Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations together with Part II, Item 6, “Selected Financial Data” and our audited consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements based upon current plans, expectations and beliefs involving risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and in other parts of this Annual Report on Form 10-K. A discussion of the year ended December 31, 2019 compared to the year ended December 31, 2018 has been reported previously in our final prospectus dated September 22, 2020 filed with the SEC on September 24, 2020 pursuant to Rule 424(b)(4) (File No. 333-248465) of the Securities Act (the “Prospectus”), under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Overview
Our mission is to help Americans get the healthcare they need at a price they can afford. To achieve this, we are building the leading, consumer-focused digital healthcare platform in the United States.
Healthcare consumers in the United States face an increasing number of challenges. These include a lack of affordability, transparency, and access to care. Additionally, healthcare professionals’ lack of access to current prescription pricing and out of pocket consumer cost information exacerbate the challenges that healthcare consumers face. GoodRx was founded to solve these challenges. We started with a price comparison tool for prescriptions, offering consumers free access to lower prices on their medication. Today, our expanded platform also provides access to brand medication savings programs, affordable and convenient medical provider consultations and lab tests via our telehealth offerings, GoodRx Care and the GoodRx Telehealth Marketplace, and other healthcare related content. Whether a consumer is insured or uninsured, young or old, or suffers from an acute or a chronic ailment, we strive to be at the consumer’s side throughout their healthcare journey. We believe that our offerings provide significant savings to consumers, and can help drive greater medication adherence, faster treatment and better patient outcomes that also benefit the broader healthcare ecosystem and its stakeholders. These all contribute to a healthier, happier society.
We believe our financial results reflect the significant market demand for our offerings and the value that we provide to the broader healthcare ecosystem. Our revenue grew 42% for the year ended December 31, 2020 to $550.7 million, up from $388.2 million for the year ended December 31, 2019. In the year ended December 31, 2020, net loss was $293.6 million, compared to net income of $66.0 million in the year ended December 31, 2019. Net loss for the year ended December 31, 2020 was impacted by $383.4 million of stock-based compensation expense and payroll tax expense related to stock-based compensation in connection with equity awards made to the Co-Chief Executive Officers in connection with the IPO, and a $41.7 million charge related to a charitable stock donation in support of our philanthropic endeavors. Adjusted EBITDA was $203.4 million in the year ended December 31, 2020, up from $159.8 million in the year ended December 31, 2019. We have been focusing on capital efficiency and delivering on a cash generative monetization model since inception. Cash flow provided by operating activities grew 58% in the year ended December 31, 2020 to $131.3 million, up from $83.3 million in the year ended December 31, 2019.
Adjusted EBITDA is a non-GAAP financial measure. For a reconciliation of Adjusted EBITDA to the most directly comparable GAAP financial measure, information about why we consider Adjusted EBITDA useful and a discussion of the material risks and limitations of these measures, please see Part II, Item 6, “Selected Financial Data – Non-GAAP Financial Measures” included elsewhere in this Annual Report on Form 10-K.
79
Impact of COVID-19
GoodRx continues to closely monitor how the spread of COVID-19 is affecting its employees, customers and business operations. The outbreak has resulted in authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter-in-place orders, and business shutdowns. In particular for our business, governmental authorities have also recommended, and in certain cases, required, that elective or other medical appointments be suspended or cancelled to avoid non-essential patient exposure to medical environments and potential infection. These and other measures have not only negatively impacted consumer spending and business spending habits, they have adversely impacted and may further impact our workforce and operations and the operations of healthcare professionals, pharmacies, consumers, PBMs and others in the broader healthcare ecosystem. Although certain of these measures are beginning to ease in some geographic regions, overall measures to contain the COVID-19 outbreak may remain in place for a significant period of time, and certain geographic regions are experiencing a resurgence of COVID-19 infections. The duration and severity of this pandemic is unknown and the extent of the business disruption and financial impact depend on factors beyond our knowledge and control.
Various government measures, community self-isolation practices and shelter-in-place requirements, as well as the perceived need by individuals to continue such practices to avoid infection, have generally reduced the extent to which consumers visit healthcare professionals in-person, seek treatment for certain conditions or ailments, and receive and fill prescriptions. Consumers may also increasingly elect to receive prescriptions by mail order instead of at the pharmacy, which could have an adverse impact on our prescription offering. In addition, many pharmacies and healthcare providers have reduced staffing, closed locations or otherwise limited operations, and many prescribing healthcare professionals have reduced or postponed treatment of certain patients.
The number of Monthly Active Consumers decreased and our prescription offering experienced a decline in activity in the second quarter of 2020 as compared to the first quarter of 2020 as many consumers avoided visiting healthcare professionals and pharmacies in-person, which we believe has had a similar effect across the industry. The number of Monthly Active Consumers then sequentially increased in the third and fourth quarters of 2020 as the number of physician visits increased and as consumers partially resumed their interaction with the healthcare system. Even though we saw improved activity in our prescription offering in the third and fourth quarters of 2020, we believe COVID-19 continues to have an adverse impact on our prescription offerings and continued improvement in future periods remains uncertain. Any decrease in the number of consumers seeking to fill prescriptions could negatively impact demand for and use of certain of our offerings, particularly our prescription offering, which would have an adverse effect on our business, financial condition and results of operations.
Conversely, pandemics, epidemics and outbreaks may significantly and temporarily increase demand for our telehealth offerings. COVID-19 has significantly accelerated the awareness and use of our telehealth offerings, including demand for our GoodRx Care offering and the utilization of our GoodRx Telehealth Marketplace. While we have experienced a significant increase in demand for the telehealth offerings, there can be no assurance that the levels of interest, demand and use of our telehealth offerings will continue at current levels or will not decrease during or after the pandemic. Any such decrease could have an adverse effect on our growth and the success of our telehealth offerings.
Additionally, while the potential economic impact brought by, and the duration of any pandemic, epidemic or outbreak of an infectious disease, including COVID-19, may be difficult to assess or predict, the widespread COVID-19 pandemic has resulted in, and may continue to result in, significant disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity.
The full extent to which the outbreak of COVID-19 will continue to impact our business, results of operations and financial condition is still unknown and will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume. Even after the outbreak of COVID-19 has subsided, we may experience materially adverse impacts to our business as a result of its global economic impact, including any recession that has occurred or may occur in the future.
80
For additional information, see Part I, Item 1A, “Risk Factors—Risks Related to Our Business—A pandemic, epidemic or outbreak of an infectious disease in the United States, including the outbreak of COVID-19, could impact our business.”
Seasonality
We typically experience stronger consumer demand during the first and fourth quarters of each year, which coincide with generally higher consumer healthcare spending, doctor office visits, annual benefit enrollment season, and seasonal cold and flu trends. This seasonality may impact revenue and sales and marketing expense. The rapid growth of our business may have masked these trends to date, and we expect the impact of seasonality to be more pronounced in the future. However, in 2020 we saw the impact of the COVID-19 pandemic further disrupt these trends. This disruption has continued in 2021 and may continue in future periods.
Initial Public Offering
On September 25, 2020, we completed our IPO by issuing 28,615,034 shares of our Class A common stock at a price to the public of $33 per share, resulting in net proceeds to us of $886.9 million, after deducting the underwriting discount of $52.5 million and offering expenses of $4.9 million. Additionally, certain existing stockholders sold an aggregate of 11,192,657 shares.
Private Placement
On September 25, 2020, we completed the sale of 3,030,303 shares of our Class A common stock at a purchase price of $33 per share to SLP Geology Aggregator, L.P., resulting in proceeds to us of $100.0 million. SLP Geology Aggregator, L.P. is an investment fund associated with Silver Lake Partners.
Recent Developments
On March 8, 2021, we entered into a definitive agreement to acquire 100% of the outstanding equity interests of HealthiNation, Inc. (“HealthiNation”) for approximately $75.0 million in cash, subject to customary adjustments and payable at closing of the acquisition. HealthiNation is a leading provider of engaging and informative health video content across all main categories of healthy living. The proposed acquisition will allow us to supplement and expand the services currently available under our existing pharmaceutical manufacturer solutions platform. We expect to fully fund the proposed acquisition with available cash on hand, but may also opt to fund a portion or all of the consideration through borrowings under our existing line of credit.
The proposed acquisition is expected to close in the latter half of the second quarter of 2021, subject to a number of customary conditions, including but not limited to, resolution of any due diligence findings and no material adverse changes occurring in HealthiNation.
81
Key Financial and Operating Metrics
We use Monthly Active Consumers and Adjusted EBITDA to assess our performance, make strategic and offering decisions and build our financial projections.
Monthly Active Consumers
We define Monthly Active Consumers as the number of unique consumers who have used a GoodRx code to purchase a prescription in a given calendar month and have saved money compared to the list price of the medication. A unique consumer who uses a GoodRx code more than once in a calendar month to purchase prescription medications is only counted as one Monthly Active Consumer in that month. A unique consumer who uses a GoodRx code in two or three calendar months within a quarter will be counted as a Monthly Active Consumer in each such month. Monthly Active Consumers do not include subscribers to our subscription offerings, consumers of our pharmaceutical manufacturer solutions offering, or consumers who used our telehealth offerings. When presented for a period longer than a month, Monthly Active Consumers is averaged over the number of calendar months in such period. For example, a unique consumer who uses a GoodRx code twice in January, but who did not use our prescription offering again in February or March, is counted as 1 in January and as 0 in both February and March, thus contributing 0.33 to our Monthly Active Consumers for such quarter (average of 1, 0 and 0). A unique consumer who uses a GoodRx code in January and in March, but did not use our prescription offering in February, would be counted as 1 in January, 0 in February and 1 in March, thus contributing 0.66 to our Monthly Active Consumers for such quarter. Monthly Active Consumers from acquired companies are only included beginning in the first full quarter following the acquisition. Beginning in the fourth quarter of 2020, our Monthly Active Consumers number includes consumers we acquired through the acquisition of Scriptcycle in August 2020.
Three Months Ended
(in thousands)
The number of Monthly Active Consumers is a key indicator of the scale of our consumer base and a gauge for our marketing and engagement efforts. We believe that this metric reflects our scale, growth and engagement with consumers. The number of average Monthly Active Consumers grew 34% in the year ended December 31, 2020 to 5.0 million, compared to 3.7 million in the year ended December 31, 2019.
Adjusted EBITDA
Adjusted EBITDA is a key measure we use to assess our financial performance and is also used for internal planning and forecasting purposes. We believe Adjusted EBITDA is helpful to investors, analysts and other interested parties because it can assist in providing a more consistent and comparable overview of our operations across our historical financial periods. In addition, this measure is frequently used by analysts, investors and other interested parties to evaluate and assess performance.
Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP measures and are presented for supplemental informational purposes only and should not be considered as alternatives or substitutes to financial information presented in accordance with GAAP.
For more information about Adjusted EBITDA and Adjusted EBITDA Margin, including the definition and limitations of such measures, and a reconciliation of Adjusted EBITDA to net (loss) income, the most comparable financial measure calculated in accordance with GAAP, see Part II, Item 6, "Selected Financial Data" included in Part II of this Annual Report on Form 10-K.
82
The following table presents our Adjusted EBITDA and Adjusted EBITDA Margin for the periods indicated:
Year Ended December 31,
(dollars in thousands)
Adjusted EBITDA Margin 36.9 % 41.2 %
Adjusted EBITDA grew 27% in the year ended December 31, 2020 to $203.4 million, compared to $159.8 million in the year ended December 31, 2019 as our business continued to grow. Adjusted EBITDA margin decreased from 41.2% to 36.9% due to an increase in cost of revenue relative to revenue due primarily to continued investments in product development and technology, growth of our telehealth offering, as well as investments in our general and administrative infrastructure as we prepared for our IPO and to operate as a public company.
We expect our Adjusted EBITDA and Adjusted EBITDA Margin to fluctuate primarily based on the level of our investments in sales and marketing and product development and technology relative to changes in revenue.
We generally expect to continue to invest in sales and marketing in the near-term, but will continue to evaluate the impact of COVID-19 on our business and actively manage our sales and marketing spend, including investment in consumer acquisition, which is largely variable, as market conditions change. We also intend to continue to invest in product development and technology to continue to improve our platform, introduce new offerings and scale existing ones. Additionally, we expect to continue to invest in our general and administrative infrastructure to support our operations as a public company.
