10-Q
0001809519October 11, 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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM 10-Q

 

 

(Mark One)

 

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

For the quarterly period ended March 31, 2022

OR

 

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

For the transition period from to

Commission File Number: 001-39549

 

 

GoodRx Holdings, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

47-5104396

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

 

 

2701 Olympic Boulevard

Santa Monica, CA

90404

(Address of principal executive offices)

(Zip Code)

(855) 268-2822

(Registrant’s telephone number, including area code)

N/A

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

 

 

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

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Class A common stock, $0.0001 par value per share

 

GDRX

 

The Nasdaq Stock Market LLC

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

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

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

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

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

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

As of May 3, 2022, the registrant had 82,726,202 shares of Class A common stock, $0.0001 par value per share, and 313,731,628 shares of Class B common stock, $0.0001 par value per share, outstanding.

 

 


 

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, 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, the impact of a grocer not accepting PBM pricing on our future results of operations, stock compensation, our stock repurchase program, 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 transactions 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 any failure to maintain effective internal control over financial reporting; 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; 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; the increasing focus on environmental sustainability and social initiatives; 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 sections entitled “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (“2021 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.

 


 

 

Table of Contents

 

 

 

Page

 

 

 

PART I.

FINANCIAL INFORMATION

 

Item 1.

Condensed Consolidated Financial Statements (Unaudited)

1

 

Condensed Consolidated Balance Sheets

1

 

Condensed Consolidated Statements of Operations

2

 

Condensed Consolidated Statements of Stockholders’ Equity

3

 

Condensed Consolidated Statements of Cash Flows

5

 

Notes to Condensed Consolidated Financial Statements

6

Item 2.

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

14

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

23

Item 4.

Controls and Procedures

23

 

 

 

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

24

Item 1A.

Risk Factors

24

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

24

Item 3.

Defaults Upon Senior Securities

24

Item 4.

Mine Safety Disclosures

25

Item 5.

Other Information

25

Item 6.

Exhibits

26

 

Signatures

27

 

 


 

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (Unaudited)

 

GoodRx Holdings, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

 

(in thousands, except par values)

 

March 31,
2022

 

 

December 31,
2021

 

Assets

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

845,427

 

 

$

941,109

 

Accounts receivable, net

 

 

123,281

 

 

 

118,080

 

Prepaid expenses and other current assets

 

 

26,015

 

 

 

29,638

 

Total current assets

 

 

994,723

 

 

 

1,088,827

 

Property and equipment, net

 

 

22,564

 

 

 

21,612

 

Goodwill

 

 

334,642

 

 

 

329,696

 

Intangible assets, net

 

 

85,990

 

 

 

88,791

 

Capitalized software, net

 

 

52,505

 

 

 

44,987

 

Operating lease right-of-use assets

 

 

26,978

 

 

 

27,705

 

Other assets

 

 

20,926

 

 

 

6,007

 

Total assets

 

$

1,538,328

 

 

$

1,607,625

 

Liabilities and stockholders' equity

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable

 

$

12,820

 

 

$

17,501

 

Accrued expenses and other current liabilities

 

 

33,812

 

 

 

50,732

 

Current portion of debt

 

 

7,029

 

 

 

7,029

 

Operating lease liabilities, current

 

 

5,703

 

 

 

5,851

 

Total current liabilities

 

 

59,364

 

 

 

81,113

 

Debt, net

 

 

654,845

 

 

 

655,858

 

Operating lease liabilities, net of current portion

 

 

32,512

 

 

 

33,592

 

Deferred tax liabilities, net

 

 

397

 

 

 

244

 

Other liabilities

 

 

4,703

 

 

 

5,138

 

Total liabilities

 

 

751,821

 

 

 

775,945

 

Commitments and contingencies (Note 8)

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 50,000 shares authorized and
    
zero shares issued and outstanding at March 31, 2022 and
    December 31, 2021

 

 

 

 

 

 

Common stock, $0.0001 par value; Class A: 2,000,000 shares
   authorized,
82,400 and 85,028 shares issued and outstanding at
   March 31, 2022 and December 31, 2021, respectively; and
   Class B:
1,000,000 shares authorized, 313,732 and 315,534
   shares issued and outstanding at March 31, 2022 and
   December 31, 2021, respectively

