Q4 2023 GoodRx Holdings Inc Earnings Call
Okay.
Okay.
Operator: Ladies and gentlemen, thank you for standing by, and welcome to the GoodRx fourth quarter and full year 2023 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 Notaro, Vice President of Investor Relations. Ms. Notaro, you may begin.
Speaker Change: Ladies and gentlemen, thank you for standing by and welcome to the good Rx fourth quarter and full year of 2023 earnings call.
Speaker Change: As a reminder, today's conference call is being recorded.
Speaker Change: I'd now like to introduce your host for today's call Whitney Natera, Vice President of Investor Relations. Mr. <unk> you may begin.
Whitney Notaro: Thank you, operator. Good morning, everyone, and welcome to Goodrx's earnings conference call for the fourth quarter and full year 2023. Joining me today are Scott Wagner, our Interim Chief Executive Officer, and Karsten Voermann, 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, without limitation, statements regarding management's plans, strategies, goals and objectives, our market opportunity, our anticipated financial performance, underlying trends in the business, our value proposition, our potential for growth, collaborations and partnerships with third parties, including our integrated savings program, our hybrid retail direct and PBM contacting approach, anticipated impacts of the deprioritization of certain solutions under our pharma manufacturer solutions offering and our cost savings initiative, expected impact of the wind down of Kroger Savings Club, the amount, timing and benefits of our new share of purchase program, the expected impact of the macroeconomic environment on our business and the expected impact of recent outages disclosed by UnitedHealth Group. These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties, and other important factors.
Whitney Notaro: Thank you operator, good morning, everyone and welcome to <unk> earnings Conference call for the fourth quarter and full year 2023.
Joining me today are Scott Wagner, our interim Chief Executive Officer, and Carsten Gorman, our Chief Financial Officer.
Whitney Notaro: Before we begin I'd like to remind everyone that this call will contain forward looking statements.
Whitney Notaro: All statements made on this call that do not relate to matters of historical fact should be considered forward looking statements, including without limitation statements regarding management's plan strategies goals and objectives, our market opportunity our anticipated financial performance underlying trends in the business our value proposition.
Whitney Notaro: Our potential for growth collaborations and partnerships with third parties, including our integrated savings program, our hybrid retail direct M. P. B M contracting approach anticipated impacts of the de prioritization of certain solutions under our pharma manufacturer solutions offering and our cost savings initiatives.
Whitney Notaro: The impact of the wind down of Kroger savings club, the amount timing and benefits of our new share repurchase program.
That did impact the macroeconomic environment on our business and the expected impact of recent outages disclose by United Health Group.
Whitney Notaro: These statements are neither promises nor guarantees, but involve known and unknown risks uncertainties and other important factor.
Whitney Notaro: 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 statement. Factors discussed in the risk factor section of our annual report on Form 10-K for the year ended December 31, 2023, 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 management's estimates as of the date of this call, and we disclaim any obligation to update these statements. Even if subsequent events cause our views to change,
Whitney Notaro: 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.
Whitney Notaro: Factors discussed in the risk factors section of our annual report on Form 10-K for the year ended December 31, 2023, and our other filings with the Securities and Exchange Commission could cause actual results could differ materially from those indicated by the forward looking statements made on this call.
Whitney Notaro: Any such forward looking statements represent managements estimates as of the date of this call and we disclaim any obligation to update these statements.
Whitney Notaro: Even if subsequent events cause argued to change.
Whitney Notaro: In addition, we will be referencing certain non-GAAP metrics in today's remarks. We have reconciled each non-GAAP metric to the nearest GAAP metric in the company's earnings press release, which can be found on the overview page of our investor relations website at investors.goodrx.com. I'd also like to remind everyone that a replay of this call will become available there shortly as well. With that, I'll turn it over to Scott. Thanks, Whitney.
Whitney Notaro: In addition, we will be referencing certain non-GAAP metric for today's remark.
Whitney Notaro: We have reconciled each non-GAAP metric to the nearest GAAP metric in the company's earnings press release, which can be found on the overview page of our Investor Relations website at investors <unk> Dot com.
I'd also like to remind everyone that a replay of this call will become available there shortly as well with that I'll turn it over to Scott.
Speaker Change: Thanks, Whitney and thanks to everyone joining us today to discuss our fourth quarter results.
Scott W. Wagner: And thanks to everyone joining us today to discuss our fourth quarter results. Today, I'd like to highlight the meaningful progress we're making on our key priorities, and then Karsten will take you through our Q4-23 financials and expectations for Q1 and full year 2024. I'd like to start by framing the fundamentals of what we do, the critical and growing consumer needs we serve, and the importance of the Goodrx value proposition, which is saving people money on prescriptions. In the history of the company, Goodrx has saved consumers approximately $70 billion. Over the history of the company, Goodrx has saved consumers approximately $70 billion. And just last year, we saved consumers approximately $15 billion. There's a big fundamental value. Well, health care is highly complex. The role Goodrx plays is pretty simple.
I'd like to highlight the meaningful progress, we're making on our key priorities and then Carsten who will take you through our Q4, 'twenty three financials and expectations for Q1 and full year 2024.
Like to start by framing the fundamentals of what we do the critical and growing consumer needs, we serve and the importance of the good Rx value proposition, which is saving people money on prescriptions over the history of the company good Rx to save consumers approximately $70 billion.
Speaker Change: And just last year, we save consumers approximately $15 billion theres big fundamental value here.
Speaker Change: Ill health care is highly complex the world. Good Rx plays it's pretty simple.
Scott W. Wagner: Consumers today are facing rising health care costs, with plans continuing to increase patient out-of-pocket costs, like deductibles and co-pays, and increasing gaps in drug coverage with narrower formulas. We believe these market coverage trends are stronger than they've ever been, and we don't expect them to change. Think about how Medicaid redetermination alone has limited access to funded benefit plans.
Speaker Change: Consumers today are facing a rising health care costs with plans continuing to increase patient out of pocket costs like deductibles and co pays and increasing gaps of drug coverage with narrow formularies.
Speaker Change: We believe these market coverage trends are stronger than they've ever been and we don't expect them to change things.
Speaker Change: Think about how Medicaid Redetermination alone has limited access to funding benefit plans.
Scott W. Wagner: We believe this reality makes GoodRx an essential part of the American healthcare system and is a trusted solution for consumers to access affordable medications in the U.S. Healthcare Providers Recognize, which is why we've become a fundamental resource for them and why more than 80% of healthcare professionals refer their patients to us. In 2023 alone, over 25 million consumers will use Goodrx to achieve approximately $15 billion in prescription savings, making Goodrx one of the leading consumer-driven digital health care experiences. For those who have been following both Goodrx and the industry in recent years, short-term movements in the industry value chain have created some confusion about our process. We believe the market tailwinds are increasing, patient out-of-pocket costs are growing, Goodrx's scale, our users, and our HCP advocacy are growing too, making us confident in the strength of the Goodrx value proposition and our ability to grow. Our financial results continue to improve as we focus on helping our industry partners in the value chain benefit proportionally from the value that Goodrx creates for our 25 million plus consumers annually.
Speaker Change: We believe this reality makes good Rx and a central part of the American health care system as a trusted solution for consumers to access affordable medications in the U S.
Speaker Change: Care providers recognizes.
Which is why we become fundamental resorts for them and why more than 80% of health care professionals refer their patients to us.
Speaker Change: In 2023 alone over 25 million consumers use <unk> to achieve approximately $15 billion in prescription savings, making good Rx one of the leading consumer driven digital health care experiences.
Speaker Change: For those who have been following both good Rx and the industry in recent years short term movement in the industry value chain have created some confusion about our prospects. We believe the market wins are increasing patient out of pocket costs are growing.
Speaker Change: <unk> scale, our users our HCP advocacy are growing to making us confident in the strength of the good R X value proposition and our ability to grow our business.
Speaker Change: Our financial results continue to improve as we focused on helping our industry partners in the value chain benefit proportionately from the value that good Rx creates for our 25 million plus consumers annually.
Scott W. Wagner: In Q4, we continue to see positive momentum in the business, both financially and operationally. Consistent with the preliminary Q4 results we announced in January, our Q4 year-over-year adjusted revenue growth accelerated to 7%, significantly compared to our Q3 growth, And our Q4 adjusted EBITDA margin was 29.1%, up 220 basis points year-over-year, with adjusted EBITDA growing 15% year-over-year. This financial performance is the direct result of our efforts throughout 2023, specifically in three areas. First, leading into our relationships with retail partners. Second, bringing the fundamental benefit of Goodrx to commercial plans through our Integrated Savings Program, or ISP.
Speaker Change: In Q4, we continue to see positive momentum in the business, both financially and operationally consistent with the preliminary Q4 results, we announced in January our Q4 year over year adjusted revenue growth accelerated to 7%.
Speaker Change: Significantly compared to our Q3 growth rate and.
Speaker Change: In our Q4 adjusted EBITDA margin was 29, 1% up 220 basis points year over year with adjusted EBITDA growing 15% year over year.
Speaker Change: This financial performance is the direct result of our efforts throughout 2023, specifically in three areas first.
Speaker Change: Leading into our relationships with retail partners secondly, bringing the fundamental benefit of good Rx to commercial plan through our integrated savings program for ISP and third bringing good Rx savings to brand drugs through our pharma manufacturer solutions offering.
Scott W. Wagner: And third, bringing Goodrx savings to brand drugs through our Pharma Manufacturer Solution. These all reinforce our value proposition and are showing up in the results. We expect adjusted revenue to continue to grow into Q1 and for the full year 2024 as well. We anticipate adjusted revenue to be about $800 million in 2024, with adjusted EBITDA of approximately $250 million. Karsten will go through our art look in more detail in a bit.
Speaker Change: These all reinforce our value proposition and are showing up in our results.
Speaker Change: We expect adjusted revenue to continue to grow into Q1 and for the full year 2024 as well we.
Speaker Change: We anticipate adjusted revenue to be about $800 million for 2024 with adjusted EBITDA of approximately $250 million.
Speaker Change: We will go through our outlook in more detail in a bit.
Speaker Change: I will say I'm confident our priorities are the right ones to deliver the growth, we're expecting in 2024 and to drive shareholder value over the long term.
Speaker Change: There are three areas of the business I'll highlight today first we have been focused on strengthening our retail pharmacy relationships and accelerating the continued success of our hybrid model, which includes retailer direct and Pbms contracting.
Scott W. Wagner: I'll say I'm confident our priorities are the right ones to deliver the growth we're expecting in 2024 and to drive shareholder value over the long term. There are three areas of the business I'll highlight today. First, we've been focused on strengthening our retail pharmacy relationships and accelerating the continued success of our hybrid model, which includes retailer direct and PBM contracts. As a reminder, a retail direct approach is where leading pharmacies like CVS and Walgreens, as well as smaller grocers and pharmacies, work closely with us to create consumer value while executing against joint revenue and margin targets.
Speaker Change: As a reminder, our retail direct approach as we're leading pharmacies like Cvs and Walgreens as well as smaller groceries and pharmacies work closely with us to create consumer value, while executing against joint revenue and margin targets in the fourth quarter, our contracting efforts with retailers were a driver of top line performance.
Speaker Change: As we continued to sign direct contracts with new pharmacies and expand the drugs covered by direct contracts within pharmacies.
Speaker Change: Today, we have retailer direct contracts with most of our largest retail pharmacy partners and are directly contracted medication volume makes up a growing minority of our overall prescription transaction volume.
Speaker Change: It's important to remember that good Rx drives volume and traffic for pharmacies. We do this in two ways first we estimate that between 20 and 30% of all prescriptions in the U S go unfilled each year due to price.
