GoodRx Holdings, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the GoodRx first quarter 2023 earnings call. As a reminder, today's conference is being recorded. I would now like to introduce your host for today's call, Aubrey Reynolds, senior manager of investor relations. Ms. Reynolds, you may begin.

Thank you, operator. Good afternoon, everyone, and welcome to GoodRx's earnings conference call for the first quarter 2023. Joining me today are Doug Hirsch, our Chief Mission Officer, Trevor Bezdek, our Chairman, Carson Vorman, our Chief Financial Officer, and Scott Wagner, our Interim Chief Executive Officer. Before we begin, I'd like to remind everyone that this call will contain forward-looking statements. All statements made on the call that do not relate to matters of historical fact should be considered forward-looking statements, including, without limitation, statements regarding management's plans, strategies, goals, and objectives, our market opportunities, our anticipated financial performance, the impact of the grocery issue on our business, underlying trends in our business, our potential for growth, collaborations, and partnerships with third parties, and the expected impact from macroeconomic environment on our business. These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties, and other important factors. These factors may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. Factors discussed in the risk factors section of our annual report on Form 10-K for the year ended December 31st, 2022, As updated by our quarterly report on Form 10-Q for the quarter ended March 31st, 2023, and other filings with the Securities and Exchange Commission, could cause actual results to differ materially from those indicated by the forward-looking statements made on this call. Any such forward-looking statements represents management's estimates as of the date of this call, and we disclaim any obligation to update these statements, even if subsequent events cause our views to change. In addition, we may also reference non-GAAP metrics, which are reconciled to the nearest GAAP metrics in the company's earnings press release, which can be found on the overview page of the Investor Relations website at investors.gooderax.com. I'd also like to remind everyone that a replay of this call will become available there shortly as well. With that, I'll turn it over to Doug.

Thank you, Aubrey. Good morning, everyone, and thank you for joining us. We started GoodRx 12 years ago because we were passionate about helping consumers access and afford the care they deserve. We are so proud that the company we built has become a service that millions of consumers rely on. Since those early days, much has changed, and our business has evolved into something bigger than Trevor and I ever dreamed. We have saved Americans over $55 billion on their medications, and our team has launched entirely new business lines, including pharma manufacturer solutions, which enables us to make brand drugs more accessible, and GoodRx Health, which we believe offers some of the best and most trusted online health content. It's been both exciting and rewarding to build a business that enables us to help even more people in more ways. Trevor and I love what we do, but we also recognize that an important part of expanding our impact includes generating growth, margins, and profitability. We've always known that there would be a time when there would be others better equipped than us to run and grow a large public company, and I'm proud to say that we've found that person in Scott Wagner, who's agreed to step in as our interim CEO. Scott brings more than 25 years of experience running and scaling consumer technology companies that are leaders in their field, including at public companies, and has the knowledge and expertise needed to enter the next phase of our company's growth. In 2012, Scott stepped in as interim CEO at GoDaddy and went on to become president, COO, CFO, and then CEO. During his tenure, he took the company public, nearly tripled revenue to approximately $3 billion, grew the business profitably, and managed over 7,000 employees. Scott also has experience working with our sponsors, Silver Lake, Francisco Partners, and Spectrum Equity. I've been working alongside him for the past two weeks and have already seen him put his breadth of experience into action. Trevor and I are excited about what Scott's new perspective will bring. It's no secret this past year has been rough. Our results have disappointed us as well as our stakeholders, and we believe the time is right to have someone lead the company who has extensive experience running and growing public companies. We truly feel this is just the beginning of what GoodRx can accomplish. We love GoodRx and want it to succeed more than anything else. Trevor and I are remaining at the company and are committed to supporting Scott and the business. I have taken on the role of Chief Mission Officer and am so excited that I get to focus on doing what I love most, evangelizing the company's mission to external parties Whether it's physicians, manufacturers, pharma, or other partners, I will spend my time talking about all the amazing ways we aim to make healthcare affordable and convenient for Americans. I will now pass the call over to Trevor.