 

 

40

 

 

 

40

 

Additional paid-in capital

 

 

2,189,881

 

 

 

2,247,347

 

Accumulated deficit

 

 

(1,403,414

)

 

 

(1,415,707

)

Total stockholders' equity

 

 

786,507

 

 

 

831,680

 

Total liabilities and stockholders' equity

 

$

1,538,328

 

 

$

1,607,625

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

1


 

GoodRx Holdings, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

 

 

 

Three Months Ended
March 31,

 

(in thousands, except per share amounts)

 

2022

 

 

2021

 

Revenue

 

$

203,329

 

 

$

160,431

 

Costs and operating expenses:

 

 

 

 

 

 

Cost of revenue, exclusive of depreciation and
   amortization presented separately below

 

 

12,280

 

 

 

10,428

 

Product development and technology

 

 

35,042

 

 

 

26,160

 

Sales and marketing

 

 

92,950

 

 

 

79,694

 

General and administrative

 

 

31,923

 

 

 

43,786

 

Depreciation and amortization

 

 

11,373

 

 

 

5,361

 

Total costs and operating expenses

 

 

183,568

 

 

 

165,429

 

Operating income (loss)

 

 

19,761

 

 

 

(4,998

)

Other expense, net:

 

 

 

 

 

 

Interest income

 

 

(52

)

 

 

(16

)

Interest expense

 

 

5,869

 

 

 

5,905

 

Total other expense, net

 

 

5,817

 

 

 

5,889

 

Income (loss) before income taxes

 

 

13,944

 

 

 

(10,887

)

Income tax (expense) benefit

 

 

(1,651

)

 

 

12,555

 

Net income

 

$

12,293

 

 

$

1,668

 

Earnings per share:

 

 

 

 

 

 

Basic

 

$

0.03

 

 

$

0.00

 

Diluted

 

$

0.03

 

 

$

0.00

 

Weighted average shares used in computing
   earnings per share:

 

 

 

 

 

 

Basic

 

 

414,739

 

 

 

406,170

 

Diluted

 

 

427,378

 

 

 

429,577

 

 

 

 

 

 

 

 

Stock-based compensation included in costs and
   operating expenses:

 

 

 

 

 

 

Cost of revenue

 

$

(46

)

 

$

121

 

Product development and technology

 

 

7,478

 

 

 

8,336

 

Sales and marketing

 

 

5,394

 

 

 

5,258

 

General and administrative

 

 

17,323

 

 

 

32,811

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

2


 

GoodRx Holdings, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

 

 

 

Class A and Class B
Common Stock

 

 

Additional
Paid-in

 

 

Accumulated

 

 

Total
Stockholders'

 

(in thousands)

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2021

 

 

400,562

 

 

$

40

 

 

$

2,247,347

 

 

$

(1,415,707

)

 

$

831,680

 

Stock options exercised

 

 

749

 

 

 

 

 

 

3,699

 

 

 

 

 

 

3,699

 

Stock-based compensation

 

 

 

 

 

 

 

 

32,161

 

 

 

 

 

 

32,161

 

Vesting of restricted stock units

 

 

822

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock withheld related to
   net share settlement

 

 

(364

)

 

 

 

 

 

(9,561

)

 

 

 

 

 

(9,561

)

Repurchases of Class A common stock

 

 

(5,637

)

 

 

 

 

 

(83,765

)

 

 

 

 

 

(83,765

)

Net income

 

 

 

 

 

 

 

 

 

 

 

12,293

 

 

 

12,293

 

Balance at March 31, 2022

 

 

396,132

 

 

$

40

 

 

$

2,189,881

 

 

$

(1,403,414

)

 

$

786,507

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

3


 

GoodRx Holdings, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

 

 

 

Class A and Class B
Common Stock

 

 

Additional
Paid-in

 

 

Accumulated

 

 

Total
Stockholders'

 

(in thousands)

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2020

 

 

391,660

 

 

$

39

 

 

$

2,101,773

 

 

$

(1,390,453

)

 

$

711,359

 

Stock options exercised

 

 

513

 

 

 

 

 

 

2,680

 

 

 

 

 

 

