Q1 2021 Goodrx Holdings Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the good R X first quarter 2021 earnings call. As a reminder, today's conference call is being recorded.
I would now like to introduce your host for today's call we'd need the Toro Vice President of Investor Relations Ms. Natasha Lee you may begin.
Thank you operator, good afternoon, everyone and welcome to better access earnings conference call for the first quarter of 2021.
Joining me today, and Doug Hirsch and cover bad debt, our co founder and co Chief Executive Officer, and Carsten government, our Chief Financial Officer.
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 facts should be considered forward looking statements, including statements regarding management's plan strategy and Goldman objectives, our market opportunity our anticipated financial performance.
And the expected impact of COVID-19 on our business.
These statements are neither promises nor guarantees, but and 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.
Doctors discussed and the risk factors section of our quarterly report on form 10-Q for the quarter ended March 31st and our 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 represent managements 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 certain non-GAAP metrics, which are reconciled to the nearest GAAP metric and the company's shareholder letter.
Which can be found on the overview page of our Investor Relations website at investors thought that or ask dot 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 the call over to Doug.
Thank you Whitney and.
And thanks to all of you for joining us this afternoon.
I wanted to take a minute to talk about trust and health care Trust is really really hard to earn Americans convoluted health care system is so complex and frustrating and opaque because that consumers increasingly question the guidance they receive and.
And by getting the best care do I really need this treatment can I afford this.
When Trevor and I started to get Rx, we didn't know much about health care, but we knew that there was a huge lack of trust it.
It seemed that the industry's modems rarely align with the needs of the patient they need the complicated terms and information surprise bills and lots of bad experiences.
We knew that we would build products that put the patient's needs first and.
So we designed <unk> to provide simple easy to understand savings and assistance without asking for much and return.
And embraced transparency and education is core tenants of our relationship with consumers.
And created a team of patient advocates to help guide consumers to the best outcome.
Fast forward to late 2020, with the miraculous development of multiple Cup and 19 vaccines, we recognize our crucial role and the next step of the process be a trusted resource to help Americans and figure out where when and how to get vaccinated.
The good or ex COVID-19 vaccine guide went from concept to launch and just three weeks using government data and working with numerous stakeholders. We built a centralized service that tracks vaccine inventory and appointments and thousands of locations across the nation.
We alert over $2 5 million people when eligibility changes and their state or county, and we published comprehensive information about the virus vaccines and treatments and people can reference easily.
So far more than 15 million people, who have visited our vaccine guide since launch we anticipated the need and leveraged our capabilities to quickly develop a solution that empower consumers to take action.
Our obsession with improving the user experience and health care drives the development of everything we do.
We're constantly asking our consumers about their health care pain points, and then imagining ways to address them, we build relationships and turn a transaction into a relationship rooted in trust.
This is why it got Rx gold our paid subscription program continues to be a strategic priority. Most people joined goal to find even greater savings on prescription and then we build tighter relationships with members by anticipating and solving additional health care need FERC.
For example, gold subscribers are presented with mail order pharmacy options exclusive discounts on online Doctor visits true. They go to write cat and dedicated customer support as well as a more personalized and customized experience.
We believe these types of benefits drive acquisition and conversion, which has fueled subscriber growth and consumer savings and we're proud to say that between the family and individual plans being offered across could Rx cold and the Kroger Rx savings club or 931000, and subscription plans translate to over $1 4 million Americans, who benefit from the subscription programs.
We are solving more pinpoint and building trust with more people every day with $5 7 million monthly active consumers 1.4 million Americans and nearly 1 million subscription plans and thousands more using our telehealth services every month, we are clearly onto something.
Almost 20 million monthly visitors came to good or actually this quarter to compare prices learn about health care reference or vaccine guidance or use our manufacturer solutions platform and we're just beginning as.
As the pandemic recede, we will still be faced with american's existing health care crisis. So we are accelerating the development of new products and services to provide better ways for Americans to find the care they need.
We're proud to report that consumers have now saved $30 billion using good or excellent we maintained high NPS scores with both consumers and providers and a 4.8 operating for good or at this.
And this dynamic is driven and value to stakeholders across the entire health care ecosystem.
We believe we have barely scratched the surface of this opportunity to transform health care for all Americans consumers' needs are evolving and they are seeking new ways to access their health care.
Our Gulf of greater access to be there for them as a trusted resource for each step of the journey.
With the strength of our brand are increasing reach commitment to our mission and the value. We continue to create per consumers. We believe we are well positioned to win across the four trillion dollar and health care ecosystem in 2020, one and beyond.
With that I'll turn it over to Trevor to address key highlights from the quarter and trends and our business.
Thank you Doug I'm proud to report that <unk> achieved a number of new financial records and the first quarter, we delivered record revenue at attractive margins and increase the number of visitors to our platform. We grew the number of consumers we serve across all of our offerings and ramped up our subscription manufacturer solutions and telehealth offerings. We also acquired two outs.
Scanning companies to deepen our capabilities.
Healthy nation with its award winning staff produces video content and a hundreds of health and wellness topics and closed in April.
And nations content, creative and collaboration with doctors and other health care professionals helps us educate consumers from diagnosis to disease management.
And April we also closed the acquisition of our favor our brand and we believe it's complementary to our own prescription transactions offering we believe M&A from played important role and helping us build the leading digital platform and consumer health care.
Revenue for the first quarter grew 20% year over year to a record $164 million, even with continued headwinds from COVID-19, and we cold and flu season. Other revenue continued to show strong and met them growing 154% year over year, reflecting the continued rapid growth of offerings like subscriptions manufacturer solutions and all of our other.
New initiatives.
Adjusted EBITDA margin was an attractive 31, 8% as we continue to make growth investments and our platform and brand.
During the quarter, we helped a record $5 7 million monthly active consumers save on their prescriptions by using good Rx and one of our 70000 participating pharmacies.