Thank you, Doug, and good morning, everyone. As Doug mentioned, we recognize the challenges both our business and our stock performance have faced over the past couple of years. We are still recovering from the impact the grocery issue had on our core business. We haven't driven product innovation forward as quickly as we planned to, and our pharma manufacturer solutions offerings has faced continued macroeconomic headwinds with the spending delays and reductions we discussed in our fourth quarter earnings call in February, which have contributed to uneven execution to date. We don't take this lightly, and we understand the importance of bringing in someone at this juncture who can drive the business forward faster. We are incredibly lucky to have Scott on board. He has extensive experience transitioning businesses from founding teams into highly successful public companies. He's already identified ways to improve and potentially grow the business, accelerate our long-term plan and platform expansion, and drive efficiency and margin. We are confident that this move is coming at the right time. Our business remains very attractive. We have a core prescription business that endured an unexpected disruption over the past year, but is fundamentally a category innovator in a large, growing market. We believe our pharma manufacturer solutions efforts are delivering compelling ROI to customers, but still in their early days. We need to continue to build scale and repeatability. We believe this leadership transition will accelerate our growth and performance and reflects our enthusiasm about the opportunity for GoodRx over the years to come. In my new role as chairman, I'll continue to leverage my deep network of industry relationships and extensive knowledge of the healthcare industry to support Scott with our overall healthcare strategy, strategic partner relationships, and product innovation. I get to focus on supporting the business structure and strategy, the stuff I love. Before I turn the call over to Scott, I want to discuss the highlights from this quarter. which we view as evidence of our strong value proposition in our very under-penetrated TAM, deep competitive mode, and incredibly loyal consumer and prescriber users, with whom we have 90 MPS. There are four key areas where we saw the most success in Q1. One, our hybrid strategy. Two, our engagement efforts. Three, our recent ability to rapidly adjust consumer pricing, which is driving more volume for us. And four, our collaboration with Express Scripts. First, we began implementing a hybrid approach where we formalized relationships with our retail pharmacy network to ensure stability and mutual success for all parties. The early success we've had with this strategy has led us to increase the number of retail pharmacy partners we are directly contracting with, as well as the proportion of claims associated with direct contracts. It has allowed us to understand their needs better and more deeply engage with these retailers. We believe we are creating incentives to encourage greater use of GoodRx and drive incremental volume through these retailers. Second, as we work toward creating more meaningful direct consumer and provider relationships, our engagement efforts continue to play a critical role. As of the end of the first quarter, we are pleased that the proportion of prescription transactions from fully registered consumers has continued to increase after doubling in the second half of 2022. and that over 450,000 prescribers have engaged with us in provider mode since its launch. Third, we have found innovative ways to be able to rapidly adjust consumer pricing through point-of-sale discounts to optimize around demand elasticity on a per-medication basis. We have increased our total spend on consumer-facing discounts from $24.7 million in all of 2022 to $10.9 million just in one Q23. We believe that, much like consumer product brands who leverage coupons, our abilities to catalyze user behaviors are highly effective. And fourth, our PDM partners can benefit from the increased retail and network stability our hybrid strategy creates, and we are innovating in ways to do even more with them. A prime example is our Express Scripts Integrated Savings Collaboration, Price Assure, powered by GoodRx, which is one of our most exciting new initiatives. Early performance indicators across this innovative program continue to show promising signs And we can report we saw greater than expected momentum via the Express Scripts program, particularly towards the end of the quarter. The Express Scripts collaboration helps remove the need for consumer education on prescription savings and provides more transparency and price awareness automatically across the healthcare system by allowing eligible users to automatically receive GoodRx discount prices as part of their pharmacy benefits. It's built right into their card with no action required on the consumer's part. Express Scripts continues to educate and enroll plan sponsors across the balance of their commercial book of business. We believe this program opens up a significant new segment of the prescription savings TAM for us, and we are seeing great early results. We can say definitively we are reaching more consumers through this partnership, driving greater savings and improving awareness and affordability. We aspire to broaden our reach further through arrangements with additional PDMs. We believe our pharma manufacturer solutions platform has great potential based on the feedback from clients and the ROI those clients are achieving. But it operates with different pacing and is more nascent. We're still building out our execution abilities in this offering with respect to our product investments and learning how to predict outcomes more accurately. We are also working on increasing our synergies across GoodRx Health and provider mode to drive awareness. I will now turn the call over to Scott.

