Q2 2022 Goodrx Holdings Inc Earnings Call

August 8, 2022

The conference will begin shortly to raise your hand.

[music].

Yeah.

Ladies and gentlemen, thank you for standing by and welcome to the good Rx second quarter 2022 earnings call. As a reminder, today's conference call is being recorded I would now like to introduce your host for today's call Whitney Natal Rowe Vice President of Investor Relations.

You may begin.

Thank you operator, good afternoon, everyone and welcome to Codexis earnings Conference call for the second quarter of 2022.

Joining me today are Doug Hirsch and Trevor got deck, our cofounder and co Chief Executive Officer, and cost environment, 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 fact should be considered forward looking statements, including statements regarding management's plan strategies goals and objectives, our market opportunity our anticipated financial performance the impact of the grocer issue on our business and the expected impact of COVID-19 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 Dr.

Factors discussed in the risk factors section of our annual report on Form 10-K for the year ended December 31, 2021 as updated by our quarterly report on Form 10-Q for the quarter ended June 32022, 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.

They are reconciled to the nearest GAAP metric in the company's shareholder letter, which can be found on the overview page of our Investor Relations website at Investor <unk>.

Dot com.

Also like to remind everyone that a replay of this call will become available that shortly as well with that I will turn it over to Doug.

Good afternoon, and thank you for joining us.

Today, we would like to share our perspective on our recent performance and actions, we're taking to strengthen the business as we navigate the headwinds we're facing.

We are disappointed with our performance this year and I suspect you feel the same way.

We anticipated both higher growth and stronger margins and that we would be helping more Americans get the health care they need at a price they can afford.

On our fourth quarter earnings call, we reset expectations, because our historical cohorts from the Covid period contributed less than we expected.

Then our prescription transactions offering was impacted by the grocer issue, we discussed on our first quarter earnings call.

We did not expect to be in this position I can say that Trevor and I as both founders and significant shareholders have no higher priority than getting <unk> back on track.

Over the past several months, we have significantly strengthened our leadership team and embarked on a top to bottom review of our business our products and our relationships with key partners to ensure that we are prepared for the future.

We will also be doubling down in our engagement efforts with consumers medical professionals and other constituents that make up our business.

We are amazingly devoted users and close relationships with America's healthcare professionals as we've previously shared our NPS with both consumers and providers is a remarkable 90.

We had the best known brands in our space with significant scale, we consistently have great cash conversion and high cash flow from operations.

And we've proven our team's ability to enter adjacent markets as exemplified by the trajectory of our pharma manufacturer solutions offering.

We want you to know that we as an executive team are fully focused on returning to the level of performance you've seen from us in the past.

Finally, I want to highlight that the grocery issue we discussed on our first quarter earnings call was very recently addressed as communication is rolled out to the grocery chain pharmacy, we expect good Rx discounts to be consistently welcomed at the point of sale.

While we recognize that our year to date performance has been below expectations. We are aggressively working to reverse that reality and evaluating every aspect of our business where.

We're taking actions to better prioritize spending and investments with a focus on enhancing both growth and margin and we're confident in our ability to execute.

I'll now turn the call over to Trevor to speak about our results and plans in more detail.

Thank you Doug as Doug said, we are disappointed by our year to date performance and we're committed to driving toward higher gross margin in the future. The second quarter was particularly disappointing due to the impact of the grocers, who we discussed which was in line with the expected $30 million revenue, we estimated on our first quarter earnings call. Despite.

Despite that headwind our revenue and to a greater extent, our adjusted EBITDA came in ahead of our expectations for the quarter prescription transactions revenue subscriptions revenue in pharma manufacturer solutions revenue each performed slightly better than we anticipated preschool.

Subscription and transaction revenue decreased 7% year over year due to the grocery issue.

The second quarter seeing approximately 20% of the weekly volume we process Judith grocer before the issue began in March and have seen subsequent continued declines per quarter and we.

We were effective at redirecting new users during the respective periods on our retailers' new user numbers in the second quarter were close to prior period levels.

As Doug mentioned, the grocer issue has been addressed we work collaboratively with the grocer over the last few months to address this situation in a way that allows good rocks and the grocer to jointly serve consumers in a way that helps consumers and also satisfying for grocers needs. We are pleased that our consumers can once again enjoying the prescription access and affordability benefits of goodwill at the grille.

We value as a partner Carsten.

Carsten will provide more detail on our second quarter revenue impact and the expected third quarter revenue impact.

During the second quarter. We also took actions to strengthen our prescription transactions offering and minimize the potential for disruptions going forward.

Addition to ongoing conversations with Pbms, we work with as well as the growths are discussed we also proactively engaged with many retail pharmacies to ensure broader marketplace stability.

<unk> been meeting with the pharmacies that represent the vast majority of our volume.

<unk> pharmacy is unique challenges in the current macro environment and we are working proactively to collaborate on solutions to drive our mutual success and profitability. We strongly believe that our pharmacy network remained stable during the period. The gross ratio occurred volume at other retailers grew substantially in.

In fact with the exception of this particular grocer volume across other pharmacies increased more than 3% quarter over quarter.

As mentioned, our new user counts in the second quarter, driven by strong new user growth in many of the grocers competitors as consumers chose to put other pharmacies with attractive good Rx prices, largely offset the needs or decrease the grocer.

We were able to effectively move new users returning users were down significantly due to the grocers and drove the decrease in prescription in transaction revenue.

<unk> mentioned on our last earnings call returning users often go directly to the grocer without checking prices on correct, given how reliable our savings have historically been.

Behavior resulted in a decrease in overall volume of transactions from returning users and of course, returning user counts.

In addition to the actions we've taken to ensure marketplace network stability. We're also prioritizing new product enhancements when.

When we founded <unk>, we recognized that building trust with consumers with key so we created a user experience. There was this frictionless and simple to use as possible.

<unk> good access to the Dart platform and find significant savings without creating account today, we are focused on developing new services and incentives for users to register with <unk>. So that we can increase our touch points and play a more active role in all aspects of their care.

Friction for the acquisition and price search funnel, almost likely negatively impact conversion macro than revenue, which carsten who will speak to in guidance.

However, we believe the benefits of deeper relationships with our consumers will allow us to help them better navigate their health care journey with even more compelling value proposition and user experience. We also believe that allowing users to provide us more information, we'll increase the LTV of each user in prescription transactions and other areas of the business over time as we leverage.

To create new tools and products for our users and quarters and years to come.

The diversification of our revenue continued in the second quarter with our other offerings now, making up 30% of revenue compared to approximately 5% just three years ago, primarily driven by their rapid growth.

Subscription revenue grew 82% year over year as the response from our gold subscriber base to the increase in monthly subscription fees was largely in line with our expectations the.

The momentum in our pharma manufacturer solutions offering continued during the quarter with revenue more than doubling year over year as we continued to increase penetration and deliver high rois from manufacturers and brands, we work with our distinct ability to reach both consumers and providers continue to be recognized by manufacturers as evidenced by the strong growth.

We expect continued year over year growth is more pharma AD spend shift to digital and pharma manufacturers continue to recognize the attractive return on their marketing spend as they leverage our broad provider and consumer audiences.

Our second quarter acquisition of vital care pharmacy services platform. It gives us valuable capabilities to facilitate the brand vacation prescription process from start to finish.

Given that our innovative product and enhances our pharma focused capabilities.

We believe vital care increases our strength and differentiation, particularly as it relates to the access element of the medication awareness access and adherence spectrum, which is a key focus for manufacturers to drive medication volume and revenue.

We recently announced a strategic initiative with Mayne pharma to deliver an enhanced direct to consumer campaign.

Awareness of next tell us they are novel contraceptive expand access to birth control by combining our extensive reach across consumer and health care providers with Mayne pharma is novel contraceptive. This campaign aims to create broader awareness and access to this branded contraceptive and other available birth control options. We will also build awareness among health.

Care providers.

This exciting relationship with Mayne pharma demonstrates the tremendous value we can deliver a scaled platform for both patients and HCP is engaged with us at the same stage with patients health care journey.

Even with the rapid growth of our pharma manufacturer solutions offering our revenue has penetrated less than 1% of the $30 billion pharma manufacturer solutions can we expect growth to be driven by more relationships with more pharma manufacturers more penetration of their brands and increasing the number of solutions each brand deploying with US we are also adding.

More solutions to our consumer and provider offering and continuing to sell into the HCP opportunity with good Rx for providers.

Good luck for providers created more customized experience equips providers with the tools they need to support their patients throughout their health care journey with over 825000 prescribers using <unk> June of 2021, and more than 300000, Hcp's, who have opted into the good or extra provider mode. So far we believe there is an enormous opportunity for <unk>.

To meet providers unique needs with innovative solutions, while helping them achieve better patient outcomes with our incredible often right to a good extra provider's platform. We believe we are on the path to becoming one of the largest provider platforms in the U S.

With a combination of good Rx for providers and our consumer offerings, we have the opportunity to deliver a truly unparalleled digital health care platform that enables us our partners physicians and manufacturers to educate and serve providers and patients in a coordinated fashion.

Before I close I'd also like to talk about margins and cost structure, we've historically combined high growth and high profitability.

We are committed to increasing book growth rate and margins from today's levels. We're taking a hard look at all of our costs and expenses and re prioritizing where and how much we spend across the business and all of our offerings. This is one of the principal focuses of Raj Berry, our recently hired CFO and we have begun to take actions to improve our cost structure.

Can you to do so into the fourth quarter. Despite the grocer issue, we delivered revenue growth margin and strong operating cash flow in the second quarter.

Fueled by the continued commitment of our team and our collective dedication to our mission with the current macroeconomic environment and the pressure, it's putting on consumers to make deliberate choices about how to prioritize their spending we recognize that helping Americans get the health care they need at a price. They can afford has never been more relevant the opportunity for <unk> is clear and we tend to capture it.

With that I'll turn it over to Carsten to discuss our financial results and guidance.

Thank you Trevor revenue for the quarter grew 9% year over year to $191 8 million exceeding.

Exceeding the guidance we provided in May.

Prescription transactions revenue decreased 7% year over year to $134 $4 million due to the growth ratio, we disclosed in the prior quarter and which Trevor discussed earlier the estimated impact of the issue on our prescription transactions revenue in the second quarter was largely in line with the $30 million.

<unk> on our last earnings call and drove a decrease in both Max.

Which decreased 3% year over year to $5 8 million and PTR per Mac, which decreased 4% as.

As consumers at the grocer has historically had more transactions per month with a slightly higher fee per transaction.

I will discuss the expected future impact of the growth ratio in more detail on the guidance section, but in the meantime, I want to point out that we estimate the issue had a mid teens percentage impact on our revenue growth.

Market wise when you look at trends in prescriptions in the U S. The second quarter is back to pre COVID-19 levels on most prescription metrics like total generic volume new prescriptions and new therapy starts, which is a positive development, we anticipated and baked into our guidance.

Turning to subscriptions subscriptions revenue continued to grow rapidly up 82% year over year to $26 million. We ended the quarter with over $1 1 billion subscription plans and $1 6 million members benefiting from our subscription offerings since our family's subscription generally serve multiple consumers.

