GoodRx Holdings, Inc. (Nasdaq: GDRX) (“GoodRx” or the
“Company”), a leading resource for healthcare savings and
information, has released its financial results for the third
quarter 2023.
Third Quarter 2023
Highlights
- Revenue1 of $180.0 million
- Adjusted Revenue1,2 of $190.0 million
- Net loss of $38.5 million; Net loss margin of 21.4%
- Adjusted Net Income2 of $25.5 million; Adjusted Net Income
Margin2 of 13.4%
- Adjusted EBITDA2 of $53.5 million; Adjusted EBITDA Margin2
of 28.1%
- Net cash provided by operating activities of $60.3
million
- Over 550,000 prescribers3 engaged with us through Provider
Mode since its launch
- Exited the quarter with over 7 million consumers of
prescription-related offerings4
“We’ve been working to rebuild momentum in the business, both
financially and operationally, with an eye toward compounding
growth in 2024 and beyond, and we made meaningful progress in the
third quarter,” said Scott Wagner, Interim Chief Executive Officer.
“We achieved an important milestone with year-over-year Adjusted
Revenue growth, while strengthening and expanding our retail
pharmacy relationships, announcing two additional integrated
savings programs with MedImpact and Navitus as well as an exciting
collaboration with Sanofi to help make insulin more accessible to
all Americans.”
1Revenue was impacted by a $10.0 million
client contract termination payment, which was recognized as a
reduction of revenue, in connection with our plan to de-prioritize
certain solutions under our pharma manufacturer solutions offering
approved by our board of directors on August 7, 2023 (the
“Restructuring Plan”). Revenue excluding the $10.0 million client
contract termination payment represents Adjusted Revenue for the
third quarter. For all other periods, revenue equals Adjusted
Revenue.
2Adjusted Revenue and metrics presented as
a percentage of Adjusted Revenue, Adjusted EBITDA, Adjusted EBITDA
Margin, Adjusted Net Income, Adjusted Net Income Margin, and
adjusted costs and operating expenses are non-GAAP financial
measures and are presented for supplemental informational purposes
only. For the periods presented, Adjusted EBITDA Margin and
Adjusted Net Income Margin are defined as Adjusted EBITDA and
Adjusted Net Income, respectively, divided by Adjusted Revenue.
Refer to the Non-GAAP Financial Measures section below for
definitions, additional information, and reconciliations to the
most directly comparable GAAP measures.
3As of September 30, 2023. Prescribers are
defined as individuals in the medical profession who are allowed to
write orders for medical treatment.
4Sum of Monthly Active Consumers (MACs)
for Q3'23 and subscribers to our subscription plans as of September
30, 2023. Refer to Key Operating Metrics below for definitions of
Monthly Active Consumers and subscription plans.
Third Quarter 2023 Financial
Overview (all comparisons are made to the same period of
the prior year unless otherwise noted):
Revenue decreased 4% to $180.0 million compared to $187.3
million, primarily due to a $10.0 million contract termination
payment to a client in the third quarter of 2023, which was
recognized as a reduction of revenue, partially offset by organic
growth in prescription transactions revenue. Adjusted Revenue1,2,
which represents revenue excluding the $10.0 million contract
termination payment, increased 1% to $190.0 million compared to
$187.3 million, primarily driven by growth in prescription
transactions revenue. Prescription transactions revenue increased
3% to $135.4 million compared to $131.2 million, primarily driven
by a 5% increase in Monthly Active Consumers partially offset by
lower fees per transaction related to our ongoing shift to a hybrid
model as well as from our consumer incentives program principally
in the form of consumer discounts on prescription drugs processed
through pharmacies that we directly contract with, which is
recognized as a reduction of prescription transactions revenue.
Pharma manufacturer solutions revenue decreased 35% to $15.9
million compared to $24.5 million, primarily driven by the $10.0
million contract termination payment described above, which was
paid in connection with our Restructuring Plan, and is recognized
as a reduction of pharma manufacturer solutions revenue. Organic
growth in the underlying pharma manufacturer solutions offering
partially offset the impact of the $10.0 million payment.
Subscription revenue decreased 12% to $23.2 million compared to
$26.5 million, primarily driven by a decrease in the number of
subscription plans largely due to the sunset of our partnership
subscription program, Kroger Savings Club, as well as a change in
the mix of Gold plans to more single-user subscription plans and
away from family Gold plans. Gold subscription plans grew
year-over-year and quarter-over-quarter as of September 30, 2023.
Other revenue increased 5% to $5.4 million compared to $5.2
million.
Cost of revenues increased 8% to $18.7 million, or 10% of
revenue, compared to $17.4 million, or 9% of revenue, primarily
driven by an increase in personnel related costs arising from the
Restructuring Plan. Adjusted cost of revenues2 decreased 8% to
$15.7 million, or 8% of Adjusted Revenue2, compared to $17.1
million, or 9% of Adjusted Revenue2.
Product development and technology expenses increased 10% to
$39.6 million, or 22% of revenue, compared to $35.9 million, or 19%
of revenue, primarily driven by the disposal of certain capitalized
software principally in connection with our Restructuring Plan,
partially offset by a decrease in payroll and related costs due to
lower average headcount and higher capitalization of certain
qualified costs related to software development. Adjusted product
development and technology expenses2 decreased 3% to $24.0 million,
or 13% of Adjusted Revenue2, compared to $24.9 million, or 13% of
Adjusted Revenue2.
