GoodRx Holdings, Inc. 10-Q

Item 2. 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 unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, as well as Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Part II, Item 8, “Financial Statements and Supplementary Data” included in our Annual Report on Form 10- K for the fiscal year ended December 31, 2024 filed with the Securities and Exchange Commission ("SEC") on February 27, 2025 (“ 2024 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 in the "Risk Factors" sections of our 2024 10-K and this Quarterly Report on Form 10-Q and other factors set forth in other parts of this Quarterly Report on Form 10-Q and our filings with the SEC. Glossary of Selected Terminology As used in this Quarterly Report on Form 10-Q, unless the context otherwise requires, references to: • “ we ,” “ us ,” “ our ,” the “ Company ,” “ GoodRx ,” and similar references refer to GoodRx Holdings, Inc. and its consolidated subsidiaries. • “ Co-Founders ” refers to Trevor Bezdek, our Co-Chairman and a director of the Company, and Douglas Hirsch, a director of the Company. • “ consumers ” refer to the general population in the United States that uses or otherwise purchases healthcare products and services. References to “ our consumers ” or “ GoodRx consumers ” refer to consumers that have used one or more of our offerings. • “ discounted price ” refers to a price for a prescription provided on our platform that represents a negotiated rate provided by one of our PBM partners at a retail pharmacy or under a direct contract with one of our partner pharmacies. Through our platform, our discounted prices are free to access for consumers by saving a GoodRx code to their mobile device for their selected prescription and presenting it at the chosen pharmacy. The term “discounted price” excludes prices we may otherwise source, such as prices from patient assistance programs for low-income individuals and Medicare prices, and any negotiated rates offered through our subscription offerings: GoodRx Gold (“ Gold ”), and Kroger Rx Savings Club powered by GoodRx (“ Kroger Savings ”) which sunset in July 2024. • “ GoodRx code ” refers to codes that can be accessed by our consumers through our apps or websites or that can be provided to our consumers directly by healthcare professionals, including physicians and pharmacists, that allow our consumers free access to our discounted prices or a lower list price for their prescriptions when such code is presented at their chosen pharmacy. • “ Monthly Active Consumers ” refers to the number of unique consumers who have used a GoodRx code to purchase a prescription medication in a given calendar month and have saved money compared to the list price of the medication. A unique consumer who uses a GoodRx code more than once in a calendar month to purchase prescription medications is only counted as one Monthly Active Consumer in that month. A unique consumer who uses a GoodRx code in two or three calendar months within a quarter will be counted as a Monthly Active Consumer in each such month. Monthly Active Consumers do not include subscribers to our subscription offerings, consumers of our pharma manufacturer solutions offering, or consumers who used our telehealth offering. When presented for a period longer than a month, Monthly Active Consumers is averaged over the number of calendar months in such period. For example, a unique consumer who uses a GoodRx code twice in January, but who did not use our prescription transactions offering again in February or March, is counted as 1 in January and as 0 in both February and March, thus contributing 0.33 to our Monthly Active Consumers for such quarter (average of 1, 0 and 0). A unique consumer who uses a GoodRx code in January and in March, but did not use our prescription transactions offering in February, would be counted as 1 in January, 0 in February and 1 in March, thus contributing 0.66 to our Monthly Active Consumers for such quarter. Effective January 1, 2025, Monthly Active Consumers from acquired companies are included beginning from the acquisition date. Prior to January 1, 2025, Monthly Active Consumers from acquired companies were only included beginning in the first full quarter following the acquisition. • " partner pharmacies " refers to select licensed pharmacies with whom we have direct contractual agreements. • “ PBM ” refers to a pharmacy benefit manager. PBMs aggregate demand to negotiate prescription medication prices with pharmacies and pharma manufacturers. PBMs find most of their demand through relationships with insurance companies and employers. However, nearly all PBMs also have consumer direct or cash network pricing that they negotiate with pharmacies for consumers who choose to purchase prescriptions outside of insurance. • “ pharma ” is an abbreviation for pharmaceutical. 