We continue to successfully drive consumers to our subscription offering with our subscription is growing 96% year over year to approximately 931000 across our two subscription programs. Good Rx gold and the Kroger Rx savings club powered by good rocks, including family plans each subscription represents on average more than.
One American so we actually have one 4 million members now benefiting from our subscription offerings. In addition to the $5 7 million monthly active consumers previously mentioned.
These paid subscription programs have generated greater value for us and the Max He is our prescription transactions offering.
Our SaaS growth and subscribers has been fueled by the new benefits, we've added to gold as well as a redesigned integrated user experience, which drove more effective consumer acquisition and conversion.
During the first quarter of 2021, we began promoting growth to our telehealth consumer looks at checkout and have seen encouraging adoption numbers. This is just one of many integrations, we expect to drive further subscription growth and lifetime value.
The success of gold has captured the attention of others interested and providing better ex benefits to their constituents.
We have recently entered into a few exciting relationships, which extend the reach of Twitter ex called including new partnerships with door dash to offer additional value to drivers and their platform and groupon and these offer and the value and benefits from our gold subscription programs, even more consumers, including those in the gig economy early results from these collaborations have been positive.
In March we rebranded Hey, Doctor as good our ex cat and.
A new name and new home for affordable online Doctor visits and prescription savings, which you can use whether or not you have insurance.
It will take more than 20 days on average to see a doctor and the U S. According to and industry survey with good Rx care patients can complete affordable doctor visits and just minutes. Unlike most <unk> companies, we have a direct relationship with our patients our relationships cannot be disintermediation by and employer or third party payer plans shifting I've covered per things to another provider.
Also we can integrate other good Rx services, such as mail order or good art's gold directly into the patient experience, which we're doing today.
<unk> care provides another opportunity to delight consumers as evidenced by the five star App store ratings and its predecessor, Hey, Doctor carriers available for over 150 conditions, and all 50 states across <unk> and its marketplace partners.
It also creates and additional user acquisition entry point into the good Rx platform as consumers may use good rx share or a prescription and related services before and then using one of our other offerings.
These integrations have meaningful upsides after integrating <unk> discounts and to a doctor and 2020, we found that more than 30% of Hey, Doctor visits drove incremental revenue through our mail order or retail prescription offerings. We believe this integrated experience will enhance our ability to cross sell going forward and increasingly LTV of our users.
Our manufacturer solutions offering continues to grow at a rapid pace with momentum from our record bookings and the fourth quarter driving nearly four X year over year revenue growth and the first quarter with almost 20 million consumers and health care providers visiting good Rx each month, it's no surprise, we're seeing this kind of growth combining this massive audience with our <unk>.
Rod and strong pharma relationships creates the perfect intersection to drive rapid growth and manufacturer solutions.
We believe that the pandemic permanently impacted how manufacturers and interact with health care providers and consumers.
Manufacturers are embracing digital channels.
More and more of the $30 billion that manufacturers and annually on advertising to attract patients to their brands has already been redeployed toward interactive platforms.
<unk> offers a targeted and efficient way to reach consumers and their health care providers and high ROI uniquely positioning us to capitalize on the shift to digital.
We're particularly excited about our integration with global biopharmaceutical company Sanofi to streamline patient access to their diabetes related discounts. We didnt go direct commercially insured and uninsured consumers can find and claims Sanofi manufacturer discounts that can save them hundreds of dollars on life saving medications. This.
Save Americans and millions of dollars and 2021 alone.
During the first quarter, we entered into an agreement to acquire healthy nation and as part of our continued effort to present best in class health information and consumers' healthy nation possesses a lead and comprehensive library of thousands of premium clinician reviewed videos on a wide range of health topics.
<unk> Library and provides a platform for pharmaceutical manufacturers to reach targeted audiences and high intent consumers.
With healthy Nations extensive video library and editorial expertise.
And can offer manufacturers new ways to reach large audiences and contextually relevant manner.
This acquisition aligns with our research and constant efforts to further empower consumers increase engagement drive consumer acquisition, and propel even faster growth and our manufacturer solutions offering.
The helping agent acquisition closed and the second quarter and we are grateful to our team has joined <unk>.
We are very pleased with our first quarter results the growth of our offerings and the continued progress, we're making to deliver more value to more consumers throughout their health care journey.
As we near the second half of the year, we look forward to the reopening of our country and believe there will be a new normal when it comes to health care the way consumers seek healthcare and inevitably evolved because during the pandemic and had to we.
We expect there to be a permanent shift to tell all catalyzed by consumers and not employers are payers, particularly from the low risk conditions, we serve.
Many people who did not previously felt comfortable accessing health care online are now feeling more comfortable than ever and we believe these engage consumers will force changes to the way health care constituents market to both patients and healthcare professionals that treat them. Additionally, the way manufacturer or interact with consumers whether directly or indirectly through provide.
This has changed as many manufacturers we're prohibited from sending their sales force and the physician's offices during COVID-19.
Quickly pivoted redirecting their AD spend to digital and learn that their returns could be higher.
Consumers are demanding virtual solutions for their health needs more than ever.
Meanwhile, as COVID-19 retreats and patients reemerged to treat the almost 1 billion misdiagnoses, they'll find and overwhelmed traditional health care system, the same barriers and affordability and access this makes the space ripe for disruption and innovation and good Rx is prepared to lead the charge with new products and services for people, who know there has to be.
When we.
We believe that we are uniquely positioned to capitalize on this new normal. It's one of the most trusted brands and health care with our high consumer NPS and our consumer centric philosophy, we see a numerable opportunities to further disrupt the industry with new products that re imagine health care, making it more affordable and convenient for even more Americans.
As we continue to pioneer the transformation of health care, and we remain focused on increasing our reach and strengthening our relationships with consumers and continuing to build a trusted brand to deliver on our promise on affordable and convenient and health care. We look forward to share more updates with you and the future and with that I'll turn it over to Carsten to discuss our financial results and guidance.
