; becoming a sustained Rule of 40 company; plans to successfully launch programmatic access to the company's authenticated EHR network; programmatic access increasing inventory utilization and unlocking a high-growth revenue channel; ability to capitalize on significant long-term opportunity; shifting a greater portion of revenue toward a subscription-based model; cost management; estimated 2026 revenue and adjusted EBITDA ranges; technology investments and growth opportunities; funding operating needs and key strategic priorities; and upcoming events and announcements.
Forward-looking statements also include 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 or contemplated by the forward-looking statements. The risks and uncertainties to which forward-looking statements are subject include, but are not limited to, 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 record networks, and other material risks.
Risks and uncertainties that 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 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 and running for a year on the investor section of the company's website. Thank you for joining us today. This concludes today's conference call. You may now disconnect your lines.