Thanks, Trevor. First, I'd like to take a minute and applaud Trevor and Doug for all they've accomplished over the last 12 years. Under their leadership, GoodRx grew into a leading digital healthcare platform, serving over 7 million consumers a month. Trevor and Doug are smart, creative people who have built a category-defining company. I've got an incredible respect for both of these guys, both what they built at GoodRx and who they are as people. I'm thrilled to be here and to contribute to the next leg of the GoodRx journey. As Trevor and Doug mentioned earlier on the call, I've got a bunch of experience helping companies deliver growth at scale while building exceptional customer experiences. Personally, I really enjoy building companies and doing so the right way. Companies that do unique and valuable things for their customers, that continue to innovate and grow, that deliver attractive financial returns and have high performing teams. I'm excited to join GoodRx, not just for what the business is today, but more importantly, for what it can be and for how I can help right now. There is a lot to like about the GoodRx of today. GoodRx has a unique value proposition as the leading prescription savings marketplace. GoodRx has a true brand loved by both patients and healthcare professionals alike, with net promoter scores approaching 90. That's pretty incredible. GoodRx plays a unique role in the prescription ecosystem, providing value to patients, providers, and manufacturers alike. There's a lot of opportunity here. GoodRx has a huge TAM with interesting opportunities to expand from the discount card space to serving a larger portion of both Medicare and commercial plans. GoodRx has demonstrated product market fit with pharma partners, building a meaningful business from scratch in a really short time period. We believe this business has growth because it's incredibly useful to customers and manufacturers alike. GoodRx is unique in that it touches a vast array of constituents across the healthcare ecosystem, spanning patients, providers, retailers, PBMs, and pharma manufacturers, this ecosystem-wide foundation is our basis for further expansion. It's also clear that GoodRx can do some things differently. I believe we need to do a better job of identifying and prioritizing the things that matter and are most impactful. We also have to evolve our execution against these opportunities, making sure that we execute with quality and with urgency, and meet our commitments to each other and the company and to all of you. I've been around the block a bunch, GoDaddy being the most visible, but also before that with the private equity firm KKR, leading businesses from one stage of evolution to another. While not driven by a playbook per se, there's a combination of strategic insight, execution, and team alignment that can help here. As I jump in as interim CEO, there's a couple key areas that I plan to drive and focus on with the team. First, making sure that we have the strongest network relationships and retail pharmacy strategy possible. Two, honing our short and medium-term growth plans for the core prescription business and aligning teams and resources behind it. Three, scaling our pharma manufacturing solutions efforts. There is a lot of goodness here. We've got a very unique capability in branded pharma that can benefit both patients and manufacturers alike. While our offerings in this area are nascent, we believe early proof points have been extremely positive with pharma customers, being really strong value given our high-intent audience that spans both patients and healthcare professionals. It's particularly valuable for the awareness and access solutions that they've been promoting. We're going to lean into these high ROI solutions and focus on driving further product innovation, expanding our brand reach with existing partners, as well as landing more lighthouse brands with new manufacturers. If we get this right, I'm confident we're going to be able to turn manufacturer solutions into a larger and more profitable business over time. Finally, we're going to put our combined efforts against our biggest opportunities, make decisions, and then execute with quality and with urgency. For the investors on the call, I'm a big believer in transparency. GoodRx has experienced some uneven performance over the past 12 months, and no one likes that. We need to get us to a place where we can provide clear ranges of growth and profitability to our investors, deliver against those ranges consistently, barring any external and exogenous events, then lay out longer-term plans and milestones over a three-plus-year period of time. Right now, Our financial expectations represent our team's best thinking. As I dig in more with the teams, I'll be open with everyone on my thoughts on what our and your financial expectations should be for GoodRx, with a focus on building multi-year value while hitting our short-term commitments. With that, I'll turn it over to Karsten to discuss the quarter in more detail and our priorities going forward, and I look forward to both working with and speaking with everybody in the months to come. Thanks, Karsten. Thank you, Scott. We recognize everyone's going to be focused on what's to come, so I'll provide a short commentary on the first quarter and then get to guidance before