GoodRx Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 10, 2023

There are 15 speakers on the call.

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the GoodRx First Quarter 2023 Earnings Call. As a reminder, today's conference is being recorded. I would now like to introduce your host for today's call, Aubrey Reynolds, Senior Manager of Investor Relations. Ms. Reynolds, you may begin.

Speaker 1

Thank you, operator. Good afternoon, everyone, and welcome to GoodRx's earnings conference call for the Q1 2023. Joining me today are Doug Hirsch, our Chief Mission Officer Trevor Bezdek, our Chairman Karsten Vorman, our Chief Financial Officer and Scott Wagner, our Interim Chief Executive Officer. Before we begin, I'd like to remind everyone This call will contain forward looking statements. All statements made on the call that do not relate to matters of historical fact Should be considered forward looking statements, including without limitation, statements regarding management's plans, strategies, goals and objectives For market opportunities, our anticipated financial performance, the impact of the grocery issue on our business, underlying trends in our business, Our potential for growth, collaborations and partnerships with 3rd parties and the expected impact from macroeconomic environment on our business.

Speaker 1

These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties and other important factors. These factors may cause our actual results, performance or achievements to be materially different from any future results, Call. On Form 10 ks for the year ended December 31, 2022, as updated by our quarterly report on Form 10 Q for the quarter ended March 31, 2023 and other filings with the Securities and Exchange Commission 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 In addition, we may also reference non GAAP metrics, which are reconciled to the nearest GAAP metrics the company's earnings press release, which can be found on the overview page of the Investor Relations website at investors. Goodrx.com.

Speaker 1

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

Speaker 2

Thank you, Aubrey. Good morning, everyone, and thank you for joining us. We started GoodRx 12 years ago because we were passionate about helping consumers Since those early days, much has changed and our business has evolved into something bigger than Trevor and I ever dreamed. We have saved Americans over $55,000,000,000 on their medications and our team has launched entirely new business lines, including pharma manufacturer solutions, which enables us to make brand drugs more accessible and GoodRx Health, which we believe offers some of the best and most trusted online health content. It's been both exciting and rewarding to build a business that enables us to help even more people in more ways.

Speaker 2

Trevor and I love what we do, but we also recognize that an important part of expanding our impact includes generating growth, margins and profitability. We've always known that there would be a time when there would be others better equipped than us to run and grow a large public company, And I'm proud to say that we found that person in Scott Wagner, who has agreed to step in as our Interim CEO. Scott brings more than 25 years of experience running and scaling consumer technology companies that are leaders in their field, including as public companies and has the knowledge and expertise needed to enter the next phase of our company's growth. In 2012, Scott stepped in as Interim CEO at GoDaddy I went on to become President, COO, CFO and then CEO. During his tenure, he took the company public, Nearly tripled revenue to approximately $3,000,000,000 grew the business profitably and managed over 7,000 employees.

Speaker 2

Scott also has experience working with our sponsors, Silver Lake, Francisco Partners and Spectrum Equity. I've been working alongside him for the past 2 weeks and have already seen him put his breadth of Trevor and I are excited about what Scott's new perspective will bring. It's no secret this past year has been rough. Our results have disappointed us as well as our stakeholders and we believe the time is right to have someone leave the company who has extensive experience running and growing public companies. We truly feel this is just the beginning of what GoodRx can accomplish.

Speaker 2

We love GoodRx and wanted to succeed more than anything else. Trevor and I are remaining at the company and are committed to supporting Scott and the business. I have taken on the role of Chief Mission Officer I will spend my time talking about all the amazing ways we aim to make healthcare affordable and convenient for Americans. I will now pass the call over to Trevor.

Speaker 3

Thank you, Doug, and good morning, everyone. As Doug mentioned, we recognize the challenges both our business and our stock performance have faced over the

Speaker 4

past couple of years. We are

Speaker 3

still recovering from the impact the grocery issue had on our core business. We haven't driven product innovation forward as quickly as we planned to And our pharma manufacturer solutions offering has faced continued macroeconomic headwinds with the spending delays and reductions we discussed in our Q4 earnings call in February, We are incredibly lucky to have Scott on board. He has extensive experience transitioning businesses from founding teams into highly successful public companies. We've already identified ways to improve and potentially grow the business, accelerate our long term plan and platform expansion and drive efficiency and margins. We are confident that this move is coming at the right time.

Speaker 3

Our business remains very attractive. We have a core prescription business that endured an unexpected disruption over the past year, It's fundamentally a category innovator in a large growing market. We believe our pharma manufacturer solutions efforts are delivering compelling ROI to customers, It's still in the early days. We need to continue to build scale and repeatability. We believe this leadership transition will accelerate our growth and performance and reflects our enthusiasm about the opportunity for GoodRx over the years to come.

Speaker 3

In my new role as Chairman, I'll continue to leverage my deep network of industry relationships An extensive knowledge of the healthcare industry to support Scott with our overall healthcare strategy, strategic partner relationships and product innovation, I get to focus on supporting the business structure and strategy, the stuff I love. Before I turn the call over to Scott, I want to discuss the highlights from this quarter, There are 4 key areas where we saw the most success in Q1. 1, our hybrid strategy 2, our engagement efforts 3, our recent ability to rapidly adjust consumer pricing, which is driving more volume for us. And 4, our collaboration with Express Scripts. First, we began implementing a hybrid approach where we formalize relationships with our retail pharmacy network to ensure stability and mutual success for all parties.

Speaker 3

The early success we've had with this strategy has led us to increase the number of retail pharmacy partners we are directly contracting with, As well as the proportion of claims associated with direct contracts. It has allowed us to understand their needs better and more deeply engage with these retailers. We believe we are creating incentives to encourage greater use of GoodRx and drive incremental volume through these retailers. 2nd, As we work toward creating more meaningful direct consumer and provider relationships, our engagement efforts continue to play a critical role. As of the end of the Q1, we are pleased that the proportion of prescription transactions from fully registered consumers has continued to increase After doubling in the second half of twenty twenty two and that over 450,000 prescribers have engaged with us in provider mode since its launch.

Speaker 3

3rd, we have found innovative ways to be able to rapidly adjust consumer pricing through point of sale discounts To optimize around demand elasticity on a per medication basis, we have increased our total spend on consumer facing discounts We believe that much like consumer product brands who leverage coupons, our abilities to catalyze user behaviors are highly effective. And 4th, our PBM partners can benefit from the increased retail and network stability our hybrid strategy creates and we are innovating in ways to do even more with them. A prime example is our Express Scripts integrated savings collaboration, PriceAssure powered by GoodRx, which is one of our most exciting new initiatives. Early performance indicators across this innovative program continue to show promising signs and we can report we saw greater than expected momentum via the Express Scripts program, particularly towards the end of the quarter. The Express Scripts collaboration helps to remove the need for consumer education on prescription savings and provides more transparency and price awareness automatically across the healthcare system by allowing eligible users to automatically receive GoodRx discount prices As part of their pharmacy benefits, it's built right into their card with no action required on the consumer's part.

Speaker 3

Express Scripts continues to educate and enroll plan sponsors We are seeing great early results. We can say definitively we are reaching more consumers through this partnership, driving greater savings and improving awareness and affordability. We aspire to broaden our reach further through arrangements with additional PBMs. We believe our pharma manufacturer solutions platform has great potential Based on the feedback from clients and the ROI those clients are achieving, but it operates with different pacing and is more nascent. We're still building out our execution abilities In this offering, with respect to our product investments and learning how to predict outcomes more accurately, we are also working on increasing our synergies across GoodRx Health and Provider Mode I will now turn the call over to Scott.

