Great. Good morning, everyone, and thank you for joining us at this session on day 3 of the BofA Healthcare Conference. I'm Michael Cherny, the healthcare tech distribution analyst, and we have with us today the GoodRx team, just more than 24 hours off of earnings, so be a good time for update. We have Karsten Verweyen, Chief Financial Officer, as well as Rajat Ghiya, I hope I pronounced it correctly, Chief Accounting Officer. The team didn't bring any slides, which is perfect 'cause I didn't want them to. I'll get this fly that's buzzing around as we go. Maybe just because you did report earnings yesterday. Sure. Why don't you give some of the key highlights that you think stood out relative to the results and especially versus your expectations? Sure. Thank you for the question. First of all, I think more importantly, thank you for hosting us here, Michael. We're really grateful to be here and be a part of the conference. Yeah. Appreciate that very much, and appreciate all of you joining too. See some familiar faces in the audience, so that's nice as well. With respect to earnings and the highlights from yesterday, we outlined a Q1 beat on revenue, as well as the specific revenue lines underlying it, as well as a significant beat on adjusted EBITDA as well, which we're quite pleased with. That part of earnings, I think was a pleasure to be able to do and be able to communicate to investors. I think the other highlight is that we recently brought on a new executive, a new Chief Executive Officer in the form of Scott Wagner. Scott, for some of you who may not know him, used to be CEO of GoDaddy, which was a very large consumer-oriented technology company, and we're pleased that he's elected to join GoodRx in the context of helping to do some similar work to what he did at GoDaddy, namely, to profitably grow the business at a very, very high rate. We're excited about that too. Those are probably the biggest highlights of the earnings that we did yesterday, Michael. Maybe let's just start with that on the Scott front. Sure. you know, obviously there's been a lot of, you know, new CEO, especially taking over from founders, brings a significant amount of change. I know it's very early. It's been 3 weeks, something like that. About that, yeah. Give or take. I mean, I guess, you know, off the bat, you know, what's been some of your customer and partner reaction to bringing in Scott versus Trevor and Doug, who I know are obviously staying with the business? Yep. I guess hitting the ground running, what are the biggest priorities, biggest focus points that Scott is bringing to the organization? Sure. Let me hit both those pieces, separately, the customer reactions and then the focus points, just because we may have some folks here today who aren't as familiar with the story as others. When we talk about customers at GoodRx, they fall into 2 groups. First of all, GoodRx has a large prescription discounts offering that allows Americans to save a substantial amount off what they'd otherwise pay for prescriptions, not just focused on uninsured users. In fact, that's a tiny minority of our users, but focused on insured Americans, where we can substantially beat the co-pays they traditionally pay. That's a big part of our offering. We do that both through our prescription transactions and for folks who wanna save even more off a subscriptions offering. On that side, we consider them like, more users versus customers. We have a second prong of the business. That second prong of the business is focused on Pharma Manufacturer Solutions, and is B2B insofar as pharma manufacturers engage with us to provide awareness of medications and access solutions for medications, both to consumers and ever more to healthcare providers as well. That's where the customers are. To scale those two things for folks, in terms of users, we serve about 7 million users a month through our prescription discount offerings. We have a large multiple of that in terms of folks who hit our web properties, but the actual ones who engage on the prescription savings side are about 7 million. On the prescriber side, on the Pharma Manufacturer Solutions side, we have approximately 450,000+ providers or healthcare providers, you can think of them as doctors, who engage with our platforms. We've seen our monthly active users of those docs and healthcare providers double since December of 2023, and we have a total of about 2 million providers who have a patient that's used GoodRx. That's why pharma manufacturers work with us to reach out, that's why pharma manufacturers are our customers. Very long roundabout way of getting to your question about how customers reacted. I probably should add partners too, 'cause then obviously... Yeah. You work with various different Pharmacy Benefit Managers and obviously, and retailers, so. Totally, yeah. Yeah. From the customer perspective, I think the dominant ones that matter for this context are probably the Pharma Manufacturer Solutions one. Scott, our new CEO, went to a conference called The ASSEMBLY Show, that was actually here in Vegas, recently, met with a large number of the customers, and the reaction was highly positive. I think they're very excited to work with him too because this is such a key area of focus. I