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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 March 31, 2021

OR

 

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.)

 

 

2701 Olympic Boulevard

Santa Monica, CA

90404

(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  May 10, 2021, the registrant had 69,555,726 shares of Class A common stock, $0.0001 par value per share, and 323,389,392 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, risks related to our limited operating history and early stage of growth; our ability to achieve broad market education and change consumer purchasing habits; our ability to continue to attract, acquire and retain consumers in a cost-effective manner; our reliance on our prescription offering and ability to expand our offerings; changes in medication pricing and pricing structures; our inability to control the categories and types of prescriptions for which we can offer savings or discounted prices; our reliance on a limited number of industry participants; the competitive nature of industry; risks related to pandemics, epidemics or outbreak of infection disease, including the COVID-19 pandemic; the accuracy of our estimate of our total addressable market and other operational metrics; the development of the telehealth market; our ability to maintain and expand a network of skilled telehealth providers; risks related to negative media coverage; our ability to respond to changes in the market for prescription pricing and to maintain and expand the use of GoodRx codes; our ability to maintain positive perception of our platform and brand; risks related to our material weaknesses in our internal control over financial reporting and any future material weaknesses; risks related to use of social media, emails, text messages and other messaging channels as part of our marketing strategy; our ability to accurately forecast revenue and appropriately plan our expenses in the future; risks related to information technology and cyber-security; compliance with government regulation of the internet, e-commerce and data and other regulations; our ability to utilize our net operating loss carryforwards and certain other tax attributes; management’s ability to manage our transition to being a public company; our ability to attract, develop, motivate and retain well-qualified employees; risks related to general economic factors, natural disasters or other unexpected events; risks related to our acquisition strategy; risks related to our debt arrangements; interruptions or delays in service on our apps or websites; our reliance on third-party platforms to distribute our platform and offerings; our reliance on software as-a-service technologies from third parties; systems failures or other disruptions in the operations of these parties on which we depend; changes in consumer sentiment or laws, rules or regulations regarding tracking technologies and other privacy matters; risks related to our intellectual property; risks related to operating in the healthcare industry; risks related to our organizational structure; as well as the other important factors discussed in Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (“2020 10-K”) and our other filings with the Securities and Exchange Commission (“SEC”). 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.


 

GOODRX HOLDINGS, INC.

Table of Contents

 

 

 

Page

 

 

 

PART I.

FINANCIAL INFORMATION

 

Item 1.

Condensed Consolidated Financial Statements (Unaudited)

1

 

Condensed Consolidated Balance Sheets

1

 

Condensed Consolidated Statements of Operations

2

 

Condensed Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

3

 

Condensed Consolidated Statements of Cash Flows

5

 

Notes to Condensed Consolidated Financial Statements

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

16

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

28

Item 4.

Controls and Procedures

28

 

 

 

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

31

Item 1A.

Risk Factors

31

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

31

Item 3.

Defaults Upon Senior Securities

31

Item 4.

Mine Safety Disclosures

31

Item 5.

Other Information

31

Item 6.

Exhibits

32

 

Signatures

33

 

 


 

 

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (Unaudited)

 

GoodRx Holdings, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

 

(in thousands, except par values)

 

March 31,

2021

 

 

December 31,

2020

 

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

990,463

 

 

$

968,691

 

Restricted cash

 

 

2,900

 

 

 

2,900

 

Accounts receivable, net

 

 

74,399

 

 

 

68,729

 

Prepaid expenses and other current assets

 

 

55,618

 

 

 

46,048

 

Total current assets

 

 

1,123,380

 

 

 

1,086,368

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

22,693

 

 

 

23,057

 

Goodwill

 

 

261,116

 

 

 

261,116

 

Intangible assets, net

 

 

34,443

 

 

 

36,919

 

Capitalized software, net

 

 

25,944

 

 

 

19,800

 

Operating lease right-of-use assets

 

 

27,883

 

 

 

27,712

 

Deferred tax assets, net

 

 

13,344

 

 

 

13,117

 

Other assets

 

 

2,171

 

 

 

2,025

 

Total assets

 

$

1,510,974

 

 

$

1,470,114

 

Liabilities and stockholders' equity

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

15,101

 

 

$

10,291

 

Accrued expenses and other current liabilities

 

 

34,944

 

 

 

37,692

 

Current portion of debt

 

 

7,029

 

 

 

7,029

 

Operating lease liabilities, current

 

 

5,975

 

 

 

4,539

 

Total current liabilities

 

 

63,049

 

 

 

59,551

 

Debt, net

 

 

658,883

 

 

