Item 7. Management’s Discussion and Analysis
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations together with
our audited consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K.
This discussion contains forward-looking statements based upon current plans, expectations and beliefs involving risks and
uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result
of various factors, including those set forth under Part I, Item 1A, “Risk Factors” and in other parts of this Annual Report on
Form 10-K. A discussion of the year ended December 31, 2023 compared to the year ended December 31, 2022 has been
reported previously in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on
February 29, 2024 , under the heading “Management’s Discussion and Analysis of Financial Condition and Results of
Operations.”
Overview
Our mission is to help Americans get the healthcare they need at a price they can afford. To achieve this, we are
building the leading consumer-focused digital healthcare platform in the United States. Copays have continued to trend
upward in recent years and we believe as insurance providers continue to shift the cost burden more and more to
consumers, consumers are now more than ever searching for sustainable affordable healthcare solutions which, in turn,
strengthens our value proposition. We believe our financial results reflect the significant market demand for our offerings and
the value that we provide to the broader healthcare ecosystem .
We have seen rapid changes in the U.S. retail pharmacy landscape recently with Rite Aid 's store closures in addition to
announcements of store closures and reduction of footprint from various other retail pharmacies, including Walgreens .
Future store closures and reduction of footprint from retail pharmacies are expected to have an immediate adverse impact
on our prescription volume and prescription transactions revenue. However, we believe this impact to be largely transient as
we expect prescription volume to migrate to other in-network pharmacies in the near term. As an extension of the changing
retail pharmacy landscape, we have seen and continue to expect heightened renegotiations between pharmacies and PBMs
as a result of the pharmacies' increased focus on rationalizing their spending, which in turn has had and may have an impact
on our prescription transactions revenue.
For the year ended December 31, 2024 as compared to the year ended December 31, 2023 :
• Revenue increased 6% to $792.3 million from $750.3 million ;
• Adjusted Revenue increased 4% to $792.3 million from $760.3 million ;
• Net income and net income margin were $16.4 million and 2.1% , respectively, compared to net loss and net
loss margin of $8.9 million and 1.2% , respectively; and
• Adjusted EBITDA and Adjusted EBITDA Margin were $260.2 million and 32.8% , respectively, compared to
$217.4 million and 28.6% , respectively.
Revenue, net income (loss) and net income (loss) margin are financial measures prepared in conformity with
accounting principles generally accepted in the United States ("GAAP"). Adjusted Revenue, Adjusted EBITDA and Adjusted
EBITDA Margin are non-GAAP financial measures. For a reconciliation and presentation of Adjusted Revenue, Adjusted
EBITDA and Adjusted EBITDA Margin to the most directly comparable GAAP financial measures, information about why we
consider Adjusted Revenue, Adjusted EBITDA and Adjusted EBITDA Margin useful and a discussion of the material risks
and limitations of these measures, please see “Key Financial and Operating Metrics—Non-GAAP Financial Measures"
included within this Part II, Item 7 of this Annual Report on Form 10-K.
Seasonality
We typically experience stronger consumer demand during the first and fourth quarters of each year, which coincide
with generally higher consumer healthcare spending, doctor office visits, annual benefit enrollment season, and seasonal
cold and flu trends. For our integrated savings program, we may experience stronger traffic during the first half of each year
since more claims are likely to be routed through GoodRx while plan members are in the deductible phase of their health
plans. We may also experience stronger demand for our pharma manufacturer solutions offering during the fourth quarter of
each year, which coincides with pharma manufacturers' annual budgetary spending patterns. In addition, this seasonality
may impact revenue and sales and marketing expense. PBM-pharmacy issues, including changes in the retail landscape, as
well as macroeconomic events such as the COVID-19 pandemic may have masked some of these trends in recent periods
and may continue to impact these trends in the future.
Recent Development
On January 13, 2025, we acquired substantially all of the assets and assembled workforce of the prescription savings
business of Vivid Clear Rx, Inc. for $30.0 million in cash. See Note 19 in the notes to our audited consolidated financial
statements included elsewhere in this Annual Report on Form 10-K.
