Q4 2024 GoodRx Holdings Inc Earnings Call
Okay.
Ladies and gentlemen, thank you for standing by and welcome to the <unk>.
Speaker Change: Our fourth quarter and full year 2024 earnings call. As a reminder, today's call is being recorded I would now like to introduce your host for today's call already Reynolds director of Investor Relations. Mr. Reynolds you may begin.
Speaker Change: Thank you operator, good morning, everyone and welcome to go to access earnings conference call for the fourth quarter and full year 2024.
Speaker Change: Joining me today are Wendy Barnes, our Chief Executive Officer, and Chris Mcginnis, Our Chief Financial Officer.
Speaker Change: Before we begin I'd like to remind everyone that this call will contain forward looking statements.
Speaker Change: All statements made on this call that do not relate to the waters of historical fact should be considered forward looking statements, including without limitations statements regarding managements plan strategies goals and objectives, our market opportunity our anticipated financial performance.
Speaker Change: Trends in our business and industry, including ongoing changes in the pharmacy ecosystem.
Speaker Change: Our value proposition, our long term growth prospects are direct and hybrid contracting approach collaborations and partnerships with third parties, including our point of sale cash programs and are integrating savings program.
Our E Commerce strategy.
Speaker Change: Capital allocation priorities.
Speaker Change: These statements are neither promises nor guarantees, but involve known and unknown risks uncertainties and other important factors.
Speaker Change: These factors, including the factors discussed in the risk factors section of our annual report on Form 10-K for the year ended December 31, 2024, and our other filings with the Securities and Exchange Commission could cause actual results performance or achievements to differ materially from those expressed or implied by the forward looking statements made on this.
Speaker Change: Paul.
Speaker Change: Any such forward looking statements represents 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.
Speaker Change: In addition, we'll 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 in the overview page of our Investor Relations website at investors thought that their ask dot com.
Wendy Barnes: 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 Wendy.
Thank you operator, and thanks to everyone joining us today I would first like to share my excitement about joining good our acts at such a pivotal time for both the company and health care system as a whole.
Speaker Change: The last 30 years in the pharmacy and medical benefit industry. Most recently in our benefits express scripts and Rite aid working across almost every aspect of the drug supply chain, So I understand where there can be friction and opportunity.
Speaker Change: I have also spent the last 30 years building strong relationships with colleagues clients and other business partners to represent a network with key leaders across health care.
Speaker Change: Leveraging my background and deep relationships with these leaders my goal is to help good or accelerate its ability to solve the very pain points that consumers currently face in getting medication. It is a privilege to take on this role I'm excited and optimistic about the opportunities we have to help make access to health care convenient and more affordable to millions of.
Speaker Change: Oregon.
Speaker Change: On today's call I would like to highlight my focus for the first two months of CEO progress we've seen in the business and my initial thoughts on where we have the greatest opportunities then Chris our newly appointed CFO will take you through the Q4 financials, which are substantially in line with our expectations and guidance.
Speaker Change: My priorities over these first two months of centered around two principal action first understanding our business capabilities opportunities and people and second committing substantial time to personally meet with our partners across the pharmacy ecosystem to understand how we can best leverage our capabilities to drive innovation and success.
Speaker Change: Guarding the first point after conducted comprehensive reviews with our internal leader I'm deeply impressed by the level of expertise and strategic thinking throughout the company.
Speaker Change: Regarding the second point my principal action had been meeting with industry leaders and business partners across pharmacy benefit managers retail pharmacies pharma manufacturers and health care professionals.
Speaker Change: During these meetings I focused on identifying ways to enhance the prescription experience for consumers and healthcare professionals recognizing that each constituent have distinct needs.
Speaker Change: With pharmacies, it is enhancing and aligning more economic value and meaningful technological innovation.
Speaker Change: With pharma manufacturers. It is building on our momentum through optimize patient access solutions for all brand medications that target, both our consumer and health care professional audiences.
Speaker Change: For our consumers, we are making it easier to say both within and outside the insurance benefit.
Speaker Change: And for our health care professionals. It is investing in tools to improve their workflows reinforcing that our acts as a seamless and a central part of the caregiving experience.
Speaker Change: The value proposition is clear good Rx makes it easy for people to save time and money when filling medication complementing insurance by filling in the inevitable and growing coverage gaps and friction points of planned design consumers and partners Trust us to deliver affordability clarity and simplicity.
That is why nearly 30 million consumers and over 1 million healthcare professionals use to get Rx in 2024.
Speaker Change: Our reach proves that medication cost and access our universal challenge, regardless of income or insurance coverage. We have seen this firsthand my father-in-law retired research scientist in college Professor had great insurance and his medications where sell them more than a 15 dollar copay when he was forced to change insurance provider.
Speaker Change: Medications that were $115 are now multiple higher with one nearing $400.
Speaker Change: Our strong brand awareness his providers referred him to get our act, which he now use it for multiple prescription saving over 90% for the most costly one Mike and loss experience highlights a broader trade.
Speaker Change: <unk> is an indispensable complement to anyone's insurance.
Speaker Change: The system needs, a better model, one that benefits consumers healthcare professionals and the most challenged parts of the ecosystem.
Speaker Change: His work at our ex comes in we reduce friction improve access and make saving on medications simple.
Speaker Change: And in a world where potential regulatory changes center on transparency and lower prices. We believe we will be operating in a favorable environment to make it easier to benefit from an access more affordable options.
Speaker Change: The opportunities ahead are substantial and I am excited to lead better access we grow and expand our impact.
Speaker Change: Now, let's dive into our prescription marketplace and manufacturer solutions offerings are.
Speaker Change: <unk> solutions in the prescription marketplace have never been more needed, which is reflected in the company's scale and growing market share in 2020 for almost 30 million consumers used to get our acts that's almost $5 million more than 2023, saving nearly $17 billion on their medication our share of the.
Speaker Change: Should discount segment grew 3% year over year in the fourth quarter reinforcing our position as the leading platform for medications savings.