Sales and marketing expenses increased 6% to $91.6 million, or
51% of revenue, compared to $86.2 million, or 46% of revenue,
primarily driven by an increase in payroll and related costs,
primarily due to higher stock-based compensation, as well as higher
third-party marketing and related support services. Adjusted sales
and marketing expenses2 increased 2% to $80.4 million, or 42% of
Adjusted Revenue2, compared to $78.7 million, or 42% of Adjusted
Revenue2.
General and administrative expenses decreased 29% to $35.3
million, or 20% of revenue, compared to $49.5 million, or 26% of
revenue, primarily driven by a $16.6 million expense for the fair
value adjustment of contingent consideration related to the
vitaCare acquisition in the third quarter of 2022. Adjusted general
and administrative expenses2 increased 12% to $16.4 million, or 9%
of Adjusted Revenue2, compared to $14.7 million, or 8% of Adjusted
Revenue2.
Net loss was $38.5 million compared to a net loss of $41.7
million, primarily driven by the individual factors described above
as well as due to an income tax benefit of $8.1 million, compared
to an income tax expense of $19.5 million. Net loss margin was
21.4% compared to a net loss margin of 22.3%. Adjusted Net Income2
was $25.5 million compared to Adjusted Net Income2 of $29.9
million.
Adjusted EBITDA2 was $53.5 million compared to $52.0 million,
primarily driven by higher prescription transactions revenue.
Adjusted EBITDA Margin2 was 28.1% compared to 27.8%.
Cash Flow and Capital
Allocation
Net cash provided by operating activities in the third quarter
was $60.3 million compared to $33.7 million in the comparable
period last year, largely driven by improvements in the net impacts
of net losses and non-cash adjustments year over year. As of
September 30, 2023, GoodRx had cash and cash equivalents of $794.9
million and total outstanding debt of $661.8 million.
GoodRx is focused on a disciplined approach to capital
allocation, centered on furthering the Company’s mission and
creating shareholder value. Our capital allocation priorities are
investing for profitable growth, paying down debt, buying back
shares, and M&A that aligns with our strategic priorities.
These priorities support GoodRx’s long-term growth strategy while
also providing flexibility to navigate near-term challenges.
Share Repurchases
During the third quarter of 2023, we repurchased $7.7 million in
shares of Class A common stock, representing approximately 1.1
million shares. As of September 30, 2023, we had $122.1 million
remaining of our $250.0 million share repurchase authorization
approved by our board of directors during the first quarter
2022.
Guidance
For the fourth quarter and full year 2023, and full year 2024,
management is anticipating the following:
$ in millions
4Q 2023
4Q 2022
YoY Change
Revenue5
$188-$194
$184.1
2%-5%
Adjusted Revenue5
$188-$194
$184.1
2%-5%
Adjusted EBITDA Margin6
Mid-to-high twenty-percent
range
$ in millions
FY 2023
FY 2022
YoY Change
Revenue5
$742-$748
$766.6
(3%)-(2%)
Adjusted Revenue5
$752-$758
$766.6
(2%)-(1%)
Adjusted EBITDA Margin6
High twenty-percent range
“We are guiding to fourth quarter revenue and Adjusted Revenue
in the range of $188 million to $194 million, representing 2%-5%
year-over-year growth, and Adjusted EBITDA Margin in the
mid-to-high twenty-percent range,” said Karsten Voermann, Chief
Financial Officer. “While we are continuing to refine our views on
2024, including assessing the uptake in new initiatives like our
integrated savings programs, we feel good about the business
growing next year at a roughly similar rate to the growth rate
implied in the 4Q23 guide, and we expect our 2024 Adjusted EBITDA
Margin6 to meet or exceed 4Q23.”
“Our balance sheet and liquidity position remained strong in the
third quarter, while generating healthy cash flow from operations.
We will continue to prioritize cash conversion and disciplined
capital deployment to support our strategic priorities and
accelerate value creation,” concluded Voermann.
5Adjusted Revenue is a non-GAAP financial
measure and is presented for supplemental informational purposes
only. We expect revenue, the most directly comparable financial
measure calculated in accordance with GAAP, to equal Adjusted
Revenue for the fourth quarter of 2023. For the full year 2023
guidance, revenue of $742 million to $748 million, excluding the
$10 million client contract termination costs incurred in the third
quarter of 2023, represents Adjusted Revenue. For the fourth
quarters of 2022 and 2023 and full years 2022 and 2024, Revenue
equals Adjusted Revenue.
6Adjusted EBITDA Margin is Adjusted EBITDA
divided by Adjusted Revenue. Adjusted EBITDA Margin is a non-GAAP
financial measure and is presented for supplemental informational
purposes only. We have not reconciled our Adjusted EBITDA Margin
guidance to GAAP net income or loss margin, because we do not
provide guidance for GAAP net income or loss margin due to the
uncertainty and potential variability of stock-based compensation
expense, acquired intangible assets and related amortization and
income taxes, which are reconciling items between Adjusted EBITDA
Margin and GAAP net income or loss margin. Because such items
cannot be provided without unreasonable efforts, we are unable to
provide a reconciliation of the non-GAAP financial measure guidance
to the corresponding GAAP measure. However, such items could have a
significant impact on our future GAAP net income or loss
margin.