Components of our Results of Operations
Revenue
Our revenue is primarily derived from prescription transactions revenue that is generated when pharmacies fill prescriptions for consumers, and from other revenue streams such as our subscription offerings, from pharmaceutical manufacturers and affiliates, and our telehealth offerings. All of our revenue has been generated in the United States.
83
Expenses
We incur the following expenses directly related to our cost of revenue and operating expenses:
Other (Income) Expense
Our other (income) expense consists of the following:
84
Income Tax Benefit (Expense)
Our income tax benefit (expense) consists of federal and state income taxes. Our effective income tax rates for the year ended December 31, 2020 was 3.2% and for the year ended December 31, 2019 was 20.4%. The change in our effective income tax rate for the year ended December 31, 2020 compared to the year ended December 31, 2019 was primarily due to non-deductible stock-based compensation expense for the Founders Awards made in connection with the IPO. The tax effects of the non-deductible officers’ compensation were offset by excess tax benefits related to the exercise of stock options and tax benefits from U.S. federal and state tax credits. Our effective income tax rate differed from the U.S. statutory tax rate of 21% primarily due to officers’ compensation limitations, stock-based compensation tax deductions, and U.S. federal and state tax credits.
Results of Operations
The following table summarizes key components of our results of operations for the years ended December 31, 2020 and 2019:
Year Ended December 31,
(in thousands)
Revenue:
Costs and operating expenses:
Other (income) expense:
Other (income) expense, net (22 ) 2,967
Loss on extinguishment of debt — 4,877
85
Year Ended December 31, 2020 Compared to Year Ended December 31, 2019
Revenue
Year Ended December 31, Change
(dollars in thousands)
Prescription transactions revenue for the year ended December 31, 2020 increased $123.7 million, or 34%, compared to the year ended December 31, 2019, driven primarily by a 34% increase in the number of our average Monthly Active Consumers. We believe prescription transactions revenue continues to be impacted by COVID-19. Scriptcycle active consumers are also included in our Monthly Active Consumers number beginning in the fourth quarter of 2020, the first full quarter post its acquisition.
Other revenue for the year ended December 31, 2020 increased $38.8 million, or 164%, compared to the year ended December 31, 2019. This increase was primarily due to an increase in subscription revenue as a result of an increase in the number of subscribers in the year ended December 31, 2020 compared to the year ended December 31, 2019, an increase in revenue from our pharmaceutical manufacturers offering, and an increase in telehealth revenue driven by GoodRx Care and the launch of the GoodRx Telehealth Marketplace in March 2020.
Costs and operating expenses
Cost of revenue, exclusive of depreciation and amortization
Year Ended December 31, Change
(dollars in thousands)
As a percentage of total revenue 5 % 4 %
Cost of revenue for the year ended December 31, 2020 increased $15.6 million, or 111%, compared to the year ended December 31, 2019. This increase was primarily due to a $7.1 million increase in provider cost related to our telehealth offerings driven by an increase in the number of online provider visits, a $3.5 million increase in outsourced and in-house personnel related consumer support expense to support our growth, and other increases in allocated overhead, hosting and cloud expenses, and merchant fees.
Product development and technology
Year Ended December 31, Change
(dollars in thousands)
As a percentage of total revenue 11 % 8 %
Product development and technology expenses for the year ended December 31, 2020 increased by $32.5 million, or 111%, compared to the year ended December 31, 2019. This increase was primarily due to increases in product development related personnel expenses of $23.8 million due to higher headcount and an increase in stock-based compensation expense related to awards made in connection with and after our IPO. The increase in product development and technology expense was also due to an increase in allocated overhead of $4.6 million to support our product development efforts and an increase in third-party services and contractor expenses related to product development of $4.1 million.
86
Sales and marketing
Year Ended December 31, Change
(dollars in thousands)
As a percentage of total revenue 46 % 46 %
Sales and marketing expenses for the year ended December 31, 2020 increased by $78.2 million, or 44%, compared to the year ended December 31, 2019. This increase was primarily due to a $58.7 million increase in advertising expenses and a $14.1 million increase in sales and marketing related personnel expenses due to higher headcount and an increase in stock-based compensation expense related to awards made in connection with and after our IPO.
We continue to evaluate the impact of COVID-19 on our business and actively manage our consumer acquisition spending according to market conditions.
General and administrative
Year Ended December 31, Change
(dollars in thousands)
As a percentage of total revenue 84 % 4 %
General and administrative expenses for the year ended December 31, 2020 increased by $446.8 million, or 3,041%, compared to the year ended December 31, 2019. This increase was primarily due to $383.4 million of expense related to the Founders Awards made in connection with the IPO as further described in Note 15 of our audited consolidated financial statements, made up of $373.0 million of stock based compensation and $10.4 million payroll tax related to this award, and a $41.7 million charge related to a charitable stock donation in support of our philanthropic endeavors. The increase in general and administrative expense was also due to a $10.3 million increase in other executive and administrative related personnel expenses due to higher headcount and an increase in stock-based compensation expense related to awards made in connection with and after our IPO, and a $9.0 million increase in insurance and professional and other fees to support our growth, preparation for our IPO, and operations as a public company after our IPO.
Depreciation and amortization
Year Ended December 31, Change
(dollars in thousands)
As a percentage of total revenue 3 % 3 %
Depreciation and amortization expenses for the year ended December 31, 2020 increased by $4.9 million, or 36%, compared to the year ended December 31, 2019. This increase was due primarily to a $2.6 million increase in capitalized software amortization due to higher capitalized costs for platform improvements and the introduction of new products and features and a $1.5 million increase in intangible assets amortization as a result of intangible asset additions from our 2019 and 2020 acquisitions. We expect depreciation to increase over the near term due to $21.8 million of tangible assets placed in service towards the end of the fourth quarter of 2020 related to our new office facility in Santa Monica.
87
Other (income) expense, net
Year Ended December 31, Change
(dollars in thousands)
As a percentage of total revenue 0 % 1 %
Other expenses decreased by $3.0 million compared to 2019 due to third-party transaction expenses related to an amendment to the First Lien Credit Agreement in November 2019.
Loss on extinguishment of debt
Year Ended December 31, Change
(dollars in thousands)
Loss on extinguishment of debt $ — $ 4,877 $ (4,877 ) (100 )%
As a percentage of total revenue 0 % 1 %
In 2019, we recognized a loss of $4.9 million related to prepayment penalties and the write-off of unamortized loan fees upon the extinguishment of our Second Lien Term Loan Facility (as defined below) in November 2019.
Interest income
Year Ended December 31, Change
(dollars in thousands)
As a percentage of total revenue 0 % 0 %
The decrease in interest income was primarily due to lower interest rates during the year ended December 31, 2020, compared to the year ended December 31, 2019.
Interest expense
Year Ended December 31, Change
(dollars in thousands)
As a percentage of total revenue 5 % 13 %
Interest expense for the year ended December 31, 2020 decreased by $21.7 million, or 44%, compared to the year ended December 31, 2019 primarily due to the November 2019 amendment to increase the amount of the First Lien Term Loan Facility in order to repay all amounts outstanding under the Second Lien Term Loan Facility, which bore interest at a higher rate than the First Lien Term Loan Facility, as further described below, as well as due to lower average debt balances and lower interest rates.
88
Income tax benefit (expense)
Year Ended December 31, Change
(dollars in thousands)
Effective income tax rate 3 % 20 %
For the year ended December 31, 2020, we had an income tax benefit of $9.8 million, compared to income tax expense of $16.9 million for the year ended December 31, 2019 and an effective income tax rate of 3% and 20%, respectively. This difference was due primarily to the pre-tax loss for the year ended December 31, 2020 as a result of $373.0 million of stock-based compensation expense related to the Founders Awards made in connection with the IPO and a $41.7 million charge related to a charitable stock donation in support of our philanthropic endeavors. The tax effects of the non-deductible Founders Awards stock-based compensation expense were partially offset by excess tax benefits related to the exercise of stock options and tax benefits from U.S. federal and state tax credits.
Liquidity and Capital Resources
Since our inception, we have financed our operations primarily through net cash provided by operating activities, equity issuances, and borrowings under our long-term debt arrangements. Our primary requirements for liquidity and capital are to finance working capital, capital expenditures and general corporate purposes. Our principal sources of liquidity are expected to be our cash and cash equivalents and borrowings available under our $100.0 million secured asset-based Revolving Credit Facility. As of December 31, 2020, we had cash and cash equivalents of $968.7 million and $90.9 million available under the Revolving Credit Facility.
We believe that our net cash provided by operating activities, cash on hand and availability under the Revolving Credit Facility will be adequate to meet our operating, investing and financing needs for at least the next 12 months. Our future capital requirements will depend on many factors, including our revenue growth, the timing and extent of investments to support such growth, the expansion of sales and marketing activities, and many other factors as described in Part I, Item 1A, “Risk Factors”. We historically have not had any off-balance sheet arrangements nor do we currently have any off-balance sheet arrangements as defined under SEC rules.
If necessary, we may borrow funds under our Revolving Credit Facility to finance our liquidity requirements, subject to customary borrowing conditions. To the extent additional funds are necessary to meet our long-term liquidity needs as we continue to execute our business strategy, we anticipate that they will be obtained through the incurrence of additional indebtedness, additional equity financings or a combination of these potential sources of funds; however, such financing may not be available on favorable terms, or at all. In particular, the widespread COVID-19 pandemic has resulted in, and may continue to result in, significant disruption of global financial markets, reducing our ability to access capital. If we are unable to raise additional funds when or on the terms desired, our business, financial condition and results of operations could be adversely affected.
In light of the large number of RSUs subject to the Founders Awards that were granted in connection with our IPO in September 2020, we have incurred and anticipate that we will incur substantial additional stock-based compensation and expend substantial funds to satisfy tax withholding and remittance obligations as these RSUs vest over time. The grant date fair value of the Founders Awards was $533.3 million. Given the Company’s stock price for the post IPO period, all of the stock price goals with respect to the Performance-Vesting Founders Awards, (see Note 15 of our consolidated financial statements) were achieved in October 2020. As a result, all 16,422,044 Performance-Vesting Founders Awards vested during the year ended December 31, 2020. During the year ended December 31, 2020, the Company has recognized a cumulative $373.0 million of stock-based compensation expense related to the Founders Awards, of which $53.2 million related to the Time-Vesting Founders Awards and $319.8 million related to the Performance-Vesting Founders Awards. At December 31, 2020, there was $160.3 million of total
89
unrecognized stock-based compensation cost related to the time-vesting portion of the Founders Awards, which is expected to be recognized over the weighted average remaining service period of 2.1 years. In addition, as a result of the Founders Awards, and the Performance-Vesting Founders Awards in particular, a large number of shares of Class B common stock will be issued on the settlement date. On the settlement dates for the RSUs, we plan to withhold shares and remit income taxes on behalf of the holders of such Founders Awards at applicable statutory rates, which we refer to as net settlement, which may result in substantial tax withholding obligations. As an employee earns compensation, both the employer and the employee are liable for some portion of Social Security taxes and Medicare taxes (collectively referred to as “FICA” taxes) on the compensation. FICA taxes are generally due in the period when the substantial risk of forfeiture lapses.As the Performance-Vesting Founders Awards vested in October 2020, the Company accelerated the settlement of 0.7 million RSUs during the fourth quarter of 2020 sufficient to satisfy FICA tax withholding obligations due in the year of vesting. The remaining non-accelerated 15.7 million Performance-Vesting Founders Awards shares will not be issued until three years from the vesting date or, if earlier, a change in control event, as defined in the RSU agreements governing the Founders Awards.
Assuming an approximate 47% income tax withholding rate and stock price of $65.00 per share at settlement, for the 15.7 million Performance-Vesting Founders Award shares that vested and have yet to be settled as described in the preceding paragraph, we estimate that our cash obligation on behalf of our Co-Founders to the relevant tax authorities to satisfy income tax withholding obligations would be approximately $481.7 million, and we would deliver an aggregate of approximately 8.3 million shares of our Class B common stock to net settle these awards, after withholding an aggregate of approximately 7.4 million shares of our Class B common stock. The actual amount of the income tax obligations and the number of shares to be delivered could be higher or lower, depending on the price of our Class A common stock upon settlement and the applicable income tax withholding rates then in effect.