Speaker 3

Thanks, Trevor. First, I'd like to take a minute and applaud Trevor and Doug Trevor and Doug are smart, creative people who have built the category defining company. I've got an incredible respect for both of these guys, both what they've built at GoodRx and who they are as people. I'm thrilled to be here and to contribute to the next leg of the GoodRx journey. As Trevor and Doug mentioned earlier on the call, I've got a bunch of experience helping companies deliver growth at scale, while building exceptional customer experiences.

Speaker 3

Personally, I really enjoy building companies and doing so the right way. Companies that do unique and valuable things for their customers, They continue to innovate and grow, they deliver attractive financial returns and have high performing teams. I'm excited to join GoodRx, not just for what the business is today, but more importantly for what it can be and for how I can help right now. There is a lot to like about the GoodRx of today. GoodRx has a unique value proposition as the leading prescription savings marketplace.

Speaker 3

GoodRx has a true brand loved by both patients and healthcare professionals alike With net promoter scores approaching 90, that's pretty incredible. GoodRx plays a unique role in the prescription ecosystem Providing value to patients, providers and manufacturers alike. There's a lot of opportunity here. GoodRx has a huge TAM with interesting opportunities to expand from the discount card space to serving a larger portion of both Medicare And commercial plans. GoodRx has demonstrated product market fit with pharma partners, building a meaningful business from scratch in a really short time period.

Speaker 3

We believe this business has growth because it's incredibly useful to customers and manufacturers alike. GoodRx

Speaker 5

This is unique in that

Speaker 3

it touches a vast array of constituents across the healthcare ecosystem spanning patients, providers, Retailers, PBMs and pharma manufacturers, this ecosystem wide foundation is our basis for further expansion. It's also clear that GoodRx can do some things differently. I believe we need to do a better job of identifying and prioritizing the things that matter and are most impactful. We also have to evolve our execution against these opportunities, making sure that we execute with quality and with urgency And meet our commitments to each other and the company and to all of you. I've been around the block a bunch, GoDaddy being the most visible, but also before that with Private equity firm KKR leading businesses from one stage of evolution to another.

Speaker 3

While not driven by a Playbook per se, there's a combination of strategic insight, execution and team alignment that can help here. As I jump in as Interim CEO, There's a couple of key areas that I plan to drive and focus on with the team. 1st, making sure that we have the strongest network relationships And retail pharmacy strategy possible. 2, honing our short and medium term growth plans for the core prescription business And aligning teams and resources behind it. 3, scaling our pharma manufacturing solutions efforts.

Speaker 3

There is a lot of goodness here. We've got a very unique capability in branded pharma that can benefit both patients and manufacturers alike. While our offerings in this area are nascent, we believe early proof points have been extremely positive with pharma customers, Being really strong value given our high intent audience that spans both patients and healthcare professionals. It's particularly valuable for the awareness and access solutions that they've been promoting. We're going to lean into these high ROI solutions And focus on driving further product innovation, expanding our brand reach with existing partners as well as landing more lighthouse brands with new manufacturers.

Speaker 3

If we get this right, I'm confident we're going to be able to turn manufacturer solutions into a larger and more profitable business over time. Finally, we're going to put our combined efforts against our biggest opportunities, make decisions and then execute with quality and with urgency. For the investors on the call, I'm a big believer in transparency. GoodRx has experienced some uneven performance over the past 12 months And no one likes that. We need to get to a place where we can provide clear ranges of growth and profitability to our investors, Deliver against those ranges consistently barring any external and exogenous events, then lay out longer term plans and milestones over a 3 plus Teams, I'll be open with everyone on my thoughts on what our and your financial expectations should be for GoodRx with a focus on building multiyear value while hitting our With that, I'll turn it over to Carsten to discuss the quarter in more detail and our priorities going forward, and I look forward We recognize everyone is going to be focused on what's to come.

Speaker 3

So I'll provide a short commentary on the Q1 and then get to guidance before turning it over to the operator for Q and A. In summary, during the Q1, we exceeded guidance on revenue, adjusted EBITDA and adjusted EBITDA margin with those coming in at $184,000,000 $53,200,000 29 percent respectively. Going into more detail, total revenue for the quarter decreased 10% year over year to $184,000,000 as I mentioned. Prescription transactions revenue growth was down 13% year over year $234,900,000 but up quarter over quarter by 4%. MAX declined 5% year over year to 6,100,000 But increased 3% quarter over quarter.

Speaker 3

PTR volume excluding the grocer involved in the previously discussed grocer issues continued to grow consistently It is up 3% sequentially and 16% year over year for 1Q 2023. The year over year declines were largely driven by the gross ratio. Our PTR also benefited from unexpected one time contributions as we expanded our efforts to ensure our network counterparties were adhering to the contracts we have in place, Our Pharma Manufacturing Solutions revenue declined 13% year over year in the Q1 to $20,400,000 Our focus is on signing deals with high levels of recurring revenue potential, so we did not do deals with one time customers as we did in 1Q22. We're pleased with the trajectory we've achieved and the quality of campaigns we're running. We remain very optimistic about this offering long term.

Speaker 3

Turning to subscriptions. Subscriptions revenue grew 26% year over year to $24,100,000 As the gold membership fee increase implemented in the first half of twenty twenty two more than offset the negative impact from Kroger Savings Club And related reduced marketing of the program and price increase related to gold user churn. We ended the quarter at 1,000,000 plans, Down 16% year over year. Cost of revenue is $16,700,000 or 9% of revenue Versus $12,300,000 or 6 percent of revenue in 1Q 2022. The increase in personnel costs related to consumer support An allocated overhead from the Vitacare acquisition primarily drove the year over year increase.

Speaker 3

Product development and technology expenses were $32,900,000 18% of revenue, which compared to $35,000,000 and 17 percent of revenue in 1Q 'twenty two, Decrease in absolute dollar is primarily driven by a decrease in payroll and related costs and higher than expected level of capitalizable labor based on our quarter end analysis. Sales and marketing expenses were $78,500,000 or 43 percent of revenue I'd like to take a moment and delve deeper into one aspect of our marketing program, That is similar to couponing by consumer packaged goods companies. This enhances our ability to fulfill our mission around medication affordability. We can deploy this tool against specific medications and to drive specific behaviors, including for example, our engagement efforts. Last year, we disclosed in our 10 ks, we spent $24,700,000 on these efforts and we believe we've been able to continue to make the spend effective at scale.

Speaker 3

POS discounts are one of the many tactics at our disposal to help secure great pricing for our consumers in what we believe To be an extremely targeted and effective manner, this spend contributed to our ability to drop sales and marketing expenses as a percent of revenue mid-twenty 22 Even as our use of POS discounts grew, in the Q1 we spent a total of $10,900,000 $9,500,000 of which is included in sales and marketing $1,400,000 of which was contra revenue, meaning that instead of hitting OpEx, it reduces revenue and also reduces our growth rates. That is similar to the contra revenue accounting treatment of coupons in the CPG space. The P and L geography of contra revenue versus sales and marketing For our POS discounts has no impact on adjusted EBITDA. General and administrative expenses were $29,600,000 or 16 percent of revenue Versus $31,900,000 or 16 percent of revenue in the Q1 last year. The decrease is primarily driven by a decrease in stock based compensation expense related to the co founders awards granted in connection with our IPO.