2,680

 

Stock-based compensation

 

 

 

 

 

 

 

 

48,254

 

 

 

 

 

 

48,254

 

Vesting of restricted stock units

 

 

608

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock withheld related to
   net share settlement

 

 

(324

)

 

 

 

 

 

(14,902

)

 

 

 

 

 

(14,902

)

Net income

 

 

 

 

 

 

 

 

 

 

 

1,668

 

 

 

1,668

 

Balance at March 31, 2021

 

 

392,457

 

 

$

39

 

 

$

2,137,805

 

 

$

(1,388,785

)

 

$

749,059

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

4


 

GoodRx Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

Three Months Ended
March 31,

 

(in thousands)

 

2022

 

 

2021

 

Cash flows from operating activities

 

 

 

 

 

 

Net income

 

$

12,293

 

 

$

1,668

 

Adjustments to reconcile net income to net cash provided by
   operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

11,373

 

 

 

5,361

 

Amortization of debt issuance costs

 

 

856

 

 

 

863

 

Non-cash operating lease expense

 

 

727

 

 

 

872

 

Stock-based compensation expense

 

 

30,149

 

 

 

46,526

 

Deferred income taxes

 

 

(394

)

 

 

(227

)

Changes in operating assets and liabilities, net of effects of business acquisition

 

 

 

 

 

 

Accounts receivable

 

 

(5,198

)

 

 

(5,670

)

Prepaid expenses and other assets

 

 

3,616

 

 

 

(9,844

)

Accounts payable

 

 

(4,442

)

 

 

4,943

 

Accrued expenses and other current liabilities

 

 

(17,197

)

 

 

(67

)

Operating lease liabilities

 

 

(1,228

)

 

 

631

 

Other liabilities

 

 

(435

)

 

 

429

 

Net cash provided by operating activities

 

 

30,120

 

 

 

45,485

 

Cash flows from investing activities

 

 

 

 

 

 

Purchase of property and equipment

 

 

(1,736

)

 

 

(2,715

)

Acquisition, net of cash acquired

 

 

(6,976

)

 

 

 

Capitalized software

 

 

(10,682

)

 

 

(6,980

)

Investment in minority equity interest

 

 

(15,007

)

 

 

 

Net cash used in investing activities

 

 

(34,401

)

 

 

(9,695

)

Cash flows from financing activities

 

 

 

 

 

 

Payments on long-term debt

 

 

(1,758

)

 

 

(1,757

)

Repurchases of Class A common stock

 

 

(83,765

)

 

 

 

Proceeds from exercise of stock options

 

 

3,683

 

 

 

2,372

 

Employee taxes paid related to net share settlement of equity awards

 

 

(9,561

)

 

 

(14,633

)

Net cash used in financing activities

 

 

(91,401

)

 

 

(14,018

)

Net change in cash, cash equivalents and restricted cash

 

 

(95,682

)

 

 

21,772

 

Cash, cash equivalents and restricted cash

 

 

 

 

 

 

Beginning of period

 

 

941,109

 

 

 

971,591

 

End of period

 

$

845,427

 

 

$

993,363

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

Non cash investing and financing activities:

 

 

 

 

 

 

Stock-based compensation included in capitalized software

 

$

2,012

 

 

$

1,728

 

 

The following table presents a reconciliation of cash, cash equivalents and restricted cash in our condensed consolidated balance sheets to the total of the same such amounts shown above:

 

 

 

March 31,

 

(in thousands)

 

2022

 

 

2021

 

Cash and cash equivalents

 

$

845,427

 

 

$

990,463

 

Restricted cash

 

 

 

 

 

2,900

 

Total cash, cash equivalents and restricted cash

 

$

845,427

 

 

$

993,363

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

5


 

GoodRx Holdings, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Description of Business

GoodRx Holdings, Inc. was incorporated in September 2015 and has no material assets or standalone operations other than its ownership in its consolidated subsidiaries. GoodRx, Inc. (“GoodRx”), a Delaware corporation that was initially formed in September 2011, is a wholly-owned subsidiary of GoodRx Intermediate Holdings, LLC, which itself is a wholly-owned subsidiary of GoodRx Holdings, Inc.