Credit Facilities
In October 2018, GoodRx, Inc., our wholly owned subsidiary, as borrower, and GoodRx Intermediate Holdings, LLC, entered into a first lien credit agreement with various lenders (“First Lien Credit Agreement”). The First Lien Credit Agreement provided for a $40.0 million Revolving Credit Facility and a $545.0 million senior secured term loan facility (“First Lien Term Loan Facility” and, together with the Revolving Credit Facility, the “Credit Facilities”). In November 2019, the First Lien Term Loan Facility was amended to increase the amount of the facility to $700.0 million. Additionally, in May 2020, the Revolving Credit Facility was amended to increase the amount of the facility to $100.0 million.
The Revolving Credit Facility and the First Lien Term Loan Facility under the First Lien Credit Agreement are collateralized by substantially all of our assets, including our intellectual property, and 100% of the equity interest of GoodRx, Inc.
The First Lien Credit Agreement that governs the Revolving Credit Facility and the First Lien Term Loan Facility contains certain affirmative and negative covenants, including, among other things, restrictions on indebtedness, liens, fundamental changes, repurchases of stock, dividends and other distributions. GoodRx, Inc. is restricted from making dividend payments, loans or advances to GoodRx Intermediate Holdings, LLC and GoodRx Holdings, Inc. In addition, GoodRx, Inc. is subject to a financial covenant whereby GoodRx, Inc. is required to maintain a First Lien Net Leverage Ratio (as defined in the First Lien Credit Agreement) not to exceed 8.2 to 1.0. At December 31, 2020, we were in compliance with the covenants under the First Lien Credit Agreement.
Revolving Credit Facility
Loans under the Revolving Credit Facility bear interest at a rate per annum equal to the LIBO Screen Rate (as defined in the First Lien Credit Agreement) plus a variable margin rate, which is based on our most recently determined First Lien Net Leverage Ratio (as defined in the First Lien Credit Agreement), that ranges from 2.50% to 3.00%. The Revolving Credit Facility has a variable commitment fee, which is based on the Company’s most recently determined First Lien Net Leverage Ratio (as defined in the First Lien Credit Agreement), and ranges from 0.25% to 0.50% per annum. In addition, the Revolving Credit Facility has a fixed fronting fee of 0.125% per annum of our aggregate undrawn and disbursed but unreimbursed letters of credit. The Revolving Credit Facility expires on October 11, 2024. As of December 31, 2020, there was no outstanding principal balance under the Revolving Credit Facility.
90
Under the terms of a lease agreement entered into during September 2019, GoodRx, Inc. assigned to the landlord drawdown rights against the Revolving Credit Facility for up to $9.0 million to meet the contractual line of credit requirement in the lease agreement. The landlord can draw on the Revolving Credit Facility in the event of the Company’s default on rent or damages to the building. The assigned rights to the landlord will be held for the initial three years of the lease term, and subject to certain conditions, the letter of credit will decrease thereafter by up to 10% per year based upon the original amount to no less than $2 million. This outstanding letter of credit to the landlord reduces our available borrowings under the Revolving Credit Facility by an amount equal to the value of assigned rights. There were outstanding letters of credit issued against the Revolving Credit Facility for $9.1 million as of December 31, 2020, which reduces the Company’s available borrowings under the Revolving Credit Facilityto $90.9 million.
First Lien Term Loan Facility
The First Lien Term Loan Facility accrues interest at a rate per annum equal to the LIBO Screen Rate (as defined in the First Lien Credit Agreement) plus a variable margin rate, which is based on the Company’s most recently determined Net Leverage Ratio (as defined in the First Lien Credit Agreement), that ranges from 2.75% to 3.00% per annum. The First Lien Credit Agreement requires quarterly principal payments from March 2019 through September 2025, with any remaining unpaid principal and any accrued and unpaid interest due on the maturity date of October 10, 2025.
The effective interest rate on the First Lien Term Loan Facility was 3.97% for the year ended December 31, 2020 and 5.90% for the year ended December 31, 2019.
The carrying value of the First Lien Term Loan Facility was $666.9 million, net of unamortized debt issuance costs and discount of $14.2 million, as of December 31, 2020.
Second Lien Term Loan Facility
Concurrent with the above First Lien Credit Agreement, GoodRx, Inc., as borrower, and GoodRx Intermediate Holdings, LLC entered into a second lien credit agreement with various lenders (the “Second Lien Credit Agreement”). The Second Lien Credit Agreement provided for a $200.0 million secured term loan facility (the “Second Lien Term Loan Facility”) that accrued interest at a rate per annum equal to the LIBO Screen Rate (as defined in the Second Lien Credit Agreement) plus a margin of 7.50% per annum. In connection with the amendment to increase the amount of the First Lien Term Loan Facility in November 2019, we repaid all amounts outstanding and owed under the Second Lien Term Loan Facility, using the proceeds from the amendment to the First Lien Term Loan Facility and existing cash resources, including $200.0 million in principal amount outstanding, approximately $0.1 million of accrued interest and a $2.0 million prepayment penalty.
Holding Company Status
We are a holding company that does not conduct any business operations of our own. As a result, we are largely dependent upon cash distributions and other transfers from our subsidiaries to meet our obligations and to make future dividend payments, if any. The First Lien Credit Agreement contains covenants restricting payments of dividends by our subsidiaries, including GoodRx, Inc., unless certain conditions are met. These covenants provide for certain exceptions for specific types of payments. Based on these restrictions, all of the net assets of GoodRx, Inc. were restricted pursuant to the terms of the Credit Facilities as of December 31, 2020. Since the restricted net assets of GoodRx, Inc. and its subsidiaries exceed 25% of our consolidated net assets, in accordance with Regulation S-X, refer to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for condensed parent company financial information of GoodRx Holdings, Inc.
91
Cash Flows
Year Ended December 31,
(in thousands)
Net cash provided by operating activities $ 131,341 $ 83,286
Net cash used in investing activities (91,617 ) (37,055 )
Net cash provided by (used in) financing activities 905,817 (54,781 )
Net cash provided by operating activities
Net cash provided by operating activities was $131.3 million for the year ended December 31, 2020 consisting of $293.6 million of net loss, adjusted for $457.4 million of non-cash expenses, made up primarily from the combination of stock-based compensation of $397.3 million, including $373.0 million of stock-based compensation related to the Founders Awards made in connection with the IPO and a charitable stock donation of $41.7 million in support of our philanthropic endeavors. These non-cash expenses were partially offset by $32.5 million of net cash used as a result of changes in operating assets and liabilities. The changes in operating assets and liabilities were primarily driven by an increase in income taxes receivable due to our third and fourth quarter tax benefit and increases in accrued expenses and other current liabilities, accounts receivable, accounts payable, and prepaid expenses due to our growing operations.
Net cash provided by operatingactivities was $83.3 million for the year ended December 31, 2019 consisting of $66.0 million of net income, adjusted for $22.1 million of non-cash expenses, partially offset by $4.8 million of net cash used as a result of changes in operating assets and liabilities. The changes in operating assets and liabilities were primarily driven by increases in accounts receivable, partially offset by an increase in our accrued expenses and other current liabilities due to our growing operations.
Net cash used in investing activities
Net cash used in investing activities of $91.6 million for the year ended December 31, 2020 was related to $55.8 million in cash consideration, net of cash acquired, related to the acquisition of Scriptcycle, $20.6 million for capital expenditures, due primarily to leasehold improvements and furniture and fixtures related to our new office facility in Santa Monica, California, and $15.3 million for capitalized software.
Net cash used in investing activities of $37.1 million for the year ended December 31, 2019 was related to $31.3 million in cash consideration, net of cash acquired, related to our 2019 acquisitions, $4.3 million for capitalized software, and $1.4 million for capital expenditures.
Net cash provided by (used in) financing activities
Net cash provided by financing activities of $905.8 million for the year ended December 31, 2020 was related to $886.9 million in net proceeds from our IPO, $100.0 million in proceeds from our private placement in September 2020, and $6.0 million from exercise of options, partially offset by a net $7.0 million in long-term debt principal payments, $78.7 million for employee taxes paid related to net share settlement of equity awards, and payments of $1.3 million for debt issuance costs related to increasing the amount of our line of credit in May 2020.
Net cash used in financing activities of $54.8 million for the year ended December 31, 2019 was primarily related to $211.8 million in long-term debt payments and payments of $2.2 million for debt issuance costs and prepayment penalties, partially offset by $154.6 million in proceeds from long-term debt and $4.7 million in proceeds from issuance of common stock and exercise of options.
92
Contractual Obligations and Commitments
The following table summarizes our contractual obligations and commitments as of December 31, 2020:
Less than
Total 1 year 1-3 years 3-5 years Thereafter
(in thousands)
Recent Accounting Pronouncements
See Note 2 to our audited consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K for further information on certain accounting standards adopted in 2020 and recent accounting announcements that have not yet been required to be implemented and may be applicable to our future operations.
Critical Accounting Policies and Estimates
Our audited consolidated financial statements and the related notes thereto included elsewhere in this Annual Report on Form 10-K are prepared in accordance with GAAP. The preparation of consolidated financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from our estimates. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.
We believe that the accounting policies described below involve a significant degree of judgment and complexity. Accordingly, we believe these are the most critical to aid in fully understanding and evaluating
93
our consolidated financial condition and results of operations. For further information, see Note 2 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Revenue Recognition
Our revenue is primarily derived from prescription transaction fees generated when pharmacies fill prescriptions for consumers. We also generate other revenue from subscription, pharmaceutical manufacturer solutions and telehealth services.
On January 1, 2019, we adopted ASC 606, Revenue from contracts with customers, on a modified retrospective basis. The adoption of ASC 606 was applied to all contracts at the date of initial application and did not have a material impact on our revenue recognition.
Prescription Transactions Revenue
Prescription transactions revenue is primarily generated from PBMs, or customers, when a prescription is filled with a GoodRx code provided through our platform, and saves money compared to the list price in that pharmacy. In our contracts with customers, the nature of our promise is to direct prescription volume through our platform, which may include marketing through our apps, websites and GoodRx cards. These activities are not distinct from each other and are not separate performance obligations. Our performance obligation is to connect consumers with pharmacies that are contracted with our customers. We have no performance obligation to fill prescriptions.
Contracts with PBMs provide that we are entitled to either a percentage of fees the PBM charges the pharmacy or fixed amount per type of medication prescription, when a consumer uses a GoodRx code provided through our platform. Our performance obligation is satisfied upon the completion of pharmacies filling prescriptions. We recognize revenue for the estimated fee due from the customers at a point in time when a prescription is filled.
We receive reporting from customers of the number of prescriptions and amount of consideration to which we are entitled at a prescription level. Certain arrangements with PBMs provide that the amount of consideration we are entitled to is based on the volume of prescription fills each month. In addition, the amount of consideration to which we are entitled may be adjusted in the event that a fill is determined ineligible, or based upon other adjustments allowed under our contracts with customers. We estimate the amount we expect to be entitled to using the expected value method based on the historical experience of the number of prescriptions filled, ineligible fills and applicable rates.
Other Revenue
Other revenue consists of subscription revenue from our subscription offerings, revenue generated from pharmaceutical manufacturers for advertising and integrating onto our platform their affordability solutions to our consumers and advertising in direct mailers, and revenue generated by GoodRx Care and the GoodRx Telehealth Marketplace.
Subscription revenue consists of subscriptions to Gold and Kroger Savings. For Gold, subscribers purchase a monthly subscription that provides access to lower prices for prescriptions and telehealth. Subscribers can cancel their GoodRx Gold subscription at any time. We recognize revenue for Gold over the subscription period. For Kroger Savings, subscribers pay an annual upfront fee for a subscription that provides access to lower prices on prescriptions at Kroger pharmacies. At the commencement of the subscription term, subscribers pay the annual fee to us which we share with Kroger. Kroger Savings subscription fees are generally nonrefundable to the subscriber after the first 30 days, unless we cancel the subscription, in which case the subscriber is entitled to a pro rata refund. We recognize revenue for Kroger Savings over the subscription period, net of the fee shared with Kroger.
