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 June 30,March 31, 20212022
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 |
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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 |
| 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 |
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Non-accelerated filer | ☐ |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of August 9, 2021,May 3, 2022, the registrant had 75,429,44382,726,202 shares of Class A common stock, $0.0001 par value per share, and 320,210,544313,731,628 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, (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q may be forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “forecasts,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to statements regarding our future results of operations and financial position, industry and business trends, 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 our material weaknesses in ourany failure to maintain effective internal control over financialfinancial reporting and any future material weaknesses;; risks related to use of social media, emails, text messages and other messaging channels as part of our marketing strategy; our ability to accurately forecast revenue and appropriately plan our expenses in the future; risks related to information technology and cyber-security; compliance with government regulation of the internet, e-commerce and data and other regulations; our ability to utilize our net operating loss carryforwards and certain other tax attributes; management’s ability to manage our transition to being a public company; our ability to attract, develop, motivate and retain well-qualified employees; risks related to general economic factors, natural disasters or other unexpected events; risks related to our acquisition strategy; risks related to our debt arrangements; interruptions or delays in service on our apps or websites; our reliance on third-party platforms to distribute our platform and offerings; our reliance on software as-a-service technologies from third parties; systems failures or other disruptions in the operations of these parties on which we depend; changes in consumer sentiment or laws, rules or regulations regarding tracking technologies and other privacy matters; 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 sectionsections entitled “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 20202021 (“20202021 10-K”) and this Quarterly Report on Form 10-Q and in our other filings with the Securities and Exchange Commission (“SEC”). The forward-looking statements in this Quarterly Report on Form 10-Q are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed as exhibits to this Quarterly Report on Form 10-Q with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained in this Quarterly Report on Form 10-Q, whether as a result of any new information, future events or otherwise.
GOODRX HOLDINGS, INC.
Table of Contents
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PART I. | FINANCIAL INFORMATION |
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Item 1. | 1 | |
1 | ||
2 | ||
3 | ||
5 | ||
6 | ||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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PART II. | OTHER INFORMATION |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
GoodRx Holdings, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands, except par values) |
| June 30, |
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| December 31, |
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| March 31, |
|
| December 31, |
| ||||
Assets |
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Current assets |
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Cash and cash equivalents |
| $ | 894,703 |
| $ | 968,691 |
|
| $ | 845,427 |
| $ | 941,109 |
| ||
Restricted cash |
| 0 |
| 2,900 |
| |||||||||||
Accounts receivable, net |
| 87,004 |
| 68,729 |
|
| 123,281 |
| 118,080 |
| ||||||
Prepaid expenses and other current assets |
|
| 94,043 |
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| 46,048 |
|
|
| 26,015 |
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|
| 29,638 |
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Total current assets |
| 1,075,750 |
| 1,086,368 |
|
| 994,723 |
| 1,088,827 |
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Property and equipment, net |
| 22,105 |
| 23,057 |
|
| 22,564 |
| 21,612 |
| ||||||
Goodwill |
| 320,196 |
| 261,116 |
|
| 334,642 |
| 329,696 |
| ||||||
Intangible assets, net |
| 94,780 |
| 36,919 |
|
| 85,990 |
| 88,791 |
| ||||||
Capitalized software, net |
| 31,996 |
| 19,800 |
|
| 52,505 |
| 44,987 |
| ||||||
Operating lease right-of-use assets |
| 26,902 |
| 27,712 |
|
| 26,978 |
| 27,705 |
| ||||||
Deferred tax assets, net |
| 12,971 |
| 13,117 |
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Other assets |
|
| 2,229 |
|
| 2,025 |
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|
| 20,926 |
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|
| 6,007 |
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Total assets |
| $ | 1,586,929 |
| $ | 1,470,114 |
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| $ | 1,538,328 |
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| $ | 1,607,625 |
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Liabilities and stockholders' equity |
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Current liabilities |
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Accounts payable |
| $ | 18,378 |
| $ | 10,291 |
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| $ | 12,820 |
| $ | 17,501 |
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Accrued expenses and other current liabilities |
| 33,759 |
| 37,692 |
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| 33,812 |
| 50,732 |
| ||||||
Current portion of debt |
| 7,029 |
| 7,029 |
|
| 7,029 |
| 7,029 |
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Operating lease liabilities, current |
|
| 6,325 |
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| 4,539 |
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| 5,703 |
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| 5,851 |
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Total current liabilities |
| 65,491 |
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| 59,551 |
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| 59,364 |
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| 81,113 |
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Debt, net |
| 657,877 |
| 659,888 |
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| 654,845 |
| 655,858 |
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Operating lease liabilities, net of current portion |
| 32,818 |
| 33,467 |
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| 32,512 |
| 33,592 |
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Deferred tax liabilities, net |
| 397 |
| 244 |
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Other liabilities |
|
| 6,349 |
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| 5,849 |
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| 4,703 |
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| 5,138 |
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Total liabilities |
| 762,535 |
| 758,755 |
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| 751,821 |
| 775,945 |
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Commitments and contingencies (Note 8) |
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Stockholders' equity |
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Preferred stock, $0.0001 par value; 50,000 shares |
| — |
| — |
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Common stock, $0.0001 par value; Class A: 2,000,000 shares |
| 39 |
| 39 |
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Preferred stock, $0.0001 par value; 50,000 shares authorized and |
| 0 |
| 0 |
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Common stock, $0.0001 par value; Class A: 2,000,000 shares |
| 40 |
| 40 |
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Additional paid-in capital |
| 2,182,079 |
| 2,101,773 |
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| 2,189,881 |
| 2,247,347 |
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Accumulated deficit |
|
| (1,357,724 | ) |
|
| (1,390,453 | ) |
|
| (1,403,414 | ) |
|
| (1,415,707 | ) |
Total stockholders' equity |
|
| 824,394 |
|
| 711,359 |
|
|
| 786,507 |
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| 831,680 |
| |
Total liabilities and stockholders' equity |
| $ | 1,586,929 |
| $ | 1,470,114 |
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| $ | 1,538,328 |
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| $ | 1,607,625 |
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See accompanying Notes to Condensed Consolidated Financial Statements.
1
GoodRx Holdings, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
|
| Three Months Ended |
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| Six Months Ended |
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| Three Months Ended |
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(in thousands, except per share amounts) |
| 2021 |
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| 2020 |
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| 2021 |
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| 2020 |
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| 2022 |
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| 2021 |
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Revenue |
| $ | 176,635 |
| $ | 123,295 |
| $ | 337,066 |
| $ | 256,703 |
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| $ | 203,329 |
| $ | 160,431 |
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Costs and operating expenses: |
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Cost of revenue, exclusive of depreciation and |
| 11,090 |
| 6,824 |
| 21,518 |
| 12,843 |
|
| 12,280 |
| 10,428 |
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Product development and technology |
| 29,567 |
| 11,962 |
| 55,727 |
| 22,287 |
|
| 35,042 |
| 26,160 |
| ||||||||||
Sales and marketing |
| 88,381 |
| 51,920 |
| 168,075 |
| 115,082 |
|
| 92,950 |
| 79,694 |
| ||||||||||
General and administrative |
| 39,579 |
| 6,332 |
| 83,365 |
| 12,219 |
|
| 31,923 |
| 43,786 |
| ||||||||||
Depreciation and amortization |
|
| 8,369 |
|
| 4,521 |
|
| 13,730 |
|
| 8,866 |
|
|
| 11,373 |
|
|
| 5,361 |
| |||
Total costs and operating expenses |
|
| 176,986 |
|
| 81,559 |
|
| 342,415 |
|
| 171,297 |
|
|
| 183,568 |
|
|
| 165,429 |
| |||
Operating (loss) income |
|
| (351 | ) |
|
| 41,736 |
|
| (5,349 | ) |
|
| 85,406 |
| |||||||||
Operating income (loss) |
|
| 19,761 |
|
|
| (4,998 | ) | ||||||||||||||||
Other expense, net: |
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Other income, net |
| 0 |
| (16 | ) |
| 0 |
| (21 | ) | ||||||||||||||
Interest income |
| (13 | ) |
| (41 | ) |
| (29 | ) |
| (116 | ) |
| (52 | ) |
| (16 | ) | ||||||
Interest expense |
|
| 5,906 |
|
| 6,795 |
|
| 11,811 |
|
| 15,433 |
|
|
| 5,869 |
|
|
| 5,905 |
| |||
Total other expense, net |
|
| 5,893 |
|
| 6,738 |
|
| 11,782 |
|
| 15,296 |
|
|
| 5,817 |
|
|
| 5,889 |
| |||
(Loss) income before income taxes |
| (6,244 | ) |
| 34,998 |
| (17,131 | ) |
| 70,110 |
| |||||||||||||
Income tax benefit (expense) |
|
| 37,305 |
|
| (7,661 | ) |
|
| 49,860 |
|
| (15,427 | ) | ||||||||||
Income (loss) before income taxes |
| 13,944 |
| (10,887 | ) | |||||||||||||||||||
Income tax (expense) benefit |
|
| (1,651 | ) |
|
| 12,555 |
| ||||||||||||||||
Net income |
| $ | 31,061 |
| $ | 27,337 |
| $ | 32,729 |
| $ | 54,683 |
|
| $ | 12,293 |
|
| $ | 1,668 |
| |||
Net income attributable to common stockholders: |
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Basic |
| $ | 31,061 |
| $ | 17,663 |
| $ | 32,729 |
| $ | 35,325 |
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Diluted |
| $ | 31,061 |
| $ | 17,842 |
| $ | 32,729 |
| $ | 35,674 |
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Earnings per share: |
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Basic |
| $ | 0.08 |
| $ | 0.08 |
| $ | 0.08 |
| $ | 0.15 |
|
| $ | 0.03 |
| $ | 0.00 |
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Diluted |
| $ | 0.07 |
| $ | 0.08 |
| $ | 0.08 |
| $ | 0.15 |
|
| $ | 0.03 |
| $ | 0.00 |
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Weighted average shares used in computing |
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Basic |
| 408,363 |
| 230,160 |
| 407,273 |
| 230,020 |
|
| 414,739 |
| 406,170 |
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Diluted |
| 428,867 |
| 236,890 |
| 429,228 |
| 236,557 |
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| 427,378 |
| 429,577 |
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Stock-based compensation included in costs and |
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Cost of revenue |
| $ | 181 |
| $ | 24 |
| $ | 302 |
| $ | 41 |
|
| $ | (46 | ) |
| $ | 121 |
| |||
Product development and technology |
| 7,987 |
| 918 |
| 16,323 |
| 1,814 |
|
| 7,478 |
| 8,336 |
| ||||||||||
Sales and marketing |
| 5,262 |
| 608 |
| 10,520 |
| 1,478 |
|
| 5,394 |
| 5,258 |
| ||||||||||
General and administrative |
| 27,246 |
| 571 |
| 60,057 |
| 998 |
|
| 17,323 |
| 32,811 |
|
See accompanying Notes to Condensed Consolidated Financial Statements.
2
GoodRx Holdings, Inc.
Condensed Consolidated Statements of Changes in Redeemable Convertible
Preferred Stock and Stockholders’ Equity (Deficit)
(Unaudited)
|
| Redeemable |
|
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| Class A and Class B |
|
| Additional |
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| Accumulated |
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| Total |
|
| Class A and Class B |
|
| Additional |
|
| Accumulated |
|
| Total |
| |||||||||||||||||||||
(in thousands) |
| Shares |
|
| Amount |
|
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Equity |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Equity |
| ||||||||||||
Balances at December 31, 2020 |
| 0 |
| $ | 0 |
|
|
| 391,660 |
| $ | 39 |
| $ | 2,101,773 |
| $ | (1,390,453 | ) |
| $ | 711,359 |
| ||||||||||||||||||||||||||
Balance at December 31, 2021 |
| 400,562 |
|
| $ | 40 |
|
| $ | 2,247,347 |
| $ | (1,415,707 | ) |
| $ | 831,680 |
| |||||||||||||||||||||||||||||||
Stock options exercised |
| — |
| — |
|
|
| 513 |
| 0 |
| 2,680 |
| — |
| 2,680 |
|
| 749 |
|
|
| — |
|
|
| 3,699 |
|
|
| — |
|
|
| 3,699 |
| |||||||||||||
Stock-based compensation |
| — |
| — |
|
|
| — |
| — |
| 48,254 |
| — |
| 48,254 |
|
| — |
|
|
| — |
|
|
| 32,161 |
|
|
| — |
|
|
| 32,161 |
| |||||||||||||
Vesting of restricted stock units |
| — |
| — |
|
|
| 608 |
| 0 |
| 0 |
| 0 |
| 0 |
|
| 822 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| |||||||||||||
Common stock withheld for tax obligations |
| — |
| — |
|
|
| (324 | ) |
| 0 |
| (14,902 | ) |
| 0 |
| (14,902 | ) | ||||||||||||||||||||||||||||||
Common stock withheld related to |
| (364 | ) |
|
| — |
|
|
| (9,561 | ) |
|
| — |
|
|
| (9,561 | ) | ||||||||||||||||||||||||||||||
Repurchases of Class A common stock |
| (5,637 | ) |
|
| — |
|
|
| (83,765 | ) |
| — |
|
|
| (83,765 | ) | |||||||||||||||||||||||||||||||
Net income |
|
| — |
|
| — |
|
|
|
| — |
|
| — |
|
| — |
|
| 1,668 |
|
| 1,668 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 12,293 |
|
|
| 12,293 |
| |||||
Balances at March 31, 2021 |
| 0 |
| $ | 0 |
|
|
| 392,457 |
| $ | 39 |
| $ | 2,137,805 |
| $ | (1,388,785 | ) |
| $ | 749,059 |
| ||||||||||||||||||||||||||
Stock options exercised |
| — |
| — |
|
|
| 2,609 |
| — |
| 13,291 |
| — |
| 13,291 |
| ||||||||||||||||||||||||||||||||
Stock-based compensation |
| — |
| — |
|
|
| — |
| — |
| 42,366 |
| — |
| 42,366 |
| ||||||||||||||||||||||||||||||||
Vesting of restricted stock units |
| — |
| — |
|
|
| 631 |
| — |
| — |
| — |
| — |
| ||||||||||||||||||||||||||||||||
Common stock withheld for tax obligations |
| — |
| — |
|
|
| (304 | ) |
| — |
| (11,383 | ) |
| — |
| (11,383 | ) | ||||||||||||||||||||||||||||||
Net income |
|
| — |
|
| — |
|
|
|
| — |
|
| — |
|
| — |
|
| 31,061 |
|
| 31,061 |
| |||||||||||||||||||||||||
Balances at June 30, 2021 |
|
| 0 |
| $ | 0 |
|
|
|
| 395,393 |
| $ | 39 |
| $ | 2,182,079 |
| $ | (1,357,724 | ) |
| $ | 824,394 |
| ||||||||||||||||||||||||
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 Changes in Redeemable Convertible
Preferred Stock and Stockholders’ Equity (Deficit)
(Unaudited)
|
| Redeemable |
|
|
| Common Stock |
| Additional |
| Accumulated |
| Total |
|
| Class A and Class B |
|
| Additional |
|
| Accumulated |
|
| Total |
| ||||||||||||||||||||||||
(in thousands) |
| Shares |
| Amount |
|
|
| Shares |
| Amount |
| Capital |
| Deficit |
| Deficit |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Equity |
| |||||||||||||||||
Balances at December 31, 2019 |
| 126,046 |
|
| $ | 737,009 |
|
|
|
| 229,750 |
|
| $ | 460 |
|
| $ | 8,788 |
|
| $ | (1,096,830 | ) |
| $ | (1,087,582 | ) | |||||||||||||||||||||