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Key Financial and Operating Metrics
We use Monthly Active Consumers, subscription plans, Adjusted Revenue, Adjusted EBITDA and Adjusted EBITDA
Margin to assess our performance, make strategic and offering decisions and build our financial projections. The number of
Monthly Active Consumers and subscription plans are key indicators of the scale of our consumer base and a gauge for our
marketing and engagement efforts. We believe these operating metrics reflect our scale, growth and engagement with
consumers.
We exited the fourth quarter of 2024 with over 7 million prescription-related consumers that used GoodRx across our
prescription transactions and subscription offerings. Our prescription-related consumers represent the sum of Monthly Active
Consumers for the three months ended December 31, 2024 and subscribers to our subscription plans as of December 31,
2024 .
Monthly Active Consumers
Three Months Ended
(in millions)
December 31,
2024
September 30,
2024
June 30,
2024
March 31,
2024
December 31,
2023
September 30,
2023
June 30,
2023
March 31,
2023
Monthly Active Consumers
6.6
6.5
6.6
6.7
6.4
6.1
6.1
6.1
Subscription Plans
Subscription plans have been impacted by a sequential decline in our subscription plans for Kroger Savings as a result
of reduced marketing spend in relation to that offering, which sunset in July 2024.
As of
(in thousands)
December 31,
2024
September 30,
2024
June 30,
2024
March 31,
2024
December 31,
2023
September 30,
2023
June 30,
2023
March 31,
2023
Subscription plans
684
701
696
778
884
930
969
1,007
Non-GAAP Financial Measures
Adjusted Revenue, Adjusted EBITDA and Adjusted EBITDA Margin are key measures we use to assess our financial
performance and are also used for internal planning and forecasting purposes. We believe Adjusted Revenue, Adjusted
EBITDA and Adjusted EBITDA Margin are helpful to investors, analysts and other interested parties because they can assist
in providing a more consistent and comparable overview of our operations across our historical financial periods. In addition,
these measures are frequently used by analysts, investors and other interested parties to evaluate and assess performance.
We define Adjusted Revenue for a particular period as revenue excluding client contract termination costs associated
with restructuring related activities. We exclude these costs from revenue because we believe they are not indicative of past
or future underlying performance of the business.
We define Adjusted EBITDA for a particular period as net income or loss before interest, taxes, depreciation and
amortization, and as further adjusted, as applicable, for acquisition related expenses, stock-based compensation expense,
payroll tax expense related to stock-based compensation, loss on extinguishment of debt, financing related expenses, loss
on operating lease assets, restructuring related expenses, legal settlement expenses , gain on sale of business and other
income or expense, net. These excluded items are either non-cash charges or such that we believe do not represent our
underlying core operating performance and that their exclusion provides investors with a better understanding of the factors
and trends affecting our business . Adjusted EBITDA Margin represents Adjusted EBITDA as a percentage of Adjusted
Revenue.
Adjusted Revenue, Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP financial measures and are
presented for supplemental informational purposes only and should not be considered as alternatives or substitutes to
financial information presented in accordance with GAAP. These measures have certain limitations in that they do not
include the impact of certain costs that are reflected in our consolidated statements of operations that are necessary to run
our business. Other companies, including other companies in our industry, may not use these measures or may calculate
these measures differently than as presented in this Annual Report on Form 10-K, limiting their usefulness as comparative
measures.