Investor Conference Call and
Webcast
GoodRx management will host a conference call and webcast today,
November 9, 2023, at 5:00 a.m. Pacific Time (8:00 a.m. Eastern
Time) to discuss the results and the Company’s business
outlook.
To access the conference call, please pre-register using the
following link:
https://register.vevent.com/register/BI11f5bb26d0ab48bd971760488dcdead6
Registrants will receive a confirmation with dial-in details and a
unique passcode required to join.
The call will also be webcast live on the Company’s investor
relations website at https://investors.goodrx.com, where
accompanying materials will be posted prior to the conference
call.
Approximately one hour after completion of the live call, an
archived version of the webcast will be available on the Company’s
investor relations website at https://investors.goodrx.com for at
least 30 days.
About GoodRx
GoodRx is a leading resource for healthcare savings and
information that makes healthcare affordable and convenient for all
Americans. We offer consumers free access to transparent and lower
prices for brand and generic medications, affordable and convenient
medical provider consultations via telehealth, and comprehensive
healthcare research and information. Since 2011, we have helped
consumers save over $65 billion and are one of the most downloaded
medical apps over the past decade.
GoodRx periodically posts information that may be important to
investors on its investor relations website at
https://investors.goodrx.com. We intend to use our website as a
means of disclosing material non-public information and for
complying with our disclosure obligations under Regulation FD.
Accordingly, investors and potential investors are encouraged to
consult GoodRx’s website regularly for important information, in
addition to following GoodRx’s press releases, filings with the
Securities and Exchange Commission and public conference calls and
webcasts. The information contained on, or that may be accessed
through, GoodRx’s website is not incorporated by reference into,
and is not a part of, this press release.
Forward-Looking
Statements
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. All statements contained in this press release that do not
relate to matters of historical fact should be considered
forward-looking statements, including without limitation statements
regarding our future results of operations and financial position,
industry and business trends, the launch of new offerings, stock
compensation, our stock repurchase program, anticipated impacts of
the de-prioritization of certain solutions under our pharma
manufacturer solutions offering and our cost savings initiatives,
our direct contracting approach with retailers, the anticipated
benefits from our collaborations with MedImpact, Navitus and
Sanofi, realizability of deferred tax assets, business strategy,
cash conversion and capital deployment, potential outcomes and
estimated impacts of certain legal proceedings, our plans, market
growth and our objectives for future operations. These statements
are neither promises nor guarantees, but involve known and unknown
risks, uncertainties and other important factors that may cause our
actual results, performance or achievements to be materially
different from any future results, performance or achievements
expressed or implied by the forward-looking statements, including,
but not limited to, risks related to our limited operating history
and early stage of growth; our ability to achieve broad market
education and change consumer purchasing habits; our general
ability to continue to attract, acquire and retain consumers in a
cost-effective manner; our reliance on our prescription
transactions offering and ability to expand our offerings; changes
in medication pricing and pricing structures; our general inability
to control the categories and types of prescriptions for which we
can offer savings or discounted prices; our reliance on a limited
number of industry participants, including pharmacy benefit
managers, pharmacies, and pharma manufacturers; the competitive
nature of industry; risks related to pandemics, epidemics or
outbreak of infectious disease, including COVID-19; the accuracy of
our estimate of our total addressable market and other operational
metrics; risks related to a decrease in consumer willingness to
receive correspondence or any technical, legal or any other
restrictions to send such correspondence; risks related to any
failure to comply with applicable data protection, privacy and
security, advertising and consumer protection laws, standards, and
other requirements; risks related to negative media coverage; our
ability to respond to changes in the market for prescription
pricing and to maintain and expand the use of GoodRx codes; our
ability to maintain positive perception of our platform and brand;
risks related to any failure to maintain effective internal control
over financial reporting; risks related to use of social media,
emails, text messages and other messaging channels as part of our
marketing strategy; our ability to accurately forecast revenue and
appropriately plan our expenses in the future; risks related to
government regulation of the internet, e-commerce, consumer data
and privacy, information technology and cyber-security; our ability
to utilize our net operating loss carryforwards and certain other
tax attributes; our ability to attract, develop, motivate and
retain well-qualified employees, and to successfully transition our
Chief Executive Officer role; risks related to general economic
factors, natural disasters or other unexpected events; risks
related to our acquisition strategy; risks related to our debt
arrangements; interruptions or delays in service on our apps or
websites; our reliance on third-party platforms to distribute our
platform and offerings, including software as-a-service
technologies; systems failures or other disruptions in the
operations of these parties on which we depend; the increasing
focus on environmental sustainability and social initiatives; risks
related to our intellectual property; risks related to climate
change; risks related to operating in the healthcare industry;
risks related to our organizational structure; risks related to
fluctuations in our tax obligations and effective income tax rate
which could materially and adversely affect our results of
operations; litigation related risks; risks related to the recent
healthcare reform legislation and other changes in the healthcare
industry and in healthcare spending which may adversely affect our
business, financial condition and results of operations; the risk
that we may not achieve the intended outcomes of our restructuring
and cost reduction efforts; as well as the other important factors
discussed in the sections entitled “Risk Factors” of our Annual
Report on Form 10-K for the fiscal year ended December 31, 2022, as
updated by our Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 2023, and in our other filings with the
Securities and Exchange Commission. The forward-looking statements
in this press release are based upon information available to us as
of the date of this press release, 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.
