Q1 2023 GoodRx Holdings Inc Earnings Call

Ladies and gentlemen, thank you for standing by and welcome to the good Rx first quarter 2023 earnings call.

As a reminder, today's conference is being recorded.

I would now like to introduce your host for today's call I'll be Reynolds senior manager of Investor Relations is Reynolds you may begin.

Thank you operator, good afternoon, everyone and welcome to <unk> earnings Conference call for the first quarter 2023.

Joining me today are Doug Hirsch, our Chief Nursing Officer, Trevor Bedford, Our chairman Carsten Boardman, our Chief Financial Officer, and Scott Wagner, our interim Chief Executive Officer.

Before we begin I'd like to remind everyone that this call will contain forward looking statements.

All statements made on the call that do not relate to matters of historical fact should be considered forward looking statements.

Including without limitation statements regarding managements plan strategy goals and objectives our market opportunity.

Our anticipated financial performance.

The impact of the grocery issue on our business.

Underlying trends in our business our potential for growth collaborations and partnerships with third parties and the expected impact from macro economic environment on our business.

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

These factors may cause our actual results performance or achievements to be materially different from any future results performance or achievements expressed or implied by the forward looking statements.

Factors discussed in the risk factors section of our annual report on Form 10-K for the year ended December 31st 2022.

As updated by our quarterly report on Form 10-Q for the quarter ended March 31, 2023, and other filings with the Securities and Exchange Commission.

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 non-GAAP metrics, which are reconciled to the nearest GAAP metric in the company's earnings press release, which can be found in the overview page of the <unk>.

Relations website at investors garage Stockholm.

I'd also like to remind everyone that a replay of this call will become available there shortly as well.

With that I'll turn it over to Doug.

Thank you Audrey and good morning, everyone and thank you for joining us.

We started good R X 12 years ago, because we were passionate about helping consumers access and afford the care they deserve.

So proud that the company. We've built has become a service that millions of consumers rely on.

Since those early days much has changed in our business has evolved into something bigger than Trevor and I ever dreamed.

We have saved Americans over $55 billion on their medications and our team has launched an entirely new business lines, including pharma manufacturer solutions, which enables us to make brand drugs more accessible and grass health, which we believe offer some of the best and most trusted online health content, it's been both exciting and rewarding to build a business that enable.

I was asked to help even more people in more ways.

Okay.

Trevor and I Love, what we do but we also recognize that an important part of expanding our impact includes generating growth margins and profitability.

We've always known that there would be a time when there would be others better equip us to run and grow a large public company and I'm proud to say that we found that person in Scott Wagner, who has agreed to step in as our interim CEO .

Okay.

Scott brings more than 25 years of experience running and scaling consumer technology companies that are leaders in their field, including at public companies and has the knowledge and expertise needed to enter the next phase of our company's growth.

In 2012, Scott stepped in as interim CEO at Godaddy and wanted to become President COO and CFO and then CEO .

His tenure he took the company public nearly tripled revenue to approximately $3 billion.

Grew the business profitably and managed over 7000 employees.

Scott also has experienced working with our sponsors Silverlake Francisco partners and spectrum equity.

I've been working alongside him for the past two weeks and have already seen and put his breadth of experience into action.

Trevor and I are excited about what Scott's my perspective, all brand.

It's no secret this past year has been rough.

Our results are disappointing to us as well as our stakeholders and we believe the time is right to someone lead the company, who has extensive experience running and growing public companies.

We truly feel this is just the beginning of what <unk> can accomplish.

And wanted to succeed more than anything else.

Trevor and I are remaining at the company and are committed to supporting Scott in the business.

I have taken on the role of Chief Merchant Officer, and I'm. So excited that I get to focus on doing what I love most evangelizing the company's mission to external parties.

Whether its physicians manufacturers pharma or other partners I will spend my time talking about all the amazing ways, we aim to make health care affordable and convenient for Americans.

I'll now pass the call over to Trevor.

Thank you Doug and good morning, everyone as Doug mentioned, we recognize the challenges both our business and our stock performance have faced over the past couple of years.

We're still recovering from the impact of the grocers you had on our core business, we haven't driven product innovation forward as quickly as we planned to and our pharma manufacturer solutions offerings.

And you'd macroeconomic headwinds with the spending delays and reductions we discussed on our fourth quarter earnings call in February which have contributed to uneven execution to date, we don't take the slightly and we understand the importance of bringing in someone at this juncture, who can drive the business forward faster.

Credibly Lucky to have Scott on board you have extensive experience transitioning business from counting tears into highly successful public companies is already identified ways to improve and potentially grow the business accelerate our long term plan and platform expansion and drive efficiency and margins. We are confident that this move is coming at the right time our business.

Remains very attractive we have a core prescription business that endured an unexpected disruption over the past year.

Remains very attractive we have a core prescription business that endured an unexpected disruption over the past year.

Mentally of category innovator in a large growing market. We believe our pharma manufacturer solutions efforts are delivering compelling ROI to customers, but still in the early days, we need to continue to build scale and repeatability.

We believe this leadership transition will accelerate our growth and performance and reflects our enthusiasm about the opportunity for <unk> over the years to come.

In my new role as Chairman I will continue to leverage my deep network of industry relationships and extensive knowledge of the health care industry to support Scott with our overall health care strategy strategic partner relationships and product innovation, I guess focused on supporting the business structure and strategy before I turn the call over to Scott.

Wanted to discuss the highlights for this quarter, which we view as evidence of our strong value proposition and are very underpenetrated Tam deep competitive moat and incredibly loyal consumer and prescriber users with whom we have 90 NPS there.

Our four key areas, where we saw the most success in Q1, one our hybrid strategy to our engagement efforts three our recent ability to rapidly adjust consumer pricing, which is driving more volume for us and for our collaboration with express scripts.

First we began implementing a hybrid approach, where we formalized relationships with our retail pharmacy network to ensure stability and mutual success for all parties.

The early success, we've had with this strategy has led us to increase the number of retail pharmacy partners. We are directly contracting with as well as the proportion of claims associated with direct contracts. It has allowed us to understand their needs better and more deeply engaged with these retailers. We believe we are creating incentives to encourage greater use of <unk> and drive incremental volume through these retailers.

Second as we work towards creating more meaningful direct consumer and provider relationships. Our engagement efforts continue to play a critical role.

As of the end of the first quarter. We are pleased that the proportion of prescription transaction from fully registered consumers have continued to increase after doubling in the second half of 2022 and that over 450000 prescribers have engaged with us in providing mode since its launch.

Third we have found innovative ways to be able to rapidly adjust consumer pricing youre point of sale discounts to optimize around demand elasticity on a per medication basis.

We've increased our total spend on consumer facing discounts from $24 $7 million in all of 2020 to $10 9 million Justin <unk> 23, we believe that much like consumer product brands, who leverage coupons, our abilities to catalyze user behaviors are highly effective.

And fourth our PVM partners can benefit from the increased retail and network stability our hybrid strategy creates.

Innovating in ways to do even more with them. A Prime example is our express scripts integrated savings collaboration prices sure powered by <unk>, which is one of our most exciting new initiatives early performance indicators across this innovative program continue to show promising signs and we can report we saw greater than expected momentum via the express scripts program, particularly.

Towards the end of the quarter.

The express scripts collaboration helps remove the need for consumer education on prescription savings and provides more transparency and price awareness automatically across the health care system.

Allowing eligible users to automatically receive better ex discount prices as part of their pharmacy benefit.

Right into their card with no accident required on the consumers' part.

