GoodRx Holdings, Inc. 10-Q

Item 1. Financial Statements. GoodRx Holdings, Inc. Condensed Consolidated Balance Sheets (Unaudited) (in thousands, except par values) September 30, 2020 December 31, 2019 Assets Current assets Cash and cash equivalents $ 1,075,024 $ 26,050 Restricted cash 2,900 — Accounts receivable, net 63,518 48,129 Prepaid expenses and other current assets 39,630 12,403 Total current assets 1,181,072 86,582 Property and equipment, net 16,757 1,860 Goodwill 261,116 236,225 Intangible assets, net 39,225 21,267 Capitalized software, net 15,400 5,178 Operating lease right-of-use assets 29,318 32,315 Deferred tax assets, net 1,687 2,207 Other assets 2,230 1,162 Total assets $ 1,546,805 $ 386,796 Liabilities, redeemable convertible preferred stock and stockholders' equity (deficit) Current liabilities Accounts payable $ 14,014 $ 7,851 Accrued expenses and other current liabilities 36,093 15,556 Current portion of debt 7,029 7,029 Operating lease liabilities, current 3,029 2,937 Total current liabilities 60,165 33,373 Debt, net 688,891 663,893 Operating lease liabilities, net of current portion 34,424 37,129 Deferred tax liabilities, net 1,772 — Other liabilities 5,144 2,974 Total liabilities 790,396 737,369 Commitments and contingencies (Note 8) Redeemable convertible preferred stock, $0.006 par value; zero and 130,000 shares authorized at September 30, 2020 and December 31, 2019, respectively; and zero and 126,046 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively — 737,009 Stockholders' equity (deficit) Preferred stock, $0.0001 par value; 50,000 and zero shares authorized at September 30, 2020 and December 31, 2019, respectively; and zero shares issued and outstanding at September 30, 2020 and December 31, 2019 — — Common stock, $0.002 par value; zero and 380,000 shares authorized at September 30, 2020 and December 31, 2019, respectively; and zero and 229,750 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively — 460 Common stock, $0.0001 par value; Class A: 2,000,000 and zero shares authorized, 42,922 and zero shares issued and outstanding, at September 30, 2020 and December 31, 2019, respectively; and Class B: 1,000,000 and zero shares authorized, 346,357 and zero shares issued and outstanding, at September 30, 2020 and December 31, 2019, respectively 39 — Additional paid-in capital 1,848,549 8,788 Accumulated deficit (1,092,179 ) (1,096,830 ) Total stockholders' equity (deficit) 756,409 (1,087,582 ) Total liabilities, redeemable convertible preferred stock and stockholders' equity (deficit) $ 1,546,805 $ 386,796 See accompanying Notes to Condensed Consolidated Financial Statements. 1 GoodRx Holdings, Inc. Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, (in thousands, except per share amounts) 2020 2019 2020 2019 Revenue $ 140,453 $ 101,745 $ 397,156 $ 274,968 Costs and operating expenses: Cost of revenue, exclusive of depreciation and amortization presented separately below 7,540 3,396 20,383 9,420 Product development and technology 15,846 7,844 38,133 19,480 Sales and marketing 65,113 44,950 180,195 122,639 General and administrative 108,479 4,102 120,698 10,165 Depreciation and amortization 5,160 3,609 14,026 9,355 Total costs and operating expenses 202,138 63,901 373,435 171,059 Operating (loss) income (61,685 ) 37,844 23,721 103,909 Other expense (income): Other expense (income), net 1 (4 ) (20 ) (3 ) Interest income (24 ) (271 ) (140 ) (580 ) Interest expense 6,264 12,773 21,697 39,452 Total other expense, net 6,241 12,498 21,537 38,869 (Loss) income before income tax expense (67,926 ) 25,346 2,184 65,040 Income tax benefit (expense) 17,894 (5,727 ) 2,467 (14,219 ) Net (loss) income $ (50,032 ) $ 19,619 $ 4,651 $ 50,821 Net (loss) income attributable to common stockholders Basic $ (50,032 ) $ 12,616 $ 3,045 $ 32,638 Diluted $ (50,032 ) $ 12,708 $ 3,092 $ 32,858 (Loss) earnings per share: (Loss) earnings per share - basic $ (0.21 ) $ 0.06 $ 0.01 $ 0.14 (Loss) earnings per share - diluted $ (0.21 ) $ 0.05 $ 0.01 $ 0.14 Weighted average shares used in computing (loss) earnings per share: Basic 241,061 227,058 233,727 226,251 Diluted 241,061 231,770 244,529 230,559 Stock-based compensation included in costs and operating expenses: Cost of revenue $ 57 $ — $ 98 $ — Product development and technology 2,958 449 4,772 1,265 Sales and marketing 4,284 331 5,762 931 General and administrative 99,574 176 100,572 496 See accompanying Notes to Condensed Consolidated Financial Statements . 2 GoodRx Holdings, Inc. Condensed Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) (Unaudited) Redeemable Convertible Preferred Stock Common Stock Class A and Class B Common Stock Additional Paid-in Accumulated Total Stockholders' Equity (in thousands) Shares Amount Shares Amount Shares Amount Capital Deficit (Deficit) Balance at December 31, 2019 126,046 $ 737,009 229,750 $ 460 — $ — $ 8,788 $ (1,096,830 ) $ (1,087,582 ) Stock options exercised — — 467 1 — — 691 — 692 Stock-based compensation — — — — — — 2,501 — 2,501 Net income — — — — — — — 27,346 27,346 Balance at March 31, 2020 126,046 $ 737,009 230,217 $ 461 — $ — $ 11,980 $ (1,069,484 ) $ (1,057,043 ) Stock options exercised — — 222 1 — — 530 — 531 Stock-based compensation — — — — — — 2,440 — 2,440 Net income — — — — — — — 27,337 27,337 Balance at June 30, 2020 126,046 $ 737,009 230,439 $ 462 — $ — $ 14,950 $ (1,042,147 ) $ (1,026,735 ) Stock options exercised — — 780 1 453 — 4,291 — 4,292 Stock-based compensation — — — — — — 107,825 — 107,825 Conversion of redeemable convertible preferred stock to common stock in connection with initial public offering (126,046 ) (737,009 ) 126,046 252 — — 736,757 — 737,009 Issuance of Class A common stock in connection with initial public offering, net of offering costs, underwriting discounts and commissions — — — — 28,615 3 886,853 — 886,856 Private placement of Class A common stock — — — — 3,030 — 100,000 — 100,000 Conversion of common stock into Class B common stock in connection with initial public offering — — (357,265 ) (715 ) 357,265 36 679 — — Common stock withheld for tax obligations and net settlement — — — — (85 ) — (2,806 ) — (2,806 ) Vesting of restricted stock units — — — — 1 — — — — Net loss — — — — — — — (50,032 ) (50,032 ) Balance at September 30, 2020 — $ — — $ — 389,279 $ 39 $ 1,848,549 $ (1,092,179 ) $ 756,409 See accompanying Notes to Condensed Consolidated Financial Statements. 3 GoodRx Holdings, Inc. Condensed Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) (Unaudited) Redeemable Convertible Preferred Stock Common Stock Additional Paid-in Accumulated Total Stockholders' (in thousands) Shares Amount Shares Amount Capital Deficit Deficit Balance at December 31, 2018 126,046 $ 737,009 225,201 $ 451 $ — $ (1,162,878 ) $ (1,162,427 ) Stock options exercised — — 340 1 263 — 264 Stock-based compensation — — — — 887 — 887 Net income — — — — — 11,552 11,552 Balance at March 31, 2019 126,046 $ 737,009 225,541 $ 452 $ 1,150 $ (1,151,326 ) $ (1,149,724 ) Stock options exercised — — 1,377 3 1,620 — 1,623 Restricted stock issuance 1,879 3 (3 ) — — Stock-based compensation — — — — 1,057 — 1,057 Net income — — — — — 19,650 19,650 Balance at June 30, 2019 126,046 $ 737,009 228,797 $ 458 $ 3,824 $ (1,131,676 ) $ (1,127,394 ) Stock options exercised — — 379 1 728 — 729 Common stock issuance — — 273 1 1,622 — 1,623 Stock-based compensation — — — — 1,072 — 1,072 Net income — — — — — 19,619 19,619 Balance at September 30, 2019 126,046 $ 737,009 229,449 460 $ 7,246 $ (1,112,057 ) $ (1,104,351 ) See accompanying Notes to Condensed Consolidated Financial Statements. 