The increase in subscription revenue was driven primarily by the one time increase in monthly subscription fees, we charge for <unk> Gold program and also an 8% year over year increase in subscription plan.

As a reminder, in the first quarter of 2022, we increased fees for new Gold's subscribers for the first time in our history from $5 99, and 999 per individual and family to 999 and $19 99, respectively. In the second quarter, we increased fees to our existing gold subscriber base as well.

Which catalyzed the largely price driven revenue increase.

Subscription plans were down modestly quarter over quarter as expected and as we discussed during our fourth quarter earnings call. When we set expectations for a one time higher than usual churn level in the second quarter due to a onetime increase in monthly fees.

Overall, we are pleased with the response of our subscriber base to the increase in gold subscription fees, which was in line with our expectations.

Pharma manufacturer solutions revenue grew 102% year over year to $26 $6 million as we continue to work with more pharma manufacturers and offer more solutions and deliver superior rois.

With which we work.

This is the first quarter that includes revenue related to Vida care, which contributed approximately $1 million.

Other revenue grew 13% year over year to $4 9 million driven by the growth in <unk> care.

Moving down the P&L.

Cost of revenue was $18 million or nine 4% of revenue compared to $11 1 million from six 3% of revenue in Q2 'twenty one the increase in cost of revenue as a percentage of revenue was driven by the growth ratio described earlier, which materially impacted our prescription transactions revenue.

Well as the acquisition of vital care, which has a higher cost of revenue operational nature of its business.

Product development and technology expenses were $35 4 million.

Compared to $29 $6 million in the comparable period last year. This increase was primarily due to continued investments in the team and product excluding stock based compensation expense and other items adjusted product development technology expense.

13% of revenue compared to 11, 3% of revenue and <unk> 21.

The grocery as you described earlier contributed to the increase in adjusted product development and technology expense as a percentage of revenue.

Adjusted product development and technology expenses were modestly lower quarter over quarter, due primarily to a higher capitalization rate of certain qualified costs related to the development of internal use software.

Sales and marketing expenses were $94 $3 million compared to $88 4 million and <unk> 21, as we continued to invest in our incredible team with the goal of increasing our consumer and pharma manufacturer base and building. The <unk> brand. This was partially offset by lower advertising and.

<unk> spend which decreased $4 $8 million year over year.

Excluding stock based compensation expense and other items adjusted sales and marketing expense was largely flat quarter over quarter in absolute dollars and decreased year over year as a percentage of revenue, making up 45, 3% of our revenue and <unk> 22, compared to 46, 7% last year.

General and administrative expenses were $34 7 million.

Compared to $39 6 million and <unk> 21, the decrease was due primarily to stock based compensation expense relating to the nonrecurring co CEO org made in connection with our IPO, which was approximately $12 $1 million higher than the comparable period last year, excluding these and other <unk>.

Estimates adjusted G&A as a percentage of revenue were seven 7% compared to 5% and <unk> 21. The grocery issue described earlier contributed to the increase in adjusted general and administrative expense as a percentage of revenue.

Net loss was $1 4 million compared to net income of $31 $1 million in the second quarter of last year net loss was impacted by stock based compensation expense of $31 6 million $11 9 million of which related to the nonrecurring <unk> Awards made at the time of the IPO.

The year over year decrease was primarily due to the growth ratio, we discussed as well as a decrease in our tax benefit which was $37 $3 million last year compared to on the $8 $7 million this year.

This was partially offset by a decrease in stock based compensation expense.

In addition to these drivers the acquisition of <unk> also had a negative impact on our second quarter 2022, net loss, but to a lesser extent.

Moving on adjusted net income decreased 22% year over year to $27 2 million.

Adjusted EBITDA decreased 13% year over year to $47 2 million.

Adjusted EBITDA margin decreased year over year, but continued to be a strong 24, 6%.

The decrease in adjusted net income adjusted EBITDA and adjusted EBITDA margin were all driven primarily by the growth ratio.

We're able to keep adjusted sales and marketing largely flat quarter over quarter in absolute dollars and decrease the proportionate amount of revenue on a year over year basis.

<unk> formed a larger percent of revenue compared to the first quarter. This year and some other more fixed costs and expenses formed a larger percentage of revenue as well due to the decrease in prescription transactions revenue.

Even with the grocery or impact on our business, we are still able to generate an adjusted EBITDA margin of almost 25% and continued to generate strong cash flow with net cash from operating activities of $51 million for the quarter.

Moving onto guidance.

We will not be providing full year expectations at this time as the full year impact of the growth ratio continues to be difficult to estimate because there are several variables, including among others.

Tumor response to pricing and returning user levels that has to be determined.

Given we only have less than a week of empirical data on utilization and a more normalized state with the growth. There we do not yet have enough data to reliably estimate the impact.

For the third quarter, we expect total revenue of approximately $185 million.

This assumes the loss in prescription transaction revenue related to the growth ratio expenditure of approximately $35 million to $40 million. The impact is expected to be greater compared to a $30 million impact and <unk> 22, as the impact of gradual as the quarter developed and was not as severe in April .

As it was in June and is there a plan for the year assumes sequential growth at the grocer is.

As Trevor mentioned, we exited the second quarter at 20% of weekly volumes at the grocer in July that number is already lower in the mid teens.

We believe the benefit to third quarter revenue from the grocer issue being addressed will be immaterial in other words, we do not expect a meaningful volume lift relative to where we exited the second quarter for a few reasons first the issue is addressed less than a week ago and it takes time for changes in communication.

To reach the pharmacy in store level second it is unclear how many good or as consumers switch to their insurance or another form of savings at the grocery during the second quarter will return to using <unk>.

And if they do return how quickly that will happen.

Finally pricing has changed and will be higher in many cases.

For all these reasons, we believe that the impact or benefit on Q3, and Q4 revenue and possibly for a period of time after that will be minimal.

In addition to the impact of the grocery issue, we expect the consumer engagement efforts Trevor discussed earlier to further impact prescription transactions revenue by approximately $5 million in the third quarter and approximately twice that in the fourth quarter due to a higher friction in the funnel as Trevor said, we believe that these efforts will allow us to create.

Tighter relationships with our consumers and deliver more value to them in the future. We also believe it will allow us to generate higher LTV from our users across not only prescription transactions, but also our other existing offerings as well as services and products that we will build or buy in the future the.

The impact expands from the third to fourth quarter. Since we began this effort in the middle of the third quarter.

For these reasons as well as a modest decrease and PTR per Mac, we're anticipating due to continued volume mix shift, we expect a quarter over quarter prescription transactions and a decrease of approximately $10 million in the third quarter.

We expect subscription revenue will be moderately lower by $1 million to $2 million in the third quarter compared to the second quarter due to the late second quarter churn from our existing user base as we rolled out fee increases to the entire subscriber base. This is in line with our expectations from earlier in the year.

On the fourth quarter earnings call, we discussed our strategic repositioning of gold our subscription program and the fact that we're planning to focus.

More specific audience that we believe funds more value from gold members with chronic conditions multiple recurring prescriptions and other long term needs.

As part of this repositioning we undertook a one time price increase for new gold subscribers in January to reflect all of the value. We've added to the program in 2021 and create a clear differentiation between our offerings.

In the second quarter, we rolled out increased prices to our existing subscriber base.

When we announced the gold price increase on our Q4 earnings call. We shared that we expected a onetime churn impact when we raise prices to our existing subscriber base in the second quarter.

As we anticipated we're entering the third quarter with a slightly smaller gold subscriber base due to churn.

As a reminder, this strategic repositioning of this offering focuses on a narrower audience, which may affect future growth rates.

We will continue to work hard to ensure that our consumers find the offering that makes the most sense for them and best suits their needs.

We expect pharma manufacturer solutions to grow approximately 60% to 90% year over year.

We're providing a fairly wide range, both because individual deals can be quite large and delivering on pre or post quarter end can swing revenue materially. We've also begun to take advantage of opportunities to earn revenue based on our performance and the timing when we drive consumer or HCP actions can also create some fluctuation.

Yeah.

Finally, we expect other revenue to be largely flat year over year.

We realize that our total revenue guidance for the third quarter reflects a year over year declining revenue.

Primary reason for that is the loss of the majority of revenues from the grocer, which made up almost a quarter of our prescription transactions revenue in the comparable period last year.

We currently anticipate the growth ratio and our registration efforts will negatively impact our year on year growth rates by more than 20% in the third quarter.

Turning to adjusted EBITDA, We expect third quarter adjusted EBITDA margin of approximately 20%.

As mentioned in the second quarter are able to keep adjusted sales and marketing largely flat in absolute dollars quarter over quarter and decreased the proportionate made of revenue on a year over year basis, but it's still formed a larger percentage of revenue compared to the first quarter of this year and some of our other more fixed cost and expense.

<unk> formed a larger percentage of revenue due to the decrease in prescription transaction revenue because of the grocer issue.

Even with this issue we are still able to generate an adjusted EBITDA margin of almost 25%.

Our 20% adjusted EBITDA margin guidance is lower than our historical margin profile and lower than our second quarter results, primarily driven by the revenue compression due to the growth ratio an additional factor is vital care, which we indicated at the time of acquisition would have a low single digit drag on adjusted EBITDA.

<unk> historically been in a negative adjusted EBITDA position, which we expect to be the case for a few more quarters, we are committed to ensuring our adjusted EBITDA in future quarters increases relative to this quarters.

I also want to reemphasize, our commitment to increasing growth rates are improving margins all of us on the leadership team are focused on these goals and we're reevaluating spending to prioritize growing adjusted EBITDA as a percentage of revenue.

That until scrutinizing all of our costs and expenses with the objective of greater efficiency today, and greater adjusted EBITDA flow through as we grow we've historically been able to deliver a strong combination of growth and margin and we want to make sure that continues to be the case in the future.

We're confident in our ability to continue to drive our mission to help Americans get the health care they need at a price they can afford and we believe the current macroeconomic environment that increases many people's need to trade off expenses as inflation rises.

Everything we do more and more relevant for all Americans.

With that I'll now turn it over to the operator for Q&A.

As a reminder to ask a question you will need to press star one on your telephone.

Sure.

Are you willing to press star one one on your telephone.

We ask that you please limit yourself to one question.

Our first question comes from the line of Glen Santangelo.

<unk> from Jefferies.

Two quick ones.

And then we're supposed to ask one so I'll be quick with respect to revenue growth and the outlook for that do you expect to be at some normalized rate in the fourth quarter. So that when you exited Q4 will return back to that sort of mid 20% sort of growth targets that you have as you enter 2023, and then secondly on the margin side.

Margins have come down substantially year after year here and Trevor to your comments, you say youre focused on it but I understand the grocer issue is a big part of it but now it sounds like you're doubling down in consumer engagement and Youre talking about a modest decrease in PTR per Mac, you highlighted product development Tech.

In the press release is this the trough in the margin here in the second half of <unk>.

2022, and how should we think about the outlook for margins as we as we also move into 2023.

Thank you very much for the question I'm Gonna have cartoon Hey.