Express scripts continues to educate and enroll plan sponsors across the balance of their commercial book of business. We believe this program opens up a significant new segment of the prescription savings Tam for us and we're seeing great. Early results. We can say definitively we are reaching more consumers through this partnership driving greater savings and improving awareness and afford.

We aspire to broaden our reach further new arrangements with additional pbms.

We believe our pharma manufacturer solutions platform has great potential based on the feedback from clients and the ROI of those clients are achieving but it operates with different pacing and if more nascent we're still building out our execution abilities. In this offering with respect to our product investments and learning how to predict outcomes more accurately. We're also working on increasing.

Synergies across good Rx health provider mode to drive awareness I will now turn the call over to Scott.

Thanks, Trevor first I'd like to take a minute and applaud Trevor and Doug for all they have accomplished over the last 12 years.

Under their leadership good Rx grew into a leading digital health care platform, serving over 7 million consumers a month.

Doug a smart creative people, who have built a category defining company.

Got it incredible respect for both of these guys both what they've built a good Rx and who they are as people I'm thrilled to be here and to contribute to the next leg of the good R X journey.

As Trevor and Doug mentioned earlier in the call I've got a bunch of experience, helping companies deliver growth at scale, while building exceptional customer experiences.

I really enjoyed building companies in doing so the right way companies that do a unique and valuable things for their customers.

<unk> to innovate and grow the.

To deliver attractive financial returns and have high performing teams.

I'm excited to join good Rx not just for what the business is today, but more importantly for what it can be and for how I can help right now.

There is a lot to like about the good our exit today.

Good Rx has a unique value proposition as the leading prescription savings marketplace.

Good Rx has a true brand love by both patients and healthcare professionals alike with net promoter scores approaching 90.

That's pretty incredible.

<unk> plays a unique role in the prescription ecosystem, providing value to patients providers and manufacturers alike.

There's a lot of opportunity here.

<unk> has a huge tam with interesting opportunities to expand from the discount card space to serving a larger portion of both Medicare and commercial plans.

<unk> has demonstrated product market fit with pharma partners building a meaningful business from scratch in a really short time period. We believe this business has growth because it's incredibly useful to customers and manufacturers alike.

<unk> is unique in that it touches a vast array of constituents across the healthcare ecosystem spanning patients providers retailers Pbms and pharma manufacturers. This ecosystem wide foundation as our basis for further expansion.

It is also clear that good Rx can do some things differently I believe we need to do a better job of identifying and prioritizing the things that matter and are most impactful.

We also have to evolve our execution against these opportunities, making sure that we execute with quality and with urgency and meet our commitments to each other in the company and to all of you.

I've been around the block a bunch godaddy being the most visible but also before that with a private equity firm KKR, leading businesses from one stage of evolution do another while not driven by a playbook per se. There is a combination of strategic insight execution and team alignment that can help here.

As I jump in as interim CEO Theres, a couple of key areas that I plan to drive and focus on with the team.

First making sure that we have the strongest network relationships in retail pharmacy strategy possible.

Two honing our short and medium term growth plans for the core prescription business and aligning teams and resources behind it.

Three scaling our pharma manufacturing solutions efforts. There is a lot of goodness here, we've got a very unique capability and branded pharma that can benefit both patients and manufacturers alike, while there.

Our offerings in this area are nascent we believe early proof points had been extremely positive with pharma customers being really strong value given our high intent audience that spans both patients and healthcare professionals.

It's particularly valuable for the awareness and access solutions that they've been promoting.

We're going to lean into these higher high ROI solutions and focus on driving further product innovation, expanding our brand reach with existing partners as well as landing more lighthouse brands with new manufacturers. If we get this right I'm confident we're going to be able to turn manufacturer solutions into a larger and more profitable business over time.

Finally, we're going to put our combined efforts against our biggest opportunities make decisions and then execute with quality and with urgency.

For the investors on the call I'm, a big believer in transparency.

<unk> has experienced some uneven performance over the past 12 months and no one likes that.

We need to get us to a place where we can provide clearer ranges of growth and profitability to our investors deliver against those ranges consistently barring any external and exogenous events.

Then lay out longer term plans and milestones over a three.

Year period of time.

Right now our financial expectations represent our team's best thinking as I dig in more with the teams I'll be opening with everyone on my thoughts on what are and your financial expectations should be for good Rx with a focus on building multiyear value, while hitting our short term commitments.

With that I'll turn it over to Carsten to discuss the quarter in more detail and our priorities going forward and I look forward to both working with and speaking with everybody in the months to come thanks Carsten.

Thank you Scott, we recognize everyone's going to be.

And what's to come so I'll provide a short commentary on the first quarter and then get the guidance before turning it over to the operator for Q&A in.

In summary, during the first quarter, we exceeded guidance on revenue adjusted EBITDA and adjusted EBITDA margin with those coming in at $184 million $53 2 million and 29% respectively.

Going into more detail total revenue for the quarter decreased 10% year over year to 184 points here $1 billion as I mentioned prescription transactions revenue growth was down 13% year over year to $134 9 million, but up quarter over quarter by 4% Max declined 5% year over year to six.

Part of $1 million increased 3% quarter over quarter.

<unk> volume, excluding the growths are involved and the previously discussed gross ratio has continued to grow consistently and is up 3% sequentially and 16% year over year for <unk> 2003.

The year over year declines were largely driven by the growth ratio.

<unk> also benefited from unexpected one time contributions as we expanded our efforts to ensure network counterparties, we're adhering to the contracts we have in place, which resulted in unanticipated revenue gains of approximately 1% and our PTR offering late in the quarter was essentially 100% flow through to adjusted EBITDA.

Our farmer manufacturing solutions revenue declined 13% year over year in the first quarter to $24 million.

Our focus is on signing deals with high levels of recurring revenue potential. So we did not do deals with onetime customers as we did in <unk> 'twenty two.

We're pleased with the trajectory of achieved and the quality of campaigns. We are running we remain very optimistic about this offering long term.

Turning to subscriptions subscriptions revenue grew 26% year over year to $24 1 million.

The gold membership fee increase implemented in the first half of 2022 more than offset the negative impact from Kroger savings club and related to reduced marketing of the program and price increase related to gold user churn.

We ended the quarter at 1.0 million plants down 16% year over year.

Cost of revenue was $16 7 million or 9% of revenue versus $12 3 million or 6% of revenue in <unk> 2002.

The increase in personnel costs related to consumer support and allocated overhead from Nevada care acquisition, primarily drove the year over year increase.

Development and technology expenses were $32 9 million or 18% of revenue, which compared to $35 million and 17% of revenue and <unk> 22 decrease in absolute dollars, primarily driven by a decrease in payroll and related costs and higher than expected level of capitalized labor based on our.

Quarter end analysis.

Sales and marketing expenses were $78 5 million or 43% of revenue versus $93 million or 46% of revenue in the first quarter of 2022 as we have discussed we are proactively managing marketing span the current environment and finding ways to leverage our brand we're getting higher returns.

Each dollar invested I'd like to take a moment and delve deeper into one aspect of our marketing program point of sale discounts for consumers <unk>.

Pos discount flow better ex to take control of the amounts consumers paying a rapid targeted manner that is similar to couponing by consumer packaged good companies. This enhances our ability to fulfill our mission around medication affordability. We can deploy this tool against specific medications and to drive specific behaviors, including for example, our engagement effort.

It's.

Last year, we disclosed in our 10-K, we spent $24 $7 million on these efforts and we believe we've been able to continue to make the spanned effective at scale.

Discounts are one of the many tactics at our disposal to help secure great pricing for our consumers and what we believe to be an extremely targeted and effective manner. This been contributed to our ability to drop sales and marketing expenses as a percent of revenue in mid 2022, even as their use of Pos discounts group.

