# GoodRx Holdings, Inc.: Form 10-Q for the period ended Sep 30, 2023

- Company: [GoodRx Holdings, Inc.](/companies/gdrx.md) (CIK 1809519)
- Form: 10-Q
- Filed: 2023-11-09
- Accepted by EDGAR: Nov 9, 2023, 14:21 ET
- Period: 2023-09-30
- Accession: 0001809519-23-000036
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1809519/000180951923000036/gdrx-20230930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1809519/000180951923000036/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $180.0m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $553.6m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Research and development | 3 months, 2023-07-01 to 2023-09-30 | $39.6m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2023-01-01 to 2023-09-30 | $103.8m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | −$38.3m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | −$8.7m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | −$8.1m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | −$47.9m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | −$38.5m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | $17.0m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.09 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | $0.04 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.09 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | $0.04 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 413,437,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 416,450,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | $122.4m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-01-01 to 2023-09-30 | $634.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 9 months, 2023-01-01 to 2023-09-30 | $26.1m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2023-09-30 | $794.9m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-09-30 | $969.1m | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $1.71bn | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $117.8m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-09-30 | $826.7m | us-gaap:Liabilities |
| Long-term debt | at 2023-09-30 | $648.7m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2023-09-30 | $7.0m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2023-09-30 | $881.3m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 62,494 characters.

*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 Operations” and Part II, Item 8, “Financial Statements and Supplementary Data” included in our 2022 10-K. 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" sections of our 2022 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:

- “***we,” “us,” “our,”*** the “***Company,” “GoodRx,”*** and similar references refer to GoodRx Holdings, Inc. and its consolidated subsidiaries.
- “***consumers”*** refer to the general population in the United States that uses or otherwise purchases healthcare products and services. References to “***our consumers”*** or “***GoodRx consumers”*** refer to consumers that have used one or more of our offerings.
- “***discounted price”*** refers to a price for a prescription provided on our platform that represents a negotiated rate provided by one of our PBM partners at a retail pharmacy. Through our platform, our discounted prices are free to access for consumers by saving a GoodRx code to their mobile device for their selected prescription and presenting it at the chosen pharmacy. The term “discounted price” excludes prices we may otherwise source, such as prices from patient assistance programs for low-income individuals and Medicare prices, and any negotiated rates offered through our subscription offerings: GoodRx Gold (“***Gold”***), and Kroger Rx Savings Club powered by GoodRx (“***Kroger Savings”).***
- “***GoodRx code”*** refers to codes that can be accessed by our consumers through our apps or websites or that can be provided to our consumers directly by healthcare professionals, including physicians and pharmacists, that allow our consumers free access to our discounted prices or a lower list price for their prescriptions when such code is presented at their chosen pharmacy.
- “***Monthly Active Consumers”*** refers to the number of unique consumers who have used a GoodRx code to purchase a prescription medication in a given calendar month and have saved money compared to the list price of the medication. A unique consumer who uses a GoodRx code more than once in a calendar month to purchase prescription medications is only counted as one Monthly Active Consumer in that month. A unique consumer who uses a GoodRx code in two or three calendar months within a quarter will be counted as a Monthly Active Consumer in each such month. Monthly Active Consumers do not include subscribers to our subscription offerings, consumers of our pharma manufacturer solutions offering, or consumers who used our telehealth offerings. When presented for a period longer than a month, Monthly Active Consumers is averaged over the number of calendar months in such period. For example, a unique consumer who uses a GoodRx code twice in January, but who did not use our prescription transactions offering again in February or March, is counted as 1 in January and as 0 in both February and March, thus contributing 0.33 to our Monthly Active Consumers for such quarter (average of 1, 0 and 0). A unique consumer who uses a GoodRx code in January and in March, but did not use our prescription transactions offering in February, would be counted as 1 in January, 0 in February and 1 in March, thus contributing 0.66 to our Monthly Active Consumers for such quarter. Monthly Active Consumers from acquired companies are only included beginning in the first full quarter following the acquisition.
- “***PBM”*** refers to a pharmacy benefit manager. PBMs aggregate demand to negotiate prescription medication prices with pharmacies and pharma manufacturers. PBMs find most of their demand through relationships with insurance companies and employers. However, nearly all PBMs also have consumer direct or cash network pricing that they negotiate with pharmacies for consumers who choose to purchase prescriptions outside of insurance.
- “***pharma”*** is an abbreviation for pharmaceutical.
- “***savings,” “saved”*** and similar references refer to the difference between the list price for a particular prescription at a particular pharmacy and the price paid by the GoodRx consumer for that prescription utilizing a GoodRx code available through our platform at that same pharmacy. In certain circumstances, we may show a list price on our platform when such list price is lower than the negotiated price available using a GoodRx code and, in certain circumstances, a consumer may use a GoodRx code and pay the list price at a pharmacy if such list price is lower than the negotiated price available using a GoodRx code. We do not earn revenue from such transactions, but our savings calculation includes an estimate of the savings achieved by the consumer because our platform has directed the consumer to the pharmacy with the low list price. This

estimate of savings when the consumer pays the list price is based on internal data and is calculated as the difference between the average list price across all pharmacies where GoodRx consumers paid the list price and the average list price paid by consumers in the pharmacies to which we directed them. We do not calculate savings based on insurance prices as we do not have information about a consumer’s specific coverage or price. We do not believe savings are representative or indicative of our revenue or results of operations.

- “***subscribers”*** and similar references refers to our consumers that are subscribed to either of our subscription offerings, Gold or Kroger Savings. References to subscription plans as of a particular date represents an active subscription to either one of our aforementioned subscription offerings as of the specified date. Each subscription plan may represent more than one subscriber since family subscription plans may include multiple members.

Certain monetary amounts, percentages, and other figures included in this Quarterly Report on Form 10-Q have been subject to rounding adjustments. Percentage amounts included in this Quarterly Report on Form 10-Q have not in all cases been calculated on the basis of such rounded figures, but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this Quarterly Report on Form 10-Q may vary from those obtained by performing the same calculations using the figures in our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. Certain other amounts that appear in this Quarterly Report on Form 10-Q may not sum due to rounding.

### Overview

Our mission is to help Americans get the healthcare they need at a price they can afford. To achieve this, we are building the leading resource for healthcare savings and information in the United States. We believe our financial results reflect the significant market demand for our offerings and the value that we provide to the broader healthcare ecosystem; however, our financial results for the three and nine months ended September 30, 2023 have been materially impacted by certain restructuring related activities undertaken by us during 2023 and the sustained effects of certain events that occurred during 2022.

Late in the first quarter of 2022, a grocery chain took actions that impacted acceptance of discounted pricing for a subset of prescription drugs from PBMs, who are one category of our customers, and whose pricing we promote on our platform (such events referred to as the grocer issue). This had a material adverse impact on our prescription transactions revenue and Monthly Active Consumers, which was partially offset by our ability to shift certain prescription transactions to other retailers. Although the grocer issue was addressed in August 2022 and our discounted pricing has since been consistently welcomed at the point of sale by the grocery chain, beginning in the second quarter of 2022, it has had and will continue to have a sustained adverse impact on our prescription transactions revenue and Monthly Active Consumers due to consumer response to updated consumer pricing and the timing and extent of returning user levels. We have not experienced, and are not aware of, PBM-pharmacy issues at any other large volume pharmacies, with the exception of the grocery chain described above, and we believe our pharmacy and PBM relationships remain strong. For additional information, please see sections entitled “Risk Factors" in our 2022 10-K and this Quarterly Report on Form 10-Q.