94
Pharmaceutical manufacturer solutions revenue consists primarily of revenue generated through advertisements placed in apps, websites and direct mailers for pharmaceutical manufacturers. Customers may purchase advertisements for a fixed fee that appear on our apps and websites for a specified period of time, and revenue is recognized over the term of the arrangement. Customers may also purchase advertisements for which we charge fees on a cost-per-click basis, or they may purchase advertisements placed in our direct mailers. Revenue for these arrangements is recognized at a point-in-time when the advertisement is clicked or when the direct mailer is shipped.
Telehealth revenue consists primarily of revenue generated from consumers who complete a telehealth visit with a member of our network of qualified healthcare professionals. Consumers pay a fee per telehealth visit and we recognize the fee as revenue at a point-in-time when the visit is complete.
Stock-Based Compensation
Stock-based compensation cost is allocated to cost of revenue, product development and technology, sales and marketing, and general and administrative expense in the consolidated statements of operations. Compensation cost for stock options, restricted stock units and restricted stock awards granted to employees is based on the fair value of these awards at the date of grant. We recognize compensation cost over the requisite service period, which is generally the vesting period of the award. For awards that vest based on continued service, compensation cost is recognized on a straight-line basis over the requisite service period. For awards with performance vesting conditions, compensation cost is recognized on a graded vesting basis when it is probable the performance condition will be achieved. Stock-based compensation cost for awards that contain market vesting conditions is recognized on a graded vesting basis over the requisite service period, even if the market condition is not satisfied. For our awards with market conditions, the requisite service period is the longer of the service period, performance period or derived service period from a Monte Carlo simulation model. For awards that contain service, performance and market vesting conditions, the Company commences recognition of stock-based compensation cost once it is probable that the performance condition will be achieved. If the performance condition is an initial public offering or a change in control event, the performance condition is not probable of being achieved for accounting purposes until the event occurs. Once it is probable that the performance condition will be achieved, the Company recognizes stock-based compensation cost over the remaining requisite service period under a graded vesting model, with a cumulative adjustment for the portion of the service period that occurred for the period prior to the performance condition becoming probable of being achieved. Thereafter, expense is recognized even if the market condition was not or is not achieved, provided the employee continues to satisfy the service condition.To the extent that the market vesting conditions are achieved earlier than the end of the requisite service period, then stock-based compensation cost is accelerated. Forfeitures are recognized when they occur.
Determining the fair value of stock-based awards requires judgment. The Black-Scholes option-pricing model is used to estimate the fair value of stock options with service and performance vesting conditions, while the fair value of our common stock at the date of grant is used to measure the fair value of restricted stock units and restricted stock awards with service and performance conditions. For awards with market vesting conditions, the fair value is estimated using a Monte Carlo simulation model that incorporates the likelihood of achieving the market condition.
The valuation of stock-based compensation awards using the Black-Scholes option-pricing model or the Monte Carlo simulation model require the input of subjective assumptions, which include:
95
• The dividend yield is based on our current expectations of dividend payouts.
We used a Monte Carlo simulation model to calculate the grant date fair value of the Performance-Vesting Founders Awards and the derived service period. The primary inputs used in the Monte Carlo simulation model were volatility of 55% and our estimated cost of equity of 11%. We then applied a 20% discount for lack of marketability (“DLOM”) to the value of the RSUs as the issuance of the shares for these awards is deferred by three-years from the applicable vesting date, or earlier, upon a qualifying change in control or to satisfy tax withholding requirements. The Company utilized the Finnerty Model to calculate the DLOM using inputs, including length of holding period, volatility and dividend yield, with volatility considered as a significant Level 3 input in the fair value hierarchy. The grant date fair value of the Time-Vesting Founders Awards was estimated based on the fair value of our common stock on the date of grant.
The assumptions used in the Black-Scholes option-pricing model and the Monte Carlo simulation model represent management’s best estimates. These estimates involve inherent uncertainties and the application of management’s judgment. If factors change and different assumptions are used, stock-based compensation could be materially different in the future.
Common Stock Valuation
Subsequent to the completion of our IPO in September 2020, the fair value of common stock was determined on the grant date using the closing price of the Company’s common stock. Prior to the IPO, given our common stock was not publicly traded, our board of directors exercised significant judgment in determining the fair value of our common stock on the date of each stock-based grant, with input from management and based on several objective and subjective factors. In determining the fair market value of our common stock, our board of directors considered the following:
• our operating and financial performance;
• the hiring of key personnel;
• the market performance of comparable publicly traded companies; and
• the overall U.S. economic, regulatory and capital market conditions.
In valuing our common stock, we first determined the equity value using both the income and market approach valuation methods. In addition, we also considered values implied by sales of preferred and common stock, if applicable. We then allocated the equity value to our classes of stock using an option-pricing model (“OPM”) or Probability Weighted Expected Return Method (“PWERM”).
96
The income approach estimates equity value based on the expectation of future cash flows that a company will generate. These future cash flows, and an assumed terminal value, are discounted to their present values using a discount rate based on a weighted-average cost of capital that reflects the risks inherent in the cash flows. The market approach estimates equity value based on a comparison of the subject company to comparable public companies in a similar line of business. From the comparable companies, a representative market value multiple is determined and then applied to the subject company’s financial forecasts to estimate the value of the subject company.
Once we determined an equity value, we used a combination of approaches to allocate the equity value to each of our classes of stock. We used the OPM, and more recently also used the OPM in combination with the PWERM. The OPM allocates values to each equity class by creating a series of call options on our equity value, with exercise prices based on the liquidation preferences, participation rights, and strike prices of the equity instruments. Using the PWERM, the value of our common stock was estimated based upon a probability-weighted analysis of varying values for our common stock assuming possible future events, which included an IPO, merger or sale, dissolution, or continued operation as a private company. In determining the estimated fair value of our common stock, we considered the fact that our stockholders could not freely trade our common stock in the public markets. Accordingly, we also applied a lack of marketability discount to the equity value.
Business Combinations
The results of businesses acquired in a business combination are included in our consolidated financial statements from the date of the acquisition. Purchase accounting results in assets and liabilities of an acquired business being recorded at their estimated fair values on the acquisition date. Any excess consideration over the fair value of assets acquired and liabilities assumed is recognized as goodwill.
We perform valuations of assets acquired and liabilities assumed for an acquisition and allocate the purchase price to its respective net tangible and intangible assets. Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgment and estimates including the selection of valuation methodologies, estimates of future revenue, costs, and cash flows, discount rates and selection of comparable companies. For material acquisitions, we may engage the assistance of valuation specialists in concluding on fair value measurements of certain assets acquired or liabilities assumed in a business combination.
Jumpstart Our Business Startups Act of 2012
Under the JOBS Act, an “emerging growth company” can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an “emerging growth company” to delay the adoption of new or revised accounting standards that have different transition dates for public and private companies until those standards would otherwise apply to private companies. We meet the definition of an “emerging growth company” and have elected to use this extended transition period. As a result of this election, our timeline to comply with these standards will in many cases be delayed as compared to other public companies that are not eligible to take advantage of this election or have not made this election. Therefore, our consolidated financial statements may not be comparable to those of companies that comply with the public company effective dates for these standards.
97
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
We only have operations within the United States and therefore do not have any foreign currency exposure. We are exposed to market risks in the ordinary course of our business, including the effects of interest rate changes.
Interest Rate Risk
Our exposures to market risk for changes in interest rates relate primarily to the Credit Facilities which bear floating interest rates and a rising interest rate environment will increase the amount of interest paid on these loans. A hypothetical 100 basis point increase in interest rates would have increased our interest expense by $7.2 million for the year ended December 31, 2020.
Impact of Inflation
We do not believe that inflation has had a material effect on our business, results of operations or financial condition. Nonetheless, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs. Our inability or failure to do so could harm our business, financial condition and results of operations.
Item 8. Financial Statements and Supplementary Data.
The financial statements required to be filed pursuant to this Item 8 are appended to this report. An index of those financial statements is found in Item 15 of Part IV of this Annual Report on Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Limitations on effectiveness of controls and procedures
In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Evaluation of disclosure controls and procedures
Our management, with the participation of our co-principal executive officers and principal financial officer, evaluated, as of the end of the period covered by this Annual Report on Form 10-K, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, and as a result of the material weaknesses described below, our co-principal executive officers and principal financial officer concluded that, as of December 31, 2020, our disclosure controls and procedures were not effective at the reasonable assurance level.
Material Weaknesses
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual and interim financial statements will not be detected or prevented on a timely basis.
98
In connection with the preparation of our financial statements for 2019, we identified certain control deficiencies in the design and operation of our internal control over financial reporting that constituted material weaknesses. The material weaknesses are:
These material weaknesses contributed to the following additional material weaknesses:
These material weaknesses resulted in adjustments identified by our independent registered public accounting firm and recorded by us primarily related to goodwill, capitalized software, leases, debt extinguishment, revenue recognition and sales allowances. These material weaknesses could result in a misstatement of our accounts or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.
Remediation Measures
We are in the early stages of compiling the system and processing documentation necessary to perform the evaluation needed to comply with Section 404(a) of Sarbanes-Oxley Act and we are taking steps to remediate the material weaknesses. Management, with the participation of the audit committee and the board of directors, is engaged in remedial activities to address the material weaknesses described above. Those remediation measures are ongoing and include the following:
99
We believe we are making progress toward achieving the effectiveness of our internal control over financial reporting and disclosure controls and procedures. The actions that we are taking are subject to ongoing senior management review, as well as Audit Committee oversight. We will not be able to conclude whether the steps we are taking will fully remediate these material weaknesses in our internal control over financial reporting until we have completed our remediation efforts and subsequent evaluation of their effectiveness. We may also conclude that additional measures may be required to remediate the material weaknesses in our internal control over financial reporting, which may necessitate additional implementation and evaluation time. We will continue to assess the effectiveness of our internal control over financial reporting and take steps to remediate the known material weaknesses expeditiously.
100
Management’s annual report on internal control over financial reporting
This Annual Report on Form 10-K does not include a report of management’s assessment regarding our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) or an attestation report of our independent registered accounting firm due to a transition period established by rules of the SEC for newly public companies. Additionally, our independent registered accounting firm will not be required to opine on the effectiveness of our internal control over financial reporting pursuant to Section 404 until we are no longer an “emerging growth company” as defined in the JOBS Act.
Changes in internal control over financial reporting
We are taking actions to remediate the material weaknesses relating to our internal control over financial reporting. Other than the changes to our internal control over financial reporting described in “Remediation Measures” above, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information.
None.
101
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Information about our Directors
The following table presents information concerning our board of directors.
Name Age Position In Current Position Since
Trevor Bezdek 43 Director & Co-Chief Executive Officer September 2011
Douglas Hirsch 50 Director & Co-Chief Executive Officer September 2011
Christopher Adams 41 Director October 2015
Julie Bradley 52 Director August 2020
Dipanjan Deb 51 Director October 2015
Adam Karol 45 Director October 2018
Jacqueline Kosecoff 71 Director May 2016
Stephen LeSieur 47 Director October 2015
Gregory Mondre 46 Director October 2018
Agnes Rey-Giraud 56 Director June 2016
The following are brief biographies describing the backgrounds of our directors.
Trevor Bezdek
Mr. Bezdek is one of our co-founders and has served as our Co-Chief Executive Officer since January 2015 and as a member of our board of directors since our founding in September 2011. Mr. Bezdek also serves as President and Chief Executive Officer of two of our wholly-owned subsidiaries. Previously, Mr. Bezdek served as Managing Partner at Tryarc, LLC, an information technology consulting firm from 2001 to 2007, and co-founded Bioware, a community for biologists and scientists. Mr. Bezdek holds a B.S. in Biological Sciences from Stanford University. We believe Mr. Bezdek is qualified to serve as a member of our board of directors because of his extensive experience in the healthcare, prescription medication and technology industries, in addition to the continuity he brings as one of our co-founders and Co-Chief Executive Officers.
Douglas Hirsch
Mr. Hirsch is one of our co-founders and has served as a Chief Executive Officer and as a member of our board of directors since our founding in September 2011. From January 2015, Mr. Hirsch served as our Co-Chief Executive Officer. Prior to our founding, Mr. Hirsch served as Chief Executive Officer at DailyStrength, Inc., a healthcare-focused social network centered on support groups, from March 2005 to November 2008, and previously held senior roles at Facebook, Inc., and Yahoo! Inc. Mr. Hirsch holds a B.A. in Political Science from Tufts University. We believe Mr. Hirsch is qualified to serve on our board of directors because of the historical knowledge, operational expertise, leadership, and continuity that he brings to our board of directors as our co-founder and Co-Chief Executive Officer.