Balance at December 31, 2020 |
| 391,660 |
|
| $ | 39 |
|
| $ | 2,101,773 |
| $ | (1,390,453 | ) |
| $ | 711,359 |
| |||||||||||||||||||||||||||||||
Stock options exercised |
| — |
|
|
| — |
|
|
|
| 467 |
|
|
| 1 |
|
|
| 691 |
|
|
| — |
|
|
| 692 |
|
| 513 |
|
|
| — |
|
|
| 2,680 |
|
|
| — |
|
|
| 2,680 |
| ||
Stock-based compensation |
| — |
|
|
| — |
|
|
|
| — |
|
|
| — |
|
|
| 2,501 |
|
|
| — |
|
|
| 2,501 |
|
| — |
|
|
| — |
|
|
| 48,254 |
|
|
| — |
|
|
| 48,254 |
| ||
Vesting of restricted stock units |
| 608 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||||||||
Common stock withheld related to |
| (324 | ) |
|
| — |
|
|
| (14,902 | ) |
|
| — |
|
|
| (14,902 | ) | ||||||||||||||||||||||||||||||
Net income |
|
| — |
|
|
| — |
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 27,346 |
|
|
| 27,346 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,668 |
|
|
| 1,668 |
|
Balances at March 31, 2020 |
| 126,046 |
|
| $ | 737,009 |
|
|
|
| 230,217 |
|
| $ | 461 |
|
| $ | 11,980 |
|
| $ | (1,069,484 | ) |
| $ | (1,057,043 | ) | |||||||||||||||||||||
Stock options exercised |
| — |
|
|
| — |
|
|
|
| 222 |
|
|
| 1 |
|
|
| 530 |
|
|
| — |
|
|
| 531 |
| |||||||||||||||||||||
Stock-based compensation |
| — |
|
|
| — |
|
|
|
| — |
|
|
| — |
|
|
| 2,440 |
|
|
| — |
|
|
| 2,440 |
| |||||||||||||||||||||
Net income |
|
| — |
|
|
| — |
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 27,337 |
|
|
| 27,337 |
| ||||||||||||||||||||
Balances at June 30, 2020 |
|
| 126,046 |
|
| $ | 737,009 |
|
|
|
| 230,439 |
|
| $ | 462 |
|
| $ | 14,950 |
|
| $ | (1,042,147 | ) |
| $ | (1,026,735 | ) | ||||||||||||||||||||
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)
|
| Six Months Ended |
|
| Three Months Ended |
| ||||||||||
(in thousands) |
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net income |
| $ | 32,729 |
| $ | 54,683 |
|
| $ | 12,293 |
| $ | 1,668 |
| ||
Adjustments to reconcile net income to net cash provided by |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Depreciation and amortization |
| 13,730 |
| 8,866 |
|
| 11,373 |
| 5,361 |
| ||||||
Amortization of debt issuance costs |
| 1,727 |
| 1,596 |
|
| 856 |
| 863 |
| ||||||
Non-cash operating lease expense |
| 1,791 |
| 2,232 |
|
| 727 |
| 872 |
| ||||||
Stock-based compensation expense |
| 87,202 |
| 4,331 |
|
| 30,149 |
| 46,526 |
| ||||||
Deferred income taxes |
| (364 | ) |
| 2,292 |
|
| (394 | ) |
| (227 | ) | ||||
Loss on abandonment of operating lease assets |
| 780 |
| 0 |
| |||||||||||
Changes in operating assets and liabilities, net of effects of business acquisitions |
|
|
|
|
|
| ||||||||||
Changes in operating assets and liabilities, net of effects of business acquisition |
|
|
|
|
|
| ||||||||||
Accounts receivable |
| (12,873 | ) |
| (10,653 | ) |
| (5,198 | ) |
| (5,670 | ) | ||||
Prepaid expenses and other assets |
| (47,241 | ) |
| (3,952 | ) |
| 3,616 |
| (9,844 | ) | |||||
Accounts payable |
| 4,917 |
| 753 |
|
| (4,442 | ) |
| 4,943 |
| |||||
Accrued expenses and other current liabilities |
| (1,897 | ) |
| 23,164 |
|
| (17,197 | ) |
| (67 | ) | ||||
Operating lease liabilities |
| (590 | ) |
| (224 | ) |
| (1,228 | ) |
| 631 |
| ||||
Other liabilities |
|
| 500 |
|
| 737 |
|
|
| (435 | ) |
|
| 429 |
| |
Net cash provided by operating activities |
|
| 80,411 |
|
| 83,825 |
|
|
| 30,120 |
|
|
| 45,485 |
| |
Cash flows from investing activities |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Purchase of property and equipment |
| (3,058 | ) |
| (1,779 | ) |
| (1,736 | ) |
| (2,715 | ) | ||||
Acquisitions, net of cash acquired |
| (125,728 | ) |
| 0 |
| ||||||||||
Acquisition, net of cash acquired |
| (6,976 | ) |
| 0 |
| ||||||||||
Capitalized software |
|
| (13,630 | ) |
|
| (6,540 | ) |
| (10,682 | ) |
| (6,980 | ) | ||
Investment in minority equity interest |
|
| (15,007 | ) |
|
| 0 |
| ||||||||
Net cash used in investing activities |
|
| (142,416 | ) |
|
| (8,319 | ) |
|
| (34,401 | ) |
|
| (9,695 | ) |
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Proceeds from long-term debt |
| 0 |
| 28,000 |
| |||||||||||
Payments on long-term debt |
| (3,515 | ) |
| (3,515 | ) |
| (1,758 | ) |
| (1,757 | ) | ||||
Payment for contingent consideration |
| (832 | ) |
| 0 |
| ||||||||||
Payment of debt issuance costs |
| 0 |
| (1,306 | ) | |||||||||||
Repurchases of Class A common stock |
| (83,765 | ) |
| 0 |
| ||||||||||
Proceeds from exercise of stock options |
| 15,481 |
| 1,223 |
|
| 3,683 |
| 2,372 |
| ||||||
Proceeds from early exercise of stock options |
| 0 |
| 667 |
| |||||||||||
Employee taxes paid related to net share settlement of equity awards |
|
| (26,017 | ) |
|
| 0 |
|
|
| (9,561 | ) |
|
| (14,633 | ) |
Net cash (used in) provided by financing activities |
|
| (14,883 | ) |
|
| 25,069 |
| ||||||||
Net cash used in financing activities |
|
| (91,401 | ) |
|
| (14,018 | ) | ||||||||
Net change in cash, cash equivalents and restricted cash |
| (76,888 | ) |
| 100,575 |
|
| (95,682 | ) |
| 21,772 |
| ||||
Cash, cash equivalents and restricted cash |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Beginning of period |
|
| 971,591 |
|
| 26,050 |
|
|
| 941,109 |
|
|
| 971,591 |
| |
End of period |
| $ | 894,703 |
| $ | 126,625 |
|
| $ | 845,427 |
|
| $ | 993,363 |
| |
Supplemental disclosure of cash flow information |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Non cash investing and financing activities |
|
|
|
|
|
| ||||||||||
Offering costs included in accounts payable and accrued expense and other current liabilities |
| $ | 0 |
| $ | 736 |
| |||||||||
Right-of-use assets obtained in exchange for new operating lease liabilities |
| 471 |
| 0 |
| |||||||||||
Stock-based compensation included in capitalized software development costs |
| 3,418 |
| 610 |
| |||||||||||
Capitalized software development costs in accounts payable and accrued expenses and |
| 828 |
| 269 |
| |||||||||||
Purchase of property and equipment included in accounts payable and accrued expenses |
| 0 |
| 2,125 |
| |||||||||||
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 the Company’s Condensed Consolidated Balance Sheetsour condensed consolidated balance sheets to the total of the same such amounts shown above:
|
| June 30, |
|
| March 31, |
| ||||||||||
(in thousands) |
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
Cash and cash equivalents |
| $ | 894,703 |
| $ | 126,625 |
|
| $ | 845,427 |
| $ | 990,463 |
| ||
Restricted cash |
|
| 0 |
|
| 0 |
|
|
| 0 |
|
|
| 2,900 |
| |
Total cash, cash equivalents and restricted cash |
| $ | 894,703 |
| $ | 126,625 |
|
| $ | 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. On October 7, 2015, GoodRx Holdings, Inc. acquired 100% of the outstanding shares of and has no material assets or standalone operations other than its ownership in its consolidated subsidiaries. GoodRx, Inc. (“GoodRx”). GoodRx,, a Delaware corporation that was initially formed in September 2011.2011, 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 (the “Company”(collectively, "we," "us" or "our") offer information and tools to help consumers compare prices and save on their prescription drug purchases. The Company operatesWe operate a price comparison platform that provides consumers with curated, geographically relevant prescription pricing, and provides access to negotiated prices through GoodRxour codes that can be used to save money on prescriptions across the United States (the “prescription offering”). TheStates. These services are free to consumers and the Companywe primarily earnsearn revenue from itsour core business from pharmacy benefit managers (“PBMs”) that manage formularies and prescription transactions including establishing pricing between consumers and pharmacies. The CompanyWe also offersoffer 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 the Company’sour audited consolidated financial statements for the year ended December 31, 20202021 and the related notes, which are included in the Company'sour Annual Report on Form 10-K filed with the SEC on March 12, 2021.1, 2022 ("2021 10-K"). The December 31, 20202021 condensed consolidated balance sheet was derived from the Company’sour audited consolidated financial statements as of that date. The Company’s condensed consolidated financial statements include, in the opinion of management, all adjustments, consisting of normal and recurring items, necessary for the fair statement of theour 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.
The Company’sOur significant accounting policies are discussed in “Note 2. Summary of Significant Accounting Policies” in the notes to theour consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.our 2021 10-K. There have been no material changes in accounting policies during the sixthree months ended June 30, 2021March 31, 2022 from those disclosed in the annualnotes to our consolidated financial statements for the year ended December 31, 2020 and the related notes.included in our 2021 10-K.
During the three and six months ended June 30, 2021 and 2020, other than net income, the Company did not have any other elements of comprehensive income or loss. The operating results for the three and six months ended June 30, 2021 are not necessarily indicative of the results expected for the full year ending December 31, 2021.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of GoodRx Holdings, Inc., its wholly owned subsidiaries and variable interest entities (“VIEs”) for which the Company iswe are the primary beneficiary. Intercompany balances and transactions have been eliminated in consolidation. Results of businesses acquired are included in the Company’sour condensed consolidated financial statements from their respective dates of acquisition.
Consolidation of VIEs
GoodRx Care, LLC (formerly known as HeyDoctor), a wholly owned subsidiary of the Company, provides management and other services to professional service corporations (“PSCs”), which are owned by medical professionals in accordance with certain state laws that restrict the corporate practice of medicine and require medical practitioners to own such entities. The Company determined that the PSCs are VIEs. The Company also determined that it is able to direct the activities of the PSCs that most significantly impact their economic performance and it funds and absorbs all losses of these VIEs resulting in the Company being the primary beneficiary of the PSCs. Accordingly, the Company consolidates the VIEs.
6
Revenue of the VIEs were approximately 2% of the Company’s revenue for each of the three and six months ended June 30, 2021 and 2020, respectively. The net results of operations of the VIEs for the three and six months ended June 30, 2021 and 2020 were not material. The VIEs’ total assets and liabilities were each approximately 1% of the Company’s total assets and liabilities at June 30, 2021 and December 31, 2020, respectively.
Segment Reporting and Geographic Information
Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker manages the Company on the basis of 1 operating segment. During the three and six months ended June 30, 2021 and 2020, all of the Company’s revenue was from customers located in the United States. In addition, at June 30, 2021 and December 31, 2020, all of the Company’s right-of-use assets and property and equipment was in the United States.
Use of Estimates
The preparation of the Company’s condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements, including the accompanying notes. The Company bases itsWe base our estimates on historical factors, current circumstances, consideration of the economic impact of COVID-19 and the experience and judgment of our management. The Company evaluates itsWe evaluate our estimates and assumptions on an ongoing basis. Actual results could differ materially from those estimates. Significantthese estimates, reflectedand such differences could affect the results of operations reported in the condensed consolidated financial statements include revenue recognition, valuation of intangible assets and assumptions used for purposes of determining stock-based compensation.future periods.
Certain Risks and Concentrations
Financial instruments that potentially subject the Companyus to significant concentrations of credit risk consist principally of cash, cash equivalents and accounts receivable. The Company maintains
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. The Company believesWe believe that the financial institutions that hold itsour cash are financially sound and, accordingly, minimal credit risk exists with respect to these balances. The Company hasWe have not experienced any losses in such accounts.
The Company extends credit to its customers based on an evaluation of their ability to pay amounts due under contractual arrangements and generally does not obtain or require collateral.
For the three months ended June 30, 2021, 3 customers accounted for approximately 13%, 11% and 10% of the Company’s revenue, respectively. For the six months ended June 30, 2021, 3 customers accounted for approximately 13%, 12% and 10% of the Company’s revenue, respectively. For the three months ended June 30, 2020, 3 customers accounted for approximately 17%, 17% and 11% of the Company's revenue, respectively. For the six months ended June 30, 2020, 3 customers accounted for approximately 18%, 18% and 12% of the Company's revenue, respectively. At June 30, 2021, 0 customers accounted for more than 10% of the Company’s accounts receivable balance. At December 31, 2020, 1 customer accounted for 12% of the Company’s accounts receivable balance.
In March 2020, the World Health Organization declared the outbreak of the novel coronavirus disease (“COVID–19”) a pandemic. The Company’s prescription offering initially experienced a decline in activity as many consumers avoided visiting healthcare professionals and pharmacies in-person, though beginning in the second half of 2020 activity in the Company’s prescription offering improved. The Company’s prescription offering sequentially increased beginning in the third quarter of 2020 through the second quarter of 2021 as consumers partially resumed their interaction with the healthcare system. In addition, the Company has experienced a significant increase in demand for its telehealth offerings. The full extent to which the outbreak of COVID-19 will impact the Company’s business, results of operations and financial condition is still unknown and will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the pandemic, the actions to contain the virus or treat its impact, mutations of the virus, availability and adoption of effective vaccines and how quickly and to what extent normal economic and operating conditions can resume.
In light of the currently unknown ultimate duration and severity of COVID-19, the Company faces a greater degree of uncertainty than normal in making the judgments and estimates needed to apply significant accounting policies. The Company assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to the Company and the unknown future impacts of COVID-19 as of June 30, 2021 and through the date of this report. The accounting matters assessed included, but were not limited to, the
7
Company’s carrying value of goodwill and other long-lived assets, valuation of intangible assets acquired in business combinations, incentive-based compensation and income taxes.
As of the date of these condensed consolidated financial statements, management is not aware of any specific event or circumstance that would require an update to estimates or judgments or a revision to the carrying value of assets or liabilities. However, these estimates and judgments may change as new events occur and additional information is obtained, which may result in changes being recognized in the Company’s condensed consolidated financial statements or annual consolidated financial statements in future periods.
Cash, Cash Equivalents and Restricted Cash
The Company considers 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 deposits are all in financial institutions in the United States. Cash and cash equivalents consist primarily of U.S. treasury securities money market funds held with an investment bank and cash on deposit.
Cash equivalents, consisting of money market funds, of $852.5772.5 million and $932.5852.5 million at June 30, 2021March 31, 2022 and December 31, 2020,2021, respectively, were classified as Level 1 of the fair value hierarchy and valued using quoted market prices in active markets.
Restricted cashWe 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, 2 customers accounted for approximately 13% and 10% of our revenue. For the three months ended March 31, 2021, 4 customers accounted for approximately 14%, 11%, 10% and 10% of our revenue. At March 31, 2022 and December 31, 2021, 0 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, 2020 represented cash held in an escrow pursuant to terms of2021 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 Scriptcycle, LLC business combination relating to contingent consideration, see "Note 3. Business Combinations – Scriptcycle, LLC.”three months ended March 31, 2022.