4 GoodRx Holdings, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended September 30, (in thousands) 2020 2019 Cash flows from operating activities Net income $ 4,651 $ 50,821 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 14,026 9,355 Amortization of debt issuance costs 2,430 2,545 Non-cash operating lease expense 3,431 1,497 Stock-based compensation 111,204 2,692 Change in fair value of contingent consideration 901 — Deferred income taxes 2,292 26 Changes in operating assets and liabilities, net of effect of business acquisitions Accounts receivable (10,928 ) (8,013 ) Prepaid expenses and other assets (31,832 ) (181 ) Accounts payable 3,411 1,461 Accrued expenses and other current liabilities 13,763 7,956 Operating lease liabilities 1,641 (1,454 ) Other liabilities 1,501 66 Net cash provided by operating activities 116,491 66,771 Cash flows from investing activities Purchase of property and equipment (15,681 ) (992 ) Acquisitions, net of cash acquired (55,793 ) (31,306 ) Capitalized software (10,333 ) (2,987 ) Net cash used in investing activities (81,807 ) (35,285 ) Cash flows from financing activities Proceeds from issuance of common stock in initial public offering, net of underwriting discounts and commissions 891,793 — Proceeds from private placement 100,000 — Proceeds from long-term debt 28,000 — Payments on long-term debt (5,272 ) (10,088 ) Payment of debt issuance costs (1,306 ) — Issuance of common stock — 1,623 Payments of initial public offering issuance costs (1,840 ) — Proceeds from exercise of stock options 5,148 2,065 Proceeds from early exercise of stock options 667 — Net cash provided by (used in) financing activities 1,017,190 (6,400 ) Net change in cash, cash equivalents and restricted cash 1,051,874 25,086 Cash, cash equivalents and restricted cash Beginning of period 26,050 34,600 End of period $ 1,077,924 $ 59,686 Non cash investing and financing activities Offering costs included in accounts payable and accrued expenses and other current liabilities $ 3,097 $ — Right-of-use assets obtained in exchange for new operating lease liabilities 234 3,444 Stock-based compensation included in capitalized software development costs 1,562 324 Capitalized software development costs in accrued expenses and other current liabilities 1,175 417 Employee tax withholding obligations on stock option exercises included in accrued expenses and other current liabilities 2,439 — Conversion of preferred stock to common stock in connection with initial public offering 737,009 — The following table presents a reconciliation of cash, cash equivalents and restricted cash in our Condensed Consolidated Balance Sheets to the total of the same such amounts shown above (in thousands): September 30, 2020 2019 Cash and cash equivalents $ 1,075,024 $ 59,686 Restricted cash 2,900 — Total cash, cash equivalents and restricted cash $ 1,077,924 $ 59,686 See accompanying Notes to Condensed Consolidated Financial Statements. 5 GoodRx Holdings, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) 1. Description of Business GoodRx Holdings, Inc. (the “Company”) and its subsidiaries offer information and tools to help consumers compare prices and save on their prescription drug purchases. The Company operates a price comparison platform that provides consumers with curated, geographically relevant prescription pricing, and provides access to negotiated prices through GoodRx codes that can be used to save money on prescriptions across the United States (the “prescription offering”). The services are free to consumers and the Company primarily earns revenue from its core business from Pharmacy Benefit Managers (“PBMs”) that manage formularies and prescription transactions including establishing pricing between consumers and pharmacies. The Company also offers other healthcare products and services, including telehealth services. The Company was incorporated in September 2015. On October 7, 2015, the Company acquired 100% of the outstanding shares of GoodRx, Inc. (“GoodRx”). GoodRx was initially formed in September 2011 as GoodRx, Inc., a Delaware corporation. Initial Public Offering The Company’s registration statement on Form S-1 (“IPO Registration Statement”) related to its initial public offering (“IPO”) was declared effective on September 22, 2020, and the Company’s Class A common stock began trading on the Nasdaq Global Select Market on September 23, 2020. On September 25, 2020, the Company completed its IPO of 39,807,691 shares of the Company Class A common stock, $0.0001 par value per share (the “Class A Common Stock”) at an offering price of $33.00 per share, pursuant to the Company’s IPO Registration Statement. The Company sold 28,615,034 shares, including 5,192,307 shares that were sold pursuant to the full exercise of the underwriters’ option to purchase additional shares, and certain existing stockholders sold an aggregate of 11,192,657 shares. The Company received aggregate net proceeds of $886.9 million after deducting underwriting discounts and commissions of $52.5 million and other offering expenses of $4.9 million, $3.1 million of which was unpaid at September 30, 2020. Immediately prior to the completion of the IPO, 126,045,531 outstanding shares of redeemable convertible preferred stock with a carrying value of $737.0 million converted into an equivalent number of shares of common stock. Immediately prior to the completion of the IPO, the Company filed an Amended and Restated Certificate of Incorporation, which authorized a total of 2,000,000,000 shares of Class A Common Stock, 1,000,000,000 shares of Class B Common Stock, $0.0001 par value per share and 50,000,000 shares of Preferred Stock, par value $0.0001 per share (the “Preferred Stock”). Upon the filing of the Amended and Restated Certificate of Incorporation, 357,265,256 shares of the Company’s common stock then outstanding were automatically reclassified into an equivalent number of shares of the Company’s Class B Common Stock. Immediately after the reclassification and prior to the completion of the IPO, a total of 10,098,121 shares of Class B Common Stock held by certain existing shareholders were exchanged for an equivalent number of shares of Class A Common Stock pursuant to terms of certain exchange agreements. As a result, following the completion of the IPO, the Company has two classes of authorized and outstanding common stock: Class A Common Stock and Class B Common Stock. The rights of the holders of the Class A and Class B Common Stock are identical except for voting and conversion rights. The holders of the Class A Common Stock are entitled to one vote per share and the holders of the Class B Common Stock are entitled to 10 votes per share. Each share of Class B Common Stock is convertible into one share of Class A Common Stock at any time at the option of the holder and will automatically convert to Class A Common Stock upon any transfer, except for certain permitted transfers. All Class B Common Stock will convert automatically into an equivalent number of Class A Common Stock upon the earlier of (i) September 25, 2027; and (ii) the first date the aggregate number of shares of Class B Common Stock cease to represent at least 10% of the aggregate outstanding shares of common stock. On September 13, 2020, the Company entered into a stock purchase agreement with an existing investor to issue $100.0 million worth of shares of Class A Common Stock, with the price per share to be equal to the per share price to the public in the Company’s initial public offering of Class A Common Stock. Closing of the investment was subject to certain customary conditions, including the closing of the initial public offering of Class A common stock. Concurrent with the completion of the IPO, the Company issued 3,030,303 shares of Class A Common Stock. 