Hey, Glenn of Carson here, let me take the two questions related to <unk> and to margins generally over overtime I think first of all with respect to revenue <unk> into four here, we didn't guide for Q, yet again, as we said in our prepared remarks, mostly because the impact.

<unk> of this year remains.

Somewhat.

Challenging to predict is probably the best way of putting it especially since addressing the issue with this particular grocer only happened recently so for that reason, we're not actually guiding for acute today. However, I think we have indicated that from the <unk> level.

<unk> of impact, which are around $30 million and represented about 70% 75% drop.

Relative to your expected revenue.

Presented about 70% to 75% drop.

Relative to your expected revenue of the grocer into three Q expanded somewhat because of the effect has been there for the entirety of the quarter. So we expect a larger impact we talked about.

35 to <unk> $35 million to $40 million, and we expect that impact to understand.

Not only into the third quarter, but potentially into the fourth quarter and beyond as well the reason for that.

Specifically to the fact that number one.

And again resolution necessity. So we don't have that much empirical data on the <unk>.

Future looking impact of addressing the issue.

It's unclear how many good Rx users switch to another form of payment and perhaps using their insurance and Luc <unk> given about 75% of our users have insurance coverage.

We will return and how quickly that return to using <unk>.

Thirdly.

In fact, our pricing.

To some degree and in many cases be higher at the grocery question as well. So I think our view is that we expect the impact to continue beyond just the third quarter with respect to the second question you had on margins.

We're taking extremely hard look at our cost structure right now so from that perspective, we continue to believe that especially in the longer term our expectations around margin haven't seen we've talked about the fact that we aspire to believe we can return to becoming a rule of 40 company and I think what's changed is that.

This one time step down in revenue that we've experienced hasn't necessarily impacted growth trajectory at all but it impacts the step down right now with the grocer that may extend the period, a little bit it takes for us to get to those higher combined growth plus margin level, sorry for the long answer but wanted to make sure I hurtful.

Okay. Thank you.

Yes.

Thank you. Our next question comes from the line of Sandy Draper from Guggenheim Partners.

Alright, thanks, so much.

I may just trying to follow up on that line of questioning.

Certainly different angle.

Totally appreciate that.

Follow up response to Glenn's question that was very helpful. Maybe asked another way.

What could happen that would make the impact the 30% to 40 35 to 40 million you're expecting in <unk>.

In the third quarter is there anything that can happen that can make it bigger I get now why the 30 in the second quarter stepping down the 35 to 40, but I'm trying to see I don't we don't know clearly when it's getting better and I can appreciate that I'm just trying to understand would there be.

Anything that would cause it to decline further.

Because it just doesn't seem like at this point it for further step down it seems like the uncertainty is just when and if it starts coming back.

Sure I can grab this one two if thats the case Andrea's Carsten speaking here.

Hesitated.

I'd say nothing could happen that could cause a drop to be bigger.

But I think at the same time with respect to the issue in question speaking more narrowly about that.

We are extrapolating from the levels.

Usage that we see today, hence the increase from <unk>.

We talk a little bit about that.

On the scripted remarks talk a little bit about the fact that we've seen.

Further exacerbation of the issue from <unk> and given that reality.

And extrapolating from levels that were seeing now.

I don't think we're in a place where we anticipate the impact would be larger than we have talked about.

That said at the same time.

The counterbalancing issue that we do have limited empirical data right now.

And that's because.

Associated with the.

Addressing of the situation, we will likely see some changes to consumer pricing and will likely also see that impacting potentially with particular pharmacies consumers utilize <unk>.

A nice job of being able to shift demand and consumers have gone to wherever the price of their best.

That's why I've covered articulated in the scripted remarks, we've seen.

Average about a 3% growth.

Volume in other places.

I'm not sure that would be totally Dallas area, if prices increase a little more a little less than expected.

I think to answer your question in some we think we've taken.

Realistically view of it.

I think beyond the other issue outside the growths are one that we talked about a little bit on the call was that we're also focusing quite aggressively on on <unk>.

Increased engagement with consumers and that May have some final impact that we've talked about on the call that looking like it could be about $5 million of impact in <unk> and about double that in for Q.

Those two elements together are the ones that we realistically see essentially impacting us hope thats useful F&D and sorry for the long response.

Yes, no that's great. Thanks, I'll keep it to one question and jump back in the queue.

Okay.

Thank you. Our next question comes from the line of Stephanie Davis from SBB security.

Question on congrats on the resolution.

I was wondering if you could talk to us about the renegotiated prices set of growth, there and how that compared to their historical levels as well as your broader pricing base.

So with the pricing reset in a way where credit of a basketball the majority of volume if everything shakes out before.

Thank you more radical distribution of volume post resolution because their pricing is more in line with the broader base.

Thank you very much for the question.

We are happy that the grocers, who has been addressed and we're really pleased to have this more strategically aligned relationship with the grocer, who we value as a partner.

<unk>.

In regards to pricing specifically that you asked about some of them are ex prices at the grocery will now be higher for consumers. They were previously but the prices are discounted relative to what you might otherwise pay and we believe they're sustainable for all parties the consumer the grocer and good Rx pharmacies have to manage the price volume tradeoff sustainably.

And.

There is these are highly dynamic.

We know that consumers are extremely price sensitive, but they also value having the choice of pharmacy. So.

We're really pleased that they will have that access and Stephanie. This is Carson again, I'm going to jump into the <unk> as well I think one more point on pricing is that the growth of prices for most medications will now we expect likely end up being more similar in lines of prices. So at other retailer.

Based on what we saw in the second quarter when full through generally seeing pricing at either retailer new users just shifted their marketplaces work and went through their next loss right.

Found the prices.

<unk> to be quite attractive, but to your point that doesn't mean that volume shift.

Pretty much on average all of the other pharmacy and retailers picked up volume during this period the last.

Thank you. Our next question comes from the line of Michael Cherny from both Bob.

Thank you for taking the question.

Maybe along those same lines of thoughts as we think about your placement competitive environment. I. Appreciate the commentary you had about being able to shift volumes to other pharmacies and at the same time that dynamic that you mentioned at the beginning about with the impacted grocer and how.

Traditional customers just got used to still going and they are only to find out that they were.

Participating in the network and so how does that play off in terms of the dynamic.

For the individuals that went to these new grocers is it just that they changed and that's it and how does that factor in in terms of where you see that rebalancing re basing of growth going forward across your various different grocery and other pharmacy channel partners.

Thank you.

That question yet.

You talked about four new users new.

The new users.

Largely moved to other retailers when we saw the new user volumes were are quite similar to they were prior to this issue.

However, existing users often are.

Half go directly to a retailer without always checking direct first because historically.

Prices of drug do move up and down there is some relative stability. There. So that's one of the reasons, we have been very focused on engagement.

And on driving and spoke about that in the prepared remarks, because we want to make sure we can move.

Existing customers just make them learn about information.

A change in price or something else and learning about that quicker. So we can get quicker action on that existing user side into the future.

Yes.

I think adding safe drivers playing I think the reality is that as we continue to move forward through this through this.

So we're going to continue to see the benefit.

The.

Now.

Now address situation.

And with that we're going to see that we're good at.

To work with each of the individual pharmacies to continue to meet their specific needs in a manner, that's going to create a.

A more sustainable environment in the long run.

Thank you. Our next question comes from the line of Craig Hudson back from Morgan Stanley .

No a lot of the focus is on the growth there, but you did comment that more broadly the difficulty for a number of pharmacies and so just wanted to see how youre thinking about that in terms of what that means because it is the economics of the business and pricing on a more broader basis.

Sure.

Yeah.

I appreciate it.

<unk>.

We've been really proactively engaging with pharmacies.

That represent the vast majority of the volume and we strongly believe the pharmacy network is very stable.

What we've seen and to your to your to your question is that each pharmacy is facing unique challenges and in particular relative to the current macro environment changes.

That is a different.

Impacting different opportunities for each pharmacy, so we've been working proactively to collaborate on solutions to drive mutual success and profitability and sustainable economics for all the parties in our ecosystem.

As an example, many of the pharmacies in our network benefited from increased volume during this period, the grocers who occurred and they are working closely with us on additional tactics to grow volumes in the future.

But each pharmacy has different needs and we're trying to make sure we're really.

Effective in addressing that and we've just recognize the importance of working creatively to help pharmacies address unique challenges and supporting our strategic priorities and believe we are doing a much better job in trying to be.

Expeditions on that.

Yes, it's jumping in on that.

Carson again looking ahead I think what we do see the grocers you havent caused the one time step down in terms of revenues.

Also I believe that it's going to impact our growth rate in future years or it doesn't impact the future market size your opportunity and thats been part because our value proposition with pharmacies very strong we drive foot traffic and how consumers are a positive experience at the pharmacy counter and our data says that <unk> users by incremental items more than $75.

Out of the time, which is of course very attractive.

And on top of that you've seen us do a lot of work with individual pharmacy banners as well.

That we've shot together in Walgreens Rite aid, having joined our gold program deep integrations on the tech side things like the ability to book Cvs Minuteclinic appointments through to better access.

So I think again, given the volume growth we've seen.

Sigh of the particular growth question I think we're feeling like the other retailers and pharmacies.

Highlights of biotic relationship with us.

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

Thanks, I wanted to ask if you had any commentary on some of Amazon's recent moves and maybe the acquisition pending acquisition of one medical and whether that may actually create opportunities for you.

Shipper distribution opportunities for you. Thank you very much.

Yeah.

Okay.

Thank you for the question.

Amazon has been pursuing the health business for years, we have not seen a material impact on our business. We believe the recent acquisition of one medical signals an intention to move further into the employer services space and their efforts with Amazon care and we don't expect this to have any impact on.

Our business.

Yeah.

Thank you.

Our next question comes from the line of Eric Sheridan from Goldman Sachs.

If I can first just a clarifying question the new agreement with the grocer partner does that have a duration.

New agreements that we can better understand so somewhere down the road for us to get renegotiated or be renewed that we're aware of sort of the timing dynamics around.

The agreement that would be number one and number two you know moving away from the grocery you talked a lot over the last couple of earnings calls about.

A return to normal in terms of Doctor visits of prescriptions, where are we in general in terms of the overall backlog of Doctor visits and unexpected prescriptions and how you think about either leaning in and if youre seeing that improve or are elements of broader customer growth you take that could drive in the platform as we move further away from the <unk>. Thank you.

Yes.

Thank you for the question I'll have Carson, particularly.

Hey, Eric with respect to the terms of the agreement.

In terms of the agreement are confidential so I can't really go there on this call.

But we're feeling very good about the fact that the situation is addressed not just for today, but for the future as well with respect to the therapy starts and the like.

For the first time seeing now.

First time in certainly a couple of years seeing now that new therapy starts.

Are approaching levels that they're at for almost all therapies categories that they are at pre COVID-19.

When I look back at the data.

And generally seeing that the data is now converging back to sort of the 100 index.

Yes.

Previously to the Covid period, so from that perspective, we view that as generally positive.

Think what's hard for us.

Is that when we look at our own data as a growth or if you did create some noise. So that makes it a little tougher for us to see.