In addition to the above, but to a lesser extent, the acquisition of vitaCare Prescription Services, Inc. ("vitaCare") in April 2022 also had a negative impact on our net (loss) income, net (loss) income margin, Adjusted EBITDA and Adjusted EBITDA Margin for the three and nine months ended September 30, 2023. vitaCare has a higher cost of revenue due to the operational nature of the solutions it supports and has historically generated net losses and negative Adjusted EBITDA.

On August 7, 2023, our board of directors (our "Board") approved a plan to de-prioritize certain solutions provided under our pharma manufacturer solutions offering, including vitaCare (the “Restructuring Plan”). The Restructuring Plan included (i) a reduction in force involving employees of our wholly-owned subsidiaries GoodRx, Inc. and vitaCare; (ii) the entry into retention agreements with certain other employees for the purpose of maintaining business continuity; and (iii) the restructuring or termination of certain solutions and arrangements with our clients to better align with our strategic goals and future scale. These actions are part of our continued strategic focus on scaling and re-balancing our cost structure to drive improved profitability and are expected to be substantially complete by the end of 2023. Our revenue and net (loss) income for the three and nine months ended September 30, 2023 have been impacted by costs incurred due to the Restructuring Plan, which we expect will continue through the end of 2023. These restructuring activities are expected to result in approximately $18 million to $22 million of annualized run rate cash savings. The annualized run rate cash savings are estimates and subject to a number of assumptions, and actual results may differ materially. In addition, we expect the run rate cash savings to principally impact future cost of revenues. For additional information regarding the Restructuring Plan, see Note 12 to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.

For the three months ended September 30, 2023 as compared to the same period of 2022:

- Revenue decreased 4% to $180.0 million (which was impacted by $10.0 million of client contract termination costs incurred in connection with the Restructuring Plan) from $187.3 million;
- Adjusted Revenue increased 1% to $190.0 million (which represents revenue excluding the $10.0 million of client contract termination costs incurred in connection with the Restructuring Plan, which was recognized as a reduction of revenue) from $187.3 million;
- Net loss and net loss margin were $38.5 million and 21.4%, respectively, compared to net loss and net loss margin of $41.7 million and 22.3%, respectively; and
- Adjusted EBITDA and Adjusted EBITDA Margin were $53.5 million and 28.1%, respectively, compared to $52.0 million and 27.8%, respectively.

For the nine months ended September 30, 2023 as compared to the same period of 2022:

- Revenue decreased 5% to $553.6 million (which was impacted by $10.0 million of client contract termination costs incurred in connection with the Restructuring Plan) from $582.4 million;
- Adjusted Revenue decreased 3% to $563.6 million (which represents revenue excluding the $10.0 million of client contract termination costs incurred in connection with the Restructuring Plan, which was recognized as a reduction of revenue) from $582.4 million;
- Net income and net income margin were $17.0 million and 3.1%, respectively, compared to net loss and net loss margin of $30.9 million and 5.3%, respectively; and
- Adjusted EBITDA and Adjusted EBITDA Margin were $160.2 million and 28.4%, respectively, compared to $163.9 million and 28.1%, respectively.

Revenue, net (loss) income and net (loss) income margin are financial measures prepared in conformity with accounting principles generally accepted in the United States ("GAAP"). Adjusted Revenue, Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP financial measures. For a reconciliation and presentation of Adjusted Revenue, Adjusted EBITDA and Adjusted EBITDA Margin to the most directly comparable GAAP financial measures, information about why we consider Adjusted Revenue, Adjusted EBITDA and Adjusted EBITDA Margin useful and a discussion of the material risks and limitations of these measures, please see “Key Financial and Operating Metrics—Non-GAAP Financial Measures" below.

### 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 grocer issue and the ongoing impact of COVID-19 may have masked these trends in recent periods and may continue to impact these trends in the future.

### Recent Developments

In October 2023, we net settled the remaining vested 15.7 million shares of Class B common stock underlying the Performance-Vesting Founders Awards (as defined in our 2022 10-K) and remitted aggregate cash consideration of $44.5 million on behalf of our co-founders to the relevant tax authorities to satisfy income tax withholding obligations. Additionally, in October 2023, we entered into a proposed settlement agreement with respect to an ongoing class action litigation. See Note 13 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information.

### Key Financial and Operating Metrics

We use Monthly Active Consumers, subscription plans, Adjusted Revenue, Adjusted EBITDA and Adjusted EBITDA Margin to assess our performance, make strategic and offering decisions and build our financial projections. The number of Monthly Active Consumers and subscription plans are key indicators of the scale of our consumer base and a gauge for our marketing and engagement efforts. We believe these operating metrics reflect our scale, growth and engagement with consumers.

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.

### Monthly Active Consumers

Monthly Active Consumers beginning with the second quarter of 2022 were impacted by the grocer issue.

*(in millions)*

|  | Three Months Ended 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 |

### Subscription Plans

Beginning in 2022, subscription plans have been impacted by a pricing increase for Gold subscribers that went into effect in the first half of 2022 and a sequential decline in our subscription plans for Kroger Savings as a result of reduced marketing spend in relation to the offering. We expect our subscription plans for Kroger Savings to continue to sequentially decline through July 2024, the expected sunset of the program.

*(in thousands)*

|  | As of 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 |

### Non-GAAP Financial Measures

Adjusted Revenue, Adjusted EBITDA and Adjusted EBITDA Margin are key measures we use to assess our financial performance and are also used for internal planning and forecasting purposes. We believe Adjusted Revenue, Adjusted EBITDA and Adjusted EBITDA Margin are helpful to investors, analysts and other interested parties because they can assist in providing a more consistent and comparable overview of our operations across our historical financial periods. In addition, these measures are frequently used by analysts, investors and other interested parties to evaluate and assess performance.

We define Adjusted 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, as applicable, for 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.

Adjusted Revenue, Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP financial 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 costs that are reflected in our condensed consolidated statements of operations that are necessary to run our business. Other companies, including other companies in our industry, may not use these measures or may calculate these measures differently than as presented in this Quarterly Report on Form 10-Q, limiting their usefulness as comparative measures.

The following table presents a reconciliation of net (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, 2023 | 2022 | Nine Months Ended September 30, 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.

### 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 pharma manufacturer solutions, subscription offerings, and our telehealth offering. All of our revenue has been generated in the United States. We consider PBMs, pharmacies, pharma manufacturers and our subscribers, with whom we have direct contractual agreements, to be our primary customers.

- *Prescription transactions revenue*: Consists primarily of revenue generated from PBMs when a prescription is filled with a GoodRx code provided through our platform. The majority of our contracts with PBMs provide for fees that represent a percentage of the fees that PBMs charge to the pharmacy, and a minority of our contracts provide for a fixed fee per transaction. Our percentage of fee contracts often also include a minimum fixed fee per transaction. Certain contracts also provide that the amount of fees we receive is based on the volume of prescriptions filled each month. We expect the revenue contribution from contracts with fixed fee arrangements to remain largely stable over the medium term, and do not expect that changes in revenue contribution from fixed fee versus percentage of fee arrangements will materially impact our revenue from PBMs. Beginning in late 2022, we began to enter into direct contractual agreements with pharmacies, which generally provide for lower fees per transaction relative to prescriptions filled through our agreements with PBMs. Our contracts with pharmacies provide consumers access to discounted prices. We earn fixed fees per transaction from such pharmacies when a prescription is filled with a GoodRx code provided through our platform. We expect to increase direct contractual relationships with more pharmacies in proportion to existing contractual agreements with our PBMs in the near term. Consumer incentives principally in the form of discounts on prescription drugs processed through pharmacies that we directly contract with are recognized as a reduction of prescription transactions revenue.
- *Pharma manufacturer solutions revenue:* Consists primarily of revenue generated from pharma manufacturers and other customers for advertising, including integrating onto our platform their affordability solutions to our consumers, and also from prescription transaction fees generated when pharmacies fill prescriptions for products sold by pharma manufacturers via our vitaCare pharmacy services solution, net of consideration paid or payable to clients in connection with terminating pharma manufacturer solutions contracts.
- *Subscription revenue*: Consists of revenue from our Gold and Kroger Savings subscription offerings.
- *Other revenue*: Consists of revenue generated by our telehealth offering that allows consumers to access healthcare professionals online.