In the first quarter, we spent a total of $10 9 million $9 5 million of which was included in sales and marketing and $1 4 million of which wasn't contra revenue, meaning that instead of hitting opex. It reduces revenue and also reduces our growth rate that is similar to the contra revenue accounting treatment of coupons in the CPG.

Space.

The P&L geography of Contra revenue versus sales and marketing expense for our pass discounts has no impact on adjusted EBITDA.

General and administrative expenses were $29 6 million and 16% of revenue versus $31 9 million or 16% of revenue in the first quarter last year. The decrease was primarily driven by a decrease in stock based compensation expense related to the co founders of awards granted in connection with our IPO.

Net loss of $3 3 million compared to net income of $12 3 million in the first quarter of 2022 and was impacted by lower sales volumes related primarily to the grocery issue integration costs related to provide care and fluctuations in our quarterly estimated tax provision, partially offset by lower sale.

Marketing expense.

Net income was $29 5 million compared to $41 $3 million in the first quarter of 2022.

Adjusted EBITDA decreased 18% year over year to $53 2 million.

Which was ahead of expectations and up 7% quarter over quarter, given the PTR offering has very little incremental cost per transaction the impact on our PCR volume from a growth ratio and to a lesser degree pharma manufacturer solutions revenue were the biggest drivers to the year over year performance adjusted EBITDA.

Margin of approximately 29% was down 290 basis points year over year, while improving 200 basis points quarter over quarter.

We generated net cash provided by operating activities of $32 3 million.

Compared to $31 million in the prior year period.

Our capital allocation priorities are unchanged and we will continue to focus on high return investments and maximizing value for shareholders.

Our balance sheet remains strong and we ended the quarter at $761 million in cash on the balance sheet and $665 $3 million of outstanding debt.

<unk> credit facility had $98 million of unused capacity, representing total liquidity of $851 9 million.

Now onto guidance, our outlook for revenue of $185 million to $188 million for <unk> and for the full year, we expect total revenue of $750 to $775 million.

Both of those numbers are net of anticipated Pos discount contra revenue of $1 million to $2 million for the second quarter and around $10 million for the full year.

As I said earlier the portion of pass discounts that are contra revenue increases revenue and our growth rate versus traditional sales and marketing expense treatment.

The Pos discount Contra revenue amounts were not included in our prior guidance numbers, given there evolution and have no impact on adjusted EBITDA since the value ascribed to conquer revenue would otherwise <unk> expense.

We have reduced our farmer manufacturer solutions outlook for the coming few quarters as we aim to ramp up a series of large programs, which have been either recently implemented are in our late stage pipeline.

Material portion of our pay for performance, providing upside for US we believe our customers have been very pleased with them.

There are less predictable for us than our historical flat fee deals, which contributes to us lowering the bottom end of our annual guidance range.

To provide context, our farmer manufacturer solutions offering as film basin. While we believe early proof points have been strong in terms of customer satisfaction and ROI, our product innovation and delivery processes are still in early stages manufacturer solutions revenue is less than $20 million in 2020. Since then we've learned.

<unk> progressed as we grew the revenue to five times that amount through 2022.

We've increased the types of clients, we work with and the offerings, we sell to them. We believe that we're now in a position to put energy and resources behind the deal contracts that work the best for our clients and ourselves.

For example in terms of clients, we are proud of focal points in women's health and diabetes and on the operating side. We're focused on a couple of areas first driving prescriber usage and newer growth factor for us, whereas siem provider mode Meus <unk> since December 2022, and where we are leveraging over 450000 providers.

Who are engaged with our provider mode offering since its launch already resulting in multimillion dollar contributions to pharma manufacturer solutions revenue.

Also on the offering side, we see an increasing number of pharma manufacturers interested in creating cash solutions for branded medications leveraging our direct bottomless final consumer marketing capabilities. One example is our dotcom point of sale solution, which provides savings of $200 for consumers.

Overall, we believe that our pharma manufacturer solutions pipeline is robust and we are very excited about the long term potential of this offering but we are in the early innings.

<unk> the timing of when we can close and deliver on some of the Lumpier large deals is tricky for US were also more focused than ever on our recurring revenue, which means we're going potentially multimillion dollar onetime revenue deals that we took in the past we believe our highly sustainable and highly valuable pharma manufacturer solutions.

Business has to be founded on a growing base of repeat usage.

Moving onto second quarter guidance by offering we expect prescription transactions revenue of approximately $132 million to $134 million.

Net of the anticipated impact of Pos discount revenue reductions of approximately $1 million to $2 million.

Our expectation for PPR per Mack is to show a modest decrease over the coming quarters as we focus even more on driving volume with retailer pharmacies through our hybrid model and we experienced the seasonal impact of more consumers potentially hitting their deductibles impacting our price Fisher express scripts collaboration.

We expect subscription revenue of approximately $23 million to $24 million in the second quarter, which at the top end is relatively flat quarter over quarter. As we are nearing the anniversary of our fee increases implemented last year and expect to see less churn in future quarters.

We expect pharma manufacturer solutions to return to sequential growth in the second quarter with revenue of approximately $26 million up.

27% quarter over quarter.

Finally, we expect other revenue to be approximately $4 million in the second quarter as.

As we mentioned in our last call. We continue to have additional marketing investments, we anticipate making in the coming quarters, and we will remain opportunistic as we structure the timing of those investments as a result, we expect our adjusted EBITDA margin to be in the mid 20% range for the second quarter.

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

If you'd like to ask a question at this time. Please press star one one on your telephone and wait for your name to be announced.

To withdraw your question. Please press star one again.

Our first question comes from the line of Stephanie Davis with SBB Securities.

Thank you for taking my question and Scott welcome to the Queen.

Thank you Stephanie.

I was hoping to hear a little bit more about growth at scale.

Having a bit of your catch phrase.

To hear a mainly about the growth adds back from the prepared remarks the presentation.

Correct to assume that that will be we'll be focused on the turnaround of manufacturer solutions focusing on provider mode or given the scale of your consumer facing brand are you looking at any of the growth areas like <unk>, one or other things like that.

Sure.

Thanks, Stephanie.

There is.

Bunch of things underway and rather than go through all of them. There is a couple that are incredibly promising that are already showing great signs of life. So in the core prescription marketplace.

Got this fantastic and unique value proposition.

There's a whole bunch of ways that are reflected in our merchandising and pricing within that marketplace and make sure that we get the most affordable.

Prescription for a particular drug branded or generic to consumers. So if you think about that value prop that moves in a couple of different ways, one of which in the marketplace is expanding to additional value propositions not only for cash.

But particularly against Medicare and commercial insurance and there is again, some wonderful things underway that really opens up the promise of.

What good Rx could.

Could continue to become <unk>.

Going back to the pharma, Matt So just think about that marketplace and that intersection of having a branded drug show up with a price point and the right price point that both a manufacturer wants and delivers incredible value to consumers that sort of the core of manufacturing solutions.

And it's unique to <unk>.

And so when we talk about the kinds of things that we want to do more and do more at scale.

It's leading into the things that build up the business of good Rx today, and kind of where we can take it.

That's very helpful. Thank you and then the next one is for cards.

And then gave US a lot of color on all the moving pieces in the guidance.

Could you just help us size the growth youre impact in <unk>, and how to think about that going forward.

Thanks for the questions Daphne and good morning, Yes, the grocers contribution to your revenue declined by roughly mid <unk> of millions of dollars between <unk> 22, and <unk> 23 at the time of the grocers either revenue derived from the grocery results actually growing but even if we ignore the growth and just add the difference in revenue between.