The following table presents a reconciliation of net income (loss) and revenue, the most directly comparable financial
measures calculated in accordance with GAAP, to Adjusted EBITDA and Adjusted Revenue, respectively, and presents net
income (loss) margin, the most directly comparable financial measure calculated in accordance with GAAP, with Adjusted
EBITDA Margin:
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Year Ended December 31,
(dollars in thousands)
2024
2023
Net income (loss)
$ 16,390
$ (8,868)
Adjusted to exclude the following:
Interest income
(23,273)
(32,171)
Interest expense
52,922
56,728
Income tax expense (benefit)
15,070
(46,704)
Depreciation and amortization
69,538
107,668
Other expense
2,660
4,008
Loss on extinguishment of debt
2,077
—
Financing related expenses (1)
898
—
Acquisition related expenses (2)
557
1,777
Restructuring related expenses (3)
8,902
27,023
Legal settlement expenses (4)
13,000
100
Stock-based compensation expense
99,026
104,820
Payroll tax expense related to stock-based compensation
2,471
1,693
Loss on operating lease assets (5)
—
1,353
Adjusted EBITDA
$ 260,238
$ 217,427
Revenue
$ 792,324
$ 750,265
Adjusted to exclude the following:
Client contract termination costs
—
10,000
Adjusted Revenue
$ 792,324
$ 760,265
Net income (loss) margin
2.1%
(1.2%)
Adjusted EBITDA Margin
32.8%
28.6%
_____________________________________________________
(1) Financing related expenses include third party fees related to proposed financings.
(2) Acquisition related expenses principally include costs for actual or planned acquisitions including related third party
fees, legal, consulting and other expenditures, and as applicable, severance costs and retention bonuses to
employees related to acquisitions and change in fair value of contingent consideration. From time to time,
acquisition related expenses may also include similar transaction related costs for business dispositions.
(3) Restructuring related expenses include costs for various workforce optimization and organizational changes to
better align with our strategic goals and future scale including employee severance and other personnel related
costs, contract termination costs, and losses from the disposal of certain technology and certain capitalized
software.
(4) Legal settlement expenses consist of periodic settlement costs for significant and unusual litigation matters.
(5) Loss on operating lease assets include losses incurred relating to the abandonment or sublease of certain leased
office spaces.
Components of our Results of Operations
For a description of the components of our results of operations, see Note 2 to our audited consolidated financial
statements included elsewhere in this Annual Report on Form 10-K.
Our revenue is primarily derived from prescription transactions revenue that is generated when pharmacies fill
prescriptions for consumers, and from other revenue streams such as pharma manufacturer solutions, our subscription
offerings, and our telehealth services. We consider PBMs, pharmacies, pharma manufacturers and consumers of our
subscription and telehealth services, for which we have direct contractual agreements, to be our primary customers . We
expect pharma manufacturer solutions to continue to grow as a percentage of total revenue in the near to medium term as
we continue to scale and expand available services, capabilities and platforms of our pharma manufacturer solutions
offering. All of our revenue has been generated in the United States .
Prior to December 2023, we provided consumer incentives principally in the form of discounts to a limited number of
consumers on a limited number of prescription drugs for a limited time ("limited marketing promotions"). Consumer discounts
on prescription drugs with partner pharmacies as our customers were recognized as a reduction of prescription transactions
revenue. For consumer discounts on prescription drugs with PBMs as our customers, we evaluate whether such discounts
represent payments to a customer, which are recognized as a reduction of prescription transactions revenue if no distinct
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benefit is received, or whether the discounts relate to limited marketing promotions, which are recognized as sales and
marketing expenses. We consider various factors including whether the discounts are made available for a limited time on a
limited number of prescription drugs, consumer eligibility requirements, whether discounts are targeted towards consumer
transactions with specific partner pharmacies or PBMs, and whether there is involvement or reasonable expectations of our
customers with regards to the discounts. In December 2023, we implemented a change in some aspects of our consumer
incentives program whereby the incentives are no longer limited marketing promotions and we believe our customers can
now reasonably expect to benefit from these incentives . As a result, all consumer discounts subsequent to this change were
and are expected to continue to be recognized as a reduction of prescription transactions revenue.