Speaker 3

Net loss was $3,300,000 compared to net income of $12,300,000 in Q1 of 2022 and was impacted by lower sales volumes related primarily to the grocery issue, Integration costs related to VidaCare and fluctuations in our quarterly estimated tax provision, partially offset by lower sales and marketing expense. Adjusted net income was $29,500,000 compared to $41,300,000 in the Q1 of 2022. Adjusted EBITDA decreased 18% year over year to $53,200,000 which was ahead of expectations and up 7% quarter over quarter. Given the PTR offering has very little incremental cost per transaction, the impact on our PTR volume from the grocer issue And to a lesser degree, Pharma and Manufacturer Solutions revenue were the biggest drivers to the year over year performance. Adjusted EBITDA margin of approximately 29% was down 2 90 basis points year over year, while improving 200 basis points quarter over quarter.

Speaker 3

We generated net cash provided by operating activities of $32,300,000 compared to $30,100,000 in the prior year period. Our capital allocation priorities are unchanged and we will continue to focus on high return investments and maximizing value for shareholders. Our balance sheet remains strong and we ended the quarter with $761,100,000 in cash on the balance sheet And $665,300,000 of outstanding debt. Our revolving credit facility had $90,800,000 of unused capacity, representing total liquidity of $851,900,000 Now on to guidance. Our outlook for revenue is $185,000,000 to $188,000,000 for 2Q and for the full year we expect total revenue of 7.50 $775,000,000 Both of those numbers are net of anticipated POS discount contour revenue of $1,000,000 to $2,000,000 for the 2nd quarter and around $10,000,000 for the full year.

Speaker 3

As we said earlier, the portion of POS discounts that are Contour revenue reduces revenue and our growth rate versus traditional sales and marketing expense treatment. The POS discount Contour revenue amounts were not included in our prior guidance numbers given their evolution. It has no impact on adjusted EBITDA since the value ascribed to contra revenue would otherwise hit S and M expense. We've reduced our Pharma Manufacturer Solutions outlook for the coming few quarters as we aim to ramp up a series of large programs, Which have been either recently implemented or are in our late stage pipeline. A material portion are pay for performance providing upside for us.

Speaker 3

We believe our customers have been very pleased with them, but they are less predictable for us than our historical flat fee deals, which contributes to us lowering the To provide context, our pharma manufacturer solutions offering is still nation. While we believe early proof points have been strong in terms of customer satisfaction and ROI, our product innovation and delivery processes are Still in early stages. Manufacturer Solutions revenue is less than $20,000,000 in 2020. Since then, we've learned and progressed as we grew the revenue to 5 times that amount through 2022. We have increased the types of clients we work with and the offerings we sell to them.

Speaker 3

We believe that we're now in a position to put energy and resources behind the deal constructs that work the best for our clients and ourselves. For example, in terms of clients, we found focal points in women's health and diabetes. And on the offering side, we're focused on a couple of areas. First, driving prescriber usage, a newer growth vector for us, where we've seen provider mode MAUs double since December 2022 And where we are leveraging over 450,000 providers who have engaged with our provider mode offering since its launch, Already resulting in multimillion dollar contributions to Pharma Manufacturers Solutions revenue. Also on the offering side, We've seen increasing number of pharma manufacturers interested in creating cash solutions for branded medications, leveraging our direct Bottom of funnel consumer marketing capabilities.

Speaker 3

One example is our DexCom point of sale solution, which provides savings of $200 for consumers. Overall, we believe that our pharma manufacturer solutions pipeline is robust and we are very excited about the long term potential of this offering, but we're in the early innings. Predicting the timing of when we can close and deliver on some of the lumpier large deals is tricky for us. We are also more focused than ever on recurring revenue, Which means we're foregoing potentially multimillion dollar one time revenue deals that we took in the past. We believe a highly sustainable and highly valuable Pharma Manufactured Solutions business has to be founded on a growing base of repeat usage.

Speaker 3

Moving on to Q2 guidance by offering, We expect prescription transactions revenue of approximately $132,000,000 to $134,000,000 net of the anticipated impact of POS Revenue reductions of approximately $1,000,000 to $2,000,000 Our expectation for PTR per MAC is to show a modest decrease over the coming quarters As we focus even more on driving volume with retailer pharmacies through our hybrid model and we experience the seasonal impact of more consumers We expect subscription revenue of approximately $23,000,000 $24,000,000 in the 2nd quarter, which at the top end is relatively flat quarter over quarter as we are nearing the anniversary of our fee increases To return to sequential growth in the 2nd quarter with revenue of approximately $26,000,000 up 27% quarter over quarter. Finally, we expect other revenue to be approximately $4,000,000 in the Q2. As we mentioned in our last call, we continue to have additional marketing investments we anticipate in the coming quarters and we'll remain opportunistic as we structure the timing of those investments. As a result, we expect our adjusted EBITDA margin to be in the mid-20s percent range for the Q2. With that, I'll now turn it over to the operator for Q and A.

Operator

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

Speaker 6

Hey, guys. Thank you for taking my question. Scott, welcome to the team.

Speaker 3

Hi, Stephanie. I

Speaker 6

I was hoping to hear a little bit more about growth at scale, just because that's becoming a bit of your catchphrase. So I want to hear mainly about the growth aspects. From the prepared remarks, the presentation, is it correct to assume that that will be focused on the turnaround and manufacturer solutions, are you focusing on provider mode or just given the scale of your consumer facing brand, are you looking at any of the growth areas like GLP-1 or other things like that, where you could really get bigger.

Speaker 3

Thanks, Stephanie. So there's a whole bunch of things underway. And rather than go through all of them, there's a couple that are incredibly promising that are already Showing great signs of life. So in the core prescription marketplace, we've got this fantastic and unique value proposition. And there's a whole bunch of ways that are reflected in our merchandising and pricing within that marketplace to make sure that we get the most affordable Prescription for a particular drug branded or generic to consumers.

Speaker 3

So if you think about that value prop, that moves in a couple of different ways. One of which in the marketplace is expanding Two additional value propositions, not only for cash pay, but particularly against Medicare and commercial insurance. And there's Again, some wonderful things underway that really opens up the promise of what GoodRx can continue to become. Going back to Pharmamancell, just think about that marketplace and that intersection of having a branded drug Show up with the price point and the right price point that both a manufacturer wants and delivers incredible value to consumers. That's sort of the core of Manufacturing Solutions, it's unique to GoodRx.

Speaker 3

And so when we talk about the kinds of things that we want to do more and do more at scale, Yes, it's leading into the things that build up the business of GoodRx today and kind of where we can take it.

Speaker 6

Super helpful. Thank you. And then the next one is for Carson, just given you gave us a lot of color on all the pieces in the guidance. But could you just help us size the grocer impact in 1Q and how to think about that going forward?

Speaker 3

Thanks for the question, Stephanie, and good morning. Yes, the grocer's contribution to revenue declined by roughly mid-30s of 1,000,000 of dollars between 1Q 'twenty two And 1Q 'twenty three, at the time of the growth we achieved, the revenue derived from the growth was also actually growing. But even if we ignore the growth And just to add the difference in revenue between the two quarters, then our total revenue would have been up approximately 8% year over year. If we look just at PTR, prescription transactions revenue, which is the most relevant component, which came in at about 135,000,000 dollars in 1Q 'twenty three, that number would have been about $170,000,000 had the gross revenue come in as Had last year, which would have put PTR growth at about 9%, but for the issue. Hope that's helpful.

Speaker 6

Awesome. Thanks, folks.

Operator

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

Speaker 7

Thanks very much. Just one quick clarification for Carson and then maybe a question for Scott. Carson, on the revenue reduction, I'm trying to did I hear you right that the contra revenue issue was, It's now a factored reduction, but it's also Pharma Solutions and just want to make sure I can understand the moving parts to that. So that's the first question. And then the second broader question for Scott and

Speaker 3

sort of follow us up

Speaker 7

on Stephanie's. When you think about those growth opportunities, Are there things that you think that you can change that could accelerate growth near term or are these all things that are going

Speaker 2

to take a while And there's

Speaker 7

a lot of long term growth, but there's not a lot of changes you can make to improve growth in the near term. Thanks.

