10-Q
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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, 2023

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 2, 2023, the registrant had 83,136,600 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 grocery chain not accepting pharmacy benefit managers ("PBMs") pricing (the "grocer issue") on our future results of operations, stock compensation, our stock repurchase program, impacts of our cost savings initiatives, 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 general 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 general 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, including PBMs, pharmacies, and pharma manufacturers; the competitive nature of industry; risks related to pandemics, epidemics or outbreak of infectious disease, including the COVID-19 pandemic; the accuracy of our estimate of our total addressable market and other operational metrics; risks related to a decrease in consumer willingness to receive correspondence or any technical, legal or any other restrictions to send such correspondence; risks related to any failure to comply with applicable data protection, privacy and security, advertising and consumer protection laws, standards, and other requirements; 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 government regulation of the internet, e-commerce, consumer data and privacy, information technology and cyber-security; 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, and to successfully transition our Chief Executive Officer role; 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, including software as-a-service technologies; systems failures or other disruptions in the operations of these parties on which we depend; the increasing focus on environmental sustainability and social initiatives; risks related to our intellectual property; risks related to climate change; 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; litigation related risks; risks related to the recent healthcare reform legislation and other changes in the healthcare industry and in healthcare spending which may adversely affect our business, financial condition and results of operations; the risk that we may not achieve the intended outcomes of our recent reduction in force; 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, 2022 (“2022 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.

We periodically post information that may be important to investors on our investor relations website at https://investors.goodrx.com. We intend to use our website as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. Accordingly, investors and potential investors are encouraged to consult our website regularly for important information, in addition to following GoodRx’s press releases, filings with the SEC and public conference calls and webcasts. The information contained on, or that may be accessed through, our website is not incorporated by reference into, and is not a part of, this Quarterly Report on Form 10-Q.

 


 

 

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

13

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

22

Item 4.

Controls and Procedures

22

 

 

 

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

23

Item 1A.

Risk Factors

23

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

26

Item 3.

Defaults Upon Senior Securities

27

Item 4.

Mine Safety Disclosures

27

Item 5.

Other Information

27

Item 6.

Exhibits

28

 

Signatures

29

 

 


 

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, 2023

 

 

December 31, 2022

 

Assets

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

761,075

 

 

$

757,165

 

Accounts receivable, net

 

 

116,442

 

 

 

117,141

 

Prepaid expenses and other current assets

 

 

29,499

 

 

 

45,380

 

Total current assets

 

 

907,016

 

 

 

919,686

 

Property and equipment, net

 

 

18,767

 

 

 

19,820

 

Goodwill

 

 

412,117

 

 

 

412,117

 

Intangible assets, net

 

 

114,256

 

 

 

119,865

 

Capitalized software, net

 

 

83,047

 

 

 

70,072

 

Operating lease right-of-use assets

 

 

34,916

 

 

 

35,906

 

Other assets

 

 

41,381

 

 

 

27,165

 

Total assets

 

$

1,611,500

 

 

$

1,604,631

 

Liabilities and stockholders' equity

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable

 

$

12,389

 

 

$

17,700

 

Accrued expenses and other current liabilities

 

 

47,730

 

 

 

47,523

 

Current portion of debt

 

 

7,029

 

 

 

7,029

 

Operating lease liabilities, current

 

 

1,833

 

 

 

4,068

 

Total current liabilities

 

 

68,981

 

 

 

76,320

 

Debt, net

 

 

650,776

 

 

 

651,796

 

Operating lease liabilities, net of current portion

 

 

56,278

 

 

 

54,131

 

Other liabilities

 

 

7,997

 

 

 

7,557

 

Total liabilities

 

 

784,032

 

 

 

789,804

 

Commitments and contingencies (Note 7)

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 50,000 shares authorized and
    
zero shares issued and outstanding at March 31, 2023 and
    December 31, 2022

 

 

 

 

 

 

Common stock, $0.0001 par value; Class A: 2,000,000 shares
   authorized,
82,917 and 83,293 shares issued and outstanding at
   March 31, 2023 and December 31, 2022, respectively; and
   Class B:
1,000,000 shares authorized and 313,732 shares issued
   and outstanding at March 31, 2023 and December 31, 2022

 

 

40

 

 

 

40

 

Additional paid-in capital

 

 

2,279,253

 

 

 

2,263,322

 

Accumulated deficit

 

 

(1,451,825

)

 

 

(1,448,535

)

Total stockholders' equity

 

 

827,468

 

 

 

814,827

 

Total liabilities and stockholders' equity

 

$

1,611,500

 

 

$

1,604,631

 

 

See accompanying notes to condensed consolidated financial statements.