Results of Operations
The following table sets forth our results of operations for the years ended December 31, 2024 and 2023 :
(dollars in thousands)
Year Ended
December
31, 2024
% of Total
Revenue
Year Ended
December
31, 2023
% of Total
Revenue
Change
($)
Change
(%)
Revenue:
Prescription transactions revenue
$ 577,549
73%
$ 550,738
73%
$26,811
5%
Subscription revenue
86,536
11%
94,410
13%
(7,874)
(8%)
Pharma manufacturer solutions revenue
107,237
14%
85,065
11%
22,172
26%
Other revenue
21,002
3%
20,052
3%
950
5%
Total revenue
792,324
750,265
Costs and operating expenses:
Cost of revenue, exclusive of
depreciation and amortization
presented separately below
48,215
6%
66,925
9%
(18,710)
(28%)
Product development and technology
123,749
16%
135,836
18%
(12,087)
(9%)
Sales and marketing
367,114
46%
341,328
45%
25,786
8%
General and administrative
117,862
15%
125,515
17%
(7,653)
(6%)
Depreciation and amortization
69,538
9%
107,668
14%
(38,130)
(35%)
Total costs and operating expenses
726,478
777,272
Operating income (loss)
65,846
(27,007)
Other expense, net:
Other expense
(2,660)
—%
(4,008)
1%
1,348
(34%)
Loss on extinguishment of debt
(2,077)
—%
—
0%
(2,077)
n/m
Interest income
23,273
3%
32,171
4%
(8,898)
(28%)
Interest expense
(52,922)
7%
(56,728)
8%
3,806
(7%)
Total other expense, net
(34,386)
(28,565)
Income (loss) before income taxes
31,460
(55,572)
Income tax (expense) benefit
(15,070)
2%
46,704
6%
(61,774)
(132%)
Net income (loss)
$ 16,390
$ (8,868)
Revenue
Prescription transactions revenue increased $26.8 million , or 5% , year-over-year, primarily as a result of a 7% increase
in the number of our average Monthly Active Consumers from organic growth, including expansion of our integrated savings
program, which integrates our discounts and pricing in a seamless experience over the pharmacy counter for eligible plan
members served by certain PBM partners .
Subscription revenue decreased $7.9 million , or 8% , year-over year, primarily driven by a decrease in the number of
subscription plans due to the sunset of Kroger Savings resulting in 684 thousand subscription plans as of December 31,
2024 compared to 884 thousand as of December 31, 2023 . Kroger Savings contributed $9.0 million of subscription revenue
in 2023 and $1.1 million in 2024 . Given the subscription fee is higher for Gold relative to Kroger Savings, the sunset of
Kroger Savings resulted in a higher year-over-year decline in subscription plans relative to subscription revenue.
Pharma manufacturer solutions revenue increased $22.2 million , or 26% , year-over year, driven by organic growth as
we continued to expand our market penetration with pharma manufacturers and other customers. The prior year included a
$10.0 million contract termination payment to a pharma manufacturer solutions client in connection with our restructuring
activities, which was recognized as a reduction of revenue. vitaCare Pres cription Services, Inc., ("vitaCare"), a solution
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impacted by the restructuring, contribut ed ($2.2) milli on of net revenue in 2023 (which is net of the $10.0 million contract
termination payment described above) compared to nil in 2024 . We expect pharma manufacturer solutions to continue to
grow as a percentage of total revenue in the near to medium term as we continue to scale and expand available services,
capabilities and platforms of our pharma manufacturer solutions offering.
Costs and Operating Expenses
Cost of revenue, exclusive of depreciation and amortization
Cost of revenue is largely driven by the growth of our visitor, subscriber and active consumer base, as well as our
offering mix. Our cost of revenue as a percentage of revenue may vary based on the change in mix of our various offerings.
Cost of revenue decreased $18.7 million , or 28% , year-over-year, primarily driven by a $17.0 million decrease i n
outsourced and in-house personnel and other costs related to consumer support and a $5.9 million decrease in allocated
overhead due to lower average headcount, principally as a result of the restructuring of our pharma manufacturer solutions
offering in 2023. The impact from these drivers was partially offset by a $3.8 million incr ease in processing fees due to
growth in our prescription transactions revenue.
Product development and technology
Product development and technology expenses are primarily driven by changes in headcount and investments to
support and develop our various products. We capitalize c ertain qualified costs related to the development of internal-use
software, which may cause product development and technology expenses to vary from period to period.