Speaker 3

Hey Sandy, I'll take that first one since that's just a quick clarification. So our POS discounts are targeted incentive programs aimed at consumers, Which are intended to drive behaviors like registering for an account or claiming a first fill, for example. So they're related specifically to our prescription transactions business. I think you had alluded to the fact that they may have something to do with PharmaMan's fault, but they do not. They are related to our prescription transactions business.

Speaker 3

And because a portion of the incentives are routed through customer arrangements, that's why they were treated as a reduction of revenue, Because we don't receive a distinct good or service forum, when they're not routed through customer arrangements and their SMM. So again, focused wholly on the PTR business and driving specific behaviors on the part of our users Like our engagement efforts, for example. Yes, thanks. And then in terms of characterizing growth, If you think about the three things articulated earlier, boy, let's really lean into the network and solidify it To its best extent. 2nd is PTR both be awesome at what we do and how do we expand intelligently and then the third is Mansfield Delivery and Expansion.

Speaker 3

What I think those represent are long term multiyear really strategically important things Where you put points on the Board week by week, month by month, quarter by quarter. So there's a whole bunch of short term things Underneath each of those containers, but those are really multiyear events. So what does that translate into financial expectations and how do those build? I think it's really important right now for all of us to hit not only the range of commitments that we've just laid out, but then work like hell to get on top of it. And as these things land, we'll be clear about what kind of impact they're going to have and the shape of the P and L going forward.

Speaker 7

Great. Thanks.

Operator

Our next question comes from the line of Charles Rhyee with Cowen.

Speaker 8

Yes, thanks for taking the questions. I guess first For Scott and Carsten, when we think about the guidance here and the way you kind of characterized a lot of The parts of your business, you're looking at Vansol as a nascent business And kind of looking at a lot of the areas that you described, it seems like you've kind of taken a step back in how you're Seeing your position in the market and it looks at the surface that you're trying to manage sort of the expectations here You know, of what to expect at least in the near medium term. Maybe Scott, you can kind of Good to find here, as you've kind of evaluated where the company is at the moment, is this do you feel like you've really level set Sort of how you're seeing the business performing relative to than what you think you can do as we move forward from here?

Speaker 3

Sure. Let me this is early week 3 officially. And so before going into guidance, maybe to take a little bit of a step back. Even over the last couple of weeks, I've been spending time with our team's leadership Serve with the priorities across the company and have also had the opportunity to get to a bunch of customers, particularly in NANSAL And have been doing a heck of a lot of both user flow reviews that have touched consumers and docs. And again, not deep coverage, but touching those three areas.

Speaker 3

And the fundamental value proposition of GoodRx, Both its marketplace and the value we provide and then the extension of NAND SOL to Branded Drugs and Pharma Manufacturers, it's really powerful. And that's a super important point. So there's a solid foundation that we can build on here and there's things to do, again, both in the core marketplace and in building up the NANDASOL And the team here, there's a heck of a lot of really good people who are energetic, committed and talented. So when we think then about what's here, there's stuff to do, right? And I think everybody who's an investor in the company, If you look back at the value proposition of the company and think about ways to build the business, yes, I think you're going to find a whole bunch of things that to be positive about.

Speaker 3

When we go to financial guidance, I think the best thing I can do for you and for people on the call right now is almost give you my philosophy, Which is on guidance, a range is the expected outcomes that Based on our best knowledge, we should deliver against. And so to me, that's been a commitment, both places I've been before, Public and private, again, based on what we know and what the rhythm and pacing of the business is. And as a team, you don't just work like How to meet your commitments, you do it to exceed them. But so the guidance range that's coming out right now is our teams. Best estimate of the committed range of where we are.

Speaker 3

And again, we're working like crazy, not just To meet that commitment, but have everything land that we think is important to build the business long term and that should show up in the financial results.

Speaker 8

Appreciate that. And then just maybe as a follow-up, if we think about we're seeing Clearly, a big focus on MANSAL here. And it looks like that's expected to be the big driver For the company building off the scale base core business, when we think about the it seems like if we think about the piece that drive it, Is it fair to say it's really provider mode will be the main driver for MANSAL? How much does the subscription membership And driving Mancell growth and do MAX play a role in that as well? It's our understanding that pharma marketing kind of maybe ignores Just the transactional members really wants to focus on providers and subscribers since those are repeat customers per se.

Speaker 8

What's the relative value between maybe the different pieces from a manufacturer's

Speaker 3

Sure. I'll take that one. This is Carsten Charles. So Couple of things. First of all, providers do provide an attractive growth vector for us.

Speaker 3

And with the launch of provider mode, we're seeing multimillion dollar revenue That said, when you think about it, when folks come to GoodRx, About a quarter of the folks visiting, just the general users, are coming to GoodRx to look for a prescription branded prescription drugs And good prices on branded description drugs. So those users, even coming in as individuals are highly, highly valuable. They're bottom of funnel, script in hand, looking for an affordability solution, and that's very attractive to manufacturers. So both prongs, Our original promise was more consumer focused and our newer growth vector providers are highly relevant. More broadly, I think as we look at the business, the macro environment for Generally, I think we've seen some short term pullback by manufacturers in terms of spending, but we're continuing to see the ongoing shift to digital, And our clients are confirming they're getting great ROIs.

Speaker 3

So from that perspective, We think that aspect of the business is also very solid. So we think it's really up to our execution. And as Scott said, there's some bigger lumpier deals in the pipeline. Some of them are more performance oriented, so we'll have to see how they track I know exactly how much revenue they'll generate, but we're looking forward to those with great anticipation and we expect To see Q o Q sequential growth going forward over the next few quarters. I'd just add 2 quick things over the top.

Speaker 3

One is the Real unique foundation of our marketplace is this intersection of consumers, their doctors And the drug itself. And if you're a branded manufacturer, you're spending outrageous sums of money in different media components To really get to that point and that's sort of the unique value proposition that GoodRx has today. If you're A branded manufacturer with any sort of cash back or co pay cards that are really aimed at market access We're phenomenal. You're seeing that in the campaigns and some of the feedback from manufacturers. So that's really just the super high return.

Speaker 3

And then in terms of awareness and hitting the audience, we're building up tools, whether it's health or provider mode, but also allow people to reach audience. So There's really 2 components to kind of what we have that I think are long term valuable to Branded Pharma.

Speaker 8

Great. Thank you.

Operator

Our next question comes from the line of Mark Mahaney with Evercore ISI. Great. Can you guys hear me?

Speaker 3

Yes, we can. Hey, John, we can.

Speaker 9

Hey, guys. This is Jan for Mark Mahaney. Just a couple of questions. First question, just on PTR. To clarify, if you can Kind of walk through like the magnitude of the grosser impact in the next few quarters.

Speaker 9

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

Speaker 3

Sure. Great questions, Jan. Happy to jump in. So We talked a little bit in response to one of the prior questions about the impact of the grocer issue on 1Q 23 relative to 1Q 2022 being in the mid-30s of 1,000,000 of dollars, just off that delta. So that gives you a rough sense Of the headwind, we're still continuing to face as we look Q over Q or more pointedly year over year.