GoodRx Holdings, Inc. and its subsidiaries (collectively, "we," "us" or "our") offer information and tools to help consumers compare prices and save on their prescription drug purchases. We operate a price comparison platform that provides consumers with curated, geographically relevant prescription pricing, and provides access to negotiated prices through our codes that can be used to save money on prescriptions across the United States. These services are free to consumers and we primarily earn revenue from our core business from pharmacy benefit managers that manage formularies and prescription transactions including establishing pricing between consumers and pharmacies. We also offer 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 our 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 our audited consolidated financial statements for the year ended December 31, 2021 and the related notes, which are included in our Annual Report on Form 10-K filed with the SEC on March 1, 2022 ("2021 10-K"). The December 31, 2021 condensed consolidated balance sheet was derived from our audited consolidated financial statements as of that date. The condensed consolidated financial statements include, in the opinion of management, all adjustments, consisting of normal and recurring items, necessary for the fair statement of our condensed consolidated financial statements. The operating results for three months ended March 31, 2022 are not necessarily indicative of the results expected for the full year ending December 31, 2022.

Our significant accounting policies are discussed in “Note 2. Summary of Significant Accounting Policies” in the notes to our consolidated financial statements included in our 2021 10-K. There have been no material changes in accounting policies during the three months ended March 31, 2022 from those disclosed in the notes to our consolidated financial statements included in our 2021 10-K.

Principles of Consolidation

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

Use of Estimates

The preparation of the 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. We base our estimates on historical factors, current circumstances, consideration of the economic impact of COVID-19 and the experience and judgment of our management. We evaluate our estimates and assumptions on an ongoing basis. Actual results could differ materially from these estimates, and such differences could affect the results of operations reported in future periods.

Certain Risks and Concentrations

Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash, cash equivalents and accounts receivable.

 

6


 

We maintain 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. We believe that the financial institutions that hold our cash are financially sound and, accordingly, minimal credit risk exists with respect to these balances. We have not experienced any losses in such accounts. We consider 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 equivalents, consisting of money market funds, of $772.5 million and $852.5 million at March 31, 2022 and December 31, 2021, respectively, were classified as Level 1 of the fair value hierarchy and valued using quoted market prices in active markets.

We extend credit to our customers based on an evaluation of their ability to pay amounts due under contractual arrangements and generally do not obtain or require collateral. For the three months ended March 31, 2022, two customers accounted for approximately 13% and 10% of our revenue. For the three months ended March 31, 2021, four customers accounted for approximately 14%, 11%, 10% and 10% of our revenue. At March 31, 2022 and December 31, 2021, no customer accounted for more than 10% of our accounts receivable balance.

Equity Investments

We retain minority equity interests in privately-held companies without readily determinable fair values. Our ownership interests are less than 20% of the voting stock of the investees and we do not have the ability to exercise significant influence over operating and financial policies of the investees. The equity investments are accounted for under the measurement alternative in accordance with Accounting Standards Codification ("ASC") Topic 321, Investments – Equity Securities, which is cost minus impairment, if any, plus or minus changes resulting from observable price changes. Equity investments included in other assets on our accompanying condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021 were $19.0 million and $4.0 million, respectively. We did not recognize any changes resulting from observable price changes or impairment loss during the three months ended March 31, 2022.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In October 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”). Under current GAAP, an acquirer generally recognizes assets acquired and liabilities assumed in a business combination, including contract assets and contract liabilities arising from revenue contracts with customers, at fair value on the acquisition date. This ASU results in the acquirer recording acquired contract assets and liabilities on the same basis that would have been recorded by the acquiree before the acquisition under ASC 606. The amendments in this ASU do not affect the accounting for other assets or liabilities that may arise from revenue contracts with customers in accordance with ASC 606, such as refund liabilities, or in a business combination, such as customer-related intangible assets and contract-based intangible assets. The new guidance is effective for us for annual and interim periods beginning after December 15, 2022. Early adoption of this ASU is permitted, including adoption in an interim period. This update should be applied prospectively to business combinations occurring on or after the effective date of the amendments. We early adopted this guidance on January 1, 2022, and the adoption did not have a material impact to our 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 LIBO Screen Rate 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. We adopted this guidance on January 1, 2022, and the adoption did not have a material impact to our consolidated financial statements. We intend to apply this guidance for contract modifications related to the reference rate reform as they occur through December 31, 2022.