Recent Accounting Pronouncements
As an “emerging growth company”, the Jumpstart Our Business Startups Act, or the JOBS Act, allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. The Company has elected to use the adoption dates applicable to private companies. As a result, the Company’s consolidated financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective date for new or revised accounting standards that are applicable to public companies.
Recently Adopted Accounting Pronouncements
In August 2018,October 2021, the Financial Accounting Standards Board (“FASB”("FASB") issued Accounting Standards Update (“ASU”) 2018-15,2021-08, Customer’sBusiness Combinations (Topic 805): Accounting for Implementation Costs IncurredContract Assets and Contract Liabilities from Contracts with Customers, which requires contract assets and contract liabilities acquired in a Cloud Computing Arrangementbusiness 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 is a Service Contract.would have been recorded by the acquiree before the acquisition under ASC 606. The amendments in this ASU 2018-15 requires implementation costs incurred bydo not affect the accounting for other assets or liabilities that may arise from revenue contracts with customers in cloud computing arrangements to be deferred over the noncancelable term of the cloud-computing arrangements plus any optional renewal periods (1) that are reasonably certain to be exercised by the customeraccordance with ASC 606, such as refund liabilities, or (2) for which exercise of the renewal option is controlled by the cloud service provider. Thisin a business combination, such as customer-related intangible assets and contract-based intangible assets. The new guidance may be applied retrospectively or prospectively and is effective for fiscal years beginning after December 15, 2020,us for annual and interim periods within annual periods beginning after December 15, 2021. On January 1, 2021, the Company adopted2022. Early adoption of this ASU 2018-15is permitted, including adoption in an interim period. This update should be applied prospectively and cloud computing implementation costs incurredto business combinations occurring on or after January 1, 2021 are included in other assets in the consolidated balance sheet and are presented within operating cash flows. As of June 30, 2021, capitalized implementation costs for cloud computing arrangements were not material.
In October 2018, the FASB issued ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to the Related Party Guidance for Variable Interest Entities. ASU 2018-17 changes how entities evaluate decision-making fees under the variable interest entity guidance. To determine whether decision-making fees represent a variable interest, an entity considers indirect interests held through related parties under common control on a proportional basis, rather than in their entirety. This guidance is effective for fiscal years, beginning after December 15, 2020 and interim periods within fiscal years beginning after December 15, 2021, with early adoption permitted. All entities are required to apply the amendments in this ASU retrospectively with a cumulative-effect adjustment to retained earnings or accumulated deficit at the beginningdate of the earliest period presented. The Company adopted this guidance on January 1, 2021, and the adoption did not have any impact to the Company’s consolidated financial statements.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The objective of the guidance is to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and to provide more consistent application to improve the comparability of financial statements. The guidance is effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022, with early adoption permitted. The Companyamendments. We early adopted this guidance on January 1, 2021,2022, and the adoption did not have a material impact to the Company’s consolidated financial statements.
8
Recently Issued Accounting Pronouncements - Not Yet Adopted
In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, to require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The ASU also amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. In February 2020, the FASB issued ASU 2020-02, Financial Instruments - Credit Losses (Topic 326) and Leases (Topic 842) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842) (SEC Update), which amends the language in Subtopic 326-20 and addresses questions primarily regarding documentation and company policies. The guidance in ASU 2016-13 and ASU 2020-02 related to credit losses is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of the new guidance on itsour 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 LIBORLIBO 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. The Company is currently evaluating the impact ofWe adopted this guidance on January 1, 2022, and the adoption of this ASU on itsdid 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 Combinations
RxSaver, Inc.Combination
On April 30, 2021, the CompanyFebruary 18, 2022, we acquired all of the outstanding equity interests of RxSaver,flipMD, Inc. (“RxSaver”("flipMD"). Similar to the Company’s prescription offering business, RxSaver operates a price comparison platform to provide discount offerings through partnerships with PBMs. The acquisition expands the Company’s business capabilities and consumer reach, particularly with respect to its prescription offering. The aggregate purchase consideration was for $50.77.0 million in cash. The purchase consideration iscash, subject to net working capitalcustomary closing adjustments. flipMD is a marketplace connecting practicing physicians with organizations seeking on-demand medical expertise and other closing adjustments.
Goodwill associatedexpands both our engagement with this acquisition totaled $25.9 millionhealthcare providers and primarily related to the expected long-term synergies and other benefits, including the acquired assembled workforce. The acquisition was considered an acquisition of assets for tax purposes and, accordingly, goodwill is deductible for tax purposes. Identifiable intangible assets related to this acquisition totaled $25.2 million, of which $20.7 million was attributable to a customer related intangible asset, with an estimated useful life of 13 years; and $4.5 million was attributable to developed technology and a tradename with estimated useful lives ranging from 1 to 3 years. In addition, the Company acquired tangible assets of $3.6 million, principally comprised of accounts receivable, and assumed liabilities of $4.0 million.
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 RxSaverflipMD acquisition has not been presented because the effects arewere not material to the Company’sour condensed consolidated financial statements.
The purchase accounting for the RxSaverflipMD acquisition remains incomplete with respect to acquired tangible and intangible assets and liabilities assumed as management continues to gather and evaluate information about circumstances that existed as of the acquisition date.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.
HealthiNation Inc.
On April 16, 2021, the Company acquired all of the outstanding equity interests of HealthiNation Inc. (“HealthiNation”). HealthiNation is a leading provider of engaging and informative health video content across all main categories of healthy living. The acquisition allows the Company to supplement and expand the services currently available under its existing pharma manufacturer solutions platform. The aggregate purchase consideration was $76.6 million in cash. The purchase consideration is subject to net working capital and other closing adjustments.
9
Goodwill associated with this acquisition totaled $33.2 million and primarily related to the expected long-term synergies and other benefits, including the acquired assembled workforce. The acquisition was considered a stock acquisition for tax purposes and, accordingly, goodwill is not deductible for tax purposes. Identifiable intangible assets related to this acquisition totaled $40.0 million, of which $28.0 million was attributable to a customer related intangible asset, with an estimated useful life of 11 years; $9.5 million was attributable to a content library with an estimated useful life of 3 years; $1.9 million was attributable to an order backlog, with an estimated useful life of 1 year; and $0.6 million was attributable to developed technology and a tradename with estimated useful lives of 1 year. In addition, the Company acquired tangible assets of $5.0 million, principally comprised of acquired cash and accounts receivable, and assumed liabilities of $1.6 million.
Unaudited supplemental pro forma financial information for the HealthiNation acquisition has not been presented because the effects are not material to the Company’s condensed consolidated financial statements.
The purchase accounting for the HealthiNation acquisition remains incomplete with respect to acquired tangible and intangible assets and liabilities assumed as management continues to gather and evaluate information about circumstances that existed as of the acquisition date. Measurement period adjustments, if any, will be recognized in the reporting period in which the adjustment amounts are determined within twelve months from the acquisition date.
Scriptcycle, LLC
On August 31, 2020, the Company acquired all of the equity interests of Scriptcycle, LLC (“Scriptcycle”). Scriptcycle specializes in managing prescription programs and primarily partners with regional retail pharmacy chains to provide discount offerings. The purpose of the acquisition was to help expand the Company’s business capabilities, particularly with respect to its prescription offering. The aggregate purchase consideration was $58.3 million, including the estimated fair value of contingent consideration of $0.8 million. The purchase consideration was subject to working capital and other closing adjustments. The maximum amount of contingent consideration payable was $2.9 million subject to the achievement of certain revenue thresholds through January 2021.
As of December 31, 2020, the fair value of the contingent consideration was $2.9 million, which represents the maximum amount of contingent consideration payable, based upon the Company’s assessment of the revenue thresholds that were achieved. The $2.9 million contingent consideration was paid in full during the three months ended June 30, 2021.
Goodwill associated with this acquisition totaled $24.9 million and primarily related to the expected long-term synergies and other benefits, including the acquired assembled workforce.The acquisition was considered an acquisition of assets for tax purposes and, accordingly, goodwill was deductible for tax purposes. Identifiable intangible assets related to this acquisition totaled $28.3 million, of which $25.3 million was attributable to a customer related intangible asset, with an estimated useful life of 11 years and $3.0 million was attributable to developed technology and a tradename with useful lives ranging from 1 to 9 years. In addition, the Company acquired current assets of $5.9 million and assumed liabilities of $1.1 million.
Unaudited supplemental pro forma financial information for the Scriptcycle acquisition has not been presented because the effects are not material to the Company’s condensed consolidated financial statements.
4. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following:
(in thousands) |
| June 30, |
|
| December 31, |
|
| March 31, |
|
| December 31, |
| ||||
Income taxes receivable |
| $ | 79,797 |
|
| $ | 28,564 |
|
| $ | 5,826 |
|
| $ | 8,331 |
|
Prepaid expenses |
|
| 14,246 |
|
|
| 17,484 |
|
|
| 20,189 |
|
|
| 21,307 |
|
Total prepaid expenses and other current |
| $ | 94,043 |
|
| $ | 46,048 |
|
| $ | 26,015 |
|
| $ | 29,638 |
|
10
5. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following:
(in thousands) |
| June 30, |
|
| December 31, |
|
| March 31, |
|
| December 31, |
| ||||
Accrued bonus and other payroll related |
| $ | 13,500 |
| $ | 13,607 |
|
| $ | 10,213 |
| $ | 24,031 |
| ||
Accrued marketing |
| 8,773 |
| 10,045 |
|
| 8,479 |
| 15,493 |
| ||||||
Deferred revenue |
| 8,899 |
| 6,852 |
|
| 10,319 |
| 6,869 |
| ||||||
Other accrued expenses |
|
| 2,587 |
|
| 7,188 |
|
|
| 4,801 |
|
|
| 4,339 |
| |
Total accrued expenses and other |
| $ | 33,759 |
| $ | 37,692 |
|
| $ | 33,812 |
|
| $ | 50,732 |
|
The Company expectsDeferred 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 June 30, 2021March 31, 2022 will be recognized as revenue within the nextsubsequent twelve months. Of the $6.9 million of deferred revenue included in the condensed consolidated balance sheet at December 31, 2020,2021, $1.4 million and $5.74.5 million was recognized as revenue during the three and six months ended June 30, 2021, respectively.March 31, 2022. Revenue recognized during the three and six months ended June 30, 2020March 31, 2021 of $0.94.3 million and $2.8 million, respectively, was included as deferred revenue at December 31, 2019.2020.
6. Income Taxes
The Company calculatesWe generally calculate income taxes in interim periods by applying an estimated annual effective income tax rate to (loss) income or loss before income taxes and by calculating the tax effect of discrete items recognized during the period.
The Company'ssuch periods. Our estimated annual effective income tax rate is based on itsour estimated full year income or loss and the related income taxes for each jurisdiction in which the Company operates.we operate. This rate can be affected by estimates of full year pretaxpre-tax income or loss and permanent differences.
The Company’s interimeffective income tax rate was 11.8% and estimated annual115.3% for the three months ended March 31, 2022 and 2021, respectively. The primary differences between our effective income tax rates differ fromand the U.S. Federalfederal statutory tax rate of 21.0% primarilyfor 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, and benefits from research and development tax credits. In addition, the Company'scredits and excess tax benefits from our equity awards. The effective income tax rate includes recognizedfor 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 its equity awardsthe 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 a discrete item.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, 2020, the Company2021, we had unrecognized tax benefits of $7.414.8 million.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 0 significant changes to the Company’sour unrecognized tax benefits during the three and six months ended June 30, 2021,March 31, 2022, and the Company doeswe do not expect to have any significant changes to unrecognized tax benefits through the end of 2021.2022.
7. Debt
The Company hasWe have a term loan with an original principal amount of $700.0 million (the “First Lien Term Loan Facility”) under itsour first lien credit agreement (the “First Lien Credit Agreement”) obtained through itsour wholly owned subsidiary GoodRx as borrower and collateralized by substantially all of theour assets of the Company and 100% of the equity of GoodRx. The First Lien Term Loan Facility requires quarterly payments through September 2025, with any unpaid principal and interest due upon maturity on in October 10, 2025,, and bears interest at a rate per annum equal to the LIBO Screen Rate plus a variable margin based on the Company’s most recently determined Net Leverage Ratio (as defined in the First Lien Credit Agreement), ranging from 2.75% to 3.00%. The effective interest rate on the First Lien Term Loan Facility for each of the three months ended June 30,March 31, 2022 and 2021 and 2020 was 3.39% and .3.83%, respectively. The effective interest rate on the First Lien Term Loan Facility for the six months ended June 30, 2021 and 2020 was 3.39% and 4.33%, respectively.
The CompanyWe also hashave a line of credit with a maximum principal amount of $100.0 million (the “Revolving Credit Facility”) associated with the First Lien Credit Agreement. The Revolving Credit Facilitywhich matures on inOctober 11, 2024 and bears interest at a rate equal to the LIBO Screen Rate plus a variable margin based on the Company’s most recently determined Net Leverage Ratio (as defined in the First Lien Credit Agreement),rates ranging from 2.50% to 3.00% on used amounts and 0.25% to 0.50% on unused amounts. There werewas 0 borrowingsborrowing outstanding underand the Revolving Credit Facility as of June 30, 2021 and December 31, 2020. There were outstanding letters of credit issued against the Revolving Credit Facility forwere $9.19.2 million as of June 30, 2021 and DecemberMarch 31, 2020,2022, which reduces the Company’sour available borrowings under the Revolving Credit Facility.
Our
11
The Company’s debt consisted of the following:
(in thousands) |
| June 30, |
|
| December 31, |
| ||
Principal balance under First Lien Term |
| $ | 677,611 |
|
| $ | 681,126 |
|
Less: Unamortized debt issuance costs |
|
| (12,705 | ) |
|
| (14,209 | ) |
|
| $ | 664,906 |
|
| $ | 666,917 |
|
(in thousands) |
| March 31, |
|
| December 31, |
| ||
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 June 30, 2021, the Company isMarch 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 the Company.us. At June 30, 2021, the Company wasMarch 31, 2022, we were in compliance with itsour covenants.
8. Commitments and Contingencies
Aside from the below, as of June 30, 2021,March 31, 2022, there were no material changes to the Company’sour commitments and contingencies as disclosed in the notes to our consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
Purchase Commitments
The Company entered into a commercial agreement with a third-party during the quarter ended March 31,our 2021 pursuant to which the Company committed to spend an aggregate of at least $3.0 million by the end of the fiscal year ending December 31, 2021 on certain advertising services. As of June 30, 2021, the remaining commitment was $1.2 million.
Leases
On May 27, 2021, the Company entered into a non-cancelable lease agreement with a third-party to lease additional office space that is adjacent to and expands its existing corporate headquarters in Santa Monica, California. The lease commences beginning in the year 2022 and expires in the year 2033 with minimum lease payments expected to total approximately $41.4 million over the term of the lease.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 the Companyus and certain of itsour executive officers in the United States District Court for the Central District of California (Case No. 2:20-cv-11444). On January 8, 2021, Bryan Kearney, individually and on behalf of all others similarly situated, also filed a class action lawsuit against the Companyus and certain of itsour executive officers in the United States District Court for the Central District of California (Case No. 2:21-cv-00175). The plaintiffs seek compensatory damages as well as interest, fees and costs. The complaints allege violations of Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and assert that the Companywe failed to disclose to investors that Amazon.com, Inc. was developing its own mobile and online prescription medication ordering and fulfillment service that would compete directly with the Company.us. According to the
9
complaints, when Amazon announced its competitor service, the Company’sour stock price fell, causing investor losses. Lead plaintiff applications were submitted February 16, 2021, and on April 8, 2021, the court consolidated the 2 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. The CompanyWe 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 Company believes it hascourt 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 intendsintend to defend itselfourselves vigorously. This litigation is at preliminary stages, and the outcome of any complex legal proceeding is inherently unpredictable and subject to significant uncertainties. Based upon information presently known to management, the Company has not accrued a loss for this matter as a loss is not probable and reasonably estimable. While it is possible a loss may have been incurred, the Company is unable to estimate a loss or range of loss in this matter.