Product development and technology expenses decreased $12.1 million , or 9% , year-over-year, primarily driven by a
$9.4 million decrease in payroll and related costs largely due to higher capitalization of such costs related to the
development of internal-use software and a $8.0 million loss recognized in 2023 on the disposal of certain capitalized
software that were not yet ready for their intended use, principally as a result of the restructuring of our pharma
manufacturer solutions offering. The impact from these drivers was partially offset by a $4.3 million increase in third-party
services and contractors associated with product development and allocated overhead.
Sales and marketing
Sales and marketing expenses are primarily driven by investments to grow and retain our consumer base and may
fluctuate based on the timing of our investments in consumer acquisition and retention. We continuously evaluate the impact
of sales and marketing activities on our business and actively manage our sales and marketing spend, including investment
in consumer acquisition, which is largely variable, as market and business conditions change.
Sales and marketing expenses increased $25.8 million , or 8% , year-over-year primarily driven by a $21.8 million
increase in payroll and related costs, principally due to higher average headcount and higher stock-based compensation
expense , due to a reversal in 2023 of previously recognized stock-based compensation expense as certai n performance
milestones were no longer probable of being met in addition to changes in our employee composition. The year-over-year
change was also driven by a $12.6 million increase in advertising expenses, $11.0 million increa se in third- party marketing
expenses, and a $5.0 million increase in restructuring related costs . The impact from these drivers was partially offset by a
$27.1 million decrease in promotional expenses substantially in the form of consumer discounts. Beginning in December
2023, consumer discounts have been recognized as a reduction of revenue as a result of a change in some aspects of our
consumer incentives program as described above.
General and administrative
General and administrative expenses are primarily driven by changes in headcount and investments to support our
compliance and reporting obligations as a public company. General and administrative expenses may vary from period to
period based on the timing and extent of business mergers, acquisitions and dispositions, to support our organic growth, and
financing activities. Impairments and disposals of long-lived assets may also cause general and administrative expenses to
fluctuate period to period.
General and administrative expenses decreased $7.7 million , or 6% , year-over-year, primarily driven by a $16.1 million
decrease in stock-based compensation expense related to awards granted to our Co-Founders in 2020 and a $3.0 million
decrease in professional fees. The impact from these drivers was partially offset by a net $12.9 million increase in an
estimated loss with respect to ongoing class action litigations.
Depreciation and amortization
Our depreciation and amortization changes are primarily based on changes in our property and equipment, intangible
assets, and capitalized software balances and estimates of useful lives.
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Depreciation and amortization expenses decreased $38.1 million , or 35% , year-over-year, primarily driven by $46.7
million of amortization recognized in 2023 related to certain intangible assets, which had been accelerated in connection
with the restructuring of our pharma manufacturer solutions offering. The impact from this driver was partially offset by higher
amortization related to capitalized software due to higher capitalization costs for platform improvements and the introduction
of new products and features.
Other Expense
We recognized other expense of $2.7 million in 2024 related to third-party transaction costs as a result of our debt
refinance in July 2024. For additional information, see Note 12 in the notes to our audited consolidated financial statement
appearing elsewhere in this Annual Report on Form 10-K. We recognized other expense of $4.0 million in 2023 related to an
impairment loss on one of our minority equity interest investments.
Loss on Extinguishment of Debt
We recognized a loss on extinguishment of debt of $2.1 million in 2024 related to the write-off of a portion of existing
unamortized debt issuance costs and discounts as a result of our debt refinance in July 2024. For additional information, see
Note 12 in the notes to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-
K.
Interest Income
Interest income decreased by $8.9 million , or 28% , year-over-year, primarily due to lower average balance of cash
equivalents held in U.S. treasury securities money market funds.
Interest Expense
Interest expense decreased by $3.8 million , or 7% , year-over-year, primarily due to lower average debt balances ,
partially offset by higher interest rates.