Speaker Change: Our partners closely with pharmacies to help solve challenges big base around lower reimbursement rising store costs and technological innovation and we're driving real results, we estimate that our partner pharmacies profitability in our book of business was up over 20% per script in January 2025.
Speaker Change: Compared to the same period in 2024, and this is not coming at the expense of good our exit aligned economics, but through a combination of cost plus reimbursement pricing partnership and brand drug solutions. As an example, deep engagement with one major retailer on pricing has driven over 20 million.
Speaker Change: Of estimated incremental annual margin for them, while also contributing incremental good Rx prescription transaction revenue.
Speaker Change: Our value proposition to retailers frankly stronger than I originally thought from the outside looking in in terms of opportunity that are acts have technological capabilities that I believe can significantly enhance and streamline the pharmacy experience, reducing pharmacy labor costs, improving workflows and delivering an engaging digital.
Speaker Change: Consumer experience.
Speaker Change: Now pivoting to our integrated savings program or ISP, which provides consumers with a seamlessly integrated complement to their health insurance.
Speaker Change: ISP primarily works on covered generics today, but we are working to expand that to non covered brands through our ISP rap program, given 28% of new brand prescriptions are never filled ISP wrap helped to bridge coverage gaps, creating a win win for consumers healthcare professionals pharmacy benefit.
Speaker Change: Manager and pharma manufacturer <unk>.
Speaker Change: We have a deep understanding of PVM economics, and in turn of the clients and consumers. We mutually serve sophisticated clients are already demanding in the integrated funded in cash benefit experience, where consumers pharmacists and prescribers are no longer left to solve those gaps on their own we believe integrating good Rx is.
Speaker Change: The answer and Im taking this message to the top of every payer broker and coalition with you might already have a relationship.
Speaker Change: Now pivoting to our manufacturer solutions offering.
<unk> is more than just a place to advertise brand medications, we are becoming the starting point for brand medication access.
Speaker Change: The brand drug ecosystem, it's full of inefficiencies rising gross to net cost for pharma manufacturer lower reimbursements for pharmacies reduced coverage for consumers and many medications are administratively burdensome for health care professionals to confidently prescribe <unk>.
Speaker Change: We have grown the number of brands, we work with from 150 in 2023 to over 202024 and plan on continuing this growth in the coming months and year.
Speaker Change: Pharma manufacturers serve more patients and grow their revenue through three main avenues integrated access solutions brand point of sale discount program and our E Commerce solution.
Speaker Change: Each of these.
Speaker Change: First our integrated access solutions.
Speaker Change: Surface pharma manufacturers co pay and patient support program directly on good our axis brand drug price page.
Speaker Change: Which has five to 10 times the traffic of a typical brand affordability website. This allows high volumes of qualified consumers to download a copay card or enroll in patient support program.
Speaker Change: Second our brand point of sale discount programs generate clear and affordable cash prices for brand medications. We ended the year with 78 signed brands nearly three times. The number we began with in 2024.
Speaker Change: Growing our brand point of sale discount program footprint is a key priority and we have clear opportunities across the spectrum, including new brands mature brands and even those who have lost exclusivity. We are enthusiastic about the progress of these critical solutions and see their potential to be a major growth driver.
Speaker Change: Third on our last earnings call, we talked about our e-commerce infrastructure that we launched with <unk>. The first over the counter birth control pill, marking our entry into an incremental addressable market.
Speaker Change: Our e-commerce capability was built to allow pharmaceutical brands to seamlessly integrate their direct to patient flows into the <unk> platform.
Speaker Change: It is a virtual health care professional visit prescription fulfillment and home delivery or scheduling vaccinations at the pharmacy of their choice and there's much more we can do here.
Speaker Change: We believe this shift from media based partnership to an integrated platform partnership with top pharma manufacturer allows us to secure a better terms across a broader set of solutions.
Speaker Change: One clear example from Pfizer is it launch of a good or at point of sale cash price for its entire portfolio of menopause hormone therapies on our platform last October.
Speaker Change: We saw not only a significant increase in prescriptions filled but also a large number of new to brand our access in Q4, reversing a two year decline in one of their drugs to market share.
Speaker Change: Turning towards the <unk> there are four key opportunities IC that align with our broader strategy to enhance medication access deepen partnerships and drive sustainable long term growth. These are areas, where we have an opportunity to win and we're winning will help create value across the entire value chain first.
Speaker Change: Brand medications, we want to ensure that every brand affordability and access program is available on the <unk> platform right now we've partnered with over 200 brands, but we are just scratching the surface, having now met with several pharma manufacturers, where we've shared validated results. We believe that we provide an extremely strong.
Speaker Change: Value proposition to brand team.
Speaker Change: We want to help pharmacies improve profitability and drive innovation in the prescription experience there.
Speaker Change: There is a lot of friction at the pharmacy counter and we can help modernize the prescription experience and remove strain on consumers' health care professional and pharmacists.
Pharmacy is clearly see good or access an ally serving our shared consumers.
Speaker Change: Third we want to build out the prescribers office is it go to market channel.
Speaker Change: <unk> and other prescribers play a key role in keeping their patients on therapy and get our act is uniquely positioned to help remove the friction they face.
Speaker Change: We have several teams throughout the company doing exceptional work in this area already and I believe we need to be doing more and I'm focused on integrating these efforts under one executive leader.
Speaker Change: Fourth we are determining how best to expand <unk> into the pharmacy benefit ecosystem. Our integrated savings program is already driving meaningful savings for consumers and plan sponsors and we believe there is an opportunity to expand its reach and impact by broadening drugscope in membership we can deliver deeper savings across.
Speaker Change: Generics brands and specialty drugs in.
Speaker Change: In addition, I am intrigued by other opportunities around employer program direct delivery in real time benefit check that will begin to explore I look forward to updating you on the progress we make on all of these priorities over the next several quarters.