6 2. Summary of Significant Accounting Policies Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial information. Certain information and disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. Accordingly, these condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2019 and the related notes, which are included in the Company's Prospectus dated September 22, 2020 filed with the SEC pursuant to Rule 424(b) of the Securities Act of 1933, as amended, relating to the Company's IPO Registration Statement. The December 31, 2019 condensed consolidated balance sheet was derived from our audited consolidated financial statements as of that date. The Company’s unaudited interim condensed consolidated financial statements include, in the opinion of management, all adjustments, consisting of normal and recurring items, necessary for the fair statement of the condensed consolidated financial statements. There have been no significant changes in accounting policies during the three and nine months ended September 30, 2020 from those disclosed in the annual consolidated financial statements for the year ended December 31, 2019 and the related notes. The operating results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results expected for the full year ending December 31, 2020. Principles of Consolidation The consolidated financial statements include the financial statements of GoodRx Holdings, Inc., its wholly owned subsidiaries and variable interest entities (“VIEs”) for which the Company is the primary beneficiary. Intercompany balances and transactions have been eliminated in consolidation. Results of businesses acquired are included in the Company’s consolidated financial statements from their respective dates of acquisition. Consolidation of VIEs The Company evaluates whether an entity in which it has a variable interest is considered a variable interest entity (“VIE”). VIEs are generally entities that have either a total equity investment that is insufficient to permit the entity to finance its activities without additional subordinated financial support, or whose equity investors lack the characteristics of a controlling financial interest (i.e., ability to make significant decisions through voting rights and a right to receive the expected residual returns of the entity or an obligation to absorb the expected losses of the entity). Under the provisions of Accounting Standards Codification (“ASC”) 810, Consolidation, an entity consolidates a VIE if it is determined to be the primary beneficiary of the VIE. The primary beneficiary has both (a) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance, and (b) the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. The Company periodically reassesses whether it is the primary beneficiary of a VIE. On April 18, 2019, the Company acquired Sappira, Inc. d.b.a. HeyDoctor (“HeyDoctor”). HeyDoctor provides management and other services to Professional Service Corporations (“PSCs”), which are owned by medical professionals in accordance with certain state laws which restrict the corporate practice of medicine and require medical practitioners to own such entities. The Company determined that the PSCs are VIEs. The Company also determined that it is able to direct the activities of the PSCs that most significantly impact their economic performance and it funds and absorbs all losses of these VIEs resulting in the Company being the primary beneficiary of the PSCs. Accordingly, the Company consolidates the VIEs. Total revenue and net loss for the VIEs were $3.0 million and $(0.3) million, respectively, for the three months ended September 30, 2020. Total revenue and net loss for the VIEs were $6.6 million and $(0.9) million, respectively, for the nine months ended September 30, 2020. The VIEs’ total assets and liabilities were $4.8 million and $7.3 million, respectively, at September 30, 2020. The VIEs’ total stockholders' deficit was $2.5 million at September 30, 2020. Total revenue and net loss for the VIEs were $0.4 million and $(0.4) million, respectively, for the three months ended September 30, 2019. Total revenue and net loss for the VIEs were $0.6 million and $(0.9) million, respectively, for the nine months ended September 30, 2019. The VIEs’ total assets and liabilities were $1.4 million and $2.9 million, respectively, at December 31, 2019. The VIEs’ total stockholders’ deficit was $1.5 million at December 31, 2019. 7 Segment Reporting and Geographic Information Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker manages the Company on the basis of one operating segment. During the three and nine months ended September 30, 2020 and the three and nine months ended September 30, 2019, all of the Company’s revenue was from customers located in the United States. In addition, at September 30, 2020 and December 31, 2019, all of the Company’s right-of-use assets and property and equipment was in the United States. Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements, including the accompanying notes. The Company bases its estimates on historical factors, current circumstances, and the experience and judgment of management. The Company evaluates its estimates and assumptions on an ongoing basis. Actual results could differ from those estimates. Significant estimates reflected in the condensed consolidated financial statements include revenue recognition, valuation of intangible assets, useful lives of long-lived assets and capitalized software costs, recovery of long-lived assets and goodwill, assumptions used for purpose of determining stock-based compensation, and income tax reserves, among others. Certain Risks and Concentrations Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash, cash equivalents and accounts receivable. The Company maintains cash deposits with several financial institutions in the United States which, at times, may exceed federally insured limits. Cash may be withdrawn or redeemed on demand. The Company believes that the financial institutions that hold its cash are financially sound and, accordingly, minimal credit risk exists with respect to these balances. The Company has not experienced any losses in such accounts. The Company extends credit to its customers based on an evaluation of their ability to pay amounts due under contractual arrangements and generally does not obtain or require collateral. For the three months ended September 30, 2020, four customers accounted for approximately 16%, 13%, 12% and 10% of the Company’s revenue. For the nine months ended September 30, 2020, three customers accounted for approximately 17%, 16% and 11% of the