Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, as well as Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation” and Part II, Item 8, “Financial Statements and Supplementary Data” included in our Annual Report on Form 10-K for the year ended December 31, 2021 (“2021 10-K") filed with the SEC on March 1, 2022. This discussion contains forward-looking statements based upon current plans, expectations and beliefs involving risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the "Risk Factors" section of our 2021 10-K and other factors set forth in other parts of this Quarterly Report on Form 10-Q and our filings with the SEC.
Glossary of Selected Terminology
As used in this Quarterly Report on Form 10-Q, unless the context otherwise requires, references to:
•“we,” “us,” “our,” the “Company,” “GoodRx,” and similar references refer to GoodRx Holdings, Inc. and its consolidated subsidiaries.
•“consumers” refer to the general population in the United States that uses or otherwise purchases healthcare products and services. References to “our consumers” or “GoodRx consumers” refer to consumers that have used one or more of our offerings.
•“discounted price” refers to a price for a prescription provided on our platform that represents a negotiated rate provided by one of our PBM partners at a retail pharmacy. Through our platform, our discounted prices are free to access for consumers by saving a GoodRx code to their mobile device for their selected prescription and presenting it at the chosen pharmacy. The term “discounted price” excludes prices we may otherwise source, such as prices from patient assistance programs for low-income individuals and Medicare prices, and any negotiated rates offered through our subscription offerings: GoodRx Gold (“Gold”), and Kroger Rx Savings Club powered by GoodRx (“Kroger Savings”).
•“GoodRx code” refers to codes that can be accessed by our consumers through our apps or websites or that can be provided to our consumers directly by healthcare professionals, including physicians and pharmacists, that allow our consumers free access to our discounted prices or a lower list price for their prescriptions when such code is presented at their chosen pharmacy.
•“Monthly Active Consumers” refers to the number of unique consumers who have used a GoodRx code to purchase a prescription medication in a given calendar month and have saved money compared to the list price of the medication. A unique consumer who uses a GoodRx code more than once in a calendar month to purchase prescription medications is only counted as one Monthly Active Consumer in that month. A unique consumer who uses a GoodRx code in two or three calendar months within a quarter will be counted as a Monthly Active Consumer in each such month. Monthly Active Consumers do not include subscribers to our subscription offerings, consumers of our pharma manufacturer solutions offering, or consumers who used our telehealth offerings. When presented for a period longer than a month, Monthly Active Consumers is averaged over the number of calendar months in such period. For example, a unique consumer who uses a GoodRx code twice in January, but who did not use our prescription transactions offering again in February or March, is counted as 1 in January and as 0 in both February and March, thus contributing 0.33 to our Monthly Active Consumers for such quarter (average of 1, 0 and 0). A unique consumer who uses a GoodRx code in January and in March, but did not use our prescription transactions offering in February, would be counted as 1 in January, 0 in February and 1 in March, thus contributing 0.66 to our Monthly Active Consumers for such quarter. Monthly Active Consumers from acquired companies are only included beginning in the first full quarter following the acquisition.
•“PBM” refers to a pharmacy benefit manager. PBMs aggregate demand to negotiate prescription medication prices with pharmacies and pharma manufacturers. PBMs find most of their demand through relationships with insurance companies and employers. However, nearly all PBMs also have consumer direct or cash network pricing that they negotiate with pharmacies for consumers who choose to purchase prescriptions outside of insurance.
•“pharma” is an abbreviation for pharmaceutical.
14
•“savings,” “saved” and similar references refer to the difference between the list price for a particular prescription at a particular pharmacy and the price paid by the GoodRx consumer for that prescription utilizing a GoodRx code available through our platform at that same pharmacy. In certain circumstances, we may show a list price on our platform when such list price is lower than the negotiated price available using a GoodRx code and, in certain circumstances, a consumer may use a GoodRx code and pay the list price at a pharmacy if such list price is lower than the negotiated price available using a GoodRx code. We do not earn revenue from such transactions, but our savings calculation includes an estimate of the savings achieved by the consumer because our platform has directed the consumer to the pharmacy with the low list price. This estimate of savings when the consumer pays the list price is based on internal data and is calculated as the difference between the average list price across all pharmacies where GoodRx consumers paid the list price and the average list price paid by consumers in the pharmacies to which we directed them. We do not calculate savings based on insurance prices as we do not have information about a consumer’s specific coverage or price. We do not believe savings are representative or indicative of our revenue or results of operations.