Income Taxes
In 2024, we had an income tax expense of $15.1 million compared to an income tax benefit of $46.7 million in 2023 and
an effective income tax rate of 47.9% and 84.0% , respectively. The year-over-year change in our income taxes was primarily
due to the tax benefit recognized in 2023 from the release of our valuation allowance against our beginning of the year net
deferred tax assets in excess of tax amortizable goodwill. This was partially offset by a decrease in excess tax effects from
equity awards, tax effects from nondeductible officers' compensation and an increase in U.S. federal research and
development tax credits. For information regarding our valuation allowance analysis, see Part II, Item 7, "Management’s
Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates—
Income Taxes—Valuation of Deferred Tax Assets" and Note 11 in the notes to our audited consolidated financial statements
included elsewhere in this Annual Report on Form 10-K.
Liquidity and Capital Resources
Since our inception, we have financed our operations primarily through net cash provided by operating activities, equity
issuances, and borrowings under our long-term debt arrangements. Our principal sources of liquidity are our cash and cash
equivalents and borrowings available under our $100.0 million secured revolving credit facility, of which $12.0 million will
mature on July 11, 2025 and $88.0 million on April 10, 2029 . As of December 31, 2024 , we had cash and cash equivalents
of $448.3 million and $91.7 million available under our revolving credit facility. For additional information regarding our
revolving credit facility and our term loan, see Note 12 to our audited consolidated financial statements included elsewhere
in this Annual Report on Form 10-K.
Our primary short-term and long-term requirements for liquidity and capital are to finance working capital including our
noncancelable operating lease obligations, interest and principal payments related to our outstanding debt arrangements,
share repurchases, capital expenditures, general corporate purposes, and business acquisitions and investments we may
make from time to time.
Based on our current conditions, we believe that our net cash provided by operating activities and cash on hand will be
adequate to meet our operating, investing and financing needs for at least the next twelve months from the date of the
issuance of our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K. Our future
capital requirements will depend on many factors, including the growth of our business, the timing and extent of investments,
sales and marketing activities, and many other factors as described in Part I, Item 1A, “Risk Factors.” For additional
information regarding our cash requirements from noncancelable operating lease obligations, terms and commitments under
our debt arrangements including our term loan and revolving credit facility, and other commitments and contingencies, see
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Note 10 , Note 12 and Note 13 to our audited consolidated financial statements included elsewhere in this Annual Report on
Form 10-K, respectively.
If necessary, we may borrow funds under our revolving credit facility to finance our liquidity requirements, subject to
customary borrowing conditions. To the extent additional funds are necessary to meet our long-term liquidity needs as we
continue to execute our business strategy, we anticipate that they will be obtained through the incurrence of additional
indebtedness, additional equity financings or a combination of these potential sources of funds; however, such financing
may not be available on favorable terms, or at all. In particular, the current economic uncertainty, including rising inflation
and socio-political events, has resulted in, and may continue to result in, significant disruption of global financial markets,
including rising interest rates, reducing our ability to access capital. If we are unable to raise additional funds when or on the
terms desired, our business, financial condition and results of operations could be adversely affected.
Holding Company Status
GoodRx Holdings, Inc. is a holding company that does not conduct any business operations of its own. As a result,
GoodRx Holdings, Inc. is largely dependent upon cash distributions and other transfers from its subsidiaries to meet its
obligations and to make future dividend payments, if any. Our existing debt arrangements contain covenants restricting
payments of dividends by our subsidiaries, including GoodRx, Inc., unless certain conditions are met. These covenants
provide for certain exceptions for specific types of payments. Based on these restrictions, all of the net assets of GoodRx,
Inc. were restricted pursuant to the terms of our debt arrangements as of December 31, 2024 . Since the restricted net
assets of GoodRx, Inc. and its subsidiaries exceed 25% of our consolidated net assets, in accordance with Regulation S-X,
refer to Note 18 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for
condensed parent company financial information of GoodRx Holdings, Inc.