 


 

GoodRx Holdings, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

 

 

 

Three Months Ended March 31,

 

(in thousands, except per share amounts)

 

2023

 

 

2022

 

Revenue

 

$

183,986

 

 

$

203,329

 

Costs and operating expenses:

 

 

 

 

 

 

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

 

 

16,695

 

 

 

12,280

 

Product development and technology

 

 

32,908

 

 

 

35,042

 

Sales and marketing

 

 

78,522

 

 

 

92,950

 

General and administrative

 

 

29,619

 

 

 

31,923

 

Depreciation and amortization

 

 

14,939

 

 

 

11,373

 

Total costs and operating expenses

 

 

172,683

 

 

 

183,568

 

Operating income

 

 

11,303

 

 

 

19,761

 

Other expense, net:

 

 

 

 

 

 

Other expense

 

 

(1,808

)

 

 

 

Interest income

 

 

7,234

 

 

 

52

 

Interest expense

 

 

(13,133

)

 

 

(5,869

)

Total other expense, net

 

 

(7,707

)

 

 

(5,817

)

Income before income taxes

 

 

3,596

 

 

 

13,944

 

Income tax expense

 

 

(6,886

)

 

 

(1,651

)

Net (loss) income

 

$

(3,290

)

 

$

12,293

 

(Loss) earnings per share:

 

 

 

 

 

 

Basic

 

$

(0.01

)

 

$

0.03

 

Diluted

 

$

(0.01

)

 

$

0.03

 

Weighted average shares used in computing
   (loss) earnings per share:

 

 

 

 

 

 

Basic

 

 

412,429

 

 

 

414,739

 

Diluted

 

 

412,429

 

 

 

427,378

 

 

 

 

 

 

 

 

Stock-based compensation included in costs and
   operating expenses:

 

 

 

 

 

 

Cost of revenue

 

$

161

 

 

$

(46

)

Product development and technology

 

 

8,589

 

 

 

7,478

 

Sales and marketing

 

 

4,412

 

 

 

5,394

 

General and administrative

 

 

12,337

 

 

 

17,323

 

 

See accompanying notes to condensed consolidated financial statements.

 


 

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, 2022

 

 

397,025

 

 

$

40

 

 

$

2,263,322

 

 

$

(1,448,535

)

 

$

814,827

 

Stock options exercised

 

 

192

 

 

 

 

 

 

895

 

 

 

 

 

 

895

 

Stock-based compensation

 

 

 

 

 

 

 

 

28,263

 

 

 

 

 

 

28,263

 

Vesting and settlement of restricted stock units

 

 

1,668

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock withheld related to net share
   settlement

 

 

(666

)

 

 

 

 

 

(3,710

)

 

 

 

 

 

(3,710

)

Repurchases of Class A common stock

 

 

(1,570

)

 

 

 

 

 

(9,517

)

 

 

 

 

 

(9,517

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(3,290

)

 

 

(3,290

)

Balance at March 31, 2023

 

 

396,649

 

 

$

40

 

 

$

2,279,253

 

 

$

(1,451,825

)

 

$

827,468

 

 

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, 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 and settlement 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.