•“subscribers” and similar references refers to our consumers that are subscribed to either of our subscription offerings, Gold or Kroger Savings. References to subscription plans as of a particular date represents an active subscription to either one of our aforementioned subscription offerings as of the specified date. Each subscription plan may represent more than one subscriber since family subscription plans may include multiple members.
Certain monetary amounts, percentages, and other figures included in this Quarterly Report on Form 10-Q have been subject to rounding adjustments. Percentage amounts included in this Quarterly Report on Form 10-Q have not in all cases been calculated on the basis of such rounded figures, but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this Quarterly Report on Form 10-Q may vary from those obtained by performing the same calculations using the figures in our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. Certain other amounts that appear in this Quarterly Report on Form 10-Q may not sum due to rounding.
Overview
Our mission is to help Americans get the healthcare they need at a price they can afford. To achieve this, we are building the leading, consumer-focused digital healthcare platform in the United States. We believe our financial results reflect the significant market demand for our offerings and the value that we provide to the broader healthcare ecosystem. For the three months ended March 31, 2022 as compared to the same period of 2021:
•Revenue grew 27% to $203.3 million from $160.4 million.
•Net income and net income margin was $12.3 million and 6.0%, respectively, up from $1.7 million and 1.0%, respectively. The increases in net income and net income margin were principally from the continued growth of our business as well as a $16.4 million decrease in stock-based compensation expense primarily related to the Founders Awards (as defined and described in Note 11 to our condensed consolidated financial statements) made in connection with our initial public offering (“IPO”), partially offset by an increase to our provision for income taxes, which was a $1.7 million expense in the first quarter of 2022 and a $12.6 million benefit in the comparable period of the prior year.
•Adjusted EBITDA was $64.7 million up from $51.0 million principally from the continued growth of our business. Adjusted EBITDA Margin was 31.8% for the three months ended March 31, 2022, unchanged from the comparable period last year. Adjusted EBITDA Margin remained flat as, relative to revenue, our reduction in sales and marketing was offset by increases in continued investments in product development and technology, as well as continued investments in our general and administrative infrastructure, particularly in relation to operating as a public company.
Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP financial measures. For a reconciliation and presentation of Adjusted EBITDA and Adjusted EBITDA Margin to their most directly comparable GAAP financial measures, information about why we consider Adjusted EBITDA and Adjusted EBITDA Margin useful to investors and a discussion of the material risks and limitations of these measures, please see “Key Financial and Operating Metrics—Non-GAAP Financial Measures" below.
Impact of COVID-19
We believe COVID-19 continues to have an adverse impact on the growth of our prescription transactions offering due to the cumulative impact of lower healthcare utilization for approximately two years since the pandemic began, and continued improvement in future periods remains uncertain. Any decrease in the number of consumers seeking to fill
15
prescriptions could negatively impact demand for and use of certain of our offerings, particularly our prescription transactions and subscription offerings, which would have an adverse effect on our business, financial condition and results of operations.
Seasonality
We typically experience stronger consumer demand during the first and fourth quarters of each year, which coincide with generally higher consumer healthcare spending, doctor office visits, annual benefit enrollment season, and seasonal cold and flu trends. In addition, we may experience stronger demand for our pharma manufacturer solutions offering during the fourth quarter of each year, which coincides with pharma manufacturers' annual budgetary spending patterns. This seasonality may impact revenue and sales and marketing expense. The rapid growth of our business may have masked the extent of these trends to date, and we expect the impact of seasonality to be more pronounced in the future. In 2020 and 2021, we saw the impact of COVID-19 pandemic further disrupt these trends, which may continue in future periods.
Recent Development
In April 2022, we acquired vitaCare, Inc. ("vitaCare"). Refer to Note 13 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Key Financial and Operating Metrics
We use Monthly Active Consumers, subscription plans, Adjusted EBITDA and Adjusted EBITDA Margin to assess our performance, make strategic and offering decisions and build our financial projections. The number of Monthly Active Consumers and subscription plans are key indicators of the scale of our consumer base and a gauge for our marketing and engagement efforts. We believe these operating metrics reflect our scale, growth and engagement with consumers.