On April 29, 2021, and May 5, 2021 and September 15, 2021, Neesha Patel, and Wayne Geist and Alan Pinyavat, respectively, each filed a derivative lawsuit purportedly on behalf of the Companyus against certain of itsour 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. 2:21-cv-03829,1:21-cv-01309, respectively). The plaintiffs assert claims for breach of fiduciary duty and contribution under the Exchange Act. Neesha Patel asserts additional claims for
12
unjust enrichment and corporate waste.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 the Company’s board.our board of directors. The Company intends to seek dismissal of these cases, or a stayderivative lawsuits are stayed pending the outcome of the class action lawsuit. Any liability
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 claims allegedmatters described above as a loss is not currently 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 if any, is not reasonably estimable.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, the Companywe may become subject to, and is presently involved in, legal proceedings, claims and litigation. Such matters are subject to many uncertainties and outcomes are not predictable with assurance. Accruals for loss contingencies are recorded when a loss is probable, and the amount of such loss can be reasonably estimated.
The Company does not believe that the disposition of matters that are pending or asserted will have a material effect on its consolidated financial statements.
Indemnification
The Company’s amended and restated bylaws provides that it will indemnify the Company’s directors and officers to the fullest extent permitted by the Delaware General Corporation Law. Certain of the Company’s officers and directors are also a party to indemnification agreements with the Company. Pursuant to the Company’s indemnification agreements and directors’ and officers’ liability insurance, certain of the Company’s officers and directors will be indemnified and insured against the cost of defense, settlement or payment of a judgment under certain circumstances. The maximum potential amount of future payments the Company could be required to make under these indemnification provisions is indeterminable. The Company has never paid a material claim, nor has the Company been involved in litigation, with respect to these indemnification arrangements. As of June 30, 2021 and December 31, 2020, the Company has not accrued a liability for these guarantees as, the likelihood of incurring a payment obligation, if any, in connection with these guarantees is not probable or reasonably estimable.10
9. Revenue
Revenue consisted of the following:
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
(in thousands) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Prescription transactions revenue |
| $ | 144,857 |
|
| $ | 109,548 |
|
| $ | 278,918 |
|
| $ | 232,565 |
|
Subscription revenue (1) |
|
| 14,316 |
|
|
| 6,358 |
|
|
| 26,323 |
|
|
| 11,998 |
|
Other revenue |
|
| 17,462 |
|
|
| 7,389 |
|
|
| 31,825 |
|
|
| 12,140 |
|
Total revenue |
| $ | 176,635 |
|
| $ | 123,295 |
|
| $ | 337,066 |
|
| $ | 256,703 |
|
(1) Represents revenue from the Company's 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. |
|
13
|
| Three Months Ended |
| |||||
(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 |
|
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, 2020 |
|
| 21,528 |
|
| $ | 6.22 |
|
|
|
|
|
| |
Granted |
|
| 0 |
|
|
| 0 |
|
|
|
|
|
| |
Exercised |
|
| (513 | ) |
|
| 5.23 |
|
|
|
|
|
| |
Expired / Cancelled / Forfeited |
|
| (253 | ) |
|
| 6.07 |
|
|
|
|
|
| |
Outstanding at March 31, 2021 |
|
| 20,762 |
|
| $ | 6.24 |
|
| 7.9 years |
| $ | 680,528 |
|
Granted |
|
| 0 |
|
|
| 0 |
|
|
|
|
|
| |
Exercised |
|
| (2,609 | ) |
|
| 5.09 |
|
|
|
|
|
| |
Expired / Cancelled / Forfeited |
|
| (222 | ) |
|
| 7.71 |
|
|
|
|
|
| |
Outstanding at June 30, 2021 |
|
| 17,931 |
|
| $ | 6.39 |
|
| 7.7 years |
| $ | 531,079 |
|
Exercisable at June 30, 2021 |
|
| 8,756 |
|
| $ | 4.36 |
|
| 6.8 years |
| $ | 277,143 |
|
|
|
|
|
|
|
|
| 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 |
| $ | 165,307 |
|
Exercisable at March 31, 2022 |
|
| 7,139 |
|
| $ | 5.80 |
|
| 6.0 years |
| $ | 101,277 |
|
There were
011
stock options granted during the three and six months ended June 30, 2021.
The weighted-average grant date fair value per share of stock options granted for the three and six months ended June 30, 2020March 31, 2022 was $3.1710.92 and $3.04, respectively. The aggregate intrinsic value of options exercised for the three months ended June 30, 2021 and 2020 was $79.9 million and $1.0 million, respectively. The aggregate intrinsic value of options exercised for the six months ended June 30, 2021 and 2020 was $98.6 million and $2.4 million, respectively.
All options outstanding at June 30, 2021 are options to purchase shares of Class A common stock. The fair value of option awards issued with service or service and performance vesting conditions are estimated on the grant date using the Black-Scholes option pricing model. The Company does not have material stock options issued with market vesting conditions.
.
For the three months ended June 30,March 31, 2022 and 2021, and 2020, the stock-based compensation expense related to stock options was $3.92.0 million and $1.7 million, respectively. For the six months ended June 30, 2021 and 2020, the stock-based compensation expense related to stock options was $8.1 million and $3.44.2 million, respectively. At June 30, 2021,March 31, 2022, there was $26.531.7 million of total unrecognized stock-based compensation cost related to stock options, which is expected to be recognized over a weighted average remaining service period of 2.52.0 years.
Restricted Stock Awards and Restricted Stock Units
A summary of the Restricted Stock Awards (“RSAs”) and Restricted Stock UnitUnits (“RSUs”) activity is as follows:
|
| Restricted |
|
| Restricted |
|
| Restricted |
|
| Weighted |
| ||||
|
| Stock |
|
| Common |
|
| Common |
|
| Grant Date |
| ||||
(in thousands, except per share amounts) |
| Awards |
|
| Stock |
|
| Stock |
|
| Fair Value |
| ||||
Nonvested restricted stock awards or restricted |
|
| 1,409 |
|
|
| 2,790 |
|
|
| 7,698 |
|
| $ | 26.74 |
|
Granted |
|
| 0 |
|
|
| 647 |
|
|
| 0 |
|
|
| 44.12 |
|
Vested |
|
| 0 |
|
|
| (95 | ) |
|
| (513 | ) |
|
| 29.12 |
|
Forfeited |
|
| 0 |
|
|
| (17 | ) |
|
| 0 |
|
|
| 42.31 |
|
Nonvested restricted stock awards or restricted |
|
| 1,409 |
|
|
| 3,325 |
|
|
| 7,185 |
|
| $ | 28.05 |
|
Granted |
|
| 0 |
|
|
| 618 |
|
|
| 0 |
|
|
| 37.86 |
|
Vested |
|
| (470 | ) |
|
| (118 | ) |
|
| (513 | ) |
|
| 18.68 |
|
Forfeited |
|
| 0 |
|
|
| (67 | ) |
|
| 0 |
|
|
| 36.61 |
|
Nonvested restricted stock awards or restricted |
|
| 939 |
|
|
| 3,758 |
|
|
| 6,672 |
|
| $ | 29.44 |
|
14
|
| Restricted |
|
| Restricted |
|
| Restricted |
|
| Weighted |
| ||||
|
| Stock |
|
| Common |
|
| Common |
|
| Grant Date |
| ||||
(in thousands, except per share amounts) |
| Awards |
|
| Stock |
|
| Stock |
|
| Fair Value |
| ||||
Nonvested restricted stock awards or restricted |
|
| 939 |
|
|
| 4,431 |
|
|
| 5,645 |
|
| $ | 29.64 |
|
Granted |
|
| 0 |
|
|
| 2,283 |
|
|
| 0 |
|
|
| 17.88 |
|
Vested |
|
| 0 |
|
|
| (309 | ) |
|
| (513 | ) |
|
| 31.83 |
|
Forfeited |
|
| 0 |
|
|
| (201 | ) |
|
| 0 |
|
|
| 38.32 |
|
Nonvested restricted stock awards or restricted |
|
| 939 |
|
|
| 6,204 |
|
|
| 5,132 |
|
| $ | 27.15 |
|
There were 0 RSUs granted or outstanding during the three and six months ended June 30, 2020.
Restricted Stock Awards
For the three months ended June 30, 2021 and 2020, total stock-based compensation expense related to RSAs was $0.5 million and $0.4 million, respectively. For the six months ended June 30, 2021 and 2020, total stock-based compensation expense related to RSAs was $1.0 million and $0.9 million, respectively. At June 30, 2021, there was $3.2 million of total unrecognized stock-based compensation cost related to these RSAs which is expected to be recognized over the remaining service period of 1.8 years. There were 0 RSAs granted subsequent to December 31, 2019.
Restricted Stock Units for Class A Common Stock
For the three and six months ended June 30,March 31, 2022 and 2021, totalthe stock-based compensation expense related to RSUs for Class A common stock was $12.313.8 million and $24.111.8 million, respectively. At June 30, 2021,March 31, 2022, there was $131.7166.2 million of total unrecognized stock-based compensation cost related to these RSUs, which is expected to be recognized over thea weighted average remaining service period of 3.43.0 years.
Restricted Stock Units for Class B Common Stock
OnIn September 11, 2020, theour board of directors granted RSUs covering an aggregate of 24,633,06624.6 million shares of Class B common stock to the Company’sour Co-Chief Executive Officers (the “Founders Awards”), subject to the completion of our IPO and continued employment through the Company’s initial public offering.applicable vesting dates. Each of theour Co-Chief Executive Officers received (i) 8,211,0228.2 million RSUs that vest based on the achievement of certain stock price goals ranging from $6.07 per share to $51.28 per share, subject to continued employment through the applicable vesting date (the “Performance-Vesting Founders Awards”) and (ii) 4,105,5114.1 million RSUs that vest and settle in equal quarterly installments over four years, subject to continued employment through the applicablecertain vesting dateacceleration terms (the “Time-Vesting Founders Awards”). The grant date fair value of these awards was $533.3 million. The Performance-Vesting Founders Awards vested during the fourth quarterAll of 2020 and will be settled in shares of common stock in October 2023 or, if earlier, upon a qualifying change in control event or to satisfy tax withholding requirements. The Time-Vesting Founders Awards are subject to vesting acceleration terms upon a qualifying change in control. All the stock price goals with respect to the Performance-Vesting Founders Awards were achieved as of October 22, 2020. As a result, all 16,422,044 Performance-Vesting Founders Awards vested during the year ended December 31, 2020. As of June 30, 2021, the Company has recognized a cumulative $427.0 million of stock-based compensation expense related to the Founders Awards, of which $107.2 million related to the Time-Vesting Founders Awards and $319.8 million related to the Performance-Vesting Founders Awards. During the three and six months ended June 30, 2021, the Company recognized stock-based compensation expense related to the Time-Vesting Founders Awards of $24.0 million and $54.0 million, respectively. At June 30, 2021, there was $106.3 million of total unrecognized stock-based compensation cost related to the Time-Vesting Founders Awards, which is expected to be recognized over the weighted average remaining service period of 1.9 years. The Company expects to recognize a total of $36.9 million in stock-based compensation expense related to the Time-Vesting Founders Awards in the second half of 2021.
15
As the Performance-Vesting Founders Awards vested in October 2020 the Companyand we settled 0.7 million RSUs during the fourth quarter of 2020,at that time sufficient to satisfy FICAcertain tax withholding obligations due in the year of vesting. The remaining 15.7 million Performance-Vesting Founders Awards shares will not be issuedsettled until October 2023 or, if earlier, upon a change in control event, as defined in the RSU agreements governing the Founders Awards.
For the three months ended March 31, 2022 and 2021, the stock-based compensation expense related to the Time-Vesting Founders Awards was $13.9 million and $30.0 million, respectively. At March 31, 2022, there was $55.5 million of total unrecognized stock-based compensation cost related to the Time-Vesting Founders Awards, which is expected to be recognized over a weighted average remaining service period of 1.3 years.
12
11.12. Basic and Diluted Earnings Per Share
The computation of earnings per share for the three and six months ended June 30,March 31, 2022 and 2021 and 2020 is as follows:
|
| Three Months Ended |
|
| Six Months Ended |
|
| Three Months Ended |
| |||||||||||||||
(in thousands, except per share amounts) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net income |
| $ | 31,061 |
|
| $ | 27,337 |
|
| $ | 32,729 |
|
| $ | 54,683 |
|
| $ | 12,293 |
|
| $ | 1,668 |
|
Less: Undistributed earnings allocated to |
|
| 0 |
|
| (9,674 | ) |
|
| 0 |
|
|
| (19,358 | ) | |||||||||
Net income attributable to common stockholders - |
| $ | 31,061 |
|
| $ | 17,663 |
|
| $ | 32,729 |
|
| $ | 35,325 |
| ||||||||
Add: Undistributed earnings reallocated to holders |
|
| 0 |
|
| 179 |
|
| 0 |
| 349 |
| ||||||||||||
Net income attributable to common stockholders - |
| $ | 31,061 |
|
| $ | 17,842 |
|
| $ | 32,729 |
|
| $ | 35,674 |
| ||||||||
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Weighted average shares - basic |
|
| 408,363 |
|
|
| 230,160 |
|
|
| 407,273 |
|
|
| 230,020 |
|
|
| 414,739 |
|
|
| 406,170 |
|
Dilutive impact of stock options, restricted stock |
|
| 20,504 |
|
| 6,730 |
|
| 21,955 |
|
| 6,537 |
|
|
| 12,639 |
|
|
| 23,407 |
| |||
Weighted average shares - diluted |
|
| 428,867 |
|
| 236,890 |
|
| 429,228 |
|
| 236,557 |
|
|
| 427,378 |
|
|
| 429,577 |
| |||
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Basic |
| $ | 0.08 |
|
| $ | 0.08 |
|
| $ | 0.08 |
|
| $ | 0.15 |
|
| $ | 0.03 |
|
| $ | 0.00 |
|
Diluted |
| $ | 0.07 |
|
| $ | 0.08 |
|
| $ | 0.08 |
|
| $ | 0.15 |
|
| $ | 0.03 |
|
| $ | 0.00 |
|
The following weighted average potentially dilutive shares were excluded from the computation of diluted earnings per share for the periods presented because including them would have been antidilutive:
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
(in thousands) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Redeemable convertible preferred stock |
|
| 0 |
|
|
| 126,046 |
|
|
| 0 |
|
|
| 126,046 |
|
Stock options, restricted stock awards and restricted |
|
| 3,277 |
|
|
| 11,556 |
|
|
| 1,904 |
|
|
| 11,309 |
|
|
| Three Months Ended |
| |||||
(in thousands) |
| 2022 |
|
| 2021 |
| ||
Stock options and restricted stock units |
|
| 4,902 |
|
|
| 531 |
|
12.13. Subsequent EventsEvent
On July 7, 2021, the CompanyApril 14, 2022, we acquired substantially all of the assetsequity interests of RxNXT LLCvitaCare Prescription Services, Inc. (“RxNXT”vitaCare”), a wholly-owned subsidiary of TherapeuticsMD, Inc., for $14.5150.0 million in cash subjectpaid at closing and contingent consideration of up to customary closing adjustments. RxNXT$7.0 million payable in cash based upon its achievement of certain specified revenue results through 2023. We also established a management incentive plan under which certain continuing vitaCare employees would be eligible to receive up to $10.0 million of additional compensation upon achievement of certain performance milestones. vitaCare is a prescription technology platform.and service platform that simplifies the prescription fulfillment process for consumers taking brand medications by helping them gain access to therapies and stay on those therapies for as long as medically appropriate. The purpose of the acquisition is to helpstrengthen and expand the Company’s business capabilities, particularly with respect to its prescription offering. services currently available under our existing pharma manufacturer solutions platform.