### Costs and Operating Expenses

We incur the following expenses directly related to our cost of revenue and operating expenses:

- *Cost of revenue:* Consists primarily of costs related to outsourced consumer support; healthcare provider costs; personnel costs including salaries, benefits, bonuses and stock-based compensation expense, for our consumer support employees; hosting and cloud costs; merchant account fees; processing fees; allocated overhead; and as applicable, fulfillment costs for certain solutions provided to customers under our pharma manufacturer solutions offering. Cost of revenue is largely driven by the growth of our visitor, subscriber and active consumer base, as well as our offering mix. Our cost of revenue as a percentage of revenue may vary based on the change in mix of our various offerings.
- *Product development and technology:* Consists primarily of personnel costs, including salaries, benefits, bonuses and stock-based compensation expense, for employees involved in product development activities; costs related to third-party services and contractors related to product development, information technology and software; and allocated overhead. Product development and technology expenses are primarily driven by changes in headcount and investments to support and develop our various products. We capitalize certain qualified costs related to the development of internal-use software, which may also cause product development and technology expenses to vary from period to period. Product development and technology expenses also include, as applicable, losses associated with disposal of capitalized development costs related to internal-use software that are not yet ready for their intended use.
- *Sales and marketing:* Consists primarily of advertising and promotional expenses for consumer acquisition and retention including consumer (who are not our customers) discounts and incentives that are generally offered to a limited number of consumers for a limited time on a limited number of prescription drugs processed through our PBMs; as well as personnel costs, including salaries, benefits, bonuses, stock-based compensation expense and sales commissions, for sales and marketing employees; costs related to third-party services and contractors; and allocated overhead. Sales and marketing expenses are primarily driven by investments to grow and retain our consumer base and may fluctuate based on the timing of our investments in consumer acquisition and retention. We continuously evaluate the impact of sales and marketing activities

on our business and actively manage our sales and marketing spend, including our investments in consumer acquisition, which is largely variable, as market and business conditions change.

- *General and administrative:* Consists primarily of personnel costs including salaries, benefits, bonuses and stock-based compensation expense for our executive, finance, accounting, legal, and human resources functions; as well as professional fees; occupancy costs; other general overhead costs; and as applicable, change in fair value of contingent consideration, loss on operating lease assets, gain on sale of business, legal settlement charges, net of insurance recoveries, and charitable donations.
- *Depreciation and amortization:* Consists of depreciation of property and equipment and amortization of capitalized internal-use software costs and intangible assets. Our depreciation and amortization changes primarily based on changes in our property and equipment, intangible assets, and capitalized software balances and estimated useful lives.

### Other Expense, Net

Our other expense, net consists of the following:

- *Other expense*: Consists primarily of miscellaneous expense that are not core to our operations.
- *Interest income*: Consists primarily of interest income earned on excess cash held in interest-bearing accounts.
- *Interest expense*: Consists primarily of interest expense associated with our debt arrangements, including amortization of debt issuance costs and discounts.

### Income Taxes

Our income taxes consist of federal and state income taxes. Our effective income tax rate differs from the U.S. federal statutory rate of 21.0% primarily due to effects of non-deductible officers’ stock-based compensation expense, changes in the valuation allowance against our net deferred tax assets, state income taxes, research and development tax credits and tax effects from our equity awards. 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

### Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022

The following table sets forth our results of operations for the three months ended September 30, 2023 and 2022:

*(dollars in thousands)*

| Revenue: | Three Months Ended September 30, 2023 | % of Total Revenue | Three Months Ended September 30, 2022 | % of Total Revenue | Change ($) | Change (%) |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Prescription transactions revenue | $135,427 | 75% | $131,216 | 70% | $4,211 | 3% |
| Pharma manufacturer solutions revenue (1) | 15,897 | 9% | 24,499 | 13% | (8,602) | (35%) |
| Subscription revenue | 23,240 | 13% | 26,450 | 14% | (3,210) | (12%) |
| Other revenue | 5,394 | 3% | 5,153 | 3% | 241 | 5% |
| Total revenue | 179,958 |  | 187,318 |  |  |  |
| Costs and operating expenses: |  |  |  |  |  |  |
| Cost of revenue, exclusive of depreciation and amortization presented separately below | 18,721 | 10% | 17,395 | 9% | 1,326 | 8% |
| Product development and technology | 39,611 | 22% | 35,921 | 19% | 3,690 | 10% |
| Sales and marketing | 91,615 | 51% | 86,215 | 46% | 5,400 | 6% |
| General and administrative | 35,317 | 20% | 49,548 | 26% | (14,231) | (29%) |
| Depreciation and amortization | 33,024 | 18% | 13,952 | 7% | 19,072 | 137% |
| Total costs and operating expenses | 218,288 |  | 203,031 |  |  |  |
| Operating loss | (38,330) |  | (15,713) |  |  |  |
| Other expense, net: |  |  |  |  |  |  |
| Other expense | (2,200) | 1% | — | 0% | (2,200) | n/m |
| Interest income | 8,649 | 5% | 2,920 | 2% | 5,729 | 196% |
| Interest expense | (14,720) | 8% | (9,478) | 5% | (5,242) | 55% |
| Total other expense, net | (8,271) |  | (6,558) |  |  |  |
| Loss before income taxes | (46,601) |  | (22,271) |  |  |  |
| Income tax benefit (expense) | 8,106 | 5% | (19,463) | 10% | 27,569 | (142%) |
| Net loss | $(38,495) |  | $(41,734) |  |  |  |

(1) Pharma manufacturer solutions revenue for the three and nine months ended September 30, 2023 included a $10.0 million contract termination payment to a pharma manufacturer solutions client in connection with our Restructuring Plan, which was recognized as a reduction of revenue. See Note 12 to our condensed consolidated financial statements for additional information.

### Revenue

Prescription transactions revenue increased $4.2 million, or 3%, year-over-year, primarily driven by a 5% increase in the number of our Monthly Active Consumers, partially offset by lower fees per transaction as a result of our ongoing shift to direct contractual agreements with pharmacies and an increase in our consumer incentives programs pertaining to transactions processed through pharmacies that we directly contracted with, which were recognized as a reduction of revenue. We expect a modest trend of lower fees per transaction in the near term as we continue to focus on increasing the volume of transactions processed through pharmacies that we directly contract with, which, in general, do and may in the future provide lower pricing relative to transactions processed through our PBMs.

Pharma manufacturer solutions revenue decreased $8.6 million, or 35%, year-over-year, primarily driven by a $10.0 million contract termination payment to a client in connection with the Restructuring Plan, which was recognized as a reduction of revenue, partially offset by organic growth. We expect the results of the de-prioritization of certain solutions under our pharma manufacturer solutions offering in connection with the Restructuring Plan will have a sustained adverse impact on our pharma manufacturer solutions revenue in the medium term.

Subscription revenue decreased $3.2 million, or 12%, year-over-year, primarily driven by a decrease in the number of subscription plans largely due to the sunset of Kroger Savings, resulting in 930 thousand subscription plans as of

September 30, 2023 compared to 1,060 thousand as of September 30, 2022, as well as a change in the sales mix of Gold subscription plans to more single-user plans and away from family plans leading to a lower price per subscription plan. We do not believe the grocer issue materially impacted subscription revenue through the third quarter of 2023.