 

659,888

 

Operating lease liabilities, net of current portion

 

 

33,705

 

 

 

33,467

 

Other liabilities

 

 

6,278

 

 

 

5,849

 

Total liabilities

 

 

761,915

 

 

 

758,755

 

Commitments and contingencies (Note 8)

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 50,000 shares

   authorized and zero shares issued and outstanding

   at March 31, 2021 and December 31, 2020

 

 

 

 

 

 

Common stock, $0.0001 par value; Class A: 2,000,000 shares

   authorized, 69,043 and 63,071 shares issued and outstanding

   at March 31, 2021 and December 31, 2020, respectively; and

   Class B: 1,000,000 shares authorized, 323,414 and 328,589

   shares issued and outstanding at March 31, 2021 and

   December 31, 2020, respectively

 

 

39

 

 

 

39

 

Additional paid-in capital

 

 

2,137,805

 

 

 

2,101,773

 

Accumulated deficit

 

 

(1,388,785

)

 

 

(1,390,453

)

Total stockholders' equity

 

 

749,059

 

 

 

711,359

 

Total liabilities and stockholders' equity

 

$

1,510,974

 

 

$

1,470,114

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

1

 


 

GoodRx Holdings, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

 

 

 

Three Months Ended

March 31,

 

(in thousands, except per share amounts)

 

2021

 

 

2020

 

Revenue

 

$

160,431

 

 

$

133,408

 

Costs and operating expenses:

 

 

 

 

 

 

 

 

Cost of revenue, exclusive of depreciation and

   amortization presented separately below

 

 

10,428

 

 

 

6,019

 

Product development and technology

 

 

26,160

 

 

 

10,325

 

Sales and marketing

 

 

79,694

 

 

 

63,162

 

General and administrative

 

 

43,786

 

 

 

5,887

 

Depreciation and amortization

 

 

5,361

 

 

 

4,345

 

Total costs and operating expenses

 

 

165,429

 

 

 

89,738

 

Operating (loss) income

 

 

(4,998

)

 

 

43,670

 

Other expense, net:

 

 

 

 

 

 

 

 

Other income, net

 

 

 

 

 

(5

)

Interest income

 

 

(16

)

 

 

(75

)

Interest expense

 

 

5,905

 

 

 

8,638

 

Total other expense, net

 

 

5,889

 

 

 

8,558

 

(Loss) income before income taxes

 

 

(10,887

)

 

 

35,112

 

Income tax benefit (expense)

 

 

12,555

 

 

 

(7,766

)

Net income

 

$

1,668

 

 

$

27,346

 

Net income attributable to common stockholders

 

 

 

 

 

 

 

 

Basic

 

$

1,668

 

 

$

17,662

 

Diluted

 

$

1,668

 

 

$

17,832

 

Earnings per share:

 

 

 

 

 

 

 

 

Earnings per share - basic

 

$

0.00

 

 

$

0.08

 

Earnings per share - diluted

 

$

0.00

 

 

$

0.08

 

Weighted average shares used in computing

   earnings per share:

 

 

 

 

 

 

 

 

Basic

 

 

406,170

 

 

 

229,880

 

Diluted

 

 

429,577

 

 

 

236,225

 

 

 

 

 

 

 

 

 

 

Stock-based compensation included in costs and

   operating expenses:

 

 

 

 

 

 

 

 

Cost of revenue

 

$

121

 

 

$

17

 

Product development and technology

 

 

8,336

 

 

 

896

 

Sales and marketing

 

 

5,258

 

 

 

870

 

General and administrative

 

 

32,811

 

 

 

427

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

 

2

 


 

 

GoodRx Holdings, Inc.

Condensed Consolidated Statements of Changes in Redeemable Convertible

Preferred Stock and Stockholders’ Equity (Deficit)

(Unaudited)

 

 

 

Redeemable

Convertible Preferred Stock

 

 

 

Class A and Class B

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

 

 

Total

Stockholders'

 

(in thousands)

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balances at December 31, 2020

 

 

 

 

$

 

 

 

 

391,660

 

 

$

39

 

 

$

2,101,773

 

 

$

(1,390,453

)

 

$

711,359

 

Stock options exercised

 

 

 

 

 

 

 

 

 

513

 

 

 

 

 

 

2,680

 

 

 

 

 

 

2,680

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

48,254

 

 

 

 

 

 

48,254

 

Vesting of restricted stock units

 

 

 

 

 

 

 

 

 

608

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock withheld for tax obligations

   and net settlement

 

 

 

 

 

 

 

 

 

(324

)

 

 

 

 

 

(14,902

)

 

 

 

 

 

(14,902

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,668

 

 

 

1,668

 

Balances at March 31, 2021

 

 

 

 

$

 

 

 

 

392,457

 

 

$

39

 

 

$

2,137,805

 

 

$

(1,388,785

)

 

$

749,059

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

3


 

GoodRx Holdings, Inc.