turning it over to the operator for Q&A. In summary, during the first quarter, we exceeded guidance on revenue, adjusted EBITDA, and adjusted EBITDA margin, with those coming in at $184 million, $53.2 million, and 29% respectively. Going into more detail, total revenue for the quarter decreased 10% year over year, to $184.0 million, as I mentioned. Prescription transactions revenue growth was down 13% year-over-year to $134.9 million, but up quarter-over-quarter by 4%. Max decline 5% year-over-year to 6.1 million, but increased 3% quarter-over-quarter. PTR volume excluding the grocer involved in the previously discussed grocer issues continued to grow consistently. It is up 3% sequentially and 16% year-over-year for 1Q23. The year-over-year declines were largely driven by the gross ratio. Our PTR also benefited from unexpected one-time contributions as we expanded our efforts to ensure network counterparties were adhering to the contracts we have in place, which resulted in unanticipated revenue gains of approximately 1% in our PTR offering late in the quarter with essentially 100% flow-through to adjusted EBITDA. Our pharma manufacturing solutions revenue declined 13% year over year in the first quarter to $20.4 million. Our focus is on signing deals with high levels of recurring revenue potential, so we did not do deals with one-time customers as we did in 1Q22. We're pleased with the trajectory we've achieved and the quality of campaigns we're running. We remain very optimistic about this offering long-term. Turning to subscriptions. Subscriptions revenue grew 26% year over year to $24.1 million as a gold membership fee increase implemented in the first half of 2022 more than offset the negative impact from Kroger Savings Club and related reduced marketing of the program and price increase related to gold user churn. We ended the quarter at 1.0 million plans down 16% year over year. Cost of revenue is $16.7 million or 9% of revenue versus $12.3 million, or 6% of revenue in 1Q22. The increase in personnel costs related to consumer support and allocated overhead from the VitaCare acquisition primarily drove the year-over-year increase. Product development and technology expenses were $32.9 million, or 18% of revenue, which compared to $35.0 million, or 17% of revenue in 1Q22, decreased in absolute dollars primarily driven by a decrease in payroll and related costs, and higher than expected level of capitalizable labor based on our quarter-end analysis. Sales and marketing expenses were $78.5 million, or 43% of revenue, versus $93 million, or 46% of revenue, in the first quarter of 2022. As we have discussed, we are proactively managing marketing spend in the current environment and finding ways to leverage our brand while getting higher returns each dollar invested. I'd like to take a moment and delve deeper into one aspect of our marketing program, point of sale discounts for consumers. POS discounts allow GoodRx to take control of the amounts consumers pay in a rapid, targeted manner that is similar to couponing by consumer packaged goods companies. This enhances our ability to fulfill our mission around medication affordability. We can deploy this tool against specific medications and to drive specific behaviors, including, for example, our engagement efforts. Last year, we disclosed in our 10-K We spent $24.7 million on these efforts, and we believe we've been able to continue to make the spend effective at scale. POS discounts are one of the many tactics at our disposal to help secure great pricing for our consumers in what we believe to be an extremely targeted and effective manner. This spend contributed to our ability to drop sales and marketing expenses at the percent of revenue mid-2022, even as our use of POS discounts grew. In the first quarter, we spent a total of $10.9 million, $9.5 million of which is included in sales and marketing, and $1.4 million of which was Contra revenue, meaning that instead of hitting OpEx, it reduces revenue and also reduces our growth rates. That is similar to the Contra revenue accounting treatment of coupons in the CPG space. The P&L geography of Contra revenue versus sales and marketing expense for our POS discounts has no impact on adjusted EBITDA. General and administrative expenses were $29.6 million, or 16% of revenue, versus $31.9 million, or 16% of revenue, in the first quarter last year. The decrease is primarily driven by a decrease in stock-based compensation expense related to the co-founders' awards granted in connection with our IPO. Net loss was $3.3 million, compared to net income of $12.3 million in the first quarter of 2022, and was impacted by lower sales volumes related primarily to the grocery issue, integration costs related to VitaCare, and fluctuations in our quarterly estimated tax provision, partially offset by lower sales and marketing expense. Adjusted net income was $29.5 million compared to $41.3 million in the first quarter of 2022. Adjusted EBITDA decreased 18% year-over-year to $53.2 million, which was ahead of expectations and up 7% quarter-over-quarter. Given the PTR offering has very little incremental cost per transaction, the impact on our PTR volume from the grocer issue and to a lesser degree, pharma manufacturer solutions revenue were the biggest drivers to the year-over-year performance. Adjusted EBITDA