While we may elect to update such forward-looking statements at
some point in the future, we disclaim any obligation to do so, even
if subsequent events cause our views to change.
Key Operating Metrics
Monthly Active Consumers (MACs) refers to the number of unique
consumers who have used a GoodRx code to purchase a prescription
medication in a given calendar month and have saved money compared
to the list price of the medication. A unique consumer who uses a
GoodRx code more than once in a calendar month to purchase
prescription medications is only counted as one Monthly Active
Consumer in that month. A unique consumer who uses a GoodRx code in
two or three calendar months within a quarter will be counted as a
Monthly Active Consumer in each such month. Monthly Active
Consumers do not include subscribers to our subscription offerings,
consumers of our pharma manufacturer solutions offering, or
consumers who use our telehealth offerings. When presented for a
period longer than a month, Monthly Active Consumers are averaged
over the number of calendar months in such period. Monthly Active
Consumers from acquired companies are only included beginning in
the first full quarter following the acquisition.
Subscription plans represent the ending subscription plan
balance across both of our subscription offerings, GoodRx Gold and
Kroger Savings Club. Each subscription plan may represent more than
one subscriber since family subscription plans may include multiple
members.
We exited the third quarter of 2023 with over 7 million
prescription-related consumers that used GoodRx across our
prescription transactions and subscription offerings. Our
prescription-related consumers represent the sum of Monthly Active
Consumers for the three months ended September 30, 2023 and
subscribers to our subscription plans as of September 30, 2023.
Three Months Ended
(in millions)
September 30,
2023
June 30, 2023
March 31, 2023
December 31,
2022
September 30,
2022
June 30, 2022
March 31, 2022
Monthly Active Consumers
6.1
6.1
6.1
5.9
5.8
5.8
6.4
As of
(in thousands)
September 30,
2023
June 30, 2023
March 31, 2023
December 31,
2022
September 30,
2022
June 30, 2022
March 31, 2022
Subscription plans
930
969
1,007
1,030
1,060
1,133
1,203
GoodRx Holdings, Inc.
Condensed Consolidated Balance
Sheets (Unaudited)
(in thousands, except par
values)
September 30, 2023
December 31, 2022
Assets
Current assets
Cash and cash equivalents
$
794,905
$
757,165
Accounts receivable, net
121,146
117,141
Prepaid expenses and other current
assets
53,047
45,380
Total current assets
969,098
919,686
Property and equipment, net
16,879
19,820
Goodwill
412,117
412,117
Intangible assets, net
89,431
119,865
Capitalized software, net
91,979
70,072
Operating lease right-of-use assets
31,501
35,906
Deferred tax assets, net
57,695
—
Other assets
39,272
27,165
Total assets
$
1,707,972
$
1,604,631
Liabilities and stockholders'
equity
Current liabilities
Accounts payable
$
32,905
$
17,700
Accrued expenses and other current
liabilities
74,554
47,523
Current portion of debt
7,029
7,029
Operating lease liabilities, current
3,334
4,068
Total current liabilities
117,822
76,320
Debt, net
648,729
651,796
Operating lease liabilities, net of
current portion
52,387
54,131
Other liabilities
7,761
7,557
Total liabilities
826,699
789,804
Stockholders' equity
Preferred stock, $0.0001 par value
—
—
Common stock, $0.0001 par value
40
40
Additional paid-in capital
2,312,767
2,263,322
Accumulated deficit
(1,431,534
)
(1,448,535
)
Total stockholders' equity
881,273
814,827
Total liabilities and stockholders'
equity
$
1,707,972
$
1,604,631
GoodRx Holdings, Inc.
Condensed Consolidated Statements of
Operations (Unaudited)
(in thousands, except per share
amounts)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023
2022
2023
2022
Revenue
$
179,958
$
187,318
$
553,621
$
582,445
Costs and operating expenses:
Cost of revenue, exclusive of depreciation
and amortization presented separately below
18,721
17,395
51,755
47,719
Product development and technology
39,611
35,921
103,804
106,367
Sales and marketing
91,615
86,215
247,577
273,503
General and administrative
35,317
49,548
95,144
116,211
Depreciation and amortization
33,024
13,952
64,060
38,644
Total costs and operating expenses
218,288
203,031
562,340
582,444
Operating (loss) income
(38,330
)
(15,713
)
(8,719
)
1
Other expense, net:
Other expense
(2,200
)
—
(4,008
)
—
Interest income
8,649
2,920
23,697
3,829
Interest expense
(14,720
)
(9,478
)
(41,907
)
(22,316
)
Total other expense, net
(8,271
)
(6,558
)
(22,218
)
(18,487
)
Loss before income taxes
(46,601
)
(22,271
)
(30,937
)
(18,486
)
Income tax benefit (expense)
8,106
(19,463
)
47,938
(12,370
)
Net (loss) income
$
(38,495
)
$
(41,734
)
$
17,001
$
(30,856
)
(Loss) earnings per share:
Basic
$
(0.09
)
$
(0.10
)
$
0.04
$
(0.07
)
Diluted
$
(0.09
)
$
(0.10
)
$
0.04
$
(0.07
)
Weighted average shares used in
computing (loss) earnings per share:
Basic
413,437
412,956
412,698
413,254
Diluted
413,437
412,956
416,450
413,254
Stock-based compensation included in
costs and operating expenses:
Cost of revenue
$
146
$
136
$
487
$
190
Product development and technology
6,829
8,029
22,952
25,327
Sales and marketing
10,273
4,766
11,665
15,999
General and administrative
15,398
16,107
40,938
49,304
GoodRx Holdings, Inc.
