GoodRx Holdings, Inc. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022. Dollar amounts below are in millions unless otherwise noted. GoodRx operates a consumer prescription-price comparison platform and also offers subscriptions, pharma manufacturer solutions, and telehealth services. Its core prescription business earns revenue primarily from pharmacy benefit managers (PBMs).
Financial performance and liquidity
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $187.3 | $195.1 | $582.4 | $532.2 |
| Operating income (loss) | $(15.7) | $7.0 | $0.001 | $1.7 |
| Net income (loss) | $(41.7) | $(18.1) | $(30.9) | $14.7 |
| Adjusted EBITDA | $52.0 | $61.8 | $163.9 | $167.4 |
| Adjusted EBITDA margin | 27.8% | 31.7% | 28.1% | 31.5% |
| Operating cash flow | Not separately presented | Not separately presented | $114.9 | $129.0 |
- Q3 GAAP net loss margin was 22.3%, versus 9.3% in Q3 2021; nine-month net loss margin was 5.3%, versus net income margin of 2.8%.
- Q3 revenue declined 4% year over year, while nine-month revenue increased 9%. Q3 prescription transactions revenue fell 16% to $131.2; subscription revenue rose 63% to $26.5; pharma manufacturer solutions revenue rose 32% to $24.5.
- Cash and cash equivalents were $728.8 at September 30, 2022, down from $941.1 at year-end 2021. Nine-month investing cash outflow was $211.8, including $156.9 for acquisitions and $36.1 for capitalized software; financing cash outflow was $115.4, including $101.7 in stock repurchases.
- Debt carrying value was $659.8, including $7.0 current and $652.8 long-term. The $700.0 original-principal term loan matures in October 2025 and bears a floating rate; its effective rate was 5.50% in Q3. The $100.0 revolving facility had no borrowings, with $90.8 available after letters of credit. GoodRx reported compliance with debt covenants.
- Management said cash on hand and operating cash flow should be sufficient for operating, investing, and financing needs for at least the next 12 months.
Material changes and management commentary
- The grocery-chain pricing disruption materially reduced prescription transactions revenue and Monthly Active Consumers in Q2 and Q3. GoodRx estimated revenue impacts of approximately $30.0 in Q2 and $40.0 in Q3. The issue was addressed in August, but management expects continued adverse effects as consumer response and the return of users remain uncertain. Q3 average Monthly Active Consumers were 5.8 million, down 9% year over year.
- Subscription growth was supported by a Gold price increase, while subscription plans declined to 1.06 million from 1.129 million a year earlier. Pharma manufacturer solutions growth reflected organic expansion and the vitaCare acquisition.
- The Q3 net loss included an approximately $16.6 charge from changes in fair value of vitaCare-related contingent consideration. For the nine months, the reported charge was approximately $16.9. vitaCare’s contingent consideration receivable was reduced to $1.2 after concerns about the seller’s ability to pay; the valuation used a 95% probability of nonpayment. A hypothetical change in scenario probabilities described in the filing would increase the receivable’s fair value by approximately $4.8.
- GoodRx acquired vitaCare in April for an estimated net purchase consideration of $131.8, including a contingent consideration receivable, and acquired flipMD in February for $7.0 cash. Management said vitaCare has historically generated losses and negative Adjusted EBITDA, which it expects to continue in the near to medium term.
- In August, the company approved a reduction in force affecting approximately 140 employees, or 16% of GoodRx, Inc.’s workforce. It estimated $5–$7 in related pre-tax charges and $23–$25 of annualized run-rate cash savings, excluding future hiring or other cost additions; the filing cautions that intended benefits may not be achieved.
Risks, contingencies, and unusual items
- The FTC investigation into GoodRx’s privacy and data-sharing practices was under settlement discussions. GoodRx accrued $2.8 for a probable loss; actual costs could be materially higher or lower, and the ultimate outcome was uncertain.
- GoodRx disclosed that it no longer plans to occupy office space under a lease commencing October 1, 2022 and is seeking to sublease it. It expects a Q4 impairment charge, but the amount was not yet determined.
- Class and derivative lawsuits related to alleged nondisclosure of Amazon’s competing prescription service were dismissed and closed during Q3 2022. GoodRx said loss was remote for those cases.
- Other disclosed risks include dependence on a limited number of industry participants, healthcare regulation and prescription pricing changes, consumer and pharmacy behavior, competition, privacy and cybersecurity, and variable-rate debt. The company also cited COVID-19-related pressure on healthcare utilization and typical seasonal fluctuations.
- No specific forward revenue or earnings guidance was provided in the filing. GoodRx noted uncertainty around the lasting grocery-chain disruption and the effects of healthcare reform, including the Inflation Reduction Act.
Most important facts for investors to verify
- Whether prescription transactions and active consumers recover following the August resolution of the grocery-chain issue, and whether its estimated revenue impact persists.
- Whether vitaCare’s seller can meet payment obligations and whether the contingent consideration valuation or acquisition economics change.
- The eventual FTC settlement or other costs relative to the $2.8 accrual.
- Whether the workforce reduction delivers expected savings without impairing operations or growth initiatives.
- The size and timing of any impairment on the unused office lease, and the continuing impact of floating interest rates on debt service.
- Cash generation and acquisition, software investment, and share-repurchase pace; the filing reported $148.3 remaining under the repurchase authorization at September 30, 2022.