Scott W. Wagner: In the fourth quarter, our contracting efforts with retailers were a driver of top-line performance as we continued to sign direct contracts with new pharmacies and expand the drugs covered by direct contracts within pharmacies. Today, we have retail direct contracts with most of our largest retail pharmacy partners, and our directly contracted medication volume makes up a growing minority of our overall prescription transaction volume. It's important to remember that Goodrx drives volume and traffic for farmers. We do this in two ways.
Speaker Change: By offering lower price points pharmacies can fill scripts that patients would otherwise walk away from.
Speaker Change: Second in 2023 alone we've invested over $200 million in advertising and promotion related marketing almost all of which is focused on increasing the number of good Rx users and which ultimately drives incremental prescription volume to pharmacy.
Speaker Change: Pharmacies proprietary affordability solutions by definition only impact their customers while in contrast.
Scott W. Wagner: First, we estimate that between 20% and 30% of all prescriptions in the U.S. go unfilled each year due to price. By offering lower price points, pharmacies can fill scripts that patients would otherwise walk away from. Second, in 2023 alone, we've invested over $200 million in advertising and promotion related mark, almost all of which is focused on increasing the number of Goodrx users, and which ultimately drives incremental prescription volume. Pharmacy's proprietary affordability solutions, by definition, only impact their customers, while, in contrast, Goodrx has the ability to drive incremental retail prescriptions and people into their stores. This is one of the reasons pharmacies have been so receptive to locking I also want to emphasize that as part of these retail direct contracts, Goodrx offers discount card pricing agreements that provide retailers defined margins and are informed by acquisition cost-based pricing at a number of key retail pharmacy partners, including CVS Pharmacy. We've seen other large pharmacies work with us to use a combination of pricing models. And that's worked out very well for both of them.
Speaker Change: <unk> has the ability to drive incremental retail prescriptions and people into their stores. This is one of the reasons pharmacies have been so receptive to locking in multiyear contracts with us.
Speaker Change: I also want to emphasize that as part of these retail direct contracts. Good Rx offers discount card pricing agreements that provide retailers defined margins and are informed by acquisition cost based pricing and a number of key retail pharmacy partners, including Cvs pharmacy.
Speaker Change: <unk> seen other large pharmacies work with us to use a combination of pricing models and Thats worked out very well for both of us.
Speaker Change: We welcome the broader movement to cost plus reimbursement models in both funded benefit plans and benefit as it is a great way to align economics between pharmacies payers and consumers critically we believe that our retail direct contracting strategy, which takes our cost aligned approach positions us well for.
Speaker Change: Anable growth in a market with evolving pharmacy reimbursement models.
Speaker Change: We estimate that over three quarters of good Rx users have some form of insurance coverage that means consumers are comparing prices against co pays not exclusively comparing prices between pharmacies for uninsured users the opportunity for greater patient affordability is relative to usual.
Speaker Change: And customary cash pricing, which has generally substantially higher than good R X pricing.
Speaker Change: If there were a scenario where a more cost focused pharmacy reimbursement model reduces drug price disparity across retail pharmacies, which we don't believe will ultimately be the case since each pharmacy use pricing strategically to attract different kinds of consumers. We see this trend overall is neutral to good Rx given we will still be.
Scott W. Wagner: We welcome the broader movement to cost-plus reimbursement models in both funded benefit plans and off-benefit, as it's a great way to align the economics between pharmacies, payers, and consumers. Critically, we believe that our Retail Direct Contracting strategy, which takes a cost-aligned approach, positions us well for sustainable growth in a market with evolving pharmacy reimbursement. We estimate that over three-quarters of Goodrx users have some form of insurance coverage.
Speaker Change: To deliver significant savings benefit to consumers.
Speaker Change: Our second priority has been to hone our growth plans for our core prescription transactions offering which includes extending the good rx benefit to commercial insurance programs or funded plans.
Scott W. Wagner: That means consumers are comparing prices against co-pays, not exclusively comparing prices between pharmacies. For uninsured users, the opportunity for greater patient affordability is relative to usual and customary cash pricing, which is generally substantially higher than Goodrx prices. If there were a scenario where a more cost-focused pharmacy reimbursement model reduced drug price disparity across retail pharmacies, which we don't believe will ultimately be the case since each pharmacy uses pricing strategically to attract different kinds of consumers.
Speaker Change: We've done this through our integrated savings program, our ISP with PVM partners like Cvs Caremark Express scripts net impact in evidence who aggregate demand for our prescription discounts.
Speaker Change: The early traction we're seeing for ISP. So far in 2024 is encouraging and its contribution to Q1 revenue as reflected in our growth expectations ISP is generating incremental year over year revenue, which is manifesting in line with our expectations.
Speaker Change: As we mentioned in the past, we believe there will be some level of ramp to the volume that comes to rise.
Speaker Change: And we're still in the very early days as we work with Pbms to add more types of prescription transactions to the program.
Speaker Change: And to ensure acceptance at retail.
Speaker Change: Also while our ppm partners market these programs to be over 60% of eligible lives in the U S that they cover we're working in parallel with them to educate and inform employers about these programs and accelerate the number of lives we can onboard.
Scott W. Wagner: We see this trend overall as neutral to Goodrx, given we will still be able to deliver significant savings benefits to consumers. Our second priority has been to hone our growth plans for our core prescription transactions offering, which includes extending the Goodrx benefit to commercial insurance programs or funded plans. We've done this through our Integrated Savings Program, or ISP, with PBM partners like CVS Caremark, Express Scripts, MedImpact, and Avidis, who aggregate demand for our prescription distances.
Speaker Change: Along with increasing lives. We believe we can inflect conversion as well given we've historically been able to increase good R X discounts and lower pricing over time, and our non ISP direct to consumer offerings.
Speaker Change: As we do so in the context of ISP. We believe we can be patient co pays more often.
Speaker Change: Given that ISP is incremental to our direct to consumer offering and any evidence of cannibalization has been minimal we remain focused on accelerating its growth.
Scott W. Wagner: The early traction we're seeing for ISPs so far in 2024 is encouraging, and its contribution to Q1 revenue is reflected in our growth expectations. ISP is generating incremental year-over-year revenue, which is manifesting in line with our expectations. As we've mentioned in the past, we believe there will be some level of ramp-up to the volume that comes through ISP, and we're still in the very early days as we work with PBMs to add more types of prescription transactions to the program and to ensure acceptance at redeployment. Also, while our PBM partners market these programs to the over 60% of eligible lives in the U.S. that they cover, we're working in parallel with them to educate and inform employers about these programs and accelerate the number of lives we can onboard.
Speaker Change: Based on our learnings from last year, we expect our ISP relationships to create some incremental seasonality with higher revenue during the first half of the year and contributing less revenue in the latter part since more claims are likely to be routed through good Rx while consumers are in the deductible phase of their health plans.
Speaker Change: Yeah.
Speaker Change: That said our growth expectations are predicated on how ISP. It's performed for the first few weeks of this year.
If we're successful in driving more types of transactions and more lives to the program as we helped drive more employer sales, we may achieve incremental lift in the coming months and during 2025 patient deductible reset period.
Update everyone. If we see this manifesting.
Speaker Change: Third we're focused on scaling our pharma manufacturer solutions upwards in.
Speaker Change: In Q4, we continue doing the work to build our pipeline and believe we have set ourselves up for year over year growth in the first quarter and FY 'twenty four.
Speaker Change: We've been leaning into our access and awareness solution that we believe will accelerate 2024 growth and as we mentioned in the past in 2023, we prioritize deal quality with a focus on foregoing one off deals and instead, creating standardized go to market programs that we expect to scale sustainably.
Scott W. Wagner: Along with increasing lives, we believe we can incite conversion as well, given we have historically been able to increase Goodrx discounts and lower pricing over time in our non-ISP direct-to-consumer business. As we do so in the context of ISP, we believe we can beat patients' co-pays more often. Given that ISP is incremental to our direct-to-consumer offering, and any evidence of cannibalization has been minimal, we remain focused on accelerating its growth.
Speaker Change: Our restructuring and this offer including rationalizing vital care is essentially complete and we're on track to deliver our expected margin accretion in 2024, which carsten will speak to in more detail.
With that I'll hand, it over to Carsten.
Carsten: Thank you Scott I'll speak briefly to our <unk> 23 financial results, which were consistent with the preliminary Q4 results, we announced in January before turning to guidance in summary during the fourth quarter adjusted revenue exceeded the guidance range. We provided on our Q3 earnings call in November.
Scott W. Wagner: Based on our learnings from last year, we expect our ISP relationships to create some incremental seasonality, with higher revenue during the first half of the year and contributing less revenue in the latter part, since more claims are likely to be routed through Goodrx while consumers are in the deductible phase of their health. That said, our growth expectations are predicated on how ISP performs for the first few weeks of this year. And if we're successful in driving more types of transactions and more lives into the program as we help drive more employer sales, we may achieve incremental lift in the coming months and during 2025's patient deductible reset period. We'll update everyone if we see this manifesto.
And adjusted EBITDA margin was in the upper end of the guidance range we provided.
Carsten: Total revenue and adjusted revenue for the quarter increased 7% year over year to $196 6 million.
Carsten: Primarily driven by organic growth in prescription transactions revenue.
Carsten: Prescriptions transactions revenue grew 11% year over year to $143 9 million.
Scott W. Wagner: Third, we're focused on scaling our pharma manufacturer solution. In Q4, we continue doing the work to build our pipeline and believe we've set ourselves up for year-over-year growth in the first quarter and FY25. We've been leaning into our access and awareness solutions that we believe will accelerate 2024 growth, and, as we mentioned in the past, in 2023, we prioritize deal quality with a focus on foregoing one-off deals and instead creating standardized go-to-market programs that we expect to scale sustainably. A restructuring of this offer, including rationalizing VitaCare, is essentially complete, and we're on track to deliver our expected margin With that, I'll hand it over to Karsten.
Carsten: An acceleration from Q3 growth, which was partially driven by quarter specific favorability related to certain client contracts, which also slightly increased PTR per Mac.
Subscriptions revenue declined 6% to $23 1 million.
Carsten: Due to the wind down of Kroger savings club Kroger savings club revenue was over $1 million less in the fourth quarter of 2023 than in the prior year period.
Carsten: Gold subscription count was up both quarter over quarter and year over year.
Carsten: In Q4 gold revenue was $21 $5 million and their related sub count was 694000, we expect the continued wind down of Kroger's savings club subscribers from now to July and given the relative subscription fee is much higher for good Rx gold than for the Kroger subscribers.
Karsten Voermann: Thank you, Scott. I'll speak briefly to our 4Q23 financial results, which were consistent with the preliminary Q4 results we announced in January before turning to guidance. In summary, during the fourth quarter, adjusted revenue exceeded the guidance range we provided on our Q3 earnings call in November, and adjusted EBITDA margin was in the upper end of the guidance range we provided. Total revenue and adjusted revenue for the quarter increased 7% year-over-year to $196.6 million, primarily driven by organic growth and prescription transactions revenue. Prescriptions transactions revenue grew 11% year over year to $143.9 million, an acceleration from Q3 growth, which is partially driven by quarter-specific favorability related to certain client contracts, which also slightly increased PTR per max. Subscriptions revenue declined 6% to $23.1 million due to the wind-down of Kroger Savings Club. Kroger Savings Club revenue was over $1 million less in the fourth quarter of 2023 than in the prior year period.
Carsten: Wind down should be more impactful to subscription plan count than revenue.
Carsten: Pharma manufacturer solutions declined 2% year over year to $24 $4 million driven by a restructuring of the offering which included shutting down vital care.
Carsten: Prior year quarter included over $2 million of revenue related to Veda care, whereas in <unk> 'twenty three there is essentially zero.
Carsten: Net loss was $25 9 million compared to a net loss of $2 <unk> million dollars in the fourth quarter of 2022, adjusted net income was $31 1 million compared to $27 4 million in the fourth quarter of 2022.