 

7


 

3. Business Combination

On February 18, 2022, we acquired all of the equity interests of flipMD, Inc. ("flipMD") for $7.0 million in cash, subject to customary closing adjustments. flipMD is a marketplace connecting practicing physicians with organizations seeking on-demand medical expertise and expands both our engagement with healthcare providers and services currently available under our existing pharma manufacturer solutions platform. Unaudited supplemental pro forma financial information and the revenue and earnings from the date of acquisition through March 31, 2022 for the flipMD acquisition has not been presented because the effects were not material to our condensed consolidated financial statements.

The purchase accounting for the flipMD acquisition remains incomplete. 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.

4. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:

 

(in thousands)

 

March 31,
2022

 

 

December 31,
2021

 

Income taxes receivable

 

$

5,826

 

 

$

8,331

 

Prepaid expenses

 

 

20,189

 

 

 

21,307

 

Total prepaid expenses and other current assets

 

$

26,015

 

 

$

29,638

 

 

5. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:

 

(in thousands)

 

March 31,
2022

 

 

December 31,
2021

 

Accrued bonus and other payroll related

 

$

10,213

 

 

$

24,031

 

Accrued marketing

 

 

8,479

 

 

 

15,493

 

Deferred revenue

 

 

10,319

 

 

 

6,869

 

Other accrued expenses

 

 

4,801

 

 

 

4,339

 

Total accrued expenses and other current liabilities

 

$

33,812

 

 

$

50,732

 

 

Deferred revenue represents payments received in advance of providing services for subscriptions and certain advertising contracts with customers. We expect substantially all of the deferred revenue at March 31, 2022 will be recognized as revenue within the subsequent twelve months. Of the $6.9 million of deferred revenue at December 31, 2021, $4.5 million was recognized as revenue during the three months ended March 31, 2022. Revenue recognized during the three months ended March 31, 2021 of $4.3 million was included as deferred revenue at December 31, 2020.

6. Income Taxes

We generally calculate income taxes in interim periods by applying an estimated annual effective income tax rate to income or loss before income taxes and by calculating the tax effect of discrete items recognized during such periods. Our estimated annual effective income tax rate is based on our estimated full year income or loss and the related income taxes for each jurisdiction in which we operate. This rate can be affected by estimates of full year pre-tax income or loss and permanent differences.

The effective income tax rate was 11.8% and 115.3% for the three months ended March 31, 2022 and 2021, respectively. The primary differences between our effective income tax rates and the federal statutory tax rate for the three months ended March 31, 2022 and 2021 were due to the effects of non-deductible officers’ stock-based compensation expense, state income taxes, benefits from research and development tax credits and excess tax benefits from our equity awards. The effective income tax rate for the three months ended March 31, 2022 was further impacted by the valuation allowance on our net deferred tax assets.

 

8


 

We consider all available evidence, both positive and negative in assessing the extent to which a valuation allowance should be applied against our net deferred tax assets. Due principally to cumulative three-year pre-tax losses adjusted for permanent adjustments, primarily from substantial excess tax benefits realized from the exercise of stock options granted prior to our initial public offering ("IPO"), and a significant number of outstanding stock options granted prior to our IPO that are or will be available to be exercised in future tax periods which may generate incremental excess tax benefits if they are exercised, we maintain a full valuation allowance against our net deferred tax assets in excess of tax amortizable goodwill as of March 31, 2022.

Our judgment regarding the need of a valuation allowance may reasonably change in the next twelve months. The exact timing and amount of any release of the valuation allowance is subject to change depending on the level of tax profitability that we achieve, changes in tax laws or regulations, and exercises of outstanding stock options granted prior to our IPO in future periods.

As of December 31, 2021, we had unrecognized tax benefits of $14.8 million, of which approximately $5.1 million of unrecognized tax benefits, if recognized, would impact the effective income tax rate. The remaining $9.7 million of unrecognized tax benefits would not impact the effective income tax rate to the extent that we continue to maintain a full valuation allowance against our net deferred tax assets. There were no significant changes to our unrecognized tax benefits during the three months ended March 31, 2022, and we do not expect to have any significant changes to unrecognized tax benefits through the end of 2022.

