GoodRx Holdings, Inc. Q3 FY2024 earnings call

• GoodRx's value proposition includes having a large consumer and healthcare provider audience, being a complement to health insurance, and having relevant relationships with pharmacies, PBMs, healthcare providers, and consumers.
• In pharma manufacturer solutions, it's expected to deliver about 20% year-over-year top line growth in the fourth quarter, extending the integrated savings program to include uncovered brand medication, and having partnerships with multiple companies for point-of-sale cash discounts and e-commerce capabilities.
• The retail pharmacy environment is unsettled, affecting the near-term growth of the prescription transaction business centered around generics, but GoodRx is working with retailers in direct contracts and deepening relationships with PBMs.

In the third quarter, total revenue increased 8% and adjusted revenue increased 3% year-over-year to $195.3 million. Prescription transactions revenue grew 4% year-over-year to $140.4 million primarily due to a 7% increase in monthly active consumers despite Rite Aid closure impact of $2.4 million. Subscription revenue declined 8% to $21.3 million largely due to the sunset of the Kroger Savings Club. Pharma manufacturer solutions revenue increased to $28.1 million, representing 77% year-over-year growth. Net income was $4.0 million compared to a net loss of $38.5 million in the third quarter of 2023. Adjusted net income was $31.9 million, up from $25.5 million in the third quarter of 2023. Adjusted EBITDA increased 21.5% year-over-year to $65.0 million with an adjusted EBITDA margin of 33.3%.

• For the fourth quarter, expects revenue and adjusted revenue to be around $200 million, with full year revenue and adjusted revenue just under $795 million, resulting in ~6% year-over-year growth in revenue and ~4% growth on an adjusted revenue basis. Pharma manufacturer solutions expected to be ~$29 million to $30 million, ~20% growth. Adjusted EBITDA margin expected to be about 34% in the fourth quarter. Full year adjusted EBITDA expected $255 million to $260 million, up over 17% from 2023. In 2025, confident in 20% plus year-over-year growth in pharma manufacturer solutions, and expects total GoodRx revenue to grow in single-digit percentage range, with adjusted EBITDA margins continuing to increase.

• Retail pharmacy environment instability impacting near-term growth of prescription transaction business centered around generics. - Uncertainties in pharma company spending and retail contract negotiations.

Q: Stan Berenshteyn of Wells Fargo Securities asked about pharmacies negotiating contracts with PBMs and take rates.

A: Karsten Voermann said renegotiation is standard, but pharmacies are more aggressive now, and Scott Wagner added they're having conversations on the overall category and ways to create more economics for retailers through brands.

Q: Sean Dodge of RBC Capital Markets asked about ISP rollout pace across PBM partners.

A: Scott Wagner said it's a mix across the PBM environment, with ISP serving as a complement to insurance plans and continuing to round out benefits.

Q: Jailendra Singh of Truist Securities asked about PMS business and pharma companies' willingness to spend.

A: Karsten Voermann said GoodRx has high traffic on brand drug pages, and they're continuing to work with brands to bring assistance programs onto GoodRx, and Scott Wagner said they're not relying on budget flush outcomes for fourth quarter numbers.

Q: Unidentified Analyst asked about GLP-1s and compounded GLP-1s on the platform.

A: Karsten Voermann said there's huge activity on GLP-1s on GoodRx, they're working with brands on e-commerce capabilities, and have stood on the side of working with branded pharma over compounders.

Q: Allen Lutz of Bank of America asked about pharmacies being aggressive with PBMs and impact on GoodRx.

A: Karsten Voermann said pharmacies are more aggressive due to margin needs, majority of volume still flows through PBMs, and GoodRx's usage growth is healthy, creating opportunities to be differentiated.

Q: Daniel Grosslight of Citi asked about Kroger direct contract update.

A: Scott Wagner said he'd rather not talk about super specific metrics at an individual retailer level, but they're working with Kroger and driving views to Kroger within their environment.

Q: George Hill of Deutsche Bank asked about Biosimilar strategy and Rx choppiness.

A: Scott Wagner said the Humira partnership with Boehringer is a proof point for affordability, and the Rx choppiness is due to retail pharmacy environment but GoodRx's promise of affordability is powerful.

Q: Dan Clark of Leerink asked about 2025 core prescriptions business and Medicare Part D plans.

A: Scott Wagner said the out of pocket max in Medicare Part D applies to a tiny proportion of users, so minimal impact on GoodRx business