 

 

4


 

GoodRx Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

Three Months Ended March 31,

 

(in thousands)

 

2023

 

 

2022

 

Cash flows from operating activities

 

 

 

 

 

 

Net (loss) income

 

$

(3,290

)

 

$

12,293

 

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

14,939

 

 

 

11,373

 

Amortization of debt issuance costs

 

 

849

 

 

 

856

 

Non-cash operating lease expense

 

 

1,042

 

 

 

727

 

Stock-based compensation expense

 

 

25,499

 

 

 

30,149

 

Deferred income taxes

 

 

35

 

 

 

(394

)

Loss on minority equity interest investment

 

 

1,808

 

 

 

 

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

 

 

 

 

 

 

Accounts receivable

 

 

699

 

 

 

(5,198

)

Prepaid expenses and other assets

 

 

(6,005

)

 

 

3,616

 

Accounts payable

 

 

(4,737

)

 

 

(4,442

)

Accrued expenses and other current liabilities

 

 

1,184

 

 

 

(17,197

)

Operating lease liabilities

 

 

(140

)

 

 

(1,228

)

Other liabilities

 

 

405

 

 

 

(435

)

Net cash provided by operating activities

 

 

32,288

 

 

 

30,120

 

Cash flows from investing activities

 

 

 

 

 

 

Purchase of property and equipment

 

 

(148

)

 

 

(1,736

)

Acquisition, net of cash acquired

 

 

 

 

 

(6,976

)

Capitalized software

 

 

(14,140

)

 

 

(10,682

)

Investment in minority equity interest

 

 

 

 

 

(15,007

)

Net cash used in investing activities

 

 

(14,288

)

 

 

(34,401

)

Cash flows from financing activities

 

 

 

 

 

 

Payments on long-term debt

 

 

(1,758

)

 

 

(1,758

)

Repurchases of Class A common stock

 

 

(9,517

)

 

 

(83,765

)

Proceeds from exercise of stock options

 

 

708

 

 

 

3,683

 

Employee taxes paid related to net share settlement of equity awards

 

 

(3,523

)

 

 

(9,561

)

Net cash used in financing activities

 

 

(14,090

)

 

 

(91,401

)

Net change in cash and cash equivalents

 

 

3,910

 

 

 

(95,682

)

Cash and cash equivalents

 

 

 

 

 

 

Beginning of period

 

 

757,165

 

 

 

941,109

 

End of period

 

$

761,075

 

 

$

845,427

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

Non cash investing and financing activities:

 

 

 

 

 

 

Stock-based compensation included in capitalized software

 

$

2,764

 

 

$

2,012

 

Capitalized software included in accounts payable and accrued expenses and
   other current liabilities

 

 

2,625

 

 

 

1,515

 

Capitalized software transferred from prepaid assets

 

 

5,751

 

 

 

 

 

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 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 ("PBMs") that manage formularies and prescription transactions including establishing pricing between consumers and pharmacies. We also offer other healthcare products and services, including pharmaceutical ("pharma") manufacturer solutions, subscriptions 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, 2022 and the related notes, which are included in our Annual Report on Form 10-K filed with the SEC on March 1, 2023 ("2022 10-K"). The December 31, 2022 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 the three months ended March 31, 2023 are not necessarily indicative of the results expected for the full year ending December 31, 2023.

There have been no material changes in significant accounting policies during the three months ended March 31, 2023 from those disclosed in “Note 2. Summary of Significant Accounting Policies” in the notes to our consolidated financial statements included in our 2022 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, including the impact of a grocery chain that previously did not accept discounted pricing for a subset of prescription drugs from our PBMs starting late in the first quarter of 2022 ("grocer issue"); macroeconomic events and conditions, including the 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 can differ materially from these estimates, and such differences can affect the results of operations reported in future periods. Although the grocer issue was addressed in August 2022 and our discounted pricing has since been consistently welcomed at the point of sale by the grocery chain, the sustained effects of the grocer issue on our business, future results of operations and financial condition continue to be difficult to estimate

 

6


 

because there are several variables that are highly uncertain, including, among others, consumer response to updated consumer pricing and timing and extent of returning user levels.

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.

