GoodRx’s Downbeat Q2 Ends With Grocery Win

No feel-good prescription can put a happy face on GoodRx’s downcast second-quarter performance, despite news that its issue with a major grocery pharmacy chain has been resolved.

Revenue for the quarter grew 9% year over year to $191.8 million. Subscriptions revenue increased 82% year over year to $26 million, but that was largely driven by a price increase for the company’s subscription plans, rather than increased transactions.

On the company’s earnings call after hours on Monday (Aug. 8), executives refrained from naming “the grocer,” but during the question-and-answer session, mentions of “Kroger” effectively confirmed what market watchers already knew or strongly suspected. Shares in the Santa Monica, California, company surged nearly 50% in extended Nasdaq trading afterward.

“We are disappointed with our performance this year, and I suspect you feel the same way,” CEO and co-founder Doug Hirsch told analysts, adding, “We did not expect to be in this position” while announcing that “the grocer issue We discussed at our first quarter earnings call was very recently addressed. As communication is rolled out to the grocery chain’s pharmacists, we expect GoodRx discounts to be consistently welcomed at the point of sale.”

Co-CEO Trevor Bezdek echoed Hirsch, saying “We’re disappointed by our year-to-date performance,” and adding that “prescription transaction revenue [PTR] decreased 7% year over year due to the grocery issue. We exited the second quarter seeing approximately 20% of the weekly volume we processed through this grocer before the issue began in March and have seen subsequent continued declines post quarter end.”

The matter was further complicated by unknowns around how many GoodRx subscribers were lost because of that grocery chain disruption, how many would return and how long that process would take. GoodRx ended the second quarter with more than 1.1 million subscription plans and 1.6 million members.

Bezdek added that new user counts were driven by consumers shopping at competitors of the grocer in question but added that “returning users were down significantly due to the grocery issue and drove the decrease in prescription transaction revenue.”

See also: GoodRx Q1 2022 Performance Marred by Mystery Grocery Chain Prescription Beef

Engagement as a Hedge

GoodRx leadership said it took to direct talks with pharmacy benefit managers (PBMs), and retail pharmacies other partners to strengthen relationships after the devastating blow from the over-indexed grocery account, presumably to head off similar defections down the road.

These “consumer engagements” are expected to cost GoodRx $5 million in Q3 and “approximately twice that in the fourth quarter due to higher friction in the funnel,” according to Chief Financial Officer Karsten Voermann. Voermann put a price tag on the missing grocer’s revenue, saying “prescription transaction revenue decreased 7% year over year to $134.4 million due to the grocery issue we disclosed in the prior quarter.”

He said the estimated impact of the issue on our prescription transactions revenue in Q2 was “largely in line with the $30 million we estimated on our last earnings call and drove a decrease in both MAC [monthly active consumers]which decreased 3% year over year to 5.8 million, and PTR per MAC, which decreased 4% as consumers at the grocer have historically had more transactions per month with a slightly higher fee per transaction.”

A bright spot is GoodRx’s pharma manufacturers solutions. Bezdek said, “momentum in our pharma manufacturers solutions offering continued during the quarter with revenue more than doubling year over year as we continue to increase penetration and deliver high ROI for manufacturers and brands we work with.”

An example of that is the late July deal between GoodRx and Mayne Pharma Group on a “collaborative initiative” centered in an enhanced direct-to-consumer program aimed at building awareness of Mayne’s Nextellis oral contraceptive.

Read: Study Cites Mark Cuban’s Online Pharmacy Model for Price Reform

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