7. Debt

We have a term loan with an original principal amount of $700.0 million (the “First Lien Term Loan Facility”) under our first lien credit agreement (the “First Lien Credit Agreement”) obtained through our wholly owned subsidiary GoodRx as borrower and collateralized by substantially all of our assets and 100% of the equity of GoodRx. The First Lien Term Loan Facility requires quarterly payments through September 2025, with any unpaid principal and interest due upon maturity in October 2025, and bears interest at a rate per annum equal to the LIBO Screen Rate plus a variable margin ranging from 2.75% to 3.00%. The effective interest rate on the First Lien Term Loan Facility for each of the three months ended March 31, 2022 and 2021 was 3.39%.

We also have a line of credit with a maximum principal amount of $100.0 million (the “Revolving Credit Facility”) which matures in October 2024 and bears interest at LIBO Screen Rate plus rates ranging from 2.50% to 3.00% on used amounts and 0.25% to 0.50% on unused amounts. There was no borrowing outstanding and the outstanding letters of credit issued were $9.2 million as of March 31, 2022, which reduces our available borrowings under the Revolving Credit Facility.

Our debt consisted of the following:

 

(in thousands)

 

March 31,
2022

 

 

December 31,
2021

 

Principal balance under First Lien Term Loan Facility

 

$

672,339

 

 

$

674,097

 

Less: Unamortized debt issuance costs and discounts

 

 

(10,465

)

 

 

(11,210

)

 

 

$

661,874

 

 

$

662,887

 

 

As of March 31, 2022, we are subject to a financial covenant requiring maintenance of a Net Leverage Ratio not to exceed 8.2 to 1.0 and other nonfinancial covenants under the First Lien Credit Agreement. Additionally, GoodRx is restricted from making dividend payments, loans or advances to us. At March 31, 2022, we were in compliance with our covenants.

8. Commitments and Contingencies

Aside from the below, as of March 31, 2022, there were no material changes to our commitments and contingencies as disclosed in the notes to our consolidated financial statements included in our 2021 10-K.

Legal Contingencies

On December 18, 2020, R. Brian Terenzini, individually and on behalf of all others similarly situated, filed a class action lawsuit against us and certain of our 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 us and certain of our 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 we 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 us. According to the

 

9


 

complaints, when Amazon announced its competitor service, our stock price fell, causing investor losses. Lead plaintiff applications were submitted February 16, 2021, and on April 8, 2021, the court consolidated the two lawsuits under the caption In re GoodRx Holdings, Inc.(Case No. 2:20-cv-11444) and appointed Betty Kalmanson, Lawrence Kalmanson, Shawn Kalmanson, and Janice Kasbaum as Lead Plaintiffs. On June 7, 2021, Lead Plaintiffs filed a consolidated complaint containing substantially similar factual allegations as the prior complaints, but adding claims under Section 11 of the Securities Act of 1933. We filed a motion to dismiss the consolidated case on August 6, 2021 and Lead Plaintiffs subsequently filed an omnibus opposition to our motion to dismiss on October 5, 2021. We subsequently filed a reply in support of notice of motion and motion to dismiss. The court granted our motion to dismiss on January 2, 2022. The Lead Plaintiffs filed an amended complaint on February 7, 2022, and we filed a motion to dismiss the amended complaint on March 10, 2022. Briefing is ongoing, and the hearing on the motion to dismiss the amended complaint is set for June 6, 2022. We believe we have meritorious defenses to the claims of the plaintiffs and members of the class and intend to defend ourselves vigorously. This litigation is at preliminary stages, and the outcome of any complex legal proceeding is inherently unpredictable and subject to significant uncertainties.

On April 29, 2021, May 5, 2021 and September 15, 2021, Neesha Patel, Wayne Geist and Alan Pinyavat, respectively, each filed a derivative lawsuit purportedly on behalf of us against certain of our officers and directors in the United States District Court for the Central District of California (Case No. 2:21-cv-03671, Case No. 2:21-cv-03829 and Case No. 1:21-cv-01309, respectively). The plaintiffs assert claims for breach of fiduciary duty and contribution under the Exchange Act. Neesha Patel asserts additional claims for unjust enrichment and corporate waste and Alan Pinyavat asserts additional claims for unjust enrichment, abuse of control and gross mismanagement. 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 our board of directors. The derivative lawsuits are stayed pending the outcome of the class action lawsuit.