Company’s revenue. For the three months ended September 30, 2019, two customers accounted for approximately 25% and 24% of the Company’s revenue. For the nine months ended September 30, 2019, two customers accounted for 25% and 23% of the Company’s revenue. At September 30, 2020, two customers accounted for 12% and 11% of the Company’s accounts receivable balance. At December 31, 2019, two customers accounted for 17% and 16% of the Company’s accounts receivable. In March 2020, the World Health Organization declared the outbreak of the novel coronavirus disease (“COVID–19”) a pandemic. COVID-19 has spread to almost every country in the world and all 50 states within the United States. The Company’s prescription offering initially experienced a decline in activity as many consumers avoided visiting healthcare professionals and pharmacies in-person, though in recent months activity in the Company’s prescription offering improved. In addition, the Company has experienced a significant increase in demand for the telehealth offerings. The Company only commenced its telehealth offerings following the acquisition of HeyDoctor in April 2019. The full extent to which the outbreak of COVID-19 will impact the Company’s business, results of operations and financial condition is still unknown and will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume. In light of the currently unknown ultimate duration and severity of COVID-19, the Company faces a greater degree of uncertainty than normal in making the judgments and estimates needed to apply significant accounting policies. The Company assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to the Company and the unknown future impacts COVID-19 as of September 30, 2020 and through the date of this report. The accounting matters assessed included, but were not limited to, the Company’s allowance for doubtful accounts, the carrying value of the goodwill and other long-lived assets, incentive-based compensation and income taxes. 8 As of the date of these condensed consolidated financial statements, management is not aware of any specific event or circumstance that would require an update to estimates or judgments or a revision to the carrying value of assets or liabilities. However, these estimates and judgments may change as new events occur and additional information is obtained, which may result in changes being recognized in our consolidated financial statements in future periods. Cash, Cash Equivalents and Restricted Cash The Company considers all short-term, highly liquid investments purchased with an original maturity of three months or less at the date of purchase to be cash equivalents. Cash deposits are all in financial institutions in the United States. Cash and cash equivalents consisted primarily of U.S. Treasury Securities money market funds held with an investment bank and cash on deposit. Cash equivalents, consisting of money market funds, of $1,013.5 million and zero at September 30, 2020 and December 31, 2019, respectively, were classified as Level 1 of the fair value hierarchy and valued using quoted market prices in active markets. The Company had no other material financial instruments that were measured at fair value as of September 30, 2020 and December 31, 2019. Restricted cash as of September 30, 2020 represents cash held in an escrow pursuant to terms of the Scriptcycle business combination relating to contingent consideration. Income Taxes The Company calculates income tax expense in interim periods by applying an estimated annual effective tax rate to income (loss) before income taxes and by calculating the tax effect of discrete items recognized during the period. Revenue For the three and nine months ended September 30, 2020 and 2019, revenue comprises the following: Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2020 2019 2020 2019 Prescription transactions revenue $ 124,385 $ 95,795 $ 356,950 $ 260,114 Other revenue 16,068 5,950 40,206 14,854 Total revenue $ 140,453 $ 101,745 $ 397,156 $ 274,968 Stock-Based Compensation Compensation cost is allocated to cost of revenue, product development and technology, sales and marketing, and general and administrative expense in the condensed consolidated statements of operations for stock options and restricted stock awards, based on the fair value of these awards at the date of grant. For awards that vest based on continued service, stock-based compensation cost is recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the awards. For awards with performance vesting conditions, stock-based compensation cost is recognized on a graded vesting basis over the requisite service period when it is probable the performance condition will be achieved. The grant date fair value of stock options that contain service or performance conditions is estimated using the Black-Scholes option-pricing model and the grant date fair value of restricted stock awards that contain service or performance conditions is estimated based on the fair value of the Company’s common stock. For awards with market vesting conditions, the fair value is estimated using a Monte Carlo simulation model that incorporates the likelihood of achieving the market condition. Stock-based compensation cost for awards that contain market vesting conditions is recognized on a graded vesting basis over the requisite service period, even if the market condition is not satisfied. For awards that contain service, performance and market vesting conditions, the Company commences recognition of stock-based compensation cost once it is probable that the performance condition will be achieved. If the performance condition is an initial public offering or a change in control event, the performance condition is not probable of being achieved for accounting purposes until the event occurs. Once it is probable that the performance condition will be achieved, the Company recognizes stock-based compensation cost over the remaining requisite service period under a graded vesting model, with a cumulative adjustment for the portion of the service period that occurred for the period prior to the performance condition becoming probable of being achieved. Thereafter, expense is recognized even if the market condition was not or is not achieved, provided the employee continues to satisfy the service condition. Forfeitures are recognized when they occur. 