Other revenue increased 5% year-over-year. We do not believe the expected sunset of Kroger Savings in July 2024 will have a material impact on our future revenue and financial results.

### Costs and Operating Expenses

#### Cost of revenue, exclusive of depreciation and amortization

Cost of revenue increased $1.3 million, or 8%, year-over-year, primarily due to personnel related costs arising from the Restructuring Plan.

#### Product development and technology

Product development and technology expenses increased $3.7 million, or 10%, year-over-year, primarily driven by a $7.6 million loss on the disposal of certain capitalized software that were not yet ready for their intended use, principally in connection with the Restructuring Plan. The impact from this loss was partially offset by a $4.0 million decrease in payroll and related costs due to lower average headcount and higher capitalization of certain qualified costs related to the development of internal-use software.

#### Sales and marketing

Sales and marketing expenses increased $5.4 million, or 6%, year-over-year, primarily driven by a $3.3 million increase in payroll and related costs, principally from higher stock-based compensation expense due to changes in our employee composition, a $2.5 million increase in third-party marketing and related support services and a $1.4 million increase in advertising expenses. The impact from these drivers was partially offset by a $2.2 million decrease in promotional expenses substantially in the form of consumer discounts pertaining to transactions processed through our PBMs.

#### General and administrative

General and administrative expenses decreased $14.2 million, or 29%, year-over-year, primarily driven by a $16.6 million change in fair value of contingent consideration in 2022 related to the vitaCare acquisition and a $5.6 million decrease in stock-based compensation expense related to awards granted to our co-founders (the "Founders Awards") in connection with our initial public offering ("IPO") in 2020. The impact from these drivers was partially offset by a net $3.0 million estimated legal settlement loss recognized during the third quarter of 2023 with respect to an ongoing class action litigation (see Note 8 to our condensed consolidated financial statements), a $3.0 million increase in payroll and related expenses, principally driven by stock-based compensation expense related to a stock option award granted to our Interim Chief Executive Officer in the second quarter of 2023, as well as a $2.4 million increase in professional fees.

#### Depreciation and amortization

Depreciation and amortization expenses increased $19.1 million, or 137%, year-over-year, primarily driven by $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.

### Other Expense

Other expense increased by $2.2 million year-over-year, due to an impairment loss on one of our minority equity interest investments.

### Interest Income

Interest income increased by $5.7 million year-over-year primarily due to higher interest rates earned on cash equivalents held in U.S. treasury securities money market funds.

### Interest Expense

Interest expense increased by $5.2 million, or 55%, year-over-year, primarily due to higher interest rates, partially offset by lower average debt balances.

### Income Taxes

For the three months ended September 30, 2023, we had an income tax benefit of $8.1 million compared to income tax expense of $19.5 million for the three months ended September 30, 2022 and an effective income tax rate of 17.4% and (87.4%), respectively. The year-over-year change in our income taxes was primarily due to the changes in our estimated annual effective income tax rate year-over-year from the tax effects of our valuation allowance previously maintained against our net deferred tax assets in excess of tax amortizable goodwill. For information regarding our valuation allowance analysis, see Part I, Item 2, "Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates—Income Taxes—Valuation of Deferred Tax Assets" included elsewhere in this Quarterly Report on Form 10-Q.

### Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

The following table sets forth our results of operations for the nine months ended September 30, 2023 and 2022:

*(dollars in thousands)*

| Revenue: | Nine Months Ended September 30, 2023 | % of Total Revenue | Nine Months Ended September 30, 2022 | % of Total Revenue | Change ($) | Change (%) |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Prescription transactions revenue | $406,874 | 73% | $421,126 | 72% | $(14,252) | (3%) |
| Pharma manufacturer solutions revenue (1) | 60,662 | 11% | 74,519 | 13% | (13,857) | (19%) |
| Subscription revenue | 71,261 | 13% | 71,545 | 12% | (284) | 0% |
| Other revenue | 14,824 | 3% | 15,255 | 3% | (431) | (3%) |
| Total revenue | 553,621 |  | 582,445 |  |  |  |
| Costs and operating expenses: |  |  |  |  |  |  |
| Cost of revenue, exclusive of depreciation and amortization presented separately below | 51,755 | 9% | 47,719 | 8% | 4,036 | 8% |
| Product development and technology | 103,804 | 19% | 106,367 | 18% | (2,563) | (2%) |
| Sales and marketing | 247,577 | 45% | 273,503 | 47% | (25,926) | (9%) |
| General and administrative | 95,144 | 17% | 116,211 | 20% | (21,067) | (18%) |
| Depreciation and amortization | 64,060 | 12% | 38,644 | 7% | 25,416 | 66% |
| Total costs and operating expenses | 562,340 |  | 582,444 |  |  |  |
| Operating (loss) income | (8,719) |  | 1 |  |  |  |
| Other expense, net: |  |  |  |  |  |  |
| Other expense | (4,008) | 1% | — | 0% | (4,008) | n/m |
| Interest income | 23,697 | 4% | 3,829 | 1% | 19,868 | 519% |
| Interest expense | (41,907) | 8% | (22,316) | 4% | (19,591) | 88% |
| Total other expense, net | (22,218) |  | (18,487) |  |  |  |
| Loss before income taxes | (30,937) |  | (18,486) |  |  |  |
| Income tax benefit (expense) | 47,938 | 9% | (12,370) | 2% | 60,308 | (488%) |
| Net income (loss) | $17,001 |  | $(30,856) |  |  |  |

(1) Pharma manufacturer solutions revenue for the three and nine months ended September 30, 2023 included a $10.0 million contract termination payment to a pharma manufacturer solutions client in connection with our Restructuring Plan, which was recognized as a reduction of revenue. See Note 12 to our condensed consolidated financial statements for additional information.

### Revenue

Prescription transactions revenue decreased $14.3 million, or 3%, year-over-year, primarily driven by the grocer issue described above, as well as lower fees per transaction as a result of our ongoing shift to direct contractual agreements with pharmacies, partially offset by a 2% increase in the number of our Monthly Active Consumers.

Pharma manufacturer solutions revenue decreased $13.9 million, or 19%, year-over-year, primarily driven by a $10.0 million contract termination payment to a client in connection with the Restructuring Plan, as well as by our increased focus on prioritizing service arrangements with high levels of recurring revenue potential relative to the prior year and moderation in spending across pharma manufacturers. vitaCare, an acquisition completed in April 2022, provided an increase of $4.2 million in revenue contribution for the nine months ended September 30, 2023 compared to the same period of 2022.

Subscription revenue stayed relatively flat year-over-year, primarily driven by a decrease in the number of subscription plans largely due to the sunset of Kroger Savings, resulting in 930 thousand subscription plans as of September 30, 2023 compared to 1,060 thousand as of September 30, 2022, offset by the effects of the pricing increase for Gold subscribers in the first half of 2022.

Other revenue decreased 3% year-over-year. Other than revenue from vitaCare relative to pharma manufacturer solutions revenue, our acquisitions individually and in the aggregate did not materially contribute to the change in our revenue for the nine months ended September 30, 2023 compared to the same period of 2022. For expected revenue trends, see our discussion and analysis above for the three months ended September 30, 2023 compared to the same period of 2022.

### Costs and Operating Expenses

#### Cost of revenue, exclusive of depreciation and amortization

Cost of revenue increased $4.0 million, or 8%, year-over-year, primarily driven by a $4.9 million increase in personnel related costs principally due to the Restructuring Plan as well as allocated overhead due to higher average headcount, largely as a result of our acquisition of vitaCare in April 2022. The impact from these drivers was partially offset by a $2.3 million decrease in fulfillment costs for certain solutions provided to customers under our pharma manufacturer solutions offering.