In March 2020, we received a letter from the Federal Trade Commission ("FTC") indicating its intent to investigate our privacy and security practices to determine whether such practices comply with Section 5 of the FTC Act. In April 2020, the FTC sent an initial request for information to us regarding our sharing of data regarding individuals’ use of our website, app and services with service providers, including Google and Facebook. Since April 2020, we have timely responded to the FTC’s information requests and follow-up questions. On October 14, 2021, staff at the FTC notified us that it intends to recommend that the agency pursue an enforcement action against us and certain of our officers and employees. On January 12, 2022, staff at the FTC sent us a draft complaint and consent order. We believe we have complied with applicable regulations and that we have meritorious defenses to any claims or assertions to the contrary, and therefore intend to defend ourselves vigorously. No assurance can be given regarding the outcome of this matter. As a result of enforcements of this nature, there may be settlements, enforcement actions, or related litigation that could include monetary penalties and/or compliance requirements that may impose significant and material costs.

Based upon information presently known to our management, we have not accrued a loss for the matters described above as a loss is not probable and reasonably estimable. While it is reasonably possible a loss may have been incurred, we are unable to estimate a loss or range of loss in these matters.

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 reasonably possible.

In addition, during the normal course of business, we 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.

 

 

10


 

9. Revenue

Revenue consisted of the following:

 

 

 

Three Months Ended
March 31,

 

(in thousands)

 

2022

 

 

2021

 

Prescription transactions revenue

 

$

155,507

 

 

$

134,061

 

Subscription revenue (1)

 

 

19,110

 

 

 

12,007

 

Pharma manufacturer solutions revenue (2)

 

 

23,469

 

 

 

9,369

 

Other revenue

 

 

5,243

 

 

 

4,994

 

Total revenue

 

$

203,329

 

 

$

160,431

 

 

(1)
Represents revenue from our Gold and Kroger Savings subscription offerings. Subscription revenue is disclosed separately from other revenue beginning in the second quarter of 2021. Prior period amounts have been recast to conform with the current period presentation.
(2)
Represents revenue from pharma manufacturers and other customers for advertising, including integrating onto our platform their affordability solutions to our consumers. Pharma manufacturer solutions revenue is disclosed separately from other revenue beginning in the first quarter of 2022. Prior period amounts have been recast to conform with the current period presentation.

10. Stockholders' Equity

On February 23, 2022, our board of directors authorized the repurchase of up to an aggregate of $250.0 million of our Class A common stock through February 23, 2024 (the "repurchase program"). Repurchases under the repurchase program may be made in the open market, in privately negotiated transactions or otherwise, with the amount and timing of repurchases to be determined at our discretion, depending on market conditions and corporate needs. Open market repurchases will be structured to occur in accordance with applicable federal securities laws, including within the pricing and volume requirements of Rule 10b-18 under the Securities Exchange Act of 1934, as amended. We may also, from time to time, enter into Rule 10b5-1 plans to facilitate repurchases of our shares under this authorization. This repurchase program does not obligate us to acquire any particular amount of Class A common stock and may be modified, suspended or terminated at any time at the discretion of our board of directors.

During the three months ended March 31, 2022, we repurchased and retired 5.6 million shares of our Class A common stock for an aggregate purchase price of $83.8 million under the repurchase program. We had $166.2 million available for future repurchases of our Class A common stock under the repurchase program as of March 31, 2022.

11. 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, 2021

 

 

13,568

 

 

$

7.55

 

 

7.3 years

 

$

341,929

 

Granted

 

 

1,163

 

 

 

17.17

 

 

 

 

 

 

Exercised

 

 

(749

)

 

 

4.94

 

 

 

 

 

 

Expired / Cancelled / Forfeited

 

 

(281

)

 

 

16.80

 

 

 

 

 

 

Outstanding at March 31, 2022

 

 

13,701

 

 

$

8.32

 

 

7.0 years

 

$