9 Comprehensive Income During the three and nine months ended September 30, 2020 and the three and nine months ended September 30, 2019, other than net income (loss), the Company did not have any other elements of comprehensive income (loss). Recent Accounting Pronouncements As an “emerging growth company”, the Jumpstart Our Business Startups Act, or the JOBS Act, allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. The Company has elected to use the adoption dates applicable to private companies. As a result, the Company’s financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective date for new or revised accounting standards that are applicable to public companies. Recently adopted accounting pronouncements In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement . This ASU eliminates, modifies and adds disclosure requirements for fair value measurements. The Company adopted this guidance on January 1, 2020, and the adoption did not have any impact to the consolidated financial statements. Recently issued accounting pronouncements - not yet adopted In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments , to require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The ASU also amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. In February 2020, the FASB issued ASU 2020-02, Financial Instruments - Credit Losses (Topic 326) and Leases (Topic 842) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842) (SEC Update), which amends the language in Subtopic 326-20 and addresses questions primarily regarding documentation and company policies. The guidance in ASU 2016-13 and ASU 2020-02 related to credit losses is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements. In August 2018, the FASB issued ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract . ASU 2018-15 requires implementation costs incurred by customers in cloud computing arrangements to be deferred over the noncancelable term of the cloud-computing arrangements plus any optional renewal periods (1) that are reasonably certain to be exercised by the customer or (2) for which exercise of the renewal option is controlled by the cloud service provider. This guidance is effective for fiscal years beginning after December 15, 2020, and interim periods within annual periods beginning after December 15, 2021. Early adoption is permitted. This guidance can be adopted either using the prospective or retrospective transition approach. The Company is currently evaluating the impacts of this ASU on its consolidated financial statements. In October 2018, the FASB issued ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to the Related Party Guidance for Variable Interest Entities . ASU 2018-17 changes how entities evaluate decision-making fees under the variable interest entity guidance. To determine whether decision-making fees represent a variable interest, an entity considers indirect interests held through related parties under common control on a proportional basis, rather than in their entirety. This guidance is effective for fiscal years, beginning after December 15, 2020 and interim periods within fiscal years beginning after December 15, 2021, with early adoption permitted. All entities are required to apply the amendments in this ASU retrospectively with a cumulative-effect adjustment to retained earnings at the beginning of the earliest period presented. The Company is currently evaluating the impact of the adoption of this ASU on its consolidated financial statements. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes . The objective of the guidance is to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and to provide more consistent application to improve the comparability of financial statements. The guidance is effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal 10 years beginning after December 15, 2022. The Company is currently evaluating the impact of this ASU on its consolidated financial statements . In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting . The ASU provides optional guidance for a limited period of time to ease the potential burden in accounting for or recognizing the effects of reference rate reform on financial reporting. The ASU applies only to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of the reference rate reform. The amendments in this ASU were effective upon issuance and may be applied through December 31, 2022. The Company is currently evaluating the impact of the adoption of this ASU on its consolidated financial statements. 3. Business Combinations Scriptcycle, LLC On August 31, 2020, the Company acquired all of the equity interests of Scriptcycle, LLC, (“Scriptcycle”). Scriptcycle specializes in managing prescription programs and primarily partners with regional retail pharmacy chains to provide discount offerings. The purpose of the acquisition is to help expand the Company’s business capabilities, particularly with respect to its prescription offering. The aggregate purchase consideration is $58.3 million, including the estimated fair value of contingent consideration of $0.8 million. The purchase consideration is subject to working capital and other closing adjustments. The maximum amount of contingent consideration payable is $2.9 million subject to the achievement of certain revenue thresholds through January 2021. As of September 30, 2020, the Company estimated the fair value of the contingent consideration was $1.7 million. The change in the fair value of the contingent consideration from the acquisition date through September 30, 2020 was recorded in general and administrative expenses. The fair value of the contingent consideration is measured using Level 3 inputs in the fair value hierarchy. The Company estimated the fair value of the acquisition related contingent consideration using a Monte-Carlo simulation model. The Company applied a discount rate of 5.4% at the acquisition date and 5.3% at September 30, 2020, which captures the risk associated with the contingent consideration. The significant unobservable input used in the fair value measurement of the contingent consideration is forecasted revenue as defined in the purchase agreement. Significant changes in forecasted revenue would result in a significantly higher or lower fair value measurement. Goodwill associated with this acquisition totaled $24.9 million and is primarily related to the expected long-term synergies and other benefits, including the acquired assembled workforce. The acquisition was considered an acquisition of assets for tax purposes and, accordingly, goodwill is expected to be deductible for tax purposes. Identifiable intangible assets related to this acquisition totaled $28.3 million, of which $25.3 million was attributable to a customer related intangible asset, with an estimated useful life of 11 years and $3.0 million was attributable to developed technology and a tradename with useful lives ranging from 1 to 9 years. In addition, the Company acquired current assets of $5.9 million and assumed liabilities of $1.1 million. Unaudited supplemental pro forma financial information for the Scriptcycle acquisition, and the revenue and earnings of Scriptcycle from the acquisition date through September 30, 2020, have not been presented because the effects were not material to the Company’s consolidated financial statements. Sappira Inc. (d.b.a HeyDoctor) On April 18, 2019, the Company completed its acquisition of 100% of the equity interests in San Francisco, California-based Sappira Inc. (d.b.a HeyDoctor), a privately-held company offering an online application for consultation with physicians. HeyDoctor can be used by patients to obtain prescriptions for various medical afflictions. The Company intends to use HeyDoctor’s technology and service offerings to increase the visits to the GoodRx online platform. The total purchase consideration for the acquisition of HeyDoctor was $14.3 million in cash, of which $1.4 million was placed in escrow for potential breaches of representations and warranties. The escrow amount, net of any claims for such indemnifiable matters, was released from escrow to stockholders of HeyDoctor in October 2020. The goodwill recorded in connection with this acquisition primarily related to the expected long-term