Condensed Consolidated Statements of Changes in Redeemable Convertible

Preferred Stock and Stockholders’ Equity (Deficit)

(Unaudited)

 

 

 

Redeemable

Convertible Preferred Stock

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

 

 

Total

Stockholders'

 

(in thousands)

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Deficit

 

Balances 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

 

Balances at March 31, 2020

 

 

126,046

 

 

$

737,009

 

 

 

 

230,217

 

 

$

461

 

 

$

11,980

 

 

$

(1,069,484

)

 

$

(1,057,043

)

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

 

 

4


 

 

GoodRx Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

Three Months Ended

March 31,

 

(in thousands)

 

2021

 

 

2020

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net income

 

$

1,668

 

 

$

27,346

 

Adjustments to reconcile net income to net cash provided by

   operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

5,361

 

 

 

4,345

 

Amortization of debt issuance costs

 

 

863

 

 

 

783

 

Non-cash operating lease expense

 

 

872

 

 

 

1,152

 

Stock-based compensation

 

 

46,526

 

 

 

2,210

 

Deferred income taxes

 

 

(227

)

 

 

2,292

 

Changes in operating assets and liabilities

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(5,670

)

 

 

(12,064

)

Prepaid expenses and other assets

 

 

(9,844

)

 

 

(2,821

)

Accounts payable

 

 

4,943

 

 

 

7,254

 

Accrued expenses and other current liabilities

 

 

(67

)

 

 

15,501

 

Operating lease liabilities

 

 

631

 

 

 

(427

)

Other liabilities

 

 

429

 

 

 

21

 

Net cash provided by operating activities

 

 

45,485

 

 

 

45,592

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(2,715

)

 

 

(674

)

Capitalized software

 

 

(6,980

)

 

 

(2,733

)

Net cash used in investing activities

 

 

(9,695

)

 

 

(3,407

)

Cash flows from financing activities

 

 

 

 

 

 

 

 

Proceeds from long-term debt

 

 

 

 

 

28,000

 

Payments on long-term debt

 

 

(1,757

)

 

 

(1,757

)

Proceeds from exercise of stock options

 

 

2,372

 

 

 

692

 

Proceeds from early exercise of stock options

 

 

 

 

 

667

 

Employee taxes paid related to net share settlement of equity awards

 

 

(14,633

)

 

 

 

Net cash (used in) provided by financing activities

 

 

(14,018

)

 

 

27,602

 

Net change in cash, cash equivalents and restricted cash

 

 

21,772

 

 

 

69,787

 

Cash, cash equivalents and restricted cash

 

 

 

 

 

 

 

 

Beginning of period

 

 

971,591

 

 

 

26,050

 

End of period

 

$

993,363

 

 

$

95,837

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

 

 

Non cash investing and financing activities

 

 

 

 

 

 

 

 

Stock-based compensation included in capitalized software

   development costs

 

 

1,728

 

 

 

291

 

Capitalized software development costs in accrued expenses and

   other current liabilities

 

 

615

 

 

 

119

 

 

The following table presents a reconciliation of cash, cash equivalents and restricted cash in the Company’s Condensed Consolidated Balance Sheets to the total of the same such amounts shown above:

 

 

 

March 31,

 

(in thousands)

 

2021

 

 

2020

 

Cash and cash equivalents

 

$

990,463

 

 

$

95,837

 

Restricted cash

 

 

2,900

 

 

 

 

Total cash, cash equivalents and restricted cash

 

$

993,363

 

 

$

95,837

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

 

5


 

 

GoodRx Holdings, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Description of Business

GoodRx Holdings, Inc. was incorporated in September 2015. On October 7, 2015, GoodRx Holdings, Inc. acquired 100% of the outstanding shares of GoodRx, Inc. (“GoodRx”). GoodRx, a Delaware corporation, was initially formed in September 2011.