think that might've been your next question, right? Like what are his areas of focus? Exactly. What does he bring to the table? Especially 'cause he brings a history of business scaling, but obviously from outside the healthcare world. you know, what do you think are the most important things that he's bringing to the table? Sure. He wants to make sure he's implementing and continuing the GoodRx progress? Absolutely. I think there are four things that matter here that he's articulated and that we've echoed back as a leadership team to the company to prioritize our focus on. The first big focus is stability on our prescription discount business side, stability of the network. That's our relationship with Pharmacy Benefit Managers, retailers, et cetera, to continue to deepen those relationships to be able to leverage them to drive more volume. Second thing is growth in that business, meaning leveraging different tools we have at our disposal, both on the marketing side and on the pricing side, to be able to optimize for consumer growth in our prescription discount offerings. Thirdly, it's to grow our Pharma Manufacturer Solutions business, the one where you just talked about the customers, where we have so many healthcare providers that pharma manufacturers are trying to reach, as well as our consumer base. That's been our fastest-growing business. The business did about $19 million in revenue in 2020. It did $20 million in revenue last quarter, and it did $99 million last year. It's grown about 5x from 2020 to today. Very excited about that. That's the business Scott's focused on accelerating the growth of most. Within that context, the fourth prong, 'cause I said there are four, again, stability and deeper retailer and PBM relationships, growth of the prescription transactions, discount business, pharma demand, solid growth. Then the final one that he'd add as being critical underlying all of those is executing with incremental urgency to be able to increase the pace of play, maybe relative to where a founder-led company might be, Michael. Got it. That's helpful. I definitely wanna make sure we have plenty of time for the pharma manufacturer business. I wanna start on the traditional prescription discount side. we're basically on a year anniversary, give or take, since your grocer- Yep. Situation, I guess we'll call it that, arose. I think I remember reading the press release, while I was out here at our conference last year. Yep. Maybe just level set for us, what has changed in your network, in terms of how the lay of the land of your interactions with pharmacies, currently sit right now? I think about and I look back at it, basically, end up seems to me from a high -level basis is their share of prescriptions or me if you're hiring the share of the overall market. I guess. Were. Yeah. Were. Yes. Very clearly were. As you sit now, what is that landscape and how has it changed from priority partners, but pharmacies that maybe access higher share versus lower share and what that discount dynamic in terms of the spread you see across your pharmacy partners look like? Sure. We may split this answer. I may address the piece related to the grocer in question, the incident that happened, and Rajat can talk about some of the initiatives, especially our direct contracts that we're engaging with pharmacies. Sure. to make sure this never happens again. Gotcha. For folks in the audience, about a year ago, a large retailer here in the States, at this point, everyone knows their name, it's Kroger, elected not to accept cash pay prescription discounts anymore at all. They basically shut that business down. Since we aggregate prescription discounts from all the different pharmacy benefit managers we work with, which are well over a dozen and a half, that meant that particular area of retail distribution, that particular pharmacy became unavailable to our users. Because the folks there had particularly attractive prescription pricing, we had about 24% of our revenue flowing through or sourced from, as maybe a way to say it, associated with being the most general with that particular pharmacy. That 24% of revenue effectively disappeared for us, almost immediately. That amount of revenue in Q1 2022 was in the mid-$30 million. On a quarterly basis, it was material to our revenue. Certainly around 15%-20% of revenue that disappeared quite rapidly. In that context, we've since done a couple of things differently. Number one is, as we look at the need to increase network stability, we've started to rely less on solely the PBMs running these relationships, but also getting into them ourselves, which Rajat will talk about. Before going there, I think some of the relevant things that showcase what we've done since then in numerical fashion are that when we look at growth outside this grocer and compare that year-over-year, number 1, we've seen growth rates in the last quarter that showed volume being up approximately 16%. We reported in our fourth quarter call, volumes outside the grocer were up about 12.5%. We're consistently seeing high growth outside the grocer in question, i.e. through all the other pharmacies we work with. Number 2, I think the other thing that's relevant is it's really made it difficult, I think, for investors, so