Speaker Change: Before turning the call over I'd like to say a few words about our new CFO, Chris Mcginnis and why I'm excited to welcome him to the team Chris has over 30 years of experience in the healthcare industry across operational strategic legal and corporate development functions. He most recently served as the CEO of citizens Rx and <unk>.
Chris McGinnis: Held a number of leadership and advisory role for health care companies at the privilege of working alongside Chris During his tenure at express scripts and now he is uniquely equipped to help guide our accurate next phase of growth with that I'll turn it over to Chris to discuss our financial results and outlook.
Chris: Thank you Lindy before I review, our financial results in 2025 guidance I would like to take a moment to talk to you about why joining <unk> was the right decision for me.
Chris: Being in the pharmacy space for a long time, I understand the pain points that consumers face in getting access to their medications.
Chris: I joined <unk> for what it is a solution that is complementary to insurance, enabling consumers to fill prescriptions easily at an affordable price.
Chris: Perhaps more so I joined <unk> for what it can be.
Chris: Pharmacy is the first line of defense for managing healthcare in far too. Many prescriptions go unfilled for reasons that can and should be addressed I believe <unk> is poised to leverage its core capabilities deepen its relationships across the pharmacy ecosystem and drive towards a broader solution set to benefit all participants consumers' health care.
Chris: Professional pharma manufacturers pharmacy benefit managers and retailers.
Chris: That's where a good rx can step in to reduce friction enhance access educate drive adherence and seamlessly transact all while simplifying the process of saving money on medications.
Speaker Change: I also joined this company because I had the privilege of working with Wendy previously and I believe she is the right leader to continue to execute on the next phase of our company and I could not be more excited to be a part of <unk> leadership team.
Speaker Change: Now turning to financial results for the fourth quarter and full year 2024.
Speaker Change: For the fourth quarter revenue came in at $198 6 million and adjusted EBITDA was $67 1 million.
Speaker Change: This resulted in full year 2020 for revenue of $792 $3 million.
Speaker Change: It was up 6% year over year on a GAAP basis.
Speaker Change: Full year, adjusted EBITDA was $262 million, which constitutes 20% growth over 2023.
Speaker Change: On balance our 2024 financial performance was substantially in line with the company's latest guidance.
Speaker Change: Drilling down on full year revenue prescriptions transactions revenue grew 5% year over year to $577 5 million.
Speaker Change: Primarily due to a 7% increase in monthly active consumers.
Speaker Change: Subscription revenue declined 8% to $86 $5 million, which was expected largely due to the sunset of a retailer specific prescription savings program in July of 2024.
Speaker Change: That program contributed approximately $8 million more in 2023 than it did in 2024.
Speaker Change: Pharma manufacturer solutions revenue increased to $107 2 million up 26% year over year.
Speaker Change: With respect to other financial data net income was $16 $4 million compared to a net loss of $8 $9 million in 2023.
Speaker Change: While adjusted net income was $131 6 million up from $114 $6 million in 2023.
Speaker Change: As I stated a moment ago, adjusted EBITDA increased 20% year over year, while adjusted EBITDA margin was up 420 basis points year over year to 32, 8%.
Speaker Change: Marking another year of margin expansion on an annual basis.
Speaker Change: The significant year over year improvement was primarily driven by pull through from topline revenue growth and run rate savings from the restructuring of our vital care pharma manufacturing solutions offering in the prior year.
Speaker Change: Adjusted EBITDA margin grew sequentially every quarter of 2024 from 30.
Speaker Change: <unk> 31, 7% in Q1 to 33, 8% in Q4.
Speaker Change: We continue to have a strong balance sheet generating net cash from operating activities of $183 $9 million in 2024 compared to $138 $3 million in 2023.
Speaker Change: Ending cash on hand for 2024 was $448 3 million.
Speaker Change: With $500 million about 10 GAAP or.
Speaker Change: Our $100 million revolver had $91 $7 million of unused capacity at the end of 2024, resulting in total liquidity of approximately $540 million.
Speaker Change: Turning to our outlook for 2025.
Speaker Change: Andy and I are committed to providing the market with clear expectations about the financial outlook of <unk>.
Speaker Change: Given our limited time here, we are taking a disciplined approach to guidance, ensuring we provide visibility where we have conviction, while allowing ample room within our ranges to adapt as we gain greater clarity.
Speaker Change: For full year 2025, we expect revenue to be in the range of $810 million to $840 million, which represents growth of approximately 4% at the midpoint of the range.
Speaker Change: We expect adjusted EBITDA to be in the range of 270 $286 million.
Speaker Change: Representing growth of approximately 7% at the midpoint of the range.
Speaker Change: With that context for the first quarter of 2025, we expect revenue to be in the range of $201 million to $205 million.
Speaker Change: This represents 3% year over year growth at the midpoint.
Speaker Change: Furthermore, we expect adjusted EBITDA margin to be relatively consistent with 2024 at approximately 33% in Q1.
Speaker Change: Our Q1 growth outlook is directionally in line with our full year expectations and reflects the same underlying trends driving our annual guidance.
Speaker Change: As Linda highlighted good Rx has a lot of runway there are several avenues to pursue profitable growth.
Linda: While helping to solve pain points for consumers enhancing medication access and deepening our partnerships.
Linda: I believe the company made solid progress in 2024, exemplified by 20% growth in adjusted EBITDA and significant operating cash flows I am excited about good or Exxon I look forward to future discussions.
Linda: With that I'll turn the call over to the operator for questions.
Linda: Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, one moment for our first question.
Linda: Yeah.
Speaker Change: Our first question is going to come from the line of Lisa Gill with Jpmorgan. Your line is open. Please go ahead.
Lisa Gill: Great. Thanks, very much good morning, welcome back Chris and Thanks to work with you and Linda again.
Speaker Change: I really just wanted to start with a couple of things when you talked a lot about different initiatives with both manufacturers and retailers.
Speaker Change: <unk> to focus on the consumer et cetera can you maybe just talk about how many of those new initiatives are included in the guidance.