Condensed Consolidated Statements of
Cash Flows (Unaudited)
(in thousands)
Nine Months Ended
September 30,
2023
2022
Cash flows from operating
activities
Net income (loss)
$
17,001
$
(30,856
)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization
64,060
38,644
Amortization of debt issuance costs
2,539
2,562
Non-cash operating lease expense
3,022
2,314
Stock-based compensation expense
76,042
90,820
Change in fair value of contingent
consideration
—
16,857
Deferred income taxes
(57,989
)
(141
)
Loss on operating lease assets
374
—
Loss on disposal of capitalized
software
7,615
—
Loss on minority equity interest
investment
4,008
—
Changes in operating assets and
liabilities, net of effects of business acquisitions
Accounts receivable
(4,005
)
(2,370
)
Prepaid expenses and other assets
(29,867
)
(3,137
)
Accounts payable
14,515
(8,011
)
Accrued expenses and other current
liabilities
26,071
9,097
Operating lease liabilities
(1,460
)
(3,415
)
Other liabilities
498
2,537
Net cash provided by operating
activities
122,424
114,901
Cash flows from investing
activities
Purchase of property and equipment
(634
)
(3,817
)
Acquisitions, net of cash acquired
—
(156,853
)
Capitalized software
(42,260
)
(36,107
)
Investment in minority equity interest
—
(15,007
)
Net cash used in investing activities
(42,894
)
(211,784
)
Cash flows from financing
activities
Payments on long-term debt
(5,272
)
(5,272
)
Repurchases of Class A common stock
(26,149
)
(101,721
)
Proceeds from exercise of stock
options
4,385
9,110
Employee taxes paid related to net share
settlement of equity awards
(15,403
)
(17,557
)
Proceeds from employee stock purchase
plan
649
—
Net cash used in financing activities
(41,790
)
(115,440
)
Net change in cash and cash
equivalents
37,740
(212,323
)
Cash and cash equivalents
Beginning of period
757,165
941,109
End of period
$
794,905
$
728,786
Non-GAAP Financial Measures
Adjusted Revenue, Adjusted EBITDA, Adjusted EBITDA Margin,
Adjusted Net Income, Adjusted Net Income Margin and Adjusted
Earnings Per Share are supplemental measures of our performance
that are not required by, or presented in accordance with, U.S.
GAAP. We also present each cost and operating expense on our
condensed consolidated statements of operations on an adjusted
basis to arrive at adjusted operating income. Collectively, we
refer to these non-GAAP financial measures as our “Non-GAAP
Measures."
We define Adjusted Revenue for a particular period as revenue
excluding client contract termination costs associated with
restructuring related activities. We exclude these costs from
revenue because we believe they are not indicative of past or
future underlying performance of the business.
We define Adjusted EBITDA for a particular period as net income
or loss before interest, taxes, depreciation and amortization, and
as further adjusted for, as applicable for the periods presented,
acquisition related expenses, stock-based compensation expense,
payroll tax expense related to stock-based compensation, loss on
extinguishment of debt, financing related expenses, loss on
operating lease assets, restructuring related expenses, legal
settlement expenses, charitable stock donation, gain on sale of
business, and other income or expense, net. Adjusted EBITDA Margin
represents Adjusted EBITDA as a percentage of Adjusted Revenue.
We define Adjusted Net Income for a particular period as net
income or loss adjusted for, as applicable for the periods
presented, amortization of intangibles related to acquisitions and
restructuring activities, acquisition related expenses, stock-based
compensation expense, payroll tax expense related to stock-based
compensation, loss on extinguishment of debt, financing related
expenses, loss on operating lease assets, restructuring related
expenses, legal settlement expenses, charitable stock donation,
gain on sale of business, other expense, and as further adjusted
for estimated income tax on such adjusted items. Our adjusted taxes
also excludes (i) the valuation allowance recorded against certain
of our net deferred tax assets that was recognized in accordance
with GAAP and any subsequent releases of the valuation allowance,
and (ii) all tax benefits/expenses resulting from excess tax
benefits/deficiencies in connection with stock-based compensation.
Adjusted Net Income Margin represents Adjusted Net Income as a
percentage of Adjusted Revenue.
Adjusted Earnings Per Share is Adjusted Net Income attributable
to common stockholders divided by weighted average number of
shares. The weighted average shares we use in computing Adjusted
Earnings Per Share – basic is equal to our GAAP weighted average
shares – basic and the weighted average shares we use in computing
Adjusted Earnings Per Share – diluted is equal to either GAAP
weighted average shares – basic or GAAP weighted average shares –
diluted, depending on whether we have adjusted net loss or adjusted
net income, respectively.
We also assess our performance by evaluating each cost and
operating expense on our condensed consolidated statements of
operations on a non-GAAP, or adjusted, basis to arrive at adjusted
operating income. The adjustments to these cost and operating
expense items include, as applicable for the periods presented,
acquisition related expenses, amortization of intangibles related
to acquisitions and restructuring activities, stock-based
compensation expense, payroll tax expense related to stock-based
compensation, loss on extinguishment of debt, financing related
expenses, restructuring related expenses, legal settlement
expenses, loss on operating lease assets, charitable stock
donation, other expense, and gain on sale of business. Adjusted
operating income is Adjusted Revenue less non-GAAP costs and
operating expenses.