synergies and other benefits, including the acquired assembled workforce, from the acquisition. The acquisition was considered a stock acquisition for tax purposes and, accordingly, goodwill is not expected to be deductible for tax purposes. Identifiable intangible assets related to this acquisition totaled $4.2 million, of which $3.1 million was attributable to developed technology, with an estimated useful life of 4 years and $1.1 million was attributable to trademarks and backlog with useful 11 lives ranging from 1 t o 7 years. In addition, the Company acquired current assets of $2.1 million and assumed current liabilities of $0.5 million. Unaudited supplemental pro forma financial information for the HeyDoctor acquisition, and the revenue and earnings of HeyDoctor from the acquisition date through September 30, 2020, have not been presented because the effects were not material to the Company’s consolidated financial statements. FocusScript LLC On August 30, 2019, the Company completed the acquisition of certain software assets and the assembled workforce of Creve Coeur, Missouri-based FocusScript LLC (“FocusScript Acquisition”). The Company intends to use the acquired claim routing software to service its customers. The total purchase consideration consisted of $18.7 million in cash. The goodwill recorded in connection with this acquisition primarily related to the expected long-term synergies and other benefits, including the acquired assembled workforce, from the acquisition. Goodwill is deductible for tax purposes. Identifiable intangible assets related to this acquisition totaled $12.2 million, which was attributable to developed technology with an estimated useful life of 4 years. Disclosure of unaudited supplemental pro forma financial information for the FocusScript Acquisition is not practicable given the Company purchased certain assets and assembled workforce for which historical information was not available. In addition, disclosure of revenues and earnings of FocusScript from the acquisition date through September 30, 2020 is not practicable as the FocusScript Acquisition has been integrated into the Company’s operations. 4. Prepaid expenses and other current assets Prepaid expenses and other current assets consisted of the following: (in thousands) September 30, 2020 December 31, 2019 Income taxes receivable $ 28,759 $ — Prepaid expenses $ 8,169 $ 5,014 Lease incentive receivable 2,702 7,389 Total prepaid expenses and other current assets $ 39,630 $ 12,403 5. Accrued expenses and other current liabilities Accrued expenses and other current liabilities consisted of the following: (in thousands) September 30, 2020 December 31, 2019 Accrued bonus and payroll $ 12,908 $ 3,037 Accrued marketing 11,372 5,820 Deferred revenue 6,911 3,453 Income taxes payable — 1,349 Other accrued expenses 4,902 1,897 Total accrued expenses and other current liabilities $ 36,093 $ 15,556 Of the $3.5 million deferred revenue balance included in the balance sheet at December 31, 2019, $3.3 million was recognized as revenue during the nine months ended September 30, 2020. The Company expects substantially all of the deferred revenue at September 30, 2020 will be recognized as revenue within the next twelve months. 6. Income Taxes The effective income tax rate for the three and nine months ended September 30, 2020 was 26.3% and (112.8)%, respectively, and for the three and nine months ended September 30, 2019 was 22.6% and 21.9%, respectively. The change in the Company’s effective income tax rate for the three and nine months ended September 30, 2020 compared to three and nine months ended September 30, 2019 was primarily due to tax effects of nondeductible officers’ stock-based compensation expense partially offset by excess tax benefits related to the exercise of stock options. The Company’s 12 effective income tax rate differs from the U.S. Federal stat utory rate of 21% primarily due to effects of non-deductible officers’ stock-based compensation expense , and state income taxes partially offset by benefits from research and development tax credits and excess tax benefits from stock-based compensation exp ense . On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law, featuring significant tax provisions and other measures to assist individuals and businesses impacted by the economic effects of the COVID-19 pandemic. The CARES Act increased the Section 163(j) interest expense deduction limitation from 30% to 50% of adjusted taxable income, provided for the payment deferral of certain Social Security taxes, made a technical correction allowing Qualified Improvement Property to be treated as 15-year property, and included numerous other provisions. The CARES Act increased the Company’s interest expense deduction applicable to the 2019 tax year resulting in a reduction of deferred tax assets and a corresponding reduction in income taxes payable of zero and approximately $2.3 million during the three and nine months ended September 30, 2020, respectively. There were no significant changes to the Company’s unrecognized tax benefits during the nine months ended September 30, 2020, and the Company does not expect to have any significant changes to unrecognized tax benefits through the end of 2020. In 2020, the ownership of the HeyDoctor PSCs were transferred to different medical professionals. The Company's deferred income taxes reflects carryover tax attributes generated by the VIEs available for future utilization. Section 382 of the Internal Revenue Code (“IRC”) limits the utilization of U.S. net operating loss carryforwards (“NOLs”) following a change of control. As the 2020 change in ownership in the PSCs constitutes a change of control, U.S. NOLs from the PSCs will be subject to an annual limitation under IRC Section 382. Any limitation would not be material to the financial statements as a full valuation allowance has been established against the NOLs from the PSCs due to uncertainty regarding their future realization. 7. Debt The Company's debt balances at September 30, 2020 and December 31, 2019 were as follows: (in thousands) September 30, 2020 December 31, 2019 Principal balance under First Lien Credit Agreement $ 682,883 $ 688,155 Less unamortized debt issuance costs and discounts (14,963 ) (17,233 ) $ 667,920 $ 670,922 Principal balance under Revolving Credit Facility 28,000 — $ 695,920 $ 670,922 In March 2020, the Company borrowed an aggregate of $28.0 million under its line of credit, which is still outstanding as of September 30, 2020. In May 2020, GoodRx, Inc., the Company’s wholly owned subsidiary, as borrower, and GoodRx Intermediate Holdings, LLC, entered into an amendment of its first lien credit agreement (the “First Lien Credit Agreement”) to increase the amount of the line of credit by $60.0 million to a total of $100.0 million. The line of credit matures on October 11, 2024 and bears interest at a rate equal to the LIBO Screen Rate (as defined in the First Lien Credit Agreement) plus a variable margin based on the Company’s most recently determined Net Leverage Ratio (as defined in the First Lien Credit Agreement), ranging from 2.50 to 3.00% on used amounts and 0.25 to 0.50% on unused amounts. The Company incurred lender and third-party costs of $1.3 million related to the amendment which are recorded in other assets. Regulatory authorities that oversee financial markets have announced that after the end of 2021, they would no longer compel banks currently reporting information used to set the LIBO Screen Rate to continue to make rate submissions. As a result, it is possible that beginning in 2022, the LIBO Screen Rate will no longer be available as a reference rate. Under the terms of the Company's First Lien Credit Agreement, in the event of the discontinuance of the LIBO Screen Rate, a mutually agreed-upon alternate benchmark rate will be established to replace the LIBO Screen Rate. The Company and lenders under its First Lien Credit Agreement shall in good faith establish an alternate benchmark rate which places the lenders and the Company in the same economic position that existed immediately prior to the discontinuation of the LIBO Screen Rate. The Company does not anticipate that the discontinuance of the LIBO Screen Rate will materially impact its liquidity or financial position. 