Speaker Change: Specifically, when we think about ISP and you talked about the ISP wrap can you talk about what the experience has been there and also what the expectation is in guidance for 25%.
Speaker Change: Sure. Thanks, Lisa good to hear from you and equally excited to have Chris on the team here. So let me start with kind of the former part of your question, which is the broader set of opportunities and how we're thinking about those as they pertain to guidance look I would say that.
Speaker Change: General growth that Chris outlined both and <unk> as well as the full year does account for some expansion in the manufacturer programs and the overall marketplace. There specifically as it pertains to brand expansion, which you've heard us talk about a fair bit so that certainly is.
Speaker Change: Accounted for although having said that I do think that there is considerable additional opportunity there over time, which we referenced a bit to carrying through into future years, well beyond this year as it pertains to pharmacies in particular I think the area that I am most excited about is our ability to.
Speaker Change: Enhanced margin for retailers, which we know has been a considerable pressure point and we are just a wildly proud of the fact that we're showing year over year for the retailers that we're partnered with on specific programs that their profitability is about 20% improved year.
Speaker Change: Over a year.
Speaker Change: Being an ally to pharmacies as certainly.
Speaker Change: Not perhaps where we started the legacy of the company and I will say that transition and evolution.
Speaker Change: It's just critical to our ongoing growth and so the retailer partnership also.
Speaker Change: A key aspect of the growth that we've talked about both and the quarterly outlook as well as the full year outlook.
Speaker Change: As it pertains to Hcp's in general lease that you heard me mentioned that a bit at the top of the call I would say we have a lot more runway there to flesh out candidly, while we know that that top decile of Hcp's has continued to drive a good 50% of our volume.
Speaker Change: We have a lot.
A lot more that I think we can do over the coming months and years as it pertains to hcp's, but at present, we're guiding to what we actually know so those are the numbers that you heard us underscore thus far to the second half of your question regarding ISP I think we continue to see solid <unk>.
Speaker Change: And there what we know is that our PVM partners value the idea that generics.
Speaker Change: Wrapped into their offering make a ton of sense when theres a cash price that in fact is more competitive.
Speaker Change: Think the most interesting runway of course is wrapping non covered brands candidly that is an area that I believe particularly given the fiduciary pressure that employers are under.
Speaker Change: To be able to say that they in fact are providing a comprehensive benefit without putting the onus on their own employees to go searching for a better price.
Speaker Change: That to me is the biggest untapped opportunity we're actively engaged with.
Speaker Change: With a number of Pbms partners to facilitate that integration with brand trap and I would close by also saying we're also in active conversation to add another ISP program.
Speaker Change: We know that we have other partners. We can work with their we've had one notable gap specifically and I think we're making good progress.
Speaker Change: Towards having a more comprehensive ISP partnership Lyft.
Speaker Change: Alright, thank you.
Speaker Change: Thank you and one moment as we move on to our next question.
Speaker Change: And our next question is going to come from the line of John Ransom with <unk>. Your line is open. Please go ahead.
John Ransom: Hey, good morning.
John Ransom: Just thinking about your pharma manufacturing solutions.
Speaker Change: Can we agree that farmer Macs, all was a terrible ma'am you don't have to use it anymore.
John Ransom: Yes.
Speaker Change: With you on that and say, we're actually working on it with the marketing.
Speaker Change: Yeah, Hi Fi.
Speaker Change: Thank you.
Speaker Change: Yes.
Speaker Change: At the analyst day, the Algo was this 20% to 30% gross market do you still stand by that.
Speaker Change: Yes, I mean, I think what you what we demonstrated certainly from.
Speaker Change: <unk> 23 to 24.
Speaker Change: That we were up 26% and our pharma manufacturer solutions.
Speaker Change: Im still incredibly confident and enel.
Speaker Change: Other.
Speaker Change: 20% or so leading into this year with I think additional upside as well, having said that we do know that the sales cycle for these brand deals takes a little bit longer but at present, we have grown to 78, specifically around those brands at point of sale cash buy downs and <unk>.
Speaker Change: More broadly.
Speaker Change: 200 brands on platform, which is when you look at that that's about three times growth in 2024.
Speaker Change: I think that this is an amazingly untapped opportunity for us and to be the most exciting part of these partnerships are candidly the results that we've been able to validate and turnaround and say, particularly with the early manufacturers, who took a bad Ana we're able now to show them, what we've been able to.
Speaker Change: Produce for them, we know that comparatively we've got about five to 10 times the traffic through our repositioning to their brand pages as opposed to their brand dot com pages alone and when we're able to show those types of results. We see manufacturers event and say why don't we open up the broader ports.
Speaker Change: Palio of drugs and at Pfizer with a good example of that and we're starting to see that with other partners as well. So I think that a little more simply we are just proving our our ROI in this space and we're going to continue to invest in the team that is engaged with manufacturers to continue raising the bar there. Thanks for the question.
Speaker Change: Thank you.
Speaker Change: Thank you and women as we move to the next question.
Speaker Change: Our next question comes from the line of Charles <unk> with TD Cowen. Your line is open. Please go ahead.
Yes, thanks for taking the question.
Charles: Great to be working with you again, Chris.
Speaker Change: The question really is.
Speaker Change: It is about a little bit more if you can talk about RSP here I think a year or two back right. The opportunity here was partnerships with ESI and <unk>.
Speaker Change: Caremark.
Speaker Change: A couple of other Pbms and.
Speaker Change: No.
Speaker Change: So the message that we were getting last year was that.
Speaker Change: While there were signed up it wasn't being fully rolled out to.
Employer customers, even though our understanding was there was sort of an opt in opt out kind of model for employers and had to do I guess with not all the formulary not all drugs can you give us an update on where we are in those rollouts because it seems like there's been a little bit more time talking about ISP wrapped in and obviously manufacture some.
<unk> just trying to understand.