GoodRx Holdings, Inc. and its subsidiaries (the “Company”) offer information and tools to help consumers compare prices and save on their prescription drug purchases. The Company operates a price comparison platform that provides consumers with curated, geographically relevant prescription pricing, and provides access to negotiated prices through GoodRx codes that can be used to save money on prescriptions across the United States (the “prescription offering”). The services are free to consumers and the Company primarily earns revenue from its core business from pharmacy benefit managers (“PBMs”) that manage formularies and prescription transactions including establishing pricing between consumers and pharmacies. The Company also offers other healthcare products and services, including subscriptions, pharmaceutical manufacturer solutions and telehealth services.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial information. Certain information and disclosures normally included in annual consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. Accordingly, these condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2020 and the related notes, which are included in the Company's Annual Report on Form 10-K filed with the SEC on March 12, 2021. The December 31, 2020 condensed consolidated balance sheet was derived from the Company’s audited consolidated financial statements as of that date. The Company’s condensed consolidated financial statements include, in the opinion of management, all adjustments, consisting of normal and recurring items, necessary for the fair statement of the condensed consolidated financial statements.

The Company’s significant accounting policies are discussed in “Note 2. Summary of Significant Accounting Policies” in the notes to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. There have been no material changes in accounting policies during the three months ended March 31, 2021 from those disclosed in the annual consolidated financial statements for the year ended December 31, 2020 and the related notes.

During the three months ended March 31, 2021 and 2020, other than net income, the Company did not have any other elements of comprehensive income or loss. The operating results for the three months ended March 31, 2021 are not necessarily indicative of the results expected for the full year ending December 31, 2021.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of GoodRx Holdings, Inc., its wholly owned subsidiaries and variable interest entities (“VIEs”) for which the Company is the primary beneficiary. Intercompany balances and transactions have been eliminated in consolidation. Results of businesses acquired are included in the Company’s condensed consolidated financial statements from their respective dates of acquisition.

Consolidation of VIEs

GoodRx Care, LLC (formerly known as HeyDoctor), a wholly owned subsidiary of the Company, provides management and other services to professional service corporations (“PSCs”), which are owned by medical professionals in accordance with certain state laws that restrict the corporate practice of medicine and require medical practitioners to own such entities. The Company determined that the PSCs are VIEs. The Company also determined that it is able to direct the activities of the PSCs that most significantly impact their economic performance and it funds and absorbs all losses of these VIEs resulting in the Company being the primary beneficiary of the PSCs. Accordingly, the Company consolidates the VIEs.

 

6


 

Revenue of the VIEs were less than 3% and 1% of the Company’s revenue for the three months ended March 31, 2021 and 2020, respectively. The net results of operations of the VIEs for the three months ended March 31, 2021 and 2020 were not material. The VIEs’ total assets and liabilities were each approximately 1% of the Company’s total assets and liabilities at March 31, 2021 and December 31, 2020, respectively.

Segment Reporting and Geographic Information

Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker manages the Company on the basis of one operating segment. During the three months ended March 31, 2021 and 2020, all of the Company’s revenue was from customers located in the United States. In addition, at March 31, 2021 and December 31, 2020, all of the Company’s right-of-use assets and property and equipment was in the United States.

Use of Estimates

The preparation of the Company’s condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements, including the accompanying notes. The Company bases its estimates on historical factors, current circumstances, and the experience and judgment of management. The Company evaluates its estimates and assumptions on an ongoing basis. Actual results could differ from those estimates. Significant estimates reflected in the condensed consolidated financial statements include revenue recognition, valuation of intangible assets and assumptions used for purposes of determining stock-based compensation.

Certain Risks and Concentrations

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash, cash equivalents and accounts receivable. The Company maintains cash deposits with multiple financial institutions in the United States which, at times, may exceed federally insured limits. Cash may be withdrawn or redeemed on demand. The Company believes that the financial institutions that hold its cash are financially sound and, accordingly, minimal credit risk exists with respect to these balances. The Company has not experienced any losses in such accounts.

The Company extends credit to its customers based on an evaluation of their ability to pay amounts due under contractual arrangements and generally does not obtain or require collateral.

For the three months ended March 31, 2021, four customers accounted for approximately 14%, 11%, 10% and 10% of the Company’s revenue. For the three months ended March 31, 2020, three customers accounted for approximately 18%, 18% and 12% of the Company’s revenue. At March 31, 2021, one customer accounted for 10%  of the Company’s accounts receivable balance. At December 31, 2020, one customer accounted for 12% of the Company’s accounts receivable balance.