Carsten: Adjusted EBITDA increased 15% year over year to $57 3 million. The primary driver of the year over year increase was higher adjusted revenue along with our cost discipline increased marketing efficiency and the actions taken to restructure pharma manufacturer solutions, including the <unk> priority.
Asian of might occur.
Carsten: Adjusted EBITDA margin was up 220 basis points year over year to approximately 29, 1%, which was on the high end of our guidance range.
Karsten Voermann: The gold subscription count was up both quarter over quarter and year over year. In Q4, gold revenue was $21.5 million, and the related sub count was $694,000. We expect a continued winding down of Kroger Savings Club subscribers from now to July, and given the relative subscription fee is much higher for Goodrx Gold than for Kroger subscribers, the wind down should be more impactful on subscription plan count than revenue. Pharma manufacturer solutions declined 2% year over year to $24.4 million, driven by a restructuring of the offering, which included shutting down VitaCare. The prior year quarter included over $2 million of revenue related to VitaCare, whereas in 4Q23, there was essentially zero. The net loss was $25.9 million, compared to a net loss of $2.0 million in the fourth quarter of 2022.
Carsten: We generated net cash provided by operating activities of $15 9 million compared.
Carsten: Compared to $31 $9 million in the prior year period.
Carsten: Our capital allocation priorities are unchanged and we will continue to focus on high return investments and maximizing value for shareholders.
Carsten: Our balance sheet remains strong and we ended the quarter with $672 $3 million in cash and cash equivalents on the balance sheet.
Carsten: $661 8 million of outstanding debt.
Carsten: Significant uses of cash last quarter included approximately $78 million of share repurchases at approximately $5 53 per share on a blended basis.
Carsten: And.
And as we've discussed on prior calls a nonrecurring approximately $45 million of spend on withholding taxes related to the delivery of shares to our co founders related to a 2020 equity grant which was defrayed by shares we withheld.
Karsten Voermann: Adjusted net income was $31.1 million, compared to $27.4 million in the fourth quarter of 2022. Adjusted EBITDA increased 15% year over year to $57.3 million. The primary driver of the year over year increase was higher adjusted revenue, along with our cost discipline, increased marketing efficiency, and the actions taken to restructure pharma manufacturer solutions, including the deprioritization of VitaCare. Adjusted EBITDA margin was up 220 basis points year over year to approximately 29.1%, which was on the high end of our guidance range. We generated net cash provided by operating activities of $15.9 million compared to $31.9 million in the prior year period.
Carsten: Our revolving credit facility as untapped, except for letters of credit and had $98 million of unused capacity as of December 31, 2023, representing total liquidity of $763 1 million.
Carsten: This month, we extended the maturity date of our revolving credit facility to July 11 2025.
Carsten: Recently, our board of directors approved a new stock repurchase program to repurchase up to $450 million worth of class a common stock.
Carsten: Now turning to guidance.
Carsten: Our outlook for Q1 revenue and adjusted revenue is.
Carsten: $195 million to $198 million, which.
Carsten: Presents 6% to 8% year over year revenue and adjusted revenue growth, which includes our current estimate of the impact of recent outages disclose by United Health Group that we believe at this early stage. Despite lasting a couple of days is likely not had a material impact on our financials.
Karsten Voermann: Our capital allocation priorities are unchanged and will continue to focus on high return investments and maximizing value for shareholders. Our balance sheet remains strong, and we ended the quarter with $672.3 million in cash and cash equivalents on the balance sheet and $661.8 million of outstanding debt. Significant uses of cash last quarter included approximately $78 million of share repurchases at approximately $5.53 per share on a blended basis and, as we've discussed on prior calls, a non-recurring approximately $45 million of spend on withholding taxes related to the delivery of shares to our co-founders related to a 2020 equity grant, which was defrayed by shares we withheld, are revolving credit facilities untapped except for letters of credit and had $90.8 million of unused capacity as of December 31, 2023, representing total liquidity of $763.1 million.
Carsten: We expect adjusted and GAAP revenue to be identical in the first quarter, because we believe in the third quarter 2023 adjustment to revenue in relation to the pharma manufacturer solutions restructuring related to Veda care with solely onetime and nonrecurring.
Carsten: For the full year 2024, we also expect revenue and adjusted revenue to be identical at about $800 million.
Representing about 5% growth on an adjusted basis. The anticipated adjusted revenue growth rate is tempered by approximately $15 million of top line impact associated with the de prioritization of vital care as part of a firm manufacturer solutions restructuring as.
As well as the wind down of the Kroger savings club our continued investments in consumer incentives will increased contra revenue by approximately $10 million.
In aggregate, there's $25 million of topline impact is absorbed in our full year $800 million revenue and adjusted revenue guidance.
Karsten Voermann: This month, we extended the maturity date of our revolving credit facility to July 11, 2025. Additionally, recently, our Board of Directors approved a new stock repurchase program to repurchase up to $450 million worth of Class A common stock. Now turning to guidance. Our outlook for Q1 revenue and adjusted revenue is... $195 million to $198 million, which represents 6 to 8% year-over-year revenue and adjusted revenue growth, which includes our current estimate of the impact of recent outages disclosed by UnitedHealth Group that we believe, at this early stage, despite lasting a couple of days, has likely not had a material impact on our financials. We expect adjusted and gap revenue to be identical in the first quarter because we believe the third quarter 2023 adjustment to revenue in relation to the pharma manufacturer solutions restructuring related to VitaCare was solely one time and non-recurring.
Carsten: We thought it might also be helpful to provide our current expectations for a prescription marketplace in pharma manufacturer solutions offerings in 2024.
Carsten: As a reminder, our prescription marketplace is made up of prescription transactions subscriptions and other revenue we expect.
Carsten: Our prescription marketplace contribution to our implied 2024, our adjusted revenue growth to be about $25 million to $30 million.
Carsten: The expected growth includes the impacts of the previously mentioned headwinds related to increase in Contra revenue and the sunsetting of the Kroger savings club.
Carsten: This also reflects the current ISP network footprint execution, we are today and we are working to optimize both.
Carsten: We expect pharma manufacturer solutions to contribute about $10 million to $15 million to our implied 2024 adjusted revenue growth.
Carsten: This implies a year over year growth rate for that offering that exceeds the growth rate of the digital pharma AD spend market, which has been a low teen percentages.
Karsten Voermann: For the full year 2024, we also expect revenue and adjusted revenue to be identical at about $800 million, representing about 5% growth on an adjusted basis. The anticipated adjusted revenue growth rate is tempered by approximately $15 million of top-line impact associated with the deprioritization of Vitacare as part of our farm manufacturing solutions restructuring. As well as the winding down of the Kroger Savings Club, our continued investments in consumer incentives will increase contra revenue by approximately $10 million.
Carsten: As part of the restructuring of our pharma manufacturer solutions offering we discontinued Vita care, which contributed approximately $8 million of adjusted revenue in 2023 and is not contributing to 2024, considering that we're pleased with our anticipated 2020 for a farmer manufacturer solutions growth.
Carsten: As a reminder, our pharma manufacturer solutions offering has some seasonality to it and so we expect <unk> 'twenty for revenue to be slightly below <unk> 2003 revenue.
Carsten: Based on what we've seen historically, we expect there to be seasonality in some quarter over quarter variability for business more broadly, but given our scale relative to the very large times for a prescription marketplace and our pharma manufacturer solutions offering we're confident in the growth trajectory.
Karsten Voermann: In aggregate, this $25 million of top-line impact is absorbed in our full-year $800 million revenue and adjusted revenue guidance. We thought it might also be helpful to provide our current expectations for our prescription marketplace and pharma manufacturer solutions offerings in 2024. As a reminder, our prescription marketplace is made up of prescription transactions, subscriptions, and other revenue. We expect our prescription marketplace contribution to our implied 2024 adjusted revenue growth to be about $25 to $30 million. The expected growth includes the impacts of the previously mentioned headwinds related to increasing contour revenue and the sunsetting of the Kroger Savings Club.
Carsten: From a margin perspective during the last couple of quarters, we've delivered adjusted EBITDA margins in the high 20% range and we continue to expect to be in the high 20% range again for the first quarter potentially up to 30% and to achieve around $250 million of adjusted EBITDA for the full year up 15% from.
Carsten: 2023.
Speaker Change: With that I'll now turn it over to the operator for Q&A.
Speaker Change: Thank you to ask a question. 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, please standby, while we compile the Q&A roster.
Karsten Voermann: This also reflects the current ISP network footprint and execution we have today, and we are working to optimize both. We expect pharma manufacturer solutions to contribute about 10 to $15 million to our implied 2024 adjusted revenue growth. This implies a year over year growth rate for that offering that exceeds the growth rate of the digital pharma ad spend market, which has been low teen percentages. As part of the restructuring of our pharma manufacturer solutions offering, we discontinued VitaCare, which contributed approximately $8 million of adjusted revenue in 2023 and is not contributing in 2024.
Speaker Change: Our first question comes from the line of Stephanie Davis with Barclays. Your line is now open.
Stephanie July Davis: Hey, guys. Thank you for taking my question first.
Stephanie July Davis: First off it sounds like you're starting to see the direct contract and become a much bigger part of the model. So I wanted to.
Stephanie July Davis: Asked about <unk>.
Speaker Change: Not in 2024, but maybe 510 years from now do you.
See that becoming more of the primary model.
Speaker Change: Alright, thats going to be more of a balanced growth once they fully ramp.
Speaker Change: Hey, Stephanie Thanks for the question.
Speaker Change: I think if you roll this forward it'll look like what we're doing today.
Speaker Change: <unk> is a combination of.
Stephanie July Davis: Working with a multi multi varied PVM.
Stephanie July Davis: Network as well as some form of direct relationships with retailers, depending upon the size of the book and that's really kind of where we are and are in the process of rolling that out into the world.
Karsten Voermann: Considering that, we're pleased with our anticipated 2024 pharma manufacturer solutions growth. As a reminder, our pharma manufacturer solutions offering has some seasonality to it, and so we expect 1Q24 revenue to be slightly below 4Q23 revenue. Based on what we've seen historically, we expect there to be seasonality and some quarter over quarter variability for business more broadly. But given our scale relative to very large TAMs for our prescription marketplace and our farm manufacturer solutions offering, we're confident in the growth trajectory. From a margin perspective, during the last couple of quarters, we've delivered adjusted EBITDA margins in the high 20% range, and we continue to expect to be in the high 20% range again for the first quarter, potentially up to 30%, and to achieve around $250 million of adjusted EBITDA for the full year, up 15% from 2023.
Stephanie July Davis: Don't think thats going to change much because really we're following a retailer the retail partners guidance in some ways and they will approach this a little bit differently and so I don't think there's going to be really transformative difference in the composition of our network. It will literally be more of a.
Stephanie July Davis: Similar and more rolled out version of kind of what we're going through right now.
Stephanie July Davis: And what kind of.
Stephanie July Davis: No.
Stephanie July Davis: Lot of questions on the cost plus model.
Stephanie July Davis: Yes Walgreens.
Stephanie July Davis: I know you do have some relationships or is there anything you can share on how good our exit from the ecosystem.
Speaker Change: Oh absolutely.
I think the.
Speaker Change: Big theme for let's just say, it's Cvs and Walgreens as well as we're really side by side with both of them around their own merchandising strategies for the category, So specifically on Cvs and cost plus.
Operator: With that, I'll now turn it over to the operator for Q&A. Thank you. To ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.
Speaker Change: We're working with them in this manner are ready today, so the fundamentals of several of our <unk>.
Speaker Change: Specific drug contracting plus overall is really tied at the hip with Cvs. So.
Speaker Change: It works exactly on how we're how we're set up not only with Cvs, but really our core.