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. However, market conditions can impact the viability of these institutions. In the event of failure of any of the financial institutions where we maintain our cash and cash equivalents, there can be no assurance that we will be able to access uninsured funds in a timely manner or at all. 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 U.S. treasury securities money market funds, of $642.5 million at March 31, 2023 and December 31, 2022 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, 2023, two customers accounted for approximately 13% and 11% of our revenue. For the three months ended March 31, 2022, two customers accounted for approximately 13% and 10% of our revenue. At March 31, 2023, one customer accounted for approximately 13% of our accounts receivable balance. At December 31, 2022, one customer accounted for approximately 13% 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 the operating and financial policies of the investees. The equity investments are accounted for under the measurement alternative in accordance with Accounting Standards Codification Topic 321, Investments – Equity Securities, which is cost minus impairment, if any, plus or minus changes resulting from observable price changes. There were no adjustments resulting from observable price changes during the three months ended March 31, 2023. Due to indicators of a decline in the financial condition of one of our investees, we recognized a $1.8 million impairment loss on one of our minority equity interest investments during the three months ended March 31, 2023 and presented it as other expense on our accompanying condensed consolidated statement of operations. We did not recognize any changes resulting from observable price changes or impairment loss on our minority equity interest investments during the three months ended

 

7


 

March 31, 2022. Equity investments included in other assets on our accompanying condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022 was $17.2 million and $19.0 million, respectively.

Recent Accounting Pronouncement

Recently Adopted Accounting Pronouncement

In June 2022, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions ("Topic 820"), which clarifies the guidance when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security and introduces new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820. This guidance is effective for annual periods beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption of this ASU is permitted. This ASU should be applied prospectively and recognize in earnings on the adoption date any adjustments made as a result of adoption. We early adopted this guidance effective January 1, 2023, and the adoption did not have an impact to our consolidated financial statements and disclosures.

3. Business Combinations

vitaCare Prescription Services, Inc.

On April 14, 2022, we acquired all of the equity interests of vitaCare Prescription Services, Inc. (“vitaCare”), a prescription technology and services platform, for a total purchase consideration of $131.8 million, inclusive of $149.9 million in cash, offset by contingent considerations with a net estimated acquisition-date fair value of $18.1 million. vitaCare strengthens and expands our business capabilities with respect to our pharma manufacturer solutions platform. The goodwill recognized in connection with this acquisition primarily related to the expected long-term synergies and other benefits from the acquisition, including the acquired assembled workforce, and is expected to be tax deductible. The aggregate purchase consideration was principally allocated to goodwill of $80.6 million and other intangible assets of $52.0 million. Other intangible assets principally related to developed technology of $30.0 million and customer relationships of $21.0 million with estimated useful lives of five and eleven years, respectively.

The contingent considerations recognized in connection with the vitaCare acquisition consisted of a contingent consideration receivable and a contingent consideration payable with estimated acquisition-date fair values of approximately $19.7 million and $1.7 million, respectively. As of March 31, 2023 and December 31, 2022, the fair value of the contingent consideration receivable was zero as the contingency was resolved in the year of acquisition. The contingent consideration payable of up to $7.0 million in cash is based upon vitaCare's achievement of certain specified revenue results through the end of 2023 as stipulated by the purchase agreement. As of March 31, 2023 and December 31, 2022, no future contingent payments were expected to be made.

Pro forma unaudited consolidated results of operations - The following table reflects the pro forma unaudited consolidated results of operations for the three months ended March 31, 2022 as if the acquisition of vitaCare had occurred on January 1, 2021. The pro forma unaudited consolidated results of operations give effect to certain adjustments including: (i) transaction and severance costs incurred in connection with the acquisition; (ii) amortization expense related to the acquired intangible assets; and (iii) elimination of vitaCare's allocated interest expense related to the seller's financing agreement whereby vitaCare was released from as a guarantor upon the consummation of the acquisition. The pro forma unaudited consolidated results of operations are not necessarily indicative of the operating results that would have occurred if the acquisition had been consummated as of the date indicated, nor are they necessarily indicative of future operating results.

 

(in thousands)

Three Months Ended March 31, 2022

 

Pro forma revenue

$

203,824

 

Pro forma net income

$

5,140

 

flipMD, Inc.

On February 18, 2022, we acquired all of the equity interests of flipMD, Inc. ("flipMD") for $7.0 million in cash. flipMD is a marketplace connecting practicing physicians with organizations seeking on-demand medical expertise.