In March 2020, the World Health Organization declared the outbreak of the novel coronavirus disease (“COVID–19”) a pandemic. The Company’s prescription offering initially experienced a decline in activity as many consumers avoided visiting healthcare professionals and pharmacies in-person, though beginning in the second half of 2020 activity in the Company’s prescription offering improved. The Company’s prescription offering sequentially increased beginning in the third quarter of 2020 through the first quarter of 2021 as consumers partially resumed their interaction with the healthcare system. In addition, the Company has experienced a significant increase in demand for its telehealth offerings. The full extent to which the outbreak of COVID-19 will impact the Company’s business, results of operations and financial condition is still unknown and will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the pandemic, the actions to contain the virus or treat its impact, mutations of the virus, availability and adoption of effective vaccines and how quickly and to what extent normal economic and operating conditions can resume.

In light of the currently unknown ultimate duration and severity of COVID-19, the Company faces a greater degree of uncertainty than normal in making the judgments and estimates needed to apply significant accounting policies. The Company assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to the Company and the unknown future impacts of COVID-19 as of March 31, 2021 and through the date of this report. The accounting matters assessed included, but were not limited to, the Company’s carrying value of goodwill and other long-lived assets, incentive-based compensation and income taxes.

 

7


 

As of the date of these condensed consolidated financial statements, management is not aware of any specific event or circumstance that would require an update to estimates or judgments or a revision to the carrying value of assets or liabilities. However, these estimates and judgments may change as new events occur and additional information is obtained, which may result in changes being recognized in the Company’s condensed consolidated financial statements or annual consolidated financial statements in future periods.

Cash, Cash Equivalents and Restricted Cash

The Company considers all short-term, highly liquid investments purchased with an original maturity of three months or less at the date of purchase to be cash equivalents.  Cash deposits are all in financial institutions in the United States.  Cash and cash equivalents consisted primarily of U.S. treasury securities, money market funds held with an investment bank and cash on deposit.

Cash equivalents, consisting of money market funds, of $932.5 million at both March 31, 2021 and December 31, 2020, were classified as Level 1 of the fair value hierarchy and valued using quoted market prices in active markets.

Restricted cash as of March 31, 2021 and December 31, 2020 represents cash held in an escrow pursuant to terms of the Scriptcycle, LLC business combination relating to contingent consideration, see "Note 3. Business Combination – Scriptcycle, LLC.”

 

Recent Accounting Pronouncements

As an “emerging growth company”, the Jumpstart Our Business Startups Act, or the JOBS Act, allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. The Company has elected to use the adoption dates applicable to private companies. As a result, the Company’s consolidated financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective date for new or revised accounting standards that are applicable to public companies.

Recently Adopted Accounting Pronouncements

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. ASU 2018-15 requires implementation costs incurred by customers in cloud computing arrangements to be deferred over the noncancelable term of the cloud-computing arrangements plus any optional renewal periods (1) that are reasonably certain to be exercised by the customer or (2) for which exercise of the renewal option is controlled by the cloud service provider. This guidance may be applied retrospectively or prospectively and is effective for fiscal years beginning after December 15, 2020, and interim periods within annual periods beginning after December 15, 2021. On January 1, 2021, the Company adopted ASU 2018-15 prospectively and cloud computing implementation costs incurred on or after January 1, 2021 are included in other assets in the consolidated balance sheet and are presented within operating cash flows. As of March 31, 2021, capitalized implementation costs for cloud computing arrangements were not material. The adoption did not have a material impact to the Company’s consolidated financial statements.

In October 2018, the FASB issued ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to the Related Party Guidance for Variable Interest Entities. ASU 2018-17 changes how entities evaluate decision-making fees under the variable interest entity guidance. To determine whether decision-making fees represent a variable interest, an entity considers indirect interests held through related parties under common control on a proportional basis, rather than in their entirety. This guidance is effective for fiscal years, beginning after December 15, 2020 and interim periods within fiscal years beginning after December 15, 2021, with early adoption permitted. All entities are required to apply the amendments in this ASU retrospectively with a cumulative-effect adjustment to retained earnings or accumulated deficit at the beginning of the earliest period presented. The Company adopted this guidance on January 1, 2021, and the adoption did not have any impact to the Company’s consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The objective of the guidance is to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and to provide more consistent application to improve the comparability of financial statements. The guidance is effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022, with early adoption permitted. The Company early adopted this guidance on January 1, 2021, and the adoption did not have a material impact to the Company’s consolidated financial statements.

 

8


 

Recently Issued Accounting Pronouncements - Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, to require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The ASU also amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. In February 2020, the FASB issued ASU 2020-02, Financial Instruments - Credit Losses (Topic 326) and Leases (Topic 842) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842) (SEC Update), which amends the language in Subtopic 326-20 and addresses questions primarily regarding documentation and company policies. The guidance in ASU 2016-13 and ASU 2020-02 related to credit losses is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The ASU provides optional guidance for a limited period of time to ease the potential burden in accounting for or recognizing the effects of reference rate reform on financial reporting. The ASU applies only to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of the reference rate reform. The amendments in this ASU were effective upon issuance and may be applied through December 31, 2022. The Company is currently evaluating the impact of the adoption of this ASU on its consolidated financial statements.

