GoodRx Holdings, Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. GoodRx operates a U.S. prescription-price comparison platform and earns most of its core revenue from pharmacy benefit managers (PBMs); it also offers subscriptions, pharma manufacturer solutions and telehealth.
Financial performance
Amounts below are in millions, except per-share data and percentages.
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $191.8 | $176.6 | $395.1 | $337.1 |
| Operating income (loss) | $(4.0) | $(0.4) | $15.7 | $(5.3) |
| Net income (loss) | $(1.4) | $31.1 | $10.9 | $32.7 |
| Adjusted EBITDA and margin | $47.2; 24.6% | $54.6; 30.9% | $111.9; 28.3% | $105.6; 31.3% |
| Operating cash flow | Not stated separately | Not stated separately | $81.2 | $80.4 |
- Q2 revenue mix: Prescription transactions $134.4 million (down 7%); subscriptions $26.0 million (up 82%); pharma manufacturer solutions $26.6 million (up 102%); other revenue $4.9 million (up 13%).
- Cash and liquidity: Cash and cash equivalents were $730.5 million at June 30, 2022, versus $941.1 million at year-end 2021. The company reported $90.8 million available under its revolving facility, with no revolver borrowings.
- Debt: Term-loan principal was $670.6 million; carrying value, net of issuance costs and discounts, was $660.9 million. The loan matures in October 2025. The company was in compliance with its financial and other covenants.
- Six-month cash movements: Investing cash outflow was $198.0 million and financing cash outflow was $93.7 million; cash, cash equivalents and restricted cash declined $210.6 million. Investing included $156.9 million for acquisitions and $23.0 million for capitalized software. Financing included $83.8 million of share repurchases.
Material changes versus comparable periods
- Q2 revenue grew 9%, but prescription-transaction revenue declined as the grocery-chain issue reduced average Monthly Active Consumers by 3% year over year. Management estimated that issue reduced Q2 prescription-transaction revenue by about $30 million.
- Q2 net income of $31.1 million a year earlier turned to a $1.4 million loss. The income tax benefit fell $28.6 million year over year, a major factor in the change. Six-month net income also declined despite revenue growth.
- Q2 Adjusted EBITDA fell 13% and its margin declined 6.3 percentage points. For the first half, Adjusted EBITDA rose to $111.9 million, but margin declined 3.0 percentage points.
- For the first half, subscription plans were 1.133 million at June 30, down from 1.203 million at March 31; Monthly Active Consumers averaged 5.8 million in Q2 versus 6.4 million in Q1. Management attributed consumer pressure principally to the grocery-chain issue.
- GoodRx acquired flipMD in February and vitaCare in April to expand its healthcare-provider and pharma manufacturer offerings. vitaCare contributed $1.4 million of revenue and $7.3 million of net loss from acquisition through June 30; management said it expected near- to medium-term losses to continue.
Outlook, commentary and risks
- The grocery chain issue was addressed in August 2022, after quarter-end. Management expected discounted pricing to be accepted consistently again, but warned that the issue could continue to materially affect future prescription revenue and consumer activity because the timing and extent of user recovery were uncertain.
- No quantified full-year revenue or earnings guidance is provided in the filing. Management stated that cash on hand and operating cash flow should meet operating, investing and financing needs for at least the next 12 months.
- GoodRx accrued a $2.8 million probable loss related to ongoing FTC negotiations concerning privacy and security practices. The ultimate cost could be materially higher or lower; a substantially larger payment or judgment could adversely affect financial condition, results and liquidity.
- Management maintained a full valuation allowance against net deferred tax assets in excess of tax-amortizable goodwill. The timing and amount of any future release depend on profitability, tax rules and other factors.
- Other risks highlighted include reliance on a limited number of industry participants and significant customers, COVID-related pressure on healthcare utilization, competition, privacy and cybersecurity, and variable acquisition-related valuations. The company reported two customers representing approximately 12% and 11% of Q2 revenue.
- The securities class action was dismissed with prejudice in June 2022; related derivative suits remained stayed. Management said loss on those matters was remote and had not been accrued.
Important facts for investors to verify
- Whether the grocery-chain resolution restores consumer activity and prescription-transaction revenue, and how much of the estimated $30 million Q2 impact persists.
- Progress in subscription-plan growth and the sustainability of subscription and pharma manufacturer solutions growth alongside lower prescription transactions.
- The final FTC settlement terms and whether costs exceed the $2.8 million accrual.
- Cash deployment, acquisition integration and performance—particularly vitaCare’s losses and the assumptions underlying its contingent consideration receivable.
- Debt service and covenant headroom as interest rates change, as well as the effect of ongoing repurchases on liquidity and share count.
- The effect of the valuation allowance and unusually large, volatile tax benefits on reported net income.