 

8


 

 

4. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following:

 

(in thousands)

 

March 31, 2023

 

 

December 31, 2022

 

Accrued bonus and other payroll related

 

$

11,524

 

 

$

20,642

 

Accrued marketing

 

 

13,190

 

 

 

12,104

 

Deferred revenue

 

 

10,763

 

 

 

7,879

 

Income taxes payable

 

 

3,738

 

 

 

 

Other accrued expenses

 

 

8,515

 

 

 

6,898

 

Total accrued expenses and other current liabilities

 

$

47,730

 

 

$

47,523

 

Deferred revenue represents payments received in advance of providing services for certain advertising contracts with customers and subscriptions. Deferred revenue is substantially recognized as revenue within the subsequent twelve months. We expect substantially all of the deferred revenue at March 31, 2023 will be recognized as revenue within the subsequent twelve months. Of the $7.9 million of deferred revenue at December 31, 2022, $5.7 million was recognized as revenue during the three months ended March 31, 2023. Revenue recognized during the three months ended March 31, 2022 of $4.5 million was included as deferred revenue at December 31, 2021.

5. 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 191.5% and 11.8% for the three months ended March 31, 2023 and 2022, respectively. The primary differences between our effective income tax rates and the federal statutory tax rate for the three months ended March 31, 2023 and 2022 were due to the effects of non-deductible officers’ stock-based compensation expense, the valuation allowance on our net deferred tax assets, state income taxes, benefits from research and development tax credits and tax effects from our equity awards.

As of March 31, 2023 and December 31, 2022, we maintained a full valuation allowance against our net deferred tax assets in excess of tax amortizable goodwill primarily due to cumulative three-year pre-tax losses adjusted for permanent book to tax differences. Our judgment regarding the need for a valuation allowance, including the exact timing and amount of any release of such valuation allowance, may reasonably change in the next twelve months due to many factors, including changes in the level of tax profitability that we achieve, changes in tax laws or regulations and price fluctuations of our Class A common stock and its related future tax effects from our outstanding equity awards.

6. Debt

We have a $700.0 million term loan under an agreement with various lenders (“First Lien Term Loan Facility”) that accrues interest at a rate per annum based on the LIBO Screen Rate plus a variable margin based on our most recently determined First Lien Net Leverage Ratio (as defined in the agreement), ranging from 2.75% to 3.00%. The effective interest rate on the First Lien Term Loan Facility for the three months ended March 31, 2023 and 2022 was 7.81% and 3.39%, respectively. The First Lien Term Loan Facility requires quarterly principal payments through September 2025, with any remaining unpaid principal and any accrued and unpaid interest due upon maturity on October 10, 2025. We may prepay the First Lien Term Loan Facility without penalty. The First Lien Term Loan Facility is collateralized by substantially all of our assets and 100% of the equity interest of GoodRx.

We also have a revolving credit facility for up to $100.0 million ("Revolving Credit Facility") which expires on October 11, 2024 and bears interest at a rate per annum based on the LIBO Screen Rate plus a variable margin ranging from 2.50% to 3.00% on used amounts, and a commitment fee of 0.25% to 0.50% per annum on unused amounts. We had no borrowings against the Revolving Credit Facility as of March 31, 2023 and December 31, 2022. We had outstanding letters of credit issued against the Revolving Credit Facility for $9.2 million as of March 31, 2023 and December 31, 2022, which reduced our available borrowings under the Revolving Credit Facility.

 

9


 

Our debt balance is as follows:

 

(in thousands)

 

March 31, 2023

 

 

December 31, 2022

 

Principal balance under First Lien Term Loan Facility

 

$

665,310

 

 

$

667,068

 

Less: Unamortized debt issuance costs and discounts

 

 

(7,505

)

 

 

(8,243

)

 

 

$

657,805

 

 

$

658,825

 

The estimated fair value of our debt was $660.3 million and $649.6 million as of March 31, 2023 and December 31, 2022, respectively, based on inputs categorized as Level 2 in the fair value hierarchy.

As of March 31, 2023, we were subject to a financial covenant requiring maintenance of a First Lien Net Leverage Ratio not to exceed 8.2 to 1.0 and other nonfinancial covenants under the First Lien Term Loan Facility. Additionally, GoodRx is restricted from making dividend payments, loans or advances to us. At March 31, 2023, we were in compliance with our covenants.