Christopher Adams
Mr. Adams has served as a member of our board of directors since October 2015. Mr. Adams is a Partner at Francisco Partners Management, L.P. (“Francisco Partners”) a private equity firm, where he has served since August 2008. Prior to this, Mr. Adams was an associate at American Securities Capital Partners, a private equity firm, and a management consultant at Bain & Company. Mr. Adams also serves on the board of directors of several private companies. Mr. Adams holds a B.S. in Computer Engineering from the Georgia Institute of Technology and an M.B.A. from the Stanford Graduate School of Business. We believe that Mr. Adams is qualified to serve as a member of our board of directors because of his extensive experience in analyzing, investing in, and serving on the board of directors of several healthcare and technology companies from working in the private equity industry.
102
Julie Bradley
Ms. Bradley has served as a member of our board of directors since August 2020. Ms. Bradley previously served as the Chief Financial Officer of Tripadvisor, Inc., a public company that operates an online travel planning website and mobile app, from October 2011 to November 2015. Currently, Ms. Bradley serves on the board of directors of Wayfair Inc., since September 2012, where she is the member of the Audit Committee and Nominating and Governance Committee, and Blue Apron Holdings, Inc., since September 2015, where she serves on the Audit Committee and Compensation Committee. Ms. Bradley previously served on the board of directors of Constant Contact, Inc. from June 2015 to February 2016, where she served on the Audit Committee, Compensation Committee and Merger and Acquisition Committee. Ms. Bradley additionally serves on the board of directors for a private company. Ms. Bradley received a B.A. in Economics from Wheaton College. We believe Ms. Bradley is qualified to serve on our board of directors due to her financial expertise and experience serving on the board of directors of numerous technology-based companies.
Dipanjan Deb
Mr. Deb has served as a member of our board of directors since October 2015. Mr. Deb is a founder of Francisco Partners and has served as the Managing Partner/Chief Executive Officer of Francisco Partners since September 2005. Mr. Deb has also served as a Partner of Francisco Partners since its founding in August 1999. Prior to founding Francisco Partners, Mr. Deb was a principal at TPG Capital, a private equity firm, a Director of Semiconductor Banking at Robertson, Stephens & Company and a management consultant at McKinsey & Company. Mr. Deb has served on the board of directors of numerous public companies including most recently Ichor Systems, Inc. from February 2012 to May 2018, and currently serves on the board of directors of several private companies. Mr. Deb holds a B.S. in Electrical Engineering and Computer Science from the University of California, Berkeley and an M.B.A. from the Stanford Graduate School of Business. We believe that Mr. Deb is qualified to serve as a member of our board of directors because of his experience in the private equity and venture capital industries analyzing, investing in and serving on the boards of directors of manufacturing and technology companies.
Adam Karol
Mr. Karol has served as a member of our board of directors since October 2018. Mr. Karol is a Managing Director at Silver Lake. He joined Silver Lake in 2009 as a Principal and then served as a Director from 2013 to December 2018. Prior to Silver Lake, Mr. Karol worked at Silver Point Capital, L.P., an asset management firm, and at Perry Capital, a multi-strategy investment firm. Mr. Karol serves on the board of directors for A Place for Mom, Inc. Mr. Karol holds a B.S. in Finance and Management Information Systems from Boston College and an M.B.A. from The Wharton School of the University of Pennsylvania. We believe Mr. Karol is qualified to serve on our board of directors because he has significant experience in private equity investing and expertise in technology investing.
Jacqueline Kosecoff
Dr. Kosecoff has served as a member of our board of directors since May 2016. Dr. Kosecoff is a Managing Partner at Moriah Partners, LLC, where she has served since 2012. Dr. Kosecoff has also served as a Senior Advisor at Warburg Pincus since March 2012. Dr. Kosecoff has had an extensive career in healthcare including serving as Executive Vice President of PacifiCare where she had responsibility for its PBM, Medicare Part D Drug Program, and Behavioral Health, Dental and Vision companies. At UnitedHealth Group, Dr. Kosecoff was CEO of OptumRx, with responsibility for UnitedHealth’s PBM, Specialty Pharmacy and Consumer Health Products. Currently, Dr. Kosecoff serves on the board of directors of Houlihan Lokey, where she also serves on Houlihan Lokey’s Audit Committee and Nominating and Governance Committee, Sealed Air Corporation where she chairs the Compensation Committee and also serves on the Nominating and Governance Committee, STERIS Corporation, where she chairs the Organization and Compensation Committee and also serves on the Nominating and Governance Committee, TriNet, and several private companies. Dr. Kosecoff holds a B.A. in Mathematics from the University of California, Los Angeles, an M.S. in Applied Mathematics from Brown University and a Ph.D. with a concentration in Research Methods from the University of California, Los Angeles, School of Education. We believe Dr. Kosecoff is qualified to serve on our board of directors because of her extensive experience serving on the board of directors of several public and private companies and her experience and knowledge in the healthcare sector, including healthcare services and technology.
103
Stephen LeSieur
Mr. LeSieur has served as a member of our board of directors since October 2015. Mr. LeSieur is a Managing Director at Spectrum Equity, a growth stage private equity firm, where he has served since 2005 and co-leads the firm’s healthcare technology investing efforts. Prior to Spectrum, Mr. LeSieur was an associate at Trident Capital. Mr. LeSieur serves and has served on the board of directors of several private healthcare and software companies. Mr. LeSieur holds a B.A. in Economics from Princeton University and an M.B.A. from the Tuck School of Business at Dartmouth College. We believe Mr. LeSieur is qualified to serve on our board of directors because of his extensive experience in private equity investing and serving on the boards of directors of numerous healthcare and technology-based companies.
Gregory Mondre
Mr. Mondre has served as a member of our board of directors since October 2018. Mr. Mondre is Co-Chief Executive Officer at Silver Lake. He joined Silver Lake in 1999 and most recently served as a Managing Partner and Managing Director of the firm from January 2013 to December 2019. Mr. Mondre currently serves on the board of directors of Expedia Group, Inc., a position he has held since May 2020, and Motorola Solutions, a position he has held since August 2015 and where he also serves on the Audit and Governance and Nominating Committees. He previously served as a director of GoDaddy Inc. from May 2014 to February 2020, and of Sabre Corporation from March 2007 to December 2018. Mr. Mondre holds a B.S. degree in Economics from The Wharton School of the University of Pennsylvania. We believe Mr. Mondre is qualified to serve on our board of directors because of his significant experience in private equity investing and expertise in technology and technology-enabled industries.
Agnes Rey-Giraud
Ms. Rey-Giraud has served as a member of our board of directors since June 2016. Ms. Rey-Giraud is the Founder, Chairman and Chief Executive Officer of Acera Surgical Inc., a bioscience company, where she has served since its founding in January 2013. Ms. Rey-Giraud previously served as an Executive Vice President and the President of Operations at Express Scripts, a pharmacy benefit management organization, from May 1999 to May 2011. Ms. Rey-Giraud also serves on the board of directors for several private companies. Ms. Rey-Giraud holds a B.S. and M.S. in Mechanical Engineering from Ecole Nationale d’Ingenieurs de Saint Etienne (ENISE), France, a MMa in Operations Management from Ecole de Management de Lyon (EM Lyon), France and an M.B.A. from the University of Chicago. We believe Ms. Rey-Giraud is qualified to serve on our board of directors because of her experience and expertise in the PBM industry as an executive of a large publicly traded company and her experience serving on the board of directors of several companies.
Information about our Executive Officers
Name Age Position In Current Position Since
Trevor Bezdek 43 Director & Co-Chief Executive Officer January 2015
Douglas Hirsch 50 Director & Co-Chief Executive Officer January 2015
Karsten Voermann 51 Chief Financial Officer March 2020
Andrew Slutsky 35 President, Consumer October 2019
Bansi Nagji 56 President, Healthcare June 2020
The following are brief biographies describing the backgrounds of our executive officers.
The biography for each of Mr. Bezdek and Mr. Hirsch appears above in the section titled “Information about our Directors”.
104
Karsten Voermann
Mr. Voermann has served as our Chief Financial Officer since March 2020. From May 2018 to February 2020, Mr. Voermann served as Chief Financial Officer of Mercer Advisors, an investment advisory services firm, and from July 2015 to May 2018, Mr. Voermann served as Chief Financial Officer of Ibotta, an app-based provider of consumer discounts on consumer packaged goods and other items, and has over 20 years of financial experience with public and private companies. Mr. Voermann holds an H.B.A. in Business from the University of Western Ontario and an M.B.A. from Harvard Business School.
Andrew Slutsky
Mr. Slutsky has served as our President, Consumer since October 2019 and has been at the Company since February 2012 and was our third employee. From 2011 to 2012, Mr. Slutsky served as a Senior Marketing Manager at RentTheRunway, an internet clothing company, and from 2008 to 2011, Mr. Slutsky served as a Director of Loeb Enterprises, a venture capital company, where he launched digital marketing for Loeb Enterprises’ early pharmacy discount program. Mr. Slutsky holds a B.A. in Political Science from Amherst College.
Babak Azad
Mr. Azad has served as our Chief Marketing Officer and SVP, Marketing & Communications since October 2019. Mr. Azad is the Founder of Round 2 Ventures, LLC, a marketing consulting business, focused on marketing activities of various clients, including GoodRx from June 2017 to October 2019. Mr. Azad served as a Senior Vice President of Media and Customer Acquisition for Beachbody, LLC, a developer of health and fitness related products, from February 2007 to April 2015. Mr. Azad holds a B.S. in Mathematics from MIT and an M.B.A. from the Stanford Graduate School of Business.
Bansi Nagji
Mr. Nagji has served as our President, Healthcare since June 2020. Previously, Mr. Nagji served for more than 5 years as the Executive Vice President and Chief Strategy and Business Development Officer at McKesson Corporation, a global leader in healthcare supply chain management solutions and retail pharmacy. Prior to McKesson Corporation, Mr. Nagji served from January 2013 to February 2015 as a Principal of Deloitte Consulting, LLP, a consulting firm, and as the Global Leader of Monitor Deloitte. Mr. Nagji previously worked for almost 20 years at Monitor Group, a global strategy consulting firm, and served as a senior partner and President of the firm when it merged with Deloitte. Currently, Mr. Nagji serves on the board of directors of Change Healthcare, Inc., where he also sits on the Compensation Committee and Nominating and Corporate Governance Committee. He has previously served as a director of several private companies, including Deloitte LLP from 2013 to 2015. Mr. Nagji received B.A. and M.A. degrees from Cambridge University and an M.B.A. with Distinction from INSEAD.
Family Relationships
There are no family relationships among any of our executive officers or directors.
Code of Business Conduct and Ethics
The board of directors has adopted a written code of business conduct (the “Code of Business Conduct and Ethics”) that applies to all of our directors, officers and employees, including our principal executive officers and our principal financial and accounting officer. A copy of the code is available on our website at www.goodrx.com in the “Governance” section of the “Investors” page. In addition, we intend to post on our website all disclosures that are required by law concerning any amendments to, or waivers from, any provision of our Code of Business Conduct and Ethics.
105
Governance Documents
We believe that good corporate governance is important to ensure that GoodRx is managed for the long-term benefit of our stockholders. Our Nominating and Governance Committee will periodically review and reassess our Governance Guidelines, other governance documents and overall governance structure. Complete copies of our current committee charters, our Corporate Governance Guidelines and our Code of Business Conduct and Ethics are available on our website under the “Governance” section at https://investors.goodrx.com/, or by writing to our secretary at our offices at 2701 Olympic Boulevard, Santa Monica, California 90404.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires our executive officers and directors, our principal accounting officer and persons who beneficially own more than 10% of our common stock to file with the SEC reports of their ownership and changes in their ownership of our common stock. To our knowledge, based solely on review of the copies of such reports and amendments to such reports with respect to the year ended December 31, 2020 filed with the SEC and on written representations by our directors and executive officers, all required Section 16 reports under the Exchange Act for our directors, executive officers, principal accounting officer and beneficial owners of greater than 10% of our common stock were filed on a timely basis during the year ended December 31, 2020 other than one Form 4 reporting three late transactions for Trevor Bezdek, one Form 4 reporting three late transactions for Douglas Hirsch, one Form 4 reporting two late transactions for Bansi Nagji, one Form 4 reporting two late transactions for Andrew Slutsky and one Form 4 reporting one late transaction for Silver Lake Group, LLC.