15 Table of Contents • “ savings, ” “ saved ” and similar references refer to the difference between the list price for a particular prescription at a particular pharmacy and the price paid by the GoodRx consumer for that prescription utilizing a GoodRx code available through our platform at that same pharmacy. In certain circumstances, we may show a list price on our platform when such list price is lower than the negotiated price available using a GoodRx code and, in certain circumstances, a consumer may use a GoodRx code and pay the list price at a pharmacy if such list price is lower than the negotiated price available using a GoodRx code. We do not earn revenue from such transactions, but our savings calculation includes an estimate of the savings achieved by the consumer because our platform has directed the consumer to the pharmacy with the low list price. This estimate of savings when the consumer pays the list price is based on internal data and is calculated as the difference between the average list price across all pharmacies where GoodRx consumers paid the list price and the average list price paid by consumers in the pharmacies to which we directed them. We do not calculate savings based on insurance prices as we do not have information about a consumer’s specific coverage or price. We do not believe savings are representative or indicative of our revenue or results of operations. • “ subscribers ” and similar references refers to our consumers that are subscribed to either of our subscription offerings, Gold or Kroger Savings (which sunset in July 2024). References to subscription plans as of a particular date represents an active subscription to either one of our aforementioned subscription offerings as of the specified date. Each subscription plan may represent more than one subscriber since family subscription plans may include multiple members. Certain monetary amounts, percentages, and other figures included in this Quarterly Report on Form 10-Q have been subject to rounding adjustments. Percentage amounts included in this Quarterly Report on Form 10-Q have not in all cases been calculated on the basis of such rounded figures, but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this Quarterly Report on Form 10-Q may vary from those obtained by performing the same calculations using the figures in our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. Certain other amounts that appear in this Quarterly Report on Form 10-Q may not sum due to rounding. Overview Our mission is to help Americans get the healthcare they need at a price the y can afford. To achieve this, we are building the leading consumer-focused digital healthcare platform in the United States. Copays on prescription medication 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 and affordable healthcare solutions which we believe 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 bro ader healthcare ecosystem. We have seen rapid changes in the U.S. retail pharmacy landscape recently with announcements of store closures and reduction of footprint from various retail pharmacies, including Rite Aid and Walgreens. Additionally, in early May 2025, Rite Aid announced its plan to pursue a sale of substantially all of its assets through a voluntary bankruptcy process. Given the timing of this announcement, the estimated immediate impact of this plan on our revenue is not yet known, however, revenue through Rite Aid is currently forecasted to be less than 5% of our total revenue in 2025. 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, including changes in retailer reimbursement models, as a result of the pharmacies' increased focus on rationalizing their spending, which in turn has had and may continue to have an impact on our prescription transactions revenue. For the three months ended March 31, 2025 as compared to the same period of 2024 : • Revenue increased 3% to $203.0 million from $197.9 million ; • Net income and net income margin were $11.1 million and 5.4% , respectively, compared to net loss and net loss margin of $1.0 million and 0.5% , respectively; and • Adjusted EBITDA and Adjusted EBITDA Margin were $69.8 million and 34.4% , respectively, compared to $62.8 million and 31.7% , 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 EBITDA and Adjusted EBITDA Margin are non-GAAP financial measures. For a reconciliation and presentation of Adjusted EBITDA and Adjusted EBITDA Margin to the most directly comparable GAAP financial measures, information about why we consider 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" below . 16 Table of Contents 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 first quarter of 2025 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 March 31, 2025 and subscribers to our subscription plans as of March 31, 2025 . Monthly Active Consumers We expect the changes in retail pharmacy reimbursement models as discussed above to result in a year-over-year decline in Monthly Active Consumers in the near term. Three Months Ended (in millions) March 31, 2025 December 31, 2024 September 30, 2024 June 30, 2024 March 31, 2024 Monthly Active Consumers 6.4 6.6 6.5 6.6 6.7 Subscription Plans Subscription plans through the second quarter of 2024 included subscription plans for Kroger Savings, which sunset in July 2024. As of (in thousands) March 31, 2025 December 31, 2024 September 30, 2024 June 30, 2024 March 31, 2024 Subscription plans 680 684 701 696 778 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. For the three months ended March 31, 2025 and the full year of 2024, revenue was equal to Adjusted Revenue. 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, l o ss on extinguishment of de bt, 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 condensed 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 Quarterly Report on Form 10-Q, limiting their usefulness as comparative measures. 