That's fully manifested in arcade.

Higher rate of health care utilization, we do anticipate that it could continue to turn into a tailwind of trends normalize further.

Thank you. Our next question comes from the line of Doug Anmuth from Jpmorgan.

Just back to the grocer issue I know you talked about pricing for prescriptions going up for consumers there, but just was hoping you could talk a little bit more about what it means for good Rx take rates with that pharmacy and then also on an overall basis I think you mentioned.

The modest decrease in PTR per Max going forward. Thanks.

Yeah.

Sure Hey, Doug Karson here.

Yes, I think we expect that pricing for most medications at the grocer will now be more similar to those seen at other retailers.

And that has a few implications I think one is from a.

Entries perspective, we believe the growth of our reach levels that are historically with respect to our revenue economics and economic historically this grocer had higher PCR per Mac.

Mainly because the pricing was good and Max filled more scripts.

Then they did at other retailers and the other aspect is the take rate will likely go down formulaic rate simply because as prices go up all else hold held constant that larger denominator. It means that the take rate is a function of oil fall. So I think we will see those impacts to some degree.

I think the other thing that we see potentially happening.

Mix shift continues to evolve going forward. We also have the potential that we will continue to see.

Against the third quarter and beyond some flux in PCR per Mac, and we could see another low single digit percentage sort of smaller sequential drop in the third quarter with that evolving mix shifts as well.

Thank you. Our next question comes from the line of Charles <unk> from Cowen.

Thanks for taking the question just wanted to get a little bit more.

To clarify a little bit more on the gross ratio.

If I recall the issue was the grocer was having a dispute with a number all its pbms and <unk>.

Regards to reimbursement for their discount card programs and Euro and all of this is.

The algorithms facilitate showing best price.

Members at the point of them looking for a cheaper option.

I'm trying to get a better understanding is here is that the resolution you seem to be talking a bit about an agreement you have come to with the grocer.

But isn't the issue more about them having.

<unk> resolved with other pbms or I mean is that is that what we're really talking about here is just to understand your role in terms of.

Facilitating on negotiating.

Behalf of the grocer can you explain sort of what.

I understand your role was a little bit more separate from all of this.

The impact that we were seeing last quarter and then obviously into this quarter was sort of a byproduct of sort.

On a contractual dispute between the grocer and Pbms.

Thank you for the question, we're very happy with.

About the BHG has been addressed.

And it's been addressed very recently.

The next few days communications around better acceptance, we've provided the pharmacist discounted pricing will be up on a platform and most importantly, good Rx discounts will be consistently accepted at the point of sale.

The.

There are many parties involved here, so not going to speak to sort of specifically.

The agreement between different different parties, but we're pleased with consumers to be able to enjoy the prescription access and affordability benefits of good asset growth or who we value.

As a partner.

Sure.

We are though really disappointed that this disruption occurred and we are being extremely proactive.

Book to a bit before just to ensure that all needs are being met by all of the marketplace participants that all players are sustainable economics.

And make sure that the affordable prices that helped make accessible are available as broadly as possible and so we do want to play that role of trying to be helpful, where we can and making a functioning functioning marketplace.

<unk> is the best known brand in our space, we have a large devoted consumer base. We have a large HCP base, we have millions of visitors on our platform monthly and all of that gives us the opportunity to grow and scale. The business. So we're happy to be able to do that.

<unk> and <unk>.

Proactively with all of the different marketplace participants.

Thank you. Our next question comes from the line of John Ransom from Raymond James.

Hey, good afternoon.

So just to be clear.

The growths are lets say you got all of those customers back I know, that's not going to happen, but theoretical exercise you've got all those customers back in.

In the fourth quarter.

What I'm inferring.

With that particular grocer has gone down in this renegotiation.

But I don't think you've typically said that but everything reset back to normal you got all those customers back.

What would be your pro forma take rate gross margin.

Where it was say before all this happened.

Carsten.

Hey, John It's Carsten here.

I think the question relates to your HAE.

Let's see what would be the sort of gross margin impact.

The combination of mix shift given that this growth are now not.

Over indexed anymore.

Our ecosystem and in association with the addressing of the situation.

Just to make sure I got it right is that the echo back the question, you're asking maybe said a little differently.

Turning to assume yes, because you may not be able to speak right now.

So if I did get that right.

I think the impact of both the mix shift.

And the change in pricing is what we talked about a little bit to an earlier question around.

BTR.

Mac and the impact that this had on it.

It's slightly diminished PCR per Mac again because of volumes at this grocer were higher in terms of transactions per Mac and because of the take rate impact of price going up.

Actually.

Pushing down Hey, Greg So I think on a net basis all.

All of those factors would impact gross margin to some degree.

<unk>.

Again, the differences in PJM for Mac.

At the grocery question versus other ones like we said in our prepared remarks is not that significant so the impact on gross margin would also not be that significant.

Thank you. Our next question comes from the line of George Hill from Deutsche Bank.

For taking the question I wanted to kind of delve into the EBITDA guidance.

By releasing gross for a little bit more should we think of the change in the margin profile that you guys are guiding to in Q3 aside from the very small very to care drag is largely like the change in volume at the change in margin. So basically the gross margin of the business or the EBITDA margin of the business is meaningfully lower.

Ex kind of grocer under the old terms and is there a reason to expect that it would improve to historical terms.

Historical the historical ranges at the new terms with the grocery or is that just is that is that another matter a margin profile thats attainable under the new agreement.

Hey, George Carsten here again.

So if I'm understanding the question right it's Eric.

The change and the change in margin for both <unk> and ultimately for <unk> is effectively driven by the fact that PCR prescription transactions revenue with its lower.

And that drop and PTR associated with the grocery issue in combination with that cost structure that we are focused on now ameliorated that we've kept relatively constant until now.

<unk> the margins.

If you were to add back.

Essentially the kind of revenue that the growth or had historically done.

You would find that the margins would be relatively consistent a lot more consistent with what they had been historically. So I think this issue is solely one of sort of revenue hole associated with the grocer and not more.

Allocated than that from from at least the lens that we're looking at it through and as we look forward again I think the pricing at the grocer in question is not really that material and the reason I say that is that for a period of time over the last several months.

When we werent promoting discounts as the grocer in question are new user volume to sort of seamlessly flow to other retailers pharmacies grocers et cetera, and is it sort of fluid to these other places.

We saw volumes grow in those locations.

So I think our view is that.

As long as the volume come through we're sort of <unk>.

Near agnostic and this goes to John Ransom question too as to which particular retailer comes through on the margin yes. The.

Users, who frequented the grocer in question did do more transactions on a monthly basis.

The take rates, we achieved were a little higher but that was again at the margin.

Sort of a dramatic thing is the big thing was that the growth or had a significant amount of volume with us historically and that volume has now diminished and going forward, we're not sure to what degree it's going to come back.

That rate is going to come back hopefully that distinction makes sense.

Thank you. Our next question comes from the line of Dan Behrendt.

<unk> from Wells Fargo. Your line is now open.

My questions maybe.

Maybe just to go back to I believe a comment that Trevor made in the prepared remarks I.

I think you said something along the lines of having incentives for users to register with good Rx and and that May lead to friction or acquisition or conversion of new users I'm just trying to understand the source of the friction is it that if they don't register they won't get us deeper discount as those who arent registered I'm just trying to understand.

What's going on there.

Thank you for the question Yeah, we are.

Give the opportunity for consumers to provide us more account related information and a variety of places in their user journey and they'll be doing that for the reason for a reason like you just mentioned such as a deeper discount or just for additional product features in market.

And so that just may impact our conversion funnel and the number of users in the short term, but we believe this is the right choice because over time with a more robust user experience.

And it gives us just more opportunities to assist users in their health care journey.

So by personalizing that experience more.

We let them navigate.

Health care journey better.

Potentially and hopefully increase the LTV of each user in a prescription transactions offering and it just helps us.

Other areas of our business Q.

Q, let users access those and then hopefully monetize those also.

Yes, one great example of that I just want to throw out there. We've recently launched last week a feature called my Medicine Cabinet and if you had to get our <unk> App I encourage you to try it out.

This is where we're actually allowing our consumer to track their entire.

Every medication that they take and it's about not just cost. It's also about information essentially.

Essentially side effects, the Doc name of the Doctor that refill history that pharmacy, they fell as I mentioned really robust offering for consumers that goes outside of pricing outside of the pharmacy counter and so with just a little bit of information from the consumer we can actually provide a whole slew of services that can help them everywhere from diagnosis, all the way through to care management, and ultimately keep consumers healthier and keep them on.

Medication. So this is just the tip of the iceberg in terms of what we're doing on <unk>.

<unk> and we're really really excited about the things that we can do here so.

Thank you.

Thank you. Our next question comes from the line of Steven Valiquette from Barclays. Your line is now open.

Great. Thanks for taking the question.

So this was touched on a little bit and maybe just.

Hit it again.

Unpack that reported <unk> results a little bit more.

Total company revenue of $191 million to $192 million was essentially in line with the $190 million guidance.

EBITDA.

$47 million came in about $12 million to $13 million higher than the street view up 34% to 35 million, which I feel like Thats indirectly where the company started.

Sort of guided everyone towards for the quarter when talking about operations last quarter.

The questions are at the end of the day did the full 30 million revenue impact on the grocery <unk> ultimately fall right to the bottom line from your perspective in terms of $30 million impact on EBITDA as well or where there are some other mitigating factors and then I guess secondarily one could argue the EBITDA upside in the quarter was driven primarily by just the <unk>.

Slightly better underlying prescription transaction revenue and also better subscription revenue, so I guess I'm more.

So I think we lost the tail end of your question, Steve, but I think we got we think we heard most of it.

Hopefully you can hear me, Okay, I think first of all yes.

I think our $192 million in revenue.

Yes.

Revenue.

Among other things.

Did benefit from potentially some incremental.

Volume coming through in the market generally utilization volume, which is great.

But I think the more important factors or things like that we during the quarter, we were able to take some actions that potentially allowed us to optimize around opex too. So the impact was more muted between topline and bottom line. So some of the things that we've talked about in relation to that.

Or that.

<unk> rate given how we have changed the deployment of our technology, our product development and engineering staff.

Has increased which led to.

Less of the product and tech expense hitting the bottom line and some of it being now applies the balance sheet I think the other thing we've talked about a little bit is that from an advertising perspective in particular.

Sales and marketing efficiency, which will anticipate getting more of in the quarters to come as well hopefully as we've talked about focusing on our cost structure further so from an EBITDA perspective.

We're able to harvest some benefits.

Through the quarter that we didn't necessarily expect in advance of the quarter.

Okay.

Thank you. Our next question comes from the line of Jonathan Young from Credit Suisse.

Taking my question I guess going back to the growths are kind of putting it all together.

Youre talking about a bit of a mix shift away from the closer towards the pharmacies.

The pricing at the gross won't be as attractive I guess does this kind of change the growth algorithm kind of moving forward kind of given that you did have an outsize growth component related to that grocer.

And then does that $30 million to $40 million.

It almost sounds like it won't necessarily all come back I guess kind of what's your view on those items.