Cash Flows
Year Ended December 31,
(in thousands)
2024
2023
Net cash provided by operating activities
$ 183,892
$ 138,292
Net cash used in investing activities
(70,347)
(55,766)
Net cash used in financing activities
(337,495)
(167,395)
Net change in cash and cash equivalents
$ (223,950)
$ (84,869)
Net cash provided by operating activities
Net cash provided by operating activities consists of net income (loss) adjusted for certain non-cash items and changes
in assets and liabilities. The $45.6 million year-over-year increase in net cash provided by operations was due to an increase
in earnings after adjusting for non-cash adjustments and a decrease of $24.0 million in cash outflow from changes in
operating assets and liabilities. The changes in operating assets and liabilities were primarily driven by the timing of income
tax payments and refunds, as well as by the timing of payments of accounts payable and collections of accounts receivable.
Net cash used in investing activities
Net cash used in investing activities primarily consists of cash used for software development costs and capital
expenditures, and may also include cash used for acquisitions and investments that we may make from time to time. The
$14.6 million increase in net cash used in investing activities was primarily driven by a $14.4 million increase in capitalization
of certain qualified costs related to the development of internal-use software.
Net cash used in financing activities
Net cash used in financing activities primarily consists of payments related to our debt arrangements, repurchases of
our Class A common stock, and net share settlement of equity awards, partially offset by debt borrowings, and proceeds
from exercise of stock options as well as our employee stock purchase plan. The $170.1 million year-over-year increase in
net cash used in financing activities was primarily driven by an increase of $161.7 million of net repayments on our term loan
as a result of our debt refinance in July 2024 and a $54.9 million increase in payments for repurchases of our Class A
common stock. The impact from these drivers was partially offset by a $35.7 million decrease in employee taxes paid related
to net share settlement of equity awards and a $13.1 million increase in proceeds from exercise of stock options.
Recent Accounting Pronouncements
See Note 2 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for
further information on certain accounting standards adopted in 2024 and recent accounting announcements that have not
yet been required to be implemented and may be applicable to our future operations.
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Critical Accounting Policies and Estimates
Our audited consolidated financial statements and the related notes thereto included elsewhere in this Annual Report on
Form 10-K are prepared in accordance with GAAP. The preparation of consolidated financial statements also requires us to
make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and
related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be
reasonable under the circumstances. Actual results could differ significantly from our estimates. An accounting policy is
deemed critical if it is both important to the portrayal of our financial condition and results and requires us to make difficult,
subjective, or complex judgments, often as a result of the need to make estimates about the effects of matters that are
inherently uncertain. An accounting estimate is deemed critical where the nature of the estimate is material due to the levels
of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to
change, and the impact of the estimate on our financial condition or operating performance is material. We believe that the
accounting policies described below involve a significant degree of judgment and complexity. Accordingly, we believe these
are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of
operations. For further information of the below critical accounting policies and estimates and our other significant
accounting policies, see Note 2 to our audited consolidated financial statements included elsewhere in this Annual Report on
Form 10-K.
Revenue Recognition
Revenue recognition represents an important accounting policy to the understanding of our financial condition and
results of operations. Our revenue recognition does not involve any critical accounting estimates. For information regarding
our revenue recognition accounting policy, see Note 2 to our audited consolidated financial statements included elsewhere
in this Annual Report on Form 10-K.
Business Combinations
We recognize tangible and intangible assets acquired and liabilities assumed in a business combination at fair value at
the acquisition date in accordance with Accounting Standards Codification 805, Business Combinations . Any excess
consideration over the fair value of assets acquired and liabilities assumed is recognized as goodwill. Contingent
consideration arising from a business combination, if any, is included as part of purchase consideration and recognized at
fair value as of the acquisition date. Contingent consideration arrangements are remeasured to fair value at each reporting
period subsequent to the acquisition date until the contingency is resolved.
The valuations of intangible assets and contingent consideration use different valuation methods depending on the
asset acquired and underlying nature of the contingency and may include significant estimates and judgments.
During 2022, we acquired vitaCare Prescription Services, Inc. ("vitaCare") and our critical accounting estimates at the
date of acquisition related to assumptions used in the valuation of developed technology and customer relationships
intangible assets and the contingent consideration receivable.