Board Composition
The current authorized number of directors is ten. Our amended and restated certificate of incorporation provides that the authorized number of directors may be changed only by resolution of our board of directors or as provided in the stockholders agreement. Our board of directors is divided into three classes of directors, with staggered terms of three years each and holding office until his or her successor is duly elected and qualified, or until his or her earlier death, resignation or removal. The term of one class expires at each annual meeting of the stockholders; thus, directors typically stand for election after three years, unless they are filling an unexpired term. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors.
Board Committees
Our board of directors has an audit committee, a compensation committee, nominating and corporate governance committee and a compliance committee. From time to time, special committees may be established under the direction of our board of directors when necessary to address specific issues. The charters of all four committees are available on our website under the “Governance” section at https://investors.goodrx.com/.
Audit Committee and Audit Committee Financial Expert
We have a separately-designated standing audit committee (“Audit Committee”) that consists of Julie Bradley, Adam Karol and Agnes Rey-Giraud. Ms. Bradley serves as the Chair of the Audit Committee. We currently rely on the phase-in rules of Rule 10A-3 under the Exchange Act and the Nasdaq Stock Market with respect to the requirement that the Audit Committee be composed entirely of members of our board of directors who satisfy the standards of independence established for independent directors under the Nasdaq Stock Market rules and the additional independence standards applicable to audit committee members established pursuant to Rule 10A-3 under the Exchange Act, as determined by our board of directors. Our board of directors has determined that each of Julie Bradley and Agnes Rey-Giraud are independent directors under the Nasdaq Stock Market rules and the additional independence standards applicable to audit committee members established pursuant to Rule 10A-3 under the Exchange Act. Our board of directors has also determined that each of Julie Bradley, Adam Karol and Agnes Rey-Giraud meets the “financial literacy” requirement for audit committee members under the Nasdaq Stock Market rules and Julie Bradley is an “audit committee financial expert” within the meaning of the SEC rules. No Audit Committee member currently serves on the audit committees of more than three public companies.
106
Our Audit Committee oversees our corporate accounting and financial reporting process and assists our board of directors in monitoring our financial systems. The primary responsibilities and functions of our Audit Committee are, among other things:
• reviewing our policies on risk assessment and risk management;
• reviewing related person transactions;
Compensation Committee
We have a separately-designated standing compensation committee (“Compensation Committee”) that consists of Dipanjan Deb, Jacqueline Kosecoff and Gregory Mondre. Mr. Mondre serves as the Chair of the Compensation Committee. The composition of our Compensation Committee meets the requirements for independence under the Nasdaq Stock Market rules and SEC rules and regulations. Our board of directors has also determined that Ms. Kosecoff is a non-employee director, as defined in Section 16b-3 of the Exchange Act.
Our Compensation Committee oversees our compensation policies, plans and benefits programs. The primary responsibilities and functions of our Compensation Committee are, among other things:
• appointing and overseeing any compensation consultants.
Nominating and Corporate Governance Committee
We have a separately-designated nominating and corporate governance committee (“Nominating and Corporate Governance Committee”) that consists of Christopher Adams, Trevor Bezdek and Gregory Mondre. Mr. Adams serves as the chair of the Nominating and Corporate Governance Committee. The composition of our Nominating and Corporate Governance Committee meets the requirements for independence under the Nasdaq Stock Market rules and SEC rules and regulations, including the exemptions available to controlled companies.
107
Our Nominating and Corporate Governance Committee oversees and assists our board of directors in reviewing and recommending nominees for election as directors. The primary responsibilities and functions of our Nominating and Corporate Governance Committee are, among other things:
• overseeing an evaluation of our board of directors and its committees; and
Compliance Committee
We have a separately-designated compliance committee (“Compliance Committee”) that consists of Trevor Bezdek, Adam Karol, Stephen LeSieur and Agnes Rey-Giraud. Ms. Rey-Giraud serves as the chair of the Compliance Committee.
Our Compliance Committee oversees and assists our board of directors in reviewing and providing general oversight of our compliance with federal and state laws and regulations relating to healthcare and in monitoring our performance with respect to such legal and regulatory requirements. Our Compliance Committee is responsible for, among other things, reviewing and overseeing our compliance program, ensuring proper communication of significant healthcare regulatory compliance issues to our board of directors and reviewing significant healthcare regulatory compliance risk areas and the steps taken by management to monitor, control and report such compliance risk exposures.
Role of the Board in Risk Oversight
Our board of directors has an active role, as a whole and also at the committee level, in overseeing the management of our risks. Our board of directors is responsible for general oversight of risks and regular review of information regarding our risks, including credit risks, liquidity risks and operational risks. The Compensation Committee is responsible for overseeing the management of risks relating to our executive compensation plans and arrangements. The Audit Committee is responsible for overseeing the management of financial and cybersecurity risks. The Nominating and Corporate Governance Committee is responsible for overseeing the management of risks associated with the independence of our board of directors and potential conflicts of interest. Although each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire board of directors is regularly informed through discussions from committee members about such risks. Our board of directors believes its administration of its risk oversight function has not negatively affected our board of directors’ leadership structure.
Item 11. Executive Compensation.
EXECUTIVE AND DIRECTOR COMPENSATION
Executive Compensation
This section discusses the material components of the executive compensation program for our executive officers who are named in the “Summary Compensation Table” below. In 2020, our co-chief executive officers and our two other highest-paid executive officers, or our named executive officers, were as follows:
• Douglas Hirsch, Co-Chief Executive Officer;
• Trevor Bezdek, Co-Chief Executive Officer;
108
• Andrew Slutsky, President, Consumer; and
• Bansi Nagji, President, Healthcare.
This discussion may contain forward-looking statements that are based on our current plans, considerations, expectations and determinations regarding future compensation programs. Actual compensation programs that we adopt in the future may differ materially from the currently planned programs summarized in this discussion.
Summary Compensation Table
The following table sets forth information concerning the compensation of our named executive officers:
President, Healthcare
(1) Amounts reflect special bonuses.
Narrative to Summary Compensation Table
2020 Salaries
The named executive officers receive a base salary to compensate them for services rendered to our company. The base salary payable to each named executive officer is intended to provide a fixed component of compensation reflecting the executive’s skill set, experience, role and responsibilities.
The base salaries for each of Messrs. Hirsch, Bezdek and Nagji for 2020 was $500,000; and our board of directors approved an increase to Mr. Slutsky’s annual base salary from $400,000 to $500,000, effective as of October 1, 2020. Because Mr. Nagji’s employment start date was June 16, 2020, his actual base salary received in 2020 reflected his partial year of service. The Summary Compensation Table above shows the actual base salaries paid to each named executive officer in 2020.
109
2020 Bonuses
Each of Messrs. Hirsch, Bezdek, Slutsky, and Nagji was eligible to earn a cash incentive bonus based upon the achievement of pre‐determined revenue goals of the Company and its consolidated subsidiaries for 2020 (each such bonus, a Revenue Bonus). For 2020, the target Revenue Bonus for each of Messrs. Hirsch, Bezdek, and Nagji was 100% of his base salary for 2020. With respect to Mr. Slutsky, his target Revenue Bonus was blended to reflect (i) 50% of his base salary paid in 2020 through September, and (ii) an increased target of 100% of his base salary, effective as of October 1, 2020. Each named executive officer was eligible to receive a bonus expressed as a percentage of his applicable target bonus based on the actual achievement of revenue above 75% of the target revenue goal. During calendar year 2020, the Company and its consolidated subsidiaries achieved a consolidated revenue at a level that triggered the payments equal to 96% of the executive’s target bonus. The actual bonuses paid are set forth above in the Summary Compensation Table in the column entitled “Non-Equity Incentive Plan Compensation.” Because Mr. Nagji’s employment start date was June 16, 2020, he received a prorated Revenue Bonus in 2020 to reflect his partial year of service.
Equity Compensation
We typically grant equity awards to key new hires upon their commencing employment with us. We historically have used stock options as the primary incentive for long-term compensation to our named executive officers because they are able to profit from stock options only if our stock price increases relative to the stock option’s exercise price, which generally is set at or above the fair market value of our Class A common stock as of the applicable grant date. Generally, the stock options we grant vest in equal monthly installments over four years, either monthly during the four-year period or monthly following a one-year cliff, subject to the employee’s continued service with us on the vesting date.
In connection with and following our IPO, we have also granted restricted stock unit awards to certain of our named executive officers. The equity awards granted to our named executive officers in 2020 are discussed below.
Equity Compensation Plans
Prior to our IPO, our Fifth Amended and Restated 2015 Equity Incentive Plan, or the 2015 Plan, was the primary compensation plan that we used to grant equity awards to our employees, including our executive officers.
In connection with our IPO, our board of directors adopted, and our stockholders approved, the 2020 Incentive Award Plan, referred to below as the 2020 Plan, as the vehicle pursuant to which we may grant of cash and equity incentives. The 2015 Plan was terminated in connection with the effectiveness of the 2020 Plan, and no further awards have been since our IPO, or will be, granted under the 2015 Plan.
2020 Equity Grants
Founders IPO Awards. In connection with our IPO, our board of directors approved the grant of restricted stock unit awards covering an aggregate of 12,316,533 shares of Class B common stock under the 2020 Plan to each of Messrs. Hirsch and Bezdek, which we refer to as the Founders Awards.
The Founders Awards became effective upon the completion of the IPO, and each Founders Award consisted of (i) 8,211,022 restricted stock units that vest based on the achievement of performance goals, which we refer to as the Performance‐Vesting Founders Awards and (ii) 4,105,511 restricted stock units that vest based on the passage of time, which we refer to as the Time-Vesting Founders Awards.
The Performance-Vesting Founders Awards were eligible to vest over a seven-year period following the grant date, based on the achievement of stock price goals ranging from $6.07 per share to $51.28 per share. Given our stock price for the post IPO period, all of the stock price goals with respect to the Performance-Vesting Founders Awards were achieved in October 2020; as a result, all 16,422,044 Performance-Vesting Founders Awards vested. Vested restricted stock units will be settled in shares of Class B common stock on the third anniversary of the applicable vesting date or, if earlier, upon a qualifying change in control event or to satisfy tax withholding requirements.
110
The Time-Vesting Founders Awards will vest in substantially equal quarterly installments over the four-year period beginning September 1, 2020, subject to the founder’s continued employment. The Time-Vesting Founders Awards are subject to the following vesting acceleration terms (with any acceleration upon a termination of employment subject to the timely execution and non-revocation of a general release of claims):
Slutsky Equity Award. On October 30, 2020, our board of directors approved the grant of a restricted stock unit award to Mr. Slutsky under the 2020 Plan in order to compensate Mr. Slutsky for his contributions to the Company and to retain and incentivize further superior performance. The restricted stock unit award covers 1,000,000 shares of the Company’s Class A common stock and will vest in substantially equal quarterly installments over the four-year period commencing on October 1, 2020, subject to Mr. Slutsky’s continued employment with the Company through the applicable vesting date.
Nagji Equity Award. In connection with the commencement of Mr. Nagji’s employment with us in June 2020, our board of directors approved the grant of a nonqualified stock option award to Mr. Nagji under the 2015 Plan covering an aggregate of 1,500,000 shares of our common stock. This option vests and becomes exercisable as follows, subject to Mr. Nagji’s continued service with us through the applicable vesting date:
The performance condition and modified performance conditions related to the achievement of stock price goals in connection with our initial public offering. The performance condition and each of the modified performance conditions set forth in the option agreement were each satisfied in September 2020, such that 25,000 shares vested as of the closing date of our IPO and following such date, the option will vest and become exercisable as follows: (i) as to 1,100,000 of the shares underlying the option, to the extent not vested as of the IPO closing date, in accordance with the Nagji Time-Vesting Schedule; and (ii) as to 400,000 of the shares underlying the option, in full on January 1, 2022. If Mr. Nagji’s employment is terminated without “cause” or for “good reason” within 24 months after a “sale of the company” (each as defined in the option agreement), then all time-based vesting conditions that apply to the option will be waived and the option will vest and become exercisable in full as of the termination date.