#### Product development and technology

Product development and technology expenses decreased $2.6 million, or 2%, year-over-year, primarily driven by a $10.1 million decrease in payroll and related costs due to lower average headcount and higher capitalization of certain qualified costs related to the development of internal-use software. The impact from these drivers was partially offset by a $7.6 million loss on the disposal of certain capitalized software that were not yet ready for their intended use principally in connection with the Restructuring Plan.

#### Sales and marketing

Sales and marketing expenses decreased $25.9 million, or 9%, year-over-year, primarily driven by a $35.6 million decrease in advertising expenses and a $9.2 million decrease in payroll and related costs principally due to a reversal of previously recognized stock-based compensation expense as certain performance milestones were no longer probable of being met, lower average headcount and the reduction in force in August 2022. The impact from these drivers was partially offset by a $10.7 million increase in third-party marketing and related support services as well as a $7.0 million increase in promotional expenses substantially in the form of consumer discounts.

#### General and administrative

General and administrative expenses decreased $21.1 million, or 18%, year-over-year, primarily driven by a $16.9 million change in fair value of contingent consideration in 2022 related to the vitaCare acquisition, a $18.9 million decrease in stock-based compensation expense related to the Founders Awards and a $2.8 million estimated legal settlement accrual recognized in the second quarter of 2022 with respect to the then-pending FTC investigation. The impact from these drivers was partially offset by a $14.3 million increase in payroll and related expenses, principally due to changes in our employee composition and increased equity grants to existing and new employees in the nine months ended September 30, 2023 relative to the same period of 2022, as well as a net $3.0 million estimated legal settlement loss recognized during the third quarter of 2023 with respect to an ongoing class action litigation (see Note 8 to our condensed consolidated financial statements).

#### Depreciation and amortization

Depreciation and amortization expenses increased $25.4 million, or 66%, year-over-year, primarily driven by $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. The year-over-year change in depreciation and amortization was further driven by higher amortization due to higher capitalized costs for platform improvements and the introduction of new products and features.

### Other Expense

Other expense increased by $4.0 million year-over-year, due to impairment losses on one of our minority equity interest investments.

### Interest Income

Interest income increased by $19.9 million year-over-year, primarily due to higher interest rates earned on cash equivalents held in U.S. treasury securities money market funds.

### Interest Expense

Interest expense increased by $19.6 million, or 88%, year-over-year, primarily due to higher interest rates, partially offset by lower average debt balances.

### Income Taxes

For the nine months ended September 30, 2023, we had an income tax benefit of $47.9 million compared to income tax expense of $12.4 million for the nine months ended September 30, 2022 and an effective income tax rate of 155.0% and (66.9%), respectively. The year-over-year change in our income taxes was primarily due to the discrete release of our valuation allowance on beginning of year deferred tax assets in the three months ended June 30, 2023 and changes in our estimated annual effective income tax rate year-over-year from the tax effects of our valuation allowance previously maintained against our net deferred tax assets in excess of tax amortizable goodwill. The impact from these drivers was partially offset by a decrease in our excess stock benefits from our equity awards. For information regarding our valuation allowance analysis, see Part I, Item 2, "Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates—Income Taxes—Valuation of Deferred Tax Assets" included elsewhere in this Quarterly Report on Form 10-Q.

### Liquidity and Capital Resources

Since our inception, we have financed our operations primarily through net cash provided by operating activities, equity issuances, and borrowings under our long-term debt arrangements. Our principal sources of liquidity are expected to be our cash and cash equivalents and borrowings available under our $100.0 million secured revolving credit facility which expires on October 11, 2024. As of September 30, 2023, we had cash and cash equivalents of $794.9 million and $90.8 million available under our revolving credit facility. For additional information regarding our revolving credit facility and our term loan, see Note 7 to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.

As of September 30, 2023, there were no material changes to our primary short-term and long-term requirements for liquidity and capital or to our contractual commitments as disclosed in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our 2022 10-K. Based on current conditions, we believe that our net cash provided by operating activities and cash on hand will be adequate to meet our operating, investing and financing needs for at least the next twelve months from the date of the issuance of the accompanying unaudited condensed consolidated financial statements. Our future capital requirements will depend on many factors, including the growth of our business, the timing and extent of investments, sales and marketing activities, and many other factors as described in sections entitled “Risk Factors” of our 2022 10-K and this Quarterly Report on Form 10-Q.

If necessary, we may borrow funds under our revolving credit facility to finance our liquidity requirements, subject to customary borrowing conditions. To the extent additional funds are necessary to meet our long-term liquidity needs as we continue to execute our business strategy, we anticipate that they will be obtained through the incurrence of additional indebtedness, additional equity financings or a combination of these potential sources of funds; however, such financing may not be available on favorable terms, or at all. In particular, the current economic uncertainty, including rising inflation and socio-political events, has resulted in, and may continue to result in, significant disruption of global financial markets, including rising interest rates, reducing our ability to access capital. If we are unable to raise additional funds when or on the terms desired, our business, financial condition and results of operations could be adversely affected.

### Holding Company Status

GoodRx Holdings, Inc. is a holding company that does not conduct any business operations of its own. As a result, GoodRx Holdings, Inc. is largely dependent upon cash distributions and other transfers from its subsidiaries to meet its obligations and to make future dividend payments, if any. Our existing debt arrangement contains covenants restricting payments of dividends by our subsidiaries, including GoodRx, Inc., unless certain conditions are met. These covenants provide for certain exceptions for specific types of payments. Based on these restrictions, all of the net assets of GoodRx, Inc. were restricted pursuant to the terms of our debt arrangements as of September 30, 2023. Since the restricted net assets of GoodRx, Inc. and its subsidiaries exceed 25% of our consolidated net assets, in accordance with Regulation S-X, see Note 17 to our consolidated financial statements included in our 2022 10-K for the condensed parent company financial information of GoodRx Holdings, Inc.

### Cash Flows

*(in thousands)*

|  | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: |
| Net cash provided by operating activities | $122,424 | $114,901 |
| Net cash used in investing activities | (42,894) | (211,784) |
| Net cash used in financing activities | (41,790) | (115,440) |
| Net change in cash and cash equivalents | $37,740 | $(212,323) |

#### Net cash provided by operating activities

Net cash provided by operating activities consist of net income or loss adjusted for certain non-cash items and changes in assets and liabilities. The $7.5 million increase in net cash provided by operations during the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 was due to an increase of $47.9 million from the year-over-year change from net loss to net income and a net decrease of $11.1 million in cash outflow from changes in operating assets and liabilities, offset by a net decrease of $51.4 million in non-cash adjustments. The net decrease in non-cash adjustments was primarily driven by changes in deferred income tax year-over-year as a result of the discrete release of our valuation allowance in the second quarter of 2023, a year-over-year decrease in stock-based compensation expense due to the Founders Awards and a decrease in the change in fair value of contingent consideration that was recognized in 2022. The impact from these drivers was partially offset by losses on disposal of capitalized software that were not yet ready for their intended use and minority equity interest investment, as well as an increase in depreciation and amortization due to amortization of certain intangible assets that were accelerated in 2023 as a result of the Restructuring Plan. The changes in operating assets and liabilities were primarily driven by the timing of income tax payments and refunds, as well as by the timing of payments of accounts payable and accrued expenses and collections of accounts receivable.

#### Net cash used in investing activities

Net cash used in investing activities primarily consist of cash used for acquisitions and investments, software development costs and capital expenditures. The $168.9 million decrease in net cash used in investing activities for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 was primarily related to a $171.9 million decrease in cash paid for acquisition of businesses and minority equity interest investments in privately-held companies.