a lot of you and me here listening today, to assess our growth rates and what the company actually really looks like from a growth perspective on the prescription transaction side. One of the reasons I call out the fact that last year, the grocer in question contributed approximately mid-$30 million of revenue more than this year is had this incident not happened, our growth rates for total revenue would have been about 8% year-over-year. Prescription transactions revenue, the relevant prescription savings piece, up about 9% year-over-year, but for this issue happening, had the grocer's volume stayed constant. With that, I should turn to you to talk about what we're doing about it so that never happens again. Sure. The other thing I'd say is that prior to the Kroger issue, we were already exploring direct contracting with pharmacies, and it was more of a catalyst when that occurred to accelerate down that path. By having these direct contracts in place, it creates a direct relationship with the pharmacies, where we now have a pulse on what's going on at each of these retail partners and understand whether it's margin pressures they're facing or if they wanna drive volume or partnering up in other ways. We have a pulse of what's going on, so we can nip issues in the bud before they occur. The other thing I'll note is that when you look at kind of the cloud of actual volume that we're driving through, there is no other retailer that over-indexes relative to their market share, save for perhaps one that is more based on demographics overlapping rather than you know, very low pricing like the Kroger issue. The Kroger issue, and I always talk to the grocer, but if you go Kroger, I'll say Kroger too, is an interesting one in the sense that the constant push and pull between pharmacies and PBMs. Yeah. A never-ending battle, and you're not even the only PBM-oriented entity. I know you're not a PBM, but. Yeah. the partnerships that Kroger's currently in a fight with, I mean, witness their Express Scripts network disagreements. As you think about that, how does that underlie your desire to go through that direct contracting route? From an economic perspective, 'cause this is something that I know you're spending more time with, is there any economic difference between a prescription that's being done with the inside the four walls of a direct contract versus the four walls of a traditional, PBM network-wide contract? Sure. I think we can both hit on this one, too. I think the piece I can hit on is what's changed and why we're going direct at an accelerated rate now. I think one of the biggest reasons is we had these deep relationships with PBMs. We relied on their contracts with pharmacies as we aggregated all their low pricing in our marketplace. And that reliance in the context of the grocer Kroger, and that context, that reliance, proved to be something that was not helpful for us and where the PBMs themselves elected not to or weren't able to enforce the acceptance of their very own discounts that we aggregate which hurt our revenue. What's really changed for us is that historically, we resisted to some degree, or at least had concerns around direct contracting with pharmacies in the context of not wanting to disrupt our ecosystem of PBM partners, who drove so much revenue and so much margin for us. I think the reality today is that we and they have both seen through this example that complete reliance on the PBM relationships is not optimal for GoodRx. It gives us a justifiable reason for going direct to retailers and contracting for a portion of the volume at retailers, even all the volume at a given retailer, today. That's really been the biggest single change, is that we now effectively feel like this is not a channel conflict issue in the way it might have previously been, because the PBMs themselves weren't able to enforce on our behalf. I think that's the first prong of it. In terms of how direct contracting actually works. Do you wanna hit that, Rajat, or? Yeah, sure. I mean, when you look at the actual at the script or transaction level, the pharmacy's paying an admin fee up to the PBM, of which a portion's remitted to us, right? When we direct contract, it's effectively just between us and the pharmacy, and there's an admin fee involved there, just one less entity is involved as well. More broadly speaking, when you look at the, you know, direct contracting that we're doing, I think it points towards the fact that PBMs continue to want to work with us because we drive incremental value, but we cannot have direct relationships with pharmacies. That's something we believe we need to do, to the points we made earlier, to ensure that we have the most important relationships in place, and can understand what it is they want and work with them in that capacity. I think on the economic side of it gives us a unique lever we never had in the past, which I'm pretty excited about, which we're just starting to focus on now, which is, historically, a PBM has an agreement with a pharmacy, and that agreement is relatively static and pays a certain admin fee associated with the pharmacy filling a certain medication. That is what it is. When we direct contract, to a point Rajat made, we're much more deeply integrated