GoodRx Holdings, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; comparisons are with the three months ended March 31, 2023 unless noted. GoodRx operates a U.S. prescription-price comparison and savings platform, with additional subscription, pharmaceutical manufacturer solutions and telehealth offerings. The filing is unaudited.
Financial and operating performance
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Revenue | $197.9 million | $184.0 million |
| Operating income | $7.4 million | $11.3 million |
| Net loss | $1.0 million | $3.3 million |
| Operating cash flow | $42.6 million | $32.3 million |
| Adjusted EBITDA (non-GAAP) | $62.8 million | $53.2 million |
| Adjusted EBITDA margin (non-GAAP) | 31.7% | 28.9% |
Net loss margin improved to 0.5% from 1.8%. Revenue increased 8%. Revenue by stream was prescription transactions $145.4 million (+8%), subscriptions $22.6 million (-6%), pharma manufacturer solutions $24.5 million (+20%) and other $5.4 million (+19%).
Cash and cash equivalents were $533.3 million at March 31, down from $672.3 million at year-end. Operating activities provided $42.6 million; investing used $20.6 million, including $20.2 million of capitalized software; financing used $161.0 million, largely reflecting $153.2 million of share repurchases. Debt carrying value was $653.7 million, including $7.0 million current and $646.7 million noncurrent. The term loan’s effective interest rate was 8.77%. The company reported $91.7 million available under its revolving facility and compliance with debt covenants.
Monthly active consumers averaged 6.7 million, up from 6.1 million; subscription plans were 778,000, down from 1.007 million. The company reported approximately 8 million prescription-related consumers at quarter-end.
Material changes and notable items
- Prescription transaction growth was attributed primarily to 10% growth in monthly active consumers, including expansion of the integrated savings program. Higher consumer discounts, now recorded as a reduction of revenue, partly offset that growth.
- Pharma manufacturer solutions growth reflected organic expansion, partly offset by a $2.4 million decline from vitaCare, which GoodRx deprioritized during its 2023 restructuring.
- Sales and marketing expense rose 15% to $90.0 million, with higher advertising and payroll costs. General and administrative expense rose 39% to $41.1 million, including a $13.0 million estimated legal settlement loss.
- GoodRx estimated a probable $28.0 million loss in ongoing consumer privacy litigation at March 31 and accrued $27.5 million, net of an earlier $0.5 million payment to a settlement fund. The proposed $13.0 million settlement had received preliminary court approval, but final approval and negotiations remained unresolved.
- In March, GoodRx repurchased 21.3 million shares for approximately $154.8 million, including 20.9 million shares from related parties for $151.4 million. A new $450 million repurchase authorization was approved; $295.2 million remained available at quarter-end.
- The effective income tax rate was 444.4%, reflecting the small pretax-income base and tax items described in the filing. Net loss per share was reported as $(0.00).
Outlook, risks and contingencies
- GoodRx expects Kroger Savings to sunset in July 2024 and subscription plans for that offering to continue declining through then. Management expects pharma manufacturer solutions to grow as a share of revenue in the near to medium term; no numerical revenue or earnings guidance is provided in this filing.
- Management stated cash on hand and operating cash generation should meet operating, investing and financing needs for at least the next 12 months. The term loan matures October 2025; the revolving facility maturity was extended to July 2025.
- A securities class action filed April 22, 2024 alleges failure to disclose risks associated with a grocery chain’s actions affecting acceptance of discounted prices for some prescriptions. GoodRx intends to defend the case; it said a loss was reasonably possible but could not be estimated and was not accrued.
- GoodRx reported an arbitration award in its favor against Famulus, including damages and a permanent injunction. Court proceedings to confirm or vacate the award were pending, and collection and outcome were uncertain; no gain was recognized.
- Other key risks cited include dependence on PBMs, pharmacies and other industry participants; competition and medication-pricing changes; consumer privacy, data security and regulatory exposure; reliance on technology and third-party providers; debt obligations; and ability to retain consumers and execute growth plans.
Important facts for investors to verify
- Whether the privacy-litigation negotiations result in final settlement approval, and whether the $28.0 million estimated loss changes.
- Progress and financial impact of the Kroger Savings sunset, including subscription trends and the integrated savings program’s contribution to transaction growth.
- Whether pharma manufacturer solutions growth continues and offsets pressure in subscriptions and consumer incentives.
- Cash generation and capital allocation after the substantial related-party share repurchase, including remaining buyback authorization and debt repayment capacity.
- Developments in the April 2024 securities lawsuit and the Famulus arbitration award, for which outcomes or amounts were not established in the filing.
- Adjusted EBITDA is non-GAAP and excludes items including stock-based compensation and the $13.0 million legal settlement expense; compare it with GAAP results and review the company’s reconciliation.