Operator: Please stand by while we compile the Q&A roster. Our first question comes from the line of Stephanie Davis with Barclays. Your line is now open. Hey, guys, thank you for taking my question. Now, first up, it sounds like you're starting to see direct contracting become a much bigger part of the model. So I wanted to ask about what Goodrx looks like, not in 2024, but maybe 5-10 years from now.
Speaker Change: Fit today.
Speaker Change: And log Greens with anecdote that I'll share from the fall that I think is just.
Speaker Change: Indicative of our.
Speaker Change: Working relationship with all the retailers is enduring cold and flu season.
Speaker Change: We had Walgreens took a basket of cold and flu drugs and drove 40% savings because that was one of them they're merchandising goals.
Scott W. Wagner: Do you see that becoming more of the primary model versus the D2C business, or is this going to be more of a balanced growth once it's fully developed? Hey Stephanie, thanks for the question. I think if you roll this forward, it'll look like what we're doing today, which is a combination of working with a, you know, multivariate PBM network, as well as some form of direct relationships with retailers, depending upon the size of the. And that's really kind of where we are and are in the process of rolling that out, you know, into the world. I don't think that's going to change much because, really, we're following a retailer's, our retail partners' guidance in some ways, and they all approach this a little bit differently.
Speaker Change: And it drove a heck of a lot of incremental activity in traffic was good for Walgreens was good for us, but again it was really about working with our retail partners to achieve their category goals and if you step back and think thematic Lee about what we're doing with its contracted approach, it's really that which is tying them together and.
Speaker Change: Working with them to achieve goals.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Lisa Gill with Jpmorgan. Your line is now open.
Lisa Christine Gill: Lisa Gill.
Lisa Christine Gill: Hi, good morning, Thanks for taking the question.
Lisa Christine Gill: Scott I wanted to go back to ISP and I want to make sure that I heard this correctly.
Lisa Christine Gill: Thank you said that there is a 60% opportunity in the books of business for Cvs and express scripts as far as the opportunity.
Scott W. Wagner: And so I don't think there's going to be a really transformative difference in the composition of our network; it'll literally be, you know, more of a similar and more rolled out version of kind of what we're going through right now. And on that kind of, No, I feel there's a lot of questions about the cost-plus model that's been floated about CVS and Walgreens. I know you do have some relationships there.
Lisa Christine Gill: When I think about that opt in and then selling them. This option into their clients can you maybe talk about what youre seeing as far as in that first initial today's here is it opt in is more of a driver here or is it more of a utilization.
Lisa Christine Gill: When we think about the offerings that you have.
Scott W. Wagner: Is there anything you can share about how Goodrx fits into the ecosystem? Oh, absolutely. And I think the big theme for, let's just say, CVS and Walgreens as well, is that we're really side by side with both of them around their own merchandising strategies for the category. So specifically, CVS and Cost Plus, we're working with them in this manner already today. So the fundamentals of several of our specific drug contracting plus overall are really high at the hip with, So it works exactly as how we're set up, not only with CVS, but really our core benefit today. And Walgreens, you know, an anecdote that I'll share from the fall that I think is just indicative of our working relationship with all the retailers is, you know, during cold and flu season, we in Walgreens took a basket of cold and flu drugs and drove 40% savings because that was one of their merchandising goals.
Lisa Christine Gill: How should we think about this over time I heard you talk about deductibles and that makes sense longer term throughout the year, but.
Is it really going to be utilization that's driving this program over time. So if you can just help me to understand that a little bit.
Speaker Change: Yeah. Thanks, Dave.
Speaker Change: I appreciate and understand the question.
Speaker Change: First of all say that.
Speaker Change: Rollout at each of our partners, whether it's caremark ESI in that impact NAV. It is it's still early and by early 60%. You've described are the total eligible lives that they cover.
Speaker Change: Now the amount of lives that this program is operating under is.
Speaker Change: Much less than that 60% coverage universe, it's a much narrower set of that but it's about a rollout and so as we go with the first step to building. This program out is expanding more lives so getting more coverage.
Speaker Change: And there are probably.
Speaker Change: Step change or to level of rollout of just lives covered.
Scott W. Wagner: And it drove a heck of a lot of incremental activity, and traffic was good for Walgreens, and it was good for us. But again, it was really about working with a retail partner to achieve their category. And, you know, if you step back and think thematically about what we're doing with this contract approach, it's really that, which is, tying them together and working with them to achieve goals. It's awesome
Speaker Change: For where we are today I don't want to give you specific percentages because it differs by.
Speaker Change: It differs by each PVM, but the point is we're in a much narrower universe than that.
Speaker Change: Total coverage lives.
Speaker Change: Then optimization.
Speaker Change: Is something that we also believe theres going to be ongoing ways that we can tweak and hopefully help that improve over time and then the last component to this is how the program's accepted of retail which is also.
Operator: Thank you. Thank you. Our next question comes from the line of Lisa Gill with J.P. Morgan. Your line is now open. Lisa Gill.
Speaker Change: The final component of this and so.
Speaker Change: It's early days I think is the punch line on particularly the lives covered in acceptance level in.
Operator: Good morning. Thanks for taking the question. Scott, I want to go back to ISP. And I want to make sure that I heard this correctly.
Operator: I think you said that there's a 60% opportunity in the books of business for CBS and Express Scripts as far as the opportunity is concerned. When I think about that opt-in and them selling this option to their clients, can you maybe talk about what you're seeing as far as in the first initial phase here? Is opt-in more of the driver here, or is it more of utilization? And when we think about the offerings that you have, how should we think about this over time?
Scott W. Wagner: I heard you talk about deductibles, and that makes sense longer term throughout the year, but is it really going to be utilization that's driving this program over time? So if you can just help me to understand that a little bit. Yeah, thanks.
Scott W. Wagner: I appreciate it and understand the question. First of all, I'd say the rollout at each of our partners, whether it's Caremark ESI or MedImpact Navitus, it's still early, and by early, you know, the 60% you described are the total eligible lives that they Right now, the amount of lives that this program is operating under is much less than that 60% coverage universe. It's a much narrower set of that, but it's about a roll off.
Speaker Change: We'd be engineered them to try and keep them very similar.
Speaker Change: That's helpful. Thank you.
Thank you.
Our next question comes from the lineup Charles right with TB Cowan. Your line is now open.
Charles: Oh, yeah. Thanks for taking my questions I just wanted to follow up on illegal question. Scott you just mentioned that some of the the factors to consider here is the piece of the rule out and and a few other things just first one that I just for an example, if let's say.
Scott W. Wagner: And so as we go, the first step to building this program out is expanding this program to cover more lives. So getting more, And there is a, it's probably a step change or two level of rollout of just the number of lives covered for where we are today. I don't want to give you specific percentages because it differs by, you know, it differs by each PBM. But the point is we're in a much narrower universe than that, you know, total coverage.
Charles: A 10 million lives are going to be covered.
Charles: Or signed up for Iced tea does that mean, all 10 million got access to it Jan one or is there still a phased rollout where those members will gain access to it over the course of this year.
Charles: And then secondly, you kind of mentioned you're also looking at how the program is accepted a retail my understanding was that someone goes in and the system will automatically adjudicate between the funded benefit price versus the good R X price and get the the lower of.
Scott W. Wagner: Then optimization is something that we also believe there's going to be ongoing ways that, you know, we can tweak and hopefully help that improve over time. And then the last component to this is how the program's accepted at retail, which is also, you know, the final component of this. And so, you know, it's early days, I think, are the punchline on, particularly the lives covered and the acceptance level.
Charles: <unk> isn't that Ah Ah Ah system function at the P. B M level with a retailer.
Charles: Then just see which one they're charging you know can you talk about what retail acceptance means of the symptoms. Thanks.
Speaker Change: Sure Charles is the person I'm, a drunken investment first Scott Mary fall also.
Speaker Change: First point to make is is I S PS.
Speaker Change: Two extra year over year, which we're pretty pleased with I think second point is that well for ESI. This program is now in his second year of existence for caremark narrative.
Karsten Voermann: And, you know, it's in line with our expectations, I'd say, from, you know, kind of how we thought. And then can you just remind us of how to think about the margin on ISP versus your traditional business? Thanks, Lisa, for the question. This is Karsten.
Speaker Change: Impact. This is the first year and while they have a ton of live to contribute to us given they need this for their own customer relationships with sponsors with sponsored employees et cetera to be very smooth.
Karsten Voermann: With respect to margin, we think over time it looks, Transcribed by https://otter.ai, Spending CAC, marketing dollars in advance to capture users, and then we monetize them over time. In the ISP context, demand is aggregated by the PBMs, and so we do pay a marketing fee associated with that, but that's on a per-transaction basis. So over time, those two things converge, the upfront CAC and the margin we pay to the PBMs. So we've engineered them to try and keep them very similar.
We don't believe all of the volume that is potentially available to us it's been loaded on immediately upfront. So that's what it's Scott with referring to when we say hey, it's still ramping I think the second point in time retail is much.
Speaker Change: <unk> P B m's retailers.
Speaker Change: Retailers are assessing how this impacts their business and also wanted to make sure. It's a good experience for our share customers that retail customers and ours. So in that context, as well, we see retailers with different levels of energy around trying to attract.
Speaker Change: I S P business into their stores.
Operator: That's helpful. Thank you. Thank you. Our next question comes from the line of Charles Rhyee with TD Cowan. Your line is now open.
Speaker Change: I see maybe if I can follow up is there a way for consumers to know like you know.
Speaker Change: For example, I would just went to Walgreens the other day.
Karsten Voermann: Yeah, thanks for taking the questions. I just wanted to follow up on Lisa's question. You know, Scott, you just mentioned that some of the factors to consider here are the pace of the rollout and a few other things. Just first on that, I guess, for an example, if, let's say, 10 million lives are going to be covered or signed up for ISP, does that mean all 10 million got access to it on Jan 1, or is there still a phased rollout where those members will gain access to it over the course of And then secondly, you kind of mentioned, you're also looking at how the program is accepted at retail. My understanding was that someone goes in, and the system will automatically adjudicate between the funded benefit price versus the Goodrx price and get the lower of. What where isn't that a system function at the PPM level, where the retailer kind of will then just see which one they're charging? You know, can you talk about what retail acceptance means? Sure, Charles. This is Karsten.
Speaker Change: Pick up a generic script and I asked the pharmacist ask whether I was getting the iced tea price didn't seem like they could tell us your way for consumers will will they be able to know going into the future is there like a caremark number.
Speaker Change: That'd be the hoped Charles as we get to the end state I think the roll out of this is really going.
Speaker Change: Through plans and the benefit feature and so as of right now that's a communication vehicle that is almost working through your plans laughs Oh, my gosh, Walgreens or C. B S is making that a core merchandising element, but semantically.
Speaker Change: If you think about the benefits at retail pharmacy, and what might be different.
Speaker Change: Whether it's this or other things we're working on you know that's that's the dialogue that we have with each of our retailer partners or which is.
Speaker Change: And our value proposition you know help you achieve your goals so that doesn't really exist today, but it's not to say that appointment future.
Speaker Change: Alright I appreciate it thank you.
Speaker Change: Thank you.
Karsten Voermann: I may jump in on this one first, and Scott may follow, so... I think the first point to make is ISP is up about 2x year over year, which we're pretty pleased with. I think the second point is that, while for ESI, this program is now in its second year of existence, for Terramark, Navitas, and Impact, this is their first year. And while they have a ton of lives to contribute to us, given they need this for their own customer relationships with sponsors, with sponsored employees, etc. It will be very smooth.
Speaker Change: Our next question comes from the line of Michael Cherney literally rank. Your line is now open.
Michael Aaron Cherny: Good morning, and thanks, so much for taking the question I think a similar one along the same vein in terms of thinking about the.