3. Business Combination

Scriptcycle, LLC

On August 31, 2020, the Company acquired all of the equity interests of Scriptcycle, LLC (“Scriptcycle”). Scriptcycle specializes in managing prescription programs and primarily partners with regional retail pharmacy chains to provide discount offerings. The purpose of the acquisition was to help expand the Company’s business capabilities, particularly with respect to its prescription offering. The aggregate purchase consideration was $58.3 million, including the estimated fair value of contingent consideration of $0.8 million. The purchase consideration was subject to working capital and other closing adjustments. The maximum amount of contingent consideration payable was $2.9 million subject to the achievement of certain revenue thresholds through January 2021.

As of March 31, 2021 and December 31, 2020, the fair value of the contingent consideration was $2.9 million, which represents the maximum amount of contingent consideration payable, based upon the Company’s assessment of the revenue thresholds that were achieved.

Goodwill associated with this acquisition totaled $24.9 million and primarily related to the expected long-term synergies and other benefits, including the acquired assembled workforce. The acquisition was considered an acquisition of assets for tax purposes and, accordingly, goodwill was deductible for tax purposes. Identifiable intangible assets related to this acquisition totaled $28.3 million, of which $25.3 million was attributable to a customer related intangible asset, with an estimated useful life of 11 years and $3.0 million was attributable to developed technology and a tradename with useful lives ranging from 1 to 9 years. In addition, the Company acquired current assets of $5.9 million and assumed liabilities of $1.1 million.

Unaudited supplemental pro forma financial information for the Scriptcycle acquisition have not been presented because the effects are not material to the Company’s condensed consolidated financial statements.

4. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:

 

(in thousands)

 

March 31,

2021

 

 

December 31,

2020

 

Income taxes receivable

 

$

41,392

 

 

$

28,564

 

Prepaid expenses

 

 

14,226

 

 

 

17,484

 

Total prepaid expenses and other current

   assets

 

$

55,618

 

 

$

46,048

 

 

 

9


 

 

5. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:

 

(in thousands)

 

March 31,

2021

 

 

December 31,

2020

 

Accrued bonus and other payroll related

 

$

11,375

 

 

$

13,607

 

Accrued marketing

 

 

9,554

 

 

 

10,045

 

Deferred revenue

 

 

8,804

 

 

 

6,852

 

Other accrued expenses

 

 

5,211

 

 

 

7,188

 

Total accrued expenses and other

   current liabilities

 

$

34,944

 

 

$

37,692

 

 

The Company expects substantially all of the deferred revenue at March 31, 2021 will be recognized as revenue within the next twelve months. Of the $6.9 million deferred revenue included in the condensed consolidated balance sheet at December 31, 2020, $4.3 million was recognized as revenue during the three months ended March 31, 2021. Revenue recognized during the three months ended March 31, 2020 of $1.9 million was included as deferred revenue at December 31, 2019.

6. Income Taxes

The Company calculates income taxes in interim periods by applying an estimated annual effective tax rate to (loss) income before income taxes and by calculating the tax effect of discrete items recognized during the period.

The effective income tax rate was 115.3% and 22.1% for the three months ended March 31, 2021 and 2020, respectively. The change in the Company’s effective income tax rate for the three months ended March 31, 2021 compared to the three months ended March 31, 2020 was primarily due to the change from pre-tax income to loss in addition to the tax effects of nondeductible officers’ stock-based compensation expense and excess tax benefits related to the Company’s equity awards. The Company’s effective income tax rate differs from the U.S. Federal statutory rate of 21.0% primarily due to effects of non-deductible officers’ stock-based compensation expense, state income taxes, benefits from research and development tax credits, and excess tax benefits from the Company’s equity awards.

 As of December 31, 2020, the Company had unrecognized tax benefits of $7.4 million. There were no significant changes to the Company’s unrecognized tax benefits during the three months ended March 31, 2021, and the Company does not expect to have any significant changes to unrecognized tax benefits through the end of 2021.