Monthly Active Consumers
Our Monthly Active Consumers includes consumers we acquired through the acquisition of RxSaver, Inc. (acquired in April 2021) beginning in the third quarter of 2021. RxSaver, Inc. Monthly Active Consumers are estimated due to incomplete consumer information.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
(in millions) |
2022 |
|
2021 |
|
2021 |
|
2021 |
|
2021 |
|
Monthly Active Consumers |
|
6.4 |
|
|
6.4 |
|
|
6.4 |
|
|
6.0 |
|
|
5.7 |
|
Subscription Plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of |
|
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
(in thousands) |
2022 |
|
2021 |
|
2021 |
|
2021 |
|
2021 |
|
Subscription plans |
|
1,203 |
|
|
1,210 |
|
|
1,129 |
|
|
1,051 |
|
|
931 |
|
Non-GAAP Financial Measures
Adjusted EBITDA and Adjusted EBITDA Margin are key measures we use to assess our financial performance and are also used for internal planning and forecasting purposes. We believe Adjusted EBITDA is helpful to investors, analysts and other interested parties because they can assist in providing a more consistent and comparable overview of our operations across our historical financial periods. In addition, these measures are frequently used by analysts, investors and other interested parties to evaluate and assess performance.
We define Adjusted EBITDA for a particular period as net income or loss before interest, taxes, depreciation and amortization, and as further adjusted, as applicable for the periods presented, for acquisition related expenses, cash bonuses to vested option holders, stock-based compensation expense, payroll tax expense related to stock-based compensation, loss on extinguishment of debt, financing related expenses, loss on abandonment and impairment of operating lease assets, restructuring related expenses, charitable stock donation, and other income or expense, net. Adjusted EBITDA Margin represents Adjusted EBITDA as a percentage of revenue.
Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP measures and are presented for supplemental informational purposes only and should not be considered as alternatives or substitutes to financial information presented in accordance with GAAP. These measures have certain limitations in that they do not include the impact of certain expenses
16
that are reflected in our condensed consolidated statements of operations that are necessary to run our business. Other companies, including other companies in our industry, may not use these measures or may calculate these measures differently than as presented in this Quarterly Report on Form 10-Q, limiting their usefulness as comparative measures.
The following table presents a reconciliation of net income, the most directly comparable financial measure calculated in accordance with GAAP, to Adjusted EBITDA, and presents net income margin, the most directly comparable financial measure calculated in accordance with GAAP, with Adjusted EBITDA Margin:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
(dollars in thousands) |
|
2022 |
|
|
2021 |
|
Net income |
|
$ |
12,293 |
|
|
$ |
1,668 |
|
Adjusted to exclude the following: |
|
|
|
|
|
|
Interest income |
|
|
(52 |
) |
|
|
(16 |
) |
Interest expense |
|
|
5,869 |
|
|
|
5,905 |
|
Income tax expense (benefit) |
|
|
1,651 |
|
|
|
(12,555 |
) |
Depreciation and amortization |
|
|
11,373 |
|
|
|
5,361 |
|
Financing related expenses (1) |
|
|
4 |
|
|
|
257 |
|
Acquisition related expenses (2) |
|
|
1,973 |
|
|
|
3,048 |
|
Restructuring related expenses (3) |
|
|
311 |
|
|
|
— |
|
Stock-based compensation expense |
|
|
30,149 |
|
|
|
46,526 |
|
Payroll tax expense related to stock-based compensation |
|
|
1,083 |
|
|
|
828 |
|
Adjusted EBITDA |
|
$ |
64,654 |
|
|
$ |
51,022 |
|
Revenue |
|
$ |
203,329 |
|
|
$ |
160,431 |
|
Net income margin (4) |
|
|
6.0 |
% |
|
|
1.0 |
% |
Adjusted EBITDA Margin |
|
|
31.8 |
% |
|
|
31.8 |
% |
(1)Financing related expenses include third party fees related to proposed financings.