The two quarters that our total revenue would have been up approximately 8% year over year. If we look just at PCR or prescription transactions revenue, which is the most relevant component which came in at about $135 million.

In <unk> 2003 that number would have been about $170 million had big grocer revenue.

Come in as it had last year, which would put PTR growth at about 9%.

But for the issue I hope that's helpful.

Thanks, Doug.

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

Thanks, very much just one quick clarification for Carson and maybe a question for Scott.

Carsten on the revenue reduction I'm trying to adjust here you're right that the <unk>.

Contra revenue issue was is now a factory a reduction but it's also pharma solutions I just want to make sure I can understand the moving parts to that so that's the first question and then the second broader question for Scott and sort of follows up on Stephanie's. When you think about those growth opportunities are there things that you think.

You can change that could accelerate growth near term or are these all things that are going to take a while and there's a lot of long term growth, but theres not a lot of changes you can make to to make to improve growth in the near term. Thanks.

Hi, it's Andy I'll take that first one just a quick clarification. So our pls discounts our targeted incentive programs aimed at consumers, which are intended to drive behaviors like registering for an account or claiming a first fell for example, so there are related specifically to our prescription transactions business.

I think you alluded to the fact that they may have something to do with pharma menthol, but they do not they are related to our prescription transactions business and because a portion of the incentives are routed through customer arrangements. That's why they are treated as a reduction of revenue because we don't receive a distinct good or service forum.

Whether or not routed through customer arrangements in their <unk>. So again focused wholly on the <unk> business and driving specific behaviors on the part of our users like our engagement efforts for example.

Yeah. Thanks, and then in terms of characterizing growth.

If you think about the three things articulated earlier, a boy it looks really lean into the network.

Solidified.

It's best extent second is PTR, both be awesome that what we do and how do we expand intelligently and then the third is mansell delivery and expansion.

What what I think those represent our long term multiyear really strategically important things, where you put points on the board week by week month by month quarter by quarter. So there's a whole bunch of short term things underneath each of those containers, but those are really multi year events. So.

What is the what does that translate into financial expectations and how do those build.

I think it's really important right now for all of us to hit not only the range of commitments that we've just laid out but then work like hell to get on top of it and as these things land will be clearer about what kind of impact theyre going to have in the shape of the P&L going forward.

Great. Thanks.

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

Yes, thanks for taking the questions.

I guess first.

First Scott and carved in when we think about the guidance here and the way you kind of characterized a lot of.

The parts of your business.

Looking at <unk>.

<unk> is a nascent business and.

And kind of looking at a lot of the areas that you described it seems like you've kind of taken a step back in and how you're seeing your position in the market and it looks it looks at the surface that you're trying to manage sort of the expectations here.

What to expect at least in the near medium term.

Maybe Scott you can kind of.

Upon here as you've kind of evaluated where the company is at the moment.

Is this do you feel like you've.

Really level set.

Sort of how you're seeing the business performing.

Relative to what you think you can do as we as we move forward from here.

Sure let me.

This is early week three.

Officially in so before going into guidance, maybe to take a little bit of a step back even over the last couple of weeks I've been spending time with our teams leadership.

Priorities across the company and have also had the opportunity to get to a bunch of customers, particularly in menthol.

We have been doing a heck of a lot of both user flow reviews that have types of consumers and docs.

And again, not deep coverage, but touching those three areas.

And the fundamental value proposition of good Rx.

Its marketplace and the value we provide and then the extension of manned saw two branded drugs in pharma manufacturers, it's really powerful.

And at.

That's super important point, so there is a solid foundation.

We can build on here and there is things to do again, both in the core marketplace and in building up the names all business.

And the team here, there's a heck of a lot of really good people, who are energetic committed and talented.

So when we think then about what's here, there's stuff to do right and I think everybody who is an investor in the company. If you look back at the value proposition of the company and think about ways to build the business.

Youre going to find a whole bunch of things that to be positive about.

When we go to financial guidance.

The best thing I can do for you and for people on the call right now is almost give you my philosophy.

Which is on guidance.

The range is the.

<unk> outcomes.

Based on our best knowledge, we should deliver against and so to me that's been a commitment both places I've been before public and private again based on what we know and what the rhythm and pacing of the businesses and as a team.

Just work like Hell to meet your commitments you do it to exceed them, but so the guidance range, that's coming out right now as our teams.

The estimate of the committed range of where we are and again.

We are working like crazy not just to meet that commitment but.

Have everything land that we think is important to build the business long term.

And that should show up in the financial results.

I appreciate that and then just maybe as a follow up if we think about.

We're seeing clearly a big focus on men's all here.

And.

It looks like that's expected to be the big driver of the company building off this scaled base core business.

When we think about.

It seems like if we think about the pieces that drive it.

Fair to say, it's really provider mode.

The main driver for men's saw how much does the subscription membership.

And driving <unk> growth and then do Max play a role in that as well he is our understanding that.

Pharma marketing kind of maybe ignores just the transactional members really wants to focus on providers and subscribers since those are.

Repeat customers per se.

What's the relative value between maybe.

The different pieces from a from a manufacturer's perspective, when they look at the <unk> platform in.

As a as a tool for them.

Sure I'll take that one this is carsten Charles So couple of things first of all providers do provide an attractive growth vector for us and with the launch of provider mode. We're seeing multimillion dollar revenue streams associated with provider only deals already.

That said.

When you think about it when folks come to <unk> about a quarter of our folks visiting just the general users are coming to <unk> to look for a prescription branded prescription drugs and good prices on branded description drag so those users.

Even coming in as individuals are highly highly valuable their bottom of final script in hand, looking for an affordability solution and that's very attractive to manufacturers. So both prongs. Our original promise was more consumer focused and our newer growth vector providers are highly irrelevant.

More broadly I think as we look at the business.

The macro environment for pharma menthol is a good environment generally I think we've seen some short term pullback by manufacturers in terms of spending, but we're continuing to see the ongoing shift to digital which is a tailwind, especially as we look forward and our clients are confirming theyre getting great rois.

From that perspective, we think that aspect of the business was also very solid. So we think it's really up to our execution and as Scott said there are some bigger lumpier deals in our pipeline.

Some of them are more performance oriented so we will have to see how they track to know exactly how much revenue of those generate.

But we're looking forward to those with great anticipation and we expect to see Q O Q sequential growth going forward over the next few quarters.

I'd just add two quick things over the top one is.

The real unique foundation of our marketplaces this intersection of consumers their doctors and <unk>.

The drug itself and if youre a branded manufacturer.

Youre spending outrageous sums of money in different media components to really get to that point and thats sort of the unique value proposition that good our excess today.

If your branded manufacturer with any sort of cash back or co pay cards that are really aimed at market access.

We're we're phenomenon.

We're seeing that in the campaigns and some of the feedback from manufacturers. So that's <unk>.

Really just the Super high return.

And then in terms of awareness and hitting the audience. We're building up tools, whether it's health or provider mode, but also allow people to reach audience. So there is really two components.

What we have that I think are.

Long term valuable to branded pharma.

Great. Thank you.

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

Great can you guys hear me.

Yes, we can.

Kurt.

Hey, Hey, guys, Adam Dan for Mark Mahaney, just a couple of questions first question just on Pts to clarify if you can.

Kind of walk through like the magnitude of the gross or impact in the next few quarters.

Or are we expecting this to kind of moderate through the next couple of quarters that I think you said that by Q4. This year, we should fully comp that impact. So just to confirm that and also maybe just like how should we think about like ex grocer growing 16% year over year, how should we think about the exit rate of this business in a more normalized.

And a condition.

Sure Great questions, John I'm happy to jump in so we talked a little bit in response to on the prior questions about the impact of the grocery issue.

