Business context and reporting period
GoodRx Holdings, Inc. operates a U.S. consumer healthcare platform that helps people compare prescription prices and access savings. It earns most revenue from pharmacy benefit managers (PBMs), and also offers subscriptions, pharma manufacturer solutions and telehealth. This unaudited Form 10-Q covers the three months ended March 31, 2022, compared with the same quarter of 2021.
Financial and operating performance
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $203.3 million | $160.4 million |
| Operating income (loss) | $19.8 million | $(5.0) million |
| Net income | $12.3 million | $1.7 million |
| Net income margin | 6.0% | 1.0% |
| Adjusted EBITDA (non-GAAP) | $64.7 million | $51.0 million |
| Adjusted EBITDA margin (non-GAAP) | 31.8% | 31.8% |
| Cash from operating activities | $30.1 million | $45.5 million |
| Cash and cash equivalents at period end | $845.4 million | — |
Revenue grew 27%. Prescription transactions revenue was $155.5 million (+16%); subscriptions were $19.1 million (+59%); pharma manufacturer solutions were $23.5 million (+150%); and other revenue was $5.2 million (+5%). Cost of revenue was $12.3 million, or 6% of revenue. Sales and marketing was $93.0 million (46% of revenue); product development and technology was $35.0 million (17%); general and administrative was $31.9 million (16%); and depreciation and amortization was $11.4 million.
Net income improved despite a $1.7 million income tax expense, compared with a $12.6 million tax benefit in Q1 2021. Lower stock-based compensation, principally related to Founders Awards, also contributed: total stock-based compensation expense was $30.1 million versus $46.5 million.
Cash and cash equivalents declined from $941.1 million at December 31, 2021 to $845.4 million at March 31, 2022. Investing activities used $34.4 million, including the flipMD acquisition and a minority equity investment; financing activities used $91.4 million, including $83.8 million of share repurchases. The company reported $30.1 million of operating cash flow.
Debt at March 31 included a $672.3 million term-loan principal balance and $661.9 million carrying amount, net of issuance costs and discounts. The $100 million revolving facility had no borrowings outstanding; $9.2 million of letters of credit left $90.8 million available. GoodRx was compliant with its debt covenants.
Material changes versus the prior comparable period
- Operating results shifted from a $5.0 million operating loss to $19.8 million operating income; net income rose to $12.3 million from $1.7 million.
- Prescription transactions revenue grew more slowly than total revenue. Management attributed its 16% increase partly to 12% growth in average Monthly Active Consumers, which reached 6.4 million.
- Subscription plans rose to 1.203 million from 0.931 million a year earlier, though they were slightly below the 1.210 million reported at year-end 2021.
- Adjusted EBITDA increased, but its margin was unchanged at 31.8%. Management said lower sales and marketing expense as a share of revenue was offset by investment in technology and public-company infrastructure.
- Operating cash flow decreased by $15.4 million. The filing cites timing of working-capital movements and lower non-cash adjustments, including stock compensation.
Outlook, risks and unusual items
- No numerical full-year revenue or earnings guidance is provided. Management expects subscription and pharma manufacturer solutions revenue to outpace prescription transactions growth in the near to medium term, and expects continued investment in marketing, technology and general and administrative infrastructure.
- A grocery chain took actions late in Q1 that affected acceptance of certain PBM discounted prices. The Q1 revenue impact was described as immaterial, but management expects a potentially material future impact; transactions at the grocer represented a material share of prescription volume and revenue.
- Management said COVID-19’s cumulative effect on healthcare utilization continued to weigh on prescription transactions growth. Seasonality and pandemic-related disruption may affect future results.
- GoodRx acquired flipMD for $7.0 million in cash on February 18, 2022. After quarter-end, it acquired vitaCare for $150.0 million in cash, with up to $7.0 million contingent consideration and up to $10.0 million in potential employee incentive compensation.
- The company authorized up to $250 million of share repurchases through February 2024 and repurchased 5.6 million shares for $83.8 million in Q1; $166.2 million remained available at quarter-end.
- Pending matters include securities class-action and derivative litigation and an FTC privacy and security investigation. FTC staff indicated an intent to recommend enforcement and sent a draft complaint and consent order. GoodRx had not accrued a loss, stating that a loss was not probable and reasonably estimable; it could not estimate a loss range.
- Liquidity: management believes operating cash flow and cash on hand will meet needs for at least the next 12 months. Cash declined during Q1, and the vitaCare purchase occurred after quarter-end.
Important facts for investors to verify
- Progress and financial effect of the grocer’s PBM-pricing issue, including whether it affects other pharmacy relationships.
- Whether the higher-growth subscription and pharma manufacturer businesses can offset slower prescription transactions growth, and how Gold pricing changes affect subscriber counts.
- Cash generation after working-capital movements, continued investment and share repurchases; also verify liquidity following the vitaCare acquisition.
- Debt terms, covenant compliance and exposure to variable-rate borrowing.
- Developments, potential costs and outcomes in the FTC matter and securities litigation, for which the filing states no loss estimate is available.
- Adjusted EBITDA is a non-GAAP measure; review the filing’s reconciliation and exclusions alongside GAAP results.