Thank you, yes, we don't believe this changes the growth outlook.

We most importantly are very happy with four customers that.

Customers get the affordability benefits of good Rx and they get them broadly we want.

People to have the broadest accurate we can we've seen no decrease in demand we have.

And I think even with the current.

Environment the current.

Potentially recessionary environment and such that we see that Americans have even greater needs for getting a fee.

Portable health care than they ever have in the past. So we see the growth dynamics remaining the same and we are pleased that we have reached.

That this has been addressed.

But most of all we are being very.

Proactive we are working with.

<unk>.

With all the partners in our marketplace and trying to make sure.

Delivering on providing a sustainable marketplace for everyone and delivering on our mission for consumers and providing a.

A straw.

A strong robust.

Future growth story and the.

<unk>, yes, no I think we see several onetime step down associated with the growth. There. Obviously you saw that in <unk> and <unk> as described in the impact in <unk> and beyond as well, but the reality is we don't see this as shifting our trajectory linear growth rate. The Tam continues to be huge as Trevor.

That demand is high.

Seen shifts in volume even during the <unk> period, where we're seeing growth at all of the other retailers on average so from that perspective, I think we remain highly confident that the market that we're serving and the consumers that we're helping as well as our health care providers are going to continue to use <unk>.

<unk> and huge numbers going into the future as well.

Thank you at this time line is showing no further questions I would like to turn the call back over to Trevor Bell for closing remarks.

While our year to date performance is not what we expected at the start of 2022, we're aggressively working to change that we've historically been able to deliver a strong combination of growth and margin and we want to make sure that continues to be the case in the future. In addition to evaluating our business and re prioritizing spend where necessary we will continue to pursue innovative opportunities.

Is that both deliver on our mission and unlock growth and are working collaboratively with stakeholders across the ecosystem to drive mutual success.

I look forward to updating you on our progress in the quarters ahead, and thank you for joining us today.

This concludes today's conference call. Thank you for participating.

Okay.

The conference will begin shortly to raise Johan during Q&A you can dial one one.

[music].

Okay.

Yes.

[music].

Yes.

Sure.

[music].

Yes.

[music].

Okay.

[music].

Yes.

[music].

Yes.

Okay.

Yes.

Yeah.

[music].

Yes.

[music].

Okay.

[music].

Yes.

Okay.

Thanks.

Okay.

[music].

Okay.

Sure.

[music].

Okay.

Yes.

[music].

Yes.

[music].

Sure.

Yes.

Okay.

[music].

Yes.

[music].

Okay.

Sure.

[music].

Yes.

Okay.

[music].

Alright.

Sure.

Yes.

Okay.

Yes.

Okay.

Yes.

[music].

Okay.

[music].

Okay.

Yes.

Okay.

Sure.

Yes.

[music].

Yes.

[music].

Yes.

[music].

Okay.

Sure.

Okay.

Yes.

Okay.

Yes.

Thank you.

Yes.

Okay.

[music].

Sure.

Okay.

Sure.

Okay.

Yes.

[music].

Okay.

[music].

Yes.

Okay.

[music].

Yes.

Sure.

Yes.

[music].

Okay.

Yes.

Okay.

Yes.

Thank you.

Yes.

Okay.

Yes.

Okay.

Sure.

[music].

Yes.

Okay.

Yes.

Sure.

Okay.

Sure.

Okay.

Sure.

Yes.

Okay.

Yes.

Sure.

Okay.

Yes.

[music].

Thanks.

Right.

Okay.

Yes.

Thanks.

Yes.

Okay.

Yes.

Thank you.

Okay.

Great.

Yes.

Okay.

[music].

Okay.

Yes.

Okay.

[music].

Yes.

Okay.

No.

Yes.

Thank you.

Okay.

Yes.

Okay.

Sure.

Thank you.

[music].

Yes.

Okay.

Yes.

Okay.

Sure.

Great.

Okay.

Yes.

Okay.

Sure.

Okay.

Sure.

Okay.

Yes.

Sure.

Okay.

Yes.

[music].

Yes.

[music].

Okay.

Alright.

Yes.

Thanks.

Okay.

Yes.

[music].

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

Sure.

Yes.

Okay.

Thank you.

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

Thank you.

Sure.

Okay.

Sure.

Okay.

Ladies and gentlemen, thank you for standing by and welcome to the good RF second quarter 2022 earnings call.

Today's conference call is being recorded I would now like to introduce your host for today's call Whitney Natal Rowe Vice President of Investor Relations Ms. Notaro, you may begin.

Thank you operator, good afternoon, everyone and welcome to Codexis earnings Conference call for the second quarter of 2022.

Joining me today are Doug Hirsch and charter, a cofounder and co Chief Executive Officer, and cost environment, 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 fact should be considered forward looking statements, including statements regarding management's plan strategy goals and objectives, our market opportunity our anticipated financial performance the impact of the Gracia issue on our business and the expected impact of COVID-19 on our debt.

These statements are neither promises nor guarantees, but involve known and unknown risks uncertainties and other important factors.

As discussed in the risk factors section of our annual report on Form 10-K for the year ended December 31 2021.

Updated by our quarterly report on Form 10-Q for the quarter ended June 32022, 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.

In addition, we May also reference certain non-GAAP metrics.

Reconciled to the nearest GAAP metric in the company's shareholder letter.

Which can be found on the overview page of our Investor Relations website at investors <unk> Dot com.

I'd also like to remind everyone that a replay of this call will become available that shortly as well with that I'll turn it over to Doug.

Yeah.

Good afternoon, and thank you for joining us today, we would like to share our perspective on our recent performance and actions, we're taking to strengthen the business as we navigate the headwinds we're facing.

We are disappointed with our performance this year and I suspect you feel the same way.

We anticipated both higher growth and stronger margins and that we would be helping more Americans get the health care they need at a price they can afford.

On our fourth quarter earnings call, we reset expectations, because our historical cohorts from the Covid period contributed less than we expected.

And then our prescription transactions offering was impacted by the grocer issue, we discussed on our first quarter earnings call.

We did not expect to be in this position I can say that Trevor and I as both founders and significant that our shareholders have no higher priority than getting <unk> back on track.

We will also be doubling down in our engagement efforts with consumers medical professionals and other constituents that make up our business.

We are amazingly devoted users and close relationships with America's healthcare professionals as we previously shared our NPS with both consumers and providers is a remarkable 90.

The best known brands in our space with significant scale, we consistently have great cash conversion and high cash flow from operations.

And we've proven our team's ability to enter adjacent markets as exemplified by the trajectory of our pharma manufacturer solutions offering.

We want you to know that we as an executive team are fully focused on returning to the level of performance you've seen from us in the past.

Finally, I want to highlight that the grocery issue we discussed on our first quarter earnings call was very recently addressed as communication is rolled out to the grocery chain pharmacies, we expect good Rx discounts to be consistently welcomed at the point of sale.

While we recognize that our year to date performance has been below expectations. We are aggressively working to reverse that reality and evaluating every aspect of our business. We're.

We're taking actions to better prioritize spending and investments with a focus on enhancing both growth and margin and we're confident in our ability to execute.

I'll now turn the call over to Trevor to speak about our results and plans in more detail.

Thank you Doug as Doug said, we are disappointed by our year to date performance and we're committed to driving towards higher gross margin in the future. The second quarter was particularly disappointing due to the impact of the grocers, who we discussed which was in line with the expected $30 million revenue, we estimated on our first quarter earnings call. Despite.

Despite that headwind our revenue and to a greater extent, our adjusted EBITDA came in ahead of our expectations for the quarter and prescription transactions revenue subscriptions revenue and pharma manufacturer solutions revenue each performed slightly better than we anticipated.

Transaction revenue decreased 7% year over year due to the growth ratio, we exited the second quarter seeing approximately 20% of the weekly volume we process Judith grocer before the issue began in March and have seen subsequent continued declines post quarter end.

We were effective at redirecting new users during the respective periods on our retailers' new user numbers in the second quarter were close to prior period levels.

As Doug mentioned, the grocer issue has been addressed we work collaboratively with the grocer over the last few months to address the situation in a way that allows good rocks and the grocer to jointly serve consumers in a way that helps consumers and also satisfying for grocers needs. We are pleased that our consumers can once again enjoying the prescription access and affordability benefits of good rocks at the grocer.

We value as a partner.

Carsten will provide more detail on our second quarter revenue impact and the expected third quarter revenue impact.

During the second quarter. We also took actions to strengthen our prescription transactions offering and minimize the potential for disruptions going forward.

In addition to ongoing conversations with Pbms, we work with as well as the growths are discussed we also proactively engaged with many retail pharmacies to ensure broader marketplace stability.

We've been meeting with the pharmacies the represent the vast majority of our volume each pharmacy has unique challenges in the current macro environment and we are working proactively to collaborate on solutions to drive our mutual success and profitability. We strongly believe that our pharmacy network remained stable during the period. The gross ratio occurred volume at other retailers grew substantially in.

In fact with the exception of this particular grocer volume across other pharmacies increased more than 3% quarter over quarter.

While we were able to effectively move new users returning users were down significantly due to the grocery issue and drove the decrease in prescription transaction revenue.

<unk> mentioned on our last earnings call returning users often go directly to the grocer without checking prices on correct, given how reliable our savings have historically been.

Behavior resulted in a decrease in overall volume of transactions from returning users and of course, returning user counts.

In addition to the actions we've taken to ensure marketplace network stability. We're also prioritizing new product enhancements when we.

We founded <unk>, we recognized that building trust with consumers with key so we created a user experience. There was this frictionless and simple to use as possible consumers. Good access to good Rx platform and find significant savings without creating account today, we are focused on developing new services and incentives for users to register with the <unk> So that we.

Can increase our touch points and play a more active role in all aspects of their care.

This will add friction to the acquisition on price search funnel, almost likely negatively impact conversion macro than revenue, which carsten who will speak to in guidance. However, we believe the benefits of deeper relationships with our consumers will allow us to help them better navigate their health care journey with even more compelling good rx value proposition and user experience. We also believe that.

Users to provide us more information, we'll increase the LTV of each user in prescription transactions and other areas of the business over time as we leverage it to create new tools and products for our users and quarters and years to come.

Description revenue grew 82% year over year as the response from our gold subscriber base to the increase in monthly subscription fees was largely in line with our expectations.

The momentum in our pharma manufacturer solutions offering continued during the quarter with revenue more than doubling year over year as we continued to increase penetration and deliver high rois to manufacturers and brands, we work with our distinct ability to reach both consumers and providers continues to be recognized by manufacturers as evidenced by the strong growth.

We expect continued year over year growth is more pharma AD spend shift to digital and pharma manufacturers continue to recognize the attractive returns on our marketing spend as they leverage our broad provider and consumer audiences.

Our second quarter acquisition of vital care pharmacy services platform. It gives us valuable capabilities to facilitate the brand vacation prescription process from start to finish add yet another innovative product and enhances our pharma focus capabilities, we believe <unk> increases our strength and differentiation, particularly as it relates to the access element of the med.