Michael Aaron Cherny: Evolving nature of your two sided network T V M relationships as well as on the iced tea side with the pharmacies. Obviously, we had the reset from a coupla years back with Kroger and now as you go forward you look at the health of the two sides dynamics of your market where else do you think you see the next important legged develop.
Karsten Voermann: We don't believe all of the volume that is potentially available to us has been loaded on immediately up front. So that's what Scott was referring to when we say, "hey, it's still ramping." I think the second point on retail is that, much like the PBM, retailers are assessing how this impacts their business and also want to make sure it's a good experience for our shared customers, their retail customers, and ours. So in that context as well, we see retailers with different levels of energy around trying to attract this ISP business into their stores. I see.
Michael Aaron Cherny: <unk> does it adding.
Michael Aaron Cherny: More partners on the iced tea size it more direct pharmacy did you feel like you're at homeostasis now across the network and if not.
Michael Aaron Cherny: Where do we see the next leg of who the next partner should be.
Speaker Change: Yep. Thank you for that I like I like the theme of that question.
Speaker Change: In terms of our retailer.
Speaker Change:
Speaker Change: Partnerships and balance I would characterize the approach now is the right one that can carry us forward for I would hope ears.
Karsten Voermann: Maybe if I can follow up, is there a way for consumers to know, like, you know, for example, I just went to Walgreens the other day to pick up a generic script. And I asked the pharmacist desk whether I was getting the ISP price. It didn't seem like they could tell. Is there a way for consumers will, will they be able to know going into the future if they're like a Caremark That's the hope, Charles, as we get to the end state.
That is really for the forever work of how do you work with retailers as well as pbms to deliver benefit and have the economic such that if people are feeling good about so I think from a retailer standpoint.
Speaker Change: I would say we're.
Speaker Change: In the earlier days of working kind of hope he could wave a magic wand you'd always run this effort and so I'd say there won't be any probably huge structural differences, but it'll continue to evolve over time.
Operator: I think, you know, the rollout of this is really going through plans and the benefit feature. And so, as of right now, that's a communication vehicle that is almost working through your plans, less oh, my gosh, Walgreens or CVS is making that a core merchandising element. But, you know, thematically, if you think about the benefits of retail pharmacy and what might be different. Whether it's this or other things we're working on, you know, that's the dialogue that we have with each of our retail partners, which is, how can our value proposition help you achieve your goals? So that doesn't really exist today, but it's not to say that it doesn't. Great, I appreciate it, thank you.
Speaker Change: I do believe has a whole another wave of evolution is is really that's the maddock marrying of what good R X is which is the.
Speaker Change: Benefit that exist outside of your insurance plan and tying it more closely right I think the big macro context here is.
Speaker Change: 80 per cent of our own users and the vast majority of us as Americans get our healthcare through our <unk>, our insurance plans would come through our work.
Speaker Change: And the macro trends in that our Copays are growing up deductibles are growing up and there's a narrower set of drugs that are being covered that the zone that we're addressing an operating in and in a world where approximately a billion prescriptions a year billion with a b or left at the cow.
Operator: Thank you. Our next question comes from the line of Michael Cherny with Lerink. Your line is now open. Good morning.
Operator: Thanks so much for taking the question. I think a similar one along the same vein in terms of thinking about the evolving nature of your two-sided network both with the PBM relationships as well as on the ISP side with the pharmacies. Obviously, we had the reset from a couple years back with Kroger.
Speaker Change: <unk> due to affordability the whole industry actually has a heck of a lot of incentive to help people get those medications and that's the value proposition were sitting and what does that mean for our partnerships that means we're gonna continue to work with our PVM partners and then their plans downstream to bring these couple of things together, whether it's corporate funded plans.
Scott W. Wagner: And now as you go forward, you look at the health of the two-sided dynamics of your market. Where else do you think you see the next important leg of development? Is it adding more partners on the ISP side? Is it more direct pharmacy? Do you feel like you're at homeostasis now across the network? And if not, where do we see the next leg of who the next partner should be?
Speaker Change: And Medicare So I hold not just on behalf of good R X, but honestly. The system. You are hearing about continued evolution from us certainly over the coming months quarters in years to keep marrying those two things because it'll be good for the system and it would also be good for us.
Scott W. Wagner: Yeah, thank you for that. I like the theme of that question. In terms of our retailer, Partnerships and Balance, I would characterize the approach now as the right one that can carry us forward for, I would hope, years. That is really the forever work of how do you work with retailers as well as PBMs to deliver benefits and, you know, have the economics such that, you know, people are feeling good about it. And so I think from a retailer standpoint, I would say we're in the earlier days of working out how, if you could wave a magic wand, you'd always run this effort. And so I'd say there probably won't be any huge structural differences, but it'll continue to evolve over time.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line Jack Wallace, Let's Guggenheim Pardon. Your line is now open.
Speaker Change: Hi, This is Mitchell on for Jack Thanks for taking my question.
Speaker Change: What have you been seeing lately and the demand environment perform a manufacturing solutions and have there been any changes in farm a decision, making and then what gives you the confidence that you're gonna outperformed the market growth rate in that business. Thanks.
Speaker Change: <unk>.
Speaker Change: <unk> manufacturers solutions is approximately 100 million dollar business, that's really anchored in the core of the good R X marketplace, which is 25 million people you're coming here searching for a specific drug in the pricing benefit that surround the reflective of approximately.
Scott W. Wagner: What I do believe has a whole new wave of evolution is really the thematic marrying of what GoodRx is, which is the benefit that exists outside of your insurance plan and tying it more closely, right? I think the big macro context here is that 80% of our own users and the vast majority of us as Americans get our health care through our corporate insurance plans, which come through our government. And the macro trends in that are co-pays are going up, deductibles are going up, and there's a narrower set of drugs that are being covered. That's the zone that we're addressing and operating in. And in a world where approximately a billion prescriptions a year, billion with a B, are left at the counter due to affordability, the whole industry actually has a heck of a lot of incentives to help people get those medications.
Speaker Change: Again 100 million scripts, a year, if you're a brand drug whether you're a generic your brand you're no T C.
Speaker Change: Kind of want to be in that environment and be in that environment either.
Speaker Change: With a pricing discount depending upon the nature of your brand drug or merely.
Speaker Change: Merely communicating too.
Speaker Change: User at very low in the final so we're pretty high return marketing vehicle and farm and one that I would say is pretty unique and extremely valuable.
Speaker Change:
Speaker Change: So relative to our expectation here.
Speaker Change: We should be able to outperform.
Speaker Change: Market that grows in the mid single digits simply by.
Speaker Change: Penetrating more brands that we think have high value with us in the work. We're doing is really getting ourselves in front of brand managers access teams and agencies, which are different in every single company, but getting our value prop for the right things in front of him and having him sign up and run programs.
Scott W. Wagner: And that's the value proposition we're sitting on. What does that mean for our partnerships? It means we're going to continue to work with our PBM partners and then their plans downstream to bring these couple of things together, whether it's corporately funded plans and Medicare, so I hope. Not just on behalf of Goodrx, but honestly, the system. You're hearing about continued evolution from us, certainly over the coming months, quarters, and years to keep marrying those two things, because it'll be good for the system. And, you know, it'll also be good for you. Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the liner Jamie interesting with cellist your line is now open.
Jamie: Good morning, and thanks for taking my questions I wanted to follow up on your comments at all you have to expose them to the <unk> system outage. This goes by change United up can you elaborate more on the dependencies and integration day or is it more for your pharmacy Park noticed <unk> side I know you said two days, but it seems systems are down longer than that I haven't.
Operator: Our next question comes from the line of Jack Wallace with Guggenheim Partners. Your line is now open. Hi, this is Mitchell on behalf of Jack.
Operator: Thanks for taking my question. What have you been seeing lately in the demand environment for pharma manufacturing solutions? And have there been any changes in pharma decision making?
Jamie: No longer than that what happened <unk> and if it does impact on financial does it is it modem volume site or is it more of the cost side.
Jamie: <unk>. This is Carson speaking here, so I think first of all.
Scott W. Wagner: And then what gives you the confidence that you're going to outperform the market growth rate in that business? Thanks. Manufacture Solutions is approximately a $100 million business that's really anchored in the core of the Goodrx marketplace, which is 25 million people a year coming here, searching for a specific drug, and the pricing benefit that is surround, that's reflective of approximately, again, 100 million scripts a year. If you're a brand drug, whether you're a generic, you're a brand, you're an OTC, you kind of want to be in that environment, and be in that environment either with a pricing discount, depending upon the nature of your brand drug, or merely communicating to a user at very low in the funnel, um, So relative to our expectation here... We should be able to outperform a market that grows in the mid-single digit simply by, Penetrating more brands that we think have high value with us and the work we're doing is really getting ourselves in front of Brand managers access teams and agencies which you know are different in every single company But getting our value prop for the right things in front of them and having them sign up and run programs, Thank you. Our next question comes from the line of Jailendra Singh with Truist.
Carson: We've been really pleased with the performance of our tech team.
Carson: We think they did an amazing job in two ways first of all <unk>, creating alternatives for us so alternatives in a context of what switches, we use and being able to shift our volume quite rapidly. That's one of the big reasons, we refer to this as being an issue that affected us for.
Carson: For a couple of days versus an issue that affected many in the industry for a longer period of time and for a phone call. It might not know the issue if the issue around the ability to route transactions department sees being able to fill funded or discount cards groups broadly so from that perspective I think are.
Carson: Much quicker response was helpful to our users and of course helpful to us because I have diminished the impact that would otherwise have manifested in the quarter. I'll also add we're still evaluating it but sort of like with a winter storm when volume drops you often see a significant portion of that volume come back.
Carson: That's one of the reasons the impact has been.
Carson: Not as large as it would otherwise have been also want to point out that it is reflected in our queue. One guide.
Carson: We contemplated this.
Carson: Based on the data we had to date in our expectations for how the issue of evolve and included in the growth rate.
Speaker Change: Thank you.
Evercore ISI: Our next question comes from the lineup G and Lee was Evercore ISI. Your line is now open.
Karsten Voermann: Your line is now open. Good morning, and thanks for taking my questions. I want to follow up on your comments around your exposure to the recent system outage disclosed by Change United. Can you elaborate more on the dependencies and integration there? I know you said two days, but it seems systems were down longer than that, or have been down longer than that. What have been the workarounds? And if it does impact your financials, is it more on the volume side? Or is it more on the cost side?
Evercore ISI: Great. Thanks, a lot. This is jan from Mark Mahaney a couple of questions. One is maybe just going back to the I S. P. What's still go to market that good R. X can do cause it sounds like it's D. M. It's sort of dependent on the I C partners ramping up the the benefit.
Evercore ISI: <unk>, so anything that <unk> is doing to increase that penetration and may be related to that I think you guys mentioned sort of Randy up marketing what channels are you testing, what and like Where's the dollar spent.
Karsten Voermann: Hey, Jailendra, this is Karsten speaking here. So, first of all, we've been really pleased with the performance of our tech. We think they did an amazing job in two ways. First of all, creating alternatives. So, alternatives in the context of what switches we use and being able to shift our volume quite rapidly are one of the big reasons we refer to this as being an issue that affected us for a couple of days versus an issue that affected many in the industry for a longer period of time.
Speaker Change: Yeah, Scott Thanks <unk>.
Speaker Change: It's in the vein of early days right now our effort is is working with R. P. B M partners. Two then present present this capability.
Speaker Change: Into their plan and their own client base and so yeah. The nature of your question of or what what are we do and right now we're working with our partners and then over time. This question of Hey, how do you educate not only corporate the corporate clients, but <unk>.