We believe our Non-GAAP Measures are helpful to investors,
analysts and other interested parties because they assist in
providing a more consistent and comparable overview of our
operations across our historical financial periods. Adjusted
Revenue, Adjusted EBITDA and Adjusted EBITDA Margin are also key
measures we use to assess our financial performance and are also
used for internal planning and forecasting purposes. In addition,
Adjusted Revenue, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted
Net Income and Adjusted Earnings Per Share are frequently used by
analysts, investors and other interested parties to evaluate and
assess performance.
The Non-GAAP Measures are presented for supplemental
informational purposes only and should not be considered as
alternatives or substitutes to financial information presented in
accordance with GAAP. These measures have certain limitations in
that they do not include the impact of certain expenses that are
reflected in our condensed consolidated statements of operations
that are necessary to run our business. Other companies, including
other companies in our industry, may not use these measures or may
calculate these measures differently than as presented herein,
limiting their usefulness as comparative measures.
The following table presents a reconciliation of net (loss)
income and revenue, the most directly comparable financial measures
calculated in accordance with GAAP, to Adjusted EBITDA and Adjusted
Revenue, respectively, and presents net (loss) income margin, the
most directly comparable financial measure calculated in accordance
with GAAP, with Adjusted EBITDA Margin:
(dollars in thousands)
Three Months Ended
September 30,
Nine Months Ended
September 30,
(dollars in thousands)
2023
2022
2023
2022
Net (loss) income
$
(38,495
)
$
(41,734
)
$
17,001
$
(30,856
)
Adjusted to exclude the following:
Interest income
(8,649
)
(2,920
)
(23,697
)
(3,829
)
Interest expense
14,720
9,478
41,907
22,316
Income tax (benefit) expense
(8,106
)
19,463
(47,938
)
12,370
Depreciation and amortization (1)
33,024
13,952
64,060
38,644
Other expense (2)
2,200
—
4,008
—
Financing related expenses (3)
—
5
—
14
Acquisition related expenses (4)
162
18,656
1,603
23,630
Restructuring related expenses (5)
22,389
5,880
22,389
6,236
Legal settlement expenses (6)
3,000
—
3,000
2,800
Stock-based compensation expense
32,646
29,038
76,042
90,820
Payroll tax expense related to stock-based
compensation
580
184
1,425
1,739
Loss on operating lease assets (7)
—
—
374
—
Adjusted EBITDA
$
53,471
$
52,002
$
160,174
$
163,884
Revenue
$
179,958
$
187,318
$
553,621
$
582,445
Adjusted to exclude the following:
Client contract termination costs (8)
10,000
—
10,000
—
Adjusted Revenue
$
189,958
$
187,318
$
563,621
$
582,445
Net (loss) income margin (9)
(21.4
%)
(22.3
%)
3.1
%
(5.3
%)
Adjusted EBITDA Margin (10)
28.1
%
27.8
%
28.4
%
28.1
%
________________________________________________________________
(1)
Depreciation and amortization for the
three and nine months ended September 30, 2023 included $17.5
million of amortization related to certain intangible assets in
connection with the Restructuring Plan, which have been accelerated
through December 31, 2023, the date the Restructuring Plan is
expected to be substantially complete.
(2)
Other expense represents the impairment
loss on one of our minority equity interest investments.
(3)
Financing related expenses include
third-party fees related to proposed financings.
(4)
Acquisition related expenses principally
include costs for actual or planned acquisitions including related
third-party fees, legal, consulting and other expenditures, and as
applicable, severance costs and retention bonuses to employees
related to acquisitions and change in fair value of contingent
consideration.
(5)
Restructuring related expenses include
employee severance and other personnel related costs in connection
with various workforce optimization and organizational changes that
better align with our strategic goals and future scale. In
connection with the Restructuring Plan, restructuring related
expenses for the three and nine months ended September 30, 2023
included (i) a loss of $7.0 million relating to the disposal of
certain capitalized software that were not yet ready for their
intended use; (ii) net charge of $5.3 million relating to various
headcount reduction and personnel initiatives; and (iii) a $10.0
million contract termination payment to a pharma manufacturer
solutions client.
(6)
Legal settlement expenses for the three
and nine months ended September 30, 2023 represent the estimated
net loss with respect to an ongoing class action litigation. Legal
settlement expenses for the nine months ended September 30, 2022
represent the estimated amount accrued with respect to the Federal
Trade Commission ("FTC") negotiated settlement. The estimated
accrual was adjusted in the fourth quarter of 2022 to reflect the
actual negotiated settlement amount of $1.5 million. See Note 8 to
our condensed consolidated financial statements for additional
information.
(7)
Loss on operating lease assets include, as
applicable for the periods presented, losses incurred relating to
the abandonment or sublease of certain leased office spaces and
disposal of related capitalized costs.
(8)
Client contract termination costs
represent a payment to a pharma manufacturer solutions client to
terminate certain contracts in connection with the Restructuring
Plan, which was recognized as a reduction of revenue.
(9)
Net (loss) income margin represents net
loss or net income, as applicable, as a percentage of revenue.
(10)
Adjusted EBITDA Margin represents Adjusted
EBITDA as a percentage of Adjusted Revenue.