<unk> awareness access and adherence spectrum, which is a key focus for manufacturers to drive medication volume and revenue.

We recently announced a strategic initiative with Mayne pharma to deliver an enhanced direct to consumer campaign.

Awareness of next tell us their novel contraceptive and expand access to birth control by <unk>.

Binding our extensive reach across consumers and health care providers with Mayne pharma is novel contraceptive. This campaign aims to bring broader awareness and access to this branded contraceptive and other available birth control options.

So build awareness among health care providers.

This exciting relationship with Mayne pharma demonstrates the tremendous value, we can deliver a scaled platform for both patients and <unk> engage with us at the same stage with patients health care journey.

More solutions to our consumer and provider offering and continuing to sell into the HCP opportunity with good Rx for providers.

Good export providers creates a more customized experience and equips providers with the tools they need to support their patients throughout their health care journey with over 825000 prescribers using <unk> since June of 2021, and more than 300000, Hcp's, who have opted into the <unk> provider mode. So far we believe there is an enormous opportunity.

For us to meet providers unique needs with innovative solutions, while helping them achieve better patient outcomes with our incredible operating rate to a good Rx for providers platform. We believe we are on the path to becoming one of the largest provider platforms in the U S.

With a combination of good R X for providers and our consumer offerings, we have the opportunity delivered a truly unparalleled digital health care platform that enables us our partners physicians and manufacturers to educate and serve providers and patients in a coordinated fashion.

Before I close I'd also like to talk about margins and cost structure, we've historically combined high growth and high profitability and contracts and we are committed to increasing book growth rate and margins from today's levels. We're taking a hard look at all of our cost and expenses and re prioritizing where and how much we spend across the business and all of our offerings. This is one of the principal.

Focuses of Raj Berry, our recently hired CFO and we have begun to take actions to improve our cost structure.

Continue to do so into the fourth quarter. Despite the grocer issue, we delivered revenue growth margins and strong operating cash flow in the second quarter.

Fueled by the continued commitment of our team and our collective dedication to our mission with the current macroeconomic environment and the pressure, it's putting on consumers to make deliberate choices about how to prioritize the spending we recognize of helping Americans get the health care they need at a price. They can afford has never been more relevant the opportunity for <unk> is clear and we tend to capture it.

With that I'll turn it over to Carsten to discuss our financial results and guidance.

Thank you Trevor revenue for the quarter grew 9% year over year to $191 8 million exceeding.

Exceeding the guidance we provided in May.

Prescription transactions revenue decreased 7% year over year to $134 4 million due to the growth ratio, we disclosed in the prior quarter and which Trevor discussed earlier the estimated.

The impact of the issue on our prescription transactions revenue in the second quarter was largely in line with the $30 million. We estimated on our last earnings call and drove a decrease in both Max.

Which decreased 3% year over year to $5 8 million and PTR per Mac, which decreased 4% as consumers at the grocer has historically had more transactions per month with a slightly higher fee per transaction.

I will discuss the expected future impact of the growth ratio in more detail in the guidance section, but in the meantime, I want to point out that we estimate the issue had a mid teens percentage impact on our revenue growth.

Turning to subscriptions subscriptions revenue continued to grow rapidly up 82% year over year to $26 million. We ended the quarter with over $1 1 billion subscription plans and $1 6 million member is benefiting from our subscription offerings since our family's subscriptions generally serve multiple consumers.

The increase in subscription revenue was driven primarily by the one time increase in monthly subscription fees, we charge for good Rx Gold program and also an 8% year over year increase in subscription plan.

As a reminder, in the first quarter of 2022, we increased fees for new gold subscribers for the first time in our history from $5 99, and 999 per individual and family to $9 99, and $19 99, respectively and in the second quarter, we increased fees to our existing gold subscriber base as well.

Which catalyzed largely price driven revenue increase.

Subscription plans were down modestly quarter over quarter as expected and as we discussed during our fourth quarter earnings call. When we set expectations for one time higher than usual churn level in the second quarter due to a onetime increase in monthly fees.

Overall, we are pleased with the response of our subscriber base to the increasing gold subscription fees, which was in line with our expectations.

Pharma manufacturer solutions revenue grew 102% year over year to $26 $6 million as we continue to work with more pharma manufacturers and offer more solutions and deliver superior rois to vote with which we work.

This is the first quarter that includes revenue related to Vida care, which contributed approximately $1 million.

Other revenue grew 13% year over year to $4 $9 million driven by the growth in <unk> care.

Moving down the P&L.

Cost of revenue was $18 million or nine 4% of revenue compared to $11 1 million and six 3% of revenue in Q2 'twenty one the increase in cost of revenue as a percentage of revenue was driven by the growth ratio described earlier, which materially impacted our prescription transactions revenue.

As well as the acquisition of vital care, which has a higher cost of revenue due to the operational nature of its business.

Product development and technology expenses were $35 4 million compared.

13% of revenue compared to 11, 3% of revenue and <unk> 21.

The grocery issue described earlier contributed to the increase in adjusted product development and technology expense as a percentage of revenue.

Adjusted product development technology expenses were modestly lower quarter over quarter, due primarily to a higher capitalization rate of certain qualified costs related to the development of internal use software.

Sales and marketing expenses were $94 $3 million compared to $88 4 million in <unk> 'twenty, one as we continued to invest in our incredible team with the goal of increasing our consumer and pharma manufacturer base and building. The <unk> brand. This was partially offset by lower advertising and.

<unk> spend which decreased $4 $8 million year over year.

General and administrative expenses were $34 7 million.

Compared to $39 6 million and <unk> 21.

The decrease was due primarily to stock based compensation expense relating to the nonrecurring co CEO org made in connection with our IPO, which was approximately $12 $1 million higher than the comparable period last year.

Excluding these and other adjustments adjusted G&A as a percentage of revenue was seven 7% compared to 5% in <unk> 'twenty in line. The growth ratio described earlier contributed to the increase in adjusted general and administrative expense as a percentage of revenue.

The year over year decrease was primarily due to the growth ratio, we discussed as well as a decrease in our tax benefit which was $37 3 million last year compared to on the $8 $7 million. This year. This.

This was partially offset by a decrease in stock based compensation expense.

In addition to these drivers the acquisition of <unk> also had a negative impact on our second quarter 2022, net loss, but to a lesser extent.

Moving on adjusted net income decreased 22% year over year to $27 2 million.

Adjusted EBITDA decreased 13% year over year to $47 2 million.

Adjusted EBITDA margin decreased year over year, but continued to be a strong 24, 6%.

The decrease in adjusted net income adjusted EBITDA and adjusted EBITDA margin were all driven primarily by the grocery issue.

We're able to keep adjusted sales and marketing largely flat quarter over quarter in absolute dollars and decrease a proportionate amount of revenue on a year over year basis.

For the quarter.

Moving onto guidance.

Tumor response to pricing and returning user levels that has to be determined.

Given we only have less than a week of empirical data on utilization and a more normalized state with the growth. There we do not yet have enough data to reliably estimate the impact.

For the third quarter, we expect total revenue of approximately $185 million.

This assumes the loss in prescription transaction revenue related to gross ratio expanse to approximately $35 million to $40 million the impact.

As expected to be greater compared to $30 million impact and <unk> 22, as the impact of gradual as the quarter developed and was not as severe in April as it was in June and is there a plan for the year assumes sequential growth at this grocer.

As Trevor mentioned, we exited the second quarter at 20% of weekly volumes at the grocer in July that number is already lower in the mid teens.

And if they do return how quickly that will happen.

Finally pricing has changed and will be higher in many cases.

For all these reasons, we believe that the impact or benefit on Q3, and Q4 revenue and possibly for a period of time after that will be minimal.

In addition to the impact of the grocery issue, we expect the consumer engagement efforts Trevor discussed earlier to further impact prescription transactions revenue by approximately $5 million in the third quarter and approximately twice that in the fourth quarter due to higher friction in the funnel as Trevor said, we believe that these efforts will allow us to create.

Tighter relationships with our consumers and deliver more value to them in the future. We also believe it will allow us to generate higher LTV from our users across modeling prescription transactions, but also our other existing offerings as well as services and products that we will build or buy in the future the.

The impact expands from the third to fourth quarter. Since we began this effort in the middle of the third quarter.

On our fourth quarter earnings call, we discussed our strategic repositioning of gold our subscription program and the fact that we're planning to focus.

More specific audience that we believe funds more value from gold members with chronic conditions multiple recurring prescriptions and other long term needs.

In the second quarter, we rolled out increased prices to our existing subscriber base.

When we announced the gold price increase on our Q4 earnings call. We shared that we expected a onetime churn impact when we raise prices to our existing subscriber base in the second quarter.

As we anticipated we're entering the third quarter with a slightly smaller gold subscriber base due to churn.

As a reminder, this strategic repositioning of this offering focusing on a narrower audience, which may affect future growth rates.

We will continue to work hard to ensure that go direct consumers find the offering that makes the most sense for them and best suits their needs.

We expect pharma manufacturer solutions to grow approximately 60% to 90% year over year.

Yeah.

Finally, we expect other revenue to be largely flat year over year.

We realize that our total revenue guidance for the third quarter reflects a year over year declining revenue.

Primary reason for that is the loss of the majority of revenue from the grocer, which made up almost a quarter of our prescription transactions revenue in the comparable period last year.

We currently anticipate the growth ratio and our registration efforts will negatively impact our year on year growth rates by more than 20% in the third quarter.

Turning to adjusted EBITDA, We expect a third quarter adjusted EBITDA margin of approximately 20%.

It's still formed a larger percentage of revenue compared to the first quarter of this year and some of our other more fixed cost and expenses formed a larger percentage of revenue due to the decrease in prescription transaction revenue because of the growth issue.

Even with this issue we are still able to generate an adjusted EBITDA margin of almost 25%.

Everything we do more and more relevant for all Americans.

With that I'll now turn it over to the operator for Q&A.

As a reminder to ask a question you will need to press star one on your telephone.

You.

You will need to press star one one on your telephone.

We ask that you please limit yourself to one question.

Our first question comes from the line of Glen Santangelo.

From Jefferies.

Two quick ones.

And then we're supposed to ask one so I'll be quick with respect to revenue growth and the outlook for that do you expect to be in some normalized rate in the fourth quarter. So that when you exit Q4 will return back to that sort of mid 20% sort of growth targets that you have as enter 2023, and then secondly on the margin side.

Margins have come down substantially year after year here and Trevor to your comments, you say youre focused on it but I understand the grocer issue is a big part of it but now it sounds like you're doubling down on consumer engagement and Youre talking about a modest decrease in PCR per Mac, you highlighted product development Tech.

In the press release is this the trough in the margin here in the second half of <unk>.

2022, and how should we think about the outlook for margins as we as we also move into 2023.

Thank you very much for the question I'm Gonna have Carsten speaks of the high.

Hey, Glenn of Carson here, when I think the two questions related to <unk> and to margins generally over overtime I think first of all with respect to revenue <unk> into <unk>. We didn't guide for acuity again, as we said in our prepared remarks, mostly because the impact.

<unk> of this year remains.

Somewhat.