Karsten Voermann: And for folks on the call that might not know the issue, it's the issue around the ability to route transactions in the pharmacies, being able to fill funded or discount card scripts broadly. So, from that perspective, I think our much quicker response was helpful to our users and, of course, helpful to us, because that diminished the impact that would otherwise have manifested itself in the quarter. Not as large as it would otherwise have been.
Speaker Change: <unk>, the brokers and consultants who are probably.
Speaker Change: <unk>, the real decision makers and influence and this will again work with our work with our partners to figure that out so that'll be part of the things that will work on through this year and we do believe that there's more that we can and should do.
Speaker Change: Not necessarily even for our own for our own benefit, but just for the success of the product to that audience, but we'll figure it out with our partners.
Karsten Voermann: I also want to point out that this is reflected in our Q1 guide. We contemplated this based on the data we had to date and our expectations for how the issue would evolve, and we included it in the growth rate. Thank you. Our next question comes from the line of Jian Li with Evercore ISI. Your line is now open. Great, thanks a lot.
Speaker Change: Then your second question on marketing.
Speaker Change: So.
Speaker Change: The nice thing about good R X in our value Prob is.
Speaker Change: If.
Speaker Change: There is an individual.
Speaker Change: And we know what their condition is and what kind of insurance. They have you can pretty much map the savings benefit that we can do to that individual to a super precise amount and for a market or what that means is you can and should be able to hone in on audiences.
Scott W. Wagner: This is Jan from our team. We have a couple questions. One is, maybe just going back to the ISP, what's the go-to market that Goodrx can do? Because it sounds like it's the, it's sort of dependent on the ISP partners, ramping up the benefit plans on it. So anything that Goodrx is doing to increase that penetration, and maybe related to that, I think you guys mentioned sort of ramping up marketing. What channels are you testing?
That are particularly valuable in and.
Speaker Change: In a precise way not incredibly one to one way, but we can get pretty focused on here are the high value people that we're going to add a lot benefit too. So it's less about channel per se as much as mapping our message and we're good R X shows up.
Speaker Change: Towards these individuals that we just know we're gonna save $800 a thousand dollars $5000 right, where you can kind of do that that that mapping and that's really what the marketing team has been working on <unk>.
Scott W. Wagner: What, like, where's the dollar? So, Yeah, Scott, thanks. It's, again, in the vein of early days. Right now, our effort is working with our PBM partners to then present this capability to their plans and their own client base. And so the nature of your question of, oh, what are we doing? Right now, we're working with our partners. And then over time, this question of, hey, how do you educate not only the corporate clients but probably the brokers and consultants who are the real decision makers and influence in this, we'll again work with our partners to figure that out. So that'll be part of the things that we'll work on this year.
Speaker Change: Along with.
Speaker Change: This ongoing realisation of recognition that healthcare professionals, who legitimate lead love good R X coming in that was one of my biggest.
Speaker Change: Surprise delights about what's here is the fact that you walk into a health care professionals office, and whether it's a doctor or nurse or the office administrator there.
Speaker Change: Absolutely love Good R X, because we're helping people get on beds and stay on beds and.
Speaker Change: And get better.
Speaker Change: And so that audience is a huge advocate for us in a supernatural way when we look at our marketing, we're really focused on how and where can we help that audience.
Scott W. Wagner: And we do believe that there's more that we can and should do, not necessarily even for our own benefit but just for the success of the product to that audience, but we'll figure it out with our partners. Then your second question on marketing. So the nice thing about Goodrx and our value proposition is... Yeah. There's an individual.
Speaker Change: Continue to advocate for us in this totally natural way.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the lineup Allen, Let's let's Bank of America. Your line is now open.
Allen: Good morning, and thanks for taking the questions Scott it sounded like direct contracting may actually be contributing a little bit more than ISP can you break down the relative growth in 2024 from direct contracting an ISP and then regarding the ramp in an ISP is there any way to frame how many more lives.
Scott W. Wagner: And we know what their condition is and what kind of insurance they have, so you can pretty much map the savings benefit that we can give to that individual to a super precise amount. And for a marketer, what that means is you can and should be able to hone in on audiences that are particularly valuable in a precise way, not an incredibly one-to-one way, but we can get pretty focused on, here are the high-value people that we're going to add a lot of benefit to. So it's less about channel perc- As much as mapping our messaging and where Goodrx shows up for these We can kind of do that mapping, and that's really what the marketing team's been working on.
Scott: It could be on the platform by four Q versus the start of the year. Thanks.
Scott: No the the parsing of relative growth one versus the other.
Speaker Change: I might come out that a little differently, which is in the quarter revenue grew 7% you can look at the marketplace growth.
Speaker Change: And I think what you're seeing is now the the performance of good R X in the context of the system and so you see.
Speaker Change: A retail network.
Speaker Change: Add.
Speaker Change: At a we'll call it a stable place, but really working for word and so.
Scott W. Wagner: Along with, you know, this ongoing realization or recognition that healthcare professionals who legitimately love GoodRx, you know, coming in, that was one of my biggest, surprise delights about what's here is the fact that you walk into a health care professional's office, and whether it's a doctor or a nurse or the office administrator, they absolutely love GoodRx because we're helping people get on beds and stay on beds and get better. And so that audience is a huge advocate for us in a supernatural way.
Speaker Change: Now right now.
Speaker Change: You're basically just seeing the good R X operating in the way that we can within the system. So it's not retail contracting versus ISP. This is back to the fundamentals of number of people who are using <unk> to get a benefit and you're now seeing them grow nicely in the.
Speaker Change: You know now what submitted the high single digits and that is I think higher than the average prescription volume growth rate and of our category and the number of things that we have underway. The nice thing is you know if we keep landed him we should be able to continue to dry.
Scott W. Wagner: When we look at our marketing, we're really focused on how and where we can help that audience continue to advocate for us in this totally natural way. Thank you. Your next question comes from the line of Allen Lutz with Bank of America. Your line is now open.
Speaker Change: That growth above category right hopefully we can.
Speaker Change: Thank you and our next question comes from the lineup Daniel gross like what city, you're lying is now open.
Operator: Good morning, and thanks for taking the questions. Scott, it sounded like direct contracting may actually be contributing a little bit more than ISP. Can you break down the relative growth in 2024 from direct contracting and ISP? And then, regarding the ramp in ISP, is there any way to frame how many more lives could be on the platform by 4Q versus the start of the year? Thanks.
Daniel Gross: Hi, guys. Thanks for taking the question on on direct contracting you've previously noted that it might be a slight headwind two P. T. R. For Mac just get in those contracts generally have lower admin fees I'm curious as I look at your 14 numbers you had a very nice <unk>.
Daniel Gross: Much of an improvement and pizza after Mac, but for 2024 and beyond I should we be thinking about that metric give indirect contracting will become a bigger part of your business.
Daniel Gross: Thanks for the question this is Carson.
Carson: With respect to take care of her Mac, you're right. We are pleased to see that as a really a reflection of their relationships. We have in the value add when we deliver prescriptions to our customers are pvm's in our pharmacy. So from that perspective, it's really a reflection of what we do and how what.
Scott W. Wagner: The parsing of relative growth, one versus the other, you know, I might come at that a little differently, which is that in the quarter, revenue grew 7%. You can look at the marketplace growth. And I think what you're seeing is now the performance of Goodrx in the context of the system. And so you see, you know, a retail network at, at a, we'll call it a stable place, but really working forward. And so, you know, right now, you're basically just seeing Goodrx operating in the way that we can within the system. So it's not retail contracting versus ISP. This is back to the fundamentals of the number of people who are using Goodrx to get a benefit. And you're now seeing that grow nicely in the, you know, now what's mid to high single digits.
Carson: We do it I think with respect to the future we're not expecting any nonlinearity in the trends. So we think it's not gonna move very much at all as we go into 2024 now that direct contracting if there's already a significant minority of the volume coming through.
Thank you.
Speaker Change: Okay. Our next question comes from the lineup crank hadn't that what's Morgan Stanley can mine is now open.
Speaker Change: Yes. Thank you Scott circling back to us on the manufacturers solutions I know you've been meeting with pharma companies as well any particular feedback that you're hearing in terms of does your strategy involved there and then you look to target growth in this market, what's resonating verses lettuce and sang to work nine to try that Chris.
Scott W. Wagner: And that is, I think, higher than the average prescription volume growth rate of our category. And, you know, the number of things that we have underway, the nice thing is, you know, if we keep landing them, we should be able to, you know, continue to drive that growth above category rates. Hopefully, we can.
Chris: Yeah. Thanks for the question I think what's resonating is number one the <unk>.
Chris: Unique role good R X has in the ecosystem again, which is 25 million people, who are a high intended audience around prescriptions I mean in.
Karsten Voermann: Thank you. Our next question comes from the line of Daniel Grosslight with Citi. Your line is now open.
Karsten Voermann: Hi guys, thanks for taking the question. On direct contracting, you've previously noted that it might be a slight headwind to PTR per max. I'm curious, as I look at your 4Q numbers, you had a very nice sequential improvement in PTR per MAC, but for 2024 and beyond, how should we be thinking about that metric given that direct contracting will become a bigger part of your business? Thanks for the question. This is Karsten. With respect to PTR-PERMAC, you're right.
In other categories.
Chris: Call this Google.
Chris: These outside of healthcare there is low funnel marketplace areas that marketers and those industries, absolutely recognise love appreciated.
Chris: Health care is a little different where this position that we have.
Chris: As a vehicle to reach people, who are really thinking about you know a specific drug or their condition and not just people, but doctors is a unique and valuable one and so.
Karsten Voermann: We are pleased to see that as a real reflection of the relationships we have and the value we add when we deliver prescriptions to our customers, our PBMs, and our pharmacies. So from that perspective, it's really a reflection of what we do and how well we do it. I think with respect to the future, we're not expecting any non-linearity in the trends.
Chris: We're at this place where.
Chris: A couple of companies and brands, who are working with us are leaning into all the unique ways that they can work with good <unk>.
Karsten Voermann: So we think it's not gonna move very much at all as we go into 2024, now that direct contracting is already a significant minority of the volume coming through. Thank you. Your next question comes from the line of Craig Hettenbach with Morgan Stanley. Your line is now open.
Chris: Again propagate their brand messaging, whether it's to reach an audience or to end up having some unique performance deals around a cash prize that are working which is great I think the broader context around it is we're still in a spot where when we look at the top 50 brands that we.
Scott W. Wagner: Yes, thank you. Scott, just circling back to pharma manufacturing solutions. I know you've been meeting with pharma companies as well. Any particular feedback that you're hearing in terms of as your strategy evolves there, and you look to target growth in this market, you know, what's responding versus what are some things you're working on to drive that growth? Yeah, thanks for the question. I think what's responding is number one, the unique role Goodrx has in the ecosystem again, which is 25 million people who are a high-intended audience around prescriptions. I mean, in other categories, you know, you might call this Google, right?
Chris: Have gone through and said we have a lot of traffic here relative to the brand itself. There's unique things we can do for them.
Sweet spot value, we're working with a very small number of those 50 and so the effort really throughout this year. It's just kick ourselves in front of the decision makers and then getting campaigns loaded up but if I could literally wave a magic wand to get in front of access people in brand managers at each.
Chris: These companies May.
Chris: Maybe not all 50 would sign up but we think there's a value prop for these that would happen kind of right away well. That's the work for teams and for US to go do which is to get ourselves in front of them present, a value proposition hopefully I'll start to work with.
Scott W. Wagner: Outside of healthcare, there are low funnel marketplace areas that marketers in those industries absolutely recognize, love, and appreciate. Healthcare is a little different, where this position that we have as a vehicle to reach people who are really thinking about a specific drug or their condition, and not just people but doctors, is a unique and valuable one. We're in this place where a couple of companies and brands who are working with us are leaning into all the unique ways that they can work with Goodrx to, Again, propagate their brand messaging, whether it's to reach an audience or to end up having some unique performance deals around a cash price that are working, which is great. I think the broader context around it is we're still in a spot where when we look at the top There are unique things we can do for them. Like it's, it's the sweet spot value. We're working with a very small number of those 50.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the lineup Scott <unk> with Keybanc Caroline is now open.