with the pharmacy, and we can work with the pharmacy to make margin versus volume trade-offs, for example. For the first time in our history, that gives us some control over the relationship with the pharmacy and their incentive to drive more volume towards GoodRx over time. We could, for example, agree to reduce an admin fee by a certain percentage if we pick up volume that's higher by a larger percentage. That wasn't even an option. Yeah. When we worked solely through PBMs, we're pretty excited about that. Yeah. It's great for pharmacies 'cause their contracts normally renew or are renewed annually, right? That's the only opportunity they get to reset prices, and there could be a mispricing going on that whole time where you're driving volume to a mispriced drug, and you're upside down on your margin. We are in constant contact and have great relationships now with those contracts that we have in place with the pharmacy, so we can help nip those issues in the bud pretty early. Just on those lines, an interesting dichotomy in the sense that. Sure. At least from the call recently, your two biggest focuses are direct contracting. Yeah. Also your Evernorth partnership. Yeah. It's, we're trying to go with our own relationships, but also partnering with one of the big 3 PBMs in a deeper way. Maybe just give us now some background of how that came to fruition and what you're seeing so far. 'Cause I think you said it led to some of the Q1 outperformance. How exactly that's? Yeah. -that's filtering through and how as an Evernorth member, if I was one, I would feel the impact of the GoodRx discounts. Sure. Yeah. I think we wanna continue building relationships and strengthening the partnerships we have with PBMs, right? This is a perfect example. Relating to the Evernorth and, you know, Integrated Savings Program that we have in place, we saw and understood that there was a shift in the market. There was a dynamic where there were consumers or HR leads that were noticing that folks were using GoodRx instead of their traditional benefit. This was kind of a demand pull, right? Folks were asking for this. What we saw was that when ESI came to us, it was a no-brainer for them to roll this out during the pilot phase to their plans. We've seen the sell-through to their plans during this pilot phase, again, going much better than anticipated. The claims that are coming through that are converting because there's always gonna be comparison now when you bring as an ESI member, your card to the pharmacy, you're gonna compare between the GoodRx and the traditional benefit price, and that happens automatically. If it's routed to GoodRx, and we're seeing a good chunk of them being routed more than anticipated, we're gonna go ahead and have that ride in our normal PBM rails and roll it through our PTR line item. The important thing to note there is that, you know, the economics that we share with them are effectively approximating that of Our CAC normally. This is like a distribution channel that we are opening up a whole new market, which is the insured market that folks normally don't even know you can compare prices. It's a really great lever for us to kinda grow the PTR line item. And, you know, in terms of value prop for ESI, they're getting data now on all these cash discount claims that what normally would've been cash discount claims that are outside of their network. It's very valuable to them. Also it's a differentiator when they go to sell these plans to employers, right? That, you know, the other insurers don't have this, or they have programs that are not nearly as great 'cause, you know, our prices are gonna beat, you know, Optum's own network, nine times out of 10. I think the biggest thing for us is Very Sam expanding. So far as by our stats show that, about 70% of Americans don't realize the prices for medications vary dramatically between pharmacies. All those users may never have used GoodRx ever. Now that we're integrated into their ESI benefit, they don't even have to know GoodRx exists. They just slap their normal benefit card on the counter at the pharmacy, and when GoodRx is cheaper, we get the claim, we make the revenue, which is great for us. Again, ESI benefits too, 'cause they get data. They're able to, they're able to go to plan sponsors and have plan sponsors know that their consumers will always get the lowest price, et cetera. Maybe make sure we hit on everything. I might come back to subscription, transactional. Sure. Let's talk about Pharma Manufacturer Solutions. Yes. It's, you know, the, this is some timing dynamic. On one hand, yes, you've ramped the business significantly. On the other hand, some macro conditions. Yep. Seems to have it coming in a little below your expectations. Kinda walk us through what you're seeing from a demand perspective, whether it's extended lead times, greater competition, asking for additional services that you don't offer. What do you see as the current demand dynamic? You're not the only company that plays in this market that's. Sure. brought this up, so I'm curious to see what you think are the biggest drivers of where you're falling short versus your expectations. Yeah, I think, I think we're not. I think we're kinda the first company that brought this up. I