The acquisition will be accounted for as a business combination under Accounting Standard CodificationASC 805, Business CombinationsCombinations. , using the acquisition method of accounting, which among other things, requires the acquired assets and assumed liabilities be recorded at their fair values. The determination of the fair values of the acquired assets and assumed liabilities is incomplete due to the recent date of the acquisition. The results of operations of RxNXT will be included in the consolidated results of the Company beginning from the date of acquisition.
On July 21, 2021, the Company’s board of directors granted equity awards to certain employees comprised principally of RSUs for 0.5 million shares of Class A common stock, which will substantially vest over a four-year period. The Company estimates the grant date fair value of these RSUs is approximately $15.2 million, which will be recognized as stock-based compensation cost, net of forfeitures that occur, over approximately four years.
1613
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 2020Annual Report on Form 10-K for the year ended December 31, 2021 (“2021 10-K") filed with the SEC on March 12, 2021.1, 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 20202021 10-K and this Quarterly Report on Form 10-Q and other factors set forth in other parts of this Quarterly Report on Form 10-Q and our filings with the SEC.
Glossary of Selected Terminology
As used in this Quarterly Report on Form 10-Q, unless the context otherwise requires, references to:
14
17
Certain monetary amounts, percentages, and other figures included in this Quarterly Report on Form 10-Q have been subject to rounding adjustments. Percentage amounts included in this Quarterly Report on Form 10-Q have not in all cases been calculated on the basis of such rounded figures, but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this Quarterly Report on Form 10-Q may vary from those obtained by performing the same calculations using the figures in our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. Certain other amounts that appear in this Quarterly Report on Form 10-Q may not sum due to rounding.
Overview
Our mission is to help Americans get the healthcare they need at a price they can afford. To achieve this, we are building the leading, consumer-focused digital healthcare platform in the United States.
Healthcare consumers in the United States face an increasing number of challenges. These include a lack of affordability, transparency, and access to care. Additionally, healthcare professionals’ lack of access to current prescription pricing and out of pocket consumer cost information exacerbate the challenges that healthcare consumers face. GoodRx was founded to solve these challenges. We started with a price comparison tool for prescriptions, offering consumers free access to lower prices on their medication, and have been able to deliver consumers significant value. Based on a study we conducted in June 2021, consumers of our prescription offering saved an average of 79% off retail prices on prescription medication during the year 2020. In that same year, for the 100 most purchased medications, we beat the average commercial insurance copay 55% of the time (89% of the time when ignoring geographic proximity and convenience considerations), and consumers who paid less than the average commercial insurance copay saved on average 52% off the average copays. Today, our expanded platform also provides access to brand medication savings programs, affordable and convenient medical provider consultations and lab tests via our telehealth offerings, GoodRx Care and the GoodRx Telehealth Marketplace, and other healthcare and wellness related content. Whether a consumer is insured or uninsured, young or old, or suffers from an acute or a chronic ailment, we strive to be at the consumer’s side throughout their healthcare journey. We believe that our offerings provide significant savings to consumers, and can help drive greater medication adherence, faster treatment and better patient outcomes that also benefit the broader healthcare ecosystem and its stakeholders. These all contribute to a healthier, happier society.
We believe our financial results reflect the significant market demand for our offerings and the value that we provide to the broader healthcare ecosystem. Our revenue grew 43% inFor the three months ended June 30, 2021March 31, 2022 as compared to $176.6the same period of 2021:
Adjusted EBITDA is aand Adjusted EBITDA Margin are non-GAAP financial measure.measures. For a reconciliation and presentation of Adjusted EBITDA and Adjusted EBITDA Margin to thetheir most directly comparable GAAP financial measure,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”Metrics—Non-GAAP Financial Measures" below.
We have been focused on capital efficiency and delivering on a cash generative monetization model since inception. Cash flow provided by operating activities was $80.4 million in the six months ended June 30, 2021, compared to $83.8 million in the six months ended June 30, 2020.
18
We believe that our performance and future success depend on a number of factors that present significant opportunities for us but also pose risks and challenges. For discussion of these factors, please see our 2020 10-K and this Quarterly Report on Form 10-Q under the sections titled “Risk Factors."
On September 25, 2020, we completed our IPO by issuing 28,615,034 shares of our Class A common stock at a price to the public of $33.00 per share, resulting in net proceeds to us of $886.9 million, after deducting the underwriting discount of $52.5 million and offering expenses of $4.9 million. Additionally, certain existing stockholders sold an aggregate of 11,192,657 shares. On September 25, 2020, we also completed the sale of 3,030,303 shares of our Class A common stock at a purchase price of $33 per share to SLP Geology Aggregator, L.P., resulting in proceeds to us of $100.0 million. SLP Geology Aggregator, L.P. is an investment fund associated with Silver Lake Partners.
Impact of COVID-19
We continue to closely monitor how the spread of COVID-19 is affecting our employees, customers and business operations. The number of Monthly Active Consumers decreased and our prescription offering experienced a decline in activity in the second quarter of 2020 as compared to the first quarter of 2020 as many consumers avoided visiting healthcare professionals and pharmacies in-person, which we believe has had a similar effect across the industry. The number of Monthly Active Consumers then sequentially increased beginning in the third quarter of 2020 and through the second quarter of 2021 as consumers partially resumed their interaction with the healthcare system. Even though we saw improved activity in our prescription offering, we believe COVID-19 continues to have an adverse impact on the growth of our prescription offeringstransactions 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 offering,transactions and subscription offerings, which would have an adverse effect on our business, financial condition and results of operations.
Conversely, pandemics, epidemics and outbreaks may significantly and temporarily increase demand for our telehealth offerings. COVID-19 has significantly accelerated the awareness and use of our telehealth offerings. While we have experienced a significant increase in demand for the telehealth offerings, there can be no assurance that the levels of interest, demand and use of our telehealth offerings will continue at current levels or will not decrease during or after the pandemic. Any such decrease could have an adverse effect on our growth and the success of our telehealth offerings.
Additionally, while the potential economic impact brought by, and the duration of any pandemic, epidemic or outbreak of an infectious disease, including COVID-19, may be difficult to assess or predict, the widespread COVID-19 pandemic has resulted in, and may continue to result in, significant disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity.
The full extent to which the outbreak of COVID-19 will continue to impact our business, results of operations and financial condition is still unknown and will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the pandemic, new variants of the virus, availability and adoption of effective vaccines, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume. Even after the outbreak of COVID-19 has subsided, we may experience materially adverse impacts to our business as a result of its global economic impact, including any recession that has occurred or may occur in the future.
Seasonality
We typically experience stronger consumer demand during the first and fourth quarters of each year, which coincide with generally higher consumer healthcare spending, doctor office visits, annual benefit enrollment season, and seasonal cold and flu trends. 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 have seensaw the impact of the COVID-19 pandemic further disrupt these trends, which may continue in future periods.
Recent DevelopmentsDevelopment
On July 7, 2021,In April 2022, we acquired substantially all of the assets of RxNXT LLC (“RxNXT”vitaCare, Inc. ("vitaCare") for $14.5 million in cash, subject. Refer to customary closing adjustments. RxNXT is a prescription technology platform. The purpose of the acquisition is to help expand our business capabilities, particularly with respectNote 13 to our prescription offering.
The results of operations of RxNXT will becondensed consolidated financial statements included elsewhere in our consolidated results beginning from the date of acquisition.
19
this Quarterly Report on Form 10-Q.
Key Financial and Operating MetricsMetrics
We use Monthly Active Consumers, subscription plans, Adjusted EBITDA and Subscribers
Adjusted EBITDA Margin to assess our performance, make strategic and offering decisions and build our financial projections. The numbersnumber of Monthly Active Consumers and subscriberssubscription 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. Beginning in the fourth quarter of 2020, our
Monthly Active Consumers number
Our Monthly Active Consumers includes consumers we acquired through the acquisition of ScriptcycleRxSaver, Inc. (acquired in August 2020.April 2021) beginning in the third quarter of 2021. RxSaver, Inc. Monthly Active Consumers are estimated due to incomplete consumer information.
| Three Months Ended |
| |||||||||||||
| June 30, |
| March 31, |
| December 31, |
| September 30, |
| June 30, |
| |||||
| 2021 |
| 2021 |
| 2020 |
| 2020 |
| 2020 |
| |||||
| (in millions) |
| |||||||||||||
Monthly Active Consumers |
| 6.0 |
|
| 5.7 |
|
| 5.6 |
|
| 4.9 |
|
| 4.4 |
|
| 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 |
|
The number of Monthly Active Consumers grew in the three months ended June 30, 2021 to 6.0 million, compared to 4.4 million in the three months ended June 30, 2020.Subscription Plans
| As of |
| |||||||||||||
| June 30, |
| March 31, |
| December 31, |
| September 30, |
| June 30, |
| |||||
| 2021 |
| 2021 |
| 2020 |
| 2020 |
| 2020 |
| |||||
| (in millions) |
| |||||||||||||
Subscribers |
| 1.1 |
|
| 0.9 |
|
| 0.8 |
|
| 0.7 |
|
| 0.6 |
|
| 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 |
|
The number of subscribers grew to 1.1 million as of June 30, 2021, compared to 0.6 million as of June 30, 2020.
Adjusted EBITDANon-GAAP Financial Measures
Adjusted EBITDA is aand Adjusted EBITDA Margin are key measuremeasures we use to assess our financial performance and isare also used for internal planning and forecasting purposes. We believe Adjusted EBITDA is helpful to investors, analysts and other interested parties because itthey can assist in providing a more consistent and comparable overview of our operations across our historical financial periods. In addition, this measure isthese 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.
20
The following table presents a reconciliation of Adjusted EBITDA to net income, the most directly comparable financial measure calculated in accordance with GAAP: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 |
|
| Six Months Ended |
|
| Three Months Ended |
| |||||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||||||||||
|
| (dollars in thousands) |
| |||||||||||||||||||||
(dollars in thousands) |
| 2022 |
|
| 2021 |
| ||||||||||||||||||
Net income |
| $ | 31,061 |
|
| $ | 27,337 |
|
| $ | 32,729 |
|
| $ | 54,683 |
|
| $ | 12,293 |
| $ | 1,668 |
| |
Adjusted to exclude the following: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Interest income |
| (13 | ) |
|
| (41 | ) |
|
| (29 | ) |
|
| (116 | ) |
| (52 | ) |
| (16 | ) | |||
Interest expense |
| 5,906 |
|
|
| 6,795 |
|
|
| 11,811 |
|
|
| 15,433 |
|
| 5,869 |
| 5,905 |
| ||||
Income tax (benefit) expense |
| (37,305 | ) |
|
| 7,661 |
|
|
| (49,860 | ) |
|
| 15,427 |
| |||||||||
Income tax expense (benefit) |
| 1,651 |
| (12,555 | ) | |||||||||||||||||||
Depreciation and amortization |
| 8,369 |
|
|
| 4,521 |
|
|
| 13,730 |
|
|
| 8,866 |
|
| 11,373 |
| 5,361 |
| ||||
Other income, net |
| — |
|
|
| (16 | ) |
|
| — |
|
|
| (21 | ) | |||||||||
Financing related expenses (1) |
| 58 |
|
|
| 188 |
|
|
| 315 |
|
|
| 1,306 |
|
| 4 |
| 257 |
| ||||
Acquisition related expenses (2) |
| 3,022 |
|
|
| 780 |
|
|
| 6,070 |
|
|
| 1,243 |
|
| 1,973 |
| 3,048 |
| ||||
Stock-based compensation expense (3) |
| 40,676 |
|
|
| 2,121 |
|
|
| 87,202 |
|
|
| 4,331 |
| |||||||||
Restructuring related expenses (3) |
| 311 |
| — |
| |||||||||||||||||||
Stock-based compensation expense |
| 30,149 |
| 46,526 |
| |||||||||||||||||||
Payroll tax expense related to stock-based compensation |
| 2,016 |
|
|
| 22 |
|
|
| 2,844 |
|
|
| 81 |
|
| 1,083 |
| 828 |
| ||||
Loss on abandonment of operating lease assets (4) |
|
| 780 |
|
|
| — |
|
|
| 780 |
|
|
| — |
| ||||||||
Adjusted EBITDA |
| $ | 54,570 |
|
| $ | 49,368 |
|
| $ | 105,592 |
|
| $ | 101,233 |
|
| $ | 64,654 |
|
| $ | 51,022 |
|
Revenue |
| $ | 203,329 |
|
| $ | 160,431 |
| ||||||||||||||||
Net income margin (4) |
| 6.0 | % |
| 1.0 | % | ||||||||||||||||||
Adjusted EBITDA Margin |
| 30.9 | % |
|
| 40.0 | % |
|
| 31.3 | % |
|
| 39.4 | % |
| 31.8 | % |
| 31.8 | % |
Adjusted EBITDA increased 11% in the three months ended June 30, 2021 to $54.6 million, compared to $49.4 million in three months ended June 30, 2020; and increased 4% in the six months ended June 30, 2021 to $105.6 million, compared to $101.2 million in the six months ended June 30, 2020. This increase was principally a function of the continued growth of our business partially offset by our continued investments in product development and technology, investments in our general and administrative infrastructure as we started operatingNet income margin represents net income as a public company, an increase in sales and marketing spend, and an increase in costpercentage of revenue relative to revenue due primarily to offering mix.
Adjusted EBITDA Margin was 30.9% in the three months ended June 30, 2021, a decrease from 40.0% in the three months ended June 30, 2020; and 31.3% in the six months ended June 30, 2021, a decrease from 39.4% in the six months ended June 30, 2020. This decrease was primarily due to an increase in marketing spend relative to revenue compared to the second quarter of 2020, in which we proactively reduced our marketing spend at the onset of the COVID-19 pandemic, as well as continued investments in product development and technology, an increase in cost of revenue relative to revenue due to offering mix, and investments in our general and administrative infrastructure.
We expect our Adjusted EBITDA and Adjusted EBITDA Margin to fluctuate primarily based on the level of our investments in sales and marketing and product development and technology relative to changes in revenue.
We generally expect to continue to invest in sales and marketing in the near-term, but will continue to evaluate the impact of COVID-19 on our business and actively manage our sales and marketing spend, including investment in consumer acquisition, which is largely variable, as market conditions change. We also intend to continue to invest in product development and technology to continue to improve our platform, introduce new offerings and scale existing ones. Additionally, we expect to continue to invest in our general and administrative infrastructure to support our operation as a public company.
