SEC Filing - GoodRx

View:

Download DOC

Download PDF

Download XLS

Download XBRL

gdrx-10q_20200930.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-39549

GoodRx Holdings, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware	47-5104396
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

233 Wilshire Blvd., Suite 990 Santa Monica, CA	90401
(Address of principal executive offices)	(Zip Code)

(855) 268-2822

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Class A Common Stock, $0.0001 par value per share

GDRX

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☐

Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 9, 2020, the registrant had 43,925,062 shares of Class A common stock, $0.0001 par value per share, and 346,357,135 shares of Class B common stock, $0.0001 par value per share, outstanding.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q may be forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “forecasts,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to statements regarding our future results of operations and financial position, industry and business trends, stock compensation, business strategy, plans, market growth and our objectives for future operations.

The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to, the important factors discussed in Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q for the quarter ended September 30, 2020. The forward-looking statements in this Quarterly Report on Form 10-Q are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed as exhibits to this Quarterly Report on Form 10-Q with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained in this Quarterly Report on Form 10-Q, whether as a result of any new information, future events or otherwise.

SUMMARY RISK FACTORS

Our business is subject to numerous risks and uncertainties, including those described in Part II Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q. You should carefully consider these risks and uncertainties when investing in our Class A common stock. The principal risks and uncertainties affecting our business include the following:

•

Risks related to our limited operating history and early stage of growth could materially adversely impact our business, financial condition, and results of operations;

•

We may experience lower margins as HeyDoctor continues to grow as a portion of our overall business;

•

We may be unsuccessful in achieving broad market education and changing consumer purchasing habits;

•

We may be unable to continue to attract, acquire and retain consumers, or may fail to do so in a cost-effective manner;

•

We rely significantly on our prescription offering and may not be successful in expanding our offerings within our markets, or to other segments of the healthcare industry;

•

Our business is subject to changes in medication pricing and is significantly impacted by pricing structures negotiated by industry participants;

•

We generally do not control the categories and types of prescriptions for which we can offer savings;

•

We rely on a limited number of industry participants;

•

We may fail to effectively differentiate our offerings and services from those of our competitors, which could impair our ability to attract and acquire new consumers and retain existing consumers;

•

A pandemic, epidemic or outbreak of an infectious disease in the United States, including COVID-19, could adversely impact our business;

•

If we have overestimated the size of our addressable market or the various markets in which we operate, our future growth opportunities may be limited;

•

We calculate certain operational metrics using internal systems and tools and do not independently verify such metrics, and any real or perceived inaccuracies in such metrics may harm our reputation and negatively affect our business;

•

The telehealth market is immature and volatile, and if it does not develop, or if it develops more slowly than we expect, the growth of our business will be harmed;

•

Our telehealth offerings depend in part on our ability to maintain and expand a network of skilled telehealth providers;

•

We may be unable to successfully respond to changes in the market for prescription pricing, and may fail to maintain and expand the use of GoodRx codes through our apps and websites;

•

We may be unable to maintain a positive perception regarding our platform or enhance our brand;

•

As a result of material weaknesses in our internal control over financial reporting, we may not be able to accurately report our financial condition or results of operations, which may adversely affect investor confidence in us and, as a result, the value of our Class A common stock;

•

Use of social media, emails and text messages may adversely impact our reputation, subject us to fines or other penalties or be an ineffective source to market our offerings;

•

We may be unable to accurately forecast revenue and appropriately plan our expenses in the future;

•

We depend on our information technology systems, and those of our third-party vendors, contractors and consultants, and any failure or significant disruptions of these systems, security breaches or loss of data could materially adversely affect our business, financial condition and results of operations;

•

Government regulation of the internet and e-commerce is evolving, and unfavorable changes or failure by us to comply with these laws and regulations could substantially harm our business and results of operations.

•

Our business relies on email, mail and other messaging channels and any technical, legal or other restrictions on the sending of such correspondence or a decrease in consumer willingness to receive such correspondence could adversely affect our business.

•

We face the risk of litigation resulting from unauthorized text messages sent in violation of the Telephone Consumer Protection Act;

•

Actual or perceived failures to comply with applicable data protection, privacy and security, advertising and consumer protection laws, regulations, standards and other requirements could adversely affect our business, financial condition and results of operations;

•

Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited;

•

Our management team has limited experience managing a public company, and regulatory compliance may divert its attention from the day-to-day management of our business;

•

If we are unable to attract and retain well-qualified employees, our business could be harmed;

•

Future litigation could have a material adverse effect on our business and results of operations;

•

Restrictions in our debt arrangements could adversely affect our operating flexibility, and failure to comply with any of these restrictions could result in acceleration of our debt;

•

Any significant interruptions or delays in service on our apps or websites or any undetected errors or design faults could result in limited capacity, reduced demand, processing delays and loss of consumers;

•

We depend on our relationships with third parties and would be adversely impacted by system failures or other disruptions in the operations of these parties;

•

Changes in consumer sentiment or laws, rules or regulations regarding the use of cookies and other tracking technologies and other privacy matters could have a material adverse effect on our ability to generate net revenues and could adversely affect our ability to collect proprietary data on consumer behavior;

•

Risks related to our intellectual property could materially adversely impact our business, competitive position, financial condition, and results of operations;

•

Risks related to the healthcare industry and healthcare regulation could materially adversely impact our business, financial condition, and results of operations; and

•

Risks related to our organizational structure, including agreements and relationships with significant stockholders, could materially adversely impact our business, financial condition and results of operations.

GOODRX HOLDINGS, INC.

Table of Contents

		Page

PART I.	FINANCIAL INFORMATION	1
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets as September 30, 2020 and December 31, 2019	1
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2020 and 2019	2
	Condensed Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the Nine Months Ended September 30, 2020 and 2019	3
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2020 and 2019	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	34

PART II.	OTHER INFORMATION	37
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	78
Item 3.	Defaults Upon Senior Securities	78
Item 4.	Mine Safety Disclosures	78
Item 5.	Other Information	78
Item 6.	Exhibits	79
	Signatures	80

PART I—FINANCIAL INFORMATION

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.

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.

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.

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.

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