remember back in our November earnings call, we're talking about the longer timelines associated with getting agreements signed and implemented with pharma manufacturers. I think others in this space also noted that and brought it up sort of later, maybe around the 4Q earnings call and calls in Feb, March. I think what we're really seeing on the macro side is that pharma manufacturers have elected to keep more dry powder. It means that the length of time it takes to get deals signed, implemented, and producing revenue, i.e., delivering, is longer than it used to be. On those dimensions, I think that reality is one that others have now echoed as well. I think I'd have to hypothesize a little bit as to what some of the drivers are, because you'd think that that's contradictory to this big shift to digital that is for sure still going on from pharma manufacturers. I think there are a couple bases for it. One of them in particular, I think ties to GLP-1s, and I think most folks here are familiar with most of them, whether it's Lilly's Mounjaro or Wegovy or whatever. Our sense is that manufacturers have, to some degree, slowed spend right now because they all recognize that these are gonna be absolutely huge medications going forward. Given some of the manufacturing issues and the supply-demand imbalances, it hasn't made sense to market them yet. In fact, I think the first time I saw an ad for Mounjaro was on TV last week, and the medication's been out for like a bunch of quarters now. I think what we're gonna see is what we're seeing now is we're seeing preservation of dry powder to be able to push these medications that'll probably be the biggest ones over the last 10 years. We haven't yet seen that spend kick in. We're at this weird point right now where other spend is reduced to save, to be able to spend on this, but this spend hasn't really started yet. That brings up an interesting question that I agree with you, and I've seen a bunch of Ozempic commercials, but, you know, I don't think I've seen a Mounjaro commercial yet, but I mean, it's one class- Yep. With two or three manufacturers. What are you seeing from a broad-based perspective among large pharma, large biotech? Is there anything that you're seeing that you can tie back to some of the broader financial stress? Sure. dynamics in terms of maybe smaller entities pulling back? like, maybe dive a little bit more into some of that demand delay. Sure. I think in our case, there are some unique GoodRx- related, sort of demand issues as well. What I mean by that is that I think we continue to focus on scaling our sales force and doing the kinds of things we can do to take share. 'Cause again, given the TAM's $30 billion, this business, as I said, did $99 million last year in revenue. There's an awful lot of TAM to still take, and a big piece of that is continuing to hire, continuing to expand our coverage of pharma manufacturers in an aggressive way, given the very short paybacks on folks who are sellers in this space. I think we have work to do on that front, and that's one of Scott's, our new CEO's, big priorities. separately from that, where we see a lot of strength is we're seeing a lot of revenue generated out of areas like women's health, a lot of strengths in the diabetes area and some of the work we've done there with manufacturers, et cetera. Dexcom being one of the bigger ones we partner up with on that side around the Dexcom devices to offer direct point-of-sale rebates to consumers and drive a significant amount of demand for Dexcom. In terms of areas, I think where there has been pullback, I think you're right that smaller manufacturers in particular, are the ones where, given the fundraising environment, in particular, the smaller manufacturers and smaller biotech entities period that don't yet have scale and cash flow have become more conservative in particular, I'd say. That's probably what you're hearing from others too. Again, like I said, it doesn't seem like it's unique. Yeah. just happens to be Databricks. I guess, what are you looking for proof points, leading indicators to show that that could reverse? Yeah. I think first of all, from our view, we're highly confident we're gonna see sequential growth in this business quarter-over-quarter through the year. Again, given the $99 million revenue we did last year against the size of the TAM, and given what we talked about at the very beginning of the conversation about the number of providers that we have engaged with us and engaged with us very heavily during their prescribing hours, sequential growth, I think is not a concern for us at this point. I think what we're looking at to really see as proof points is a couple things. One is we've begun to shift to capture more of the value in this area from primarily almost exclusively flat fee deals to deals where we're paid for performance. That holds true, for example, in our Dexcom deal. We're looking very carefully at the ramp of those deals because this is a new way for us to monetize, and it lets us grab more of the value because we're putting ourselves on the line effectively and saying, as you get incremental revenue, pharma manufacturer, we'll take more because your risk is reduced since we're not just charging you a flat fee. I think