GoodRx Holdings, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. GoodRx operates a consumer prescription-price comparison and savings platform; it primarily earns revenue from PBMs, alongside pharma manufacturer solutions, subscriptions and telehealth.
Financial results and liquidity
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $180.0M | $187.3M | $553.6M | $582.4M |
| Operating income (loss) | $(38.3)M | $(15.7)M | $(8.7)M | $0.0M |
| Net income (loss) | $(38.5)M | $(41.7)M | $17.0M | $(30.9)M |
| Adjusted EBITDA (non-GAAP) | $53.5M | $52.0M | $160.2M | $163.9M |
- Q3 net loss margin improved to 21.4% from 22.3%; Adjusted EBITDA margin was 28.1% versus 27.8%. Nine-month net income margin was 3.1%, compared with a 5.3% net loss margin; Adjusted EBITDA margin was 28.4% versus 28.1%.
- Q3 Adjusted Revenue, a non-GAAP measure excluding a $10.0M client contract termination payment recorded as a revenue reduction, was $190.0M, up 1%. Nine-month Adjusted Revenue was $563.6M, down 3%. No gross margin figure is clearly provided in the filing text.
- Revenue mix in Q3: prescription transactions $135.4M (+3%); pharma manufacturer solutions $15.9M (−35%); subscriptions $23.2M (−12%); other $5.4M (+5%).
- Nine-month operating cash flow was $122.4M, versus $114.9M. Investing cash use was $42.9M versus $211.8M; financing cash use was $41.8M versus $115.4M. Cash increased $37.7M to $794.9M.
- At September 30, cash and cash equivalents were $794.9M and total debt carrying value was approximately $655.8M, implying about $139.1M of net cash. The term loan principal was $661.8M. The $100M revolving facility had $90.8M available after letters of credit; no revolver borrowings were outstanding. The term loan’s Q3 effective rate was 8.80%, and it matures in October 2025. GoodRx reported compliance with its financial covenant.
- Current assets were $969.1M and current liabilities $117.8M. The company said operating cash flow and cash on hand should meet needs for at least the next 12 months.
Changes, outlook and management commentary
- Q3 revenue declined 4% year over year; nine-month revenue declined 5%. Q3 prescription transaction revenue grew 3%, supported by 5% more Monthly Active Consumers, but lower fees per transaction and higher consumer incentives partly offset growth. Direct pharmacy agreements generally bring lower fees than PBM transactions; management expects modest near-term fee pressure as direct contracting expands.
- The filing says the 2022 grocer issue was addressed in August 2022, but its sustained effects continued to weigh on prescription transaction revenue and consumer levels. Nine-month prescription transaction revenue fell 3%, with the grocer issue and lower transaction fees cited as factors.
- Monthly Active Consumers averaged 6.1M in Q3, up from 5.8M a year earlier. Subscription plans were 930,000, down from 1.06M, principally reflecting Kroger Savings declines and mix changes. GoodRx expects Kroger Savings plans to continue declining until the program’s expected July 2024 sunset and does not expect the sunset to materially affect future revenue and results.
- In August 2023, the company began de-prioritizing certain pharma manufacturer solutions, including solutions supported by vitaCare, and reducing staff. The plan is expected to be substantially complete by year-end 2023. Estimated total restructuring costs are $73.8M, including $40.1M incurred through September; management estimates annualized run-rate cash savings of $18M–$22M, principally affecting future cost of revenue. Savings and costs are estimates and may differ from actual results.
- Nine-month net income included a $55.9M discrete tax benefit from releasing a valuation allowance in Q2. GoodRx continued to conclude that a valuation allowance on most deferred tax assets was not needed at September 30; the $47.9M nine-month income tax benefit substantially influenced reported earnings. Deferred tax assets were $57.7M at quarter-end.
- Q3 expenses included $17.5M of accelerated intangible amortization and a $7.0M loss on disposal of capitalized software associated with restructuring. The company also recorded a $2.2M Q3 impairment loss on a minority equity investment ($4.0M for nine months).
Risks, contingencies and other notable items
- A proposed $13.0M settlement of a Florida class action concerning consumer privacy was accrued in Q3. The court granted preliminary approval on October 31, 2023; final approval remained pending, and plaintiffs in a separate consolidated California action challenged the settlement process. The company cautions that the ultimate loss could differ from its estimate.
- The FTC privacy investigation was resolved through a $1.5M settlement approved in February 2023, together with business-practice and compliance commitments.
- Two customers each represented 13% and 12% of Q3 revenue. The filing also highlights reliance on PBMs and major pharmacy chains, changing prescription pricing, consumer response to the grocer issue, and the risk that direct pharmacy arrangements may yield lower fees.
- Scott Wagner was serving as Interim CEO; the board was conducting a search for a permanent CEO. The company cited risks around management transition and its ability to realize restructuring savings.
- In October 2023, GoodRx remitted $44.5M for tax withholding in connection with the net settlement of founders’ awards. It delivered 7.6M Class B shares to the co-founders after withholding approximately 8.1M shares; the delivered shares were converted to Class A shares at the co-founders’ election.
- Management reported disclosure controls and procedures were effective as of September 30, 2023, and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether the $18M–$22M annualized restructuring savings are achieved, and whether the planned actions complete by year-end.
- How prescription transaction volumes, PBM and pharmacy relationships, direct-contracting fees, and lingering grocer-issue effects develop.
- Final approval and resolution of the $13.0M proposed privacy class-action settlement, including the related California litigation.
- Whether sustained tax profitability supports realization of deferred tax assets and the current valuation-allowance judgment.
- Debt service, refinancing needs ahead of the October 2025 term-loan maturity, and the impact of floating interest rates.