Thank you Trevor good afternoon, everyone and thank you for joining US today, our first quarter results. Once again highlight the unique combination of scale growth and profitability of our business provides our strong unit economics, and a large market and which we operate and our ability to execute and generate strong operating cash flow.
Revenue for the quarter was $164 million growing 20% year over year, even comparing a very strong <unk> 'twenty two the COVID-19 impacted when Q21, driven by continued growth and a prescription offering as well as the torrid growth of our newer offerings.
Prescription transactions revenue grew 9% year over year to $134 $1 million driven by a 17% year over year increase and our monthly active consumers, which reached a record $5 7 million.
And this was partially offset by a decrease and prescription transactions revenue per Mac solely related to script cycle, which as discussed in our last call in March and significantly lower revenue and contribution per consumer.
<unk> prescription transaction and economics have otherwise remained constant.
As a reminder, monthly active consumers represent the number of unique consumers, who use good or extra favorite and their prescription and the given month and it does not include consumers of our other offerings such as subscriptions manufacturer solutions and telehealth when presented for a quarter monthly active consumers represent the average of the calendar months.
And the quarter.
One additional clarification on the calculation of Max Unlike our subscriber count maxtor and not accumulative number measured by and presented at and ending balance for a given mindset as accounts of unique consumers, who use our prescription transactions offering to save money on the retail cash price at a pharmacy.
And so the number of days and a month's effects from Mac count.
Using the first quarter as an example February we'll have a lower number of monthly active consumers compared to January or March when holding all else constant and more specifically February had five 3 million Macs and March had $6 1 million Macs with the length of the mines being a key contributor to the increase so this year February was.
And also impacted by the close to coast storm that adversely affected the majority of the U S shutting down, Texas and other southern and Central States.
In addition, 2020 was a leap year, adding approximately 1% to Max and revenue in <unk> 'twenty relative to <unk> 'twenty one.
Since maxtor averaged over the three months and the quarter. The first quarter will consistently show a lower count all else being equal since there are fewer days and other quarters.
Other revenue grew 154% year over year to $26 $4 million with strong growth and all of our other offerings subscription telehealth and manufacturer solutions. The growth reflects the incredible demand for our offerings as well as our ability to leverage multiple entry points into our growing platform and man.
<unk> at different stages of the health care journey, which is growing and television.
And as Trevor mentioned, we finished the quarter with approximately 931000 and subscription plans and $1 4 million Americans benefiting from our subscription offerings since our family's subscriptions generally true multiple consumers.
We started disclosing our subscriber count last quarter to provide a more holistic view of a growing consumer base and to present and another way, we monetize a portion of the millions of visitors on our platform.
Our subscription offering which is already a scale business and extends our successful prescription transactions offering had addressed with similar consumer needs and generally offers even greater savings on prescription medications.
Many times consumers go through the same funnel and searching for prescription prices.
And if they choose the lowest price they will often become subscribers without ever having been a monthly active consumer.
This is mutually beneficial because we believe that we generally offer consumers more value through our subscription offerings and they also generate higher LTV for us and provide better revenue predictability.
As we continue to grow our subscription offering and and contribute more meaningfully to our financials. We believe we will enjoy increased conversion from Max to subscribers, which we believe will result, and a higher LTV.
Looking at our total prescription related offerings, we had $5 7 million Macs and are prescription transactions offering and one 4 million members associated with her and 931000 and subscriptions we.
We had almost 20 million monthly visitors this quarter aided by the Q and specific lift from our vaccine finder and.
In addition to monetizing Max and subscribers were able to further monetize a portion of these visitors with offerings, such as telehealth and manufacturer solutions, delivering more value to consumers and increasing our scale ever prescription and related offerings.
Turning back to our first quarter performance as we stated on our fourth quarter earnings call in March the fourth quarter headwinds related to COVID-19, and the weakest cold and flu season, we've ever seen continued into 2021 as new therapy starts remain below pre COVID-19 levels impacting prescription volume.
We estimate that the nonrecurring lack of flu, resulting from this winter's COVID-19 precautions had a total negative impact of approximately $5 million on prescription transactions revenue with the vast majority of this impact felt in the first quarter of 2021.
Additionally, we estimate that this had a negative impact of approximately 150000, Max and the first quarter.
These figures represent a lack of flu alone, which is incremental to the impact of COVID-19.
On a year over year comparative basis, there were a number of dynamics that play and that impacted the first quarter and a nonrecurring matter.
<unk> 'twenty was an extremely strong quarter for us relative to the COVID-19 impacted when Q 'twenty, one as the first quarter of the year and and non pandemic environment.
Typically seasonally strong as was the case and when Q 'twenty. Additionally, we saw some modest pull forward a prescription demand at the onset of the pandemic last March as consumers stockpiled their medications further impacting the year over year comparison.
And finally 2021 had unusual weather conditions extending across the entire south which affected the first quarters year over year comparison.
While the growth of our prescription transactions and subscriptions offering was impacted by headwinds related to COVID-19, we believe we are well positioned to capitalize and the inevitable rebound and doctor visits prescription fills and new therapy starts as consumers resume typical health care purchases and star.
Our clearing a substantial backlog that has built up over the last year.
Recent accumulate data has shown that the 1 billion backlog of 2020 diagnosis and visits and the U S has continued to grow to over $1 1 billion. So the entirety of the rebound remains ahead of US we anticipate that the trend of delaying care or reverse and the second half of the year and we will begin.
Growing the GAAP and clearing this massive diagnosis backlog and benefiting from their realities that diagnosis generally resolved and prescriptions.
Moving down the P&L cost of revenue was $10 $4 million from $6 five per cent of revenue compared to $6 $1 million and four 5% of revenue and <unk> 20.
The increase was driven by provider costs related to our telehealth offering due to an increase and the number of online provider visits and increase from outsourced and in house personnel related consumer support expense to support our growth and.
And an increase and overhead allocations.