Speaker Change: Sort of the rule ISP in the traditional sense plays and sort of where those programs with.
Speaker Change: Okay.
Speaker Change: With those with those Big TVN partners is currently thanks.
Speaker Change: Sure.
Speaker Change: Happy to take that question. So I think Theres no question that the original concept and the partnerships with express scripts and Caremark you know like any offering you learn as you go in the early days and you're absolutely right.
Speaker Change: While we.
Speaker Change: I think perhaps had.
Speaker Change: Anticipation for what that integrated solution was going to produce what we've discovered over time is that certainly wrapping in the non covered brands provides a much larger aperture for the value that that will convey to the pbms and in turn the.
Speaker Change: Clients that were mutually serving through that offering. So I think it's just been a natural evolution of the program as we've expanded the type of drugs that we're including in that offering and I look at it more as a longer term opportunity. Additionally to potentially come at it from a slightly different angle too so.
Speaker Change: Before I get to that I should also note, we're continuing to expand and actively dialogue with express scripts and caremark. So this is a very much a dynamic.
Speaker Change: Agreement that we have with them to ensure that its conveying value to both parties. We also continue to expand who we're working with with ISP, which I alluded to I believe and Lisa's question, So I won't repeat that.
Speaker Change: Having said that I continue to place a lot of opportunity and credence into what this can deliver if you just step back and contemplate the number of drugs that arent covered for the typical employer.
Speaker Change: In turn the beneficiary.
Speaker Change: 600, plus N Dcs.
Speaker Change: Each for the big three Pbms. So there will continually be a need for a solution that fits nicely adjacent to and filling in and complementing that insurance offering and pbms understand that they are under a lot of pressure to answer that question as well and they want to keep these clients and they want to keep them happy.
Speaker Change: I would say the tone of these ongoing conversations with our <unk> partners is really favorable and it's a matter of landing upon specific drugs that economics that makes sense for both parties and we're making a ton of progress there. So long winded way I think of saying I have a lot of confidence in these programs they're complicated.
Speaker Change: Though.
Speaker Change: So the bottom line is we're still learning and growing the platform.
Speaker Change: Okay. Thank you I appreciate that.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Our next question is going to come from the line of Michael Kearney with Leerink Partners. Your line is open. Please go ahead.
Michael Kearney: Good morning, and thanks for taking the question.
Speaker Change: Maybe we need to build on that a little bit obviously management team.
Speaker Change: Has it changed over but on the last earnings call. The preliminary guidance was talking about the changing economics that pharmacies are trying to drive with Pbms broadly.
Speaker Change: I use the term I think it was a friend a pharmacy going forward, but what do you see in terms of the current landscape right now and <unk> ability to continue to position itself well against the push and pull of potentially changing reimbursement dynamics.
Speaker Change: Sure.
Speaker Change: Let me make sure I try and address your question. There are a number of ways I could probably take that but let me start with the dynamic between.
Speaker Change: Pharmacies pbms and their ongoing negotiations is that's I think going to be something in perpetuity with pharmacies attempting to hold onto margin as much as possible and of course pbms pushing to extract margin on behalf of their clients, but what we do know regardless of.
Speaker Change: Of how those negotiations go or don't go between pharmacies and Pbms is that one we've got a multi PVM approach right. We work with multiple pbms and in turn we work with them.
Speaker Change: Essentially all of the chain and grocery pharmacies in the U S and we've got either direct or hybrid relationships with those top pharmacies. In fact eight of the 10 and so as a result of that we know that we've got installation to be able to augment those pharmacies and as I mentioned I think in our previous.
Speaker Change: Comment, we specifically are seeing with our ability to do brand cash buy downs and in some instances technological partnerships with some of these pharmacies their profitability is meaningfully up in partnership with US we're able to target specific drugs that are landing just in an exceptional place for both.
Speaker Change: Them and candidly for the consumer who's getting a really competitive price at the point of sale and what we also know is that there are over 1 billion. Our access that are unfilled in any given year and so the ability for us to engage directly again, whether it's through ISP on those.
Speaker Change: Non covered drugs or directly with those pharmacies is directly aiding the pharmacy and their ability to service that consumer at the point of sale with a good Rx filled solution, it's saving them a ton of time at the counter as well. So I guess all of that to say, we feel like we're hitting upon the right areas to both.
Speaker Change: Assist pharmacies and to filling those gaps for insurance that the Pbms just candidly can't do as they continue to employ managed care tools that I don't really see going away.
Speaker Change: And truly I don't intend to weigh in good bad or otherwise on those managed care tools I think they are here to stay.
Speaker Change: The takeaway is that good or apps fits nicely on top of and around.
Speaker Change: The tools that they're employing.
Michael Kearney: Michael I would.
Speaker Change: Bad.
Speaker Change: To that to your point about being the sort of front of the pharmacy and we want to have a long term.
Speaker Change: Relationship that has an aligned economic model.
Speaker Change: So I think what youll see as we have the ability to solve some of their pain points around.
Speaker Change: Scripts that have either gone unfilled, or where they've had particularly low or underwater margins. We think our retail partners can make more money and we think our revenue per script.
Speaker Change: Actually it goes up so even in an environment, where we may have.
Speaker Change: Headwinds on our active consumers.
Speaker Change: <unk> of some of the things going on at retail.
Speaker Change: Manage through their strategic initiatives around rationalizing footprint and whatnot I think what youll see is that our margin per script will go up some of the low margin or underwater margin scripts for them may fall out of the system.
Speaker Change: We will actually continue to grow topline revenue.
Speaker Change: Because of the because of the mix.
Speaker Change: Yes.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Our next question is going to come from the line of gentlemen, dressing with Jewish. Your line is open. Please go ahead.
Jenny: Good morning, Wendy and Chris My name is Jenny and true securities on for Til interesting.
Jenny: I just was curious on just a little bit more color on your capital allocation priorities, you talked about investing in more profitable growth to navigate near term challenges in your press release.