On <unk> <unk>.

Three relative to <unk> 'twenty, two being in the mid thirty's or millions of dollars just off that delta. So it gives you a rough sense of the headwind, we're still continuing to face as we look Q over Q or more pointedly year over year I think going forward.

When we look at where we're going to lap the growth ratios that will happen in the third quarter and the growth rates you fully manifested in the second quarter of last year. So as of third quarter, we would expect to we'd expect to lap that issue.

And at that juncture, we will be able to reflect the businesses sort of more comparable outcomes without having to call out would be adjustments that you did for <unk> 'twenty three relative to <unk> 22, and then subsequently to then that's when you'll see the business performing.

On an equivalent basis to the prior year. So in those future periods is when when we're really going to be able to show that comparison.

Yes to your point, we have been seeing X growth or growth or volume growth in the interim.

And that's been a big plus for us as well to see that volume coming into the business.

I think at this point, it's a little hard to parse it to know how much of the volume is shift and how much of the volume is net new given the grocers pulled out of the picture and we'll know more about that tier of course, as we lap the growth ratio in the third quarter.

Great and then if I may.

One follow up on.

Probably a bigger picture question on the pharma advertising the manual.

So what is required to scale this business.

Or maybe asked another way like what is the kind of the current investment most focused on is it adding experienced sales building a better AD tech platform better measurement et cetera. So if you can just kind of talk through the investment priorities here. Thank you.

Sure. This is Scott.

We'll follow up in subsequent quarters on this but today.

There is a series of.

Awareness programs that are running.

That are pretty consistent and fixed rate and then we've got a handful of pretty large volume.

Creative marketing campaigns with large manufacturers that are high intent volume driving programs.

That would fall into co pay cash back, but they are really performance.

Related execution and those are just starting or are in flight.

And just the ability to both.

Scale and ramp those kinds of programs naturally within the marketplace deliver grow them kind of consistently or just things that we just need to work through and that's a combination of people.

People talking to our branded partners and making sure that expectations are aligned between the two which are.

Account managers, and then add operations, which exists but again builds rhythm about how you actually deliver these programs within our systems are the things that we're just working through the mechanics of so.

Theres nothing thats.

That's super far afield here its just the natural part of building a business.

Okay. Thank you Scott. Thank you question.

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

Good morning, and thanks for taking the question.

Maybe if I could just diving a little bit more on the <unk> partnership as it starts to rollout as it gets built into membership base. How easily is it for you to track the discounts are being applied within that every north face in the partnership.

As you think about the economic impact of that over time first is there anything in guidance this year.

Relative to that partnership specifically and then how do you think about the checkpoints and proof points. So over the next.

235 years to show if that partnership is driving success that you want.

Thank you Michael for the question, we've been really pleased with the results our express scripts collaboration and as we said in the prepared remarks. This program prices are empowered by good it contributed to our results coming in above expectations. So this collaboration lets us reach more consumers.

Let them drive greater savings lets us improve awareness and affordability.

Because of our nature of our green with ESI I can't speak specifically to a few of the items you mentioned about discount and such but when we look at the market size here and how this program can benefit our business. We believe ESI represents over 60 million relevant lives and we don't think were very highly penetrated into that at all.

Time so.

If we do assume that this program.

We'll continue to work well for ESI and for us.

And we assume that will be the case going forward. So we think there's really potential for significant growth. We think this program is a great tour.

ESI customers and for the consumer is involved and so we're very excited about it.

And I'll follow up Trevor as well Hey, Michael.

I think with respect to economics. The main point to make here is these transactions flow through our <unk> network model exactly like any other transaction that flow therapy beyond network models.

When I think about it on a per claim or per transaction basis.

Amount of revenue that's generated better amount of revenue.

<unk> the amount of revenue as it would be off the rest of our business I think the real distinction and one of the reasons. We're so pleased with the ESI.

Slash ever North program is that we've taken a model, where we traditionally have to pay upfront attack and marketing dollars to acquire users and now we have ESI effectively in a role that similar to a channel partner partner routing those lives transactions et cetera to us.

We've taken a model, where we have been able to instead of having to pay upfront for users variable I've, it and benefit from that reality.

Thanks, and then just one more quick question.

Carsten for you I think but Scott you may have a view.

You did $9 5 million of buyback in the quarter that being said you have almost $140 million left obviously, you've noted some of the challenges disappointments with growth in the stock sell offs.

Cash positions incredibly strong cash flow positive why not do more faster.

Hey, Michael This is carsten talking first of all so.

I think there are a couple of reasons here first as you have seen us consistently buyback in periods when we haven't had.

So we've been consistent in that approach that can be the last time as an example of a client when we didn't do buybacks in connection with MPI.

When we did our reduction in force in August of 'twenty, two and then around the FTC issue, but in open windows. When we can buyback we have.

I think other than that in terms of the rate at which we're buying back.

Of course subject to a certain volume limits on that as well. So we look at this from the perspective of staying within the volume limits.

Managing the cost at which we're buying back and taking advantage of the open window opportunity that we've had in the past.

Our next question comes from Dan Bernstein with Wells Fargo.

Hi, Thanks for taking my questions.

Commented on having more direct contracting relationships with retail pharmacies.

What percentage of your <unk> revenues coming from direct contracting relationships.

Okay.

Thank you Dan for the question.

Yeah.

We've spoken about direct contracting here the direct contracting with retailer helps us balance our revenue and their margin and it lets us have the new levers such as the Prs incentive that we've spoken about to drive incremental volume.

We are focused also in those efforts to ensure retailers don't disadvantage correct and has worked really well. This is one of the areas where.

Quite enthusiastic about relative to what's gone, particularly well in the first.

First quarter.

We have a hybrid model that we've spoken about that insurers network stability and lesser collaborate closely with our partners for mutual our mutual success and profitability. So this lets us help the retailers drive their strategic initiatives and improve their unit economics and it's also maintain this.

Strength of our own economics, and while doing this we have been able to maintain our marketplace model and Pbms and that has continued to strengthen them. So this is really all about allowing us to align incentives with retailers to drive incremental volume, which we're really excited about.

To your question more specifically about percentages.

What I would like to say that we're really happy with our direct contracting progress and we plan to continue and potentially even accelerate.

<unk> down that path.

Okay can you maybe just walk us through how the economics work under our contract and our instruments, maybe both on the revenue side and marketing related costs.

Sure.

I'll, maybe speak and see a person with more to add but what I would particularly highlight here is we've now been doing this hybrid contracting approach for.

For several quarters and you can see in our financial results to some extent how that work, but you can see that.

We exceeded expectations on that BTR business.

Being able to really do.

Hey, good job.

Going into this new networking construct with its hybrid networking.

<unk> solutions that help our retail partners and align those independent and also do work for us are our financial financial results.

Yes, Trevor I'll jump in on that one too.

The hybrid contracting is definitely attractive to us given the point that Trevor made about the wins, we get I think from an.

Economic perspective going forward.

Trevor said it allows us to balance our revenue, whereas with retailer margins. The other thing. It allows us to do is to create incentives for our retailers to help us frankly in terms of driving volume and we're looking forward to doing more of that.

As we look forward to doing more of that that may entail some trade offs on our part as well.

That said that's true.

However is that if you look at <unk>, even as we've continued to drive more volume through.

Our hybrid model and direct contracts with retailers, you see PTR per Mac as being stable.

I guess I get to comment over the top on this one too because this is something that.

We will continue to work and share with everybody on the phone and I'd say this is Andy.

And in the area, where Trevor healthcare extra.

Expertise Claude.

It's really havent all of it is energy around this is going to be really helpful and we're working right at the hip together basically.