Product development and technology expenses were $26 $2 million compared to $10 $3 million from the comparable period last year. This.
This increase was primarily due to continued investment and the team and product as well as an increase and stock based compensation and.
Including awards made in connection with and after IPO.
Excluding stock based compensation and related taxes, and other items associated with acquisitions adjusted product development and technology expense was $10 six percentage of revenue compared to $6 seven per cent of revenue and <unk> 20.
We plan to continue to invest and our product and platform with the goal of creating the best consumer experience continuing to scale, our existing offerings and developing new offerings and.
All of which are intended to help more consumers and different stages of their health care journey deliver more value to them and increase the lifetime value we generate.
Sales and marketing expenses were $79 $7 million compared to $63 $2 million and when Q 'twenty, we increased advertising spend by $6 $2 million year over year and continued to build a strong team with the goal of increasing our consumer base and building the <unk> brand, which we believe.
Will yield positive returns for us long term.
Adjusted sales and marketing expense as a percentage of revenue was largely flat year over year, making up 46, 3% of our revenue and <unk> 21, compared to 46, 7% last year.
We continue to optimize our consumer acquisition spending in light of COVID-19, and market conditions and are actively monitoring doctor visits from new therapy starts.
General and administrative expenses were $43 8 million compared to $509 million and our first quarter of 2020. The majority of this increase $30 million from approximately 80% was due to stock based compensation expense related to the nonrecurring Cosio awards made in connection with the IPO.
L.
Excluding this and other adjustments, including noncash nonrecurring M&A and financing related items.
Adjusted G&A as a percentage of revenue was four 9% compared to three 2% and one Q 'twenty with incremental costs, primarily associated with starting to operate as a public company at the end of September.
And the first quarter net income was $1 $7 million, which was impacted by stock based compensation expenses of $46 $5 million from the quarter $30 million of which related to the nonrecurring cosio grants made at the time of the IPO.
Adjusted net income was $31 8 million.
Adjusted EBITDA was $51 million adjusted EBITDA margin continues to be strong at 31, 8%, reflecting our ability to deliver profitable growth due to the compelling unit economics of our business and repeat activity on our platform, which remained at over 80%.
Adjusted EBITDA margin decreased by approximately 710 basis points year over year due to continued investments and product development and technology the growth of our telehealth business and investments and our general and administrative infrastructure all of which I've discussed.
We continued to generate strong cash flow with net cash from operating activities of $45 $5 million for the quarter on the capital investment front, our primary investments were related to the build over and new headquarters in Santa Monica as well as additional investments and our platform and product. We have completed the construction of our new headquarters with them.
Approximately $16 million spent on this project net of tenant improvement reimbursements, approximately $2 million of which was spent and the first quarter.
And now turning to guidance for the second quarter of 2021, we expect revenue of 172 to 176 million.
Reflecting 41% year over year growth at the midpoint.
We believe this growth will be driven primarily by a triple digit increase and other revenue and its momentum and our manufacturer solutions subscriptions and <unk> offerings continues we expect year over year prescription transactions revenue growth to be more meaningful compared to the year over year growth and <unk> 21, given it will be a COVID-19.
Quarter to COVID-19 quarter comparison.
On the adjusted EBITDA from we expect and adjusted EBITDA margin of approximately 30%.
As stated on our previous calls we will not be providing specific guidance around or user count on a regular basis, but it's worth noting that as long as COVID-19 continues to impact consumer behavior around doctor visits and prescriptions are Mac and our subscriber growth may be impacted.
However, we believe this will be followed by a tailwind from the inevitable clearing of the substantial and medical backlog, which continues to build.
GAAP over $1 1 billion and diagnosis visits and the U S that did not happen since the beginning of 2020.
When this backlog begins to clear and we see pent up demand will be there to help our consumers are we engage with the health care system.
While we are not providing Mac guidance, we want to emphasize that we do expect other revenue to make up a higher percentage of our total revenue and the second quarter than it did and the first quarter and.
And the first quarter. It made up 16, 5% of total revenue and increase of approximately two percentage points from the fourth quarter and we expect the proportion of other revenue relative to total revenue to increase from the second quarter. So that other revenue will reach approximately 20%.
And that means that prescription transaction revenue, which was driven by Max will make up a smaller share of total revenue as more visitors and Max turned into subscribers and as we continue to grow our manufacturer solutions and telehealth offerings.
Turning to the full year, we're increasing our previous 2021 revenue guidance of $735 million to $755 million to $740 million to $760 million, reflecting year over year growth of 36% at the midpoint as discussed in our prior earnings call. This assumes the second quarter will.
Still be impacted by COVID-19, and that health care activity will begin to pick up and the third quarter as consumers resume more normalized health care activity and the substantial backlog of over $1 1 billion diagnoses and.
And the U S begins to clear significantly adding to visit therapy start and prescription volumes.
For the full year, we continue to expect our adjusted EBITDA margin to be and a range of 30% to 32% with 2020, one laying the foundation for future growth of our platform and our brand as we continue to make the right investments to maximize value for our consumers our shareholders and the company.
Our assumptions related to healthy nation, and Rx favor reflected and our revenue and EBITDA guidance. Neither acquisition will have a material financial contribution or margin impact in 2020 one.
Healthy nation's revenue will be included and other revenue and will not be associated with an increase from Max or fevers revenue will be included and prescription transactions revenue and will not have any max associated with it and the second quarter.
Typically we begin including Max and the first full quarter post acquisition, which would be the third quarter of 2021, we're in the process of analyzing our favorite data to establish whether we can reported consistently with their own Mac reporting and we plan to provide and update on our second quarter earnings call.
We are building the leading consumer focused digital health care platform and the U S and plan to continue investing our strong cash flows and our platform product user experience and our brand with the goal of creating the best consumer experience and improved health care affordability and access for all Americans.
With every transaction and the good or X network continues to strengthen.