(2)Acquisition related expenses include third party fees for actual or planned acquisitions, including related legal, consulting and other expenditures, and as applicable, retention bonuses to employees related to acquisitions and change in fair value of contingent consideration.
(3)Restructuring related expenses include employee severance and other personnel related costs in connection with workforce optimization and organizational changes to better align with our strategic goals and future scale.
(4)Net income margin represents net income as a percentage of revenue.
We generally expect to continue to invest in sales and marketing in the near-term, but will continue to evaluate the impact of COVID-19 on our business and actively manage our sales and marketing spend, including investment in consumer acquisition, which is largely variable, as market conditions change. We also intend to continue to invest in product development and technology to continue to improve our platform, introduce new offerings and scale existing ones. Additionally, we expect to continue to invest in our general and administrative infrastructure to support our operation as a public company.
Components of our Results of Operations
Revenue
Our revenue is primarily derived from prescription transactions revenue that is generated when pharmacies fill prescriptions for consumers, and from other revenue streams such as our subscription offerings, pharma manufacturer solutions offering, and our telehealth offerings. All of our revenue has been generated in the United States.
•Prescription transactions revenue: Consists primarily of revenue generated from PBMs, or customer, when a prescription is filled with a GoodRx code provided through our platform. The majority of our contracts with PBMs provide for fees that represent a percentage of the fees that PBMs charge to the pharmacy, and a minority of our contracts provide for a fixed fee per transaction. Our percentage of fee contracts often also include a minimum fixed fee per transaction. We expect the revenue contribution from contracts with fixed fee arrangements to remain largely stable over the medium term, and do not expect that changes in revenue contribution from fixed fee versus percentage of fee arrangements will materially impact our revenue. Certain contracts also provide that the amount of fees we receive is based on the volume of prescriptions filled each month.
•Subscription revenue: Consists of revenue from our Gold and Kroger Savings subscription offerings.
17
•Pharma manufacturer solutions revenue: Consists primarily of revenue generated from pharma manufacturers and other customers for advertising, including integrating onto our platform their affordability solutions to our consumers.
•Other revenue: Consists primarily of revenue generated by our telehealth offerings that allow consumers to access healthcare professionals online.
Beginning in the second quarter of 2021, subscription revenue is disclosed separately from other revenue. Beginning in the first quarter of 2022, pharma manufacturer solutions revenue is disclosed separately from other revenue. Prior period amounts have been recast to conform with the current period presentation.
Costs and Operating Expenses
We incur the following expenses directly related to our cost of revenue and operating expenses:
•Cost of revenue: Consists primarily of costs related to outsourced consumer support, healthcare provider costs for GoodRx Care, personnel costs including salaries, benefits, bonuses and stock-based compensation expense, for our consumer support employees, hosting and cloud costs, merchant account fees, processing fees and allocated overhead. Cost of revenue is largely driven by the growth of our visitor, subscriber and active consumer base, as well as our offering mix. Our cost of revenue as a percentage of revenue may vary based on the relative growth rates of our various offerings.
•Product development and technology: Consists primarily of personnel costs, including salaries, benefits, bonuses and stock-based compensation expense, for employees involved in product development activities, third-party services and contractors related to product development, information technology and software-related costs, and allocated overhead. Product development and technology expenses are primarily driven by increases in headcount required to support and further develop our various products. We capitalize certain qualified costs related to the development of internal-use software, which may also cause product development and technology expenses to vary from period to period. We expect product development and technology expenses will increase on an absolute dollar basis as we continue to grow our platform and product offerings.
•Sales and marketing: Consists primarily of advertising and marketing expenses for consumer acquisition and retention, as well as personnel costs, including salaries, benefits, bonuses, stock-based compensation expense and sales commissions, for sales and marketing employees, third-party services and contractors, and allocated overhead. Sales and marketing expenses are primarily driven by investments to grow and retain our consumer base and may fluctuate based on the timing of our investments in consumer acquisition and retention. Over the near to medium term, we expect to increase our spending on sales and marketing.