Speaker Change: 13, Thanks for taking my question most of my questions have been asked that Scott I wanted to follow up on your comments around the ISP you said, you're you're generating incrementally over your revenue in line with expectations and those will ramp throughout the year. But then you also talked about sort of seasonality in this business longer term.
Speaker Change: You'll have more in the first half due to the deductible.
Speaker Change: How should we be thinking about the back half of this year, the new clients ramp given up and probably some of them have already reached their deductibles by that time.
Speaker Change: The employees can you just like walk us through the moving parts of all of that and then my second question is you know you talked about the the revenue per transaction on the direct retailing side can you comment on the ISP side, how that's affecting that part of the business. Thanks.
Speaker Change: Mmm.
Speaker Change: Actually I might jump in first Scott and great to speak with you again this is Carson.
Scott W. Wagner: And so the effort really throughout this year has been just getting ourselves in front of the decision makers and then getting campaigns loaded up. And if I could literally wave a magic wand to get in front of access people and brand managers at each of these companies, maybe not all 50 would sign up, but we think there's a value proposition for these that would happen kind of right away.
Carson: There are two parts of the question one is around seasonality of ISP.
Carson: That dimension, we have two factors that to some degree or offsetting on the one hand, you're quite right for a life that comes on at the beginning of the year, you would expect iced tea to be more valuable to them earlier in the year for the reasons you cited I think the other effect, though is that we also anticipate.
Scott W. Wagner: Well, that's the work for our teams and for us to do, which is to get ourselves in front of them, present a value proposition, and hopefully have them start. Thank you. Our next question comes from the line of Scott Schoenhaus with KeyBank. Your line is now open. Hi team.
Carson: Not only will we be picking up some incremental lives during the year, but will be picking up incremental types of transactions during the year as well.
Carson: That we might not have from a given P. B M. At the start of the year, so well in a steady state you would see.
Carson: Primarily the former effect, meaning the seasonality of people that have deductibles I think in this year that'll be attenuated by in year expansion of the.
Operator: Thanks for taking my question. Most of my questions have already been asked. But Scott, I wanted to follow up on your comments about the ISP. You know, you said, you're generating revenue incrementally in line with expectations, and those will ramp throughout the year. But then you also talked about sort of seasonality in this business longer term; you'll have more in the first half due to the deductibles. How should we be thinking about the back half of this year as these new clients ramp up, given that probably some of them have already reached their deductibles by that time, the employees? Can you just like walk us through the moving parts of all that?
Carson: People slash lives medications et cetera that we pick up with respect to economics economics look very similar that's the only real delta.
Carson: For the primary real delta might be a better way of putting it is how we acquire users meaning in our direct to consumer business, we pay the tax upfront and then they pay back over time still consistent with what we've always said in the past and that sort of eight months time frame and the ISP contacts.
Carson: Little different because there were paying as we go in terms of marketing for you to the Pbms, who aggregate the demand in our behalf, but that's all sort of below the revenue line for the most part in terms of of revenue per transaction or revenue per users I don't think we see.
Karsten Voermann: And then my second question is, you know, you talked about the revenue per transaction on the direct retailing side. Can you comment on the ISP side, how that's affecting that part of the business? Thanks. Actually, I might jump in first, Scott, and great to speak with you again. This is Karsten.
Carson: I don't think we see substantial differences there at all.
Scott.
Scott: Thank you.
Karsten Voermann: I think there are two parts to the question. One is around seasonality of ISP traffic, and on that dimension, we have two factors that, to some degree, are offsetting. On the one hand, you're quite right.
<unk>: Next question comes from the line of <unk> with Wells Fargo, you're let us know okay.
Wells Fargo: Hi, Thanks for taking my questions under a contract or any of your direct contracts and agreements exclusive and do any of the directly contacted pharmacies advertise <unk> savings to consumers add that line of style. Thanks.
Karsten Voermann: For a life that comes on at the beginning of the year, you'd expect ISP to be more valuable to them earlier in the year for the reasons you cited. I think the other effect, though, is that we also anticipate that not only will we be picking up some incremental lives during the year, but we'll be picking up incremental types of transactions during the year as well that we might not have from a given PBM at the start of the year. So while in a steady state, you would see primarily the former effect, meaning the seasonality of people that hit deductibles. I think this year that will be attenuated by the in-year expansion of the people slash lives, medications, etc. that we pick up. With respect to economics, the economic situation was very similar.
Speaker Change: Yeah. Thanks.
Speaker Change: Mmm no, they're they're they're not exclusive but I think the way to frame that is.
Speaker Change: Is again good R X working with retailers and then how do retailers broadly each of the retailers think about discount cards and and I think the.
Speaker Change: If you if you zone out a second.
Speaker Change: We good R X if you're in the World. If you think about a cash discount card or any benefit that lives off an insurance plan.
Speaker Change: We're obviously foreign away the leading company in that space, where the only one that drives fundamental demand relative to our marketing efforts. It has what I'd call a pure relationship the retail where.
Karsten Voermann: The only real delta, The primary real delta might be a better way of putting it as how we acquire users, meaning in our direct-to-consumer business, we pay the CACs up front, and then they pay us back over time, still consistent with what we've always said in the past, sort of in that sub-eight-month time frame. In the ISP context, it's a little different because there we're paying as we go in terms of marketing fees to the PBMs who aggregate the demand on our behalf. But that's all sort of below the revenue line for the most part. In terms of revenue per transaction or revenue per user, I don't think we see any substantial differences there at all, Scott.
Speaker Change: We're above the board with every interaction we have with our our retail partners without anything going to individual pharmacists and so this category I would say has good R X and then a whole long tale of kind of small little apart and companies and if you think about us when we.
Speaker Change: Talk about direct contracting and work with retail.
Speaker Change: What this really is is the category working with each retailer in an effective way I hope from.
Speaker Change: Standpoint over a couple of years that that's going to result in us continuing to gain share just in a natural way because we could do things with a retailer to build their business that legitimately. These other companies just can't do.
Operator: Thank you. Our next question comes from the line of Stan Berenshteyn with Wells Fargo. Your line is now open. Hi, thanks for taking my questions. On direct contracting, are any of your direct contracting agreements exclusive?
Speaker Change: Mmm.
Speaker Change: Thank you.
Speaker Change: Next question comes from the lineup, Kevin Kelly and know if you'd be asking your line is now open.
Speaker Change: Thank you. This is still instantly on for Kevin Kelly <unk>. Thanks for the question. So I have P. In your 234 as caremark and the other offer the program to more and more plans.
Scott W. Wagner: And do any of the directly contracted pharmacies advertise Goodrx savings to consumers at the point of sale? Yeah, thanks. No, they're not exclusive, but I think the way to frame that is again Goodrx working with retailers and then how do retailers broadly each think about this. And, and I think the, you know, if you zone out for a second, we Goodrx, if you're in the world, if you think about a cash discount card or any benefit that lives off an insurance plan, Yeah, we're obviously far and away the leading We're the only one that drives fundamental demand relative to our marketing efforts and has what I call a pure relationship at retail where, you know, we're above the board with every interaction we have with our retail partners without anything going to individual pharmacists. And so this category, I would say, has Goodrx and then a whole long tail of kind of small little cars. And if you think about us when we talk about direct contracting and work with retail, What this really is is the category working with each retailer in an effective way.
I'm trying to get pushed out tomorrow lines. Okay. What is the reasoning that there's not going to be any overlap with existing <unk> customer lines that you already have today I.
Kevin Kelly: I guess, it's possible that there wasn't much overnight overlapping the pilot pool that you saw last year with express scripts, but I guess, what's your conviction that it continues to grow there isn't.
Much overlap with your existing base.
Kevin Kelly: Thanks.
Carson: Sure. This is Carson.
Carson: Yeah, I think the the best evidence we have is not just from last year with ESI, but even what we're seeing this year. We've continued to evaluate this.
Carson: Again, we worked with ESR last year to really assess the benefit of the program for good or acts as well as.
Carson: As well as for a counterparty before increasing its magnitude this year and we did that in large part because it's non cannibalistic like low single digit overlap on top of medications or consumers and we continue to evaluate obviously now that we've added.
Carson: <unk> and caremark and in that context, nothing has changed we're still seeing that incredibly low single digit overlap on on top 10 drugs I'm consumers et cetera. So what we're really finding here is this is sam expanding opportunity for us, meaning they're a bunch of.
Scott W. Wagner: I hope from a standpoint over a couple of years, that that's going to result in us continuing to gain share, just in a natural way, because we can do things with a retailer to build their business that legitimately these other companies cannot do. Thank you. Our next question comes from the line of Kevin Caliendo with UBS. Your line is now open. Thank you. This is Dylan Finley on behalf of Kevin Caliendo.
Carson: Folks who might never have used <unk> for a bunch of medications that they might not have used good R X four in the past who are doing it when it is automated and part of their benefit and that's exactly what we hope to see happen and it is happening.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the lineup George Hill, What's it lets you Bank. Your line is now okay.
George Robert Hill: Hey, guys. Thanks for trying to squeeze me in here, it's kind of got a question about what I think about like tail risk and I'm following like the J&J lawsuits around the ERISA rules that consolidated Appropriations Act when we probably get to a point in the future where pvm's have to do a better job of matching drug rebates with purchase prices at the point of sale and I I'd just be interesting.
Operator: Thanks for the question. So on ISP, in year two, three, four, as Caremark and the others offer the program to more and more plans, and that, in turn, gets pushed out to more lines, I guess, what is the reasoning that there's not going to be any overlap with existing Goodrx customer lines that you already have today? You know, I guess it's possible that there wasn't much overlap in the pilot pool that you saw last year with Express Scripts. But I guess what's your conviction that as it continues to grow, there isn't much overlap with your existing base? Great. Yeah, I think the best evidence we have is not just from last year with ESI, but even, Again, we worked with ESI last year to really assess the benefit of the program for Goodrx as well as for our counterparties before increasing its magnitude this year, and we did that in large part because it's non-cannibalistic, like low single-digit overlap on top medications or consumers. And we continue to evaluate, obviously, now that we've added MedImpact, Navitas, and Caremark, and in that context, nothing has changed. We're still seeing that incredibly low single-digit overlap on the top 10 drugs, on consumers, et cetera.
You think that our experts in that process and if there's a way for you guys to either facilitate that process, whether or not that serves as a rescue.
Speaker Change: Yeah. Thanks, that's that's a that's a rich question.
Speaker Change: I hope this is all.
Speaker Change: Oh answer in a hopeful way, which is there should be.
Speaker Change: There should be a future where <unk>.
Speaker Change: That in some ways reflects the foundation of how we fit in the ecosystem, which.
Speaker Change: Again is you have this dynamic of healthcare plans switch.
Speaker Change: Rebates plan design benefit right that is a.
Speaker Change: That's a complex system.
That entails plans P. B M as in the drug manufacturers in economics flowing through all of them.
Speaker Change: Yeah, but appropriately.
Speaker Change: There's this mix of what are your companies pay for his part of paying for insurance coverage and then what do we push on two people to ourselves.
Speaker Change: And that's going to be a balance and that's gonna be continuing to be a balance.
Speaker Change: And I think his plan design continues to evolve.
Karsten Voermann: So, what we're really finding here is that this is an SAM expanding opportunity for us, meaning there are a bunch of folks who might never have used Goodrx for a bunch of medications that they might not have used Goodrx for in the past who are doing it when it is automated and part of their benefit. And that's exactly what we hope to see happen, and it is happening. Thank you. Our next question comes from the line of George Hill with Deutsche Bank. Your line is now open.
