UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
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(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
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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.
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).
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.
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Emerging growth company |
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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
As of August 9, 2021, the registrant had
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; risks related to fluctuations in our tax obligations and effective income tax rate which could materially and adversely affect our results of operations; as well as the other important factors discussed in the section entitled “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (“2020 10-K”) and this Quarterly Report on Form 10-Q and in 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
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PART I. |
FINANCIAL INFORMATION |
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Item 1. |
1 |
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1 |
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2 |
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3 |
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5 |
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6 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
17 |
Item 3. |
33 |
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Item 4. |
33 |
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PART II. |
OTHER INFORMATION |
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Item 1. |
36 |
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Item 1A. |
36 |
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Item 2. |
36 |
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Item 3. |
36 |
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Item 4. |
36 |
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Item 5. |
36 |
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Item 6. |
37 |
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38 |
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
GoodRx Holdings, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands, except par values) |
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June 30, |
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December 31, |
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Assets |
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Current assets |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash |
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Accounts receivable, net |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Goodwill |
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Intangible assets, net |
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Capitalized software, net |
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Operating lease right-of-use assets |
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Deferred tax assets, net |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities and stockholders' equity |
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Current liabilities |
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Accounts payable |
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$ |
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$ |
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Accrued expenses and other current liabilities |
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Current portion of debt |
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Operating lease liabilities, current |
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Total current liabilities |
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Debt, net |
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Operating lease liabilities, net of current portion |
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Other liabilities |
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Total liabilities |
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Commitments and contingencies (Note 8) |
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Stockholders' equity |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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See accompanying Notes to Condensed Consolidated Financial Statements.
1
GoodRx Holdings, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
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Three Months Ended |
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Six Months Ended |
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(in thousands, except per share amounts) |
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2021 |
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2020 |
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2021 |
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2020 |
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Revenue |
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$ |
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$ |
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$ |
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$ |
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Costs and operating expenses: |
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Cost of revenue, exclusive of depreciation and |
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Product development and technology |
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Sales and marketing |
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General and administrative |
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Depreciation and amortization |
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Total costs and operating expenses |
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Operating (loss) income |
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Other expense, net: |
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Other income, net |
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( |
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( |
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Interest income |
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( |
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( |
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( |
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Interest expense |
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Total other expense, net |
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(Loss) income before income taxes |
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( |
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Income tax benefit (expense) |
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( |
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Net income |
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$ |
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$ |
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$ |
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$ |
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Net income attributable to common stockholders: |
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Basic |
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$ |
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$ |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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$ |
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$ |
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Earnings per share: |
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Basic |
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$ |
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$ |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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$ |
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$ |
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Weighted average shares used in computing |
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Basic |
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Diluted |
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Stock-based compensation included in costs and |
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Cost of revenue |
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$ |
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$ |
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$ |
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$ |
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Product development and technology |
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Sales and marketing |
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General and administrative |
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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)
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Redeemable |
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Class A and Class B |
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Additional |
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Accumulated |
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Total |
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(in thousands) |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Deficit |
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Equity |
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Balances at December 31, 2020 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Stock options exercised |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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Vesting of restricted stock units |
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— |
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— |
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Common stock withheld for tax obligations |
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— |
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— |
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( |
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( |
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( |
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Net income |
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— |
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— |
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— |
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— |
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— |
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Balances at March 31, 2021 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Stock options exercised |
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— |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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Vesting of restricted stock units |
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— |
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— |
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— |
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— |
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— |
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— |
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Common stock withheld for tax obligations |
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— |
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— |
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( |
) |
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— |
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( |
) |
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— |
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( |
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Net income |
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— |
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— |
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— |
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— |
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— |
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Balances at June 30, 2021 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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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)
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Redeemable |
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Common Stock |
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Additional |
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Accumulated |
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Total |
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(in thousands) |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Deficit |
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Deficit |
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Balances at December 31, 2019 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
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Stock options exercised |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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Net income |
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— |
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— |
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— |
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— |
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— |
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Balances at March 31, 2020 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
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Stock options exercised |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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Net income |
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— |
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— |
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— |
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— |
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— |
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Balances at June 30, 2020 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
See accompanying Notes to Condensed Consolidated Financial Statements.
4
GoodRx Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
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Six Months Ended |
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(in thousands) |
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2021 |
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2020 |
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Cash flows from operating activities |
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Net income |
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$ |
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$ |
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Adjustments to reconcile net income to net cash provided by |
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Depreciation and amortization |
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Amortization of debt issuance costs |
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Non-cash operating lease expense |
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Stock-based compensation expense |
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Deferred income taxes |
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( |
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Loss on abandonment of operating lease assets |
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Changes in operating assets and liabilities, net of effects of business acquisitions |
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Accounts receivable |
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( |
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( |
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Prepaid expenses and other assets |
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( |
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Accounts payable |
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Accrued expenses and other current liabilities |
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( |
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Operating lease liabilities |
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( |
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( |
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Other liabilities |
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Net cash provided by operating activities |
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|
||
Cash flows from investing activities |
|
|
|
|
|
|
||
Purchase of property and equipment |
|
|
( |
) |
|
|
( |
) |
Acquisitions, net of cash acquired |
|
|
( |
) |
|
|
|
|
Capitalized software |
|
|
( |
) |
|
|
( |
) |
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
Cash flows from financing activities |
|
|
|
|
|
|
||
Proceeds from long-term debt |
|
|
|
|
|
|
||
Payments on long-term debt |
|
|
( |
) |
|
|
( |
) |
Payment for contingent consideration |
|
|
( |
) |
|
|
|
|
Payment of debt issuance costs |
|
|
|
|
|
( |
) |
|
Proceeds from exercise of stock options |
|
|
|
|
|
|
||
Proceeds from early exercise of stock options |
|
|
|
|
|
|
||
Employee taxes paid related to net share settlement of equity awards |
|
|
( |
) |
|
|
|
|
Net cash (used in) provided by financing activities |
|
|
( |
) |
|
|
|
|
Net change in cash, cash equivalents and restricted cash |
|
|
( |
) |
|
|
|
|
Cash, cash equivalents and restricted cash |
|
|
|
|
|
|
||
Beginning of period |
|
|
|
|
|
|
||
End of period |
|
$ |
|
|
$ |
|
||
Supplemental disclosure of cash flow information |
|
|
|
|
|
|
||
Non cash investing and financing activities |
|
|
|
|
|
|
||
Offering costs included in accounts payable and accrued expense and other current liabilities |
|
$ |
|
|
$ |
|
||
Right-of-use assets obtained in exchange for new operating lease liabilities |
|
|
|
|
|
|
||
Stock-based compensation included in capitalized software development costs |
|
|
|
|
|
|
||
Capitalized software development costs in accounts payable and accrued expenses and |
|
|
|
|
|
|
||
Purchase of property and equipment included in accounts payable and accrued expenses |
|
|
|
|
|
|
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:
|
|
June 30, |
|
|||||
(in thousands) |
|
2021 |
|
|
2020 |
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Restricted cash |
|
|
|
|
|
|
||
Total cash, cash equivalents and restricted cash |
|
$ |
|
|
$ |
|
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
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, pharma 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 six months ended June 30, 2021 from those disclosed in the annual consolidated financial statements for the year ended December 31, 2020 and the related notes.
During the three and six months ended June 30, 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 and six months ended June 30, 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 approximately
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
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 June 30, 2021,
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 second 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 June 30, 2021 and through the date of this report. The accounting matters assessed included, but were not limited to, the
7
Company’s carrying value of goodwill and other long-lived assets, valuation of intangible assets acquired in business combinations, incentive-based compensation and income taxes.
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 consist 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 $
Restricted cash as of December 31, 2020 represented cash held in an escrow pursuant to terms of the Scriptcycle, LLC business combination relating to contingent consideration, see "Note 3. Business Combinations – 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
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
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
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 Combinations
RxSaver, Inc.
On
Goodwill associated with this acquisition totaled $
Unaudited supplemental pro forma financial information for the RxSaver acquisition has not been presented because the effects are not material to the Company’s condensed consolidated financial statements.
The purchase accounting for the RxSaver acquisition remains incomplete with respect to acquired tangible and intangible assets and liabilities assumed as management continues to gather and evaluate information about circumstances that existed as of the acquisition date. Measurement period adjustments, if any, will be recognized in the reporting period in which the adjustment amounts are determined within twelve months from the acquisition date.
HealthiNation Inc.
On
9
Goodwill associated with this acquisition totaled $
Unaudited supplemental pro forma financial information for the HealthiNation acquisition has not been presented because the effects are not material to the Company’s condensed consolidated financial statements.
The purchase accounting for the HealthiNation acquisition remains incomplete with respect to acquired tangible and intangible assets and liabilities assumed as management continues to gather and evaluate information about circumstances that existed as of the acquisition date. Measurement period adjustments, if any, will be recognized in the reporting period in which the adjustment amounts are determined within twelve months from the acquisition date.
Scriptcycle, LLC
On
As of December 31, 2020, the fair value of the contingent consideration was $
Goodwill associated with this acquisition totaled $
4. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following:
(in thousands) |
|
June 30, |
|
|
December 31, |
|
||
Income taxes receivable |
|
$ |
|
|
$ |
|
||
Prepaid expenses |
|
|
|
|
|
|
||
Total prepaid expenses and other current |
|
$ |
|
|
$ |
|
10
5. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following:
(in thousands) |
|
June 30, |
|
|
December 31, |
|
||
Accrued bonus and other payroll related |
|
$ |
|
|
$ |
|
||
Accrued marketing |
|
|
|
|
|
|
||
Deferred revenue |
|
|
|
|
|
|
||
Other accrued expenses |
|
|
|
|
|
|
||
Total accrued expenses and other |
|
$ |
|
|
$ |
|
The Company expects substantially all of the deferred revenue at June 30, 2021 will be recognized as revenue within the next twelve months. Of the $
6. Income Taxes
The Company calculates income taxes in interim periods by applying an estimated annual effective income tax rate to (loss) income before income taxes and by calculating the tax effect of discrete items recognized during the period.
The Company's estimated annual effective income tax rate is based on its estimated full year income or loss and the related income taxes for each jurisdiction in which the Company operates. This rate can be affected by estimates of full year pretax income or loss and permanent differences. The Company’s interim and estimated annual effective income tax rates differ from the U.S. Federal statutory rate of
As of December 31, 2020, the Company had unrecognized tax benefits of $
7. Debt
The Company has a term loan with an original amount of $
The Company also has a line of credit with a maximum amount of $
11
The Company’s debt consisted of the following:
(in thousands) |
|
June 30, |
|
|
December 31, |
|
||
Principal balance under First Lien Term |
|
$ |
|
|
$ |
|
||
Less: Unamortized debt issuance costs |
|
|
( |
) |
|
|
( |
) |
|
|
$ |
|
|
$ |
|
8. Commitments and Contingencies
Aside from the below, as of June 30, 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 $
Leases
On May 27, 2021, the Company entered into a non-cancelable lease agreement with a third-party to lease additional office space that is adjacent to and expands its existing corporate headquarters in Santa Monica, California. The lease commences beginning in the year
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 complaints, 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
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
12
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.
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 June 30, 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 |
|
|
Six Months Ended |
|
||||||||||
(in thousands) |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Prescription transactions revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Subscription revenue (1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
(1) |
|
13
10. Stock-Based Compensation
Stock Options
A summary of the stock option activity 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 |
|
|
|
|
$ |
|
|
|
|
|
|
|||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|||
Exercised |
|
|
( |
) |
|
|
|
|
|
|
|
|
||
Expired / Cancelled / Forfeited |
|
|
( |
) |
|
|
|
|
|
|
|
|
||
Outstanding at March 31, 2021 |
|
|
|
|
$ |
|
|
|
$ |
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|||
Exercised |
|
|
( |
) |
|
|
|
|
|
|
|
|
||
Expired / Cancelled / Forfeited |
|
|
( |
) |
|
|
|
|
|
|
|
|
||
Outstanding at June 30, 2021 |
|
|
|
|
$ |
|
|
|
$ |
|
||||
Exercisable at June 30, 2021 |
|
|
|
|
$ |
|
|
|
$ |
|
There were
All options outstanding at June 30, 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.