Jenny: Think about your marketing strategy. This year any particular areas of focus you would highlight there is that better.
Jenny: Policy changes in health care.
Jenny: How do you think about Contra revenue then as his approach to customer acquisitions.
Jenny: Let's start with the financial side and I'll take the marketing, yes, I mean in terms of yes, I just want to make sure I'm answering your question in terms of sort of allocation.
Jenny: In terms of our priorities first and foremost this is a free cash flow that we generate is.
Jenny: Is substantial when I look at our free cash flow yields relative to probably a peer set I think we're you know.
Jenny: We're at that.
Jenny: Sure.
Jenny: We probably generated over the last two years somewhere in the order of magnitude 12 cents on the dollar of revenue goes to free cash flow.
Jenny: Obviously, we invest in our business in terms of how we will deploy that right now I think what we will see into 2025 as a sort of a bit of a refocus around how we invest internally to support some of our strategic initiatives as we get a little bit more focused there.
Jenny: So, we'll obviously deploy cash back into our business.
Jenny: Supporting key initiatives.
Jenny: I think obviously, we are open to strategic initiatives to deploy that cash but absent that.
Jenny: I think given especially where given our stock prices that I think we will continue to return cash excess cash back to shareholders.
Jenny: In the form of a repo I think we have $290 million of authorized spend at the board level. So I think we will probably be lean into that a little bit.
Speaker Change: Thank you and one moment as we move onto our next question.
Speaker Change: Our next question is going to come from the line of Scott Schonhaus with Keybanc. Your line is open. Please go ahead.
Scott Schonhaus: Hi team Thanks for taking my question.
Speaker Change: When do your comments seem to be really.
Speaker Change: <unk>.
I'm optimistic about the partnership with retailers and you're talking about the savings that you provide.
Speaker Change: And I'm just wondering can you remind us the breakdown of.
Speaker Change: As you know direct contracting hybrid and then the traditional pbms.
Speaker Change: Contract that you guys had last year, where it is today, where do you think it can be by the end of the year and what's really the ideal mix between the three buckets. Thank you.
Speaker Change: Yeah, Hi, Thanks for the question, let me start with where we are now.
Speaker Change: So eight out of 10 of our top pharmacies are either direct or hybrid and what I would say is of the remaining two that are through.
Speaker Change: Our <unk> networks that is their choice, we effectively work with b pharmacies in whatever manner. They prefer that's really the the long and short of it. So we'll always have conversations with them pertaining to hey, do you have an interest in hybrid here's how it works if you have interest.
Speaker Change: That's direct but to the extent that they are comfortable.
Speaker Change: Accepting our pricing through their P. B M contract and that network relationship we're happy to support it.
Speaker Change: In that way.
Speaker Change: Candidly I don't know that I can tell you 12 months ago with the breakdown of those numbers were having not been here and if that's something important to you. We certainly can follow up with that but I candidly don't know the answer to that question. What I do know is that where we are today in all of the conversations I've had with our top retailers.
Speaker Change: So I personally at that point, they seem pretty pleased.
Speaker Change: With the.
Contractual mechanism with which we're working with them today.
Yes, Scott I would only add I mean in terms of the right mix.
Speaker Change: It's somewhat irrelevant to us I mean, the fact that we have multichannel, we can move scripts around to optimize.
Where where the patient saves the most money where they can get access to their drugs.
Again in line to pharmacies and be their best partner and I think that will overall drive our economics, but we have the ability to move it around.
To make sure that we're optimizing the model.
Speaker Change: Thanks.
Speaker Change: Thank you and one moment as we move onto the next question.
Our next question comes from the line of Dan Bernstein with Wells Fargo Securities. Your line is open. Please go ahead.
Dan Bernstein: Hi, Good morning, Thanks for taking my questions two quick ones for me maybe the question is could advance on a go longer but.
Dan Bernstein: The first is on the corporate channel returning can you just give us some update on the uptake you're seeing here and how does that compare to your internal expectations. And then also you launched <unk> plus I'm just curious what the opportunity youre seeing adjacency and I know, it's a bit early here, but any consumer adoption at this point. Thanks.
Dan Bernstein: To repeat the first part of your question I apologize I Couldnt you cut out there for a minute.
Dan Bernstein: Yeah on the <unk> channel returning could you just give us some update on the extent that you are seeing consumers returning here and how does that compare to your internal expectations.
Dan Bernstein: Yes, I would say, it's a little too early to comment specifically more broadly what I can tell you. Its the relationship is in a fantastic place I've personally met with their head of pharmacy. There is a lot of shared opportunity that we're both excited about and engaged on them I will say without sharing specific numbers.
Dan Bernstein: I'm seeing volume through Kroger improve nicely. So I feel like we're in a good spot with more runway in front of us and just to make sure I am clear the second part of your question with it Pat.
Dan Bernstein: Yes, correct.
Dan Bernstein: The extent that Youre seeing.
Dan Bernstein: Traction there.
Dan Bernstein: Yeah, I would say that to US is also quite early.
Dan Bernstein: We continue to see the overall opportunity being at a very nice one just to give in.
Dan Bernstein: That the total addressable market that it's pets, which which won't really come as a surprise I think to this group.
Dan Bernstein: Are a lot of competitors in the pet space, but what we do know.
Dan Bernstein: Is that it makes sense for our target audience, many of whom we know have pets and so for that reason, we continue to be bullish on it but it's really too early at this point for us to comment on anything meaningful.
Dan Bernstein: As to what it's driving in the plan.
Dan Bernstein: What we liked about the strategy to though is that that is a demographic of typically younger people who.
Dan Bernstein: All pet meds are uncovered and as those pads.
Dan Bernstein: That demographic arent heavy they don't have.
Dan Bernstein: They don't have a lot of prescriptions at this point in the right, but as they age.
Dan Bernstein: Long term value that they bring as good Rx, having a brand name and a place to come get uncovered.
Dan Bernstein: I think as you know pays dividends over the long term.