•General and administrative: Consists primarily of personnel costs including salaries, benefits, bonuses and stock-based compensation expense for our executive, finance, accounting, legal, and human resources functions, as well as professional fees, occupancy costs, other general overhead costs, and as applicable, change in fair value of contingent consideration, and charitable donations. We have incurred, and expect to continue to incur, additional general and administrative costs in compliance, legal, investor relations, insurance, and professional services related to our compliance and reporting obligations as a public company. We have incurred, and also expect to incur, additional general and administrative costs in connection with stock options and restricted stock units, including the Founders Awards made in connection with our IPO. We also anticipate that as we continue to grow as a company our general and administrative costs will increase on an absolute dollar basis.
•Depreciation and amortization: Consists of depreciation of property and equipment and amortization of capitalized internal-use software costs and intangible assets. Our depreciation and amortization changes primarily based on changes in our property and equipment, intangible assets, and capitalized software balances.
Other Expense, Net
Our other expense, net consists of the following:
•Interest income: Consists primarily of interest income earned on excess cash held in interest-bearing accounts.
•Interest expense: Consists primarily of interest expense associated with our debt arrangements, including amortization of debt issuance costs and discounts.
18
Income Tax (Expense) Benefit
Our income tax (expense) benefit consists of federal and state income taxes. Our effective income tax rate differs from the U.S. federal statutory rate of 21.0% primarily due to effects of non-deductible officers’ stock-based compensation expense, state income taxes, research and development tax credits, excess tax benefits from our equity awards and changes in the valuation allowance against our net deferred tax assets. For information regarding our calculation of income taxes in interim periods, see Note 6 to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.
Results of Operations
The following table sets forth information comparing the components of our results of operations for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
(in thousands) |
|
2022 |
|
|
2021 |
|
Revenue: |
|
|
|
|
|
|
Prescription transactions revenue |
|
$ |
155,507 |
|
|
$ |
134,061 |
|
Subscription revenue |
|
|
19,110 |
|
|
|
12,007 |
|
Pharma manufacturer solutions revenue |
|
|
23,469 |
|
|
|
9,369 |
|
Other revenue |
|
|
5,243 |
|
|
|
4,994 |
|
Total 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 |
|
Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
Change |
|
(dollars in thousands) |
|
2022 |
|
|
2021 |
|
|
$ |
|
|
% |
|
Prescription transactions revenue |
|
$ |
155,507 |
|
|
$ |
134,061 |
|
|
$ |
21,446 |
|
|
|
16 |
% |
Subscription revenue |
|
|
19,110 |
|
|
|
12,007 |
|
|
|
7,103 |
|
|
|
59 |
% |
Pharma manufacturer solutions revenue |
|
|
23,469 |
|
|
|
9,369 |
|
|
|
14,100 |
|
|
|
150 |
% |
Other revenue |
|
|
5,243 |
|
|
|
4,994 |
|
|
|
249 |
|
|
|
5 |
% |
Total revenue |
|
$ |
203,329 |
|
|
$ |
160,431 |
|
|
$ |
42,898 |
|
|
|
27 |
% |
Prescription transactions revenue for the three months ended March 31, 2022 increased $21.4 million, or 16%, compared to the three months ended March 31, 2021, driven primarily by a 12% increase in the number of our average Monthly Active Consumers. The increase in our prescription transactions revenue and Monthly Active Consumers was primarily driven by organic growth. We believe this organic growth was due to the increase in consumer awareness of our brand as a direct result of the additional investment in sales and marketing expenses on an absolute dollar basis in the three months ended March 31, 2022 compared to the three months ended March 31, 2021, which supported new consumer acquisition as well as repeat activity of existing consumers. The RxNXT LLC and RxSaver, Inc. acquisitions in July 2021
19
and April 2021, respectively, individually and in the aggregate did not materially contribute to our prescription transactions revenue for the three months ended March 31, 2022.