7. Debt

The Company has a term loan with an original amount of $700.0 million (the “First Lien Term Loan Facility”) under its first lien credit agreement (the “First Lien Credit Agreement”) obtained through its wholly owned subsidiary GoodRx as borrower and collateralized by all of the assets of the Company and 100% of the equity of GoodRx. The First Lien Term Loan Facility requires quarterly payments through September 2025, with any unpaid principal and interest due upon maturity on October 10, 2025, and bears interest at a rate per annum equal to the LIBO Screen Rate plus a variable margin based on the Company’s most recently determined Net Leverage Ratio (as defined in the First Lien Credit Agreement), ranging from 2.75% to 3.00%. The effective interest rate on the First Lien Term Loan Facility for the three months ended March 31, 2021 and 2020 was 3.39% and 5.05%, respectively.

The Company also has a line of credit with a maximum amount of $100.0 million (the “Revolving Credit Facility”) associated with the First Lien Credit Agreement.  The Revolving Credit Facility matures on October 11, 2024 and bears interest at a rate equal to the LIBO Screen Rate plus a variable margin based on the Company’s most recently determined Net Leverage Ratio (as defined in the First Lien Credit Agreement), ranging from 2.50 to 3.00% on used amounts and 0.25 to 0.50% on unused amounts. There were no borrowings outstanding under the Revolving Credit Facility as of March 31, 2021 and December 31, 2020. There were outstanding letters of credit issued against the Revolving Credit Facility for $9.1 million as of March 31, 2021 and December 31, 2020, which reduces the Company’s available borrowings under the Revolving Credit Facility.

 

10


 

The Company’s debt consisted of the following:

 

(in thousands)

 

March 31,

2021

 

 

December 31,

2020

 

Principal balance under First Lien Term

   Loan Facility

 

$

679,369

 

 

$

681,126

 

Less: Unamortized debt issuance costs

   and discounts

 

 

(13,457

)

 

 

(14,209

)

 

 

$

665,912

 

 

$

666,917

 

 

As of March 31, 2021, the Company is subject to a financial covenant requiring maintenance of a Net Leverage Ratio not to exceed 8.2 to 1.0 and other nonfinancial covenants under the First Lien Credit Agreement. Additionally, GoodRx is restricted from making dividend payments, loans or advances to the Company.  At March 31, 2021, the Company was in compliance with its covenants.

8. Commitments and Contingencies

Aside from the below, as of March 31, 2021, there were no material changes to the Company’s commitments and contingencies as disclosed in the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

Purchase Commitments

The Company entered into a commercial agreement with a third-party during the quarter ended March 31, 2021, pursuant to which the Company committed to spend an aggregate of at least $3.0 million by the end of the fiscal year ending December 31, 2021 on certain advertising services.

Legal Contingencies

On December 18, 2020, R. Brian Terenzini, individually and on behalf of all others similarly situated, filed a class action lawsuit against the Company and certain of its executive officers in the United States District Court for the Central District of California (Case No. 2:20-cv-11444). On January 8, 2021, Bryan Kearney, individually and on behalf of all others similarly situated, also filed a class action lawsuit against the Company and certain of its executive officers in the United States District Court for the Central District of California (Case No. 2:21-cv-00175). The plaintiffs seek compensatory damages as well as interest, fees and costs. The complaints allege violations of Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and assert that the Company failed to disclose to investors that Amazon.com, Inc. was developing its own mobile and online prescription medication ordering and fulfillment service that would compete directly with the Company. According to the complaint, when Amazon announced its competitor service, the Company’s stock price fell, causing investor losses. Lead plaintiff applications were submitted February 16, 2021, and on April 8, 2021, the court consolidated the two lawsuits and appointed lead plaintiffs. The Company intends to seek dismissal of the consolidated case. The Company believes it has meritorious defenses to the claims of the plaintiffs and members of the class and any liability for the alleged claims is not currently probable and a loss or range of loss, if any, is not reasonably estimable.

On April 29, 2021 and May 5, 2021, Neesha Patel and Wayne Geist, respectively, each filed a derivative lawsuit purportedly on behalf of the Company against certain of its officers and directors in the United States District Court for the Central District of California (Case No. 2:21-cv-03671 and Case No. 2:21-cv-03829, respectively). The plaintiffs assert claims for breach of fiduciary duty and contribution under the Exchange Act. Neesha Patel asserts additional claims for unjust enrichment and corporate waste. These claims are based on allegations substantially similar to those in the class action lawsuit described above. Plaintiffs are requesting declaratory relief, money damages, restitution, and certain governance reforms. Plaintiffs did not make a pre-suit demand on the Company’s board. The Company intends to seek dismissal of these cases, or a stay pending the outcome of the class action lawsuit. Any liability for the claims alleged is not currently probable and a loss or range of loss, if any, is not reasonably estimable.