the biggest thing for us through this year will be continuing to monitor how those performance deals operate, and if they ramp as we expect them to, we'll probably shift more and more of the business in that direction, so we can capture more and more of the, of the value we create for manufacturers. One other thing that came up on the call, turning back to the Prescription transaction revenue. Sure. It was on point-of-sale discounts. A newer type discussion point versus we had previously, I know, had a impact on the guidance as a whole. Can you just tell us what they are and the whole, you know, maybe I don't wanna get into too deep an accounting lesson. Yeah. The whole contra revenue dynamic of this. Yeah. We have a CEO exactly for this. Thanks, Michael. These are effectively a new incentive program that we have in place to highly target subsets of users based on certain characteristics. Some of the things we're trying to drive are behaviors like registering an account or claiming a first fill. We've seen that it's a pretty successful program so far and exploring new ways to continue using that. We disclosed that we did about $24.7 million of these last year and are continuing to do them at a healthy clip because of that success. The accounting for it in Q1, we began to see some contra revenue associated with that because as we kind of ramp up our direct contracting, some of these are running through the rails of those customer arrangements. Because of that, you have to. With pharmacies. With the pharmacies. You're gonna have to treat that as contra revenue. We had about $1.4 million of contra revenue in Q1, and that's gonna ramp up through the year. The reason that's important is because I think we, in our guide, indicated that about $10 million of the drop in revenue is gonna be associated with that. It's really a P&L reclassification from S&M into contra revenue to offset. Another important thing to note is that even though there is some contra revenue associated with these incentive programs, we are still ensuring that they are accretive, obviously, right? The LTV of these users that we're acquiring is gonna be far and above the acquisition costs of putting into the incentive program. Again, these are just highly targeted ways to incentivize certain behaviors and we're continuing to explore ways to kind of drive more users to the app to be fully engaged. Ultimately, it's aligned with our mission and values of driving more savings to consumers, right? To underscore two points, no EBITDA impact, right? Because it's either contra rev or S&M, which is really important, number one. I think number two, the other, really important part of these, POS rebates is that they provide a new lever for us. CPG companies have been doing couponing forever, which is pretty much akin to this. That's always been contra rev for, consumer products companies. We've effectively made this lever work for us now, both for driving demand for our own services on our prescription transactions business, but this is also fundamentally what underlies the ability to do things like $200 off, Dexcom point-of-sale discount for our users too. What we've done in the background is build out a whole network with all the pharmacies to be able to remit them effectively the amount of cash that they forego, by offering the consumer a lower price at the point of sale. This is new infrastructure, has not existed before, and isn't really replicable by others. We think it creates a true point of differentiation also on the Pharma Solutions side. Last big picture question for about out time, but obviously, you've been very open and vocal about the challenges that the Kroger situation has created on the P&L. Yeah. That being said, EBITDA margin is still mid 20% range, cash flow positive in the quarter. I guess, how do we think about the operating model from here and as we normalize out post Kroger reset? Sure. The flow-through on revenue across all of our lines of business to EBITDA is very, very high. Like, if you go back and pull our S-1 and go to the early years when pretty much the entire business was prescription discounts, gross margins were in, like, the low to mid-90s, right? The fixed cost structure stays fixed, the flow-through is high. As we get past some of these Kroger issues, and as we continue to scale the PharmaInsul offering, et cetera, that's one of the reasons that we've continued to articulate that in the longer term, as we look out beyond the year and into longer periods of time, that we think the sustainability of growth is there and that the growth itself will pull the margins up too. That's why we've articulated in the past that we will not be satisfied until we get to sort of a growth plus margin profile that looks more like it did pre-Kroger than now. Something with closer to like a four- handle in front of it versus something with a, you know, high two- handle in front of it potentially. That's the big distinction. Got it. Well, Carson, Romin, really appreciate the time. Really appreciate being here, and thanks everyone for joining us for the session. Thank you, everyone, especially thanks, Michael, for having us up. We really appreciate the opportunity. Yeah. Absolutely. Grateful for the time. Great. Thanks, Michael. Thanks.