#### Net cash used in financing activities

Net cash used in financing activities primarily consist of payments related to our debt arrangements, repurchases of our Class A common stock, and net share settlement of equity awards, partially offset by proceeds from exercise of stock options and from our employee stock purchase plan. The $73.7 million decrease in net cash used in financing activities for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 was primarily related to a decrease of $75.6 million for repurchases of our Class A common stock.

### Recent Accounting Pronouncement

See Note 2 to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q for further information on a new accounting standard adopted in 2023.

### Critical Accounting Policies and Estimates

Except as noted below, during the nine months ended September 30, 2023, 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 2022 10-K.

### Income Taxes—Valuation of Deferred Tax Assets

Deferred tax assets represent amounts available to reduce income taxes payable on taxable income in future years. Such assets arise because of temporary differences between the financial reporting and tax basis of assets and liabilities, as well as from net operating losses and tax credits. We evaluate the recoverability of deferred tax assets by assessing all available evidence, both positive and negative, to determine whether, based on the weight of that evidence, a valuation allowance for deferred tax assets is needed. A valuation allowance is established if it is more likely than not that all or a portion of deferred tax assets will not be realized. The determination of whether a valuation allowance should be established, as well as the amount of such allowance, requires significant judgment and estimates, including estimates of future earnings. Accordingly, the valuation of our net deferred tax assets is a critical accounting estimate.

In evaluating the realizability of our net deferred tax assets, we perform an assessment each reporting period of both positive and negative evidence. As of December 31, 2021 through March 31, 2023, we maintained a full valuation allowance against our net deferred tax assets in excess of amortizable goodwill as the objectively verifiable negative evidence outweighed the positive evidence. We determined it was more likely than not that our deferred tax assets would not be realized. Objectively verifiable negative evidence at the time primarily included (i) the existence of fiscal and trailing three-year cumulative tax losses (pre-tax earnings or losses adjusted for permanent book to tax differences) principally generated from 2021 and 2020; and (ii) the existence of substantial stock options granted prior to our IPO that remain outstanding. The tax losses in 2021 and 2020 were attributable to substantial excess tax benefits realized from the exercise of stock options granted prior to our IPO. Stock options granted prior to our IPO contained substantially lower exercise prices compared to the closing prices of our Class A common stock as reported on the Nasdaq Global Select Market in 2021 and 2020, which when exercised, resulted in significant excess tax benefits to us. In 2022 and through the first half of 2023, the excess tax benefits realized substantially decreased relative to 2021 and 2020 due to a decline in the closing prices of our Class A common stock. Accordingly, relative to 2021, the weight of the negative evidence related to substantial excess tax benefits to be realized in future tax periods declined in recent periods.

As of June 30, 2023, we determined that it was more likely than not that our net deferred tax assets would be realized. Positive evidence reviewed included sustained tax profitability, which was objective and verifiable, and anticipated future earnings. The sustained trend of tax profitability realized began in 2022 and continued through the first half of 2023. Additional positive evidence reviewed included (i) stock options granted will expire 10 years from the date of grant if unexercised; and (ii) an indefinite carryforward period for certain deferred tax assets. When a change in valuation allowance is recognized during an interim period, the change in valuation allowance resulting from current year income is included in the annual effective tax rate and the release of valuation allowance supported by projections of future taxable income is recorded as a discrete tax benefit in the interim period. Accordingly, we released $55.9 million of our valuation allowance as a discrete tax benefit during the three months ended June 30, 2023.

Although we have a significant number of outstanding stock options granted prior to our IPO available to be exercised in future tax periods, which may generate incremental excess tax benefits if they are exercised, the degree of excess tax benefits that will be realized in the future will depend on many factors outside of our control, including the closing prices of our Class A common stock in the future and stock option exercises being initiated by employees. Further, we have granted additional equity awards to our employees since our IPO at various closing prices of our Class A common stock which when vested or exercised, could offset, partially offset or supplement the incremental excess tax benefits to be realized from the exercise of stock options granted prior to our IPO in future tax periods.

We apply judgment to consider the relative impact of negative and positive evidence and the weight given to negative and positive evidence is commensurate with the extent to which such evidence can be objectively verified. For the nine months ended September 30, 2023, we continued to experience tax profitability and anticipate future earnings. Based on our evaluation of all available positive and negative evidence, and by placing greater weight on the sustained tax profitability achieved since 2022, which was objectively verifiable, and anticipated future earnings, we continued to believe that a valuation allowance against the majority of our net deferred tax assets was not required as of September 30, 2023. Our judgment regarding the need for a valuation allowance may reasonably change in future reporting periods due to many factors, including changes in the level of tax profitability that we achieve, changes in tax laws or regulations, and price fluctuations of our Class A common stock and its related future tax effects from our outstanding equity awards.

## Market risk

As filed, 183 characters.

There have been no material changes in our market risk from the disclosure included in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” of our 2022 10-K.

## Controls and procedures

As filed, 937 characters.

### Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer 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, our principal executive officer and principal financial officer concluded that, as of September 30, 2023, our disclosure controls and procedures were effective.

### Changes in Internal Control Over Financial Reporting

There have been 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 three months ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 24,435 characters.

For a discussion of potential risks and uncertainties related to us, see the information included in Part I, Item 1A, "Risk Factors" of our 2022 10-K. There have been no material changes to the risk factors previously disclosed in our 2022 10-K, except as noted below:

***We rely significantly on our prescription transactions offering and may not be successful in expanding our offerings within our markets, particularly the U.S. prescriptions market, or to other segments of the healthcare industry.***

To date, the vast majority of our revenue has been derived from our prescription transactions offering. When a consumer uses a GoodRx code to fill a prescription and saves money compared to the list price at that pharmacy, we receive fees from our partners, including PBMs, pharma manufacturers and pharmacies, as applicable. Revenue from our prescription transactions offering represented 72%, 80% and 89% of our revenue for the years ended December 31, 2022, 2021 and 2020, respectively. Substantially all of this revenue was generated from consumer transactions at brick-and-mortar pharmacies. The introduction of competing offerings with lower prices for consumers, fluctuations in prescription prices, changes in consumer purchasing habits, including an increase in the use of mail delivery prescriptions, changes in our relationships with industry participants and our various partners, changes in the regulatory landscape, and other factors could result in changes to our contracts or a decline in our total revenue, which may have an adverse effect on our business, financial condition and results of operations. Because we derive a vast majority of our revenue from our prescription transactions offering, any material decline in the use of such offering or in the fees we receive from our partners in connection with such offering would have a pronounced impact on our future revenue and results of operations, particularly if we are unable to expand our offerings overall.

We seek to expand our offerings within the prescriptions market and the pharma manufacturer solutions market in the United States, and we are actively investing in these growth areas. We also continue to focus on the optimization of our existing partnerships and have entered into and may in the future enter into new agreements with industry participants. However, expanding our offerings, entering into new markets and entering into new partnerships requires substantial additional resources, and our ability to succeed is not certain. During and following periods of active investment in such offerings, markets, relationships and partnerships, we may experience a decrease in profitability or margins, particularly if the area of investment generates lower margins than our other offerings. As we attempt to expand our offerings and optimize our partnerships, we will need to take additional steps, such as hiring additional personnel, partnering with new third parties and incurring considerable research and development expenses, in order to pursue such expansion and optimization successfully. Any such expansion and/or optimization would be subject to additional uncertainties and would likely be subject to additional laws and regulations. As a result, we may not be successful in future efforts to expand into or achieve profitability from new markets, new business models or strategies, new partnerships or new offering types, and our ability to generate revenue from our current offerings and continue our existing business may be negatively affected. If any such expansion does not enhance our ability to maintain or grow revenue or recover any associated development costs, our business, financial condition and results of operations could be adversely affected.