Speaker 3

I think going forward, When we look at where we're going to lap the grocer issue, that will happen in the Q3 since The grocer issue fully manifested in the Q2 of last year. So as of Q3, we'd expect to lap that issue. And at that juncture, we'll be able to reflect the businesses through more comparable outcomes Without having to call out the adjustments like you did for 1Q of 'twenty three relative to 1Q of 'twenty two. And then subsequently to then, that's when you'll see the business performing on an equivalent basis to the prior year. So in those future periods is when we're really going to be able to show that comparison.

Speaker 3

And yes, to your point, we have been seeing ex growth or volume growth In the interim, and that's been a big plus for us as well to see that volume coming into the business. I think at this point, it's a little hard to parse it to know how much of the volume is shift and how much of the volume is net new, Given the grocer has pulled out of the picture, and we'll know more about that too, of course, as we lap the grocer issue in the Q3.

Speaker 9

Great. And then if I may, one follow-up on probably a bigger picture question on the pharma advertising, the manusel. So what is required to scale this business? Or maybe ask another way, like what is the kind of the current investment most focused on? Is it Adding experienced sales, building a better ad tech platform, better measurement, etcetera.

Speaker 9

So if you could just kind of talk through the investment priorities here. Thank you.

Speaker 3

Sure. This is Scott and we'll follow-up in subsequent quarters on this. But Today, there's a series of both awareness programs that are running That are pretty consistent in fixed rate. And then we've got a handful of pretty large volume Creative marketing campaigns with large manufacturers that are high intent Volume driving programs that would fall into co pay cash back, but they're really a performance Related execution and those are just starting or are in flight. And Just the ability to both scale and ramp those kinds of programs naturally within the marketplace, deliver, Grow them kind of consistently are just things that we just need to work through.

Speaker 3

And that's a combination of people talking to Our branded partners and making sure that expectations and are aligned between the 2, which are our account managers and then At operations, which exists, but again, builds rhythm about how you actually deliver these programs, both within our systems are the things that we're just working through the So there's nothing that's super far afield here. It's just the natural part of building a business.

Operator

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

Speaker 10

Good morning and thanks for taking the question. Maybe if I can just dive in a little

Speaker 11

bit more on the EverNorth partnership. As it starts to roll out, as it gets built into Membership base, how easily is it for you to track the discounts that are being applied within that Evernorth base and the partnership? And as you think about the economic impact of that over time, first, is there anything in guidance this year relative to that partnership specifically? And then how do you think about the checkpoints and proof points over the next 2, 3, 5 years to show if that partnership is driving the success that you want?

Speaker 3

Thank you, Michael, for the question. We've been really pleased with the results of our Express Scripts collaboration. As we said in the prepared remarks, This program, PriceAssure powered by GoodRx, it contributed to our results coming in above expectations. So This collaboration lets us reach more consumers. It lets us drive greater savings, lets us improve awareness and affordability.

Speaker 3

Because of our nature of our agreement with ESI, we can't speak specifically to a few of the items you mentioned about discounts and such. But When we look at the market size here and how this program can benefit our business, we believe ESI represents Over 60,000,000 relevant lives, and we don't think we're very highly penetrated into that at this time. So We do assume that this program will continue to work well for ESI and for us, And we assume that will be the case going forward. So we think there's really potential for significant growth. We think this program is just great for ESI's customers and for the consumers involved and so we're very excited about it.

Speaker 3

And I'll follow-up Trevor as well. Hey Michael. I think with respect to economics, the main point to make here is these transactions flow through our PBM network model Exactly like any other transaction that flows through our PBM network model. So when I think about on a per claim or per transaction basis, The amount of revenue that's generated, that amount of revenue is identical to the amount of revenue as it would be of the rest of our business. I think the real distinction and one of the reasons we're so pleased with the ESIEvernorth program is that we've taken a model where we traditionally have to pay up And now we have ESI effectively in a role that's similar to a channel Partner routing those lives, transactions, etcetera, to us.

Speaker 3

So we've taken a model where we've been able to, instead of having to pay upfront for users, variabilize it And benefit from that reality.

Speaker 11

Thanks. And then just one more quick question. Carsten, it's I think, but Scott, you may have a view. You did $9,500,000 of buyback in the quarter. That being said, you have almost $140,000,000 left.

Speaker 11

Obviously, you've noted some of the challenges, disappointments of growth and the stock sell off. Cash position is incredibly strong here, cash flow positive. Why not do more faster?

Speaker 3

Hey, Michael. This is Carsten talking first of all. So I think there are a couple of reasons here. The first is you have seen us consistently buy back in periods when we haven't had M and PI. So We've been consistent in that approach.

Speaker 3

I think the last time, as an example of the point when we didn't do buybacks in connection with MMPI When we did our reduction in force in August of 'twenty two and then around the FTC issue. But in open windows, when we can buy back, we have. I think other than that, in terms of the rate at which we're buying back, We're of course subject to certain volume limits on that as well. So we look at this from the perspective of staying within the volume limits, Managing the cost at which we're buying back and taking advantage of the open window opportunities that we've had in the past.

Operator

Our next question comes from Stan Berenstain with Wells Fargo.

Speaker 4

Hi. Thanks for taking my questions. You commented on having more direct contracting relationships with retail pharmacies. What percentage of your PTR revenue is coming from direct contracting relationships?

Speaker 3

Thank you, Dan, for the question. Yes, we've spoken about Direct conference here. The direct contracting with the retailers helps us balance our revenue and their margin and it lets us have These new levers such as the POS incentives that we've spoken about to drive incremental volume. We are focused also in those efforts to ensure retailers don't take advantage GoodRx And this has worked really well. This is one of the areas we're quite enthusiastic about relative to What's gone particularly well in the Q1, in particular this hybrid model that we've spoken about that ensures network stability And let's us collaborate just closer with our partners on for mutual our mutual success and profitability.

Speaker 3

So this lets us help the retailers drive their strategic initiatives and improve their unit economics and it's also maintained the strength of Marrone Economics. And while doing this, we've been able to maintain our marketplace model of PBM and that has continued to strengthen. So this is really all about allowing us to align incentives with retailers to drive incremental volume, which we're really excited about. To your question more specifically about percentages, we're just what I would like to say there is we're really happy with our direct contracting progress And we plan to continue and potentially even accelerate a bit down that path.

Speaker 4

Okay. Can you maybe just walk us through How the economics work on direct contracting arrangements, maybe both on the revenue side and marketing related costs?

Speaker 3

Sure. I'll maybe speak and see if Carson has more to add. But what I would particularly highlight here is we've now been doing this hybrid Contracting approach for several quarters and you can see in our financial results To some extent, how that works. You can see that we've exceeded expectations on that PTR business and been able to really do Good job of going into this new networking construct with this hybrid networking of Making solutions that help our retail partners and align those incentives and also do work for us in our Financial results. Yes, Trevor, I'll jump in on that one too.

Speaker 3

So yes, the hybrid contracting is definitely attractive to us given the point that Trevor made about the wins we get. I think from an economic perspective going forward, as Trevor said, allows us to balance our revenue with retailer margins. The other thing it allows us to do is to create incentives for retailers to help us frankly in terms of Driving volume and we're looking forward to doing more of that. And as we look forward to doing more of that, that may entail some trade offs on our part as well. That said, as Trevor said, if you look at PTR per MAC QoQ, even as we've continued to drive more volumes through Our hybrid model and direct contracts with retailers, you see PTR per Mac as being stable.

Speaker 3

I guess I get to comment over the top on this one too. This is something that we'll continue to work and Your expertise, thoughts, is really having all of its energy around this is going to be really helpful and we're working right at the hip together to basically have all these things land in a way that's phenomenal for What you call all of our channel partners, but most importantly, continues to add value to the marketplace we have. Like that's the North Star. And all this effort around how we're engaging with retailers and the PBMs is all about, again, having Honestly, the most valuable prescription marketplace, which is access and affordability around prescription medication.

