GoodRx Holdings, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to GoodRx second quarter 2024 earnings call. As a reminder, today's conference call is being recorded. I would now like to introduce your host for today's call, Aubrey Reynolds, Director of Investor Relations. Ms. Reynolds, you may begin.

Thank you, operator. Good morning, everyone, and welcome to GoodRx's earnings conference call for the second quarter 2024. Joining me today are Scott Wagner, our Interim Chief Executive Officer, Carson Vorman, our Chief Financial Officer, and Mike Walsh, our President and EVP of Prescription Marketplace. The team is not in the same location for today's call, but we will do our best to make the Q&A portion as seamless as possible for our audience. Before we begin, I'd like to remind everyone that this call will contain forward-looking statements. All statements made on this 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 opportunity, our anticipated financial performance, underlying trends in our business and industry, including ongoing changes in the pharmacy ecosystem, our value proposition, our long-term growth prospects, our hybrid retail direct and PBM contracting approach, collaborations and partnerships with third parties, including our integrated savings program, and our capital allocation priorities. 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 factor section of our annual report on Form 10-K for the year ended December 31st, 2023, and our other financial 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 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 will be referencing certain non-GAAP metrics in today's remarks. We have reconciled each non-GAAP metric to the nearest GAAP metric in the company's earnings press release, which can be found on the overview page of our investor relations website at investors.gutterax.com. I'd also like to remind everyone that a replay of this call will become available shortly as well. With that, I'll turn it over to Scott.

Thanks, Aubrey, and thanks, everyone, joining us today to discuss our second quarter results. Today, I'd like to remind you of the themes from our recent Investor Day, share a handful of relevant updates that we think investors should care about, both in the industry and at GoodRx, and talk about Q2 financials and how we see the second half of 2024 evolving. We appreciate the feedback we received following our first Investor Day. We tried to provide clear context for the healthcare landscape in which GoodRx operates, how GoodRx complements insurance and our priorities for the future. Right now, we're all seeing the tectonic plates of healthcare continue to shift between PBMs and plans and brand manufacturers and retail. The good news for GoodRx is that we provide value to practically every part of the pharmacy ecosystem with the consumer or patient right at the start. Consumers use GoodRx to save money on their prescriptions. Healthcare professionals use GoodRx to get patients on the medication they need and save precious time. Pharma manufacturers work with GoodRx to make their brand medications available to more consumers. Pharmacies work with GoodRx to acquire new consumers, reduce friction at the counter, and keep people from walking away from the nearly 900 million 30-day scripts that go unfilled every year. And finally, pharmacy benefit managers work with us to gain incremental volume. We believe that the best proof point of GoodRx's value lies in our scale. In 2023, consumers visited the GoodRx site and app about 350 million times and viewed our drug price pages almost 140 million times. And our patients and consumers are transacting with us with 25 million unique consumers or patients filling prescriptions with GoodRx in 2023, saving about $15 billion. And it's not primarily uninsured folks who thrive with GoodRx. We estimate that about 88% of our users have commercially funded insurance or Medicare and use GoodRx as a complement to their funded benefits. That's because medication accessibility is both narrowing and becoming more complex, fueled by three trends. First, insurance benefit design and plan coverage is getting narrower. It's estimated that the number of formulary exclusions increased almost 40% in the two years through 2022. Second, more utilization management is required to access the medication with prior authorization and step therapy up an estimated 45% in the last three years. Finally, and most importantly, patients continue to bear more of the direct cost of their medication. We estimate that the total out-of-pocket spend for prescription drugs in the first half of 2024 was over $20 billion. That means our ability to give consumers access to medication at lower prices and ease of use, regardless of their insurance status, is increasingly relevant and durable. Just like consumers, healthcare professionals value GoodRx, too. Doctors' offices spend an average of 14 hours every week in 2022 completing authorizations so patients could get the medications they need to be healthier. That's a key reason the GoodRx site and app received almost 750,000 unique visits from healthcare professionals in 2023. They benefit from us just as much as their patients do. Brand drug manufacturers are paying increased attention to affordability and access as well. And they understand the important role that GoodRx's strong platform plays in helping them directly reach consumers. In 2023 alone, We had 43 million unique brand drug page interactions on our platform and estimate that a staggering 65% of our visitors learned about manufacturer savings programs for the very first time via GoodRx. Our users also support retail pharmacies. In fact, we estimate that at one major retail pharmacy, over half of their consumers purchase front of store items when they pick up a prescription with a median spend of $25. This illustrates that GoodRx is an important part of the healthcare value chain and sets the foundation for the five priorities we discussed during our investor day. Those five priorities are, one, strengthen our value proposition to key constituents in the healthcare ecosystem. Two, scale pharma manufacturer solutions. Three, grow and deepen our relationship with GoodRx users. Four, build distinctive, frictionless, end-to-end GoodRx experiences. And five, build a winning team and culture. I'd like to share a handful of recent industry developments in GoodRx News relative to these five priorities. On the first priority, strengthening our value proposition to key constituents in the healthcare ecosystem. We've been centered on solidifying our relationships with both retail pharmacies and the PBN network with most of our efforts and communication with investors centered around our contracting models. Retail pharmacies have been economically pressured and we believe our direct and hybrid contracts can meaningfully help them. As reimbursements rates shift on funded business, the volumes from our direct contracts can both boost