***Our business is subject to changes in medication pricing and is significantly impacted by pricing structures negotiated by industry participants.***

Our platform aggregates and analyzes pricing data from a number of different sources. The discounted prices that we present through our platform are based in large part upon pricing structures negotiated by industry participants. Although some of our contracts with certain of our partners contain provisions related to discount rates, we do not control the overall pricing strategies of pharma manufacturers, wholesalers, PBMs and pharmacies, each of which is motivated by independent considerations and drivers that are outside our control and has the ability to set or significantly impact market prices for different prescription medications. While we have contractual and non-contractual relationships with certain industry participants, such as pharmacies, PBMs and pharma manufacturers, these and other industry participants often negotiate complex and multi-party pricing structures, and we have no control over these participants and the policies and strategies that they implement in negotiating these multi-party pricing structures. For example, a grocery chain took actions late in the first quarter of 2022 that impacted acceptance of discounted pricing for a subset of prescription drugs from PBMs, who are one category of our customers, and whose pricing we promote on our platform. This had a material adverse impact on our results of operations for the year ended December 31, 2022 and may continue to have a material adverse impact in future periods.

Pharma manufacturers generally direct medication pricing by setting medication list prices and offering rebates and discounts for their medications. List prices are impacted by, among other things, market considerations such as the number of competitor medications and availability of alternative treatment options. Wholesalers can impact medication pricing by purchasing medications in bulk from pharma manufacturers and then reselling such medications to pharmacies. PBMs generally impact medication pricing through their bargaining power, negotiated rebates with pharma manufacturers and contracts with different pharmacy providers and health insurance companies. PBMs work with pharmacies to determine the negotiated rate that will be paid at the pharmacy by consumers. We also work with pharmacies with which we have contractual arrangements to offer discount rates to consumers. Medication pricing is also impacted by health insurance companies and the extent to which a health insurance plan provides for, among other things, covered medications, preferred tiers for different medications and high or low deductibles. A vast majority of the utilization of our platform relates to generic medications.

Our ability to present discounted prices through our platform, the value of any such discounts and our ability to generate revenue are directly affected by the pricing structures in place amongst these industry participants, and changes in medication pricing and in the general pricing structures that are in place could have an adverse effect on our business, financial condition and results of operations. For example, changes in the negotiated rates of the PBMs on our platform at pharmacies could negatively impact the prices that we present through our platform, and changes in insurance plan coverage for specific medications could reduce demand for and/or our ability to offer competitive discounts for certain medications, any of which could have an adverse effect on our ability to generate revenue and business. In addition, changes in the fee and pricing structures among industry participants, whether due to regulatory requirements, competitive pressures or otherwise, that reduce or adversely impact fees generated by PBMs or directly by us through partner pharmacies would have an adverse effect on our ability to generate revenue and business. Due in part to existing pricing structures, we generate a smaller portion of our revenue through contracts with pharma manufacturers and other intermediaries. Changes in the roles of industry participants and in general pricing structures, as well as price competition among industry participants, could have an adverse impact on our business. For example, integration of PBMs and pharmacy providers could result in pricing structures whereby such entities would have greater pricing power and flexibility or industry players could implement direct to consumer initiatives that could significantly alter existing pricing structures, either of which would have an adverse impact on our ability to present competitive and low prices to consumers and, as a result, the value of our platform for consumers and our results of operations.

***We generally do not control the categories and types of prescriptions for which we can offer savings or discounted prices.***

The categories and brands of medications for which we can present discounted prices are largely determined by PBMs, pharmacies and pharma manufacturers. PBMs work with insurance companies, employers and other organizations and enter into contracts with pharmacies to determine negotiated rates. They also negotiate rebates with pharma manufacturers. The terms that different PBMs negotiate with each pharmacy are generally different and result in different negotiated rates available via each PBM’s network, all of which is outside our control. Different PBMs prioritize and allocate discounts across different medications, and continuously update these allocations in accordance with their internal strategies and expectations. As we have agreements with PBMs to market their negotiated rates through our platform, our ability to present discounted prices is in part dependent upon the arrangements that such PBMs have negotiated with pharmacies and upon the resulting availability and allocation of discounts for medications subject to these arrangements. We also have agreements with partner pharmacies to offer discount rates to consumers and such discount rates are subject to negotiated terms and conditions. In general, industry participants are less likely to allocate or provide discounts or rebates on brand medications that are covered by patents. As a result, the discounted prices that we are able to present for brand medications may not be as competitive as for generic medications. Similar to the total prescription volume in the United States, the vast majority of the utilization of our platform relates to generic medications.

Changes in the categories and types of medications for which we can present pricing through our platform could have an adverse effect on our business, financial condition and results of operations. In addition, demand for our offerings and the use and utility of our platform is impacted by the value of the discounts that we are able to present and the extent to which there is inconsistency in the price of a particular prescription across the market. If pharmacies, PBMs or others do not allocate or otherwise facilitate adequate discounts for these medications, or if there is significant price similarity or competition across PBMs and pharmacies, the perceived value of our platform and the demand for our offerings would decrease and there would be a significant impact on our business, financial condition and results of operations.

### We rely on a limited number of industry participants.

There is currently significant concentration in the U.S. healthcare industry, and in particular there are a limited number of PBMs, including pharmacies’ in-house PBMs, and a limited number of national pharmacy chains. If we are unable to retain favorable contractual arrangements and relationships with our PBMs and partner pharmacies, including any successor PBMs or pharmacies should there be further consolidation of PBMs or pharmacies, we may lose them as customers and partners, as applicable, or the negotiated rates provided by such PBMs or directly through such partner pharmacies may become less competitive, which could have an adverse impact on the discounted prices we present through our platform.

A limited number of PBMs generate a significant percentage of the discounted prices that we present through our platform and, as a result, we generate a significant portion of our revenue from contracts with a limited number of PBMs. We work with more than a dozen PBMs that maintain cash networks and prices, and the number of PBMs we work with has significantly increased over time, limiting the extent to which any one PBM contributes to our overall revenue; however, we may not expand beyond our existing PBM partners and the number of our PBM partners may even decline. Revenue from each PBM fluctuates from period to period as the discounts and prices available through our platform change, and different PBMs experience increases and decreases in the volume of transactions processed through their respective networks. Our three largest PBM partners accounted for 31% of our revenue in 2022, 34% of our revenue in 2021, and 42% of our revenue in 2020. In 2022, Express Scripts accounted for more than 10% of revenue. In 2021, Express Scripts and Navitus each accounted for more than 10% of revenue. In 2020, Navitus, MedImpact and Express Scripts each accounted for more than 10% of revenue. The loss of any of these large PBMs may negatively impact the breadth of the pricing that we are able to offer consumers.