For the three months ended June 30, 2021 and 2020, the stock-based compensation expense related to stock options was $
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 |
|
|
Restricted |
|
|
Weighted |
|
||||
|
|
Stock |
|
|
Common |
|
|
Common |
|
|
Grant Date |
|
||||
(in thousands, except per share amounts) |
|
Awards |
|
|
Stock |
|
|
Stock |
|
|
Fair Value |
|
||||
Nonvested restricted stock awards or restricted |
|
|
|
|
|
|
|
|
|
|
$ |
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Vested |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
||
Forfeited |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||
Nonvested restricted stock awards or restricted |
|
|
|
|
|
|
|
|
|
|
$ |
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Vested |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Forfeited |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||
Nonvested restricted stock awards or restricted |
|
|
|
|
|
|
|
|
|
|
$ |
|
14
There were
Restricted Stock Awards
For the three months ended June 30, 2021 and 2020, total stock-based compensation expense related to RSAs was $
Restricted Stock Units for Class A Common Stock
For the three and six months ended June 30, 2021, total stock-based compensation expense related to RSUs for Class A common stock was $
Restricted Stock Units for Class B Common Stock
On September 11, 2020, the board of directors granted RSUs covering an aggregate of
15
As the Performance-Vesting Founders Awards vested in October 2020, the Company settled
11. Basic and Diluted Earnings Per Share
The computation of earnings per share for the three and six months ended June 30, 2021 and 2020 is as follows:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
(in thousands, except per share amounts) |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Less: Undistributed earnings allocated to |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Net income attributable to common stockholders - |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Add: Undistributed earnings reallocated to holders |
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income attributable to common stockholders - |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average shares - basic |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Dilutive impact of stock options, restricted stock |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average shares - diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Diluted |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
The following weighted average potentially dilutive shares were excluded from the computation of diluted earnings per share for the periods presented because including them would have been antidilutive:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
(in thousands) |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Redeemable convertible preferred stock |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stock options, restricted stock awards and restricted |
|
|
|
|
|
|
|
|
|
|
|
|
12. Subsequent Events
On July 7, 2021, the Company acquired substantially all of the assets of RxNXT LLC (“RxNXT”) for $
On July 21, 2021, the Company’s board of directors granted equity awards to certain employees comprised principally of RSUs for
16
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 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 Operation” and Part II, Item 8, “Financial Statements and Supplementary Data” included in our 2020 10-K filed with the SEC on March 12, 2021. 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" section of our 2020 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:
17
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 they can afford. To achieve this, we are building the leading, consumer-focused digital healthcare platform in the United States.
Healthcare consumers in the United States face an increasing number of challenges. These include a lack of affordability, transparency, and access to care. Additionally, healthcare professionals’ lack of access to current prescription pricing and out of pocket consumer cost information exacerbate the challenges that healthcare consumers face. GoodRx was founded to solve these challenges. We started with a price comparison tool for prescriptions, offering consumers free access to lower prices on their medication, and have been able to deliver consumers significant value. Based on a study we conducted in June 2021, consumers of our prescription offering saved an average of 79% off retail prices on prescription medication during the year 2020. In that same year, for the 100 most purchased medications, we beat the average commercial insurance copay 55% of the time (89% of the time when ignoring geographic proximity and convenience considerations), and consumers who paid less than the average commercial insurance copay saved on average 52% off the average copays. Today, our expanded platform also provides access to brand medication savings programs, affordable and convenient medical provider consultations and lab tests via our telehealth offerings, GoodRx Care and the GoodRx Telehealth Marketplace, and other healthcare and wellness related content. Whether a consumer is insured or uninsured, young or old, or suffers from an acute or a chronic ailment, we strive to be at the consumer’s side throughout their healthcare journey. We believe that our offerings provide significant savings to consumers, and can help drive greater medication adherence, faster treatment and better patient outcomes that also benefit the broader healthcare ecosystem and its stakeholders. These all contribute to a healthier, happier society.
We believe our financial results reflect the significant market demand for our offerings and the value that we provide to the broader healthcare ecosystem. Our revenue grew 43% in the three months ended June 30, 2021 to $176.6 million, up from $123.3 million in the three months ended June 30, 2020, and grew 31% in the six months ended June 30, 2021 to $337.1 million, up from $256.7 million in the six months ended June 30, 2020. In the three months ended June 30, 2021, net income grew 14% to $31.1 million, from net income of $27.3 million in the three months ended June 30, 2020, and declined 40% to $32.7 million in the six months ended June 30, 2021, from $54.7 million in the six months ended June 30, 2020. Net income in the three and six months ended June 30, 2021 was impacted by $40.7 million and $87.2 million of stock-based compensation expense, respectively, which includes $24.0 million and $54.0 million of stock-based compensation expense, respectively, related to equity awards made to the Co-Chief Executive Officers in connection with the initial public offering ("IPO"). Net income for the respective periods were also impacted by $37.3 million and $49.9 million of income tax benefit, respectively, primarily due to the pre-tax losses in addition to the tax effects of nondeductible officers’ stock-based compensation expense and excess tax benefits related to our equity awards. Adjusted EBITDA grew 11% to $54.6 million in the three months ended June 30, 2021, from $49.4 million in the three months ended June 30, 2020, and grew 4% to $105.6 million in the six months ended June 30, 2021, from $101.2 million in the six months ended June 30, 2020. The continued growth of our business was partially offset by continued investments in product development and technology and sales and marketing spend, an increase in cost of revenue relative to revenue due primarily to growth of our telehealth offering, as well as investments in our general and administrative infrastructure as we started operating as a public company.
Adjusted EBITDA is a non-GAAP financial measure. For a reconciliation of Adjusted EBITDA to the most directly comparable GAAP financial measure, information about why we consider Adjusted EBITDA useful and a discussion of the material risks and limitations of these measures, please see “Key Financial and Operating Metrics” below.
We have been focused on capital efficiency and delivering on a cash generative monetization model since inception. Cash flow provided by operating activities was $80.4 million in the six months ended June 30, 2021, compared to $83.8 million in the six months ended June 30, 2020.
18
We believe that our performance and future success depend on a number of factors that present significant opportunities for us but also pose risks and challenges. For discussion of these factors, please see our 2020 10-K and this Quarterly Report on Form 10-Q under the sections titled “Risk Factors."
On September 25, 2020, we completed our IPO by issuing 28,615,034 shares of our Class A common stock at a price to the public of $33.00 per share, resulting in net proceeds to us of $886.9 million, after deducting the underwriting discount of $52.5 million and offering expenses of $4.9 million. Additionally, certain existing stockholders sold an aggregate of 11,192,657 shares. On September 25, 2020, we also completed the sale of 3,030,303 shares of our Class A common stock at a purchase price of $33 per share to SLP Geology Aggregator, L.P., resulting in proceeds to us of $100.0 million. SLP Geology Aggregator, L.P. is an investment fund associated with Silver Lake Partners.
Impact of COVID-19
We continue to closely monitor how the spread of COVID-19 is affecting our employees, customers and business operations. The number of Monthly Active Consumers decreased and our prescription offering experienced a decline in activity in the second quarter of 2020 as compared to the first quarter of 2020 as many consumers avoided visiting healthcare professionals and pharmacies in-person, which we believe has had a similar effect across the industry. The number of Monthly Active Consumers then sequentially increased beginning in the third quarter of 2020 and through the second quarter of 2021 as consumers partially resumed their interaction with the healthcare system. Even though we saw improved activity in our prescription offering, we believe COVID-19 continues to have an adverse impact on our prescription offerings and continued improvement in future periods remains uncertain. Any decrease in the number of consumers seeking to fill prescriptions could negatively impact demand for and use of certain of our offerings, particularly our prescription offering, which would have an adverse effect on our business, financial condition and results of operations.
Conversely, pandemics, epidemics and outbreaks may significantly and temporarily increase demand for our telehealth offerings. COVID-19 has significantly accelerated the awareness and use of our telehealth offerings. While we have experienced a significant increase in demand for the telehealth offerings, there can be no assurance that the levels of interest, demand and use of our telehealth offerings will continue at current levels or will not decrease during or after the pandemic. Any such decrease could have an adverse effect on our growth and the success of our telehealth offerings.
Additionally, while the potential economic impact brought by, and the duration of any pandemic, epidemic or outbreak of an infectious disease, including COVID-19, may be difficult to assess or predict, the widespread COVID-19 pandemic has resulted in, and may continue to result in, significant disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity.
The full extent to which the outbreak of COVID-19 will continue to impact our 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, new variants of the virus, availability and adoption of effective vaccines, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume. Even after the outbreak of COVID-19 has subsided, we may experience materially adverse impacts to our business as a result of its global economic impact, including any recession that has occurred or may occur in the future.
Seasonality
We typically experience stronger consumer demand during the first and fourth quarters of each year, which coincide with generally higher consumer healthcare spending, doctor office visits, annual benefit enrollment season, and seasonal cold and flu trends. This seasonality may impact revenue and sales and marketing expense. The rapid growth of our business may have masked these trends to date, and we expect the impact of seasonality to be more pronounced in the future. In 2020 and 2021 we have seen the impact of the COVID-19 pandemic further disrupt these trends, which may continue in future periods.
Recent Developments
On July 7, 2021, we acquired substantially all of the assets of RxNXT LLC (“RxNXT”) for $14.5 million in cash, subject to customary closing adjustments. RxNXT is a prescription technology platform. The purpose of the acquisition is to help expand our business capabilities, particularly with respect to our prescription offering.
The results of operations of RxNXT will be included in our consolidated results beginning from the date of acquisition.
19
Key Financial and Operating Metrics
Monthly Active Consumers and Subscribers
The numbers of Monthly Active Consumers and subscribers are key indicators of the scale of our consumer base and a gauge for our marketing and engagement efforts. We believe these metrics reflect our scale, growth and engagement with consumers. Beginning in the fourth quarter of 2020, our Monthly Active Consumers number includes consumers we acquired through the acquisition of Scriptcycle in August 2020.
|
Three Months Ended |
|
|||||||||||||
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
|||||
|
2021 |
|
2021 |
|
2020 |
|
2020 |
|
2020 |
|
|||||
|
(in millions) |
|
|||||||||||||
Monthly Active Consumers |
|
6.0 |
|
|
5.7 |
|
|
5.6 |
|
|
4.9 |
|
|
4.4 |
|
The number of Monthly Active Consumers grew in the three months ended June 30, 2021 to 6.0 million, compared to 4.4 million in the three months ended June 30, 2020.
|
As of |
|
|||||||||||||
|
June 30, |
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
|||||
|
2021 |
|
2021 |
|
2020 |
|
2020 |
|
2020 |
|
|||||
|
(in millions) |
|
|||||||||||||
Subscribers |
|
1.1 |
|
|
0.9 |
|
|
0.8 |
|
|
0.7 |
|
|
0.6 |
|
The number of subscribers grew to 1.1 million as of June 30, 2021, compared to 0.6 million as of June 30, 2020.
Adjusted EBITDA
Adjusted EBITDA is a key measure we use to assess our financial performance and is also used for internal planning and forecasting purposes. We believe Adjusted EBITDA is helpful to investors, analysts and other interested parties because it can assist in providing a more consistent and comparable overview of our operations across our historical financial periods. In addition, this measure is frequently used by analysts, investors and other interested parties to evaluate and assess performance.
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, cash bonuses to vested option holders, stock-based compensation expense, payroll tax expense related to stock-based compensation, loss on extinguishment of debt, financing related expenses, loss on abandonment and impairment of operating lease assets, charitable stock donation and other income or expense, net. Adjusted EBITDA Margin represents Adjusted EBITDA as a percentage of revenue.
Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP 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 expenses 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.
20
The following table presents a reconciliation of Adjusted EBITDA to net income, the most directly comparable financial measure calculated in accordance with GAAP:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Net income |
|
$ |
31,061 |
|
|
$ |
27,337 |
|
|
$ |
32,729 |
|
|
$ |
54,683 |
|
Adjusted to exclude the following: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest income |
|
|
(13 |
) |
|
|
(41 |
) |
|
|
(29 |
) |
|
|
(116 |
) |
Interest expense |
|
|
5,906 |
|
|
|
6,795 |
|
|
|
11,811 |
|
|
|
15,433 |
|
Income tax (benefit) expense |
|
|
(37,305 |
) |
|
|
7,661 |
|
|
|
(49,860 |
) |
|
|
15,427 |
|
Depreciation and amortization |
|
|
8,369 |
|
|
|
4,521 |
|
|
|
13,730 |
|
|
|
8,866 |
|
Other income, net |
|
|
— |
|
|
|
(16 |
) |
|
|
— |
|
|
|
(21 |
) |
Financing related expenses (1) |
|
|
58 |
|
|
|
188 |
|
|
|
315 |
|
|
|
1,306 |
|
Acquisition related expenses (2) |
|
|
3,022 |
|
|
|
780 |
|
|
|
6,070 |
|
|
|
1,243 |
|
Stock-based compensation expense (3) |
|
|
40,676 |
|
|
|
2,121 |
|
|
|
87,202 |
|
|
|
4,331 |
|
Payroll tax expense related to stock-based compensation |
|
|
2,016 |
|
|
|
22 |
|
|
|
2,844 |
|
|
|
81 |
|
Loss on abandonment of operating lease assets (4) |
|
|
780 |
|
|
|
— |
|
|
|
780 |
|
|
|
— |
|
Adjusted EBITDA |
|
$ |
54,570 |
|
|
$ |
49,368 |
|
|
$ |
105,592 |
|
|
$ |
101,233 |
|
Adjusted EBITDA Margin |
|
|
30.9 |
% |
|
|
40.0 |
% |
|
|
31.3 |
% |
|
|
39.4 |
% |
Adjusted EBITDA increased 11% in the three months ended June 30, 2021 to $54.6 million, compared to $49.4 million in three months ended June 30, 2020; and increased 4% in the six months ended June 30, 2021 to $105.6 million, compared to $101.2 million in the six months ended June 30, 2020. This increase was principally a function of the continued growth of our business partially offset by our continued investments in product development and technology, investments in our general and administrative infrastructure as we started operating as a public company, an increase in sales and marketing spend, and an increase in cost of revenue relative to revenue due primarily to offering mix.