Challenging to predict is probably the best way of putting it especially since addressing the issue with this particular grocer may happen quite recently so for that reason, we're not actually guiding for Keith today. However, I think we have indicated that from the <unk> level.

<unk> of impact, which were around $30 million and represented about 70% to 75% drop.

Relative to your expected revenue.

Presented about 70%, 75% drop red.

Relative to your expected revenue of the grocer into <unk> expanded somewhat because of the effect has been there for the entirety of the quarter. So we expect a larger impact we've talked about.

35% to 40 $35 million to $48 million and we expect that the impact will expand.

Not only into the third quarter, but potentially into the fourth quarter and beyond as well the reason for that.

Specifically to the fact that number one.

Again resolution assessed achieved so we don't have that much empirical data on the future looking impact of addressing the issue.

It's unclear how many <unk> users that switch to another form of payment and perhaps using their insurance and Luc <unk> given about 75% of our users have insurance coverage.

We will return and how quickly that return to using <unk>.

Thirdly.

In fact, our pricing.

Some degree and in many cases be higher at the grocer in question as well. So I think our view is that we expect the impact to continue beyond just the third quarter with respect to the second question you had on margins.

We're taking extremely hard look at our cost structure right now so from that perspective, we continue to believe that especially in the longer term our expectations around margin haven't seen we've talked about the fact that we aspire to and believe we can return to becoming a rule of 40 company I think what's changed is that.

Okay. Thank you.

Yes.

Thank you. Our next question comes from the line of Sandy Draper from Guggenheim Partners.

Hi, Thanks, so much.

I may just try to follow up on that line of questioning.

Different angle.

Totally appreciate those.

Follow up response to Glenn's question that was very helpful. Maybe asked another way.

What could happen that would make the impact that 30% to 40 35 to 40 million youre expecting in <unk>.

In the third quarter is there anything that can happen that can make it bigger I get now why the 30 in the second quarter stepping down the 35 to 40.

But I'm trying to see I don't we don't know clearly when it's getting better and I can appreciate that I'm just trying to understand would there be anything that would cause it to decline further.

Because it just doesn't seem like at this point it for further step down it seems like the uncertainty is just when and if it starts coming back.

Sure I can grab this one two if thats the case Sanjay as Carsten speaking here.

Alex hesitated.

Nothing could happen that could cause a drop to be bigger.

But I think at the same time with respect to the issue in question speaking more narrowly about that.

We are extrapolating from the level of usage that we see today, hence the increase from <unk>.

Talk a little bit about.

On the scripted remarks talk a little bit about the fact that we've seen.

Further exacerbation of the issue from <unk> and given that reality.

Extrapolating from levels that were seeing now.

I don't think we're in a place where we anticipate the impact.

Would be larger than we've talked about.

That said at the same time.

The counterbalancing issue that we do have limited empirical data right now.

And that's because.

Associated with the.

Addressing of the situation.

We will likely see some changes to consumer pricing and will likely also see that impacting potentially with particular pharmacies consumers utilize we've done a nice job of being able to shift demand and consumers have gone to wherever the prices are best.

Why is Trevor articulated in the scripted remarks, we've seen.

On average about a 3% growth of volume in other places.

So im not sure that it would be totally Dallas area.

Prices increased a little more a little less than expected. So I think to answer your question in some we think we've taken a realistic view of it.

And I think beyond the other issue outside the growths are one that we've talked about a little bit on the call was that we're also focusing quite aggressively on.

On.

Increased engagement with consumers and that May have some final impact and we've talked about on the call that looking like it could be about $5 million of impact in <unk> and about double that in for Q. So those two elements together are the ones that we realistically see essentially impacting us hope thats useful.

Andy and sorry for the long response.

Yes, no that's great. Thanks, I'll keep it to one question and jump back in the queue.

Okay.

Thank you. Our next question comes from the line of Stephanie Davis from SBB security.

Question on congrats on the resolution.

I was wondering if you could talk to us about the renegotiated prices set of growth, there and how that compared to their historical levels.

As well as your broader pricing base.

Well the pricing VSAT in a way where credit of a basketball the majority of volume is everything shakes out.

For our banking more radical distribution of volume post resolution.

Pricing is more in line with the broader base.

Thank you very much for the question.

We are happy that the grow through issue has been addressed and we're really pleased to have this more strategically aligned relationship with the grocer, who we value as a partner.

<unk>.

In regards to pricing specifically that you asked about some good prices at the grocery will now be higher for consumers. They were previously but the prices are discounted relative to what you might otherwise pay and we believe they're sustainable for all parties. The consumer the grocer anchored Rx pharmacies have to manage price volume tradeoff sustainably.

<unk> and.

There is these are highly dynamic.

We know that consumers are extremely price sensitive, but they also value having the choice of pharmacy. So we're really pleased that they will have that access and Stephanie. This is Carson again, I'm going to jump vendors for a second as well I think one more point on pricing is that the grocery prices for most medications will now.

We expect likely end up being more similar in lines of prices. So at other retailer. So based on what we saw in the second quarter when full through generally seeing pricing at other retailers and new users just shifted their marketplaces work and went to their next loss pray so they found those prices.

Continuing to be quite attractive, but to your point that doesn't mean that we saw volume shift.

On average all the other pharmacy and retailers picked up volumes during this period thats at the lab.

Thank you. Our next question comes from the line of Michael Cherny from both Bob.

Thank you for taking the question.

Traditional customers just got used to still going and they are only to find out that.

They weren't participating in the network and so how does that play off in terms of the dynamic for the individuals that went to these new grocers is it just that.

It changed and that's it and how does that factor in in terms of where you see that rebalancing rebating of growth going forward across your various different grocery and other pharmacy channel partners.

Thank you.

For that question yeah.

As we talked about.

<unk> new users new.

Users.

Largely moved to other retailers when we saw the new user volumes work.

Similar to they were prior to this issue.

However, existing users often.

Our.

Half go directly to a retailer without always checking that our FERC because historically.

The drug do move up and down there is some relative stability. There. So that's one of the reasons we've been <unk>.

Very focused on engagement.

And on driving and spoke about that in the prepared remarks, because we want to make sure we can move.

Existing customers just make them learn about information.

About a change in price or something else and learning about that quicker. So we can get quicker action on that existing user side into the future.

Yes.

I think having safe drivers playing I think.

Reality is that as we continue to move forward through this through this process, we're going to continue to see.

The benefit.

The.

Now.

Now address situation.

And with that we're going to see that.

We're.

It will to work with each of the individual pharmacy continues to meet their specific needs in a manner that's going to create.

More sustainable environment in the long run.

Thank you. Our next question comes from the line of Craig Hudson back from Morgan Stanley .

<unk>.

Yeah.

I appreciate the question.

<unk>.

We've been really proactively engaging with pharmacies.

That represent the vast majority of the volume and we strongly believe the pharmacy network is very stable.

What we've seen and to your to your question is that each pharmacy is facing unique challenges and in particular relative to the current macro environment changes.

That is a different.

Impacting different opportunities III pharmacy, so we've been working proactively to collaborate on solutions to drive mutual success and profitability and sustainable economics for all the parties in our ecosystem.

But each pharmacy has different needs and we're trying to make sure we're really.

Expeditions on that.

Yes, it's jumping in on that.

Carson again looking ahead I think what we do see the growth Hasnt caused a one time step down in terms of revenues.

Also don't believe that it's going to impact our growth rate in future years or it doesn't impact the future market size your opportunity and thats been part because our value proposition with pharmacies very strong we drive foot traffic and how consumers are a positive experience at the pharmacy counter and our data says that our theaters by incremental items more than $75.

Out of the time, which is of course very attractive.

And on top of that you've seen us do a lot of work with individual pharmacy banners as well like ads that we've shot together in Walgreens Rite aid, having joined our gold program deep integrations on the tech side things like the ability to book Cvs Minuteclinic appointments through the better access et cetera, So I think.

Again, given the volume growth we've seen outside of the particular growth question I think we're feeling like the other retailers and pharmacies.

The highlights of biotic relationship with us.

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

Yeah.

Thank you for the question.

Amazon has been pursuing the health business for years, we have not seen a material impact on our business.

We believe the recent acquisition of one medical signals an intention to move further into the employer services space and their efforts with Amazon care and we don't expect this to have any impact on our business.

Thank you.

Our next question comes from the line of Eric Sheridan from Goldman Sachs.

If I can first just a clarifying question the new agreement with the grocer partner just how the.

Duration.

The new agreement that we can better understand so somewhere down the road for us to get renegotiated or be renewed that we're aware of sort of the timing dynamics around.

The agreement that would be number one and number two you don't.

Moving away from the grocery you talked a lot over the last couple of earnings calls about.

A return to normal in terms of Doctor visits of prescriptions, where are we in general in terms of the overall backlog of Doctor visits and unexpected prescriptions and how you think about either leaving him if youre seeing that improve or are elements of broader customer growth do you think that could drive in the platform as we move further away from the pandemic. Thank you.

Yes.

Thank you for the question I'll have Carson, particularly.

Hey, Eric with respect to the terms of the agreement.

The terms of the agreement are confidential so I can't really go there on this call.

But we're feeling very good about the fact that the situation is addressed not just for today, but for the future as well with respect to the therapy starts and the like.

We're for the first time seeing now.

For the first time and certainly a couple of years seeing now that new therapy starts.

Are approaching levels that they're at for almost all therapy categories.

They are at pre Covid.

When I look back at the data.

And generally seeing that the data is now converging back to sort of the 100 index of where it was.

Previously to the Covid period, so from that perspective, we view that as generally positive I think what's hard for us.

Is that when we look at our own data as a growth or if you did create some noise. So that makes it a little tougher for us to see.

The fully manifested in our case.

Higher rate of health care utilization, we do anticipate that it could continue to turn into a tailwind as trends normalize further.

Thank you. Our next question comes from the line of Doug Anmuth from Jpmorgan.

And just back to the grocer issue.

You talked about pricing for prescriptions going up for consumers there, but just was hoping you could talk a little bit more about what it means for good Rx take rates with that pharmacy and then also on an overall basis I think you mentioned a modest decrease in PTR per Max going forward. Thanks.

Okay.

Sure Hey, Doug Karson here.

Yes, I think we expect that pricing for most medications at the grocer will now be more similar to those seen at other retailers.

And that has a few implications I think one is from a concentration perspective, we believe the growth of our reached levels that are historically with respect to our revenue economically economic historically this grocer had higher Pcr per Mac.

Mainly because of the pricing was good and Max filled more scripts.

Then they did at other retailers and the other aspect is that take rate will likely go down formulaic way simply because as prices go up all else hold held constant that larger denominator. It means that the take rate is a function of oil fall. So I think we will see those impacts to some degree.

I think the other thing that we see potentially happening is a mix shift continues to evolve going forward. We also have the potential that we will continue to see growth.

Going into the third quarter and beyond some flux in PCR per Mac, we could see another low single digit percentage sort of smaller sequential drop in the third quarter with that evolving mix shifts as well.

Thank you. Our next question comes from the line of Charles <unk> from Cowen.

Thanks for taking the question just wanted to get a little bit more.