The following tables present a reconciliation of net (loss)
income and revenue and calculations of net (loss) income margin and
(loss) earnings per share, the most directly comparable financial
measures calculated in accordance with GAAP, to Adjusted Net
Income, Adjusted Revenue, Adjusted Net Income Margin, and Adjusted
Earnings Per Share, respectively:
(dollars in thousands, except per
share amounts)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023
2022
2023
2022
Net (loss) income
$
(38,495
)
$
(41,734
)
$
17,001
$
(30,856
)
Adjusted to exclude the following:
Amortization of intangibles related to
acquisitions and restructuring activities
21,561
5,819
32,769
17,526
Other expense (1)
2,200
—
4,008
—
Financing related expenses (1)
—
5
—
14
Acquisition related expenses (1)
162
18,656
1,603
23,630
Restructuring related expenses (1)
22,389
5,880
22,389
6,236
Legal settlement expenses (1)
3,000
—
3,000
2,800
Stock-based compensation expense
32,646
29,038
76,042
90,820
Payroll tax expense related to stock-based
compensation
580
184
1,425
1,739
Loss on operating lease assets (1)
—
—
374
—
Income tax (benefit) expense on excluded
items and adjusting for valuation allowance and excess tax
benefits/deficiencies on stock-based compensation exercises
(18,502
)
12,081
(75,168
)
(13,460
)
Adjusted Net Income
$
25,541
$
29,929
$
83,443
$
98,449
Revenue
$
179,958
$
187,318
$
553,621
$
582,445
Adjusted to exclude the following:
Client contract termination costs (1)
10,000
—
10,000
—
Adjusted Revenue
$
189,958
$
187,318
$
563,621
$
582,445
Net (loss) income margin (1)
(21.4
%)
(22.3
%)
3.1
%
(5.3
%)
Adjusted Net Income Margin (2)
13.4
%
16.0
%
14.8
%
16.9
%
Weighted average shares used in
computing (loss) earnings per share:
Basic
413,437
412,956
412,698
413,254
Diluted
413,437
412,956
416,450
413,254
(Loss) earnings per share:
Basic
$
(0.09
)
$
(0.10
)
$
0.04
$
(0.07
)
Diluted
$
(0.09
)
$
(0.10
)
$
0.04
$
(0.07
)
Weighted average shares used in
computing Adjusted Earnings Per Share:
Basic
413,437
412,956
412,698
413,254
Diluted
420,592
414,940
416,450
420,363
Adjusted Earnings Per Share:
Basic
$
0.06
$
0.07
$
0.20
$
0.24
Diluted
$
0.06
$
0.07
$
0.20
$
0.23
________________________________________________________________
(1)
Refer to reconciliation table for Adjusted
EBITDA above for further information regarding these
metrics/adjustments.
(2)
Adjusted Net Income Margin represents
Adjusted Net Income as a percentage of Adjusted Revenue.
The following table presents (i) each non-GAAP, or adjusted,
cost and expense and operating income measure together with its
most directly comparable financial measure calculated in accordance
with GAAP; and (ii) each adjusted cost and expense and adjusted
operating income as a percentage of Adjusted Revenue together with
each GAAP cost and expense and operating (loss) income as a
percentage of revenue, the most directly comparable financial
measure calculated in accordance with GAAP:
(dollars in thousands)
GAAP
Adjusted
GAAP
Adjusted
Three Months Ended
September 30,
Three Months Ended
September 30,
Nine Months Ended
September 30,
Nine Months Ended
September 30,
2023
2022
2023
2022
2023
2022
2023
2022
Cost of revenue
$
18,721
$
17,395
$
15,688
$
17,055
$
51,755
$
47,719
$
48,365
$
47,275
% of Revenue (GAAP) /
Adjusted Revenue (Adjusted)
10
%
9
%
8
%
9
%
9
%
8
%
9
%
8
%
Product development and technology
$
39,611
$
35,921
$
24,046
$
24,895
$
103,804
$
106,367
$
71,426
$
76,371
% of Revenue (GAAP) /
Adjusted Revenue (Adjusted)
22
%
19
%
13
%
13
%
19
%
18
%
13
%
13
%
Sales and marketing
$
91,615
$
86,215
$
80,389
$
78,700
$
247,577
$
273,503
$
234,806
$
252,644
% of Revenue (GAAP) /
Adjusted Revenue (Adjusted)
51
%
46
%
42
%
42
%
45
%
47
%
42
%
43
%
General and administrative (1)
$
35,317
$
49,548
$
16,364
$
14,666
$
95,144
$
116,211
$
48,850
$
42,271
% of Revenue (GAAP) /
Adjusted Revenue (Adjusted)
20
%
26
%
9
%
8
%
17
%
20
%
9
%
7
%
Depreciation and amortization
$
33,024
$
13,952
$
11,463
$
8,133
$
64,060
$
38,644
$
31,291
$
21,118
% of Revenue (GAAP) /
Adjusted Revenue (Adjusted)
18
%
7
%
6
%
4
%
12
%
7
%
6
%
4
%
Operating (loss) income (1) (2)
$
(38,330
)
$
(15,713
)
$
42,008
$
43,869
$
(8,719
)
$
1
$
128,883
$
142,766
% of Revenue (GAAP) /
Adjusted Revenue (Adjusted)
(21
%)
(8
%)
22
%
23
%
(2
%)
0
%
23
%
25
%
________________________________________________________________
(1)
Our financial results for the first
quarter of 2023 as previously announced in our press release
furnished as an exhibit to our Current Report on Form 8-K dated May
10, 2023 erroneously included an adjustment for “Other expense” of
$1.8 million in “Adjusted general & administrative expenses”
and “Adjusted operating income.” The error has been corrected by
revising the amounts for the affected line items for the nine
months ended September 30, 2023 in the table above.