We believe COVID-19 continues to have an adverse impact on the growth of our prescription transactions revenue, due to the cumulative impact of lower healthcare utilization for approximately two years since the pandemic began. In addition, we recognized that a grocery chain had taken actions late in the first quarter of 2022 that impacted acceptance of discounted pricing for a subset of drugs from PBMs, who are our customers, and whose pricing we promote on our platform. This had an immaterial adverse impact on our prescription transactions revenue in the first quarter and is expected to have an adverse impact on prescription transactions revenue in the future that may be material. Prescription transactions at this grocer represented a material proportion of our prescription volume and revenue during the three months ended March 31, 2022. We are not aware of similar PBM-pharmacy issues at any other large volume pharmacies, and with the exception of the grocer in question, we believe our pharmacy and PBM relationships remain strong. For additional information, please see Part I, Item 1A, “Risk Factors – We rely on a limited number of industry participants.” in our 2021 10-K.
Subscription revenue for the three months ended March 31, 2022 increased $7.1 million, or 59%, compared to the three months ended March 31, 2021, driven primarily by an increase in the number of subscription plans to 1.2 million as of March 31, 2022, compared to 0.9 million as of March 31, 2021, as well as a favorable change in subscription plan mix. The increase in subscription revenue was also driven by a pricing increase for a subset of Gold subscribers during the three months ended March 31, 2022, which we expect to rollout for the remaining Gold subscribers by the end of the second quarter of 2022. We expect the increase in Gold pricing to result in slower subscriber growth relative to subscription revenue growth in the near term. We do not believe the grocer issue mentioned above materially impacted subscription revenue in the first quarter of 2022, though it may be impacted in the future.
Pharma manufacturer solutions revenue for the three months ended March 31, 2022 increased $14.1 million, or 150%, compared to the three months ended March 31, 2021, driven by organic growth as we continued to expand our market penetration with pharma manufacturers and other customers, as well as to a lesser extent from the impact of HealthiNation Inc., which we acquired in April 2021.
Other revenue for the three months ended March 31, 2022 increased $0.2 million, or 5%, compared to the three months ended March 31, 2021, driven by an increase in the number of telehealth visits on our platform.
We expect the percentage growth in subscription and pharma manufacturer solutions revenue to continue to outpace our prescription transactions revenue in the near to medium term as we continue to scale the capabilities and platforms of our subscription and pharma manufacturer solutions offerings.
Costs and Operating Expenses
Cost of revenue, exclusive of depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
Change |
|
(dollars in thousands) |
|
2022 |
|
|
2021 |
|
|
$ |
|
|
% |
|
Cost of revenue, exclusive of depreciation and amortization |
|
$ |
12,280 |
|
|
$ |
10,428 |
|
|
$ |
1,852 |
|
|
|
18 |
% |
As a percentage of total revenue |
|
|
6 |
% |
|
|
6 |
% |
|
|
|
|
|
|
Cost of revenue for the three months ended March 31, 2022 increased $1.9 million, or 18%, compared to the three months ended March 31, 2021. This increase was primarily driven by a $1.6 million increase in outsourced and in-house personnel related to consumer support to support our growth.
Product development and technology
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
Change |
|
(dollars in thousands) |
|
2022 |
|
|
2021 |
|
|
$ |
|
|
% |
|
Product development and technology |
|
$ |
35,042 |
|
|
$ |
26,160 |
|
|
$ |
8,882 |
|
|
|
34 |
% |
As a percentage of total revenue |
|
|
17 |
% |
|
|
16 |
% |
|
|
|
|
|
|
Product development and technology expenses for three months ended March 31, 2022 increased by $8.9 million, or 34%, compared to the three months ended March 31, 2021. This increase was primarily due to increases in payroll and related expenses of $6.8 million due to higher headcount and an increase in allocated overhead of $1.4 million in support of our product development efforts.
20
Sales and marketing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
Change |
|
(dollars in thousands) |
|
2022 |
|
|
2021 |
|
|
$ |
|
|
% |
|
Sales and marketing |
|
$ |
92,950 |
|
|
$ |
79,694 |
|
|
$ |
13,256 |
|
|
|
17 |
% |
As a percentage of total revenue |
|
|
46 |
% |
|
|
50 |
% |
|
|
|
|
|
|
Sales and marketing expenses for the three months ended March 31, 2022 increased by $13.3 million, or 17%, compared to the three months ended March 31, 2021. This increase was primarily due to a $6.2 million increase in advertising and promotional expenses and a $5.5 million increase in payroll and related expenses due to higher headcount.