Speaker Change: There is going to be different kinds of plans for different segments different companies all within the same place.
Speaker Change: And.
Speaker Change: I think what you're seeing with ISP is is are are the industry partners and good R X try to address this need that's outside of your plan.
Speaker Change: But still allowing for affordability to create people to get access to their medications and there should be should be <unk>.
Scott W. Wagner: Hey guys, thanks for kind of squeezing me in here. Scott, I've got a question about what I think about is like tail risk. And I'm following the J&J lawsuit around the ERISA rules, the Consolidated Appropriations Act. And we probably will get to a point in the future where PBMs have to do a better job of matching drug rebates with purchase prices at the point of sale. And I'd just be interested in how you think Goodrx fits into that process, and if there's a way for you guys to either facilitate that process or whether or not that serves as a risk. Thank you, Yeah, thanks. That's a rich question.
Speaker Change: Continuing ways for us to work with.
Speaker Change: That corporate funded plan universe to create benefit for <unk>.
Speaker Change: Companies, who are paying for insurance plans and most importantly, there are people like it is again with the billions of scripts plus that.
Speaker Change: Don't get filled for affordability in People's uncertainty about is this covered or not and what's it going to look like that calls for a need for a independent marketplace that's covered across.
Speaker Change: The retail universe that creates transparency relative to their insurance and relative to other pricing options and that's kinda the value problem that we have and what we're trying to fulfill.
Scott W. Wagner: I hope, I'll answer in a hopeful way, which is there should be a future where That, in some ways, reflects the foundation of how we fit in the ecosystem, which, Again, is you have this dynamic of health care plans, which, Rebates, plan design, benefit, right? That is a. That's a complex system, that entails plans, PBMs, and the drug manufacturers and economics flowing through all of , , , , But appropriately, you know, there's this mix of what do companies pay for as part of paying for insurance coverage? And then what do we push on to people, to ourselves? And that's going to be a balance and that's going to be continuing to be a balance. And I think as plan design continues to evolve. There's going to be different kinds of plans for different segments, different companies, all within the same. And I think what you're seeing with ISP is are the industry partners and GoodRx, try to address, This need that's outside of your plan, but still allowing for affordability to create people to get access to their medication. And there should be, should be.
Speaker Change: Thank you.
Our next question comes from the lineup Eric Sheridan with Goldman Sachs. Your line is now open.
Eric James Sheridan: Thanks, so much for taking my questions before we ran out of time, maybe two just following up on top of that we've talked about so far this morning, and the subscription business could you maybe give a little more granularity on some of the headwinds and tailwinds and the subscription business as 2024 proceeds and how some of it might be more pronounced <unk>.
Eric James Sheridan: There's a subscriber side versus the revenue side as as we think about sort of bringing your forecast back to our models that'd be number one and on the that'd be sexual solution side.
Eric James Sheridan: Just did some of the key points made so far the call, but could you almost better understand some of the execution going forward is that just broader adoption manufacturer solutions that continued to execute against the opportunity well, they're still building blocks you feel like you're putting in place to drive sort of sustained reputable meant to go around that business sex.
Scott W. Wagner: Continuing ways for us to work with that corporate-funded plan universe to create a benefit for Hey, everybody. This is Jeff Heldman of the Experts in Insurance Program. I'm going to talk a little bit about the value proposition for a lot of the companies that are paying for insurance plans and, most importantly, their people. It is, again, with the billion scripts plus that don't get filled for affordability and people's uncertainty about whether this is covered or not and what it is going to look like, that calls for a need for an independent marketplace that's covered across the retail universe that creates transparency relative to their insurance and relative to other pricing options.
Speaker Change: Sure it's great to speak to you again, Eric Carson here I'll take the first part and Scott May hopping on the second part on the first part relating to subscriptions. Yeah. The reality is that R. Kroger savings club users are a lot less economically interesting for us and our gold users. Even if you just look at the pricing for the two.
Scott May: Groups are bold users are paying just shy of 10 Bucks a month the Kroger savings club individual users are paying 36 Bucks a year, which is split with Kroger. So if you compare that they're about one six of valuable right. So as.
Scott W. Wagner: Thank you. Our next question comes from the line of Eric Sheridan with Goldman Sachs. Your line is now open.
Scott May: As Kroger savings slip rolls off Uhm, we will see subscription subscriber accounts decrease.
Operator: Thanks so much for taking the questions before we ran out of time. Maybe two, just following up on topics we've talked about so far this morning. In the subscription business, can you help maybe give a little more granularity on some of the headwinds and tailwinds in the subscription business as 2024 proceeds and how some of them might be more pronounced on either the subscriber side versus the revenue side? As we think about sort of bringing your forecast back to our models, that'd be number one. And on the manufacturer solution side, I understand some of the key points made so far in the call, but can you almost better understand some of the execution going forward, is that just broader adoption of manufacturer solutions and continuing to execute against the opportunity, or are there still building blocks you feel like you're putting in place to drive sort of sustained revenue momentum around that business? Thanks.
Scott May: But the revenue impact is much much more diminished just to put it in perspective as well the revenue impact of Kroger savings club along with the the bite of care.
Scott May: Restructuring that we did together of those things where around $15 million worth of impact. So you can get a sense for the fact that there's not an awful lot of revenue there.
Scott May: Our own gold users are growing which we talked about and are prepared remarks, and we're quite pleased with that because it does reflect the value proposition that we offer to them and their interest in it which is.
Scott May: Which is something we're very pleased with with respect to farm manufacturer solutions you Wanna hop in Scott Yeah, sure I like the I like I liked that question, thanks or the.
Karsten Voermann: Sure. It's great to speak to you again, Eric. Karsten here.
Scott May: I would say first.
Karsten Voermann: I'll take the first part, and Scott may jump in on the second part. On the first part relating to subscriptions, yeah, the reality is that our Kroger Savings Club users are a lot less economically interesting for us than our gold users. Even if you just look at the pricing for the two groups, our gold users are paying just shy of $10 a month. The Kroger Savings Club individual users are paying $36 a year, which is split with Kroger.
Scott May: We.
Scott May: Have a line of sight to our value prop and particularly the tines of brands where.
Scott May: Where we have high value so at its fundamentals for everybody here, It's hey, there's there's some places we really do work.
Scott May: Now then to your question of where are we in matching yourself to all those opportunities from.
Scott May: From an execution capability standpoint, there's still a bunch of things that we're building, particularly around the flexibility and the good R X experience to have a market or show up in different points and match it with data that for anybody who's been in performance marketing before.
Karsten Voermann: So if you compare that, they're about one-sixth as valuable, right? So as Kroger Savings Club rolls off, we will see subscriber counts decrease, but the revenue impact is much, much lessened. Just to put it in perspective as well, the revenue impact of Kroger Savings Club, along with the VitaCare restructuring that we did together, those things were around $15 million worth of impact. So you can get a sense of the fact that there's not an awful lot of revenue there.
Scott May: Sure, it's things like data and add platform and all these things that.
Scott May: Honestly walking in on a scale of one to 10, where we're like a too and I'd say now where to five.
Karsten Voermann: Our own gold users are growing, which we talked about in our prepared remarks, and we're quite pleased with that because it does reflect the value proposition that we offer to them and their interest in it, which is something we're very pleased with. With respect to manufacturer solutions, do you want to jump in, Scott? Yeah, sure. I like that we have a line of sight to our value proposition and, particularly, the kinds of brands where we have high value. So at its fundamentals, for everybody here, it's, hey, there are some places we really do. Now, to your question of where are we in matching yourself to all those opportunities? From an execution capability standpoint, there's still a bunch of things that we're building, particularly around the flexibility and the Goodrx experience to have a marketer show up at different points and match it with data that, you know, for anybody who's been in performance marketing before, it's things like data and ad platform and all these things that, Honestly, walking in on a scale of 1 to 10, we were like a 2. And And that's not difficult intellectual work. You just have to do it.
Scott May: And that's that's not difficult intellectual work you just have to do it and so I I, we absolutely have work to do to continue to make a highly flexible data metric ecosystem that we cannot scale.
Run hundreds of different brands in an intelligent way that you think about it the best in class marketing platform, but we'll get there like that's just pick and shovel work and and then I think from an awareness standpoint.
Scott May: Alright again, the same one through 10 scale, we're probably at like a three.
Scott May: And I take comfort from that because our single biggest opportunity is just getting in front of the decision makers with any each company that sit either in brands and access teams are in agencies and we just have to keep doing that work, but we have a good team in place now.
Scott May: So that has done these kinds of things before and are in the market having these conversations.
Speaker Change: Hopefully that helps.
Speaker Change: Thank you and now like to turn the call back over to Scott Ladner for closing remarks.
Scott Ladner: Yeah. Thanks, Thanks, everybody for joining I appreciate the questions and thanks for joining us today too I think.
Scott W. Wagner: And so I, I, we absolutely have work to do to continue to make a highly flexible data metric ecosystem that we can, at scale, run, you know, hundreds of different brands in an intelligent way that you think about as a best in class marketing platform. But we'll get there. Like, that's just pick and shovel.
Scott Ladner: Maybe the rap a little bit and I hope when people are seeing and hearing is.
Scott Ladner:
Scott Ladner: Progress seeing the visible progress.
Scott Ladner: Against things that we started talking about in April and May that we said we were gonna do it.
Scott Ladner: Around bringing not just balance to the network with partnerships to retail thinking about ways to take this benefit and filled it out over time, which is integrated savings and we were talking about those things last year.
Scott W. Wagner: And then I think from an awareness standpoint, on the same 1 through 10 scale, we're probably at like a 3. And I take comfort in that. Because our single biggest opportunity is just getting in front of the decision makers within each company who sit either on brands and access teams or agencies. And we just have to keep doing that work. But we have a good team in place that has done these kinds of things before and is in the market having these conversations. Hopefully, that helps.
Scott Ladner: And.
Scott Ladner: They don't they needed time to bank into our financial results and I'm encouraged by the fact that now you are seeing the visible signs of progress. That's a return to growth not just on the top line, but obviously nice incremental scaling profitably the bottom line. So it's great to see those two things reflected.
Scott Ladner: And now going forward through 2024, what we're doing with our own teams in which you'll get to see.
Scott W. Wagner: Thank you. I'd now like to turn the call back over to Scott Wagner for closing remarks. Yeah, thanks. Thanks, everybody for joining us. I appreciate the questions.
Scott Ladner: Alongside of US has to work to continue to scale each of those efforts and.
Speaker Change: Well sure we'll share that progress with everybody as we go throughout the year. Thanks for joining.
And thanks for joining us today, too. I think, Maybe to wrap up a little bit, I hope what people are seeing and hearing is. Progress, Seeing the Visible Progress, against things that we started talking about in April and May that we said we were going around bringing not just balance to the network but partnerships to retail, thinking about ways to take this benefit and build it out over time, which is integrated savings. And, you know, we were talking about those things last. They needed time to bake into our financial results, and I'm encouraged by the fact that now you're seeing visible signs of progress that is a return to growth, not just on the top line, but obviously nice incremental scaling profitably.
Speaker Change: This concludes today's conference call. Thank you for your participation you may now disconnect.
Speaker Change: Mmm.
Speaker Change: [music].
So it's great to see those two things reflected. And now, going forward, through 2024, what we're doing with our own teams, and you know, what you'll get to see alongside of us is the work to continue to scale each of those efforts. And, you know, we'll share that progress with everybody as we go throughout the year. Thanks for joining us. This concludes today's conference call. Thank you for your participation. You may now disconnect. [inaudible]
Speaker Change: Mmm.
Speaker Change: [music].