Most of our PBM contracts provide for monthly payments from PBMs, including our contracts with MedImpact, Navitus, and Express Scripts. Our PBM contracts generally can be divided into two categories: PBM contracts featuring a percentage of fee arrangement, where fees are a percentage of the fees that PBMs charge to pharmacies, and PBM contracts featuring a fixed fee per transaction arrangement. Our percentage of fee contracts often also include a minimum fixed fee per transaction. The majority of our PBM contracts, including our contracts with MedImpact and Navitus, are percentage of fee contracts, and a minority of our contracts, including our PBM contract with Express Scripts, provide for fixed fee per transaction arrangements. Our PBM contracts generally, including our contracts with MedImpact, Navitus, and Express Scripts, have a tiered fee structure based on volume generated in the applicable payment period. Our PBM contracts, including our contracts with MedImpact, Navitus, and Express Scripts, do not contain minimum volume requirements, and thus do not provide for any assurance as to minimum payments to us. Our PBM contracts generally renew automatically, including our contracts with MedImpact and Navitus. In addition, our PBM contracts generally provide for continuing payments to us after such contracts are terminated, including our contracts with MedImpact, Navitus and Express Scripts. Some of our PBM contracts provide for these continuing payments for so long as negotiated rates related to the applicable PBM contract continue to be used after termination, and other contracts provide for these continuing payments for specified multi-year payment periods after termination. Our contracts with MedImpact, Navitus, and Express Scripts provide for periods of five years, three years, and five years, respectively, during which payments will be made as negotiated rates related to the applicable PBM contract continue to be used. Between contract renewals, our contracts generally provide for limited termination rights and do not provide for termination for convenience.

In addition, our PBM contracts typically include provisions that prevent PBMs from circumventing our platform, redirecting volumes outside of our platform and other protective measures. For example, our PBM contracts, including our contracts with MedImpact, Navitus, and Express Scripts, contain provisions that limit PBM use of our intellectual property related to our brand and platform and require PBMs to maintain the confidentiality of our data. While we have consistently renewed and extended the term of our contracts with PBMs over time, there can be no assurance that PBMs will enter into future contracts or renew existing contracts with us, or that any future contracts they enter into will be on equally favorable terms. Changes that limit or otherwise negatively impact our ability to receive fees from these partners would have an adverse effect on our business, financial condition and results of operations. Consolidation of PBMs or the loss of a PBM could negatively impact the discounts and prices that we present through our platform and may result in less competitive discounts and prices on our platform.

Our consumers use GoodRx codes at the point of purchase at nearby pharmacies. These codes can be used at over 70,000 pharmacies in the United States. The U.S. prescriptions market is dominated by a limited number of national and regional pharmacy chains, such as CVS, Kroger, Walmart and Walgreens. These pharmacy chains represent a significant portion of overall prescription medication transactions in the United States. Similarly, a significant portion of our discounted prices are used at a limited number of pharmacy chains and, as a result, a significant portion of our revenue is derived from transactions processed at a limited number of pharmacy chains. We have entered, and may in the future enter, into direct contractual arrangements with pharmacies, which we refer to as our partner pharmacies, to offer discount rates to consumers at such pharmacies.

If one or more of these pharmacy chains terminates its cash network contracts with PBMs that we work with, enters into cash network contracts with PBMs that we work with at less competitive rates, or to the extent a pharmacy chain has entered into a direct contractual arrangement with us, terminates such contractual arrangement, our business may be negatively affected. For example, a grocery chain took actions late in the first quarter of 2022 that impacted acceptance of discounted pricing for a subset of prescription drugs from PBMs, who are one category of our customers, and whose pricing we promote on our platform. This had a material adverse impact on our results of operations for the year ended December 31, 2022 and may continue to have a material adverse impact in future periods. Such actions could be exacerbated by further consolidation of PBMs or pharmacy chains. If such changes, individually or in the aggregate, are material, they would have an adverse effect on our business, results of operations and financial condition. If there is a decline in revenue generated from any of the PBMs we contract with, as a result of consolidation of PBMs or pharmacy chains, pricing competition among industry participants or otherwise, if we are unable to maintain or grow our relationships with PBMs and pharmacies or if we lose one or more of the PBMs or partner pharmacies we contract with and cannot replace such PBM or partner pharmacy in a timely manner or at all, there would be an adverse effect on our business, financial condition and results of operations.

We do not generate a significant percentage of revenue from mail delivery service. To the extent consumer preferences change, including as a result of public health concerns, we may not be able to accommodate sufficient demand for mail delivery service which may have an adverse effect on our business, financial condition and results of operations.

***We rely on the performance of members of management and highly skilled personnel, and if we are unable to attract, develop, motivate and retain well-qualified employees, our business could be harmed.***

Our ability to maintain our competitive position is largely dependent on the services of our senior management and other key personnel. In addition, our future success depends on our continuing ability to attract, develop, motivate and retain highly qualified and skilled employees. Competition for such personnel is extremely intense. To attract and retain such personnel, we have had to offer, and believe we will need to continue to offer, highly competitive compensation packages. However, we have experienced and may continue to experience difficulties in hiring and retaining these personnel at compensation levels consistent with our existing compensation and salary structure. Some of the companies with which we compete for experienced employees have greater resources than we have and may be able to offer more attractive terms of employment. We have needed and may in the future need to invest significant amounts of cash and equity to attract and retain employees and we may not realize sufficient returns on these investments. In addition, the loss of any of our senior management or other key employees, the failure to successfully transition key roles, or our inability to recruit, develop and retain qualified personnel could materially and adversely affect our ability to execute our business plan and we may be unable to find adequate replacements. For instance, on April 25, 2023, Trevor Bezdek and Douglas Hirsch transitioned from their prior roles as our Co-Chief Executive Officers and our board of directors appointed Scott Wagner as Interim Chief Executive Officer. Our board of directors is currently engaged in a search process for a permanent Chief Executive Officer and any inability to successfully transition the Chief Executive Officer role and/or attract a permanent successor for such role could adversely impact our business.

All of our employees are at-will employees, meaning that they may terminate their employment relationship with us at any time, and their knowledge of our business and industry would be extremely difficult to replace. If we fail to retain talented senior management and other key personnel, or if we do not succeed in attracting well-qualified employees or retaining and motivating existing employees, our business, financial condition and results of operations may be materially adversely affected.

***We may be unable to realize expected benefits from our restructuring and cost reduction efforts and our business might be adversely affected.***

In order to operate more efficiently and control costs, from time to time, we announce restructuring plans and other cost savings initiatives, which include workforce reductions as well as re-balancing of products and services to align with our business strategy. These plans are intended to generate, among other things, operating expense savings and improved margins and profitability. For example, in August 2022, we implemented a reduction in force affecting employees of our wholly-owned subsidiary GoodRx, Inc.’s workforce in order to consolidate functions and eliminate or reduce investment in areas of lower focus. Additionally, in August 2023, our Board approved a plan to de-prioritize certain solutions under our pharma manufacturer solutions offering, which included (i) a reduction in force involving employees of our wholly-owned subsidiaries GoodRx, Inc. and vitaCare; (ii) the entry into retention agreements with certain other employees for the purpose of maintaining business continuity; and (iii) the restructuring or termination of certain solutions and arrangements with our clients to better align with our strategic goals and future scale. We expect to generate approximately $18.0 million to $22.0 million of annualized run rate cash savings as a result of the actions taken under the plan.

We may undertake further restructuring actions or workforce reductions in the future. These types of restructuring and cost reduction activities are complex and may result in unintended consequences and costs, such as unforeseen delays in the implementation of our strategic initiatives, business and operational disruptions, decreased employee morale, loss of institutional knowledge and expertise, and potential impacts on financial reporting. Any reduction in workforce could also make it difficult for us to pursue, or prevent us from pursuing, new opportunities and initiatives due to insufficient personnel, or require us to incur additional and unanticipated costs to hire new personnel to pursue such opportunities or initiatives. If we do not successfully manage our current initiatives and restructuring activities or any other similar activities that we may undertake in the future, expected efficiencies and benefits might be delayed or not realized, and our business, financial condition, and results of operations may be materially adversely affected.

Filed Nov 9, 2023.
Source: SEC EDGAR, the filing index for accession 0001809519-23-000036. Last ingested by Listed: Nov 10, 2026, 21:34 ET. No prices; not investment advice.