21
Results of Operations
The following table sets forth information comparing the components of our results of operations for the periods indicated:
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
|
| (in thousands) |
| |||||||||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Prescription transactions revenue |
| $ | 144,857 |
|
| $ | 109,548 |
|
| $ | 278,918 |
|
| $ | 232,565 |
|
Subscription revenue |
|
| 14,316 |
|
|
| 6,358 |
|
|
| 26,323 |
|
|
| 11,998 |
|
Other revenue |
|
| 17,462 |
|
|
| 7,389 |
|
|
| 31,825 |
|
|
| 12,140 |
|
Total revenue |
|
| 176,635 |
|
|
| 123,295 |
|
|
| 337,066 |
|
|
| 256,703 |
|
Costs and operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cost of revenue, exclusive of depreciation and amortization presented |
|
| 11,090 |
|
|
| 6,824 |
|
|
| 21,518 |
|
|
| 12,843 |
|
Product development and technology |
|
| 29,567 |
|
|
| 11,962 |
|
|
| 55,727 |
|
|
| 22,287 |
|
Sales and marketing |
|
| 88,381 |
|
|
| 51,920 |
|
|
| 168,075 |
|
|
| 115,082 |
|
General and administrative |
|
| 39,579 |
|
|
| 6,332 |
|
|
| 83,365 |
|
|
| 12,219 |
|
Depreciation and amortization |
|
| 8,369 |
|
|
| 4,521 |
|
|
| 13,730 |
|
|
| 8,866 |
|
Total costs and operating expenses |
|
| 176,986 |
|
|
| 81,559 |
|
|
| 342,415 |
|
|
| 171,297 |
|
Operating (loss) income |
|
| (351 | ) |
|
| 41,736 |
|
|
| (5,349 | ) |
|
| 85,406 |
|
Other expense, net: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Other income, net |
|
| — |
|
|
| (16 | ) |
|
| — |
|
|
| (21 | ) |
Interest income |
|
| (13 | ) |
|
| (41 | ) |
|
| (29 | ) |
|
| (116 | ) |
Interest expense |
|
| 5,906 |
|
|
| 6,795 |
|
|
| 11,811 |
|
|
| 15,433 |
|
Total other expense, net |
|
| 5,893 |
|
|
| 6,738 |
|
|
| 11,782 |
|
|
| 15,296 |
|
(Loss) income before income taxes |
|
| (6,244 | ) |
|
| 34,998 |
|
|
| (17,131 | ) |
|
| 70,110 |
|
Income tax benefit (expense) |
|
| 37,305 |
|
|
| (7,661 | ) |
|
| 49,860 |
|
|
| (15,427 | ) |
Net income |
| $ | 31,061 |
|
| $ | 27,337 |
|
| $ | 32,729 |
|
| $ | 54,683 |
|
Components of our Results of Operations
Revenue
Our revenue is primarily derived from prescription transactions revenue that is generated when pharmacies fill prescriptions for consumers, and from other revenue streams such as our subscription offerings, pharma manufacturer solutions offering, and our telehealth offerings. All of our revenue has been generated in the United States.
17
22
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:
Other Expense, Net
Our other expense, net consists of the following:
18
Income Tax (Expense) Benefit (Expense)
Our income tax (expense) benefit (expense) consists of federal and state income taxes. We calculate income taxes in interim periods by applying an estimated annual effective income tax rate to (loss) income before income taxes and by calculating the tax effect of discrete items recognized during the period. Our effective income tax rate generally differs from the U.S. federal statutory tax rate of 21.0% primarily due to U.S. federal and state research and development tax credits,effects of non-deductible officers’ stock-based compensation expense, state income taxes, research and development tax credits, excess tax benefits from our equity awards.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:
23
|
| Three Months Ended |
| |||||
(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 |
|
| 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 June 30, 2021March 31, 2022 Compared to Three Months Ended June 30, 2020March 31, 2021
Revenue
|
| Three Months Ended |
|
| Change |
|
| Three Months Ended |
|
| Change |
| ||||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| $ |
|
| % |
| ||||||||||||||||||||
|
| (dollars in thousands) |
| |||||||||||||||||||||||||||||
(dollars in thousands) |
| 2022 |
|
| 2021 |
|
| $ |
|
| % |
| ||||||||||||||||||||
Prescription transactions revenue |
| $ | 144,857 |
|
| $ | 109,548 |
|
| $ | 35,309 |
|
|
| 32 | % |
| $ | 155,507 |
| $ | 134,061 |
| $ | 21,446 |
| 16 | % | ||||
Subscription revenue |
| 14,316 |
|
|
| 6,358 |
|
|
| 7,958 |
|
|
| 125 | % |
| 19,110 |
|
|
| 12,007 |
| 7,103 |
| 59 | % | ||||||
Pharma manufacturer solutions revenue |
| 23,469 |
|
|
| 9,369 |
| 14,100 |
| 150 | % | |||||||||||||||||||||
Other revenue |
|
| 17,462 |
|
|
| 7,389 |
|
|
| 10,073 |
|
|
| 136 | % |
|
| 5,243 |
|
|
| 4,994 |
|
|
| 249 |
|
| 5 | % | |
Total revenue |
| $ | 176,635 |
|
| $ | 123,295 |
|
| $ | 53,340 |
|
|
| 43 | % |
| $ | 203,329 |
|
| $ | 160,431 |
|
| $ | 42,898 |
|
|
| 27 | % |
Prescription transactions revenue for the three months ended June 30, 2021March 31, 2022 increased $35.3$21.4 million, or 32%16%, compared to the three months ended June 30, 2020,March 31, 2021, driven primarily by a 36%12% increase in the number of our average Monthly Active Consumers partially offset by lower contribution-per-consumer due solely to the acquisition of Scriptcycle. Scriptcycle active consumers are included. The increase in our prescription transactions revenue and Monthly Active Consumers number beginningwas 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 fourth quarterthree 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 2020,existing consumers. The RxNXT LLC and RxSaver, Inc. acquisitions in July 2021
19
and April 2021, respectively, individually and in the first full quarter post its acquisition. We believeaggregate 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 impacted by COVID-19.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 June 30, 2021March 31, 2022 increased $8.0$7.1 million, or 125%59%, compared to the three months ended June 30, 2020,March 31, 2021, driven primarily by an increase in the number of subscriberssubscription plans to 1.11.2 million as of June 30, 2021,March 31, 2022, compared to 0.60.9 million as of June 30, 2020,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.
OtherPharma manufacturer solutions revenue for the three months ended June 30, 2021March 31, 2022 increased $10.1$14.1 million, or 136%150%, compared to the three months ended June 30, 2020. This increase was primarily dueMarch 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 revenue fromthe number of telehealth visits on our pharma manufacturer solutions offering and an increase in telehealth revenue.platform.
We expect the percentage growth in subscription and otherpharma 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 and telehealth service offerings.
Costs and Operating Expenses
Cost of Revenue, Exclusiverevenue, exclusive of Depreciationdepreciation and Amortizationamortization
|
| Three Months Ended |
|
| Change |
|
| Three Months Ended |
|
| Change |
| ||||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| $ |
|
| % |
| ||||||||||||||||||||
|
| (dollars in thousands) |
| |||||||||||||||||||||||||||||
(dollars in thousands) |
| 2022 |
|
| 2021 |
|
| $ |
|
| % |
| ||||||||||||||||||||
Cost of revenue, exclusive of depreciation and amortization |
| $ | 11,090 |
|
| $ | 6,824 |
|
| $ | 4,266 |
|
|
| 63 | % |
| $ | 12,280 |
|
| $ | 10,428 |
| $ | 1,852 |
|
|
| 18 | % | |
As a percentage of total revenue |
| 6 | % |
|
| 6 | % |
|
|
|
|
|
| 6 | % |
|
| 6 | % |
|
|
|
|
|
Cost of revenue for the three months ended June 30, 2021March 31, 2022 increased $4.3$1.9 million, or 63%18%, compared to the three months ended June 30, 2020.March 31, 2021. This increase was primarily driven by a $1.6 million increase in outsourced and in-house personnel related to consumer support expense to support our growth and a $1.7 million increase in hosting expenses, merchant fees and allocated overhead.growth.
Product Developmentdevelopment and Technologytechnology
|
| Three Months Ended |
|
| Change |
|
| Three Months Ended |
|
| Change |
| ||||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| $ |
|
| % |
| ||||||||||||||||||||
|
| (dollars in thousands) |
| |||||||||||||||||||||||||||||
(dollars in thousands) |
| 2022 |
|
| 2021 |
|
| $ |
|
| % |
| ||||||||||||||||||||
Product development and technology |
| $ | 29,567 |
|
| $ | 11,962 |
|
| $ | 17,605 |
|
|
| 147 | % |
| $ | 35,042 |
|
| $ | 26,160 |
|
| $ | 8,882 |
|
|
| 34 | % |
As a percentage of total revenue |
| 17 | % |
|
| 10 | % |
|
|
|
|
|
| 17 | % |
|
| 16 | % |
|
|
|
|
|
Product development and technology expenses for the three months ended June 30, 2021March 31, 2022 increased by $17.6$8.9 million, or 147%34%, compared to the three months ended June 30, 2020.March 31, 2021. This increase was primarily due to increases in product development payroll and related expenses of $13.8$6.8 million due to higher headcount and an increase in stock-based compensation expense and payroll taxes related to awards made in connection with and after our IPO. The increase in product development and technology expense was also due to an increase in allocated overhead of $2.2$1.4 million in support of our product development efforts.
2420
of our product development efforts and an increase in third-party services and contractor expenses related to product development of $1.5 million.
Sales and Marketingmarketing
|
| Three Months Ended |
|
| Change |
|
| Three Months Ended |
|
| Change |
| ||||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| $ |
|
| % |
| ||||||||||||||||||||
|
| (dollars in thousands) |
| |||||||||||||||||||||||||||||
(dollars in thousands) |
| 2022 |
|
| 2021 |
|
| $ |
|
| % |
| ||||||||||||||||||||
Sales and marketing |
| $ | 88,381 |
|
| $ | 51,920 |
|
| $ | 36,461 |
|
|
| 70 | % |
| $ | 92,950 |
| $ | 79,694 |
| $ | 13,256 |
| 17 | % | ||||
As a percentage of total revenue |
| 50 | % |
|
| 42 | % |
|
|
|
|
|
| 46 | % |
| 50 | % |
|
|
|
|
|
Sales and marketing expenses for the three months ended June 30, 2021March 31, 2022 increased by $36.5$13.3 million, or 70%17%, compared to the three months ended June 30, 2020.March 31, 2021. This increase was primarily due to a $24.4$6.2 million increase in advertising and promotional expenses and a $9.5$5.5 million increase in sales and marketing payroll and related expenses due to higher headcount and an increase in stock-based compensation expense and payroll taxes related to awards made in connection with and after our IPO.
We continue to evaluate the impact of COVID-19 on our business and actively manage our consumer acquisition spending according to market conditions.headcount.
General and Administrativeadministrative
|
| Three Months Ended |
|
| Change |
|
| Three Months Ended |
|
| Change |
| ||||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| $ |
|
| % |
| ||||||||||||||||||||
|
| (dollars in thousands) |
| |||||||||||||||||||||||||||||
(dollars in thousands) |
| 2022 |
|
| 2021 |
|
| $ |
|
| % |
| ||||||||||||||||||||
General and administrative |
| $ | 39,579 |
|
| $ | 6,332 |
|
| $ | 33,247 |
|
|
| 525 | % |
| $ | 31,923 |
| $ | 43,786 |
| $ | (11,863 | ) |
| (27 | %) | |||
As a percentage of total revenue |
| 22 | % |
|
| 5 | % |
|
|
|
|
|
| 16 | % |
| 27 | % |
|
|
|
|
|
General and administrative expenses for the three months ended June 30, 2021 increasedMarch 31, 2022 decreased by $33.2$11.9 million, or 525%27%, compared to the three months ended June 30, 2020.March 31, 2021. This increasedecrease was primarily due to $24.0a $16.1 million ofdecrease in stock-based compensation expense related to the Founders Awards made in connection with theour IPO as further described in Note 10 of11 to our condensed consolidated financial statements. The increase in general and administrative expense was also due tostatements, partially offset by a $5.9$2.1 million increase in other executive and administrative payroll and related expenses due to higher headcount, and an increase in stock-based compensation expense and payroll taxes related to other awards made in connection with and after our IPO, and a $1.9$2.1 million increase in acquisition relatedprofessional and other professional service fees to support our growth and operations as a public company after our IPO.company.
Depreciation and Amortizationamortization
|
| Three Months Ended |
|
| Change |
|
| Three Months Ended |
|
| Change |
| ||||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| $ |
|
| % |
| ||||||||||||||||||||
|
| (dollars in thousands) |
| |||||||||||||||||||||||||||||
(dollars in thousands) |
| 2022 |
|
| 2021 |
|
| $ |
|
| % |
| ||||||||||||||||||||
Depreciation and amortization |
| $ | 8,369 |
|
| $ | 4,521 |
|
| $ | 3,848 |
|
|
| 85 | % |
| $ | 11,373 |
| $ | 5,361 |
| $ | 6,012 |
| 112 | % | ||||
As a percentage of total revenue |
| 5 | % |
|
| 4 | % |
|
|
|
|
|
| 6 | % |
| 3 | % |
|
|
|
|
|
Depreciation and amortization expenses for the three months ended June 30, 2021March 31, 2022 increased by $3.8$6.0 million, or 85%112%, compared to the three months ended June 30, 2020.March 31, 2021. This increase was due primarily to a $1.6$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 $1.6$2.9 million increase in amortization related to acquired intangible assets.
25
Other Income, Net
|
| Three Months Ended |
|
| Change |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| $ |
|
| % |
| ||||
|
| (dollars in thousands) |
| |||||||||||||
Other income, net |
| $ | — |
|
| $ | (16 | ) |
| $ | 16 |
|
|
| (100 | )% |
As a percentage of total revenue |
|
| 0 | % |
|
| 0 | % |
|
|
|
|
|
|
Other income, net was not material in the three months ended June 30, 2021 and 2020.
Interest Income
|
| Three Months Ended |
|
| Change |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| $ |
|
| % |
| ||||
|
| (dollars in thousands) |
| |||||||||||||
Interest income |
| $ | (13 | ) |
| $ | (41 | ) |
| $ | 28 |
|
|
| (68 | )% |
As a percentage of total revenue |
|
| 0 | % |
|
| 0 | % |
|
|
|
|
|
|
Interest income was not material in the three months ended June 30, 2021 and 2020.
Interest Expense
|
| Three Months Ended |
|
| Change |
|
| Three Months Ended |
|
| Change |
| ||||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| $ |
|
| % |
| ||||||||||||||||||||
|
| (dollars in thousands) |
| |||||||||||||||||||||||||||||
(dollars in thousands) |
| 2022 |
|
| 2021 |
|
| $ |
|
| % |
| ||||||||||||||||||||
Interest expense |
| $ | 5,906 |
|
| $ | 6,795 |
|
| $ | (889 | ) |
|
| (13 | )% |
| $ | 5,869 |
| $ | 5,905 |
| $ | (36 | ) |
| (1 | %) | |||
As a percentage of total revenue |
| 3 | % |
|
| 6 | % |
|
|
|
|
|
| 3 | % |
| 4 | % |
|
|
|
|
|
Interest expense for the three months ended June 30, 2021March 31, 2022 decreased by $0.9 million, or 13%,1% compared to the three months ended June 30, 2020March 31, 2021 primarily due to lower average debt balances and lower interest rates.balances.
Income Tax (Expense) Benefit (Expense)
|
| Three Months Ended |
|
| Change |
|
| Three Months Ended |
|
| Change |
| ||||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| $ |
|
| % |
| ||||||||||||||||||||
|
| (dollars in thousands) |
| |||||||||||||||||||||||||||||
Income tax benefit (expense) |
| $ | 37,305 |
|
| $ | (7,661 | ) |
| $ | 44,966 |
|
|
| (587 | )% | ||||||||||||||||
(dollars in thousands) |
| 2022 |
|
| 2021 |
|
| $ |
|
| % |
| ||||||||||||||||||||
Income tax (expense) benefit |
| $ | (1,651 | ) |
| $ | 12,555 |
| $ | (14,206 | ) |
| (113 | %) | ||||||||||||||||||
Effective income tax rate |
| 597.5 | % |
|
| 21.9 | % |
|
|
|
|
|
| 11.8 | % |
| 115.3 | % |
|
|
|
|
|
For the three months ended June 30, 2021,March 31, 2022, we had an income tax benefitexpense of $37.3$1.7 million, compared to an income tax expensebenefit of $7.7$12.6 million for the three months ended June 30, 2020March 31, 2021 and an effective income tax rate of 597.5%11.8% and 21.9%115.3%, respectively. The change in our income tax (expense) benefit (expense) was primarily due to the change from pre-tax income to loss in addition to the tax effects of nondeductible officers’ stock-based compensation expense and excess tax benefits related to our equity awards. The pre-tax loss for the three months ended June 30, 2021 was partially driven by the $24.0 million of stock-based compensation expense related to the Founders Awards made in connection with our IPO.