17 Table of Contents The following table presents a reconciliation of net income (loss) , the most directly comparable financial measure calculated in accordance with GAAP, to Adjusted EBITDA, and presents net income (loss) margin, the most directly comparable financial measure calculated in accordance with GAAP, with Adjusted EBITDA Margin : Three Months Ended March 31, (dollars in thousands) 2025 2024 Net income (loss) $ 11,052 $ (1,009) Adjusted to exclude the following: Interest income (3,932) (7,555) Interest expense 10,644 14,643 Income tax expense 5,616 1,302 Depreciation and amortization 20,912 15,942 Financing related expenses (1) — 440 Acquisition related expenses (2) 26 174 Restructuring related expenses (3) 1,219 (125) Legal settlement expenses (4) — 13,000 Stock-based compensation expense 19,174 25,096 Payroll tax expense related to stock-based compensation 685 879 Loss on operating lease asset (5) 4,409 — Adjusted EBITDA $ 69,805 $ 62,787 Revenue $ 202,970 $ 197,880 Net income (loss) margin 5.4% (0.5%) Adjusted EBITDA Margin 34.4% 31.7% _____________________________________________________ (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 asset represents losses incurred from time to time relating to the impairment or abandonment of leased office space. Components of our Results of Operations For a description of the components of our results of operations, refer to Note 2 to our audited consolidated financial statements included in our 2024 10-K. In addition, for a description of primary drivers that may cause our revenue, costs and operating expenses to fluctuate from period to period, including seasonality, refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2024 10-K. 18 Table of Contents Results of Operations The following table sets forth our results of operations for the three months ended March 31, 2025 and 2024 : (dollars in thousands) Three Months Ended March 31, 2025 % of Total Revenue Three Months Ended March 31, 2024 % of Total Revenue Change ($) Change (%) Revenue: Prescription transactions revenue $ 148,923 73% $ 145,395 73% $ 3,528 2% Subscription revenue 21,017 10% 22,601 11% (1,584) (7%) Pharma manufacturer solutions revenue 28,648 14% 24,509 12% 4,139 17% Other revenue 4,382 2% 5,375 3% (993) (18%) Total revenue 202,970 197,880 Costs and operating expenses: Cost of revenue, exclusive of depreciation and amortization presented separately below 13,364 7% 12,468 6% 896 7% Product development and technology 31,142 15% 31,017 16% 125 0% Sales and marketing 84,542 42% 89,964 45% (5,422) (6%) General and administrative 29,630 15% 41,108 21% (11,478) (28%) Depreciation and amortization 20,912 10% 15,942 8% 4,970 31% Total costs and operating expenses 179,590 190,499 Operating income 23,380 7,381 Other expense, net: Interest income 3,932 2% 7,555 4% (3,623) (48%) Interest expense (10,644) 5% (14,643) 7% 3,999 (27%) Total other expense, net (6,712) (7,088) Income before income taxes 16,668 293 Income tax expense (5,616) 3% (1,302) 1% (4,314) 331% Net income (loss) $ 11,052 $ (1,009) Revenue All of our revenue has been generated in the United States. Prescription transactions revenue increased $3.5 million , or 2% , year-over-year, primarily driven by improved unit economics related to contracting with our customers and partners and sales mix, partially offset by a 4% decrease in the number of our Monthly Active Consumers, primarily due to the broader changes in the retail pharmacy landscape including store closures and retail reimbursement models as discussed above. Our acquisitio n of VCRx (see Note 3 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q) d id not materially contribute to the year-over-year changes in prescription transactions revenue and Monthly Active Consumers. Subscription revenue decreased $1.6 million , or 7% , year-over-year, primarily driven by a decrease in the number of subscription plans principally due to the sunset of Kroger Savings with 680 thousand subscription plans as of March 31, 2025 compared to 778 thousand as of March 31, 2024 . Given the subscription fee is higher for Gold relative to Kroger Savings, the sunset of Kroger Savi ngs resulted in a higher year-over-year decline in subscription plans relative to subscription revenue. Pharma manufacturer solutions revenue increased $4.1 million , or 17% , year-over-year, driven by organic growth as we continued to expand our market penetration with pharma manufacturers and other customers. We expect pharma manufacturer solutions 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 . 19 Table of Contents Costs and Operating Expenses Cost of revenue, exclusive of depreciation and amortization Cost of revenue r emained relatively flat year-over-year , primarily driven by an increase in processing fees and hosting costs, substantially offset by a decrease in outsourced personnel costs related to consumer support . Product development and technology Product development and technology expenses remained relatively flat year-over-year, primarily driven by an increase in third-party services and contractors associated with non-capitalizable product development activities, partially offset by a decrease in payroll and related costs largely due to higher c apitalization of such costs related to the development of internal- use software. Sales and marketing Sales and marketing expenses decreased $5.4 million , or 6% , year-over-year, primarily driven by a $2.6 million decrease in third-party marketing expenses and a $1.9 million decrease in payroll