Speaker 4

Okay. Maybe one quick follow-up. Do you expect MAC growth from direct contracting to be faster, slower versus your traditional channel? Thanks.

Speaker 3

I'm not sure this goes to, I think, to your point, which I maybe didn't answer directly last time, so apologies for that, Around marketing as well. So marketing isn't really impacted at the consumer level by How we end up routing the transaction on the back end, and macro is impacted to the extent that we can drive Continued even better pricing through some of our direct contracting relationships. But broadly speaking, to the extent that Direct contracting exists. It doesn't really impact our OpEx structure on the marketing side or our CAC, and it only impacts The volume of users differentially from our traditional model to the extent we secure even better prices through our direct contracting. Thanks.

Operator

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

Speaker 12

Thanks for taking the question. You mentioned that more of your pharma solutions business will be coming from paper performance contracts and flat fee this year. I'm curious if there's A structural shift in how pharma manufacturers are contracting with you. And what are some of the performance metrics That are built into those contracts and what's the upside there to your guidance, should you perform Better than anticipated.

Speaker 3

Sure. Thanks for the question. It's Carsten speaking here. I think first of all, Historically, we've been focused primarily on flat fee deals and a big piece of that has been because those original deals where pharma manufacturers first engaged with us We're around awareness. And on the awareness side, those deals made more sense as flat fee both for us and manufacturers Then they did as more pay for performance.

Speaker 3

We're now shifting towards deals that are specifically about access to a greater degree. Some of the examples You can see and that are quite public are ones like the $200 off Dexcom device packages. And Those kinds of very, very large discounts where manufacturers are going direct to consumers to offer compelling pricing That's often lower than the pricing that they'd received through whatever other benefit, whether employer or otherwise they'd receive. Those are really access Driving volume, so we want to capture some of that upside. And number 2, where manufacturers are looking to lean in even more deeply As they go around to some degree the traditional economic models of pharma distribution.

Speaker 3

So that intersection of us Believing we're really good at that given we have the consumers and the HCPs to drive the volume and drive the actions On the first side. And number 2, them being willing to pay more in total on a paper performance versus flat fee Makes that model attractive for us. So I think as we look forward through the rest of the year, we see number 1, More of those deals happening in our future. And number 2, to your question about performance, to the extent we drive those deals Better than we include in the numbers in our guide right now, then of course, we'll over perform the guide. I think at this juncture, We're just starting down this performance oriented path.

Speaker 3

So we're taking a very reasonable approach To how we think about them, and we'll likely be able to give you an update on the upcoming calls to the extent we're crushing it as we hope we will. Hey, it's Scott over the top. I just that was well said, Carsten. I think there's one point to reiterate that's important, which is There's 2 kinds of things that we're talking about here, which is access, Low funnel access programs and then awareness. And those can be different, but they're also they also work in combination and partnership.

Speaker 3

And so the way that we're talking to branded partners is number 1, number 2, and sometimes it's a combination of both. And so the value proposition that we have works in both ways and it's particularly powerful in combination. So we're going to continue to build the business across both those areas. And to Karsten's well put point, There is inflection of volume on some very large campaigns that I think from a growth standpoint, we want to be able to deliver that repeatedly and do so naturally. And that's the things over the next couple of quarters that we're going to do.

Speaker 3

But again, it holds a lot of promise.

Speaker 12

Got it. That makes sense. And as I look at guidance, particularly keeping EBITDA Guidance at 25% margin for the full year, it does imply a bit of margin degradation in the back half of the year. Is that largely due to just decremental margin from lower Pharma Manufacturer Solutions? Because you should theoretically, mathematically get It is an uplift from this contra accounting change and 1Q margins were obviously very strong due to that one time issue.

Speaker 12

So Curious what's causing that degradation in margin, EBITDA margin in the back half of this year?

Speaker 3

So first of all, this is Carson speaking. Thanks for grasping the impact of the POS discounts. You're exactly right that To the extent they shift OpEx from S and M into contra rev, margins inherently go up. I think the second point though and the more important one is, particularly as Scott comes on board and we continue to reevaluate our marketing, You've heard us in prior quarters say, hey, I think first time was when we were talking in November on our earnings call, we said End of year can be a decent time to spend that because folks on the consumer side are entering into a new plan year, new deductible phases, etcetera. At that juncture, we felt like it wasn't a need for us to spend up then, so we pushed it out a little bit.

Speaker 3

But I think as we continue to evaluate our opportunities To do marketing and grow the business in a more aggressive way, we want to be able to preserve that capacity And not surprised folks because we continue to see new innovative ways that really work for us to drive marketing harder. We've seen our paybacks remain consistent with what we've said in the past, so in that 8 month range. And we've also I'm seeing new opportunities to market really effectively, like for example, these POS discounts, which are working great for us. So from those perspectives, preserving capacity is really important and that's why we're indicating mid-20s.

Speaker 12

Got it. Thanks for the color.

Operator

Our next question comes from Craig Hettenbach with Morgan Stanley. Craig, your line is now open.

Speaker 5

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

Speaker 5

Can you kind of talk about how that evolved over the quarter with POS discounts? And maybe as you go on throughout the year, how you view the puts and takes around marketing spend? And then maybe one for Scott. As you look Kind of the opportunity set to scale the business, how do you see where do you see the biggest opportunities to do so while kind of lowering your CAC

Speaker 3

Thanks for the question. I'll start off and then hand to Scott as you indicated. I think when we look at marketing generally from an evolutionary perspective through the year, there generally isn't A ton of seasonality to marketing, so it's really discretionary to us. And as we think about it and leveraging our discretion, We're fairly opportunistic. So we look at what's working well and put more dollars behind it.

Speaker 3

We do that in relation to The cost of marketing vehicles shift over time as well as the returns that we're seeing over time too. You also see us taking approaches that are completely novel like The Evernorth ESI price to share offering that we talked about where we shift from using our own marketing dollars effectively to channel model. So I think in terms of marketing generally, like I said in response to a prior question, we're preserving the capacity to do more and more on that front. Again, just because our paybacks are remaining consistent and we view them as really attractive. You had a couple of different questions in there.

Speaker 3

Let me go marketing and just maybe address it and then growth levers. So marketing, Marketing is an investment here, and this is something that the company in its history has done what I think really elegantly at times. The thing that I think is particularly clever and awesome is the presence at doctors' offices that historically was the GoodRx card. And if you spend time in doctors' offices and hear both docs and healthcare professionals talk about it, It's a supernatural way to put the value proposition of GoodRx right at that point of script. And so that's strategic.

Speaker 3

It's important both from a Brand standpoint of awareness to consumers and docs and then it connects right to that moment of the script. That is strategic marketing. And yes, there's things underway and with marketing to match both the breadth of consumers And doctors who not only know GoodRx, but love it. And then also to Make sure that we're getting the best discount possible to consumers lower down the funnel. So I could answer this in marketing speak of upper funnel and lower funnel and touch points, but each of those things for GoodRx are really important.

Speaker 3

It's the Historical strength of the business has grown into a really big marketplace with pretty good brand awareness and it's something to invest in with the biggest eye being effectiveness. And so it's something that we're working on and digging into with the teams and making sure that we're honing in and really trying to hit those points of Whether it's discounts in the app at the point of script, presence at the doctor's office and presence at retail. I'd say broadly also, and again, this is back to GoodRx being an awesome marketplace It's known and loved by many, but there's still opportunity. It's phenomenal to have Doug really focused on this because GoodRx's role in the healthcare system, we've got a unique position. And it's something that now, Even in my early days, I'm proprietary on GoodRx's behalf, feeling like more people, particularly docs and patients, Should know about GoodRx.