7. Commitments and Contingencies

Aside from the below, as of March 31, 2023, there were no material changes to our commitments and contingencies as disclosed in the notes to our consolidated financial statements included in our 2022 10-K.

Legal Contingencies

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. Notwithstanding our belief that we complied with applicable regulations and had meritorious defenses to any claims or assertions to the contrary, on February 1, 2023, we reached a negotiated settlement with the FTC (a "proposed consent order") to resolve all claims and allegations arising out of or relating to the FTC investigation which included a monetary settlement amount of $1.5 million that was accrued as of December 31, 2022 and paid during the three months ended March 31, 2023. The proposed consent order was filed in the United States District Court for the Northern District of California ("NDCA") and was approved and entered on February 17, 2023. The consent order also includes agreements to effect or maintain, as applicable, certain changes to our business practices, policies and compliance requirements that may impose additional costs that we do not believe will be material both individually and in the aggregate to us.

Between February 2, 2023, and March 30, 2023, five individual plaintiffs filed five separate putative class actions lawsuits against GoodRx Holdings, Inc., Google, Meta, and Criteo, alleging generally that we have not adequately protected consumer privacy and that we communicated consumer information to third parties, including the three co-defendants. Four of the plaintiffs allege California common law intrusion upon seclusion and unjust enrichment claims, as well as claims under California’s Medical Information Act, Invasion of Privacy Act, Consumer Legal Remedies Act, and Unfair Competition Law. One of these four plaintiffs additionally brings a claim under the Electronic Communications Privacy Act. The fifth plaintiff brings claims for common-law unjust enrichment and violations of New York’s General Business Law. The plaintiffs in these lawsuits are seeking various forms of monetary damages (such as statutory damages, compensatory damages, attorneys’ fees and disgorgement of profits) as well as injunctive relief. Four of these cases were originally filed in the NDCA (Cases No. 3:23-cv-00501; 3:23-cv-00744; 3:23-cv-00940; and 4:23-cv-01293). One case was originally filed in the United States District Court for the Southern District of New York (Case No. 1:23-cv-00943); however, that case was voluntarily dismissed and re-filed in the NDCA (Case No. 3:23-cv-01508). These five matters have been consolidated and assigned to U.S. District Judge Vince Chhabria in the NDCA. An amended consolidated complaint is due to be filed later in May 2023. The court has further set a briefing schedule for motions to dismiss and motions to compel arbitration. In addition, the court referred the parties to mediation, which has not been scheduled or discussed further yet at this time. 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 are presently involved in, legal proceedings, claims and litigations. Such matters are subject to many uncertainties and outcomes are not predictable with assurance. Accruals for loss contingencies are recognized when a loss is probable, and the amount of such loss can be reasonably estimated.

 

10


 

8. Revenue

For the three months ended March 31, 2023 and 2022, revenue comprised the following:

 

 

 

Three Months Ended March 31,

 

 

(in thousands)

 

2023

 

 

2022

 

 

Prescription transactions revenue

 

$

134,907

 

 

$

155,507

 

 

Pharma manufacturer solutions revenue

 

 

20,435

 

 

 

23,469

 

 

Subscription revenue

 

 

24,143

 

 

 

19,110

 

 

Other revenue

 

 

4,501

 

 

 

5,243

 

 

Total revenue

 

$

183,986

 

 

$

203,329

 

 

 

9. 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, or under a Rule 10b5-1 trading plan. 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, 2023, we repurchased and retired 1.6 million shares of our Class A common stock for an aggregate purchase price of $9.5 million under the repurchase program. 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. As of March 31, 2023, we had $138.8 million available for future repurchases of our Class A common stock under the repurchase program.

10. Basic and Diluted (Loss) Earnings Per Share

The computation of (loss) earnings per share for the three months ended March 31, 2023 and 2022 is as follows:

 

 

 

Three Months Ended March 31,

 

 

(in thousands, except per share amounts)

 

2023

 

 

2022

 

 

Numerator:

 

 

 

 

 

 

 

Net (loss) income

 

$

(3,290

)