Our leading platform and trusted brand and allow us to reach more and more consumers health care providers and pharmacist. This increased volume drives improved pricing and consumer savings strengthening engagement and further improving our great unit economics.
This allows us to continue to expand our platform and enhance our products, creating a hard to replicate virtuous circle and an even deeper competitive moat.
This is a scale platform with a rare combination of high growth and profitability, we benefit from our strong brand first mover advantage and a decade of experience and relationships that benefit all key stakeholders and our ecosystem.
And we believe we have only just begun to scratch the surface of our massive market opportunity.
Thank you for your continued interest and good Rx, we look forward to sharing our progress and the quarters to come true.
And with that I'll now turn the call over to you operator for questions and questions.
Thank you, ladies and gentlemen to ask a question you will need to press star one on your telephone we ask that you. Please limit yourself to one question to withdraw your question press the pound key please standby, while we compile the Q&A roster.
Our first question will come from Ricky Goldwasser with Morgan Stanley. Please go ahead.
Yeah, Hi, good afternoon, and thank you for and for all the details.
And so a very quick follow up on on the guidance and then now and.
Real question. So so just to clarify and on an on the guidance I know you said that the acquisitions are not material that you raised the.
Revenue guide by about $5 million, so is Rx Sandra and healthy nation.
Accounting for that and as we think also about your second half guidance considering the script growth are going to Reaccelerate and should we assume that and the second half.
And prescription revenues aren't going to go back to a more normalized and that always that 20%.
Indicative of sales trends for the remainder of the year.
I 80 percentage of total revenue and 20% from the other.
Thank you. Thank you for the question and I'll, let Carson and speak to the guidance.
Hi, Ricky this is Carson and thanks for the Great question.
As you said first half revenue related to healthy nation, and Rx fever is largely immaterial. So we'd also considered when we provided guidance for the full year and March that we had a high probability of closing the healthy nation deal. So it was included in and a probability adjusted our expected value manner and the guidance we will.
Provided already back then.
Rx fever is included in our Q2, and FY <unk> guidance as well as healthy nation, but again the financial contribution of both deals is pretty immaterial.
And we bought them because we're excited about the capabilities and they provide for us health.
<unk> revenue will go into other revenue similar to our manufacturer solutions No Association with Max and Rx favor revenue will be included and prescription transaction revenue and it won't have any max associated with and initially and.
And the second quarter, we normally add Maxine and the first full quarter that we owned it and right now as we said in our prepared remarks, we're looking at our favorite data to establish when we'll be able to report and consistently with their own Mac reporting and we will update and Dan.
With respect to the question on whether 20% of revenue and other revenue is accurate and for the full year. We continue to see other revenue growing as a percentage of revenue. So if you look back to from fourth quarter to first quarter, you'll see that it rose by about 2%.
From <unk> 16, and a half up now we see it going by growing by a little bit more than 2% again looking for and that's why we say it will approach 20% for the second quarter I think we would expect given the terror that other revenues are growing over 150% year over year that it will continue to make up a higher percentage of revenue.
For the full year than it does for the second quarter. So it'll continue to accelerate I hope that helps.
It does and if I may just kind of like asked out of question and.
Doug and Trevor you talked about sort of.
Looking to do more acquisitions and can you maybe share with US just your overall acquisition framework and and what type of assets here and looking to that thank you.
Thank you I'll, let Doug speak to this.
Hey, Rick and thank you.
Our overall strategy is really focused around.
And trying to play an important role and accelerating our path to achieving our long term vision and building the leading digital platform and consumer health care, we've historically looked at and done deals with.
The growth and accelerate our long term vision and capability and have integrated this acquisition successfully with our increased scale and capacity, we're going to accelerate those efforts to grow capacity, both organically and inorganically, given our profile and our leadership position and health care. We believe we see many opportunities and digital health care and look we look at all targets that can advance our mission and we're really trying to drive <unk>.
Health manufacturer solutions, and our core prescriptions offering we believe that we're a very attractive platform for high growth companies to help them to scale quickly and so look M&A has been and will continue to be and important part of our growth strategy, we see lots of opportunities and especially now that.
The company and with the and with the additional resources, we have to execute on our M&A.
Thank you. Our next question will come from Steven Valiquette with Barclays. Please go ahead.
Thanks.
Couple of questions here I guess first just.
In addition to your comment that over 2 million American sign up for the <unk> COVID-19 vaccine guide and we are.
I've seen some further evidence and the retail channel that big drug chains are getting some nice pull through and traditional generic prescription volume from the COVID-19 vaccine dispensing.
Benefits good Rx as well so I guess I'm curious do you have any sense for how much.
COVID-19 vaccination activity is helping the company either relative to your own expectations.
So far and 21, either quantitatively or just qualitatively if you have any additional color. Thanks.
Thanks.
So.
And I'm going to speak maybe first of all I'll just speak to the vaccine and find our effort and we did and sort of the benefits.
And of that and I'll, let Doug speak to that and then I'll speak.
More specifically to sort of that pulled through and the pharmacy setting share so.
And so yes, I'll just give you a little overview of the vaccine guide itself and what we managed to do.
Look I think from guidance just another example of the powerful content and tools and we're able to generate to help consumers throughout their health care journey. One thing we realized early on was that vaccine information be fragmented and unclear and so we built this go to destination for Americans to learn about the vaccine track availability and then find an appointment and most importantly, and we're just super proud of the product that we built it covers tens of thousands of VAT.
And site degenerative or 15 million visitors and over $2 5 million alert sign ups and this guidance is.
And could not be more proud of it because everybody and all of them. It makes it our act.
And it increases the awareness and both our brand and the value of bringing consumers and allows us to communicate with additional consumers across the U S. As they sign up to receive updates.
And of course, and a lot of these visits and it came together and we're not traditional direct customers that needed there and it's just the beginning of what we think will be a proof of our relationship with those folks. So I'll pause. There. So you can make platelets, yeah, so relative to sort.