Adjusted EBITDA Margin was 30.9% in the three months ended June 30, 2021, a decrease from 40.0% in the three months ended June 30, 2020; and 31.3% in the six months ended June 30, 2021, a decrease from 39.4% in the six months ended June 30, 2020. This decrease was primarily due to an increase in marketing spend relative to revenue compared to the second quarter of 2020, in which we proactively reduced our marketing spend at the onset of the COVID-19 pandemic, as well as continued investments in product development and technology, an increase in cost of revenue relative to revenue due to offering mix, and investments in our general and administrative infrastructure.
We expect our Adjusted EBITDA and Adjusted EBITDA Margin to fluctuate primarily based on the level of our investments in sales and marketing and product development and technology relative to changes in revenue.
We generally expect to continue to invest in sales and marketing in the near-term, but will continue to evaluate the impact of COVID-19 on our business and actively manage our sales and marketing spend, including investment in consumer acquisition, which is largely variable, as market conditions change. We also intend to continue to invest in product development and technology to continue to improve our platform, introduce new offerings and scale existing ones. Additionally, we expect to continue to invest in our general and administrative infrastructure to support our operation as a public company.
21
Results of Operations
The following table sets forth information comparing the components of our results of operations for the periods indicated:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Prescription transactions revenue |
|
$ |
144,857 |
|
|
$ |
109,548 |
|
|
$ |
278,918 |
|
|
$ |
232,565 |
|
Subscription revenue |
|
|
14,316 |
|
|
|
6,358 |
|
|
|
26,323 |
|
|
|
11,998 |
|
Other revenue |
|
|
17,462 |
|
|
|
7,389 |
|
|
|
31,825 |
|
|
|
12,140 |
|
Total revenue |
|
|
176,635 |
|
|
|
123,295 |
|
|
|
337,066 |
|
|
|
256,703 |
|
Costs and operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of revenue, exclusive of depreciation and amortization presented |
|
|
11,090 |
|
|
|
6,824 |
|
|
|
21,518 |
|
|
|
12,843 |
|
Product development and technology |
|
|
29,567 |
|
|
|
11,962 |
|
|
|
55,727 |
|
|
|
22,287 |
|
Sales and marketing |
|
|
88,381 |
|
|
|
51,920 |
|
|
|
168,075 |
|
|
|
115,082 |
|
General and administrative |
|
|
39,579 |
|
|
|
6,332 |
|
|
|
83,365 |
|
|
|
12,219 |
|
Depreciation and amortization |
|
|
8,369 |
|
|
|
4,521 |
|
|
|
13,730 |
|
|
|
8,866 |
|
Total costs and operating expenses |
|
|
176,986 |
|
|
|
81,559 |
|
|
|
342,415 |
|
|
|
171,297 |
|
Operating (loss) income |
|
|
(351 |
) |
|
|
41,736 |
|
|
|
(5,349 |
) |
|
|
85,406 |
|
Other expense, net: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other income, net |
|
|
— |
|
|
|
(16 |
) |
|
|
— |
|
|
|
(21 |
) |
Interest income |
|
|
(13 |
) |
|
|
(41 |
) |
|
|
(29 |
) |
|
|
(116 |
) |
Interest expense |
|
|
5,906 |
|
|
|
6,795 |
|
|
|
11,811 |
|
|
|
15,433 |
|
Total other expense, net |
|
|
5,893 |
|
|
|
6,738 |
|
|
|
11,782 |
|
|
|
15,296 |
|
(Loss) income before income taxes |
|
|
(6,244 |
) |
|
|
34,998 |
|
|
|
(17,131 |
) |
|
|
70,110 |
|
Income tax benefit (expense) |
|
|
37,305 |
|
|
|
(7,661 |
) |
|
|
49,860 |
|
|
|
(15,427 |
) |
Net income |
|
$ |
31,061 |
|
|
$ |
27,337 |
|
|
$ |
32,729 |
|
|
$ |
54,683 |
|
Components of our Results of Operations
Revenue
Our revenue is primarily derived from prescription transactions revenue that is generated when pharmacies fill prescriptions for consumers, and from other revenue streams such as our subscription offerings, pharma manufacturer solutions, and our telehealth offerings. All of our revenue has been generated in the United States.
22
Costs and Operating Expenses
We incur the following expenses directly related to our cost of revenue and operating expenses:
Other Expense, Net
Our other expense, net consists of the following:
Income Tax Benefit (Expense)
Our income tax benefit (expense) consists of federal and state income taxes. We calculate income taxes in interim periods by applying an estimated annual effective income tax rate to (loss) income before income taxes and by calculating the tax effect of discrete items recognized during the period. Our effective income tax rate generally differs from the U.S. statutory tax rate of 21.0% primarily due to U.S. federal and state research and development tax credits, non-deductible officers’ stock-based compensation expense, state income taxes, and excess tax benefits from our equity awards.
23
Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020
Revenue
|
|
Three Months Ended |
|
|
Change |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
$ |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Prescription transactions revenue |
|
$ |
144,857 |
|
|
$ |
109,548 |
|
|
$ |
35,309 |
|
|
|
32 |
% |
Subscription revenue |
|
|
14,316 |
|
|
|
6,358 |
|
|
|
7,958 |
|
|
|
125 |
% |
Other revenue |
|
|
17,462 |
|
|
|
7,389 |
|
|
|
10,073 |
|
|
|
136 |
% |
Total revenue |
|
$ |
176,635 |
|
|
$ |
123,295 |
|
|
$ |
53,340 |
|
|
|
43 |
% |
Prescription transactions revenue for the three months ended June 30, 2021 increased $35.3 million, or 32%, compared to the three months ended June 30, 2020, driven primarily by a 36% increase in the number of our average Monthly Active Consumers, partially offset by lower contribution-per-consumer due solely to the acquisition of Scriptcycle. Scriptcycle active consumers are included in our Monthly Active Consumers number beginning in the fourth quarter of 2020, the first full quarter post its acquisition. We believe prescription transactions revenue continues to be impacted by COVID-19.
Subscription revenue for the three months ended June 30, 2021 increased $8.0 million, or 125%, compared to the three months ended June 30, 2020, driven primarily by an increase in the number of subscribers to 1.1 million as of June 30, 2021, compared to 0.6 million as of June 30, 2020, as well as a favorable change in subscription plan mix.
Other revenue for the three months ended June 30, 2021 increased $10.1 million, or 136%, compared to the three months ended June 30, 2020. This increase was primarily due to an increase in revenue from our pharma manufacturer solutions offering and an increase in telehealth revenue.
We expect the percentage growth in subscription and other revenue to continue to outpace our prescription transactions revenue as we continue to scale the capabilities and platforms of our subscription, pharma manufacturer solutions and telehealth service offerings.
Costs and Operating Expenses
Cost of Revenue, Exclusive of Depreciation and Amortization
|
|
Three Months Ended |
|
|
Change |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
$ |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Cost of revenue, exclusive of depreciation and amortization |
|
$ |
11,090 |
|
|
$ |
6,824 |
|
|
$ |
4,266 |
|
|
|
63 |
% |
As a percentage of total revenue |
|
|
6 |
% |
|
|
6 |
% |
|
|
|
|
|
|
Cost of revenue for the three months ended June 30, 2021 increased $4.3 million, or 63%, compared to the three months ended June 30, 2020. This increase was primarily driven by a $1.6 million increase in outsourced and in-house personnel related consumer support expense to support our growth and a $1.7 million increase in hosting expenses, merchant fees and allocated overhead.
Product Development and Technology
|
|
Three Months Ended |
|
|
Change |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
$ |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Product development and technology |
|
$ |
29,567 |
|
|
$ |
11,962 |
|
|
$ |
17,605 |
|
|
|
147 |
% |
As a percentage of total revenue |
|
|
17 |
% |
|
|
10 |
% |
|
|
|
|
|
|
Product development and technology expenses for the three months ended June 30, 2021 increased by $17.6 million, or 147%, compared to the three months ended June 30, 2020. This increase was primarily due to increases in product development payroll and related expenses of $13.8 million due to higher headcount and an increase in stock-based compensation expense and payroll taxes related to awards made in connection with and after our IPO. The increase in product development and technology expense was also due to an increase in allocated overhead of $2.2 million in support
24
of our product development efforts and an increase in third-party services and contractor expenses related to product development of $1.5 million.
Sales and Marketing
|
|
Three Months Ended |
|
|
Change |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
$ |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Sales and marketing |
|
$ |
88,381 |
|
|
$ |
51,920 |
|
|
$ |
36,461 |
|
|
|
70 |
% |
As a percentage of total revenue |
|
|
50 |
% |
|
|
42 |
% |
|
|
|
|
|
|
Sales and marketing expenses for the three months ended June 30, 2021 increased by $36.5 million, or 70%, compared to the three months ended June 30, 2020. This increase was primarily due to a $24.4 million increase in advertising expenses and a $9.5 million increase in sales and marketing payroll and related expenses due to higher headcount and an increase in stock-based compensation expense and payroll taxes related to awards made in connection with and after our IPO.
We continue to evaluate the impact of COVID-19 on our business and actively manage our consumer acquisition spending according to market conditions.
General and Administrative
|
|
Three Months Ended |
|
|
Change |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
$ |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
General and administrative |
|
$ |
39,579 |
|
|
$ |
6,332 |
|
|
$ |
33,247 |
|
|
|
525 |
% |
As a percentage of total revenue |
|
|
22 |
% |
|
|
5 |
% |
|
|
|
|
|
|
General and administrative expenses for the three months ended June 30, 2021 increased by $33.2 million, or 525%, compared to the three months ended June 30, 2020. This increase was primarily due to $24.0 million of expense related to the Founders Awards made in connection with the IPO as further described in Note 10 of our condensed consolidated financial statements. The increase in general and administrative expense was also due to a $5.9 million increase in other executive and administrative payroll and related expenses due to higher headcount and an increase in stock-based compensation expense and payroll taxes related to other awards made in connection with and after our IPO, and a $1.9 million increase in acquisition related and other professional service fees to support our growth and operations as a public company after our IPO.
Depreciation and Amortization
|
|
Three Months Ended |
|
|
Change |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
$ |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Depreciation and amortization |
|
$ |
8,369 |
|
|
$ |
4,521 |
|
|
$ |
3,848 |
|
|
|
85 |
% |
As a percentage of total revenue |
|
|
5 |
% |
|
|
4 |
% |
|
|
|
|
|
|
Depreciation and amortization expenses for the three months ended June 30, 2021 increased by $3.8 million, or 85%, compared to the three months ended June 30, 2020. This increase was due primarily to a $1.6 million increase in capitalized software amortization due to higher capitalized costs for platform improvements and the introduction of new products and features and a $1.6 million increase in amortization related to acquired intangible assets.
25
Other Income, Net
|
|
Three Months Ended |
|
|
Change |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
$ |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Other income, net |
|
$ |
— |
|
|
$ |
(16 |
) |
|
$ |
16 |
|
|
|
(100 |
)% |
As a percentage of total revenue |
|
|
0 |
% |
|
|
0 |
% |
|
|
|
|
|
|
Other income, net was not material in the three months ended June 30, 2021 and 2020.
Interest Income
|
|
Three Months Ended |
|
|
Change |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
$ |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Interest income |
|
$ |
(13 |
) |
|
$ |
(41 |
) |
|
$ |
28 |
|
|
|
(68 |
)% |
As a percentage of total revenue |
|
|
0 |
% |
|
|
0 |
% |
|
|
|
|
|
|
Interest income was not material in the three months ended June 30, 2021 and 2020.
Interest Expense
|
|
Three Months Ended |
|
|
Change |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
$ |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Interest expense |
|
$ |
5,906 |
|
|
$ |
6,795 |
|
|
$ |
(889 |
) |
|
|
(13 |
)% |
As a percentage of total revenue |
|
|
3 |
% |
|
|
6 |
% |
|
|
|
|
|
|
Interest expense for the three months ended June 30, 2021 decreased by $0.9 million, or 13%, compared to the three months ended June 30, 2020 primarily due to lower average debt balances and lower interest rates.
Income Tax Benefit (Expense)
|
|
Three Months Ended |
|
|
Change |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
$ |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Income tax benefit (expense) |
|
$ |
37,305 |
|
|
$ |
(7,661 |
) |
|
$ |
44,966 |
|
|
|
(587 |
)% |
Effective income tax rate |
|
|
597.5 |
% |
|
|
21.9 |
% |
|
|
|
|
|
|
For the three months ended June 30, 2021, we had an income tax benefit of $37.3 million, compared to income tax expense of $7.7 million for the three months ended June 30, 2020 and an effective income tax rate of 597.5% and 21.9%, respectively. The change in our income tax benefit (expense) 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 our equity awards. The pre-tax loss for the three months ended June 30, 2021 was partially driven by the $24.0 million of stock-based compensation expense related to the Founders Awards made in connection with our IPO.