13 8 . Commitments and Contingencies Contingent Consideration The Company is subject to a contingent consideration agreement entered into in connection with its acquisition of Scriptcycle. If the acquired business meets predetermined targets, the Company is obligated to make additional cash payments in accordance with the terms of such contingent consideration agreement, see "Note 3. Business Combinations – Scriptcycle, LLC". Legal Contingencies During the normal course of business, the Company may become subject to, and is presently involved in, legal proceedings, claims and litigation. S uch matters are subject to many uncertainties and outcomes are not predictable with assurance. Accruals for loss contingencies are recorded when a loss is probable, and the amount of such loss can be reasonably estimated. As of September 30, 2020, the Company is not subject to any currently pending legal matters or claims that could have a material adverse effect on its financial position, results of operations, or cash flows should such litigation be resolved unfavorably. 9. Stock-Based Compensation Stock Options A summary of the stock option activity for the nine months ended September 30, 2020 is as follows, in thousands, except per share amounts and term information: Weighted Weighted Average Weighted Average Remaining Aggregate Average Exercise Contractual Intrinsic Grant Date Shares Price Term Value Fair Value Outstanding at December 31, 2019 16,850 3.82 8.2 years $ 35,043 Granted 5,597 6.20 $ 2.95 Exercised (467 ) 2.91 1,429 Expired / Cancelled / Forfeited (585 ) 4.15 Outstanding at March 31, 2020 21,395 4.46 8.5 years 51,026 Granted 3,541 6.84 $ 3.17 Exercised (222 ) 2.39 926 Expired / Cancelled / Forfeited (673 ) 5.13 Outstanding at June 30, 2020 24,041 4.81 8.4 years 47,750 Granted 881 33.00 $ 16.60 Exercised (1,233 ) 3.48 22,960 Expired / Cancelled / Forfeited (125 ) 5.21 Outstanding at September 30, 2020 23,564 5.93 8.4 years 1,169,173 Exercisable at September 30, 2020 9,544 3.28 7.3 years 499,342 All options outstanding at September 30, 2020 are options to purchase shares of Class A Common Stock. The fair value of option awards issued with service and performance vesting conditions are estimated on the grant date using the Black-Scholes option pricing model. The following table summarizes the assumptions used: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Risk-free interest rate 0.4% 1.4% - 1.6% 0.4% - 1.4% 1.4% - 2.4% Expected term 5.8 - 6.0 years 5.6 - 6.3 years 5.3 - 6.3 years 5.6 - 6.3 years Expected stock price volatility 55% 50% 50% - 62% 50% Dividend yield — — — — Fair value of common stock per share $33.00 $3.88 - $4.69 $5.94 - $33.00 $2.75 - $4.69 14 For the th ree and nine months ended September 30, 2020 , the stock-based compensation expense related to stock options was $ 6.8 million and $ 10.2 million, respectively. For the three and nine months ended September 30, 2019, the stock-based compensation expense related to stock options was $0.7 million and $ 2.1 million, respectively. At September 30, 2020 , there was $ 40.2 million of total unrecognized stock-based compensation cost related to stock options, excluding stock options which contain performance and mar ket conditions described below, which is expected to be recognized over a weighted-average remaining service period of 3.3 years. In June 2020, the Company granted stock options to purchase 0.6 million shares of common stock at an exercise price of $6.84 per share that vest upon continued service and the achievement of both performance and market conditions. For stock options to purchase 0.4 million shares of common stock, the service condition is satisfied monthly over a 4-year period and for stock options to purchase 0.2 million shares of common stock the service condition is satisfied on January 1, 2022. The performance condition was satisfied upon the closing of the Company’s IPO. The market condition is satisfied upon the Company’s common stock achieving a per share price threshold in the IPO, an average trading price of the Company’s stock for a period subsequent to the IPO, or a per share price in a change in control transaction. For stock options to purchase 0.2 million, 0.2 million and 0.2 million shares of common stock, the per share price thresholds for these market conditions are $17.82, $23.76 and $29.70, respectively, subject to adjustment for stock splits and other similar transactions. The Company estimated the grant date fair value of these awards to be $1.4 million using a Monte Carlo simulation model. The Company recognized $0.3 million of stock-based compensation expense in the three months ended September 30, 2020 related to these options. In June 2020, the Company modified the terms of an option to purchase 0.4 million shares of common stock. The original award that would otherwise have been cancelled upon the employee’s departure from the Company was modified to permit the former employee to only exercise the award within 30 days after the completion of a performance condition, which are the Company completing its IPO or a change in control of the Company or a declaration of dividend payment, as defined. The fair value of this option of $2.4 million on the modification date was recognized as stock-based compensation expense on the effective date of the Company’s IPO. Restricted Stock and Restricted Stock Units (“Restricted Stock”) The following table summarizes Restricted Stock activity for the three and nine months ended September 30, 2020: Restricted Restricted Stock Units for Class A Restricted Stock Units for Class B Weighted Average Stock Common Common Grant Date (in thousands, except per share amounts) Awards Stock Stock Fair Value Nonvested restricted shares at December 31, 2019 1,879 — — $ 3.88 Granted — — — — Vested — — — — Nonvested restricted shares at March 31, 2020 1,879 — — 3.88 Granted — — — — Vested (470 ) — — 3.88 Nonvested restricted shares at June 30, 2020 1,409 — — 3.88 Granted — 948 24,633 22.07 Vested — (1 ) — 33.00 Nonvested restricted shares at September 30, 2020 1,409 947 24,633 21.12 For the three and nine months ended September 30, 2020, total stock-based compensation expense related to Restricted Stock awards was $0.5 million and $1.4 million, respectively. For the three and nine months ended September 30, 2019, the stock-based compensation expense related to Restricted Stock awards was $0.3 million and $0.6 million, respectively. At September 30, 2020, there was $4.6 million of total unrecognized stock-based compensation cost related to these Restricted Stock awards which was expected to be recognized over the remaining service period of 2.6 years. In September 2020, the Company granted Restricted Stock Units (“RSUs”) for Class A Common Stock that will substantially vest over a four-year period. For the three and nine months ended September 30, 2020, total stock-based compensation expense related to these RSUs was $1.6 million. At September 30, 2020, there was $29.7 million of total unrecognized stock-based compensation cost related to these RSUs which was expected to be recognized over the remaining service period of 3.9 years. 