Dan Bernstein: Thanks.
Dan Bernstein: Thank you and one moment for our next question.
Speaker Change: Our next question comes from the line of Steven <unk> with Mizuho Securities. Your line is open. Please go ahead.
Dan Bernstein: Hi, Thanks.
Speaker Change: I guess, just regarding the new administration and RFK historical negatively by its views on the pharmacy, the marketing to consumers, probably some mix implications for good or accident your digital pharma.
Speaker Change: Manufacturer solutions of any policies were to move to the front burner. So obviously, it's too early to really give any specific details, but just curious to get your high level thoughts on the topic that I'm sure you've had some internal discussions.
Speaker Change: Yeah. Thank you we have I was actually just joking. This morning, I havent checked on healthcare policy changes in the last 12 hours being heads down preparing for this call and I was wondering what I've missed because things are moving so quickly.
Speaker Change: Look generally.
Speaker Change: What I would say based upon my understanding thus far.
Speaker Change: The main focus as it pertains to pharma and advertising is largely D. T C, which we're not we're not <unk>.
Speaker Change: Engaged with pharma through the TV and or a radar.
Speaker Change: Radio.
Medium, having said that it could potentially I mean, unless we play this forward.
Speaker Change: Cut up could end up being a tailwind for us if those marketing dollars, perhaps could be redirected and used through our platform, which again, we see a good five to 10 times less compared to what they typically see through their own.
Speaker Change: Brand platforms, but gosh beyond that it would just be pure speculation generally.
Speaker Change: But clearly we know that pharma has interest and utilizing those dollars.
Speaker Change: To support engaging both hcp's and consumers and we know that we are an excellent partner to help them reach both of those audiences. So again, we would we would take advantage as pharma had a channel closed off to them.
Speaker Change: Okay got it okay. Thank you.
Speaker Change: Sure.
Speaker Change: Thank you one moment as we move on to the next question.
Speaker Change: Our next question comes from the line of Craig <unk> with Morgan Stanley. Your line is open. Please go ahead.
Jason: Hi, This is Jason I'll sure Craig Thanks for taking my question.
Previously I know the goalposts are fairly wide for a prescription of transactions.
Jason: Great and negotiations and headwinds in retail pharmacy, and I know there were some mentions of near term challenges in their release can you expand of expand on what kind of headwinds are reflected in there are you still expecting anymore pharmacy store closure and packaging during in 2025. Thank you.
Jason: Yeah. Thanks for the question.
Jason: Certainly we accounted for store closures, and our 24 plan, which you've heard us talk about historically.
Jason: As it pertains to Rite aid specifically this year I mean, what what we have in the plan are things that we know.
Jason: At this point, it's just really too soon to understand what may or may not happen with rite aid.
Jason: What we do know is that anytime there are store closures those scripts to ultimately land somewhere and while there may be some short term turbulence around that jump ball with their scripts those same patients who are seeking a cash script nine times out of 10 are going to end up at another store, where we're already work.
Jason: King and in partnership with and where we expect to Reengage that same consumer. So again broadly speaking, it's just a little too early for us to really understand what may or may not happen.
Jason: With Rite aid.
Jason: But I would say in terms of the <unk>.
Jason: Terms of our overall guidance, we obviously, we're not going to drill into the prescription transactions revenue specifically, but.
Jason: We have accounted for some headwind on our monthly active consumers.
Jason: Which I think is sort of the fallout as I mentioned earlier from some of the right sizing that the retailers are going through.
Jason: And so I think we will see a headwind on our active consumers, but I still would expect based on the revenue mix that are prescription transaction revenue line grows overall into 2025. So I think the revenue prescript will be up.
Jason: And I think theres, probably headwinds on the consumers and that's baked in I think in terms of the range of guidance that we have.
Speaker Change: Thank you one moment as we move on to the next question.
Speaker Change: Our next question comes from the line of George Hill with.
Speaker Change: With Deutsche Bank. Your line is open. Please go ahead.
Speaker Change: Yes, good morning, guys and thanks for taking the questions two very quick ones for me I guess when the number one kind of following on the theme of being a friend of the pharmacy are there any plans to increase engagement with penetration in the independent channel.
Speaker Change: Number two I guess could you comment on what is explicitly complex contemplated in the guide for 2025 as it relates to volume increases from our renewing engagement with Kroger. Thank you.
Speaker Change: Thanks for the question.
Speaker Change: So let me start with independents in general part of your question. We are open to really working with any pharmacy inclusive of independents provided that lands upon.
Speaker Change: Price point that makes sense for the consumer that is in fact competitive.
Speaker Change: I would also say, perhaps a little less discussed within the company and certainly in this forum is that we actively work with.
Speaker Change: A number of independents through our.
Speaker Change: <unk> cycle offering.
Speaker Change: They are much more focused manner, and we intend to continue to expand that.
Speaker Change: Through our script cycle partnership so.
Speaker Change: Short answer is always open to it.
Speaker Change: I would also say and have extended our conversation opening with the head of N CPA with whom I've had a long standing relationship.
Speaker Change: So we'll continue that dialogue and that's really my short answer as it pertains to indeed can you kindly repeat the second half of your question again.
Speaker Change: That's about specific Kroger volume, so well George Hey, good to talk to you George.
George Hill: Yeah, so on on Kroger.
George Hill: I don't have specific volumes for you, we're not going to break it out obviously by retailer we do expect more volume to come back online I think having a direct relationship with them, we will see that volume I think our direct.
George Hill: I think our volume coming through direct relationships I think is up to about 35% of our volume is now coming direct and again, there's no magic in that mix, we can push it back to the multichannel multi ppm channel if need be if that's if that's more optimized route for us.
George Hill: And I think just having them back in the network again, I just want to say.
George Hill: I think we are contemplating a little bit of headwind on overall scripts on the print on the.
George Hill: Prescription transactions revenue line, but I think again the mix will drive the overall revenue higher.