and related expenses largely due to lower stock-based compensation expense as a result of changes in our employee composition. General and administrative General and administrative expenses decreased $11.5 million , or 28% , year-over-year, primarily driven by a net $13.0 million estimated legal settlement loss recognized in the first quarter of 2024 with respect to an ongoing class action litigation and a $2.4 million decrease in stock-based compensation expense related to awards granted to our Co-Founders in 2020 that fully vested by the end of 2024. The impact of these drivers was partially offset by a $4.4 million impairment loss related to a leased office space we recognized in the first quarter of 2025. Depreciation and amortization Depreciation and amortization expenses increased $5.0 million , or 31% , year-over-year, primarily driven by higher amortization related to capitalized software due to higher capitalization costs for platform improvements and the introduction of new products and features. Interest Income Interest income decreased by $3.6 million , or 48% , 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 $4.0 million , or 27% , year-over-year, primarily due to lower average debt balances. Income Taxes For the three months ended March 31, 2025 and 2024 , we had income tax expense of $5.6 million and $1.3 million , respectively, and an effective income tax rate of 33.7% and 444.4% , respectively. The year-over-year increase in income tax expense was primarily driven by an increase in income before income taxes and tax effects from our equity awards, partially offset by a decrease in the estimated annual effective income tax rate. 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 March 31, 2025 , we had cash and cash equivalents of $301.0 million and $91.7 million available under our revolving credit facility. As of March 31, 2025 , there were no material changes to our primary short-term and long-term requirements for liquidity and capital or to our contractual commitments as disclosed in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our 2024 10-K. In addition, see Note 12 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for a contractual commitment we entered into in April 2025. 20 Table of Contents 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 the accompanying unaudited condensed consolidated financial statements. 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" of our 2024 10-K. 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, new or increased tariffs and socio-political events, has resulted in, and may continue to result in, significant disruption of global financial markets, including rising interest rates , which could reduce our ability to access capital. If we are unable to raise additional funds when needed 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 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 March 31, 2025 . Since the restricted net assets of GoodRx, Inc. and its subsidiaries exceed 25% of our consolidated net assets, in accordance with Regulation S-X, see Note 18 to our consolidated financial statements included in our 2024 10-K for the condensed parent company financial information of GoodRx Holdings, Inc. Cash Flows Three Months Ended March 31, (in thousands) 2025 2024 Net cash provided by operating activities $ 9,413 $ 42,586 Net cash used in investing activities (51,876) (20,615) Net cash used in financing activities (104,902) (160,972) Net change in cash and cash equivalents $ (147,365) $ (139,001) Net cash provided by operating activities The $33.2 million year-over-year decrease in net cash provided by operations was driven by a $48.8 million increase in cash outflow from changes in operating assets and liabilities, partially offset by a $15.6 million increase in net income after adjusting for non-cash adjustments . Changes in operating assets and liabilities were principally driven by the timing of payments of prepaid services, accounts payable and accrued expenses, income tax payments and refunds, as well as collections of accounts receivable . Net cash used in investing activities The $31.3 million year-over-year increase in net cash used in investing activities was primarily driven by a $30.0 million increase in cash paid for the acquisition of a business. Net cash used in financing activities The $56.1 million year-over-year decrease in net cash used in financing activities was primarily driven by a $53.3 million decrease in payments for repurchases of our Class A common stock, a $3.1 million decrease in employee taxes paid related to net share settlement of equity awards, and a $2.3 million decrease in payments on our term loans as a result of our refinancing in July 2024. The impact from these drivers was partially offset by a $2.6 million decrease in proceeds from the exercise of stock options. Recent Accounting Pronouncements Refer to Note 2 to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q. 21 Table of Contents Critical Accounting Policies and Estimates During the three months ended March 31, 2025 , there have been no significant changes to our critical accounting policies and estimates compared with those disclosed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2024 10-K. Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes in our market risk from the disclosure included in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” of our 2024 10-K.