26
Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020
Revenue
|
| Six Months Ended |
|
| Change |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| $ |
|
| % |
| ||||
|
| (dollars in thousands) |
| |||||||||||||
Prescription transactions revenue |
| $ | 278,918 |
|
| $ | 232,565 |
|
| $ | 46,353 |
|
|
| 20 | % |
Subscription revenue |
|
| 26,323 |
|
|
| 11,998 |
|
|
| 14,325 |
|
|
| 119 | % |
Other revenue |
|
| 31,825 |
|
|
| 12,140 |
|
|
| 19,685 |
|
|
| 162 | % |
Total revenue |
| $ | 337,066 |
|
| $ | 256,703 |
|
| $ | 80,363 |
|
|
| 31 | % |
Prescription transactions revenue for the six months ended June 30, 2021 increased $46.4 million, or 20%, compared to the six months ended June 30, 2020, driven primarily by a 26% increase in the number of our average Monthly Active Consumers, partially offset by lower contribution-per-consumer due solely to the acquisition of Scriptcycle. Scriptcycle active consumers are included in our Monthly Active Consumers number beginningfull valuation allowance recorded in the fourth quarter of 2020, the first full quarter post its acquisition. We believe prescription transactions revenue continues to be impacted by COVID-19.
Subscription revenue for the six months ended June 30, 2021 increased $14.3 million, or 119%, compared to the six months ended June 30, 2020, driven primarily by an increaseagainst our net deferred tax assets in the numberexcess of subscribers to 1.1 million as of June 30, 2021, compared to 0.6 million as of June 30, 2020, as well as favorable change in subscription plan mix.
Other revenue for the six months ended June 30, 2021 increased $19.7 million, or 162%, compared to the six months ended June 30, 2020. This increase was primarily due to an increase in revenue from our pharma manufacturer solutions offering and an increase in telehealth revenue.
We expect the percentage growth in subscription and other revenue to continue to outpace our prescription transactions revenue astax amortizable goodwill, which we continue to scale the capabilities and platforms of our subscription, pharma manufacturer solutions and telehealth service offerings.
Costs and Operating Expenses
Cost of Revenue, Exclusive of Depreciation and Amortization
|
| Six Months Ended |
|
| Change |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| $ |
|
| % |
| ||||
|
| (dollars in thousands) |
| |||||||||||||
Cost of revenue, exclusive of depreciation and amortization |
| $ | 21,518 |
|
| $ | 12,843 |
|
| $ | 8,675 |
|
|
| 68 | % |
As a percentage of total revenue |
|
| 6 | % |
|
| 5 | % |
|
|
|
|
|
|
Cost of revenue for the six months ended June 30, 2021 increased $8.7 million, or 68%, compared to the six months ended June 30, 2020. This increase was primarily driven by a $2.7 million increase in outsourced and in-house personnel related consumer support expense to support our growth, a $1.8 million increase in provider cost related to our telehealth offerings driven by an increase in the number of online provider visits, a $1.4 million increase in hosting expenses, a $1.2 million increase in merchant fees and a $0.8 million increase in allocated overhead.
Product Development and Technology
|
| Six Months Ended |
|
| Change |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| $ |
|
| % |
| ||||
|
| (dollars in thousands) |
| |||||||||||||
Product development and technology |
| $ | 55,727 |
|
| $ | 22,287 |
|
| $ | 33,440 |
|
|
| 150 | % |
As a percentage of total revenue |
|
| 17 | % |
|
| 9 | % |
|
|
|
|
|
|
Product development and technology expenses for the six months ended June 30, 2021 increased by $33.4 million, or 150%, compared to the six months ended June 30, 2020. This increase was primarily due to increases in product development payroll and related expenses of $26.2 million due to higher headcount and an increase in stock-based compensation expense and payroll taxes related to awards made in connection with and after our IPO. The increase in product development and technology expense was also due to an increase in allocated overhead of $3.8 million in support
2721
maintained as of our product development efforts and an increase in third-party services and contractor expenses relatedMarch 31, 2022. For more information regarding the valuation allowance, see Note 6 to product development of $3.5 million.
Sales and Marketing
|
| Six Months Ended |
|
| Change |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| $ |
|
| % |
| ||||
|
| (dollars in thousands) |
| |||||||||||||
Sales and marketing |
| $ | 168,075 |
|
| $ | 115,082 |
|
| $ | 52,993 |
|
|
| 46 | % |
As a percentage of total revenue |
|
| 50 | % |
|
| 45 | % |
|
|
|
|
|
|
Sales and marketing expenses for the six months ended June 30, 2021 increased by $53.0 million, or 46%, compared to the six months ended June 30, 2020. This increase was primarily due to a $30.6 million increase in advertising expenses and a $17.6 million increase in sales and marketing payroll and related expenses due to higher headcount and an increase in stock-based compensation expense and payroll taxes related to awards made in connection with and after our IPO.
We continue to evaluate the impact of COVID-19 on our business and actively manage our consumer acquisition spending according to market conditions.
General and Administrative
|
| Six Months Ended |
|
| Change |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| $ |
|
| % |
| ||||
|
| (dollars in thousands) |
| |||||||||||||
General and administrative |
| $ | 83,365 |
|
| $ | 12,219 |
|
| $ | 71,146 |
|
|
| 582 | % |
As a percentage of total revenue |
|
| 25 | % |
|
| 5 | % |
|
|
|
|
|
|
General and administrative expenses for the six months ended June 30, 2021 increased by $71.1 million, or 582%, compared to the six months ended June 30, 2020. This increase was primarily due to $54.0 million of expense related to the Founders Awards made in connection with the IPO as further described in Note 10 of our condensed consolidated financial statements. The increasestatements appearing elsewhere in general and administrative expense was also due to a $11.4 million increase in other executive and administrative payroll and related expenses due to higher headcount and an increase in stock-based compensation expense and payroll taxes related to other awards made in connection with and after our IPO, and a $4.4 million increase in acquisition related and other professional service fees to support our growth and operations as a public company after our IPO.
Depreciation and Amortization
|
| Six Months Ended |
|
| Change |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| $ |
|
| % |
| ||||
|
| (dollars in thousands) |
| |||||||||||||
Depreciation and amortization |
| $ | 13,730 |
|
| $ | 8,866 |
|
| $ | 4,864 |
|
|
| 55 | % |
As a percentage of total revenue |
|
| 4 | % |
|
| 3 | % |
|
|
|
|
|
|
Depreciation and amortization expenses for the six months ended June 30, 2021 increased by $4.9 million, or 55%, compared to the six months ended June 30, 2020. This increase was due primarily to a $2.8 million increase in capitalized software amortization due to higher capitalized costs for platform improvements and the introduction of new products and
28
features and a $1.5 million increase in depreciation of property and equipment driven by the completion of the build of our new headquarters in Santa Monica, California.
Other Income, Net
|
| Six Months Ended |
|
| Change |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| $ |
|
| % |
| ||||
|
| (dollars in thousands) |
| |||||||||||||
Other income, net |
| $ | — |
|
| $ | (21 | ) |
| $ | 21 |
|
|
| (100 | )% |
As a percentage of total revenue |
|
| 0 | % |
|
| 0 | % |
|
|
|
|
|
|
Other income, net was not material in the six months ended June 30, 2021 and 2020.
Interest Income
|
| Six Months Ended |
|
| Change |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| $ |
|
| % |
| ||||
|
| (dollars in thousands) |
| |||||||||||||
Interest income |
| $ | (29 | ) |
| $ | (116 | ) |
| $ | 87 |
|
|
| (75 | )% |
As a percentage of total revenue |
|
| 0 | % |
|
| 0 | % |
|
|
|
|
|
|
Interest income was not material in the six months ended June 30, 2021 and 2020.
Interest Expense
|
| Six Months Ended |
|
| Change |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| $ |
|
| % |
| ||||
|
| (dollars in thousands) |
| |||||||||||||
Interest expense |
| $ | 11,811 |
|
| $ | 15,433 |
|
| $ | (3,622 | ) |
|
| (23 | )% |
As a percentage of total revenue |
|
| 4 | % |
|
| 6 | % |
|
|
|
|
|
|
Interest expense for the six months ended June 30, 2021 decreased by $3.6 million, or 23%, compared to the six months ended June 30, 2020 primarily due to lower average debt balances and lower interest rates.
Income Tax Benefit (Expense)
|
| Six Months Ended | �� |
| Change |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| $ |
|
| % |
| ||||
|
| (dollars in thousands) |
| |||||||||||||
Income tax benefit (expense) |
| $ | 49,860 |
|
| $ | (15,427 | ) |
| $ | 65,287 |
|
|
| (423 | )% |
Effective income tax rate |
|
| 291.1 | % |
|
| 22.0 | % |
|
|
|
|
|
|
29
For the six months ended June 30, 2021, we had an income tax benefit of $49.9 million, compared to income tax expense of $15.4 million for the six months ended June 30, 2020 and an effective income tax rate of 291.1% and 22.0%, respectively. The change in our income tax benefit (expense) was primarily due to the change from pre-tax income to loss in addition to the tax effects of nondeductible officers’ stock-based compensation expense and excess tax benefits related to our equity awards. The pre-tax loss for the six months ended June 30, 2021 was partially driven by the $54.0 million of stock-based compensation expense related to the Founders Awards made in connection with our IPO.
this Quarterly Report on Form 10-Q.
Liquidity and Capital Resources
Overview
Since our inception, we have financed our operations primarily through net cash provided by operating activities, equity issuances, and borrowings under our long-term debt arrangements. Our primary requirements for liquidity and capital are to finance working capital, capital expenditures and general corporate purposes. Our principal sources of liquidity are expected to be our cash and cash equivalents and borrowings available under our $100.0 million secured asset-based Revolving Credit Facility.revolving credit facility which matures in October 2024. As of June 30, 2021March 31, 2022, we had cash and cash equivalents of $894.7$845.4 million and $90.9$90.8 million available under our Revolving Credit Facility.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 and availability under our Revolving Credit Facility will be adequate to meet our operating, investing and financing needs for at least the next 12 months. Our future capital requirements will depend on many factors, including our revenue growth, the timing and extent of investments to support such growth, the expansion of sales and marketing activities, and many other factors as described in the section entitledPart I, Item 1A, “Risk Factors” of our 2020 10-K and this Quarterly Report on Form 10-Q. We historically have not had any off-balance sheet arrangements nor do we currently have any off-balance sheet arrangements as defined under SEC rules.2021 10-K.
If necessary, we may borrow funds under our Revolving Credit Facilityrevolving credit facility to finance our liquidity requirements, subject to customary borrowing conditions. To the extent additional funds are necessary to meet our long-term liquidity needs as we continue to execute our business strategy, we anticipate that they will be obtained through the incurrence of additional indebtedness, additional equity financings or a combination of these potential sources of funds; however, such financing may not be available on favorable terms, or at all. In particular, the widespread COVID-19 pandemic has resulted in, and may continue to result in, significant disruption of global financial markets, reducing our ability to access capital. If we are unable to raise additional funds when or on the terms desired, our business, financial condition and results of operations could be adversely affected.
In light of the large number of RSUs subject to the Founders Awards that were granted in connection with our IPO in September 2020, we have incurred and anticipate that we will incur substantial additional stock-based compensation expense and expend substantial funds to satisfy tax withholding and remittance obligations as these RSUs vest over time. The grant date fair value of the Founders Awards was $533.3 million. All of the stock price goals with respect to the performance vesting portion of the Founders Awards (the “Performance-Vesting Founders Awards,” see Note 10 of our condensed consolidated financial statements) were achieved in October 2020. As a result, all 16,422,044 Performance-Vesting Founders Awards vested in 2020, and we recognized a total of approximately $373.0 million of stock-based compensation expense related to the Founders Awards during 2020. During the three and six months ended June 30, 2021, we recognized an additional $24.0 million and $54.0 million of stock-based compensation expense, respectively, resulting in a cumulative total of $427.0 million of stock-based compensation expense recognized related to the Founders Awards as of June 30, 2021. The unrecognized stock-based compensation expense associated with the time vesting portion of the Founders Awards of $106.3 million as of June 30, 2021 is expected to be recognized over the weighted average remaining service period of 1.7 years. In addition, as a result of the Founders Awards, and the Performance-Vesting Founders Awards in particular, a large number of shares of Class B common stock will be issued on the applicable settlement dates. On the settlement dates for the RSUs, we plan to withhold shares and remit taxes on behalf of the holders of such Founders Awards at applicable statutory rates, which we refer to as net settlement, which may result in substantial tax withholding obligations. As an employee earns compensation, both the employer and the employee are liable for some portion of Social Security taxes and Medicare taxes (collectively referred to as “FICA” taxes) on the compensation. FICA taxes are generally due in the period when the substantial risk of forfeiture lapses. As the Performance-Vesting Founders Awards vested in October 2020, we accelerated the settlement of 0.7 million RSUs during the fourth quarter of 2020 sufficient to satisfy FICA tax withholding obligations due in the year of vesting. The remaining non-accelerated 15.7 million Performance-Vesting Founders Awards shares will not be issued until October 2023 or, if earlier, a change in control event, as defined in the RSU agreements governing the Founders Awards.
30
Assuming an approximate 47% tax withholding rate and stock price of $65.00 per share at vesting and settlement, for the 15.7 million Performance-Vesting Founders Award shares that vested as described in the preceding paragraph, we estimate that our cash obligation on behalf of our Co-Founders to the relevant tax authorities to satisfy tax withholding obligations would be approximately $481.7 million, and we would deliver an aggregate of approximately 8.3 million shares of our Class B common stock to net settle these awards, after withholding an aggregate of approximately 7.4 million shares of our Class B common stock. Cash payments for income tax withholdings are due upon the settlement date of the RSUs which is the third anniversary of the applicable vesting date or, if earlier, upon a qualifying change in control event. The actual amount of the tax obligations and the number of shares to be delivered could be higher or lower, depending on the price of our Class A common stock upon settlement and the applicable tax withholding rates then in effect. We also anticipate expending substantial funds to satisfy tax withholding and remittance obligations for other equity awards granted to our employees as they vest over time.
First Lien Credit Agreement
Our first lien credit agreement (the “First Lien Credit Agreement”) provides for a term loan with an original amount of $700.0 million (the “First Lien Term Loan Facility”). We also have a line of credit with a maximum amount of $100.0 million (the “Revolving Credit Facility”) associated with the First Lien Credit Agreement.
The Revolving Credit Facility and the First Lien Term Loan Facility under the First Lien Credit Agreement are collateralized by substantially all of our assets, including our intellectual property, and 100% of the equity interest of GoodRx, Inc.
The First Lien Credit Agreement that governs the Revolving Credit Facility and the First Lien Term Loan Facility contains certain affirmative and negative covenants, including, among other things, restrictions on indebtedness, liens, fundamental changes, repurchases of stock, dividends and other distributions. GoodRx, Inc. is restricted from making dividend payments, loans or advances to GoodRx Intermediate Holdings, LLC and GoodRx Holdings, Inc. In addition, GoodRx, Inc. is subject to a financial covenant whereby GoodRx, Inc. is required to maintain a First Lien Net Leverage Ratio (as defined in the First Lien Credit Agreement) not to exceed 8.2 to 1.0. At June 30, 2021, we were in compliance with the covenants under the First Lien Credit Agreement.