margin of approximately 29% was down 290 basis points year-over-year, while improving 200 basis points quarter-over-quarter. We generated net cash provided by operating activities of $32.3 million compared to $30.1 million in the prior year period. Our capital allocation priorities are unchanged, and we will continue to focus on high return investments and maximizing value for shareholders. Our balance sheet remains strong, and we ended the quarter at $761.1 million in cash on the balance sheet and $665.3 million of outstanding debt. Our revolving credit facility had $90.8 million of unused capacity, representing total liquidity of $851.9 million. Now, on to guidance. Our outlook for revenue is $185 million to $188 million for 2Q, and for the full year, we expect total revenue of $750 to $775 million. Both of those numbers are net of anticipated POS discount contra revenue of $1 to $2 million for the second quarter and around $10 million for the full year. As I said earlier, the portion of POS discounts that are contra revenue reduces revenue and our growth rate versus traditional sales and marketing expense treatment. The POS discount contra revenue amounts were not included in our prior guidance numbers given their evolution. It has no impact on adjusted EBITDA since the value ascribed to contra revenue would otherwise hit S&M expense. We've reduced our farmer manufacturer solutions outlook for the coming few quarters as we aim to ramp up a series of large programs which have been either recently implemented or are in our late-stage pipeline. A material portion are pay-for-performance, providing upside for us. We believe our customers have been very pleased with them, but they are less predictable for us than our historical flat fee deals, which contributes to us lowering the bottom end of our annual guidance range. To provide context, our pharma manufacturer solutions offering is still nation. While we believe early proof points have been strong in terms of customer satisfaction and ROI, our product innovation and delivery processes are still in early stages. Manufacturer solutions revenue is less than $20 million in 2020. Since then, we've learned and progressed as we grew the revenue to five times that amount through 2022. We've increased the types of clients we work with and the offerings we sell to them. We believe that we're now in a position to put energy and resources behind the deal constructs that work the best for our clients and ourselves. For example, in terms of clients, we've found focal points in women's health and diabetes. And on the offering side, we're focused on a couple of areas. First, driving prescriber usage, a newer growth vector for us, where we've seen provider mode MAUs double since December 2022, and where we are leveraging over 450,000 providers who have engaged with our provider mode offering since its launch, already resulting in multi-million dollar contributions to pharma manufacturer solutions revenue. Also on the offering side, we've seen increasing number of pharma manufacturers interested in creating cash solutions for branded medications, leveraging our direct bottom of funnel consumer marketing capabilities. One example is our Dexcom point of sale solution, which provides savings of $200 for consumers. Overall, we believe that our pharma manufacturer solutions pipeline is robust, and we are very excited about the long-term potential of this offering, but we're in the early innings. Predicting the timing of when we can close and deliver on some of the lumpier large deals is tricky for us. We're also more focused than ever on recurring revenue, which means we're foregoing potentially multi-million dollar one-time revenue deals that we took in the past, we believe a highly sustainable and highly valuable pharma manufacturer solutions business has to be founded on a growing base of repeat usage. Moving on to second quarter guidance by offering, we expect prescription transactions revenue of approximately $132 million to $134 million, net of the anticipated impact of POS discount revenue reductions of approximately $1 to $2 million. Our expectation for PTR per MAC is to show a modest decrease over the coming quarters as we focus even more on driving volume with retailer pharmacies through our hybrid model, and we experience the seasonal impact of more consumers potentially hitting their deductibles, impacting our Price Assure Express Scripts collaboration. We expect subscription revenue of approximately $23 million to $24 million in the second quarter, which at the top end is relatively flat quarter over quarter as we are nearing the anniversary of our fee increases implemented last year and expect to see less churn in future quarters. We expect pharma manufacturer solutions to return to sequential growth in the second quarter with revenue of approximately $26 million, up 27% quarter over quarter. Finally, we expect other revenue to be approximately $4 million in the second quarter. As we mentioned in our last call, We continue to have additional marketing investments we anticipate making in the coming quarters and will remain opportunistic as we structure the timing of those investments. As a result, we expect our adjusted EBITDA margin to be in the mid-20s percent range for the second quarter. With that, I'll now turn it over to the operator for Q&A.