111
Other Elements of Compensation
Retirement Plans
We currently maintain a 401(k) retirement savings plan for our employees, including our named executive officers, who satisfy certain eligibility requirements. Our named executive officers are eligible to participate in the 401(k) plan on the same terms as other full-time employees. The Code allows eligible employees to defer a portion of their compensation, within prescribed limits, on a pre‐tax basis through contributions to the 401(k) plan. Currently, we match contributions made by participants in the 401(k) plan up to a specified percentage of the employee contributions, and these matching contributions are fully vested as of the date on which the contribution is made. We believe that providing a vehicle for tax-deferred retirement savings through our 401(k) plan, and making fully vested matching contributions, adds to the overall desirability of our executive compensation package and further incentivizes our employees, including our named executive officers, in accordance with our compensation policies. Each named executive officer received Company-paid matching contributions under the 401(k) plan in 2020.
Employee Benefits and Perquisites
Health/Welfare Plans. All of our full-time employees, including our named executive officers, are eligible to participate in our health and welfare plans, including:
• medical, dental and vision benefits;
• medical and dependent care flexible spending accounts;
• short-term and long-term disability insurance; and
• life insurance.
We believe the perquisites described above are necessary and appropriate to provide a competitive compensation package to our named executive officers.
No Tax Gross-Ups
Except as in limited circumstances with regard to the special bonuses, we have not made gross-up payments to cover our named executive officers’ personal income taxes that may pertain to any of the compensation paid or provided by our company.
Outstanding Equity Awards at Year-End
The following table summarizes the number of shares of Class A and Class B common stock underlying outstanding equity incentive plan awards for each named executive officer as of December 31, 2020. Unless otherwise specified, each equity award listed in the following table was granted under the 2020 Plan and covers Class A common stock.
Option Awards Stock Awards
112
Executive Compensation Arrangements
Douglas Hirsch and Trevor Bezdek 2015 Employment Agreements
On October 7, 2015, GoodRx, Inc. entered into employment agreements with Messrs. Hirsch and Bezdek, which agreements were amended and restated effective in connection with our IPO, pursuant to which each serves as our Co-Chief Executive Officer. These employment agreements provide for at-will employment, an annual base salary, and eligibility to participate in the health and welfare benefit plans and programs maintained by GoodRx, Inc. for the benefit of its employees and certain other perquisites. In addition, each of Messrs. Hirsch and Bezdek is eligible to earn an annual cash incentive bonus targeted at 100% of his base salary, which bonus is payable upon the achievement of certain performance targets.
Under the amended and restated employment agreements, if either Messrs. Hirsch or Bezdek is terminated without “cause” or due to his death, “disability” or resignation for “good reason” (each, as defined in his employment agreement), then, in addition to any accrued obligations and subject to his timely execution and non-revocation of a general release of claims, he will be eligible to receive (i) 12 months of continued payment of his base salary and (ii) 12 months of company-reimbursed COBRA continuation coverage premiums.
The employment agreements also include a “best pay” provision under Section 280G of the Code, pursuant to which any “parachute payments” that become payable to Mr. Hirsch or Mr. Bezdek will either be paid in full or reduced so that such payments are not subject to the excise tax under Section 4999 of the Code, whichever results in the better after-tax treatment to Mr. Hirsch or Mr. Bezdek, as applicable.
Andrew Slutsky 2015 Employment Agreement
On October 7, 2015, GoodRx, Inc. entered into an employment agreement with Mr. Slutsky, which agreement was amended and restated in connection with our IPO, which provides for at-will employment, an annual base salary, and eligibility to participate in the health and welfare benefit plans and programs maintained by GoodRx, Inc. for the benefit of its employees. In addition, Mr. Slutsky is eligible to earn an annual cash incentive bonus expressed as a percentage of his base salary, which bonus is payable upon the achievement of certain performance targets. Under his amended and restated employment agreement, Mr. Slutsky was eligible to receive an annual incentive bonus equal to 50% of his base salary, which percentage was increased by our board of directors to 100% of his base salary as of October 1, 2020.
Under the amended and restated employment agreement, if Mr. Slutsky is terminated without “cause” or due to his death, “disability” or resignation for “good reason” (each, as defined in his employment agreement), then, in addition to any accrued obligations and subject to his timely execution and non-revocation of a general release of claims, he will be eligible to receive (i) 12 months of continued payment of his base salary and (ii) 12 months of company-reimbursed COBRA continuation coverage premiums.
The employment agreement also includes a “best pay” provision under Section 280G of the Code, pursuant to which any “parachute payments” that become payable to Mr. Slutsky will either be paid in full or reduced so that such payments are not subject to the excise tax under Section 4999 of the Code, whichever results in the better after-tax treatment to Mr. Slutsky.
113
Bansi Nagji 2020 Offer Letter
On March 29, 2020, GoodRx, Inc. entered into an employment offer letter with Mr. Nagji, which provides for at-will employment, an annual base salary, and eligibility to participate in the health and welfare benefit plans and programs maintained by GoodRx, Inc. for the benefit of its employees. In addition, Mr. Nagji is eligible to earn an annual discretionary performance bonus equal to 100% of his base salary (pro-rated for 2020), subject to his continued employment through the end of the applicable performance year.
Pursuant to the offer letter, in the event that the company requires via written notice that Mr. Nagji relocate to our Santa Monica, California, office, and Mr. Nagji relocates within three months of receiving such notice, the company will reimburse Mr. Nagji on a tax grossed-up basis for relocation costs up to $500,000, subject to any applicable tax withholding. If Mr. Nagji’s employment is terminated without “good reason” or for “cause” (each as defined in the offer letter) within one year following the relocation, 100% of the relocation reimbursement will be repayable to the company.
Pursuant to the offer letter, Mr. Nagji was granted a nonqualified stock option covering 1,500,000 shares of our common stock under the 2015 Plan in June 2020. Each of the performance conditions set forth in the option agreement was satisfied in September 2020, such that 25,000 shares vested as of the closing date of our IPO and following such satisfaction, the option vests and becomes exercisable as follows: (i) as to 1,100,000 of the shares underlying the option, to the extent not vested as of the IPO closing date, in accordance with the Nagji Time-Vesting Schedule; and (ii) as to 400,000 of the shares underlying the option, in full on January 1, 2022. If Mr. Nagji’s employment is terminated without cause or for good reason within 24 months after a “sale of the company,” then all time-based vesting conditions that apply to the option will be waived and the option will vest and become exercisable in full as of the termination date, subject to his execution and non-revocation of a general release of claims. For additional discussion regarding this stock option award, please see “—Nagji Equity Award” above.
Pursuant to the offer letter, if Mr. Nagji’s employment is terminated by the company without cause or by him for good reason, he will be eligible to receive 12 months of continued payment of his base salary (subject to his execution and non-revocation of a general release of claims) and any bonus amount that is earned but unpaid as of the termination date.
The offer letter also includes a “best pay” provision under Section 280G of the Code, pursuant to which any “parachute payments” that become payable to Mr. Nagji will either be paid in full or reduced so that such payments are not subject to the excise tax under Section 4999 of the Code, whichever results in the better after-tax treatment to Mr. Nagji.
Mr. Nagji was also required to execute the Company’s proprietary information and invention assignment agreement as a condition to his employment under the offer letter.
114
Director Compensation
2020 Director Compensation Program
The following table sets forth information for 2020 regarding the compensation awarded to, earned by or paid to our non-employee directors who served on our board of directors during 2020. Messrs. Hirsch and Bezdek, who served as our Co-Chief Executive Officers during 2020, and continue to serve in that capacity, do not receive additional compensation for their service as directors, and therefore are not included in the Director Compensation table below. All compensation paid to Messrs. Hirsch and Bezdek is reported above in the “Summary Compensation Table.”
Christopher Adams — — — —
Dipanjan Deb — — — —
Adam Karol — — — —
Stephen LeSieur — — — —
Gregory Mondre — — — —
The table below shows the aggregate numbers of shares of our Class A common stock subject to outstanding option awards (exercisable and unexercisable) and/or stock awards (unvested) held as of December 31, 2020 by each non-employee director who was serving as of December 31, 2020.
Name Options Outstanding at Year End Stock Awards Outstanding at Year End
Christopher Adams — —
Dipanjan Deb — —
Adam Karol — —
Stephen LeSieur — —
Gregory Mondre — —
Board Service Letter Agreements
In April 2016 and June 2016, we entered into board service letter agreements with Dr. Kosecoff and Ms. Rey-Giraud, respectively, pursuant to which they receive $20,000 per year, payable quarterly, for their service as members of our board of directors. Pursuant to the offer letters, in connection with the commencement of their service, each of Ms. Rey-Giraud and Dr. Kosecoff also received a stock option grant covering 0.25% of the fully-diluted equity of the Company as of the date of grant. These options vest in equal monthly installments over the 48 months following the grant date and vest in full upon a “sale of the company” (as defined in the 2015 Plan), subject to the director’s continued service through the vesting date or sale of the company, as applicable.
In June 2020, we entered into new board service letter agreements with each of Dr. Kosecoff and Ms. Rey-Giraud, pursuant to which they continue to serve on our board of directors and will receive $30,000 per year, paid quarterly, for their service. Additionally, if Dr. Kosecoff serves on the audit committee of the board of directors, she will receive an additional $8,000 per year, paid quarterly, for her service on this committee. All cash compensation will be pro-rated for any partial quarter of service.
115
Pursuant to the letter agreements, each of Dr. Kosecoff and Ms. Rey-Giraud was granted a non-statutory option to purchase 30,000 shares of our Class A common stock in June 2020. These options will vest in equal monthly installments over the 12 months following the director’s election date (for Dr. Kosecoff) or August 11, 2020 (for Ms. Rey-Giraud), subject to the director’s continued service through the vesting date. Dr. Kosecoff will also be eligible to receive annual equity grants for continued service as approved by the board of directors.
In August 2020, we entered into a board service letter agreement with Ms. Bradley in connection with the commencement of her service as a member of our board of directors. Pursuant to the board service letter agreement, Ms. Bradley will receive $30,000 per year, paid quarterly, for her service as a member of the board, and an additional $20,000 per year, paid quarterly, for her service as chair of the audit committee of the board of directors. All cash compensation will be pro-rated for any partial quarter of service.
Additionally, pursuant to the letter agreement, Ms. Bradley was granted two restricted stock unit awards in connection with the completion of our IPO: (i) an award of 15,000 restricted stock units corresponding to shares of our Class A common stock, which will vest in equal monthly installments over the three-year period following August 1, 2020, subject to Ms. Bradley’s continued service through the applicable vesting date; and (ii) an award of 7,500 restricted stock units corresponding to shares of our Class A common stock, which will vest in equal monthly installments over the one-year period following August 1, 2020, subject to Ms. Bradley’s continued service through the applicable vesting date.
Post-IPO Director Compensation Program
In connection with our IPO, our board of directors adopted and our stockholders approved a nonemployee director compensation program (the “Director Compensation Program”), which became effective in connection with the completion of our IPO. The Director Compensation Program provides for annual retainer fees and long-term equity awards for certain of our non-employee directors, which currently include Julie Bradley, Jacqueline Kosecoff and Agnes Rey-Giraud (each, an “Eligible Director”). The material terms of the Director Compensation Program are summarized below.
The Director Compensation Program consists of the following components:
Cash Compensation
• Annual Retainer: $30,000
• Annual Committee Chair Retainer:
• Nominating and Corporate Governance: $9,000
• Annual Committee Member (Non-Chair) Retainer:
• Compensation: $7,000
• Nominating and Corporate Governance: $4,000
Annual cash retainers will be paid in quarterly installments in arrears and will be pro-rated for any partial calendar quarter of service.
116
Equity Compensation
In addition, each Initial Grant and Annual Grant will vest in full upon a change in control, other than a non-transactional change in control, of the Company (both as defined in the 2020 Plan).
Compensation under our Director Compensation Program is subject to the annual limits on non-employee director compensation set forth in the 2020 Plan.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required by this Item is incorporated by reference to the definitive Proxy Statement for our 2021 Annual Meeting of Stockholders, which will be filed with the SEC no later than 120 days after December 31, 2020.