The fair values of the developed technology and customer relationships were estimated using a discounted cash flow
method and the fair value of the contingent consideration receivable at the acquisition date was based on the present value
of the expected future annual minimum guaranteed payments in excess of the estimated fair value of the pharmacy services
expected to be provided to the seller.
These methods included various assumptions and estimates including revenue and margin forecasts, our ability to
renew contracts in a competitive bidding process and the necessary resources and investments to support these contracts,
the seller' s ab ility to continue to order such services given the seller's liquidity position, and discount rates. The discount
rates reflected the perceived risk of each forecast, which required significant judgment. A change in the estimated risk of the
cash flows would have changed the discount rates applied, which in turn could have significantly affected the valuation of
our acquired developed technology, customer relationships intangible assets, and the contingent consideration receivable.
The contingency associated with the vitaCare contingent consideration receivable was resolved during 2022 which
reduced its fair value to nil.
There were no business acquisitions during 2023 or 2024.
Income Taxes—Valuation of Deferred Tax Assets
Deferred tax assets represent amounts available to reduce income taxes payable on taxable income in future years.
Such assets arise because of temporary differences between the financial reporting and tax basis of assets and liabilities, as
well as from net operating losses and tax credits. We evaluate the recoverability of deferred tax assets by assessing all
available evidence, both positive and negative, to determine whether, based on the weight of that evidence, a valuation
allowance for deferred tax assets is needed. A valuation allowance is established if it is more likely than not that all or a
portion of deferred tax assets will not be realized. The determination of whether a valuation allowance should be
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established, as well as the amount of such allowance, requires significant judgment and estimates, including estimates of
future earnings. Accordingly, the valuation of our net deferred tax assets is a critical accounting estimate.
In evaluating the realizability of our net deferred tax assets, we perform an assessment each reporting period of both
positive and negative evidence. As of December 31, 2022, we maintained a full valuation allowance against our net deferred
tax assets in excess of amortizable goodwill as the objectively verifiable negative evidence outweighed the positive
evidence. We determined it was more likely than not that our deferred tax assets would not be realized. In 2023, our
determination changed, as the objectively verifiable positive evidence outweighed the negative evidence. Positive evidence
reviewed included sustained tax profitability (pre-tax earnings or losses adjusted for permanent book to tax differences),
which was objective and verifiable, and anticipated future earnings. The sustained trend of tax profitability realized began in
2022 and has continued through the end of 2023. A dditional positive evidence reviewed included (i) stock options granted
that will expire 10 years from the date of grant if unexercised; and (ii) an indefinite carryforward period for certain deferred
tax assets. Although we still have a significant number of outstanding stock options granted prior to our IPO available to be
exercised in future tax periods, which may generate incremental excess tax benefits if they are exercised, the degree of
excess tax benefits that will be realized in the future will depend on many factors outside of our control, including the closing
prices of our Class A common stock in the future and stock option exercises being initiated by employees. Further, we have
granted additional equity awards to our employees since our IPO at various closing prices of our Class A common stock
which when vested or exercised, could offset, partially offset or supplement the incremental excess tax benefits to be
realized from the exercise of stock options granted prior to our IPO in future tax periods. The positive evidence described
above continued to hold through the end of 2024.
We apply judgment to consider the relative impact of negative and positive evidence and the weight given to negative
and positive evidence is commensurate with the extent to which such evidence can be objectively verified. Based on our
evaluation of all available positive and negative evidence, and by placing greater weight on the sustained tax profitability
achieved since 2022, which was objectively verifiable, and anticipated future earnings, we believed that a valuation
allowance against the majority of our net deferred tax assets was no longer required and released $54.6 million of our
valuation allowance as an income tax benefit during 2023. As of December 31, 2024 and 2023, we continued to believe that
our net deferred taxes with the exception of certain standalone tax filings' net deferred tax assets would be realized. Our
judgment regarding the need for a valuation allowance may reasonably change in future reporting periods due to many
factors, including changes in the level of tax profitability that we achieve, changes in tax laws or regulations, and price
fluctuations of our Class A common stock and its related future tax effects from our outstanding equity awards.
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