If you'd like to ask a question at this time, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Our first question comes from the line of Stephanie Davis with SBB Securities. Hey, guys. Thank you for taking my question.

Scott, welcome to the team. Thank you, Stephanie. I was hoping to hear a little bit more about growth at scale just because that's becoming a bit of your catchphrase. I want to hear mainly about the growth aspects from the prepared remarks, the presentation. Is it correct to assume that that will be, you'll be focused on the turnaround and manufacturer solutions and be focusing on provider mode or just given the scale of your consumer facing brand, are you looking at any of the growthy areas like GLP-1s or other things like that where you could really get bigger?

Thanks, Stephanie. So there's, a whole bunch of things underway. And rather than go through all of them, there's a couple that are incredibly promising that are already showing great signs of life. So in the core prescription marketplace, we've got this fantastic and unique value proposition. And there's a whole bunch of ways that are reflected in our merchandising and pricing within that marketplace to make sure that we get the most affordable prescription for a particular drug, branded or generic, to consumers. So if you think about that value prop, that moves in a couple different ways. One of which in the marketplace is expanding to additional value propositions, not only for cash pay, but particularly against Medicare and commercial insurance. And there's, again, some wonderful things underway that really opens up the promise of what GoodRx, you know, could continue to become. Going back to PharmaMansel, just think about that marketplace and that intersection of having a branded drug show up with a price point and the right price point that both a manufacturer wants and delivers incredible value to consumers. That's sort of the core of manufacturing solutions. And it's unique to GoodRx. And so when we talk about the kinds of things that we want to do more and do more at scale, it's leaning into the things that build up the business of GoodRx today and kind of where we can take it.

Super helpful. Thank you. And then the next one is for Carson, which gave us a lot of color on all the pieces in the guidance. But could you just help us size the grosser impact in one queue and how to think about that going forward?

Thanks for the question, Stephanie, and good morning. Yeah, the grocer's contribution to revenue declined by roughly mid-30s of millions of dollars between 1Q22 and 1Q23. At the time of the grocer, the revenue derived from the grocer was also actually growing. But even if we ignore the growth and just add the difference in revenue between the two quarters, then our total revenue would have been up approximately 8% year over year. If we look just at PTR, prescription transactions revenue, which is the most relevant component, which came in at about $135 million in 1Q23. That number would have been about $170 million had the grosser revenue come in as it had last year, which would have put PTR growth at about 9% for the issue. Hope that's helpful.

Awesome. Thanks, folks.

Our next question comes from the line of Sandy Draper with Guggenheim.

Thanks very much. Just one quick clarification, I think, for Carson and then maybe a question for Scott. Carson, on the revenue reduction, I'm trying to hear you right that the contra revenue issue was, is now a factor reduction, but it's also pharma solutions. I just want to make sure I can understand the moving parts do that. So that's the first question. And then the second broader question for Scott and sort of follows up on Stephanie's. When you think about those growth opportunities, are there things that you think that you can change that could accelerate growth near term? Or are these all things that are going to take a while and there's a lot of long term growth, but there's not a lot of changes you can make to improve growth in the near term? Thanks.

Hey, Sandy. I'll take that first one since that's just a quick clarification. So our POS discounts are targeted incentive programs aimed at consumers, which are intended to drive behaviors like registering for an account or claiming a first fill, for example. So they're related specifically to our prescription transactions business. I think you'd alluded to the fact that they may have something to do with Pharma Mansault, but they do not. They're related to our prescription transactions business. And because, of course, some of the incentives are routed through customer arrangements, that's why they're treated as a reduction of revenue because we don't receive a distinct good or service for them. When they're not routed through customer arrangements, then they're S&M. So, again, focused wholly on the PTR business and driving specific behaviors on the part of our users, like our engagement efforts, for example. Yeah, thanks. And then in terms of characterizing growth, If you think about the three things articulated earlier of, boy, let's really lean into the network and solidify it to its best extent. Second is PTR, both be awesome at what we do and how do we expand intelligently. And then the third is man-solved delivery and expansion. What I think those represent are long-term, multi-year, really strategically important things. where you put points on the board week by week, month by month, quarter by quarter. So there's a whole bunch of short-term things underneath each of those containers, but those are really multi-year events. So what does that translate into financial expectations and how do those build? I think it's really important right now for all of us hit not only the range of commitments that we've just laid out, but then work like hell to get on top of it. And as these things land, we'll be clear about what kind of impact they're gonna have and the shape of the P&L going forward.