Speaker Change: That's helpful. Thank you.
Speaker Change: Thank you and one moment for our next question.
Speaker Change: Our next question comes from the line of Allen Lutz with Bank of America. Your line is open. Please go ahead.
Speaker Change: Good morning, and thanks for taking the questions I wanted to follow up on Michael's question around some of the changes going on.
Speaker Change: In the end market in 2025.
Speaker Change: One of your pharmacy partners introduced a cost plus model that's going out in 2025. Another one of your <unk> partners. This pathway pessimism rebates savings at the pharmacy counter is there anything different that youre seeing through two months in 2025, whether it's the type of insurance coverage, where you are where you maybe supplementing.
Speaker Change: A different drug mix has anything changed as you kind of turned the calendar year from 2024 into 2025 as it relates to your win rate mix or really just anything that youre seeing in the end market.
Speaker Change: Yeah.
Speaker Change: Yes.
Speaker Change: I'll tell you what I know three weeks in I don't have I haven't drilled into a ton of data.
Speaker Change: Data here, Alan but what I would say is I think we've got upwards of two thirds of our volume.
Speaker Change: That is maybe 70% of our volume that's on a cost plus basis already so we're seeing sort of the impact of that is sort of non.
Speaker Change: Non impact at the moment I think again.
Speaker Change: As retailers seek to go out.
Speaker Change: And.
Speaker Change: Implement strategies, whether that's our renegotiations with pbms, whether its store rationalization.
Speaker Change: They need to be a help I mean, we need a healthy retail environment right. So we need they need to fix their margin at the point of sale.
Speaker Change: And so for US we want to be an aligned long term partner to that so when we talk about the friend of the pharmacy, we need a healthy retail environment.
Speaker Change: And the cost plus model to the extent that that creates better economics, and we can share in an aligned model I believe that is a part of the driver of why you will see our revenue mix to be a little higher getting into the specifics of what's changed I can't really give you details on that but I think I don't view this as any kind of headwind in terms of cost plus modeling.
Speaker Change: Thanks, Chris.
Speaker Change: Thank you one moment for our next question.
Speaker Change: And our last question is going to come from the line at least tomorrow. He grew with Citi. Your line is open. Please go ahead.
Speaker Change: Hey, this is luis on for Daniel gross but.
Speaker Change: I was on <unk> supply constraints are easing up.
Speaker Change: Are you currently working with GOP wondering it's actually been I would expect as the bulk over the next year or so thanks sure.
Speaker Change: Sure appreciate the question.
Speaker Change: Let me start with just a couple of the macro items to comment on through our.
Speaker Change: Health Research economic group, we just kind of wrapped up a retrospective on 2024 into 2025 and interestingly despite increased utilization coverage by payers actually hasn't changed in many instances, it's gotten worse because they tried to cover it and then they couldnt afford.
Speaker Change: And so they stopped covering it on them after it.
Speaker Change: Hammered their overall cost either as an employer or a health plan. So just to put that to the expanded number of indications for <unk> and we've seen just through our own site.
Speaker Change: Traffic of approximately 2 million consumers looking for pricing at the end of Q4 and now.
Speaker Change: In total 9 million in 2020 for what we are already doing with <unk> is we're partnered with the same manufacturers to support their manufacturer co pay coupon copay.
Speaker Change: Co pay coupon program. So my mentioned previously around that five to 10 times the left when someone.
Speaker Change: Comes through our front door as opposed to the manufacturers front door, we're doing that in partnership with with pharma today, having said that there remains an opportunity to get a truly competitive cash priced at the point of sale. We are in active dialogue to.
Speaker Change: That.
Speaker Change: We don't have one today and I think that the market is keenly aware.
Probably why that is so given.
Speaker Change: Where manufacturers are today I think the opening is now bigger than ever with these negotiations continuing given that supply should be stable and the government of course supports the notion that supply is in fact stable and theyre cutting off the compound or ability.
Speaker Change: To continue to push these molecules therefore, the demand for the branded solution is only going to increase not decrease.
Speaker Change: We believe at this point, it's a matter of when not if.
Speaker Change: We're able to have something concrete.
Speaker Change: And a point of sale brand cast by down and we are aggressively working to get it.
Speaker Change: Yes.
Speaker Change: One thing that I would add is I mean, obviously with relationships with Lilly and Novo.
Speaker Change: Actually I would say this is a microcosm of our business model.
Wendy Barnes: Wendy has really brought to the table as an elevated discussion.
Wendy Barnes: <unk> really across all of the pharmacy ecosystem, whether it's retailers whether it's the pbms.
Wendy Barnes: Whether it's <unk>.
Wendy Barnes: Manufacturers the discussion has really been elevated.
Wendy Barnes: I think relative to where it's been in the past that's what excites me. The most is these conversations across all everything we've talked about today.
Wendy Barnes: I think as becoming more of a top down discussion.
Wendy Barnes: Which I think is longer term positions us very well.
Speaker Change: Thank you and I would now like to hand, the conference back to MS. Wendy Burns for closing remarks.
Wendy Burns: Thank you so much.
Wendy Burns: Thanks to everyone for being with us today and for all of the thoughtful questions. We look forward to follow up calls with many of you I'd like to just close today quickly with three themes regarding the value of <unk>. One we are truly saving Americans time and money when filling their medication.
Wendy Burns: Two we are truly removing friction in the ecosystem and are a valuable partner to pharmacies Pbms health care professionals and manufacturers and lastly, we're or a complement to insurance, we see ourselves as necessary and integral to the insurance at all of US use each and every day to filling those gaps that insurance simply.
Wendy Burns: Doesn't cover let me close this out by saying how incredibly excited I am about the long term growth potential of <unk> and I'm really looking forward to updating all of you on our progress during future calls thanks for joining us today.
Wendy Burns: This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.
Wendy Burns: Okay.
Wendy Burns: [music].
Wendy Burns: Okay.
Wendy Burns: Okay.
Wendy Burns: [music].