General and administrative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
Change |
|
(dollars in thousands) |
|
2022 |
|
|
2021 |
|
|
$ |
|
|
% |
|
General and administrative |
|
$ |
31,923 |
|
|
$ |
43,786 |
|
|
$ |
(11,863 |
) |
|
|
(27 |
%) |
As a percentage of total revenue |
|
|
16 |
% |
|
|
27 |
% |
|
|
|
|
|
|
General and administrative expenses for the three months ended March 31, 2022 decreased by $11.9 million, or 27%, compared to the three months ended March 31, 2021. This decrease was primarily due to a $16.1 million decrease in stock-based compensation expense related to the Founders Awards made in connection with our IPO as further described in Note 11 to our condensed consolidated financial statements, partially offset by a $2.1 million increase in payroll and related expenses due to higher headcount, and a $2.1 million increase in professional and other fees to support our growth and operations as a public company.
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
Change |
|
(dollars in thousands) |
|
2022 |
|
|
2021 |
|
|
$ |
|
|
% |
|
Depreciation and amortization |
|
$ |
11,373 |
|
|
$ |
5,361 |
|
|
$ |
6,012 |
|
|
|
112 |
% |
As a percentage of total revenue |
|
|
6 |
% |
|
|
3 |
% |
|
|
|
|
|
|
Depreciation and amortization expenses for the three months ended March 31, 2022 increased by $6.0 million, or 112%, compared to the three months ended March 31, 2021. This increase was due primarily to a $3.0 million increase in capitalized software amortization due to higher capitalized costs for platform improvements and the introduction of new products and features and a $2.9 million increase in amortization related to acquired intangible assets.
Interest Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
Change |
|
(dollars in thousands) |
|
2022 |
|
|
2021 |
|
|
$ |
|
|
% |
|
Interest expense |
|
$ |
5,869 |
|
|
$ |
5,905 |
|
|
$ |
(36 |
) |
|
|
(1 |
%) |
As a percentage of total revenue |
|
|
3 |
% |
|
|
4 |
% |
|
|
|
|
|
|
Interest expense for the three months ended March 31, 2022 decreased by 1% compared to the three months ended March 31, 2021 primarily due to lower average debt balances.
Income Tax (Expense) Benefit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
Change |
|
(dollars in thousands) |
|
2022 |
|
|
2021 |
|
|
$ |
|
|
% |
|
Income tax (expense) benefit |
|
$ |
(1,651 |
) |
|
$ |
12,555 |
|
|
$ |
(14,206 |
) |
|
|
(113 |
%) |
Effective income tax rate |
|
|
11.8 |
% |
|
|
115.3 |
% |
|
|
|
|
|
|
For the three months ended March 31, 2022, we had an income tax expense of $1.7 million, compared to an income tax benefit of $12.6 million for the three months ended March 31, 2021 and an effective income tax rate of 11.8% and 115.3%, respectively. The change in our income tax (expense) benefit was primarily due to the full valuation allowance recorded in the fourth quarter of 2021 against our net deferred tax assets in excess of tax amortizable goodwill, which we
21
maintained as of March 31, 2022. For more information regarding the valuation allowance, see Note 6 to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.
Liquidity and Capital Resources
Since our inception, we have financed our operations primarily through net cash provided by operating activities, equity issuances, and borrowings under our long-term debt arrangements. Our principal sources of liquidity are expected to be our cash and cash equivalents and borrowings available under our $100.0 million secured asset-based revolving credit facility which matures in October 2024. As of March 31, 2022, we had cash and cash equivalents of $845.4 million and $90.8 million available under our revolving credit facility. For additional information regarding our revolving credit facility and our term loan, refer to Note 7 to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q. In April 2022 we acquired vitaCare for $150.0 million paid with cash and cash equivalents on hand. Refer to Note 13 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
As of March 31, 2022, there were no material changes to our primary short-term and long-term requirements for liquidity and capital as disclosed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation” of our 2021 10-K. We believe that our net cash provided by operating activities and cash on hand will be adequate to meet our operating, investing and financing needs for at least the next 12 months. Our future capital requirements will depend on many factors, including our revenue growth, the timing and extent of investments to support such growth, the expansion of sales and marketing activities, and many other factors as described in Part I, Item 1A, “Risk Factors” of our 2021 10-K.