26
Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020
Revenue
|
|
Six Months Ended |
|
|
Change |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
$ |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Prescription transactions revenue |
|
$ |
278,918 |
|
|
$ |
232,565 |
|
|
$ |
46,353 |
|
|
|
20 |
% |
Subscription revenue |
|
|
26,323 |
|
|
|
11,998 |
|
|
|
14,325 |
|
|
|
119 |
% |
Other revenue |
|
|
31,825 |
|
|
|
12,140 |
|
|
|
19,685 |
|
|
|
162 |
% |
Total revenue |
|
$ |
337,066 |
|
|
$ |
256,703 |
|
|
$ |
80,363 |
|
|
|
31 |
% |
Prescription transactions revenue for the six months ended June 30, 2021 increased $46.4 million, or 20%, compared to the six months ended June 30, 2020, driven primarily by a 26% increase in the number of our average Monthly Active Consumers, partially offset by lower contribution-per-consumer due solely to the acquisition of Scriptcycle. Scriptcycle active consumers are included in our Monthly Active Consumers number beginning in the fourth quarter of 2020, the first full quarter post its acquisition. We believe prescription transactions revenue continues to be impacted by COVID-19.
Subscription revenue for the six months ended June 30, 2021 increased $14.3 million, or 119%, compared to the six months ended June 30, 2020, driven primarily by an increase in the number of subscribers to 1.1 million as of June 30, 2021, compared to 0.6 million as of June 30, 2020, as well as favorable change in subscription plan mix.
Other revenue for the six months ended June 30, 2021 increased $19.7 million, or 162%, compared to the six months ended June 30, 2020. This increase was primarily due to an increase in revenue from our pharma manufacturer solutions offering and an increase in telehealth revenue.
We expect the percentage growth in subscription and other revenue to continue to outpace our prescription transactions revenue as we continue to scale the capabilities and platforms of our subscription, pharma manufacturer solutions and telehealth service offerings.
Costs and Operating Expenses
Cost of Revenue, Exclusive of Depreciation and Amortization
|
|
Six Months Ended |
|
|
Change |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
$ |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Cost of revenue, exclusive of depreciation and amortization |
|
$ |
21,518 |
|
|
$ |
12,843 |
|
|
$ |
8,675 |
|
|
|
68 |
% |
As a percentage of total revenue |
|
|
6 |
% |
|
|
5 |
% |
|
|
|
|
|
|
Cost of revenue for the six months ended June 30, 2021 increased $8.7 million, or 68%, compared to the six months ended June 30, 2020. This increase was primarily driven by a $2.7 million increase in outsourced and in-house personnel related consumer support expense to support our growth, a $1.8 million increase in provider cost related to our telehealth offerings driven by an increase in the number of online provider visits, a $1.4 million increase in hosting expenses, a $1.2 million increase in merchant fees and a $0.8 million increase in allocated overhead.
Product Development and Technology
|
|
Six Months Ended |
|
|
Change |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
$ |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Product development and technology |
|
$ |
55,727 |
|
|
$ |
22,287 |
|
|
$ |
33,440 |
|
|
|
150 |
% |
As a percentage of total revenue |
|
|
17 |
% |
|
|
9 |
% |
|
|
|
|
|
|
Product development and technology expenses for the six months ended June 30, 2021 increased by $33.4 million, or 150%, compared to the six months ended June 30, 2020. This increase was primarily due to increases in product development payroll and related expenses of $26.2 million due to higher headcount and an increase in stock-based compensation expense and payroll taxes related to awards made in connection with and after our IPO. The increase in product development and technology expense was also due to an increase in allocated overhead of $3.8 million in support
27
of our product development efforts and an increase in third-party services and contractor expenses related to product development of $3.5 million.
Sales and Marketing
|
|
Six Months Ended |
|
|
Change |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
$ |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Sales and marketing |
|
$ |
168,075 |
|
|
$ |
115,082 |
|
|
$ |
52,993 |
|
|
|
46 |
% |
As a percentage of total revenue |
|
|
50 |
% |
|
|
45 |
% |
|
|
|
|
|
|
Sales and marketing expenses for the six months ended June 30, 2021 increased by $53.0 million, or 46%, compared to the six months ended June 30, 2020. This increase was primarily due to a $30.6 million increase in advertising expenses and a $17.6 million increase in sales and marketing payroll and related expenses due to higher headcount and an increase in stock-based compensation expense and payroll taxes related to awards made in connection with and after our IPO.
We continue to evaluate the impact of COVID-19 on our business and actively manage our consumer acquisition spending according to market conditions.
General and Administrative
|
|
Six Months Ended |
|
|
Change |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
$ |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
General and administrative |
|
$ |
83,365 |
|
|
$ |
12,219 |
|
|
$ |
71,146 |
|
|
|
582 |
% |
As a percentage of total revenue |
|
|
25 |
% |
|
|
5 |
% |
|
|
|
|
|
|
General and administrative expenses for the six months ended June 30, 2021 increased by $71.1 million, or 582%, compared to the six months ended June 30, 2020. This increase was primarily due to $54.0 million of expense related to the Founders Awards made in connection with the IPO as further described in Note 10 of our condensed consolidated financial statements. The increase in general and administrative expense was also due to a $11.4 million increase in other executive and administrative payroll and related expenses due to higher headcount and an increase in stock-based compensation expense and payroll taxes related to other awards made in connection with and after our IPO, and a $4.4 million increase in acquisition related and other professional service fees to support our growth and operations as a public company after our IPO.
Depreciation and Amortization
|
|
Six Months Ended |
|
|
Change |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
$ |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Depreciation and amortization |
|
$ |
13,730 |
|
|
$ |
8,866 |
|
|
$ |
4,864 |
|
|
|
55 |
% |
As a percentage of total revenue |
|
|
4 |
% |
|
|
3 |
% |
|
|
|
|
|
|
Depreciation and amortization expenses for the six months ended June 30, 2021 increased by $4.9 million, or 55%, compared to the six months ended June 30, 2020. This increase was due primarily to a $2.8 million increase in capitalized software amortization due to higher capitalized costs for platform improvements and the introduction of new products and
28
features and a $1.5 million increase in depreciation of property and equipment driven by the completion of the build of our new headquarters in Santa Monica, California.
Other Income, Net
|
|
Six Months Ended |
|
|
Change |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
$ |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Other income, net |
|
$ |
— |
|
|
$ |
(21 |
) |
|
$ |
21 |
|
|
|
(100 |
)% |
As a percentage of total revenue |
|
|
0 |
% |
|
|
0 |
% |
|
|
|
|
|
|
Other income, net was not material in the six months ended June 30, 2021 and 2020.
Interest Income
|
|
Six Months Ended |
|
|
Change |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
$ |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Interest income |
|
$ |
(29 |
) |
|
$ |
(116 |
) |
|
$ |
87 |
|
|
|
(75 |
)% |
As a percentage of total revenue |
|
|
0 |
% |
|
|
0 |
% |
|
|
|
|
|
|
Interest income was not material in the six months ended June 30, 2021 and 2020.
Interest Expense
|
|
Six Months Ended |
|
|
Change |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
$ |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Interest expense |
|
$ |
11,811 |
|
|
$ |
15,433 |
|
|
$ |
(3,622 |
) |
|
|
(23 |
)% |
As a percentage of total revenue |
|
|
4 |
% |
|
|
6 |
% |
|
|
|
|
|
|
Interest expense for the six months ended June 30, 2021 decreased by $3.6 million, or 23%, compared to the six months ended June 30, 2020 primarily due to lower average debt balances and lower interest rates.
Income Tax Benefit (Expense)
|
|
Six Months Ended |
|
|
Change |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
$ |
|
|
% |
|
||||
|
|
(dollars in thousands) |
|
|||||||||||||
Income tax benefit (expense) |
|
$ |
49,860 |
|
|
$ |
(15,427 |
) |
|
$ |
65,287 |
|
|
|
(423 |
)% |
Effective income tax rate |
|
|
291.1 |
% |
|
|
22.0 |
% |
|
|
|
|
|
|
29
For the six months ended June 30, 2021, we had an income tax benefit of $49.9 million, compared to income tax expense of $15.4 million for the six months ended June 30, 2020 and an effective income tax rate of 291.1% and 22.0%, respectively. The change in our income tax benefit (expense) 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 our equity awards. The pre-tax loss for the six months ended June 30, 2021 was partially driven by the $54.0 million of stock-based compensation expense related to the Founders Awards made in connection with our IPO.
Liquidity and Capital Resources
Overview
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 primary requirements for liquidity and capital are to finance working capital, capital expenditures and general corporate purposes. Our principal sources of liquidity are expected to be our cash and cash equivalents and borrowings available under our $100.0 million secured asset-based Revolving Credit Facility. As of June 30, 2021 we had cash and cash equivalents of $894.7 million and $90.9 million available under our Revolving Credit Facility.
We believe that our net cash provided by operating activities, cash on hand and availability under our Revolving Credit Facility will be adequate to meet our operating, investing and financing needs for at least the next 12 months. Our future capital requirements will depend on many factors, including our revenue growth, the timing and extent of investments to support such growth, the expansion of sales and marketing activities, and many other factors as described in the section entitled “Risk Factors” of our 2020 10-K and this Quarterly Report on Form 10-Q. We historically have not had any off-balance sheet arrangements nor do we currently have any off-balance sheet arrangements as defined under SEC rules.
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 widespread COVID-19 pandemic has resulted in, and may continue to result in, significant disruption of global financial markets, reducing our ability to access capital. If we are unable to raise additional funds when or on the terms desired, our business, financial condition and results of operations could be adversely affected.
In light of the large number of RSUs subject to the Founders Awards that were granted in connection with our IPO in September 2020, we have incurred and anticipate that we will incur substantial additional stock-based compensation expense and expend substantial funds to satisfy tax withholding and remittance obligations as these RSUs vest over time. The grant date fair value of the Founders Awards was $533.3 million. All of the stock price goals with respect to the performance vesting portion of the Founders Awards (the “Performance-Vesting Founders Awards,” see Note 10 of our condensed consolidated financial statements) were achieved in October 2020. As a result, all 16,422,044 Performance-Vesting Founders Awards vested in 2020, and we recognized a total of approximately $373.0 million of stock-based compensation expense related to the Founders Awards during 2020. During the three and six months ended June 30, 2021, we recognized an additional $24.0 million and $54.0 million of stock-based compensation expense, respectively, resulting in a cumulative total of $427.0 million of stock-based compensation expense recognized related to the Founders Awards as of June 30, 2021. The unrecognized stock-based compensation expense associated with the time vesting portion of the Founders Awards of $106.3 million as of June 30, 2021 is expected to be recognized over the weighted average remaining service period of 1.7 years. In addition, as a result of the Founders Awards, and the Performance-Vesting Founders Awards in particular, a large number of shares of Class B common stock will be issued on the applicable settlement dates. On the settlement dates for the RSUs, we plan to withhold shares and remit taxes on behalf of the holders of such Founders Awards at applicable statutory rates, which we refer to as net settlement, which may result in substantial tax withholding obligations. As an employee earns compensation, both the employer and the employee are liable for some portion of Social Security taxes and Medicare taxes (collectively referred to as “FICA” taxes) on the compensation. FICA taxes are generally due in the period when the substantial risk of forfeiture lapses. As the Performance-Vesting Founders Awards vested in October 2020, we accelerated the settlement of 0.7 million RSUs during the fourth quarter of 2020 sufficient to satisfy FICA tax withholding obligations due in the year of vesting. The remaining non-accelerated 15.7 million Performance-Vesting Founders Awards shares will not be issued until October 2023 or, if earlier, a change in control event, as defined in the RSU agreements governing the Founders Awards.
30
Assuming an approximate 47% tax withholding rate and stock price of $65.00 per share at vesting and settlement, for the 15.7 million Performance-Vesting Founders Award shares that vested as described in the preceding paragraph, we estimate that our cash obligation on behalf of our Co-Founders to the relevant tax authorities to satisfy tax withholding obligations would be approximately $481.7 million, and we would deliver an aggregate of approximately 8.3 million shares of our Class B common stock to net settle these awards, after withholding an aggregate of approximately 7.4 million shares of our Class B common stock. Cash payments for income tax withholdings are due upon the settlement date of the RSUs which is the third anniversary of the applicable vesting date or, if earlier, upon a qualifying change in control event. The actual amount of the tax obligations and the number of shares to be delivered could be higher or lower, depending on the price of our Class A common stock upon settlement and the applicable tax withholding rates then in effect. We also anticipate expending substantial funds to satisfy tax withholding and remittance obligations for other equity awards granted to our employees as they vest over time.
First Lien Credit Agreement
Our first lien credit agreement (the “First Lien Credit Agreement”) provides for a term loan with an original amount of $700.0 million (the “First Lien Term Loan Facility”). We also have 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 and the First Lien Term Loan Facility under the First Lien Credit Agreement are collateralized by substantially all of our assets, including our intellectual property, and 100% of the equity interest of GoodRx, Inc.