Have all of these things land in a way that is phenomenal for what you'd call all of our channel partners, but most importantly continues to add value to the marketplace. We have like best in Northstar.

All of this effort around how we're engaging with retailers and the Pbms is all about again, having honestly the most valuable prescription marketplace, which is access and affordability around prescription medications.

Okay, and then maybe one quick follow up do you expect Mac growth from direct contracting to be faster or slower versus your traditional channel.

Thanks.

I'm not sure. This goes to I think to your point, which would be we didn't answer directly last time, so I apologize for that.

Around marketing as well, so marketing isn't really impacted at the consumer level by how we end up rather than a transaction on the backend.

And Mac growth is impacted to the extent that we can drive continued even better pricing through some of our direct contracting relationships.

Right.

Broadly speaking to the extent that that.

Direct contracting exist it doesn't really impact our opex structure on the marketing side or our CAC and it only impacts the volume of users differentiated from our traditional model to the extend we secure even better prices through direct contracting.

Thanks.

Our next question comes from the line of Daniel gross site with Citi.

Thanks for taking the question you mentioned that more of your pharma solutions business will be coming from pay for performance contracts than flat fee. This year I'm curious if there is a structural shift in how.

Pharma manufacturers are contracting with yet.

And what are some of the performance metrics.

That.

Built into those contracts and what's the upside there too to your guidance stretching performed better than anticipated.

Sure. Thanks for the question.

Carson speaking here I think first of all historically, we have been focused primarily on flat fee deals and a big piece of that has been because those original deals where farmer manufacturers first engaged with us where around awareness and on the awareness side.

Those deals made more centers flat fee, both for us and manufacturers than they did is as more of a pay for performance. We're now shifting towards deals that are specifically about access to a greater degree. Some of the example that you can see in that are quite public or when Blake that $200 off decks com.

Device packages and those kinds of very very large discounts where manufacturers are going direct to consumers to offer compelling pricing, that's often lower than the pricing that they received through whatever other benefit whether employer or otherwise they would receive.

Those are really access versus awareness solutions, giving towards access to these medications and Thats an avenue, where we believe we can number one be very successful at driving volume. So we want to capture some of that upside.

Number two where manufacturers are looking to lean in even more deeply.

Go around to some degree the traditional economic.

Rick models of pharma distribution, so that intersection of us, believing we're really good at that given we have the consumer and the HCP to drive volume and drive the actions on the <unk> side and number two.

<unk> being a being willing to pay more in total on a pay per performance versus flat fee.

Makes that model attractive for us So I think as we look forward through the rest of the year, we see number one more of those deals happening in our future and number two to your question about performance.

To the extent, we drive those deals.

Better than we include.

And the numbers in our guide right. Now then of course will over perform the guide and I think at this juncture. We're just starting down this performance oriented path. So we're taking a very reasonable approach to how we think about them and we will likely be able to give you an update on the upcoming calls to the extent where we're.

Crushing at as we hopefully well.

Hey, it's Scott over the top I just.

Well said cars and I think there is one point to reiterate that's important which is.

There's two kinds of things that we're talking about here, which is.

Which is the access.

Low funnel access programs, and then awareness and those can be different but they're also they also work in combination and partnership and so the way that we're talking to branded partners.

Number one number two and sometimes it's a combination of both.

And so the value proposition that we have works in both ways and it's particularly powerful in combination.

So we're going to continue to build the business across both of those areas and the costumes well put point there is inflection of volume on some very large campaigns.

I think from a growth standpoint, we want to be able to deliver that repeatedly and do so naturally.

And Thats the things over the next couple of quarters that we're going to do but again. It holds it holds a lot of problems.

Got it that makes sense and as I look at guidance, particularly keeping EBITDA.

Guidance at 25% margin.

For the full year it does imply a bit of margin margin degradation in the back half of the year.

Is that largely due to just decremental margin from lower pharma manufacturer solutions, because yes, theoretically mathematically you get a bit of an uplift from.

From this contract accounting change and one key margins were obviously very strong due to that one time issue. So curious, what's causing that degradation and margin EBITDA margin in the back half of this year.

So first of all this is Carson speaking thanks for grasping the impact of the Pls discounts, you're exactly right that to the extent they shift opex from at the mammoth into Contra Rev.

Margins inherently go up I think the second point, though and the more important one is particularly at Scott comes on board and we continue to reevaluate our marketing you have heard us.

Prior quarters say hey.

I think first time, whereas when we're talking in November on our earnings call. We said end of year can be a decent time to spend that because folks on the consumer side or entering into a new plan year, new deductible phases et cetera at that juncture, we felt like it wasn't a need for us to spend up and so we pushed it out a little bit.

But I think as we continue to evaluate our opportunities to do marketing and grow the business in a more aggressive way, we wanted to be able to preserve that capacity and not surprise folks because we continue to see new innovative ways that really works for us to drive marketing harder we've seen our payback to remain <unk>.

<unk> with what we've said in the past eight month range and we've also.

<unk> new opportunities to market really effectively like for example, the PFS discounts, which are working great for us. So from those perspectives preserving capacity is really important and that's why we're indicating mid twenties.

Got it thanks for the color.

Our next question comes from Craig hadn't Buck with Morgan Stanley .

Greg Your line is now open.

Hi, Yes. This is Macquarie on for Greg. Thanks for taking my question and congrats on the quarter I just had two questions kind of piggybacking off the last question on sales and marketing spend in Q1, I know you talked about kind of being selective.

In Q1 can you kind of talk about how that evolved over the quarter with Pos discounts and maybe as you go on throughout the year, how you view the puts and takes around marketing spend and.

Then maybe one for Scott as you look at kind of the opportunity set to scale. The business. How do you see where do you see the biggest opportunities to do so well kind of lowering your your tax because you go for it.

Thanks for the question I'll start off and then hand to Scott have you indicated I think Larry.

Looking at marketing generally from an evolutionary perspective through the year.

They are generally isn't a ton of seasonality into marketing, so thats really discretionary to us.

And as we think about it and leveraging our discretion. We're purely opportunistic. So we look at whats working well put more dollars behind that we do that in relation to how the cost of marketing vehicles shift over time as well as the returns that we're seeing over time too you'll also see us taking approaches that are completely <unk>.

Will lag the evercore at ESI price to share offering that we've talked about we're a shift from using our own marketing dollars effectively to channel model. So I think in terms of marketing generally like I said in response to a prior question.

We're preserving the capacity to do more and more on that front.

Again, just because our paybacks are remaining consistent and we view them as really attractive.

You had a couple of different questions in there, let me go marketing and <unk>.

Maybe address said that then growth levers so marketing marketing is an investment here and this is something that the company in its history has done what I think really elegantly and times, saying that I think is particularly clever in Austin is the presence of doctor's offices.

Historically was the good R X card.

And if you spend time in doctors' offices.

Here, both docks and health care professionals talk about it it's a super natural way to put the value proposition of <unk> right at that point, a script and so that's strategic it's important both from a brand standpoint of awareness to consumers and docks and it connects right to that moment of the script.

That is strategic marketing.

Yes, there is.

Things underway and with marketing to match those.

Rest of consumers.

And doctors, who not only no good or excess but love it.

And then also to make sure that we're getting the best discount possible to consumers lower down in the solid so I could answer this and marketing speak of upper funnel and lower funnel and touch points, but each of those things for good Rx are really important.

The historical strength of the business has grown into a really big marketplace with pretty good brand awareness and it's something to invest in with the biggest being effectiveness.

And so it's something that we're working on and digging into with the teams and making sure that we're honing in and really trying to hit those points of difference whether it's discounts in the app at the point of script presence at the Doctor's office and presence at retail.