15 On September 11, 2020, the Board of Directors granted RSUs covering an aggregate of 24,63 3,066 shares of common stock to the Company’s Co-Chief Executive Officers, subject to the completion of an initial public offering. Each of the Co-Chief Executive Officers received (i) 8,211,022 RSUs that vest based on the achievement of stock price goals ranging from $6.07 per share to $51.28 per share, subject to continued employment through the applicable vest ing date (the “Performance-Vesting Founder s Awards”) and (ii) 4,105,511 RSUs that vest in equal quarterly installments over four years, subject to continued employment through the applicable vest ing date (the “Time-Vesting Founder s Awards”). Any Performance-Vesting Founder s Awards that vest will be settled in shares of common stock on the third anniversary of the applicable vesting date or, if earlier, upon a qualifying change in control event. The Performance-Vesting Founder s Awards and Time-Vesting Founder s Awards are subject to certain vesting acceleration terms. T he estimated fair value of these awards of $533.3 million is expected to be rec ognized over a weighted average period of 1.2 years, though could be earlier if the stock price goals are achieved earlier than estimated. During the three months ended September 30, 2020, the Company has recognized a cumulative $98.1 million of stock-base d compensation expense , with $10.4 million relating to the Time-Vesting Founder s Awards and $87.7 million to the Performance-Vesting Founder s Awards. At September 30, 2020, there was $435.2 million of total unrecognized stock-based compensation cost relate d to these RSUs. Due to the earlier than expected achievement of stock price goals, a portion of this unrecognized stock-based compensation cost was recognized as expense during the fourth quarter of 2020. See “Note 11. Subsequent Events”. 10. Basic and diluted earnings per share The Company has two classes of common stock, Class A and Class B. Basic and diluted earnings per share (“EPS”) attributable to common stockholders for Class A and Class B common stock were the same because they are entitled to the same liquidation and dividend rights. The Company computes EPS using the two-class method required for participating securities. The two-class method requires net income to be allocated between common stock and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed. In periods where the Company has net losses, losses are not allocated to participating securities as they are not required to fund the losses. The Company considers redeemable convertible preferred stock to be participating securities as preferred stockholders have rights to participate in dividends with the common stockholders. Basic EPS is computed by dividing net income attributable to common stockholders by the weighted average number of common shares outstanding during the period. Weighted average number of common shares outstanding includes contingently issuable shares where there is no circumstance under which those shares would not be issued. The Co-Chief Executives’ Performance-Vesting Founders Awards once vested are settled in shares of common stock on the third anniversary of the applicable vesting date or, if earlier, upon a qualifying change in control event. At the time of vesting, these shares are contingently issuable and included in the weighted average number of common shares outstanding for basic EPS. The Company computes diluted EPS under a two-class method where income is reallocated between common stock, potential common stock and participating securities. Stock-based awards that contain vesting provisions contingent on achievement of performance or market conditions are included in the computation of diluted earnings per share, if dilutive, from the beginning of the period or date of issuance if later, if all necessary conditions to vest have been satisfied during the period. If all conditions have not been met by the end of the period, dilutive EPS includes the number of shares that would be issuable if the end of the period were the end of the contingency period. Potential common stock includes stock options, restricted stock awards, and RSUs computed using the treasury stock method. 16 The computation of earnings (loss) per share for the three and nine months ended September 30, 2020 and 2019 is as follows: Three Months Ended September 30, Nine Months Ended September 30, (in thousands, except per share data) 2020 2019 2020 2019 Numerator: Net (loss) income $ (50,032 ) $ 19,619 $ 4,651 $ 50,821 Less: Undistributed earnings allocated to convertible preferred stock — (7,003 ) (1,606 ) (18,183 ) Net (loss) income attributable to common stockholders - basic $ (50,032 ) $ 12,616 $ 3,045 $ 32,638 Add: Undistributed earnings reallocated to holders of common stock — 92 47 220 Net (loss) income attributable to common stockholders - diluted $ (50,032 ) $ 12,708 $ 3,092 $ 32,858 Denominator: Weighted average shares - basic 241,061 227,058 233,727 226,251 Dilutive impact of stock options and restricted stock awards — 4,712 10,802 4,308 Weighted average shares - diluted 241,061 231,770 244,529 230,559 (Loss) earnings per share Basic $ (0.21 ) $ 0.06 $ 0.01 $ 0.14 Diluted $ (0.21 ) $ 0.05 $ 0.01 $ 0.14 The following weighted-average potentially dilutive shares were excluded from the computation of diluted net (loss) income per share for the periods presented because including them would have been antidilutive: Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2020 2019 2020 2019 Redeemable convertible preferred stock 117,825 126,046 123,285 126,046 Stock options and restricted stock awards 30,537 8,654 7,540 7,503 11. Subsequent Events In October 2020, the Company repaid the outstanding balance under its revolving line of credit of $28.0 million. All the stock price goals with respect to the Performance-Vesting Founders Awards, see “Note 9. Stock-based compensation”, were achieved as of October 22, 2020. As a result, all 16,422,044 Performance-Vesting Founders Awards vested, resulting in recognition of approximately $232.1 million of stock-based compensation expense during the fourth quarter of 2020. In October 2020, the Company’s Board of Directors granted RSUs of 1.3 million shares of Class A Common Stock to employees, which will substantially vest over a four-year period. The Company estimates the grant date fair value of these RSUs is approximately $60.9 million, which will be recognized as stock-based compensation cost, net of forfeitures that occur, over approximately four years. 17