The First Lien Credit Agreement that governs the Revolving Credit Facility and the First Lien Term Loan Facility contains certain affirmative and negative covenants, including, among other things, restrictions on indebtedness, liens, fundamental changes, repurchases of stock, dividends and other distributions. GoodRx, Inc. is restricted from making dividend payments, loans or advances to GoodRx Intermediate Holdings, LLC and GoodRx Holdings, Inc. In addition, GoodRx, Inc. is subject to a financial covenant whereby GoodRx, Inc. is required to maintain a First Lien Net Leverage Ratio (as defined in the First Lien Credit Agreement) not to exceed 8.2 to 1.0. At June 30, 2021, we were in compliance with the covenants under the First Lien Credit Agreement.
Revolving Credit Facility
Loans under the Revolving Credit Facility bear interest at a rate per annum equal to the LIBO Screen Rate (as defined in the First Lien Credit Agreement) plus a variable margin rate, which is based on our most recently determined First Lien Net Leverage Ratio (as defined in the First Lien Credit Agreement), that ranges from 2.50% to 3.00%. The Revolving Credit Facility has a variable commitment fee, which is based on our most recently determined First Lien Net Leverage Ratio (as defined in the First Lien Credit Agreement), and ranges from 0.25% to 0.50% per annum. In addition, the Revolving Credit Facility has a fixed fronting fee of 0.125% per annum of our aggregate undrawn and disbursed but unreimbursed letters of credit. The Revolving Credit Facility expires on October 11, 2024. As of June 30, 2021, there was no outstanding principal balance under our Revolving Credit Facility.
Under the terms of a lease agreement entered into during September 2019, GoodRx, Inc. assigned to the landlord drawdown rights against the Revolving Credit Facility for up to $9.0 million to meet the contractual line of credit requirement in the lease agreement. The landlord can draw on the Revolving Credit Facility in the event of our default on rent or damages to the building. The assigned rights to the landlord will be held for the initial three years of the lease term, and subject to certain conditions, the letter of credit will decrease thereafter by up to 10% per year based upon the original amount to no less than $2.0 million. This outstanding letter of credit to the landlord reduces our available borrowings under the Revolving Credit Facility by an amount equal to the value of assigned rights. There were outstanding letters of credit issued against the Revolving Credit Facility for $9.1 million as of June 30, 2021, which reduces our available borrowings under the Revolving Credit Facility to $90.9 million.
First Lien Term Loan Facility
The First Lien Term Loan Facility accrues interest at a rate per annum equal to the LIBO Screen Rate (as defined in the First Lien Credit Agreement) plus a variable margin rate, which is based on our most recently determined Net Leverage Ratio (as defined in the First Lien Credit Agreement), that ranges from 2.75% to 3.00% per annum. The First Lien Credit Agreement requires quarterly principal payments through September 2025, with any remaining unpaid principal and any accrued and unpaid interest due on the maturity date of October 10, 2025.
The effective interest rate on the First Lien Term Loan Facility was 3.39% and 3.83% for the three months ended June 30, 2021 and 2020, respectively and 3.39% and 4.33% for the six months ended June 30, 2021 and 2020, respectively.
31
The carrying value of the First Lien Term Loan Facility was $664.9 million, net of unamortized debt issuance costs and discount of $12.7 million, as of June 30, 2021.
Holding Company Status
We are a holding company that does not conduct any business operations of our own. As a result, we are largely dependent upon cash distributions and other transfers from our subsidiaries to meet our obligations and to make future dividend payments, if any. The First Lien Credit Agreement contains 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 the First Lien Credit Agreement as of June 30, 2021. Since the restricted net assets of GoodRx, Inc. and its subsidiaries exceed 25% of our consolidated net assets, in accordance with Regulation S-X, refer to our audited consolidated financial statements included in our 2020 10-K for condensed parent company financial information of GoodRx Holdings, Inc.
Cash Flows
|
|
Six Months Ended |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
|
|
(in thousands) |
|
|||||
Net cash provided by operating activities |
|
$ |
80,411 |
|
|
$ |
83,825 |
|
Net cash used in investing activities |
|
|
(142,416 |
) |
|
|
(8,319 |
) |
Net cash (used in) provided by financing activities |
|
|
(14,883 |
) |
|
|
25,069 |
|
Net change in cash, cash equivalents and restricted cash |
|
$ |
(76,888 |
) |
|
$ |
100,575 |
|
Net Cash Provided by Operating Activities
Net cash provided by operating activities was $80.4 million for the six months ended June 30, 2021 consisting of $32.7 million of net income, adjusted for $104.9 million of non-cash expenses, made up primarily of stock-based compensation of $87.2 million, including $54.0 million of stock-based compensation related to the Founders Awards made in connection with the IPO, partially offset by $57.2 million of net cash used as a result of changes in operating assets and liabilities. The changes in operating assets and liabilities were primarily driven by an increase in income tax receivable due to our second quarter tax benefit as well as increases in accounts receivable due to our growing operations.
Net cash provided by operating activities was $83.8 million for the six months ended June 30, 2020 consisting of $54.7 million of net income, adjusted for $19.3 million of non-cash expenses and $9.8 million of net cash provided by changes in our operating assets and liabilities. The changes in operating assets and liabilities were primarily driven by increases in accounts receivable, prepaid expenses and other current assets and accrued expenses and other current liabilities due to our growing operations.
Net Cash Used in Investing Activities
Net cash used in investing activities of $142.4 million for the six months ended June 30, 2021 was related to $125.7 million in cash consideration, net of cash acquired, related to acquisitions, $13.6 million for capitalized software and $3.1 million of capital expenditures, due primarily to leasehold improvements and furniture and fixtures related to the completion of our new office facility in Santa Monica, California. In May 2021, we entered into a non-cancelable lease agreement to lease additional space adjacent to our new office facility in Santa Monica, California. We anticipate that we will invest in additional capital expenditures with respect to the expanded leased space principally in 2022, which is the earliest we expect to gain access to and control of the expanded leased property.
Net cash used in investing activities of $8.3 million for the six months ended June 30, 2020 was related to $6.5 million for capitalized software and $1.8 million for capital expenditures.
Net Cash (Used in) Provided by Financing Activities
Net cash used in financing activities of $14.9 million for the six months ended June 30, 2021 was related to $26.0 million of payments for employee taxes related to net share settlement of equity awards, $3.5 million in long-term debt principal payments related to our First Lien Term Loan Facility and $0.8 million payment for contingent consideration related to the acquisition of Scriptcycle, partially offset by $15.4 million in proceeds from the exercise of stock options.
32
Net cash provided by financing activities of $25.1 million for the six months ended June 30, 2020 was primarily related to $28.0 million in proceeds from our Revolving Credit Facility, $1.9 million from the exercise of stock options, partially offset by $3.5 million in long-term debt principal payments related to our First Lien Term Loan Facility and payments of $1.3 million of debt issuance costs related to increasing the amount of our line of credit in May 2020.
Contractual Obligations and Commitments
Other than as described in Note 8 to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q, there have been no material changes to our contractual obligations and commitments compared with those described in our 2020 10-K.
Critical Accounting Policies and Estimates
During the three months ended June 30, 2021, 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 2020 10-K.
Recent Accounting Pronouncements
Refer to Note 2 to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
There have been no material changes in our market risk from the disclosure included under “Quantitative and Qualitative Disclosures of Market Risk” in the 2020 10-K.
Item 4. Controls and Procedures
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our co-principal executive officers and principal financial officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, and as a result of the material weaknesses described below, our co-principal executive officers and principal financial officer concluded that, as of June 30, 2021, our disclosure controls and procedures were not effective at the reasonable assurance level.
Material Weaknesses
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual and interim financial statements will not be detected or prevented on a timely basis.
In connection with the preparation of our consolidated financial statements for 2019, we identified certain control deficiencies in the design and operation of our internal control over financial reporting that constituted material weaknesses. The material weaknesses are:
33
These material weaknesses contributed to the following additional material weaknesses:
These material weaknesses resulted in adjustments identified by our independent registered public accounting firm and recorded by us primarily related to goodwill, capitalized software, leases, debt extinguishment, revenue recognition and sales allowances. These material weaknesses could result in a misstatement of our accounts or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.
Remediation Measures
We are compiling the system and processing documentation necessary to perform the evaluation needed to comply with Section 404(a) of Sarbanes-Oxley Act and we are taking steps to remediate the material weaknesses. Management, with the participation of the audit committee and the board of directors, is engaged in remedial activities to address the material weaknesses described above. As of June 30, 2021, substantially all remediation efforts planned to address the material weaknesses have been designed and implemented by management. These implemented controls and procedures are subject to ongoing testing including their operating effectiveness over a sustained period of financial reporting cycles. The finalization of our remediation measures is ongoing and includes the following:
34
We believe we are making progress toward achieving the effectiveness of our internal control over financial reporting and disclosure controls and procedures. The actions that we are taking are subject to continued testing, ongoing senior management review, as well as audit committee oversight. We will not be able to conclude whether the steps we are taking will fully remediate these material weaknesses in our internal control over financial reporting until we have completed our remediation efforts and subsequent evaluation of their effectiveness. We may also conclude that additional measures may be required to remediate the material weaknesses in our internal control over financial reporting, which may necessitate additional implementation and evaluation time. We will continue to assess the effectiveness of our internal control over financial reporting and take steps to remediate the known material weaknesses expeditiously.
Changes in Internal Control Over Financial Reporting
We are taking actions to remediate the material weaknesses relating to our internal control over financial reporting. Other than the changes to our internal control over financial reporting described in “Remediation Measures” above, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended June 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
35
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The information required under this Part II, Item 1 is set forth in Note 8 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q is incorporated herein by this reference.
Item 1A. Risk Factors
For a discussion of potential risks and uncertainties related to us, see the information included in Part I, Item 1A, "Risk Factors" of our 2020 10-K. There have been no material changes to the risk factors previously disclosed in our 2020 10-K, except as noted below:
We may experience fluctuations in our tax obligations and effective income tax rate, which could materially and adversely affect our results of operations.
We are subject to U.S. federal and state income taxes. Tax laws, regulations and administrative practices in various jurisdictions may be subject to significant change, with or without advance notice, due to economic, political and other conditions, and significant judgment is required in evaluating and estimating our provision and accruals for these taxes. There are many transactions that occur during the ordinary course of business for which the ultimate tax determination is uncertain. Our effective income tax rates could be affected by numerous factors, such as changes in tax, accounting and other laws, regulations, administrative practices, principles and interpretations, the mix and level of earnings in a given taxing jurisdiction or our ownership or capital structures.
On May 28, 2021 the Department of the Treasury released the General Explanation of the Administration's Fiscal Year 2022 Revenue Proposals, also known as the Green Book, outlining a number of proposed amendments to the Internal Revenue Code, including significant changes for corporate taxpayers which includes a proposal to increase the federal corporate tax rate from 21% to 28%. The tax increase legislation is in the early stages of the legislative process and timing of potential tax law changes remain uncertain since the tax increase proposals will need the support of all 50 Democratic Senators. If adopted as proposed, the increase of the corporate tax rate would adversely affect our results of operations in future periods.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Unregistered Sales of Equity Securities
None.
Use of Proceeds
On September 25, 2020, we completed our IPO. All shares sold were registered pursuant to a registration statement on Form S-1 (File No. 333-248465), as amended (the “Registration Statement”), declared effective by the SEC on September 22, 2020.
There has been no material change in the expected use of the net proceeds from our IPO as described in our Registration Statement. The remaining net proceeds from our IPO have been invested in investment grade, interest-bearing instruments.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
36
Item 6. Exhibits
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Incorporated by Reference |
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Filed/ |
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Exhibit Number |
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Exhibit Description |
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Form |
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File No. |
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Exhibit |
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Filing Date |
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Furnished Herewith |
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3.1 |
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8-K |
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001-39549 |
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3.1 |
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9/28/20 |
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3.2 |
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8-K |
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001-39549 |
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3.2 |
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9/28/20 |
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4.1 |
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S-1/A |
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333-248465 |
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4.1 |
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9/22/20 |
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4.2 |
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S-8 |
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333-249069 |
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4.4 |
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9/25/20 |
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10.1^ |
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* |
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10.2^ |
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* |
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31.1 |
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Certification of Co-Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a). |
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* |
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31.2 |
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Certification of Co-Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a). |
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* |
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31.3 |
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Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a). |
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* |
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32.1 |
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Certification of Co-Chief Executive Officer pursuant to 18 U.S.C. Section 1350. |
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** |
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32.2 |
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Certification of Co-Chief Executive Officer pursuant to 18 U.S.C. Section 1350. |
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** |
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32.3 |
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Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350. |
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** |
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101.INS |
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Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
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* |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema Document |
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* |
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101.CAL |
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Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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* |
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101.DEF |
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Inline XBRL Taxonomy Extension Definition Linkbase Document |
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* |
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101.LAB |
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Inline XBRL Taxonomy Extension Label Linkbase Document |
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* |
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101.PRE |
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Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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* |
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104 |
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Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
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* |
* Filed herewith.
** Furnished herewith.
^ Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K.
