GoodRx Holdings, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; comparisons are with Q1 2020 unless otherwise noted. GoodRx operates a U.S. consumer healthcare platform, with prescription price comparison as its core offering and additional subscription, pharmaceutical manufacturer and telehealth services.
Financial and operating performance
| Metric | Q1 2021 | Prior period / comparison |
|---|---|---|
| Revenue | $160.4 million | $133.4 million; up 20% |
| Prescription transactions revenue | $134.1 million | $123.0 million; up 9% |
| Other revenue | $26.4 million | $10.4 million; up 154% |
| Operating income (loss) | $(5.0) million | $43.7 million |
| Net income | $1.7 million | $27.3 million |
| Adjusted EBITDA and margin | $51.0 million; 31.8% | $51.9 million; 38.9% |
| Operating cash flow | $45.5 million | $45.6 million |
| Cash and cash equivalents at March 31 | $990.5 million | $968.7 million at December 31, 2020 |
| Debt at March 31 | $679.4 million principal; $665.9 million carrying value, net of costs and discounts | $681.1 million principal at December 31, 2020 |
- Cash, cash equivalents and restricted cash totaled $993.4 million. The company reported $90.9 million available under its revolving facility after letters of credit. It said cash, operating cash generation and revolver availability should meet needs for at least 12 months.
- Investing cash outflow was $9.7 million, mainly capitalized software and capital expenditures; financing cash outflow was $14.0 million, mainly employee tax payments on net-settled equity awards and term-loan repayments.
- Monthly Active Consumers averaged 5.706 million, up 17% year over year. The filing attributes prescription revenue growth primarily to increased active consumers, partly offset by lower contribution per consumer due to Scriptcycle.
Changes, outlook and notable items
- Revenue grew, but operating results declined as operating expenses rose 84% to $165.4 million. Product development and technology expense increased 153%, sales and marketing 26%, and general and administrative expense 644% year over year.
- Stock-based compensation was $46.5 million, including $30.0 million for the Co-CEOs’ Founders Awards. The company cited this expense as a major reason for the pre-tax loss; a $12.6 million income tax benefit contributed to reported net income. The 115.3% effective tax rate reflected the pre-tax loss and equity-award tax effects.
- Adjusted EBITDA fell 2% and its margin declined from 38.9% to 31.8%. Management cited continued product, technology, marketing and public-company infrastructure investment, along with higher cost of revenue from telehealth growth. It expects other revenue to grow faster than prescription transactions revenue and expects continued investment; no numerical full-year guidance is provided.
- COVID-19 disrupted prescription activity in 2020; activity improved sequentially through Q1 2021, while telehealth demand increased. Management cautioned that prescription and telehealth trends remain uncertain and seasonality may be affected.
- After quarter-end, GoodRx acquired HealthiNation for $75 million cash and RxSaver for $50 million cash. Both acquisitions are intended to expand platform offerings or consumer reach; purchase accounting valuations were incomplete as of the filing.
- The company disclosed securities class actions alleging failure to disclose Amazon’s planned competing prescription service, and two subsequent derivative suits. It intends to seek dismissal; it said loss is not currently probable or reasonably estimable, while noting adverse outcomes are possible.
- Disclosure controls were deemed ineffective at March 31 because previously identified material weaknesses in internal control over financial reporting remained under remediation. Management described staffing, process, systems and control improvements, but had not concluded remediation was complete.
- Debt is secured by substantially all company assets and subject to covenants, including a maximum net leverage ratio of 8.2 to 1.0. The company reported covenant compliance. The term loan matures in October 2025; the $100 million revolver matures in October 2024.
Important facts for investors to verify
- Whether customer concentration changes: four customers accounted for approximately 14%, 11%, 10% and 10% of Q1 revenue.
- How active consumers, revenue per consumer, prescription activity and telehealth demand develop as COVID-related patterns and seasonality change.
- The scale and timing of Founders Awards costs and tax withholding: management estimated approximately $481.7 million of cash withholding for 15.7 million vested performance-award shares under assumed 47% withholding and a $65 share price; actual amounts may differ materially.
- Progress in remediating material weaknesses and whether internal controls become effective.
- Developments in the lawsuits, the competing-service landscape, and the financial contribution and integration costs of the post-quarter acquisitions.
- Debt covenant headroom, interest-rate exposure and the company’s substantial debt alongside its cash position.