revenue and margins for our pharmacy partners, both on prescriptions and on front-of-store sales. As we shared in Investor Day, 7 out of 10 of our top pharmacies have contracts with us, either for their full book of business or for some part. We're pleased with our new Kroger agreement and the improving Kroger metrics we've seen to date. At an individual retailer level, these contracts with pharmacies have varied in their impact on GoodRx revenue and implementation, and their aggregate impact on volume and revenue date has been neutral to slightly accrete. While we firmly believe this approach is the right answer for GoodRx long-term, given it cements our retail relationships and ensures network durability, The immediate contracting results can fluctuate in terms of their impact on GoodRx revenue pacing in the short term. Structurally, retail pharmacies had a tumultuous summer, with Rite Aid announcing additional store closures and Walgreens indicating that their footprint will shrink as well. Store closures impact immediate GoodRx volume and revenue, although scripts do migrate over time. While this closure trend isn't positive in the next few quarters, we do expect that the impact of this trend will normalize in the longer term as a result of such migration. ISP is tracking roughly in line with expectations with incremental lives continuing to join the program through our current PBM relationships. It's important to reiterate that ISP has been a generics-only program to date focused on integrating good Rx pricing into the benefit for covered drugs where the cash price might be lower than the patient's co-pay. Bounded on these successful launches, we continue to expand our PBM partnerships, for example, with MedImpact and also with Smith and Servi, by offering programs that also wrap around the benefit for non-covered brand medications. This is meaningful as GoodRx's increasing stable of brand-specific cash programs continues to grow and as PBMs and clients strive to balance clinically effective and cost-effective formularies with patient choice. Patients win with less friction and better prices. PBMs win with fills outside their traditional covered life base, and retail pharmacies win with attractive reimbursements on these fills. We believe GoodRx is uniquely positioned to offer this program and drive value across different healthcare stakeholders. On our second key priority, scaling pharma manufacturer solutions, we grew approximately 9% year-over-year over the second quarter. Looking ahead, we're encouraged by the momentum of deals signed and our pipeline in the quarter. We're focused on unique good Rx affordability solutions, cash, copay assistance, enrollments that meet big problems for brands and patients where we can potentially add big values. We're working with large brands and clients, and we're building execution speed and muscle. We've signed over half a dozen cash programs for brands in the quarter and have over 40 signed programs with different brands, up over 50% since the start of 2024. Those include an offering with Boringer Ingelheim for their Humira Biosimilar, which allows anyone with a valid prescription, regardless of insurance status, to pay an exclusive cash price of $550 with a GoodRx coupon. representing a 92% discount from the Humeralist price. This program is a significant step in addressing access and affordability in one of the largest therapeutic categories with a high cost burden for patients. Some other notable point-of-sale discount deals that we've talked about include our Sanofi-Lantis relationship, where claims are up over five times year over year, as well as with Dexcom on the device side. We're encouraged by the quality of our pipeline build, and we're working with extreme urgency to sign and implement throughout the second half of 2024 and to build to a 2024 exit rate. From a fundamental investor perspective, the good news in these programs is that they're typically evergreen, and they compound over time with new fills and refills. Now, it's on us to stack several of these in the coming quarters as we leverage pharma manufacturers' interest in offering cash pay alternatives as well as scaling access to copay and deductible assistance programs. In fact, we're seeing increased interest for manufacturers in leveraging the GoodRx platform, trusted brand, and user volume to surface manufacturer hub enrollments, copay programs, and other market assistance tools. Our third key priority is to grow and deepen our relationship with GoodRx users. We've always been focused on relationships with prescription drug consumers. the patients, and now we're complementing that with an increasing focus on healthcare professions. We benefit from very strong provider relationships reflected in our 84 net promoter score and 90% awareness amongst HCPs. We've increased our focus on HCP offices by increasing the doctor kits we ship out and putting over 20 times more digital marketing assets into HCP offices in the second quarter relative to the first quarter of 2024. Our top decile of HCPs drive about half of our claims, so we believe that unlocking more HCP offices can drive meaningful incremental claims and usage over time. Our fourth key priority, build distinctive, frictionless, and end-gooder access experiences. We've redesigned many of our brand medication pages, increasing visitor session duration, and we've created incremental redundancy to mitigate outage risk. We ended the quarter with 8% year-over-year macro and over 7 million prescription-related consumers. Finally, our fifth key priority, build a winning team and culture, underpins all the others. I'm pleased to announce that we've added senior talent with healthcare experience from Amazon, and we announced during the quarter that we've added two new members to our board of directors, Ian Clark, former CEO of Genentech, and Simon Patterson, a Silver Lake partner and former board member of Dell Technologies and Skype. In the future, we plan to add additional healthcare leaders with a passion for patient affordability. As I hand off to Karsten a few editorial comments on the financials, as the business has returned to growth over the past few quarters, we're seeing a sizable amount of incremental revenue flow through to adjusted EBITDA growth and adjusted EBITDA margin expansion. That's positive for the long-term growth and profit balance for investors. We promised a year ago that we'd share with investors both what we know today and what we think, and focus our guide based on what we know, and we stand by that promise. I want GoodRx to keep our collective eye on the prize of impactful growth areas available to us and to stack new programs, whether they're more brand deals, additional plan coverage areas, or more users, to exit 2024 as strong as possible. We laid out some broad growth targets in Investor Day that are appropriate goalposts over the long term for this business. And we're going to pursue those with optimistic and extreme urgency.