Great, thanks.

Our next question comes from a line of Charles Rhee with Cowan.

Yeah, thanks for taking the questions. You know, I guess first, you know, for Scott and Carsten, you know, when we think about the guidance here and the way you kind of characterized a lot of the parts of your business, you know, looking at Mansol as a nascent business and, you know, and kind of looking at a lot of the areas that you described, it seems like you've kind of taken a step back in how you're seeing your position in the market and it looks, it looks at the surface that, you know, you're trying to, you know, manage sort of the expectations here, you know, of what to expect at least in the, in the near medium term, you know, maybe Scott, you can kind of could apply here, you know, as you've kind of evaluated where the company is at the moment, you know, is this, Do you feel like you've really level set sort of how you're seeing the business performing relative to then what you think you can do as we move forward from here?

Sure. Let me – this is early week three, you know, officially. And so before going into guidance, maybe to take a little bit of a step back, even over the last couple weeks, I've been spending time – with our team's leadership, sort of the priorities across the company, and have also had the opportunity to get to a bunch of customers, particularly in Nansal, and have been doing a heck of a lot of both user flow reviews that have touched consumers and docs. And again, not deep coverage, but touching those three areas. And the fundamental value proposition of GoodRx both its marketplace and the value we provide, and then the extension of Mansol to branded drugs and pharma manufacturers, it's really powerful. And that's a super important point. So there's a solid foundation that we can build on here, and there's things to do, again, both in the core marketplace and in building up the Mansol business. In the team here, there's a heck of a lot of really good people who are energetic, committed, and talented. So when we think then about what's here, there's stuff to do, right? And I think everybody who's an investor in the company, if you look back at the value proposition of the company and think about ways to build the business, I think you're going to find a whole bunch of things to be positive about. When we go to financial guidance, I think the best thing I can do for you and for people on the call right now is almost give you my philosophy, which is on guidance, you know, a range is the expected outcomes that based on our best knowledge, we should deliver against. And so to me, that's been a commitment, both places I've been before, public and private, Again, based on what we know and what the rhythm and pacing of the business is. And as a team, you know, you don't just work like hell to meet your commitments. You do it to exceed them. But so the guidance range, you know, that's coming out right now is our team's best estimate of the committed range of where we are. And again, we're, you know, getting, we're working like crazy, not just to meet that commitment, but to, you know, have everything land that we think is important to build the business long-term. And, you know, that should show up in the financial results.

I appreciate that. And then just maybe as a follow-up, if we think about, you know, we're seeing clearly a big focus on Mansol here. And, you know, it looks like that's expected to be the big driver of the company building off the scaled base core business. When we think about the – it seems like if we think about the pieces that drive it, is it fair to say – it's really provider mode will be the main driver for Mansol. You know, how much does the subscription membership been driving Mansol growth or, and do max play a role in that as well? It's our understanding that, you know, pharma marketing kind of maybe ignores just the transactional members really wants to focus on providers and subscribers since those are, you know, repeat customers per se. You know, what's the relative value between maybe, you know, the different pieces from a manufacturer's perspective when they look at the GoodRX platform as a tool for them?