Revolving Credit Facility
Loans under the Revolving Credit Facility bear interest at a rate per annum equal to the LIBO Screen Rate (as defined in the First Lien Credit Agreement) plus a variable margin rate, which is based on our most recently determined First Lien Net Leverage Ratio (as defined in the First Lien Credit Agreement), that ranges from 2.50% to 3.00%. The Revolving Credit Facility has a variable commitment fee, which is based on our most recently determined First Lien Net Leverage Ratio (as defined in the First Lien Credit Agreement), and ranges from 0.25% to 0.50% per annum. In addition, the Revolving Credit Facility has a fixed fronting fee of 0.125% per annum of our aggregate undrawn and disbursed but unreimbursed letters of credit. The Revolving Credit Facility expires on October 11, 2024. As of June 30, 2021, there was no outstanding principal balance under our Revolving Credit Facility.
Under the terms of a lease agreement entered into during September 2019, GoodRx, Inc. assigned to the landlord drawdown rights against the Revolving Credit Facility for up to $9.0 million to meet the contractual line of credit requirement in the lease agreement. The landlord can draw on the Revolving Credit Facility in the event of our default on rent or damages to the building. The assigned rights to the landlord will be held for the initial three years of the lease term, and subject to certain conditions, the letter of credit will decrease thereafter by up to 10% per year based upon the original amount to no less than $2.0 million. This outstanding letter of credit to the landlord reduces our available borrowings under the Revolving Credit Facility by an amount equal to the value of assigned rights. There were outstanding letters of credit issued against the Revolving Credit Facility for $9.1 million as of June 30, 2021, which reduces our available borrowings under the Revolving Credit Facility to $90.9 million.
First Lien Term Loan Facility
The First Lien Term Loan Facility accrues interest at a rate per annum equal to the LIBO Screen Rate (as defined in the First Lien Credit Agreement) plus a variable margin rate, which is based on our most recently determined Net Leverage Ratio (as defined in the First Lien Credit Agreement), that ranges from 2.75% to 3.00% per annum. The First Lien Credit Agreement requires quarterly principal payments through September 2025, with any remaining unpaid principal and any accrued and unpaid interest due on the maturity date of October 10, 2025.
The effective interest rate on the First Lien Term Loan Facility was 3.39% and 3.83% for the three months ended June 30, 2021 and 2020, respectively and 3.39% and 4.33% for the six months ended June 30, 2021 and 2020, respectively.
31
The carrying value of the First Lien Term Loan Facility was $664.9 million, net of unamortized debt issuance costs and discount of $12.7 million, as of June 30, 2021.
Holding Company Status
We areGoodRx Holdings, Inc. is a holding company that does not conduct any business operations of ourits own. As a result, we areGoodRx Holdings, Inc. is largely dependent upon cash distributions and other transfers from ourits subsidiaries to meet ourits obligations and to make future dividend payments, if any. The First Lien Credit Agreement containsOur 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 the First Lien Credit Agreementour debt arrangements as of June 30, 2021.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 audited consolidated financial statements included in our 20202021 10-K for condensed parent company financial information of GoodRx Holdings, Inc.
Cash Flows
|
| Six Months Ended |
|
| Three Months Ended |
| ||||||||||
|
| 2021 |
|
| 2020 |
| ||||||||||
|
| (in thousands) |
| |||||||||||||
(in thousands) |
| 2022 |
|
| 2021 |
| ||||||||||
Net cash provided by operating activities |
| $ | 80,411 |
|
| $ | 83,825 |
|
| $ | 30,120 |
| $ | 45,485 |
| |
Net cash used in investing activities |
| (142,416 | ) |
|
| (8,319 | ) |
| (34,401 | ) |
| (9,695 | ) | |||
Net cash (used in) provided by financing activities |
|
| (14,883 | ) |
|
| 25,069 |
| ||||||||
Net cash used in financing activities |
|
| (91,401 | ) |
|
| (14,018 | ) | ||||||||
Net change in cash, cash equivalents and restricted cash |
| $ | (76,888 | ) |
| $ | 100,575 |
|
| $ | (95,682 | ) |
| $ | 21,772 |
|
Net Cash Provided by Operating Activities
Net cash provided by operating activities was $80.4 million for the six months ended June 30, 2021 consisting of $32.7 million
Net cash flows provided by operating activities consisted of net income adjusted for $104.9certain non-cash items and changes in assets and liabilities. The $15.4 million of non-cash expenses, made up primarily of stock-based compensation of $87.2 million, including $54.0 million of stock-based compensation relateddecrease in net cash provided by operations during the three months ended March 31, 2022 compared to the Founders Awards made in connection with the IPO, partially offset by $57.2three months ended March 31, 2021 was due to a $15.3 million of net cash used as a result ofdecrease 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 an increase in income tax receivable due to our second quarter tax benefitthe timing of payments for accrued expenses and accounts payable as well as increases in accounts receivable due to our growing operations.
Net cash provided by operating activities was $83.8 million for the six months ended June 30, 2020 consistingtiming of $54.7 million of net income adjusted for $19.3 million of non-cash expensestax payments and $9.8 million of net cash provided by changes in our operating assets and liabilities. The changes in operating assets and liabilities were primarily driven by increases in accounts receivable, prepaid expenses and other current assets and accrued expenses and other current liabilities due to our growing operations.
Net Cash Used in Investing Activitiesrefunds.
Net cash used in investing activities of $142.4 million for the six months ended June 30, 2021 was related to $125.7 million
Net cash flows used in cash consideration, netinvesting activities primarily consisted of cash acquired, related toused for acquisitions $13.6 million for capitalized software and $3.1 million ofinvestments, capital expenditures, due primarily to leasehold improvements and furniture and fixtures related to the completion of our new office facilitysoftware development costs. The $24.7 million increase in Santa Monica, California. In May 2021, we entered into a non-cancelable lease agreement to lease additional space adjacent to our new office facility in Santa Monica, California. We anticipate that we will invest in additional capital expenditures with respect to the expanded leased space principally in 2022, which is the earliest we expect to gain access to and control of the expanded leased property.
Netnet cash used in investing activities of $8.3 million for the sixthree months ended June 30, 2020March 31, 2022 compared to the three months ended March 31, 2021 was primarily related to $6.5$22.0 million in cash paid for capitalizedan 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 $1.8 million for capital expenditures.
Net Cash (Used in) Provided by Financing Activitiesequipment.
Net cash used in financing activities
Net cash flows from financing activities primarily consisted of $14.9 million for the six months ended June 30, 2021 waspayments related to $26.0 millionour debt arrangements, proceeds from exercise of stock options, payments for employee taxesmade related to repurchases of our Class A common stock, and payments made related to net share settlement of equity awards, $3.5awards. The $77.4 million increase in long-term debt principal payments related to our First Lien Term Loan Facility and $0.8 million paymentnet cash used in financing activities for contingent consideration relatedthe three months ended March 31, 2022 compared to the acquisition of Scriptcycle, partially offset by $15.4 million in proceeds from the exercise of stock options.
32
Net cash provided by financing activities of $25.1 million for the sixthree months ended June 30, 2020March 31, 2021 was primarily related to $28.0$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 our Revolving Credit Facility, $1.9 million from the exerciseexercises of stock options partially offset by $3.5and a $5.1 million decrease in long-term debt principal payments related to our First Lien Term Loan Facility and paymentsnet share settlement of $1.3 million of debt issuance costs related to increasing the amount of our line of credit in May 2020.equity awards.
Contractual Obligations and Commitments
Other than as described in Note 8 to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q, thereThere have been no material changes to our contractual obligations and commitments compared with those described in our 20202021 10-K.
Critical Accounting Policies and Estimates
During the three months ended June 30, 2021,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 20202021 10-K.
Recent Accounting Pronouncements
Refer to Note 2 to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.
Item 3. Quantitative and Qualitative Disclosures aboutAbout Market Risk
There have been no material changes in our market risk from the disclosure included under “Quantitative and Qualitative Disclosures ofAbout Market Risk” in the 2020our 2021 10-K.
Item 4. Controls and Procedures
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our co-principal executive officers and principal financial officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, and as a result of the material weaknesses described below, our co-principal executive officers and principal financial officer concluded that, as of June 30, 2021,March 31, 2022, our disclosure controls and procedures were not effective at the reasonable assurance level.
Material Weaknesses
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual and interim financial statements will not be detected or prevented on a timely basis.
In connection with the preparation of our consolidated financial statements for 2019, we identified certain control deficiencies in the design and operation of our internal control over financial reporting that constituted material weaknesses. The material weaknesses are:
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These material weaknesses contributed to the following additional material weaknesses:
These material weaknesses resulted in adjustments identified by our independent registered public accounting firm and recorded by us primarily related to goodwill, capitalized software, leases, debt extinguishment, revenue recognition and sales allowances. These material weaknesses could result in a misstatement of our accounts or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.
Remediation Measures
We are compiling the system and processing documentation necessary to perform the evaluation needed to comply with Section 404(a) of Sarbanes-Oxley Act and we are taking steps to remediate the material weaknesses. Management, with the participation of the audit committee and the board of directors, is engaged in remedial activities to address the material weaknesses described above. As of June 30, 2021, substantially all remediation efforts planned to address the material weaknesses have been designed and implemented by management. These implemented controls and procedures are subject to ongoing testing including their operating effectiveness over a sustained period of financial reporting cycles. The finalization of our remediation measures is ongoing and includes the following:
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We believe we are making progress toward achieving the effectiveness of our internal control over financial reporting and disclosure controls and procedures. The actions that we are taking are subject to continued testing, ongoing senior management review, as well as audit committee oversight. We will not be able to conclude whether the steps we are taking will fully remediate these material weaknesses in our internal control over financial reporting until we have completed our remediation efforts and subsequent evaluation of their effectiveness. We may also conclude that additional measures may be required to remediate the material weaknesses in our internal control over financial reporting, which may necessitate additional implementation and evaluation time. We will continue to assess the effectiveness of our internal control over financial reporting and take steps to remediate the known material weaknesses expeditiously.effective.
Changes in Internal Control Over Financial Reporting
We are taking actions to remediate the material weaknesses relating to our internal control over financial reporting. Other than the changes to our internal control over financial reporting described in “Remediation Measures” above, thereThere were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended June 30, 2021March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The information required under this Part II, Item 1 is set forth in Note 8 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q and is incorporated herein by this reference.
Item 1A. Risk Factors
There have been no material changes to the risk factors previously disclosed in our 2021 10-K. For a discussion of potential risks and uncertainties related to us, see the information included in Part I, Item 1A, "Risk Factors" of our 20202021 10-K. There have been no material changes to the risk factors previously disclosed in our 2020 10-K, except as noted below:
We may experience fluctuations in our tax obligations and effective income tax rate, which could materially and adversely affect our results of operations.
We are subject to U.S. federal and state income taxes. Tax laws, regulations and administrative practices in various jurisdictions may be subject to significant change, with or without advance notice, due to economic, political and other conditions, and significant judgment is required in evaluating and estimating our provision and accruals for these taxes. There are many transactions that occur during the ordinary course of business for which the ultimate tax determination is uncertain. Our effective income tax rates could be affected by numerous factors, such as changes in tax, accounting and other laws, regulations, administrative practices, principles and interpretations, the mix and level of earnings in a given taxing jurisdiction or our ownership or capital structures.
On May 28, 2021 the Department of the Treasury released the General Explanation of the Administration's Fiscal Year 2022 Revenue Proposals, also known as the Green Book, outlining a number of proposed amendments to the Internal Revenue Code, including significant changes for corporate taxpayers which includes a proposal to increase the federal corporate tax rate from 21% to 28%. The tax increase legislation is in the early stages of the legislative process and timing of potential tax law changes remain uncertain since the tax increase proposals will need the support of all 50 Democratic Senators. If adopted as proposed, the increase of the corporate tax rate would adversely affect our results of operations in future periods.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Unregistered Sales of Equity Securities
None.
Use of Proceeds
On September 25, 2020, we completed our IPO. All shares sold were registered pursuant to a registration statement on Form S-1 (File No. 333-248465), as amended (the “Registration Statement”), declared effective by the SEC on September 22, 2020.
There has been no material change in the expected use of the net proceeds from our IPO as described in our Registration Statement. The remaining net proceeds from our IPO have been invested in investment grade, interest-bearing instruments. As of March 31, 2022, we estimate we have used approximately $114.4 million of the net proceeds from our IPO: (i) $34.4 million for the acquisition of businesses that complement our business and (ii) $80.0 million for the repurchases of our Class A common stock.
Issuer Repurchases of Equity Securities
The following table presents information with respect to our repurchases of our Class A common stock during the three months ended March 31, 2022.
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Item 3. Defaults Upon Senior Securities
None.
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Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
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Item 6. Exhibits
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| Incorporated by Reference |
| Filed/ |
| Incorporated by Reference |
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Exhibit Number |
| Exhibit Description |
| Form |
| File No. |
| Exhibit |
| Filing Date |
| Furnished Herewith |
| Exhibit Description |
| Form |
| File No. |
| Exhibit |
| Filing Date |
| Furnished Herewith |
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3.1 |
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| 8-K |
| 001-39549 |
| 3.1 |
| 9/28/20 |
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| 001-39549 |
| 3.1 |
| 9/28/20 |
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3.2 |
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| 001-39549 |
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| 9/28/20 |
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| 001-39549 |
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| 9/28/20 |
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4.1 |
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| 333-248465 |
| 4.1 |
| 9/22/20 |
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| 333-248465 |
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| 9/22/20 |
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4.2 |
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| 333-249069 |
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| 9/25/20 |
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| 9/25/20 |
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10.1 |
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10.2^+ |
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31.1 |
| Certification of Co-Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a). |
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| Certification of Co-Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a). |
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31.2 |
| Certification of Co-Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a). |
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| Certification of Co-Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a). |
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31.3 |
| Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a). |
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| Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a). |
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32.1 |
| Certification of Co-Chief Executive Officer pursuant to 18 U.S.C. Section 1350. |
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| Certification of Co-Chief Executive Officer pursuant to 18 U.S.C. Section 1350. |
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32.2 |
| Certification of Co-Chief Executive Officer pursuant to 18 U.S.C. Section 1350. |
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| Certification of Co-Chief Executive Officer pursuant to 18 U.S.C. Section 1350. |
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32.3 |
| Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350. |
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| Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350. |
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101.INS |
| Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
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| Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
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101.SCH |
| Inline XBRL Taxonomy Extension Schema Document |
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| Inline XBRL Taxonomy Extension Schema Document |
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101.CAL |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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| Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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101.DEF |
| Inline XBRL Taxonomy Extension Definition Linkbase Document |
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| Inline XBRL Taxonomy Extension Definition Linkbase Document |
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101.LAB |
| Inline XBRL Taxonomy Extension Label Linkbase Document |
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| Inline XBRL Taxonomy Extension Label Linkbase Document |
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101.PRE |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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| Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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104 |
| Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
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| * |
| Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
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* Filed herewith.
** Furnished herewith.
^ Portions of the exhibit, marked by brackets, have been omitted because the omitted information (i) is not material and (ii) is treated as confidential by us.
+ The annexes, schedules, and certain exhibits to this exhibitExhibit have been omitted pursuant to Item 601(b)(10)(iv)601(a)(5)(b)(2) of Regulation S-K. The Registrant hereby agrees to furnish supplementally a copy of any omitted annex, schedule or exhibit to the SEC upon request.
37
26
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
GOODRX HOLDINGS, INC. | |||
Date: May 9, 2022 | By: | /s/ Douglas Hirsch | |
Douglas Hirsch | |||
Co-Chief Executive Officer | |||
(principal executive officer) | |||
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Date: | By: | /s/ | |
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Co-Chief Executive Officer | |||
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| Chief |
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3827