And sort of scripts.
I think what we really see is when you look at the results I think that's more sort of just revenue of the pharmacy chains, and that's a little bit more related to just revenue from the vaccines themselves, where we see really this benefit from the increased distribution and vaccine and that being even more so as time has passed.
And here through the pharmacy channel is that we're going and we're starting to see this clearing of the substantial medical backlog I think recent at QB and data has shown it shows about $1 billion.
Misdiagnoses, and 2020 growing at about $1 1 billion and 2021, and so you know when consumers resumed and that more normalized health care activity and backlog and begins to clear where there is consumers are re engaging with the health care system. So this distribution of vaccine just gives us an opportunity to.
And deliver more value that vaccine.
And pretty broad.
And.
And so.
And we think it's a great benefit as people are more.
And that's fine.
Okay, and one of the real quick question.
And it's been some debate and the pharma supply channel regarding and generic drug pricing trends with some conjecture that generic drug price deflation is possibly accelerated so far in 2020, one and lot of that the quick question really is whether or not and you guys have seen any downward pressure on traditional retail cash prices for generics.
It would impact your pricing and any way or are you not really seeing that just curious thanks.
Yes, it's a great question. Thank you so much generic price deflation does not generally affect our business.
And mostly impacts manufacturers and wholesalers, but its really decoupled from what consumer see so it's just not and impactful factor to our business.
I hope that I hope that's helpful.
Thank you, ladies and gentlemen, and as a reminder, we ask that you. Please limit yourself to one question. Our next question will come from Dan Lee with Evercore ISI. Please go ahead.
Okay.
And then.
And Jeff.
Okay.
Yeah.
Sure.
And so.
And for me.
And so that's true.
Pardon me.
And.
And then.
And hacking.
Yes.
Alright.
Yes.
Net.
Mhm.
What are you seeing that.
Sure.
Thank you.
Okay. Thank you very much for the question. So speaking first on each of our three and sort of other areas of policy. You know, we have been and continue to be <unk>.
Main aligned with positive regulatory trends, we provide consumers with price transparency and lower prices and we improve access to care. Since we founded good Rx a decade ago, we've seen many proposals and ideas and policies across administrations.
Including the rollout of HCA and and.
Other initiatives and with this new administration, and we continue to be aligned with the political objectives of driving affordability and access to health care for Americans and the current orders and legislation, including HR. Three are primarily focused just as you said on the Medicare business and brand drugs.
And even if those paths, which you know is really yet to be determined we believe they would have very little impact on our business. We actively track all legislative developments continue to be engaged with policymakers, we really want to be there as a resource to sort of give information about you know what.
What can be done and to benefit consumers and we feel really confident about where we are we've created a.
Sustainable product and system that works.
This is our consumers are getting medication and getting out of their health care affordably and conveniently.
And it's aligned with these overall trends so.
And in addition, I'd just note there is a number of legislative changes and we think can have a positive impact on our business. So as an example, I'll speak to sort of the transparency rules that were passed on previously and are starting to come into play and starting to kind of are starting to come into force and regards to the hospitals and then the payers you know.
This new information is only sort of helpful to us as we are expanding and building more tools to address the broader health care system. So we're super excited about the sort of availability and coming availability and more data there and think it'll be of great business great benefit to us.
Your second part of your question was about telehealth and sort of why we see a new normal. So we continue to see positive momentum and <unk> care and our marketplace. When it comes to both consumer demand and visits.
We're really we're also really excited about cross selling between our telehealth offering and between our prescription related offerings and the prescription and transactions and subscriptions. This is like getting even better as we've rebranded hey, Doctor Davita Rx care, we're unifying the experience across the platforms.
And so we're continuing to make these product investments in telehealth create and excellent user experience for our consumers, helping to get affordable doctor visits get their prescribed medication all having it.
Totally integrated.
And also telehealth has provided this extra entry point from a platform that lets us be at the consumer side across a broader set of and health care journey and.
And we believe as you asked that there is some permanent and shift to telehealth. So we want to be there for them across consumers, but.
For us this is all incremental and incremental ability to cross sell people and as we cross sell we provide these are users with a better consumer value proposition for them and we increased the LTV and we're seeing great success.
And in doing that.
Really appreciate the question.
Yes.
Yeah.
Thank you. Our next question will come from Sean Dodge with RBC capital. Please go ahead.
Thanks, and good afternoon.
Maybe going back to the Max you exited the quarter on a much steeper trajectory than it sounds like you began Carsten you said $6 1 million in March.
And you pointed out some of the impacts things like days and the months can have on that calculation, but if we think about that that March number is that a good jumping off point for kind of how to think about the second quarter or are there some seasonal aspects of nuances to march that make that unfair to kind of project and.
April and May and June.
Hi, Sean and thanks for the Great question and this is Carsten first of all I think it is a good jumping off point and so far as.
The only thing that's really unique about March is that it has more days as we've talked about and the specifics of the Mac calculation.
In general, though we have begun to see volume increase from Q2 with the vaccine now more widely available and that's why we continue to guide to over 40% Y O Y growth at the midpoint for the second quarter and our full year forecast is also much faster than our first quarters year over year.
Growth was we assume that doctor visits return to a more normal pre COVID-19 level and the second half of the year and we believe our recovery assumptions will materialize, because we expect to see the backlog of and diagnose conditions and $1 1 billion and Trevor talked about a moment ago. According to a <unk> start to clear or at least stop increasing which is based.
Clean up and the second half of 2021, and we think thats going to drive up new therapy starts. So the headwinds that we view as becoming tail wins as the year progresses and consumers interact with the health care system, where regulatory regularly and catch up on the year of delayed care and they faced.
Okay, great. Thank you.
Yeah, the only thing and I'll just add to that is.
There is also the shift that Carter mentioned earlier around other revenue where other revenue has is growing at this extreme you now at a very triple digit rate. So that is also a portion of that revenue.