If necessary, we may borrow funds under our revolving credit facility to finance our liquidity requirements, subject to customary borrowing conditions. To the extent additional funds are necessary to meet our long-term liquidity needs as we continue to execute our business strategy, we anticipate that they will be obtained through the incurrence of additional indebtedness, additional equity financings or a combination of these potential sources of funds; however, such financing may not be available on favorable terms, or at all. In particular, the widespread COVID-19 pandemic has resulted in, and may continue to result in, significant disruption of global financial markets, reducing our ability to access capital. If we are unable to raise additional funds when or on the terms desired, our business, financial condition and results of operations could be adversely affected.
Holding Company Status
GoodRx Holdings, Inc. is a holding company that does not conduct any business operations of its own. As a result, GoodRx Holdings, Inc. is largely dependent upon cash distributions and other transfers from its subsidiaries to meet its obligations and to make future dividend payments, if any. Our existing debt arrangement contain covenants restricting payments of dividends by our subsidiaries, including GoodRx, Inc., unless certain conditions are met. These covenants provide for certain exceptions for specific types of payments. Based on these restrictions, all of the net assets of GoodRx, Inc. were restricted pursuant to the terms of our debt arrangements as of March 31, 2022. Since the restricted net assets of GoodRx, Inc. and its subsidiaries exceed 25% of our consolidated net assets, in accordance with Regulation S-X, refer to the notes to our consolidated financial statements included in our 2021 10-K for condensed parent company financial information of GoodRx Holdings, Inc.
Cash Flows
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
(in thousands) |
|
2022 |
|
|
2021 |
|
Net cash provided by operating activities |
|
$ |
30,120 |
|
|
$ |
45,485 |
|
Net cash used in investing activities |
|
|
(34,401 |
) |
|
|
(9,695 |
) |
Net cash used in financing activities |
|
|
(91,401 |
) |
|
|
(14,018 |
) |
Net change in cash, cash equivalents and restricted cash |
|
$ |
(95,682 |
) |
|
$ |
21,772 |
|
Net cash provided by operating activities
Net cash flows provided by operating activities consisted of net income adjusted for certain non-cash items and changes in assets and liabilities. The $15.4 million decrease in net cash provided by operations during the three months ended March 31, 2022 compared to the three months ended March 31, 2021 was due to a $15.3 million decrease from changes in operating assets and liabilities. The $10.6 million increase in net income was offset by $10.7 million decrease in non-cash adjustments, primarily driven by a decrease in stock-based compensation expense due principally to the Founders
22
Awards. The changes in operating assets and liabilities were primarily driven by the timing of payments for accrued expenses and accounts payable as well as by the timing of income tax payments and refunds.
Net cash used in investing activities
Net cash flows used in investing activities primarily consisted of cash used for acquisitions and investments, capital expenditures, and software development costs. The $24.7 million increase in net cash used in investing activities for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 was primarily related to $22.0 million in cash paid for an acquisition of a business and a minority equity interest investment in a privately-held company during the three months ended March 31, 2022, and a $3.7 million increase in software development costs, partially offset by a decrease of $1.0 million in purchases of property and equipment.
Net cash used in financing activities
Net cash flows from financing activities primarily consisted of payments related to our debt arrangements, proceeds from exercise of stock options, payments made related to repurchases of our Class A common stock, and payments made related to net share settlement of equity awards. The $77.4 million increase in net cash used in financing activities for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 was primarily related to $83.8 million for repurchases of our Class A common stock during the three months ended March 31, 2022, partially offset by a $1.3 million increase in proceeds from exercises of stock options and a $5.1 million decrease in payments related to net share settlement of equity awards.
Contractual Obligations and Commitments
There have been no material changes to our contractual obligations and commitments compared with those described in our 2021 10-K.
Critical Accounting Policies and Estimates
During the three months ended March 31, 2022, there have been no significant changes to our critical accounting policies and estimates compared with those disclosed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2021 10-K.
Recent Accounting Pronouncements
Refer to Note 2 to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.