(2)
Adjusted operating income represents
Adjusted Revenue less non-GAAP costs and operating expenses.
The following table presents a reconciliation of each non-GAAP,
or adjusted, revenue, cost and expense and operating income measure
to its most directly comparable financial measure calculated in
accordance with GAAP:
(dollars in thousands)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023
2022
2023
2022
Revenue
$
179,958
$
187,318
$
553,621
$
582,445
Restructuring related expenses (1) (2)
10,000
—
10,000
—
Adjusted Revenue (2)
$
189,958
$
187,318
$
563,621
$
582,445
Cost of revenue
$
18,721
$
17,395
$
51,755
$
47,719
Restructuring related expenses (1)
(2,878
)
(203
)
(2,878
)
(237
)
Stock-based compensation expense
(146
)
(136
)
(487
)
(190
)
Payroll tax expense related to stock-based
compensation
(9
)
(1
)
(25
)
(17
)
Adjusted cost of revenue
$
15,688
$
17,055
$
48,365
$
47,275
Product development and technology
$
39,611
$
35,921
$
103,804
$
106,367
Acquisition related expenses (1)
(24
)
(285
)
(303
)
(876
)
Restructuring related expenses (1)
(8,403
)
(2,626
)
(8,403
)
(2,866
)
Stock-based compensation expense
(6,829
)
(8,029
)
(22,952
)
(25,327
)
Payroll tax expense related to stock-based
compensation
(309
)
(86
)
(720
)
(927
)
Adjusted product development and
technology
$
24,046
$
24,895
$
71,426
$
76,371
Sales and marketing
$
91,615
$
86,215
$
247,577
$
273,503
Acquisition related expenses (1)
—
(124
)
—
(1,879
)
Restructuring related expenses (1)
(838
)
(2,597
)
(838
)
(2,679
)
Stock-based compensation expense
(10,273
)
(4,766
)
(11,665
)
(15,999
)
Payroll tax expense related to stock-based
compensation
(115
)
(28
)
(268
)
(302
)
Adjusted sales and marketing
$
80,389
$
78,700
$
234,806
$
252,644
General and administrative
$
35,317
$
49,548
$
95,144
$
116,211
Financing related expenses (1)
—
(5
)
—
(14
)
Acquisition related expenses (1)
(138
)
(18,247
)
(1,300
)
(20,875
)
Restructuring related expenses (1)
(270
)
(454
)
(270
)
(454
)
Legal settlement expenses (1)
(3,000
)
—
(3,000
)
(2,800
)
Stock-based compensation expense
(15,398
)
(16,107
)
(40,938
)
(49,304
)
Payroll tax expense related to stock-based
compensation
(147
)
(69
)
(412
)
(493
)
Loss on operating lease assets
—
—
(374
)
—
Adjusted general and administrative
(3)
$
16,364
$
14,666
$
48,850
$
42,271
Depreciation and amortization
$
33,024
$
13,952
$
64,060
$
38,644
Amortization of intangibles related to
acquisitions and restructuring activities
(21,561
)
(5,819
)
(32,769
)
(17,526
)
Adjusted depreciation and amortization
$
11,463
$
8,133
$
31,291
$
21,118
Operating (loss) income
$
(38,330
)
$
(15,713
)
$
(8,719
)
$
1
Amortization of intangibles related to
acquisitions and restructuring activities
21,561
5,819
32,769
17,526
Financing related expenses (1)
—
5
—
14
Acquisition related expenses (1)
162
18,656
1,603
23,630
Restructuring related expenses (1)
22,389
5,880
22,389
6,236
Legal settlement expenses (1)
3,000
—
3,000
2,800
Stock-based compensation expense
32,646
29,038
76,042
90,820
Payroll tax expense related to stock-based
compensation
580
184
1,425
1,739
Loss on operating lease assets (1)
—
—
374
—
Adjusted operating income (3)
$
42,008
$
43,869
$
128,883
$
142,766
________________________________________________________________
(1)
Refer to reconciliation table for Adjusted
EBITDA above for further information regarding these
metrics/adjustments.
(2)
We define Adjusted Revenue for a
particular period as revenue excluding client contract termination
costs associated with the restructuring related activities. The
restructuring related expenses adjustment to revenue herein for the
three and nine months ended September 30, 2023 represents the $10.0
million contract termination payment to a pharma manufacturer
solutions client in connection with the Restructuring Plan.
(3)
Our financial results for the first
quarter of 2023 as previously announced in our press release
furnished as an exhibit to our Current Report on Form 8-K dated May
10, 2023 erroneously included an adjustment for “Other expense” of
$1.8 million in “Adjusted general & administrative expenses”
and “Adjusted operating income.” The error has been corrected by
revising the amounts for the affected line items for the nine
months ended September 30, 2023 in the table above.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231109040388/en/
Investor Contact GoodRx Whitney Notaro ir@goodrx.com
Press Contact GoodRx Lauren Casparis
lcasparis@goodrx.com
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