Yeah.
Got it okay. Thanks again.
Thank you.
Thank you. Our next question will come from Stephanie Davis with STB Mary. Please go ahead.
And thank you for taking my question.
First of all I have and about our Xa variances and you guys give me a little bit closer to book.
Jackson can.
Can you tell us more about the capability.
Rob.
Moving on.
And the impact that could have says that if you are expanding and building.
And potential.
Also I was hoping to hear more about your philosophy when you acquired them.
Like for like assets and if you plan on keeping the brand and the same or eventually volume the brand and the App and did the the daughter and good Rx umbrella.
Thank you very much for the question Stephanie.
So we have you know we acquired <unk> favor on April 30th for $50 million and cash.
<unk> share as our mission of helping Americans get the health care, they need price they can afford and passionate about making health care more convenient and accessible and affordable.
<unk> acquisition allows us to extend our reach and prescription transactions by adding a small consumer base and a brand that's known and resonates with a subset of consumers.
A company of a talented team and knows the prescription and transaction space well, we think there'll be highly complementary to <unk>, we do to your sort of latter part of the question, we intend to keep the brand and believe there are some.
Marketing channels and such the day abuse, there that are potentially things that will be helpful. Broadly for <unk>. We're excited to welcome the <unk> team to get our acts relative to rubber filled any change would be immaterial.
Sure.
We went there.
Businesses is relatively small here.
Got it.
Say roundness and speaking to.
Philosophy I think it varies we've had a series of acquisitions, we've done all of which have been quite successful whether we keep the brand keep and integrate the teams is pretty specific to the two.
To the.
The transaction itself and you know and what work best and in this case will keep the brand.
And as separate but we will integrate sort of team. Since these are really really complementary but it varies in different cases.
That's very helpful and if I could sneak in one quick follow up Sir and vaccines.
Because it was such a tailwind to traffic over the task order and I was hoping to hear a little more and that the halo effect and how do you think.
And some of that traffic and true max or or subscription users or something else.
Thank you.
I'll speak to that.
So we served approximately 7 million consumers and the context of this $5 7 million Max and the million subscriptions and represent about a $1 4 million consumers and we're super excited about that growth.
When we look at the vaccine guide, you know, which Doug spoke to a bit but provided this amazing vaccine information and it did drive significant traffic to the platform and which increased and awareness of Davita Rx brand. It was a key driver of that increase and visitor count to almost $20 million, but not all of those visitors will immediately become max or subs.
<unk>. This is just the beginning of our relationship with them. So we definitely do you know do care about that halo of getting people to know about our solutions and then.
Interacting with them over time, so there could be a lag between an increase and visitor count our web traffic and app downloads and that actual conversion to a Mac and subscriber or another type of user or revenue on our platform and our goal is really not to get from visitor conversion and as soon as possible. Our goal is to provide value and build relationships. So that the consumers choose to you.
And good Rx over the long run when their need arises.
Everybody needs to fill a prescription right now or see a doctor in a given time, but where we can help consumers with information and resources and be at their side, even before they have a specific medical need we believe they'll choose <unk>. When he was there. So we're super excited about.
And we were able to deliver that service sort of and a time of need for Americans and do I believe such a good job of it and just like the the long term benefits and provides us.
Thank you. Thank you very much for the question.
Thank you. Our next question will come from Charles <unk> with.
And with Cowen. Please go ahead.
Yeah. Thanks for taking the question.
Maybe for Carsten.
Helped a little bit I think to Sean's question, you talked about a jumping off point from Max at 6.1 million and clearly from the Mac number you reported.
Kind of 7% up sequentially, if we think about the 20% in the revenue guide kind of implied per second quarter would suggest a like $139 million in transaction revenue that's up about 4%. So there can you help us kind of conducted two because I guess it.
Gets back to your comments.
About this backlog of sort of.
And diagnosed visits that have yet to occur.
It sounds like you're really not expecting much of that yet and the second quarter.
But as we think about the back half of the year how much of that is do you think is really recognizable and in other words.
Given.
And this business.
And I would assume there's no assumption that.
You know some of that will just never be recoverable because just the capacity of our health care system in general.
But if you could help us kind of connect how to think about those pieces.
As we think of our model because it seems like it would suggest we're having either a lower revenue.
Per Mac or some other dynamic is happening thanks.
Thanks, Charles really appreciate the question first of all.
As we've been expecting we began to see volume increases in Q2, even as the vaccines become more prevalent and widely available and that's one of the reasons, we're guiding to a 40% Y O Y growth at the midpoint or over 40% Y O Y growth at the midpoint and for the for the second quarter.
With respect to our full year forecast reduce whom doctor visits return to more and more normal pre COVID-19 levels and the second half of the year and we're seeing indicators of that already effectively.
To your question on.
Prescription transactions revenue per Mac prescriptions transaction and revenue per Mac is actually up a little bit.
Versus the prior quarter and total revenue per Max of course up quite a bit because our other net revenue is growing so quickly.
Over 150% so both of those numbers are extremely solid at this point.
Okay.
Thank you. Our next question will come from Justin Post with Bank of America. Please go ahead.
Great I think I'll come at it a little bit per e-commerce angle.
And just wondering if you've seen any behavior change with mail order and anything there that could be affecting your business or behavior change with that respect and then of course, there has been some concern on Amazon.
And and they're kind of latest announcements on new new features maybe just remind us of your competitive moats and and how you're thinking about that thank you.
Yeah. Thank you Justin for the question.
So I'll maybe speak to these together because I think they they sort of linked together Amazon acquired pill pack and 2018 and had been trying to grow our pharmacy delivery business.
On third party data they have not been successful.
Mail order prescriptions, only make up about 5% of cell count and the U S. Even through COVID-19 Mail has remained a small piece of overall volume and is now actually starting to decrease as COVID-19 eases eases.
Third party data indicates that Amazon pharmacy is not gaining momentum and that their volume remains incredibly small.