Sure, I'll take that one. This is Karsten Charles. So a couple things. First of all, providers do provide an attractive growth vector for us. And with the launch of provider mode, we're seeing multi-million dollar revenue streams associated with provider-only deals already. That said, when you think about it, when folks come to GoodRx, about a quarter of the folks visiting, just the general users, are coming to GoodRx to look for branded prescription drugs and good prices on branded prescription drugs. So those users, even coming in as individuals, are highly, highly valuable. They're bottom of funnel, script in hand, looking for an affordability solution. And that's very attractive to manufacturers. So both prongs, our original prong, which was more consumer-focused, and our newer growth vector providers are highly relevant. More broadly, I think, as we look at the business, the macro environment for pharma mensal is a good environment generally. I think we've seen some short-term pullback by manufacturers in terms of spending. But we're continuing to see the ongoing shift to digital, which is a tail end, especially as we look forward. And our clients are confirming they're getting great ROIs. So from that perspective, we think that aspect of the business is also very solid. So we think it's really up to our execution. And as Scott said, there's some bigger, lumpier deals in the pipeline. Some of them are more performance oriented. So we'll have to see how they track to know exactly how much revenue they'll generate. But we're looking forward to those with great anticipation and we expect to see QOQ sequential growth going forward over the next few quarters. I just add two quick things over the top. One is the real unique foundation of our marketplace is this intersection of consumers, their doctors, and the drug itself. And if you're a branded manufacturer, You're spending outrageous sums of money in different media components to really get to that point, and that's sort of the unique value proposition that GoodRx has today. If you're a branded manufacturer with any sort of cashback or copay cards that are really aimed at market access, we're phenomenal. You're seeing that in the campaigns and some of the feedback from manufacturers, so that's really just the super high return And then in terms of awareness and hitting the audience, we're building up tools, whether it's health or provider mode, that also allow people to reach audience. So there's really two components to kind of what we have that I think are long-term valuable to Branded Pharma.

Great. Thank you. Our next question comes from the line of Mark Mahaney with Evercore ISI.

Great. Can you guys hear me?

Yes, we can.

Hey, John, we can. Hey, guys. This is Jan for Mark Manini. Just a couple questions. First, Carson, just on PTR, to clarify, if you can kind of walk through, like, the magnitude of the grocer impact in the next few quarters and are we expecting this to kind of moderate through the next couple of quarters? And I think you said that by Q4 this year, we should fully comp that impact. So just to confirm that. And also maybe just like, how should we think about like, you know, X grocer growing 16% year over year, how should we think about the exit rate of this business in a more normalized kind of condition?

Sure. Great questions, Jan. Happy to jump in. So, We talked a little bit in response to one of the prior questions about the impact of the grocery issue on 1Q23 relative to 1Q22 being in the mid-30s of millions of dollars just off that delta. So that gives you a rough sense of the headwind we're still continuing to face as we look Q over Q, or more pointedly, year over year. I think going forward, when we look at where we're going to lock the grocery issues, That will happen in the third quarter since the grocer issue fully manifested in the second quarter of last year. So as of third quarter, we'd expect to lap that issue. And at that juncture, we'll be able to reflect the businesses through more comparable outcomes without having to call out the adjustments like you did for 1Q of 23 relative to 1Q of 22. And then subsequently to then, that's when you'll see the business performing on an equivalent basis to the prior year. So in those future periods is when we're really going to be able to show that comparison. And yeah, to your point, we have been seeing X growth at gross or volume growth in the interim, and that's been a big plus for us as well to see that volume coming into the business. I think at this point it's a little hard to parse it to know how much of the volume is shift and how much of the volume is net new given the grocers pulled out of the picture. And we'll know more about that too, of course, as we last the grocer issue in the third quarter.

Great. And then if I may, one follow up on probably a bigger picture question on the farmer advertising, the manifold. So what is required to scale this business? Or maybe it asked another way, like what is the kind of the current investment most focused on? Is it adding experience sales, building a better ad tech platform, better measurement, et cetera. So if you could just kind of talk through the investment priorities here. Thank you.

Sure. This is Scott and we'll, we'll follow up in subsequent quarters on this, but Today, there's a series of both awareness programs that are running that are, you know, pretty consistent and fixed rate. And then we've got a handful of pretty large volume creative marketing campaigns with large manufacturers that are high intent volume driving programs. that would fall into copay, cashback, but they're really a performance-related execution. And those are just starting or are in flight. And just the ability to both scale and ramp those kinds of programs naturally within the marketplace, deliver, grow them kind of consistently are just things that we just need to work through. And that's a combination of people talking to our branded partners and making sure that expectations and, you know, are aligned between the two, which are our, you know, account managers, and then ad operations, which exists, but again, builds rhythm about how you actually deliver these programs, both within our systems or the things that we're just working through the mechanics of. So, you know, there's nothing that's super far afield here. It's just the natural part of building a business.

Great. Thank you, Scott.

Thank you, Kostya.

Our next question comes from Michael Cherney with Bank of America.