37
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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GOODRX HOLDINGS, INC. |
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Date: August 12, 2021 |
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By: |
/s/ Douglas Hirsch |
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Douglas Hirsch |
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Co-Chief Executive Officer |
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(Principal Executive Officer) |
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Date: August 12, 2021 |
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By: |
/s/ Trevor Bezdek |
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Trevor Bezdek |
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Co-Chief Executive Officer |
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(Principal Executive Officer) |
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Date: August 12, 2021 |
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By: |
/s/ Karsten Voermann |
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Karsten Voermann |
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Chief Financial Officer |
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(Principal Financial and Accounting Officer) |
38
Exhibit 10.1
Certain information marked as [***] has been excluded from this exhibit because it is both (i) not material and (ii) is the type that the Registrant treats as private or confidential.
FIRST AMENDMENT TO OFFICE LEASE
THIS FIRST AMENDMENT TO OFFICE LEASE (this “First Amendment”),
dated as of August 14, 2020 (the “Effective Date”), is entered into by and between CSHV PEN FACTORY, LLC, a Delaware limited liability company (“Landlord”), and GOODRX, a Delaware corporation (“Tenant”), with reference to the following:
R E C I T A L S
NOW, THEREFORE, in consideration of the foregoing Recitals (which are incorporated herein by this reference), for the mutual promises contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows:
A G R E E M E N T
1
291190787.5
472192-002132
16, 2019, the Lease Commencement Date would have been June 12, 2020. However, Landlord has agreed to delay the Lease Commencement Date to July 1, 2020 (the “Commencement Date Adjustment”) in exchange for the Release.
Tenant acknowledges that it is familiar with and understands California Civil Code Section 1542, which provides as follows:
“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THAT THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE AND THAT, IF KNOWN BY HIM OR HER, WOULD HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR RELEASED PARTY.”
Tenant hereby waives and relinquishes every right or benefit that it has or may have under California Civil Code Section 1542 to the full extent that it may lawfully waive such right or benefit. In connection with such waiver and relinquishment, Tenant acknowledges that it may discover facts in addition to or different from those that it knows or believes to be true with
291190787.5
472192-002132
respect to the subject matter of this First Amendment and/or the waiver(s) set forth herein, but that it is Tenant’s intention hereby to fully, finally and forever waive and release all Claims, known or unknown, suspected or unsuspected, that may exist or heretofore have existed or that may come into existence hereinafter with respect to such Claims, as well as any and all other Claims and/or matters covered herein or contemplated hereby. The releases given in this Section shall be and remain in effect as full and complete releases notwithstanding the discovery or existence of any such additional or different facts. Tenant acknowledges and agrees that it has been represented by legal counsel of its choice in connection with this First Amendment, and that such counsel has explained to Tenant the provisions of this Section. By initialing below, Tenant confirms it has agreed to the provisions of this Section.
Tenant’s initials: /s/ TB /s/ DH
c/o LaSalle Investment Management, Inc. 333 W. Wacker Drive, Suite 2300
Chicago, Illinois 60606 Attention: [***]
Email: [***]
with a copy to:
[***]
and a copy to:
CSHV Pen Factory, LLC
c/o Lincoln Property Company 915 Wilshire Blvd., Suite 2050 Los Angeles, CA 90017
Attn: Property Manager
Payable to: CSHV Pen Factory, LLC if paid by mail, then to:
291190787.5
472192-002132
CSHV Pen Factory, LLC
c/o Lincoln Property Company 915 Wilshire Blvd., Suite 2050 Los Angeles, CA 90017
Attn: Property Manager if paid by wire, then to:
[***]
matters and information related to the Lease. Landlord hereby certifies and acknowledges that, as of the Effective Date, and conditioned on the mutual execution and delivery of this Agreement and subject to Tenant’s ongoing obligations under the Lease, (A) to Landlord’s actual knowledge without duty of investigation or inquiry, Tenant is not in default under the Lease; (B) Landlord has not delivered any notice to Tenant regarding a default by Tenant under the Lease which remains uncured, and (C) Landlord is holding the L-C in the amount of $9,000,000.00. As used in this First Amendment, “Landlord’s actual knowledge without duty of investigation or inquiry” shall mean and refer to the actual knowledge without investigation or inquiry of Amy Xu, the asset manager
291190787.5
472192-002132
of the Building, and, as of the Effective Date, Landlord hereby represents and warrants to Tenant that Amy Xu is the asset manager of the Building and has a job description that requires knowledge of matters and information related to the Lease.
26.14 of the Lease are expressly incorporated herein by reference.
company, or other liability for any of the obligations entered into by LaSalle as investment manager for CALSTRS, the sole member of Landlord.
291190787.5
472192-002132
First Amendment shall control. The headings to sections of this First Amendment are for convenient reference only and shall not be used in interpreting this First Amendment. This First Amendment may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same agreement. Delivery of an electronically executed signature page hereof by electronic transmission (including, without limitation, via emailed .pdf or DocuSign) shall specifically be deemed as effective as delivery of a manually executed signature page hereof.
[SIGNATURE PAGE FOLLOWS]
291190787.5
472192-002132
7
291190787.5
472192-002132
IN WITNESS WHEREOF, Landlord and Tenant have caused their duly authorized representatives to execute this First Amendment as of the date first above written.
“LANDLORD”:
CSHV PEN FACTORY, LLC,
a Delaware limited liability company
By: California State Teachers’ Retirement System, a public entity created pursuant to the laws of the State of California, its sole member
By: LaSalle Investment Management, Inc. Its: Investment Manager
By: /s/ Amy Xu Authorized Signatory
“TENANT”:
GOODRX, INC.,
a Delaware corporation
By: /s/ Doug Hirsch
Name: Its:
291190787.5
472192-002132
Doug Hirsch
Co- CEO
By: _ /s/ Trevor Bezdek
Name: Its:
291190787.5
472192-002132
Trevor Bezdek Co-CEO
291190787.5
472192-002132
Certain information marked as [***] has been excluded from this exhibit because it is both (i) not material and (ii) is the type that the Registrant treats as private or confidential.
Exhibit 10.2
SECOND AMENDMENT TO OFFICE LEASE
THIS SECOND AMENDMENT TO OFFICE LEASE dated as of May 27, 2021
(this “Second Amendment”), is entered into by and between CSHV PEN FACTORY, LLC, a Delaware limited liability company (“Landlord”), and GOODRX, INC., a Delaware corporation (“Tenant”), with reference to the following:
R E C I T A L S
NOW, THEREFORE, in consideration of the foregoing Recitals (which are incorporated herein by this reference), for the mutual promises contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows:
A G R E E M E N T
Tenant, and Tenant shall lease from Landlord, the Expansion Space upon all of the terms of the Lease, as modified herein. For the avoidance of doubt, the parties acknowledge that the Expansion Space Commencement Date shall not be deemed to have occurred if Tenant accesses the
1
Certain information marked as [***] has been excluded from this exhibit because it is both (i) not material and (ii) is the type that the Registrant treats as private or confidential.
Expansion Space early for the “Construction License Period Early Access” or the “Non-Intrusive Early Access” as each such term is defined in Sections 1(d) and (e) below, respectively. Effective as of the Expansion Space Commencement Date, unless the context clearly indicates otherwise, all references to the “Premises” contained in the Lease shall mean and refer to the entirety of the space in the Existing Premises and the Expansion Space, which together is approximately 131,749 rentable (117,110 usable) square feet. Landlord and Tenant hereby acknowledge and agree that the rentable and usable square footages of the Existing Premises, the Expansion Space and the Expanded Premises as stated in this Second Amendment shall be deemed final, conclusive and binding for all purposes under the Lease and, notwithstanding anything to the contrary contained in the Lease, unless stated otherwise in the Lease (including, without limitation, under Section 1.2 of the Original Lease and Section 8(b)(ii)(B) below), shall not be subject to change even if any of the actual rentable or usable square footages are more or less than such stated amounts. Notwithstanding anything to the contrary contained in this Second Amendment (but subject to the remaining terms of this sentence), if (i) substantial completion of the Second Amendment Tenant Improvements is actually delayed as a result of (A) an occurrence under Section 5.2.3.2(i) or (ii) of the Original Lease (dealing with Hazardous Materials) (and Tenant hereby certifies and acknowledges to Landlord that, as of the date of mutual execution of this Second Amendment, Tenant knows of no such occurrence), (B) any maintenance or repair required for the Expansion Space (and not for the Existing Premises or any other portion of the Project), but only to the extent (x) such maintenance or repair is Landlord’s sole and express obligation under Section 7.1 of the Original Lease (for purposes of this subsection (B) only, the parties specifically agree that (aa) anything constituting a BS/BS Exception shall not be deemed Landlord’s sole and express obligation, and (bb) the definition of BS/BS Exception shall not be deemed to include the insurance exclusion originally provided in such Section 7.1 of the Original Lease), and (y) the need for such maintenance or repair was not caused or exacerbated by any Tenant Party or otherwise in connection with Tenant’s performance of the Second Amendment Tenant Improvements or by Tenant’s use or occupancy of the Existing Premises, (C) fire or other casualty covered by Article 11 of the Original Lease, or (D) eminent domain, condemnation or the grant of a deed or other instrument in lieu of eminent domain or condemnation that, in any such case, is covered by Article 13 of the Original Lease, and (ii) such delay is the sole cause (i.e., is not shared with any other cause, including, without limitation, Force Majeure, Tenant’s failure to reasonably and diligently perform the construction of the Second Amendment Tenant Improvements, and/or any other delay caused by Tenant or other event, action or inaction) of the Second Amendment Tenant Improvements not being substantially complete by October 1, 2022 (any such delay under these subsections (i) and (ii) may be referred to herein as a “Special Circumstances Delay”), then, subject to the remaining terms of this sentence, (1) the Expansion Space Commencement Date shall be delayed by one (1) day for each day after October 1, 2022 that such substantial completion does not occur solely as a result of a Special Circumstances Delay, (2) the “Expansion Space Lease Expiration Date” (as defined below) shall also be delayed on the same day-for-day basis, and (3) the parties shall promptly enter into an amendment to the Lease reflecting the foregoing, which amendment shall also update accordingly and commensurately all dates and other terms of this Second Amendment tied to the Expansion Space Commencement Date occurring on October 1, 2022 and the Expansion Space Lease Expiration Date occurring on July 31, 2033 (it being the specific
2
Certain information marked as [***] has been excluded from this exhibit because it is both (i) not material and (ii) is the type that the Registrant treats as private or confidential.
intent of the parties that the same terms of this Second Amendment shall still apply after accounting for such Special Circumstances Delay); provided, that, notwithstanding anything to the contrary contained herein, no Special Circumstances Delay shall be deemed to have occurred unless (I) Tenant has delivered written notice to Landlord that a Special Circumstances Delay is pending (if Tenant is reasonably capable of making such determination) or has occurred, (II) Landlord fails to cure any such pending delay before it becomes an actual delay, or, if an actual delay has already occurred pursuant to the foregoing, Landlord fails to cure such actual delay within three (3) business days after Landlord’s receipt of such notice from Tenant, and (III) Tenant, as a result of the Special Circumstances Delay, cannot and does not conduct normal business operations from the Expansion Space during any applicable period beginning on October 1, 2022 and ending on the new and delayed Expansion Space Commencement Date resulting from the Special Circumstances Delay (all of which under this subsection (III) shall be reasonably verified and documented by the parties using reasonable cooperation).
(ii) modifying ceilings, floors, electrical, HVAC, mechanical, plumbing, fire-life-safety and other systems, and (iii) painting.
for the sole purpose of Tenant prosecuting construction of the Second Amendment Tenant Improvements, installing Tenant’s permitted furniture, fixtures and equipment in the Expansion Space, moving into the Expansion Space, and conducting Tenant’s business at the Expansion Space in accordance with, and subject to, the terms of the Lease, and not for any other use or purpose (collectively, the “Construction License Period Use”). Tenant’s occupancy of the Expansion Space during the Construction License Period shall be subject to all the terms of the Lease (including, without limitation, those concerning Tenant’s indemnification, insurance, maintenance and repair obligations) as if the Lease were a license agreement for the Expansion
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Certain information marked as [***] has been excluded from this exhibit because it is both (i) not material and (ii) is the type that the Registrant treats as private or confidential.