The pending proceedings described above involve complex questions of fact and law and may require the expenditure of significant funds and the diversion of other resources to defend. The results of legal proceedings are inherently uncertain, and material adverse outcomes are possible.

 

11


 

In addition, during the normal course of business, the Company may become subject to, and is presently involved in, legal proceedings, claims and litigation. Such matters are subject to many uncertainties and outcomes are not predictable with assurance. Accruals for loss contingencies are recorded when a loss is probable, and the amount of such loss can be reasonably estimated.

The Company does not believe that the disposition of matters that are pending or asserted will have a material effect on its consolidated financial statements.

Indemnification

The Company’s amended and restated bylaws provides that it will indemnify the Company’s directors and officers to the fullest extent permitted by the Delaware General Corporation Law. Certain of the Company’s officers and directors are also a party to indemnification agreements with the Company. Pursuant to the Company’s indemnification agreements and directors’ and officers’ liability insurance, certain of the Company’s officers and directors will be indemnified and insured against the cost of defense, settlement or payment of a judgment under certain circumstances. The maximum potential amount of future payments the Company could be required to make under these indemnification provisions is indeterminable. The Company has never paid a material claim, nor has the Company been involved in litigation, with respect to these indemnification arrangements. As of March 31, 2021 and December 31, 2020, the Company has not accrued a liability for these guarantees as, the likelihood of incurring a payment obligation, if any, in connection with these guarantees is not probable or reasonably estimable.

9. Revenue

Revenue consisted of the following:

 

 

 

Three Months Ended

March 31,

 

(in thousands)

 

2021

 

 

2020

 

Prescription transactions revenue

 

$

134,061

 

 

$

123,017

 

Other revenue

 

 

26,370

 

 

 

10,391

 

Total revenue

 

$

160,431

 

 

$

133,408

 

 

10. Stock-Based Compensation

Stock Options

A summary of the stock option activity for the three months ended March 31, 2021 is as follows:

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

Average

 

 

 

 

 

 

 

 

 

 

Average

 

 

Remaining

 

Aggregate

 

 

 

 

 

 

 

Exercise

 

 

Contractual

 

Intrinsic

 

(in thousands, except per share amounts and term information)

 

Shares

 

 

Price

 

 

Term

 

Value

 

Outstanding at December 31, 2020

 

 

21,528

 

 

$

6.22

 

 

 

 

 

 

 

Granted

 

 

 

 

 

 

 

 

 

 

 

 

Exercised

 

 

(513

)

 

 

5.23

 

 

 

 

 

 

 

Expired / Cancelled / Forfeited

 

 

(253

)

 

 

6.07

 

 

 

 

 

 

 

Outstanding at March 31, 2021

 

 

20,762

 

 

$

6.24

 

 

7.9 years

 

$

680,528

 

Exercisable at March 31, 2021

 

 

9,812

 

 

$

3.92

 

 

7.0 years

 

$

344,350

 

 

There were no stock options granted during the three months ended March 31, 2021. The weighted-average grant date fair value per share of stock options granted for the three months ended March 31, 2020 was $2.95. The aggregate intrinsic value of options exercised for the three months ended March 31, 2021 and 2020 was $18.7 million and $1.4 million, respectively.

 

All options outstanding at March 31, 2021 are options to purchase shares of Class A common stock. The fair value of option awards issued with service or service and performance vesting conditions are estimated on the grant date using the Black-Scholes option pricing model. The Company does not have material stock options issued with market vesting conditions.

 

 

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For the three months ended March 31, 2021 and 2020, the stock-based compensation expense related to stock options was $4.2 million and $1.7 million, respectively. At March 31, 2021, there was $32.0 million of total unrecognized stock-based compensation cost related to stock options, which is expected to be recognized over a weighted average remaining service period of 2.8 years.

Restricted Stock Awards and Restricted Stock Units

A summary of the Restricted Stock Awards (“RSAs”) and Restricted Stock Unit (“RSUs”) activity is as follows:

 

 

 

Restricted

 

 

Restricted

Stock Units

for Class A

 

 

Restricted

Stock Units

for Class B

 

 

Weighted

Average

 

 

 

Stock

 

 

Common

 

 

Common

 

 

Grant Date

 

(in thousands, except per share amounts)

 

Awards

 

 

Stock

 

 

Stock

 

 

Fair Value

 

Nonvested restricted stock awards or restricted

   stock units at December 31, 2020

 

 

1,409

 

 

 

2,790

 

 

 

7,698

 

 

$

26.74

 

Granted

 

 

 

 

 

647