I would say broadly also and again this is back to <unk> being up a awesome marketplace.

It's known and loved by many but there's still opportunity.

It's phenomenal to have Doug really focused on this because <unk> role in the healthcare system.

We've got a unique position and it's something that now.

Even in my early days.

Terry.

Good rx's behalf with feeling a more people, particularly docs and patients should know about <unk> and so that's just getting the message out into the world about our role in what we can do in the ecosystem minutes honestly awesome to have forced multiplier time to be able to do that.

Great. Thanks, I'll hop back in the queue.

Our next question comes from the line of Julian you Ms Cheng with <unk> Securities.

Yeah. Thank you Ann.

Good morning, everyone.

First question is around providing more advanced.

You have 450000 prescribers engaging with the company since launch maybe provide some details around the engagement level like risk tools have you seen the highest engagement is it cost comparison or coupons hitting on news feed I'm trying to understand like the scale needed in this part of the business, where you can go to pharma manufacturers to get more.

With you a bit more launches a campaign clearly youre competing with some other players who talk about auto life in the range of 10 into one for their pharma clients. So trying to understand if the risk of being too early on your pitch in the in this part of the business.

Sure.

Jump in first year Clarkson speaking so on engagement of providers we've been.

Very pleased with the performance that we're seeing like we talked about on the call over 450000 providers, who have engaged their provider mode. Since we launched it I think the other point that pleases us and I'm, particularly happy about is that we see provider mouser are monthly active users doubling.

<unk> December of 'twenty, two and March 23, so over a relatively short period of time as well.

Which is important for us I think the other thing Thats important about it is similar to consumer engagement engagement with providers really helps on the consumer engagement side, we see more highly engaged consumers have higher LTV, we've talked about that in the past we see the same thing where we can associate more PTR prescript.

Transactions revenue claims with a given health care provider and correlation with how theyre.

They're too whether theyre solely identified providers, we know their NPI, even though they are providers, whether they're providers that.

Have been activated meeting we've offered them a chance to join provider mode may have accepted or whether they have fully developed accounts that are completed so as we look at the <unk>.

<unk> levels were pleased to see that not only is that driving our farm and small business. Because obviously these folks are very valuable to manufacturers and providers are a big growth factor for us, but they actually drive.

And we will continue to drive we expect our base business as well as rider.

Thanks, guys and then my quick follow up on the thanks for all the color on the <unk> outlook by segment, but can you share your updated revenue growth expectation by segment for the full year almost unchanged <unk> beyond 10 million discount you called out.

At this point I think we're in a position where we're going to be sharing.

More splits on the full year to lender, but you are quite right that the Pos discount headwind estimated at about a $10 million effectively decreases revenue by that amount all else being equal that's totally accurate and glad you captured classic after that.

Okay perfect. Thanks, a lot.

Our next question comes from Jonathan Young with Credit Suisse.

Hi, Thanks for taking the question just following upon that so the deals that are expected to come in this year, where do you see.

Rich on deals that were originally delayed.

A quarter or two ago, and then are there other deals still outstanding which could come in <unk>.

Guidance for this year.

I think yes to both Jonathan is the short answer we did have some deals that we anticipated might come in at towards the end of last year that we're now seeing coming in this year, particularly on the performance side.

But the pipeline remains very very robust and beads. So from that perspective, we do continue to anticipate that we will see incremental deals landing throughout the year as would normally be the case I think.

Perception that foreign manufacturers lock and spanned late <unk> early <unk> and they said well I think thats generally true.

That doesn't mean that they're necessarily specific about.

What programs, they're going to run and specific about the timing of those programs at that point just in terms of general buckets of money. So through the year, we continue to see our pipeline for that year get more and more robust well past the midpoint of the year.

Great and then just on price for sure you said that your guidance it seems that consumers potentially hit their deductibles due to seasonality, but I guess when I think about the does that mean that there is a bit of a limitation in terms of the benefit youre going to see some.

Price assurance business on that it should moderate effectively throughout the rest of the year to the point where it is.

Almost a cap on how much.

Growth comes from that business.

Yes, I think that's a great question Jonathan.

I think your your perceptions are generated rate, meaning that.

Because of the way the price of share program works at routes the user to whatever is going to be cheaper for that user.

And in general when users and <unk>.

Where they might be paying a co pay or deductible, which good or actually can be it will erode the transaction to get our accident will benefit from that as part of our PTR and our revenue per Mac.

As we proceed through the year. Some of these users may well hit their deductibles and they may well not have to pay out of pocket costs in the latter parts of the year that are as high as we earlier parts of the year. So as we look through the lens that we view that.

ESI collaboration or ever north collaboration as potentially decelerating as a proportion of revenue and its claims received through the year.

Thanks.

Our next question comes from the line of Scott <unk> with Keybanc.

<unk> can you hear me.

Sure Ken good to talk to you Scott.

Hey, guys I just wanted to drill in on par of behavior, you're seeing.

In the release, you said youre seeing slight moderation in spending from pharma customers, but then guided to 26% sequential increase in revenues on the <unk> segment for Q, what's really driving this.

Yes.

So in the menthol side I think from a macro environment perspective, we are seeing generally a deceleration I think on the flip side. You also see foreign manufacturers talking about the growth in digital spend we're hearing that from our customers. We're also seeing that in the general market research that talks about digital growth growing.

Temporary in the double digits.

Materially higher than base pharma <unk> spend.

That said, we do though is believe that the biggest determinant.

Success is what we do here were a very small proportion of the overall Tam right now $30 billion Tam all in split between consumer and HCP and in that context of the really big Tam. We think the actions that we drive or the absolutely most important ones here as we continue.

To take share Thats, where we see the potential for growth up to $26 million in revenue from farm event saw just in the next quarter, which is more revenue than we did in the whole of 2020. So from that perspective, I think as Scott said, we've got a highly engaged highly competent highly energetic sales team that's going out there.

<unk> and driving that part of the business and we continue to we continue to see and expect sequential growth from that.

As we drive through the rest of the year I think no question there.

I'd like to maybe characterize state of play again, and this will be a repeat of remarks and comments, but I think it's helpful of that question.

There is there's a lot of value here at <unk> around again, the marketplace, we have four generic and branded drugs and matching those drugs to patients in a really effective way that's what we're doing and demand saw programs that we're talking about are things that we can do.

<unk> in partnership with.

Branded pharma.

Yes.

We're sitting at.

Enterprise Technology company now the rhythm and pacing of programs and spend over time.

Have slow to it in terms of big deals and what gets booked and how does it ramp within the system and you go through those labs to be able to get to that level of predictability.

I know everybody's kind of questioning and thinking about it but really this is the new guy.

My observation is we're just at that point, where there is real proof points here and now the work is about intelligently scaling it and part of that is your not just your pipeline, but then once that pipeline land, how do things ramp up alright, and everybody wants that to be rhythmic in.

Predictable and you get to that point and we're right at this point within good Rx, where we're building those muscles.

That's not super hard curing cancer type stuff you just run through your run lapsed couple of times and you get there and we're going to get there.

That's super helpful color and maybe as a follow up there as you are trying to smooth.

Grow this business, taking market share and kind of smooth it with more recurring contracts are you seeing any shifts from the behavior of pharma clients. This year versus prior years in terms of mid year, upsells or more onetime lumpier AD campaigns I'm, just trying to get an overall sense of the market this year.

Here versus the pandemic years. Thanks.

Good morning.

I think we are and we look at the market this year.

We again see manufacturers.

We see manufacturers from.

Okay.

Spend perspective be more.

Paid I guess is the right word so we talked on earlier calls about deals taking longer and spend being spread over more time.