Amazon also to your sort of second part of your question. They partnered with inside Rx and November and that is how they're showing some retail prices that they called <unk>. We also partner with inside Rx along with a much broader set of market participants as we said in the past we believe the primary <unk> card was launched to enable Amazon pharmacy to display third party cash price.
And is not because they actually are trying to send consumers away from Amazon to competing retailers fill their prescriptions, which is against sort of the fundamental fundamental business model and you know our.
Our view has not changed.
And our review of Amazon sort of price comparison tools. We believe it's another attempt to lead generation from now and in this time since November from what we've seen and third party survey data and heard many industry participants we've observed almost no usage primarily.
At retail so we do not believe Amazon has.
Mail these dynamics have impacted our results. It is also has not impacted our views of our prospects.
In addition.
<unk> is cheaper at mail about 90% of the time and offers a lower price at retail almost 100 per cent of the time based on our internal research.
And have you also remember that 70% of consumers still don't know prescription prices can vary significantly across pharmacies.
And so if awareness of this topic increases we believe we will only benefit.
So I hope that.
And that's a little bit helpful and just wonder where mail has gone overall and speaking to you.
And how a little maybe Amazon has affected us into the market.
Great. Thanks, I appreciate it.
Thank you.
Thank you. Our next question will come from John Ransom with Raymond James. Please go ahead.
Yes, it's tough to deepen our call and I'll be clever.
And I'm gonna to be clever hopefully and.
You guys will approve of this.
So of course, and as we think about the other.
Other revenue growing faster than your traditional generic revenue.
How do we think about the long term effect on gross margin EBITDA margin et cetera.
Sure. Thanks, John for the good question and as you think about other revenue and I think.
And that other revenue specifically has two impacts one day there.
And office directly when increasing and when do increase and gross margin I think the dominant one right now is the extraordinarily rapid growth of our subscriptions and our manufacturer solutions offerings.
Offerings in particular are associated with very little cost of sales and.
And the case of manufacturer solutions virtually none and since we already have the platform in place and we already have almost 20 million visitors coming to the platform each month to benefit from all of those manufacturers solutions offerings. So I think on a net basis, while you do see the impact of telehealth impacting cost of sales a little bit increasing it.
And thats largely ameliorated by the by the effects of the very fast growing manufacturer solutions and subscriptions line. So I think from our perspective, we don't see gross margin moving significantly we see the trajectory that we showcased historically basically potentially continuing and roughly the same.
For them going forward.
Okay.
And then my other question is as we think about.
Gold prices I mean there.
Roughly half of your kind of best price.
So you have the subscription revenue and then you have basically 50%.
Far as we can tell average off your normal transactions. So how do you think about the value of a <unk>.
Subscription and customer either through Kroger or through and you're just gold program versus somebody pops, and and pay the price and it's roughly 100% higher on a kind of apples to apples basis.
Yeah.
I'm not sure.
Those are the the.
The price differences between them, but what I would what I would say is that we're really excited about the growth of <unk> gold, we're able to offer consumers more value.
We do receive higher lifetime value from those customers and it drives better revenue predictability for us we're nearing a million subscription plans I think we hadn't spoken before about sort of the theater represent more than one people more than one person because of.
The family plans have multiple individuals. So that's almost one 5 million members. So we are together with our $5 7 million Max we're serving approximately 7 million Americans with our prescription related offerings and we're excited to continue rolling out to those gold members more and more services.
That make that and even more compelling offering just like we've been doing over the last several quarters.
Yeah.
Really appreciate the question.
Yeah.
Thank you and our next question will come from Jelen dressing with credit Suisse. Please go ahead.
Yes, Thank you and Hello, everyone up putting up on the previous.
Question on Amazon and.
Amazon and how are you finding that pharmacies and your baby and partners are willing to work more closely with you in light of Amazon's positioning and and what capacity would that show up and you maybe I'll just give you a better pricing I assume you already have some of the best price us though.
Thanks Andre for the question Yeah.
Book too.
No.
We based on sort of the third party data and surveys.
We've observed almost no usage of.
The primary racks at retail and on the Mayo and third party data suggests it's very small portion of any mail volume. So you.
It's not necessarily.
Causing and any acute impact there that people might care might might drive.
Think as time passes people concern about Amazon has only decreased.
I would say, though our relationships with pharmacy as you know we continue to work even more closely with pharmacy partners and Pbms and the major pharmacies.
Who are primary partners as well as sort of grocers and smaller chains, we're working on programs with all of them to innovate and improve sort of various offerings. So one way that does come through is improved pricing, which definitely occurs and specific cases I sort of spoke to just that one stat on pricing relative to that offering.
We want to be sort of always the best price per consumer we care about sort of sustainably and just allowing consumers and across the board to get access to affordable convenient prescriptions without any of that complexity as they might otherwise have to face. So we've seen improvements and contracting pricing.
And you know and discussions to add.
You know other functionality other integrations, so lots of lots of opportunities and other Carson and sort of add to that pay day lenders Carsten and I think the one other thing I'd add is as you alluded to sort of consumer pricing I think and the question is well of us versus Amazon and on mail.
90% plus percentage of the time.
Our pricing is better than Amazon's. According to our data and just regular retail we're better price to almost 100% and that time, so no one's been able to touch us in terms of us being able to do exactly what Trevor said, which is offer the best price virtually all the time.
Okay, and just one quick clarification on Arctic stable price.
That's all I can say, what I and godaddy, both followed and multimedia model what is the overlap between European partners.
Sure. Thank you.
Yes, so there are.
There are some additional PV and partners as well as some new PV and partners. However.
In general we've continued to.
And Pbms improved contracts and you know all of those dynamics have stayed stayed the same and we're in an excellent position.
Thank you very much.
Ladies and gentlemen, this concludes today's.
Question and answer session as well as today's conference call. Thank you for your participation you may now disconnect and have a wonderful day.
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