Speaker 3

And so that's just getting the message out into the world about our role and what we can do in the ecosystem. And it's honestly awesome to have Force multiplier time to be able to do that. Great. Thanks. I'll hop back in the queue.

Operator

Our next question comes from the line of Jalendra Singh with Truist Securities.

Speaker 10

Yes. Thank you and good morning everyone. So my first question is around the provider mode where you have 450,000 prescribers engaging with the company since Launce, maybe provide some details around the engagement level, like which tools have you seen the highest engagement? Is it cost comparison or Coupon sharing on news feed. I'm trying to understand like the scale needed in this part of the business where you can go to pharma manufacturers to get more The video is bid for launches or campaign.

Speaker 10

Clearly, you're competing with some other players who talk about ROIs in range of 10 is to 1 for their pharma clients. So trying to understand With the risk of being too early on your pitch in this part of the business.

Speaker 3

Sure. I'll jump in first here. It's Kartsen speaking. So on engagement of providers, we've been very pleased with the performance that we're seeing. Like we talked about on the call, Over 450,000 providers who have engaged in their provider mode since we launched it.

Speaker 3

I think the other point that pleases us and I'm particularly happy about We see provider MAUs or monthly active users doubling between December of 'twenty two March of 'twenty three, so over a relatively short providers really helps. On the consumer engagement side, we see more highly engaged consumers have higher LTVs. We've talked about that in the past. We see the same thing where we can associate more PTR, prescription transactions revenue claims with a given healthcare provider In correlation with how engaged AR2, whether they're solely identified providers, we know they're NPIs and know they are providers, whether they're Providers that have been activated, meaning we've offered them a chance to join provider mode and they've accepted or whether they have Fully developed accounts that are completed. So as we look at the engagement levels, we're pleased to see that Not only is that driving our farmland and salt business, because obviously these folks are very valuable to manufacturers and providers are a big growth sector for us, but they actually drive And we'll continue to drive, we expect our base business as well as Grindr.

Speaker 10

Thanks, Karsten. And my quick Follow-up on the thanks for all the color on the 2Q outlook by segment. But can you share your updated revenue growth expectation by segment for Full year, are those unchanged or any changes there beyond the $10,000,000 PUS discount we called out?

Speaker 3

At this point, I don't think we're in a position where we're going to be sharing more splits on the full year, Jalendra. But you're quite right that The POS discount headwind estimated at about $10,000,000 effectively decreases revenue By that amount, all else being equal, that's totally accurate and glad you captured that.

Speaker 10

Okay, perfect. Thanks a lot.

Operator

Our next question comes from Jonathan Yong with Credit Suisse.

Speaker 13

Hi, thanks for taking the question. Just on FarmVancel, the deals that are expected to come in this year, were these the original deals that were originally delayed a quarter or 2 ago. And then are there other deals still outstanding which could come into the guidance for this year? Thanks.

Speaker 3

I think yes to both, Jonathan, is the short answer. We did have some deals that we anticipated might come in towards the end of last year that We're now seeing coming in this year, particularly on the performance side, but the pipeline remains very, very robust indeed. So From that perspective, we do continue to anticipate that we'll see incremental deals landing throughout the year As would normally be the case, I think there's a perception that farm manufacturers lock and spend late 3Q early 4Q. And while I think that's generally true, that doesn't mean that they're necessarily specific about What programs they're going to run and specific about the timing of those programs at that point just in terms of general buckets of money. So Through the year, we continue to see our pipeline for that year get more and more robust well past the midpoint of the year.

Speaker 13

Great. And then just on PriceAssure, you said that your guidance seems that consumers Potentially hit their deductibles due to seasonality. But I guess when I think about that, does that mean that there's a bit of a rate limitation in terms of the benefit you're going to see from The price is short business and that it should moderate effectively throughout the rest of the year to the point where there's almost a cap on how much growth comes from that business?

Speaker 3

Thanks. Yes, I think that's a great question, Jonathan. And I think your perceptions are generally right, meaning that Because of the way the price to share program works, it routes the user to whatever is going to be cheaper for that user. And in general, when users are in a position where they might be paying a copay or deductible, which GoodRx can be, It will route the transaction to GoodRx and we'll benefit from it as part of our PTR and our revenue per MAC. As we proceed through the year, some of these users may well hit their deductibles and they may well not have to pay out of pocket costs in the latter parts of the year that are as high as in the So as we look through the lens of that, we view that the ESI collaboration or Evernorth collaboration That's potentially decelerating as a proportion of revenue and its claims we see through the year.

Speaker 3

Thanks.

Operator

Our next question comes from the line of Scott Schoonhouse with KeyBanc.

Speaker 12

Hi, team. Can you hear me?

Speaker 3

We sure can. Good to talk to you, Scott.

Speaker 13

Hey, guys. I just wanted to

Speaker 12

drill in on pharma behavior you're seeing. In the release, you said you're seeing slight moderation in spending from pharma customers, but then guided to 26% sequential increase in revenues on the Bancel segment for 2Q. What's really driving this?

Speaker 3

So in the manhole side, I think from a macro environment perspective, we are seeing generally I think on the flip side, you also see farm manufacturers talking about the growth in digital spend. We're hearing that from our customers. We're also seeing that in the general Research that talks about digital growth growing potentially in the double digits, so materially higher than base pharma mantle spend. That said, we do though believe that the biggest determinant of our success It's what we do here. We're a very small proportion of the overall TAM right now.

Speaker 3

Again, dollars 30,000,000,000 TAM all in, Split between consumer and HCP. And in that context of the really big TAM, we think the actions that we drive are the absolutely most As we continue to take share, that's where we see the potential for growth up to $26,000,000 in revenue from Pharmavance all Just in the next quarter, which is more revenue than we did in the whole of 2020. So from that perspective, I think, as Scott said, we've got Highly engaged, highly competent, highly energetic sales team that's going out there and driving this part of the business. And we continue to see and expect sequential growth from it as we drive through the rest of the year. I think no question there.

Speaker 3

I'd like to maybe characterize State of Play again, and this will be a repeat of remarks and comments, but I think it's helpful to ask that question. There's a lot of value here at GoodRx around, again, the marketplace we have for Generic and branded drugs and matching those drugs to patients in a really effective way. That's what we're doing. And the Nansol programs that we're talking about are things that we can do in partnership with branded pharma. And if we were sitting at an enterprise technology company now, the like Rhythm and pacing of programs and spend over time would have flow to it in terms of Big deals and what gets booked and how does it ramp within the system.

Speaker 3

And you go through those laps to be able to get to that level of predictability. And I know everybody's kind of questioning and thinking about it, but really this is the new guy. My observation is we're just at that point where there's real proof points here. And now the work is about Intelligently scaling it and part of that is your not just your pipeline, but then once that pipeline lands, how do things ramp up, Right. And everybody wants that to be rhythmic and predictable.

Speaker 3

And you get to that point. And we're right at this point within GoodRx where We're building those muscles. That's not super hard curing cancer touch stuff. You just run through you run the labs a couple of times and you get there, And we're going to get there.

Speaker 12

That's super helpful color. And maybe as a follow-up there, as you're trying to smooth Grow this business, take market share and kind of smooth it with more recurring contracts. Are you seeing any shifts from the behavior of pharma clients this year Versus prior years in terms of mid year upsells or more one time lumpier ad campaigns. Just trying to get an overall sense of the market this year versus the pandemic years. Thanks.