As we work through these with our counterparty that the manufacturers and I think we continue to see that reality, taking place taking place now as well so from that perspective.

I think on a year over year basis, what I'd point to Lowes is.

A change in sort of aggressiveness of timing and how fast they go from talking to us initially to actually having a deal in market producing results and therefore recognize more revenue for us.

I think thats still thematic Lee.

What we're seeing at this point.

Thank you.

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

Hey, good morning, guys and thanks for taking the question.

And I'll go with just one here I guess it sounds like the pharmacy relationships are becoming more important to you guys direct contracting I guess can you talk about the competitive environment for those relationships and I can't imagine that any of the retailer relationships are exclusive so how do you differentiate and make sure that you guys screen at the pharmacy counter.

Yes, maybe.

I appreciate the question, maybe I'll speak a little bit broadly about competition and then try to.

Kind of narrowing on on not nuance of it.

When we look at the competitive marketplace, we don't think the.

The competitors that are out there in various different.

PCR or even permanent so are affecting our.

Our growth rate here.

We deliver a great product.

We believe we.

We're still the market leader, we believe we have the best pricing and market specifically, our last analysis indicate that for over 87% of the top 30 prescribed medications are top pharmacies, we have the best price and so that's why so many providers refer patients to interact that's why we are in MP.

90, little product that really really works and so.

We continue to have.

Rate strength, there and as we talk more specifically about the.

The hybrid contracting strategy.

We're just going out there, making these relationships and letting using them to take where we're selling where we have the best brand recognition, where we have the.

The best product, where we have the consumers and providers, who love us and.

Our retail partners to.

Drive incremental volumes in ways that work for them help them drive new programs take sort of innovative things like what we're doing around.

Pricing in the point of sale incentives to be hyper focused on specific consumer consumer segments.

And bringing it all to market so that we can.

At the end of our position and really help help with both consumers and the partnership.

Thank you.

Our next question comes from the line of Joanne finally with UBS.

Yes, thanks, guys for taking the call.

One question I don't think was hit on.

So you mentioned Carson that core growth ex kroeker was up.

15%.

And it sounds like net of the Contra revenue impact <unk> would be up another point or so from there.

I guess double where you mentioned that you work on last year.

Kroger.

I was mainly wondering what the delta is here.

Why.

And the growth of.

<unk> gone faster.

And is that sustainable.

On an ex Kroger basis through the year.

Thanks for the question, Yes, I think when we look at volume across pharmacies.

Ex <unk> ex grocer, we see the growth being up 16% year over year, and 3% Q over Q I think that's what you're referencing.

I think.

Looking forward to when we lap the growths are issue.

Applying the <unk>, 16%.

Which I think last quarter was 12, 5%, if I recollect correctly ex <unk> ex grocer growth.

In that context, I think we cautioned then two that simply using.

While ROI growth rate, maybe a little aggressive because it's a little difficult to parse out how many of those users are truly incremental versus maybe switch from the grocer to a different pharmacy. So I think we're not forecasting that the growth rates for prescription transactions revenue as a whole will be anywhere near it.

That higher 16% Y O Y represented by the non grocery pharmacy.

Growth into <unk> 'twenty three is that helpful.

Yes, I think that helps clarify so.

You think the.

Beat there the 15% 16%.

Versus like a high single digit as it related to still a little bit up.

Kroger capture.

Yes.

I think our volume growth.

Includes both both new users and also that and I think the other reality too is like we talked about in response to it.

And earlier query the there are elements of the PCR business like for example, the ever north piece of it whereas we have deductible phase.

<unk> deceleration from both parts of the business. They are quite small at this point still but nonetheless.

You should probably know that.

Hey, it's Scott two things on your question one of which is the fact of retail shift relative to volume either.

Add a grocer or not is again reinforces the value proposition of <unk> and the importance we play in.

The nature of that question what.

You are looking for and then people in the outside World as Hey give me the range of once retail.

And it's the importance of all of the retail efforts that are underway, which is.

Once that's cleaned up.

The volume range of the business rhythms that one.

And then what are the growth areas to build that volume out based on.

Deep value proposition to consumers and drug modalities and times of healthcare plans and Where's that intersection so if youre looking for athene in the core business around efforts, whether its discounts at the point of sale or spending expanded <unk> into more insurance use cases, it's again.

With that macro Northstar.

The value proposition that is allowing us to fulfill more prescription medications alright add step one is making sure that that's available at every retailer and once we get the set up then you can get more precise about your own expectations and performance.

On both volume and revenue.

For what that business looks like going forward.

Great. Thank you for the color.

Our next question comes from Steven Valiquette with Barclays.

Okay.

Hi, Thanks. Good morning, Let me also offer my congrats to Scott on joining the company.

My question today is really kind of more at a high level just with some of the PVM reform legislation, making the rounds that will potentially.

Eliminate the ability for many pbms to make any spread profits on retail prescriptions I guess I was curious whether or not this is prompting any pbms. This year in 2023 to reach out to <unk> and wanted to potentially increase their volume with you guys going forward and the cash portion of the retail market just to still try to capture some profits on retail related.

Scripps and I guess somewhat tie it into this just looking for any update on the outlook for to get our <unk> take rate for not so much 22, if we're really kind of think it beyond 'twenty three could there be any shift in the fee splits at <unk> is really in favor of <unk> might be evolving environment. Thanks.

Thank you for the question, let me speak to <unk>.

Generally maybe for the regulatory side and then.

Also speak to that.

That aspect.

The PVM.

Since we founded <unk>.

12 years ago.

We've seen a lot of proposals idea of policy crop.

Administration.

To some extent, we spoken about regulatory environment.

In every earnings call as a public company.

We are helping.

Bring improvements to consumers.

Wallet.

Affordable prescription in affordability and accessibility in ways that I think are.

In line with what all parties want here when we look specifically at the inflation reduction Act, we do not expect a material impact on our business from it.

Lot of that focus is on the negotiation of price for relatively small group.

Higher cost drugs.

And so relative to our PCR business, we don't see any meaningful impact that that would have or or too nuance you mentioned around how potentially PVM.

Contracting could could evolve deep cut.

The regulation, we don't expect any meaningful impact on our <unk> business.

We're also on the fundamental business.

We.

We continue to work with our <unk> partners, we think.

In that marketplace.

Just grown stronger.

And most of all I would say, we're just really proud that we've taken a market based solution.

We've put in place that has saved consumers over $55 billion to date and this has helped consumers.

Relative to the Pbms, specifically I don't.

I don't think there are specific to speak to you there, but I don't expect any.

Meaningful changes too.

To take place in any of the aspects you mentioned because of regulations.

Got it okay alright. Thanks.

Thank you.

Our next question comes from the line of Robert Simmons with D. A Davidson.

Hey, Thanks for taking my question Oscar.

Can you specify the impact of one time deals on pharma <unk>.

<unk> versus <unk>.

Sure so.

When we look at our historical period and looking at our pharma manufacturer solutions and onetime deals, which we define as deals where we've taken revenue from there given counterparty at once and then they havent come back and the one time, but I think there is maybe I need to clarify that a little bit.

Those amounts are in the millions of dollars and had been previously.

Early quarter, so as we shift away from that we see Delta is of again millions of dollars of revenue Q O Q.

Got it great. Thanks.

And philosophically my ahead in this volatile natural part of building up.

The business so.

It's.

Figuring out what really were.

<unk> for both our partners and us in a highly repeatable way, it's just the natural.

Natural part of building out the business.

I'm showing no further questions in queue at this time.

This concludes today's conference call. Thank.

Thank you for participating you may now disconnect.

Okay.

[music].