Space, except that (i) Tenant shall not be required to pay Base Rent for the Expansion Space, Tenant’s Share of Direct Expenses for the Expansion Space (as it relates to both the Building and the Project, as applicable) or parking charges for the Expansion Space (but Tenant shall still be subject to all of the foregoing payment obligations for the Existing Premises in accordance with, and subject to, the terms of the Lease), (ii) Tenant’s parking rights shall be as provided in this paragraph instead of as provided elsewhere in this Second Amendment for the Expansion Space, and any obligation of Landlord to provide utilities and services for the Expansion Space shall be as provided in this paragraph instead of as provided in the Original Lease, and (iii) Tenant shall not be required to vacate and surrender the Expansion Space upon the expiration of the Construction License Period (it being the specific agreement of the parties that, upon such expiration, Tenant’s license of the Expansion Space hereunder shall become a lease of the Expansion Space under the terms of the Lease). Subject to any applicable indemnification obligation of Landlord under Section 10.1 of the Original Lease (and Tenant’s assumptions of risk and releases as provided under such Section 10.1), Tenant hereby agrees to protect, defend, indemnify and hold Landlord harmless from and against any and all Claims in any way arising or resulting from or in connection with this paragraph. Subject to the terms of the Lease (including, without limitation, the rules and regulations attached as Exhibit E to the Original Lease), during the Construction License Period and only to the extent required for the Construction License Period Use, the parties hereby agree as follows (for the avoidance of doubt, this sentence shall specifically not apply with respect to the Existing Premises): (A) Tenant and its employees, the “Architect”, the “Engineers”, the “Contractor” and “Tenant’s Agents” (as each such term is defined in the Second Amendment Work Letter) shall have the right to reasonable parking at the Project in reasonable cooperation with Landlord without the payment of any parking charges for the same, and
(B) Landlord shall, without additional charge to Tenant, use reasonable efforts to provide (but only to the extent the same are not impacted by the performance of the Second Amendment Tenant Improvements) normal and customary electricity, HVAC, water and/or elevator service within the Expansion Space for Tenant and its employees, the Architect, the Engineers, the Contractor and Tenant’s Agents; provided, that “, without additional charge to Tenant,” as used in this subsection
(B) shall not apply with respect to any portion of the Expansion Space from which Tenant is conducting business. The terms of this paragraph may collectively be referred to as the “Construction License Period Early Access”.
sole purpose of Tenant performing visual/walk-through planning, visual/walk-through due diligence, measuring, space planning, and designing, all to the extent reasonably required by Tenant in preparation for the Second Amendment Tenant Improvement work and Tenant’s occupancy under the Second Amendment. Tenant shall in no event conduct business in connection with any period of entry into the Expansion Space under this paragraph. As soon as reasonably possible prior to Tenant’s entry into the Expansion Space as permitted by the terms of this paragraph, Tenant shall submit a request to Landlord, for its written approval (not to be
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unreasonably withheld, conditioned or delayed), which request shall reasonably detail the timing and purpose of Tenant’s entry. Any entry into the Expansion Space by Tenant under this paragraph (all subject to approval in writing in advance by Landlord, which shall not be unreasonably withheld, conditioned or delayed) shall be at the sole risk of Tenant, including, without limitation, theft, bodily injury, vandalism or other damage (but subject in any event to any applicable indemnification obligation of Landlord under Section
10.1 of the Original Lease). For the avoidance of doubt, the parties specifically acknowledge that, during any period of entry into the Expansion Space by Tenant in accordance with, and subject to, the terms of this paragraph, Tenant shall not be required to pay Base Rent for the Expansion Space, Tenant’s Share of Direct Expenses for the Expansion Space (as it relates to both the Building and the Project, as applicable), parking charges for the Expansion Space, or any other charges under the Lease that would otherwise be applicable to the Expansion Space (but Tenant shall still be subject to all of the foregoing payment obligations for the Existing Premises in accordance with, and subject to, the terms of the Lease); provided, that the parties specifically acknowledge that Tenant’s indemnification obligations, assumptions of risk and releases as provided under Section 10.1 of the Original Lease shall apply with respect to any such entry into the Expansion Space by Tenant. Subject to any applicable indemnification obligation of Landlord under Section 10.1 of the Original Lease, Tenant hereby agrees to protect, defend, indemnify and hold Landlord harmless from and against any and all Claims in any way arising or resulting from or in connection with this paragraph. The terms of this paragraph may collectively be referred to as the “Non-Intrusive Early Access”.
avoidance of doubt, the parties specifically agree that nothing contained in this paragraph shall be deemed to modify the Existing Premises Lease Expiration Date. In addition, and notwithstanding anything to the contrary contained in the Lease, because the Lease Term is currently not scheduled to be co-terminus for the Existing Premises and the Expansion Space, any term of the Lease that is based on the expiration or earlier termination of the Lease Term shall, unless the context clearly indicates otherwise (or unless the Lease is subsequently amended in the sole and absolute discretion of the parties to be co-terminus), be deemed to separately and independently apply to the expiration or earlier termination of the Lease Term for the Existing Premises or the Expansion Space, as applicable.
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Certain information marked as [***] has been excluded from this exhibit because it is both (i) not material and (ii) is the type that the Registrant treats as private or confidential.
(B) with respect to the Existing Premises, (1) if the first Option Term is successfully exercised, such first Option Term shall commence on March 1, 2031 and, unless sooner terminated in accordance with the terms of the Lease, end on February 28, 2036, and (2) if the second Option Term is successfully exercised, such second Option Term shall commence on March 1, 2036 and, unless sooner terminated in accordance with the terms of the Lease, end on February 28, 2041.
February 28, 2030 (the “Outside Tenant Termination Notice Date”), stating that Tenant intends to terminate the Lease for only the Expansion Space pursuant to the terms of this Section; and (B) Tenant shall cure any “Material Default” (as defined below). Within thirty (30) days after Landlord’s receipt of the Tenant Termination Notice, Landlord shall provide written notice (the “Termination Fee Notice”) to Tenant setting forth a calculation of the unamortized sum, as of the Termination Date, of the following amounts (collectively, the “Termination Fee”): the Second Amendment Tenant Improvement Allowance paid by Landlord (which shall specifically be deemed to also include any amounts deducted from or otherwise applied against the Second Amendment Tenant Improvement Allowance in accordance with, and subject to, the terms of the Second Amendment Work Letter), any brokerage commissions paid by Landlord in connection with this Second Amendment, and the “Expansion Space Base Rent Abatement” (as defined below) provided to Tenant, all as amortized on a straight-line basis without interest over the entirety of the originally- scheduled full initial Expansion Space Lease Term beginning from and after the Expansion Space Commencement Date. Absent demonstrable error in the Termination Fee Notice of Landlord’s calculation of the Termination Fee (in which case the parties shall work
6
Certain information marked as [***] has been excluded from this exhibit because it is both (i) not material and (ii) is the type that the Registrant treats as private or confidential.
together in good faith to resolve such error as soon as reasonably possible), Tenant shall pay the Termination Fee to Landlord within thirty (30) days after Tenant’s receipt of the Termination Fee Notice or resolution of any such error, as applicable. Provided that Tenant performs all of the foregoing in accordance with the terms of this Section, the Lease shall automatically terminate and be of no further force or effect for the Expansion Space (except as set forth below) as of the Termination Date as if such Termination Date were the originally-scheduled Expansion Space Lease Expiration Date under this Second Amendment, and Landlord and Tenant shall thereafter be relieved of their respective obligations under the Lease for the Expansion Space with the same force and effect as would have been the case upon the originally-scheduled Expansion Space Lease Expiration Date; accordingly, Landlord and Tenant shall have all the rights and remedies with respect to any obligation of the other under the Lease for the Expansion Space that accrues on or prior to the Termination Date and is not satisfied by Landlord or Tenant, as applicable, on or prior to the Termination Date (e.g., Tenant’s obligations regarding indemnity, insurance, maintenance and repair, surrender, any demising of the Premises, and with respect to Tenant’s payment of any Rent; without limiting the generality of the foregoing, such payment obligation of Tenant shall specifically include the payment of any amounts owed in connection with any future reconciliation of Direct Expenses in accordance with the terms of the Lease), and with respect to any obligations of Landlord or Tenant, as applicable, that expressly survive the expiration or earlier termination of the Lease (as applied to the Expansion Space). Notwithstanding anything to the contrary contained in this Second Amendment, upon Tenant’s delivery of the Tenant Termination Notice, Tenant’s right to exercise any Option Term for the Expansion Space shall terminate and be of no further force or effect. If Tenant exercises Tenant’s Termination Right in accordance with the terms herein, on the Termination Date, Tenant shall vacate the Expansion Space and surrender and deliver exclusive possession thereof to Landlord in accordance with the terms of the Lease. Tenant’s Termination Right shall expire and be of no further force or effect if Tenant fails to deliver the Tenant Termination Notice to Landlord by the Outside Tenant Termination Notice Date. If Tenant exercises Tenant’s Termination Right in accordance with the terms of this Section but retains possession of the Expansion Space or any part thereof after the Termination Date, then, in addition to all other rights and remedies Landlord may have pursuant to the Lease and at law and in equity, Tenant shall be deemed a holdover tenant with respect to the Expansion Space only and the terms of Section 16 of the Original Lease shall apply.
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Certain information marked as [***] has been excluded from this exhibit because it is both (i) not material and (ii) is the type that the Registrant treats as private or confidential.
Tenant’s Termination Right is personal only to the Tenant named in this Second Amendment (the “Named Tenant”) or any Permitted Transferee Assignee, and may not be exercised by any other Tenant, assignee, subtenant or other transferee of or successor to any portion of the Named Tenant’s interest under the Lease or to the Expansion Space. As used herein, a “Material Default” shall mean any monetary default under the Lease by Tenant beyond all applicable notice and cure periods, and any other material default under the Lease by Tenant beyond all applicable notice and cure periods (including, without limitation, in connection with any failure by Tenant to make any material repair required of Tenant under the Lease, and with respect to any Hazardous Materials contamination caused by Tenant) as reasonably determined by Landlord in a manner consistent with the standards applicable to Comparable Buildings in any event.
the rights and remedies with respect to any obligation of the other under the Lease for the Expansion Space that accrues on or prior to the Termination Date and is not satisfied by Landlord or Tenant, as applicable, on or prior to the Termination Date (e.g., Tenant’s obligations regarding indemnity, insurance, maintenance and repair, surrender, any demising of the Premises, and with respect to Tenant’s payment of any Rent; without limiting the generality of the foregoing, such payment obligation of Tenant shall specifically include the payment of any amounts owed in connection with any future reconciliation of Direct Expenses in accordance with the terms of the Lease), and with respect to any obligations of Landlord or Tenant, as applicable, that expressly survive the expiration or earlier termination of the Lease (as applied to the Expansion Space).
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Certain information marked as [***] has been excluded from this exhibit because it is both (i) not material and (ii) is the type that the Registrant treats as private or confidential.
Notwithstanding anything to the contrary contained in this Second Amendment, upon Landlord’s delivery of the Landlord Termination Notice, Tenant’s right to exercise any Option Term for the Expansion Space shall terminate and be of no further force or effect. If Landlord exercises Landlord’s Termination Right in accordance with the terms herein, on the Termination Date, Tenant shall vacate the Expansion Space and surrender and deliver exclusive possession thereof to Landlord in accordance with the terms of the Lease. Landlord’s Termination Right shall expire and be of no further force or effect if Landlord fails to deliver the Landlord Termination Notice to Tenant by the Outside Landlord Termination Notice Date. If Landlord exercises Landlord’s Termination Right in accordance with the terms of this Section but Tenant retains possession of the Expansion Space or any part thereof after the Termination Date, then, in addition to all other rights and remedies Landlord may have pursuant to the Lease and at law and in equity, Tenant shall be deemed a holdover tenant with respect to the Expansion Space only and the terms of Section 16 of the Original Lease shall apply.