Speaker 3

I think when we look at the market this year, we Again, we see manufacturers from Spend perspective be more paced, I guess, is the right word. So we Talked on earlier calls about deals taking longer and spend being spread over more time as we work with our counterparties at the manufacturers, and I think we continue to see that reality taking place now as well. So from that perspective, I think on a year over year basis, what I'd point to most is A change in sort of aggressiveness of timing and how fast they go from talking to us initially to actually having Deal and market producing results and therefore, recognizable revenue for us. I think that's still Thematically, what we're seeing at this point.

Speaker 12

Thank you.

Operator

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

Speaker 2

Hey, good morning guys and thanks for taking the question. And I'll go with just one here. I guess it sounds like the pharmacy relationships becoming more important to you guys that are contracting. I guess, can you talk about the competitive environment for those relationships? And I can't imagine that any of the retailer relationship So how do you differentiate and make sure that you guys win at the pharmacy counter?

Speaker 3

Yes. Maybe I appreciate the question. Maybe I'll speak a little bit just broadly about competition and then try to kind of narrow in on that nuance of it. When we look at the competitive marketplace, we don't think that competitors that are out there In various different PTR or even Parraman Sella are affecting Our growth rate here, we deliver a great product. When we Believe that we are still the market leader.

Speaker 3

We believe we have the best pricing in market. Specifically, our last analysis indicates That for over 87% of the top 30 prescribed medications at top pharmacies, we have the best price. And so that's why So many providers prefer patients to GoodRx. That's why we have an NPS of 90. We have a product that really, really works.

Speaker 3

And so we continue to have great strength there. And as we talk more specifically about The hybrid contracting strategy, we are just going out there making these relationships and letting using them To take where we're selling, where we have the best brand recognition, where we have the best product, where we have The consumers and providers who love us and help our retail partners to drive Incremental volumes and ways that work for them help them drive new programs, take sort of innovative things like what we're doing around Pricing and the point of sale incentives to be hyper focused on specific consumer segments And bring that all to market so that we can be in the best position and really help this both consumers and the partnership.

Speaker 2

Our next question comes from the line

Operator

of Dylan Finely with UBS.

Speaker 14

Yes. Thanks guys for taking the call. One question I don't think was hit on. So you mentioned, Carson, that core growth ex Kroger was up 15% And it sounds like net of the contra revenue impact, it would be up another point or so from there. That's, I guess, double where you Why is the core growth in PTR growing faster?

Speaker 14

And is that

Speaker 5

sustainable on

Speaker 14

an ex Kroger basis through the year.

Speaker 3

Thanks for the question. Yes, I think when we look at volume across pharmacies, Ex grocer, we see the growth being up 16% year over year and 3% Q over Q. I think that's what you're Referencing, I think looking forward to when we lap the grocer issue And applying the 16%, which I think last quarter was 12.5%, if I recollect correctly, ex grocer growth. In that context, I think we caution then too that simply using that Y over ROI growth rate may be a little aggressive because it's a little difficult parse out how many of those users are truly incremental versus maybe switch from the grocer to a different pharmacy. So I think we're not forecasting that the growth rates for prescription transactions revenue as a whole will be anywhere near that high of 16% Y o Y represented by the non grocer pharmacies growth into 1Q of 2023.

Speaker 3

Is that helpful?

Speaker 14

Yes, I think that helps clarify. So you think the beat there, the 15%, 16% Versus like a high single digit is related to still a little bit of Kroger capture.

Speaker 3

Yes. I think the volume growth includes both new users and also that. And I think the other reality too is, Like we talked about in response to an earlier query, there are elements of the PTR business, like For example, the Evernorth piece of it, whereas we hit deductible phase, we potentially see decelerations of those parts of the business. They're quite It's Scott. Two things on your question, one of which is the fact of retail shift Relative to volume, either at a grocer or not, it's again reinforces the value proposition of GoodRx and I think the nature of that question and what you're looking for and then people in the outside world is, Hey, give me the range of once retail and it's the importance of all of the retail efforts that are underway, Which is once that's cleaned up, hey, the volume range of the business rhythms at what?

Speaker 3

And then what are the growth areas to build that volume out based on deep value proposition at consumers and drug modalities and Times of healthcare plans and where is that intersection. So if you're looking for a theme in the core business Around efforts, whether it's discounts at the point of sale or expanding GoodRx into more insurance use cases, it's again With that macro North Star value proposition that's allowing us to fulfill more prescription medication, All right. And step 1 is making sure that that's available at every retailer. And once we get that set up, Then you can get more precise about your own expectations and performance on both volume and revenue For what that business looks like going forward.

Speaker 14

Great. Thank you for the color.

Operator

Our next question comes from Steven Valiquette with Barclays.

Speaker 4

Hi, thanks. Good morning. Let me also offer my congrats to Scott on joining the company. My question today is really kind of more Just with some of the PBM reform legislation making the rounds that will potentially eliminate the ability from any PBMs to make any Spread profits on retail prescriptions. I guess I was curious whether or not this is prompting any PBMs this year in 2020 Just to still try to capture some profits on retail related scripts.

Speaker 4

And I guess somewhat tied into this, just looking for any update on the outlook for GoodRx take rate for not so much 23, but really kind of thinking beyond 23. Could there be any shift in the fee split of PBM is really in favor of

Speaker 3

Thank you for the question. Let me speak just Generally, maybe for the regulatory side and then and also speak to that aspect of The PBM. Since we founded GoodRx 12 years ago, we've seen a lot of proposals, ideas, policies Across administration, to some extent, we've spoken about regulatory environment in every earnings call as a public company. We are helping bring improvements to consumers' Wallet to affordable prescriptions and affordability and accessibility in ways that I think are In line with what all parties want here. When we look specifically at the Inflation Reduction Act, We do not expect a material impact on our business from it.

Speaker 3

A lot of that focus is on the negotiation of price for Relatively small group of higher cost drugs. And so relative to our PTR business, we don't see any Meaningful impact that would have or to the nuance you mentioned around how potentially PBM Contracting could evolve because of regulations. We don't expect any meaningful impact on our PTR business And we're also on the PharmaMan's SAW business. So we Continue to work with our PBM partners. We think that marketplace has just grown stronger.

Speaker 3

And most of all, I would say we're just really proud that we've taken a market based solution That we've put in place that has saved consumers over $55,000,000,000 to date and this has helped consumers. Relative to the PBM specifically, I don't think there are specifics Speak to you there, but I don't expect any meaningful changes to take place in any of the aspects you mentioned because of Regulation 2. Got it. Okay. All right.

Speaker 3

Thanks. Thank you.

Operator

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

Speaker 3

Hey, thanks for taking the question. Asar, can you specify the impact of one time deals on firmer 1Q versus 1Q? Sure. So, when we look at our historical period and looking at Pharma manufacturer solutions and one time deals, Which we define as deals where we've taken revenue from a given counterparty once and then they haven't come back, hence the one time. But I think there's Maybe you need to clarify that a little bit.

Speaker 3

Those amounts are in the 1,000,000 of dollars and have been previously in Early quarter. So as we shift away from that, we see deltas of again 1,000,000 of dollars of revenue Q o Got it. Great. Thanks. And philosophically, my hat is that This is all a natural part of building up a business.

Speaker 3

So it's figuring out what Really, it works for both our partners and us in a highly repeatable way. It's just the natural part of building up the business.

Operator

I'm showing no further questions in queue at this time. This concludes today's conference call. Thank you for participating. You may now disconnect.

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Earnings Conference Call
GoodRx Q1 2023
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