To clarify a little bit more on the growth ratio.

If I recall the issue was the grocer was having a dispute with a number all its pbms and <unk>.

Regards to reimbursement for their discount card programs.

And all of this is.

The algorithms facilitate showing best price.

Members at the point of them looking for a cheaper option.

I'm trying to get a better understanding is here is that the resolution here you seem to be talking a bit about an agreement you have come to with the grocer.

But isn't the issue more about them having.

<unk> resolved with other pbms or I mean is that is that what we're really talking about here is just to understand your role in terms of.

Facilitating on negotiating.

Behalf of the grocer can you explain sort of what.

I understand your role was a little bit more separate from all of this.

The impact that we were seeing last quarter and then obviously into this quarter was sort of a byproduct of sort.

On a contractual dispute between the grocer and Pbms.

Thank you for the question, we're very happy.

We spoke about the BHG has been addressed.

And it's been addressed very recently over the next few days communications around better acceptance, we provided the pharmacist discounted pricing will be up on a platform and most importantly, good Rx discounts will be consistently accepted at the point of sale.

There are many parties involved here, so not going to speak to sort of specifically.

The agreement between different different parties, but we're pleased that consumers are able to enjoy the prescription access and affordability benefits of good asset growth or who we value as a partner as a partner.

We are though really disappointed that this disruption occurred.

And we are being extremely proactive.

As I spoke to a bit before just to ensure that all needs are being met by all of the marketplaces has been that all players are sustainable economics.

And make sure that the affordable prices that we have.

Mick accessible or available as broadly as possible and so we do want to play that role of trying to be helpful, where we can and making a functioning functioning marketplace.

<unk> is the best known brands in our space, we have a large devoted consumer base. We have a large HCP base, we have millions of visitors on our platform monthly and all of that gives us the opportunity to grow and scale. The business. So we're happy to be able to do that.

<unk> and <unk>.

Proactively with all of the different marketplace participants.

Thank you. Our next question comes from the line of John Ransom from Raymond James.

Hey, good afternoon.

So just to be clear.

The growths are lets say you got all of those customers back I know, that's not going to happen, but theoretical exercise you've got all those customers back in the fourth quarter.

What I'm inferring.

With that particular grocer has gone down in this renegotiation.

But I don't think you've typically said that but everything reset back to normal you got all of those customers back.

What would be your pro forma take rate gross margin versus where it was say before all this happened.

Parsons.

Hey, John It's Carsten here.

The question relates to your HAE.

What would be the sort of gross margin impact.

The combination of mix shift given that this grocers now.

Over indexed anymore in our in our ecosystem.

In association with the addressing of the situation.

Just to make sure I got it right is that the echo back the question, you're asking maybe said a little differently.

Turning to assume yes, because you may not be able to speak right now.

So if I did get that right.

I think the impact of both the mix shift.

And the change in pricing at what we talked about a little bit to an earlier question around.

PCR per.

Mac.

And the impact that this had on it.

It's slightly diminished PCR per Mac again, because of volumes at this grocer or higher in terms of transactions per bag and because of the take rate impact of price going up potentially.

Pushing down take rate, so I think on a net basis.

All of those factors would impact gross margin to some degree.

Again, the differences in PJM for Mac.

The grocery question versus other ones like we said in our prepared remarks is not that significant so the impact on gross margin would also not be that significant.

Thank you. Our next question comes from the line of George Hill from Deutsche Bank.

For taking the question I wanted to kind of delve into the EBITDA guidance.

By relational gross for a little bit more should we think of the change in the margin profile that you guys are guiding to in Q3 aside from the very small very to care drag is largely like the <unk>.

Change in volume at the change in margin. So basically the gross margin of the business. So the EBITDA margin of the business is meaningfully lower ex kind of the grocery or under the old terms and is there a reason to expect that it would improve to historical terms.

Historical the historical ranges at the new terms with the grocery or is that just not quite as that as that doesn't matter a margin profile thats attainable under the new agreement.

Hey, George Carsten here again.

So if I'm understanding the question right.

What drive the change and the change in margin for both <unk> and ultimately <unk> is effectively driven by the fact that PTR prescription transactions revenue is just lower.

And that drop and PTR associated with the grocer issue in combination with that cost structure that we are focused on now ameliorated that we've kept relatively constant until now.

Impacts to the margins if you were to add back.

Essentially the kind of revenue that the growth or had historically done.

You would find that the margins would be relatively consistent a lot more consistent with what they had been historically. So I think this issue is totally one of sort of revenue hole associated with the grocer and not more complicated than that from at least the lens that we're looking at it through and is it.

Look forward again, I think the pricing at the grocer in question is not.

Not really that material and the reason I say that is that for a period of time over the last several months.

When we werent promoting discounts at the grocery question, our new easier volume to sort of seamlessly flow to other retailers pharmacies grocers et cetera.

And is it sort of fluid to these other places.

We actually saw volumes grow in those locations.

And so I think our view is that.

As long as the volume come through where sort of.

Nir agnostic and this goes to John Ransom question too as to which particular retailer comes through on the margin yes. The.

Users, who frequented the grocer in question did do more transactions on a monthly basis.

The take rates, we achieved were a little higher but that was again at the margin.

Sort of a dramatic thing is the big thing was that the growths are had a significant amount of volume with us historically and that volume is now.

Finished and going forward, we're not sure to what degree it's going to come back and at what rate, it's going to come back hopefully that distinction makes sense.

Thank you. Our next question comes from the line of Dan Behrendt.

From Wells Fargo. Your line is now open.

My questions maybe.

Maybe just to go back to I believe a comment that Trevor made in the prepared remarks.

I think you said something along the lines of having incentives for users to register with good Rx and and that May lead to friction or acquisition or conversion of new users I'm just trying to understand the source of the friction is it that if they don't register they wont get as people a discount as those who arent registered I'm just trying to.

What's going on there.

Thank you for the question Yeah, we are.

Trying to give the opportunity for consumers to provide us more account related information and a variety of places in their user journey and they'll be doing that for the reason for a reason like you just mentioned such as a deeper discount or just for additional product features in market.

And so that just may impact our conversion funnel and the number of users in the short term, but we believe this is the right choice because over time with a more robust user experience.

And it gives us just more opportunities to assist users in their health care journey, and so by personalizing that experienced more we let them navigate.

Health care journey better.

Potentially and hopefully increase the LTV of each user in a prescription transactions offering and it just helps us.

Other areas of our business.

Q, let users access those and then hopefully monetize those also.

This is where we're actually allowing the consumer to track their entire.

Every medication that they take and it's about not just cost. It's also about information potentially side effects at the dock name of the Doctor that refill history. The pharmacy. They fell as I mentioned really robust offering for consumers that goes outside of pricing outside of the pharmacy counter and so with just a little bit of information from the consumer we can actually provide a whole slew of services that can help them everywhere.

From diagnosis, all the way through to care management, and ultimately keep consumers healthier and keep them on medication. So this is just the tip of the iceberg in terms of what we're doing on engagement and we're really really excited about the things that we can do here. So.

Thank you.

Thank you. Our next question comes from the line of Steven Valiquette from Barclays. Your line is now open.

Great. Thanks for taking the question.

So this was touched on a little bit, but maybe just.

Hit it again.

Unpack that reported <unk> results a little bit more.

Total company revenue of $191 million to $192 million was essentially in line with the $190 million guidance, but EBITDA.

$47 million came in about $12 million to $13 million higher than the street view, 34% to 35 million, which I feel like that's indirectly where the company.

Sort of guided everyone towards for the quarter when talking about operations last quarter. I guess the question is are at the end of the day did the full $30 million revenue impact from the grocery <unk> ultimately fall right to the bottom line from your perspective in terms of $30 million impact on EBITDA as well or where there are some other mitigating factors and then I guess secondarily.

One could argue the EBITDA upside in the quarter was driven primarily by just the slightly better underlying prescription transaction revenue and also better subscription revenue. So you got some more.

So I think we lost the tail end of your question, Steve, but I think we got a we think we heard most of it.

Hopefully you can hear me, Okay, I think first of all yes.

I think our $192 million in revenue.

Yes.

Revenue.

Among other things.

Did benefit from potentially some incremental.

Volume coming through in the market generally utilization volume, which is great.

Or that.

<unk> rate given how we have changed the deployment of our technology, our product development and engineering staff.

Has increased which led to.

Sales and marketing efficiency, which will anticipate getting more of in the quarters to come as well hopefully that Rick talked about focusing on our cost structure further so from an EBITDA perspective.

We're able to harvest some benefits.

During the quarter that we didn't necessarily expect in advance of the quarter.

Okay.

Thank you. Our next question comes from the line of Jonathan Young from Credit Suisse.

Taking my question I guess going back to the growths are kind of putting it altogether.

Youre talking about a bit of a mix shift away from the closer towards the pharmacies.

The pricing at the grocery won't be as attractive I guess does this kind of change the growth algorithm kind of moving forward kind of given that you did have an outsize growth component related to that grocer.

And then does that $30 million to $40 million.

It almost sounds like it won't necessarily all come back I guess kind of what's your view on those items.

Thank you Yeah, we don't believe this changes the growth outlook.

We most importantly are very happy with four customers that.

Customers get the affordability benefits of good Rx and they get them broadly we want.

People to have the broadest accurate we can we've seen no decrease in demand we have.

And I think even with the current.

Environment the current.

Potentially recessionary environment and such that we see that Americans have even greater needs for getting affordable health care than they ever have in the past. So we see the growth dynamics remaining the same and we are pleased that we have reached.

But this has been addressed.

But most of all we are being very.

Proactive we are working with.

Sure.

With all the partners in our marketplace and trying to make sure.

Delivering on providing a sustainable marketplace for everyone and delivering on our mission for consumers and providing.

A strong robust.

Future growth story and.

<unk> yeah.

Yes, no I think we see several onetime step down associated with the with the growth. There. Obviously you saw that in <unk> and <unk> as described in the impact in <unk> and beyond as well, but the reality is we don't see this as shifting our trajectory linear growth rate. The Tam continues to be huge as Trevor said demand is.

Hi.

We've seen shifts in volume even during the <unk> period, where we're seeing growth there.

All of the other retailers on average so from that perspective, I think we remain highly confident that the market that we're serving and the consumers that we're helping as well as their health care provider are going to continue to use <unk> and huge numbers going into the future as well.

Thank you at this time I'm showing no further questions I would like to turn the call back over to Trevor Bell for closing remarks.

While our year to date performance is not what we.

We expected at the start of 2022, we're aggressively working to change that we've historically been able to deliver a strong combination of growth and margin and we want to make sure that continues to be the case in the future.

In addition to evaluating our business and re prioritizing spend where necessary. We will continue to pursue innovative opportunities that both deliver on our mission and unlock growth and are working collaboratively with stakeholders across the ecosystem to drive mutual success.

I look forward to updating you on our progress in the quarters ahead, and thank you for joining us today.

This concludes today's conference call. Thank you for participating.

Q2 2022 Goodrx Holdings Inc Earnings Call

Request a DemoDemo

GDRX

GoodRx

Earnings