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*Notwithstanding anything to the contrary contained in this Second Amendment, but subject to the terms of this paragraph, Base Rent for the Expansion Space only (but not for the Existing Premises) shall be abated during the ten (10) consecutive month period beginning on November 1, 2022 and ending on August 31, 2023 (collectively, the “Expansion Space Base Rent Abatement”). Tenant shall pay any other amounts due in connection with the Lease during any such months of Expansion Space Base Rent Abatement (including, without limitation, Base Rent for the Existing Premises, Tenant’s Share of Direct Expenses, and parking charges). If there is any Material Default, any remaining Expansion Space Base Rent Abatement shall be suspended from the initial date the default that became a Material Default occurred, until such time, if ever, that such Material Default is cured. For the avoidance of doubt, the parties specifically agree that nothing contained in this Second Amendment shall be deemed to modify the Base Rent payable for the Existing Premises under the terms of the Lease.
notwithstanding anything to the contrary contained in the Lease, Section 12 of the Summary and Section 24.1 of the Original Lease (except for the last sentence of such Section 24.1, which shall apply to the “Expansion Space Passes”, as defined below) shall not apply to the Expansion Space; and provided, further, that, effective as of the Expansion Space Commencement Date and notwithstanding anything to the contrary contained in the Lease, the terms of the Lease applicable
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Certain information marked as [***] has been excluded from this exhibit because it is both (i) not material and (ii) is the type that the Registrant treats as private or confidential.
to parking are hereby modified as follows for the Expansion Space only (for the avoidance of doubt, the parties specifically agree that nothing contained in this Section 5 shall be deemed to modify the terms of the Lease applicable to parking for the Existing Premises):
(103) unreserved parking passes (collectively, the “Mandatory Expansion Space Unreserved Passes”), for parking by Tenant’s employees and Permitted Occupants in the Parking Areas; (ii) notwithstanding the immediately preceding subsection (i), three (3) of such Mandatory Expansion Space Unreserved Passes shall be deemed automatically converted to reserved parking passes in the locations therefor outlined on Exhibit C attached hereto and incorporated herein (collectively, the “Expansion Space Reserved Passes”), and shall be rented by Tenant for parking by Tenant’s employees and Permitted Occupants in the Parking Areas; and (iii) Tenant shall have the right to rent or surrender from time to time (and upon no less than thirty (30) days’ prior written notice delivered by Tenant to Landlord in any event) up to two (2) unreserved parking passes per 1,000 usable square feet of the Expansion Space (the foregoing parking pass ratio shall be known herein as the “Optional Expansion Space Parking Ratio”), which amounts to a total of up to one hundred and three (103) unreserved parking passes (collectively, the “Optional Expansion Space Unreserved Passes”), for parking by Tenant’s employees and Permitted Occupants in the Parking Areas; provided, that, subject to the “Conditional Extra Space Right” (as defined below), Tenant shall have no further right to rent any Optional Expansion Space Unreserved Pass if at any time during the Expansion Space Lease Term, for a period of six (6) or more consecutive months, Tenant ceases to use such Optional Expansion Space Unreserved Pass. In addition, if any unreserved parking passes in the Parking Areas are available on a month-to-month basis (as determined by Landlord in its sole but good faith discretion; provided, that any such unreserved parking pass that is subject to the “Priority Lease”, as defined below, shall specifically be deemed unavailable for such purposes), Tenant shall have the right (the “Conditional Extra Space Right”) to rent or surrender from time to time (and upon no less than thirty (30) days’ prior written notice delivered by Tenant to Landlord in any event), and subject, on such month-to-month basis, to the continuation of any such availability in any event (as determined by Landlord in its sole but good faith discretion), up to one (1) unreserved parking pass per 1,000 usable square feet of the Expansion Space (the foregoing parking space ratio shall be known herein as the “Conditional Parking Ratio”), which amounts to a total of up to fifty-one (51) unreserved parking passes (collectively, the “Conditional Expansion Space Unreserved Passes”; the Mandatory Expansion Space Unreserved Passes plus the Expansion Space Reserved Passes, any Optional Expansion Space Unreserved Passes and any Conditional Expansion Space Unreserved Passes may collectively be referred to herein as the “Expansion Space Passes”), for parking by Tenant’s employees and Permitted Occupants in the Parking Areas; and
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Certain information marked as [***] has been excluded from this exhibit because it is both (i) not material and (ii) is the type that the Registrant treats as private or confidential.
below), Tenant shall notify Landlord in writing whether Tenant elects to lease the entire Offer Space on the terms set forth in such Offer Notice. If Tenant timely elects to lease such Offer Space, then Landlord and Tenant shall execute an amendment to the Lease, effective as of the date such Offer Space is to be included as part of the Premises, on the terms set forth in such Offer Notice and, to the extent not inconsistent with such Offer Notice, the terms of the Lease; provided, that (i) the terms of this Section 7 shall thereafter be void and of no further force or effect with respect to such Offer Space, (ii) to the extent not inconsistent with the terms of such Offer Notice, Tenant’s Share, the L-C Amount (or, if applicable pursuant to the terms of Section 25.8 of the Original Lease, any Security Deposit), any reduction of the L-C Amount available pursuant to the terms of Section 25.3 of the Original Lease, and the parking passes to be rented pursuant to the Mandatory Expansion Space Parking Ratio shall be equitably and proportionately increased (or, in the case of any applicable L-C Amount reduction, equitably and proportionately adjusted) in proportion to the
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Certain information marked as [***] has been excluded from this exhibit because it is both (i) not material and (ii) is the type that the Registrant treats as private or confidential.
increase in the rentable (or, with respect to such parking passes, usable) square footage of the Premises, (iii) unless otherwise hereafter expressly agreed in writing by the parties in their sole and absolute discretion, no special terms from the Lease (as reasonably determined by Landlord; provided, that renewal rights, expansion rights, termination rights, monument signage rights, Building signage rights, dog rights, abatement rights, reserved parking rights, roof rights, generator rights, permitted user/occupant rights, and rights to self-perform janitorial services shall specifically be deemed special terms for such purposes) shall apply to such Offer Space, and (iv) subject to Landlord’s ongoing maintenance and repair obligations and except to the extent otherwise set forth (if at all) in such Offer Notice, Tenant shall accept such Offer Space in an “AS-IS” condition and Landlord shall not provide to Tenant any allowances (e.g., moving allowance, construction allowance, and the like) or other tenant inducements (including, without limitation, any rent credits or abatements). Notwithstanding anything to the contrary contained in the Lease, if Tenant exercises the Right of First Offer, Landlord may, in its sole and absolute discretion, elect to terminate Tenant’s Termination Right by delivering written notice of such election to Tenant at any time.
commission with respect to any space leased by Tenant under this Section 7, and Tenant shall protect, defend, indemnify and hold Landlord and its agents and representatives harmless from and against any and all “Claims” (as defined below) in any way arising or resulting from or in connection with or related to commissions or other compensation claimed by any broker or agent thereto to the extent Landlord has not so expressly agreed in writing to pay the same in accordance with the foregoing. If Tenant declines, fails or is otherwise unable to exercise the Right of First Offer, Tenant shall, promptly following Landlord’s request therefor, acknowledge such inability in writing for the benefit of Landlord.
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Certain information marked as [***] has been excluded from this exhibit because it is both (i) not material and (ii) is the type that the Registrant treats as private or confidential.
efforts to cause the timely vacation of such Offer Space by any such tenant or occupant upon the expiration or earlier termination of the occupancy agreement therefor.
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Certain information marked as [***] has been excluded from this exhibit because it is both (i) not material and (ii) is the type that the Registrant treats as private or confidential.
to which Tenant is entitled under the Lease based on parking ratios applicable to the Expansion Space), (C) Landlord shall specifically have the right to refuse consent to any such modification if Landlord in good faith believes any such modification could detract from the value of the Project or, except to the extent any such modification will be removed pursuant to subsection (D) that immediately follows, make leasing or otherwise marketing the Expanded Premises to another tenant more difficult, and (D) Landlord shall inform Tenant at the time Landlord consents to any such modification whether any such modification will need to be removed at the expiration or earlier termination of the Lease Term for any portion of the Expanded Premises (in which event the terms of the Lease regarding removal and restoration of Alterations and other improvements shall, at such time, apply with respect to any such modification, including, without limitation, such terms regarding repair and restoration);
8.5 was a typo, and no such Section 8.5 exists); and
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Certain information marked as [***] has been excluded from this exhibit because it is both (i) not material and (ii) is the type that the Registrant treats as private or confidential.
Second Amendment, Tenant shall not be required to remove any Second Amendment Tenant Improvements that consist of ordinary and customary general office improvements.
26.41 shall be deemed deleted and replaced with “the expiration or earlier termination of this Lease for the portion of the Premises that is served by the applicable Telecommunications Equipment”.
Tenant’s Notice Addresses (4 separate notices):
GoodRx, Inc.
2701 Olympic Boulevard, West Building Santa Monica, California 90404 Attention: Trevor Bezdek, CEO,
Romin Nabiey, VP Finance,
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Certain information marked as [***] has been excluded from this exhibit because it is both (i) not material and (ii) is the type that the Registrant treats as private or confidential.
Gracye Cheng, VP Legal, and
Andrew Barrett-Weiss, Director, Workplace Experience
(d) Landlord has made no representation or warranty regarding the condition of the Expanded Premises or the suitability thereof for Tenant’s business.
hereby represents and warrants to Landlord that Andrew Barrett-Weiss is the Workplace Experience Manager for Tenant and has a job description that requires knowledge of matters and information related to the Lease.
17
Certain information marked as [***] has been excluded from this exhibit because it is both (i) not material and (ii) is the type that the Registrant treats as private or confidential.
16 of the Original Lease and except with respect to Tenant’s liability for any disturbance or exacerbation of Hazardous Materials by Tenant, under no circumstances shall Landlord or Tenant be liable for consequential, punitive or special damages, including, without limitation, injury to either party’s business or for any loss of income or profit therefrom; provided, that the foregoing shall not be deemed to limit Landlord’s remedies with respect to any Rent payable to Landlord.
18
Certain information marked as [***] has been excluded from this exhibit because it is both (i) not material and (ii) is the type that the Registrant treats as private or confidential.
California Government Operations Agency established pursuant to Title 1, Division 1, Parts 13 and 14 of the California Education Code, Sections 22000, et seq., as amended (the “Education Code”). As a result, Tenant acknowledges that CALSTRS is prohibited from engaging in certain transactions with or for the benefit of an “employer”, “employing agency”, “member”, “beneficiary” or “participant” (as those terms are defined or used in the Education Code). In addition, Tenant acknowledges that certain restrictions under the Internal Revenue Code, 26 U.S.C. Section 1, et seq. (the “Code”) may apply to distributions made by CALSTRS to its members, beneficiaries and participants. Accordingly, Tenant represents and warrants to Landlord and CALSTRS that (a) Tenant is neither an employer, employing agency, member, beneficiary or participant; (b) Tenant has not made any contribution or contributions to Landlord or CALSTRS; (c) neither an employer, employing agency, member, beneficiary nor participant, nor any person who has made any contribution to Landlord or CALSTRS, nor any combination thereof, is related to Tenant by any relationship described in Section 267(b) of the Code; (d) neither Landlord, CALSTRS, LaSalle, their affiliates, related entities, agents, officers, directors or employees, nor any CALSTRS board member, employee or internal investment contractor thereof or therefor (collectively, “Landlord Affiliates”) has received or will receive, directly or indirectly, any payment, consideration or other benefit from, nor does any Landlord Affiliate have any agreement or arrangement with, Tenant or any person or entity affiliated with Tenant, relating to the transactions contemplated by the Lease except as expressly set forth in the Lease; and (e) no Landlord Affiliate has any direct or indirect ownership interest in Tenant or any person or entity affiliated with Tenant.
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Certain information marked as [***] has been excluded from this exhibit because it is both (i) not material and (ii) is the type that the Registrant treats as private or confidential.
to be the Tenant under the Lease). Except as specifically herein amended, the Lease is and shall remain in full force and effect according to the terms thereof. In the event of any conflict between the terms of the Lease and the terms of this Second Amendment, the terms of this Second Amendment shall control. The headings to sections of this Second Amendment are for convenient reference only and shall not be used in interpreting this Second Amendment. This Second Amendment may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same agreement. Delivery of an electronically executed signature page hereof by electronic transmission (including, without limitation, via emailed .pdf or DocuSign) shall specifically be deemed as effective as delivery of a manually executed signature page hereof.
[SIGNATURE PAGE FOLLOWS]
20
Certain information marked as [***] has been excluded from this exhibit because it is both (i) not material and (ii) is the type that the Registrant treats as private or confidential.
IN WITNESS WHEREOF, Landlord and Tenant have caused their duly authorized representatives to execute this Second Amendment as of the date first above written.
“LANDLORD”:
CSHV PEN FACTORY, LLC,
a Delaware limited liability company
By: California State Teachers’ Retirement System, a public entity created pursuant to the laws of the State of California, its sole member
/s/ Amy Xu
/s/ Amy Xu
By: LaSalle Investment Management, Inc. Its: Investment Manager
By: Authorized Signatory
“TENANT”:
GOODRX, INC.,
/s/ Ian Karsten Voermann
/s/ Ian Karsten Voermann
a Delaware corporation
By: Name: Ian Karsten Voermann
Its: Chief Financial Officer
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Exhibit 31.1
CERTIFICATION
I, Douglas Hirsch, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of GoodRx Holdings, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) [Omitted];
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: August 12, 2021 |
By: |
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/s/ Douglas Hirsch |
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Douglas Hirsch |
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Director and Co-Chief Executive Officer (principal executive officer) |
Exhibit 31.2
CERTIFICATION
I, Trevor Bezdek, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of GoodRx Holdings, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) [Omitted];
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: August 12, 2021 |
By: |
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/s/ Trevor Bezdek |
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Trevor Bezdek |
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Director and Co-Chief Executive Officer (principal executive officer) |
Exhibit 31.3
CERTIFICATION
I, Karsten Voermann, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of GoodRx Holdings, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) [Omitted];
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: August 12, 2021 |
By: |
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/s/ Karsten Voermann |
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Karsten Voermann |
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Chief Financial Officer (principal financial and accounting officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of GoodRx Holdings, Inc. (the “Company”) for the period ended June 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date: August 12, 2021 |
By: |
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/s/ Douglas Hirsch |
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Douglas Hirsch |
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Director and Co-Chief Executive Officer (principal executive officer) |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of GoodRx Holdings, Inc. (the “Company”) for the period ended June 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date: August 12, 2021 |
By: |
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/s/ Trevor Bezdek |
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Trevor Bezdek |
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Director and Co-Chief Executive Officer (principal executive officer) |
Exhibit 32.3
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of GoodRx Holdings, Inc. (the “Company”) for the period ended June 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date: August 12, 2021 |
By: |
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/s/ Karsten Voermann |
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Karsten Voermann |
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Chief Financial Officer (principal financial and accounting officer) |