Securities Authorized For Issuance under Equity Compensation Plans (As of December 31, 2020)
Equity compensation plans approved by security holders(1) 43,386,637 (2)
Class A Restricted Stock Units 2,789,826(3) —
Class B Restricted Stock Units 23,388,556(4) —
Equity compensation plans not approved by security holders — — —
117
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Policies and Procedures for Approval of Related Person Transactions
Our board of directors recognizes the fact that transactions with related persons present a heightened risk of conflicts of interests (or the perception thereof). We have a written policy on transactions with related persons that is in conformity with the requirements for issuers having publicly held common stock that is listed on Nasdaq. Under the policy, our legal team is primarily responsible for developing and implementing processes and procedures to obtain information regarding related persons with respect to potential related person transactions and then determining, based on the facts and circumstances, whether such potential related person transactions do, in fact, constitute related person transactions requiring compliance with the policy. In addition, any potential related person transaction that is proposed to be entered into by the Company must be reported to the Company’s General Counsel, by both the related person and the person at the Company responsible for such potential related person transaction.
If our legal team determines that a transaction or relationship is a related person transaction requiring compliance with the policy, our General Counsel is required to present to the Audit Committee all relevant facts and circumstances relating to the related person transaction. Our Audit Committee must review the relevant facts and circumstances of each related person transaction, including if the transaction is on terms comparable to those that could be obtained in arm's length dealings with an unrelated third party and the extent of the related person's interest in the transaction, take into account the conflicts of interest and corporate opportunity provisions of our Code of Business Conduct and Ethics, and either approve or disapprove the related person transaction. If advance Audit Committee approval of a related person transaction requiring the Audit Committee's approval is not feasible, then the transaction may be preliminarily entered into by management upon prior approval of the transaction by the chair of the Audit Committee subject to ratification of the transaction by the Audit Committee at the Audit Committee's next regularly scheduled meeting; provided, that if ratification is not forthcoming, management will make all reasonable efforts to cancel or annul the transaction. If a transaction was not initially recognized as a related person transaction, then upon such recognition the transaction will be presented to the Audit Committee for ratification at the Audit Committee's next regularly scheduled meeting; provided, that if ratification is not forthcoming, management will make all reasonable efforts to cancel or annul the transaction.
Our management will update the Audit Committee as to any material changes to any approved or ratified related person transaction and will provide a status report at least annually of all then current related person transactions. No director may participate in approval of a related person transaction for which he or she is a related person.
Relationships and Transactions with Directors, Executive Officers and Significant Stockholders
Preferred Stock Financing
In August 2018, we entered into a purchase and recapitalization agreement with Silver Lake Partners V, L.P. In October 2018, the agreement was assigned by Silver Lake to its affiliate, SLP Geology Aggregator, L.P. Pursuant to the agreement, in October 2018, GoodRx Holdings, Inc. issued 126,045,531 shares of redeemable convertible preferred stock for an aggregate purchase price of approximately $748.8 million. In connection with the issuance of these redeemable convertible preferred stock, our existing shares of preferred stock of GoodRx Holdings, Inc. were converted into shares of common stock.
As holders of our redeemable convertible preferred stock, SLP Geology Aggregator, L.P. is entitled to specified registration rights.
118
Investor Rights Agreement
In October 2018, we entered into an amended and restated investor rights agreement with Francisco Partners IV, L.P., Francisco Partners IV-A, L.P., Spectrum Equity VII, L.P., Spectrum VII Investment Managers’ Fund, L.P., Spectrum VII Co-Investment Fund, L.P., Idea Men, LLC, and SLP Geology Aggregator, L.P. These stockholders are entitled to rights with respect to the registration of their shares following this offering.
Silver Lake Purchase Agreement
On September 13, 2020, we entered into a purchase agreement with Silver Lake, pursuant to which Silver Lake agreed to purchase, subject to customary closing conditions, $100.0 million of our Class A common stock in a private placement concurrent with or shortly after the completion of our IPO, at a purchase price per share equal to the IPO price per share at which our Class A common stock was sold to the public.
The lock-up agreement that Silver Lake entered into with the underwriters in connection with our IPO prohibits the sale of any shares of Class A common stock Silver Lake purchased in the private placement for a period of 180 days after the date of the Prospectus, subject to certain exceptions.
Stockholders Agreements
In October 2018, we entered into an amended and restated stockholders agreement with Francisco Partners IV, L.P., Francisco Partners IV-A, L.P., Spectrum Equity VII, L.P., Spectrum VII Investment Managers’ Fund, L.P., Spectrum VII Co-Investment Fund, L.P., Idea Men, LLC, SLP Geology Aggregator, L.P., Douglas Hirsch, Trevor Bezdek, Scott Marlette and certain other stockholders. As a result of our IPO, most of the provisions set forth in the amended and restated stockholders agreement that apply to us were terminated, including rights regarding the nomination, appointment and designation of members of our board of directors and board committees, transfer restrictions, tag-along rights, drag-along rights, rights of first refusal and negative covenants. We continue to be required to maintain directors and officers indemnity insurance coverage reasonably satisfactory to the board of directors, indemnify and exculpate directors to the fullest extent permitted under applicable law and, at the request of Francisco Partners IV, L.P., Francisco Partners IV-A, L.P., Spectrum Equity VII, L.P., Spectrum VII Investment Managers’ Fund, L.P., Spectrum VII Co-Investment Fund, L.P., SLP Geology Aggregator, L.P. or Idea Men, LLC, enter into a voting agreement pursuant to which the parties will agree to vote in favor of any directors nominated by such parties, in each case pursuant to the amended and restated stockholders agreement.
In connection with our IPO, we entered into a stockholders agreement (the “Stockholders Agreement”), with SLP Geology Aggregator, L.P., Francisco Partners IV, L.P., Francisco Partners IV-A, L.P., Spectrum Equity VII, L.P., Spectrum VII Investment Managers’ Fund, L.P., Spectrum VII Co-Investment Fund, L.P. and Idea Men, LLC, granting them certain board designation rights so long as they maintain a certain percentage of ownership of our outstanding common stock. The Stockholders Agreement requires us to, among other things, nominate a number of individuals for election as our directors at any meeting of our stockholders, designated by SLP Geology Aggregator, L.P. (each such individual a “Silver Lake Designee”), Francisco Partners IV, L.P. and Francisco Partners IV-A, L.P. (each such individual a “Francisco Partners Designee”), Spectrum Equity VII, L.P., Spectrum VII Investment Managers’ Fund, L.P., and Spectrum VII Co-Investment Fund, L.P. (each such individual a “Spectrum Designee”) and Idea Men, LLC (each such individual a “Idea Men Designee,” and together with the Silver Lake Designee, Francisco Partners Designee and Spectrum Designee, the “Stockholder Designees”), such that, upon the election of such individual and each other individual nominated by or at the direction of our board of directors or a duly-authorized committee of the board, as a director of our company, the number of: (A) Silver Lake Designees serving as directors will be equal to (i) three (3) directors, if certain affiliates of Silver Lake continue to beneficially own at least 20% of the aggregate number of shares of common stock outstanding immediately following our IPO and the private placement, (ii) two (2) directors, if certain affiliates of Silver Lake continue to beneficially own less than 20% but more than 10% of the aggregate number of shares of common stock outstanding immediately following our IPO and the private placement or (iii) one (1) director, if certain
119
affiliates of Silver Lake continue to beneficially own less than 10% but more than 5% of the aggregate number of shares of common stock outstanding immediately following our IPO and the private placement; (B) Francisco Partners Designees serving as directors will be equal to (i) two (2) directors, if certain affiliates of Francisco Partners continue to beneficially own at least 10% of the aggregate number of shares of common stock outstanding immediately following our IPO and the private placement, or (ii) one (1) director, if certain affiliates of Francisco Partners continue to beneficially own less than 10% but more than 5% of the aggregate number of shares of common stock outstanding immediately following our IPO and the private placement; (C) Spectrum Designees serving as directors will be equal to one (1) director, if certain affiliates of Spectrum continue to beneficially own at least 5% of the aggregate number of shares of common stock outstanding immediately following our IPO and the private placement; and (D) Idea Men Designees serving as directors will be equal to two (2) directors, if Idea Men, LLC continues to beneficially own at least 5% of the aggregate number of shares of common stock outstanding immediately following our IPO and the private placement provided that the Idea Men Designees shall be Trevor Bezdek, for so long as Trevor Bezdek serves as our Chief Executive Officer or Co-Chief Executive Officer, and Douglas Hirsch, for so long as Douglas Hirsch serves as our Chief Executive Officer or Co-Chief Executive Officer.
Each party to our Stockholders Agreement has also agreed to vote, or cause to vote, all of their outstanding shares of our Class A common stock and Class B common stock at any annual or special meeting of stockholders in which directors are elected, so as to cause (i) the election of the Silver Lake Designees, Francisco Partners Designees, Spectrum Designee and Idea Men Designees and (ii) the election of two (2) directors who are not affiliated with any party to our Stockholders Agreement and who satisfy the standards of independence established for independent directors under the rules and the additional independence standards applicable to audit committee members established pursuant to Rule 10A-3 under the Exchange Act.
In addition, pursuant to the Stockholders Agreement, if Idea Men, LLC continues to beneficially own at least 5% of the aggregate number of outstanding shares of common stock at any time that the number of Silver Lake Designees, Francisco Partners Designees or the Spectrum Designee is decreased pursuant to the terms above, then the number of Idea Men Designees serving as directors will be increased on a one to one basis. For so long as each of Silver Lake and Francisco Partners continue to maintain at least one (1) director as Silver Lake Designees and Francisco Partners Designees, respectively, Idea Men, LLC shall not nominate a director to fill a vacancy caused by a decrease in the number of Silver Lake Designees or Francisco Partners Designees, or by the removal of the Spectrum Designee, pursuant to the terms above without the consent of each of Silver Lake and Francisco Partners.
If the number of individuals that Silver Lake, Francisco Partners, Spectrum or Idea Men, LLC have the right to designate is decreased because of the decrease in its in ownership, then the corresponding Silver Lake Designee, Francisco Partners Designee, Spectrum Designee or Idea Men Designee will immediately tender his or her resignation for consideration by our board of directors and, unless a majority of our board of directors agrees that such director shall not resign following the decrease, such director shall resign within thirty (30) days. The last remaining Silver Lake Designee, Francisco Partners Designee, Spectrum Designee or Idea Men Designee may remain on our board of directors through the end of his or her then current term; provided, that a director may resign at any time regardless of the period of time left in his or her then current term.
Each party to our Stockholders Agreement has also agreed, subject to certain limited exceptions, to certain limitations on their ability to sell or transfer any shares of common stock during the three-year period following our IPO. For example, each party must generally provide written notice to the other parties prior to exercising registration rights or making any transfer of such party’s shares. Following such notice, each other party shall have the ability to participate in the contemplated transaction on a pro rata basis. These restrictions on transfer terminate with respect to each party on the earlier of the three-year period following the closing of our IPO or the time at which such party beneficially owns less than 5% of the shares of common stock outstanding and does not have a director designee on our board of directors.
120
Disposition Agreement
In October 2018, we entered into an amended and restated disposition agreement with Francisco Partners IV, L.P., Spectrum Equity VII, L.P., SLP Geology Aggregator L.P., Idea Men, LLC, Douglas Hirsch, Trevor Bezdek and Scott Marlette. The agreement restricted the ability of Idea Men, LLC, Douglas Hirsch, Trevor Bezdek and Scott Marlette to sell and transfer their equity interests in us or issue equity or debt without first obtaining the written consent of certain of Francisco Partners IV, L.P., Spectrum Equity VII, L.P., SLP Geology Aggregator L.P. The amended and restated disposition agreement was terminated by its terms in connection with the completion of our IPO.
Services Agreement
In October 2018, we entered into a services agreement with Silver Lake Management Company V, L.L.C., or SLMC. Pursuant to the agreement, SLMC may render to us or any of our affiliates, by and through itself and its affiliates, each as an independent contractor, monitoring, advisory and consulting services, among others.
Pursuant to the agreement, we also granted SLMC a non-exclusive license to use our trademarks and logos in connection with the describing SLMC’s relationship with us. No services have been rendered to us pursuant to this agreement, and we have not paid any management fees to SLMC to date.
Other Transactions
We have granted options to our executive officers and certain of our directors as more fully described inthe section entitled “Executive and Director Compensation.”
Directed Share Program
At our request, the underwriters reserved for sale at the IPO price per share of $33.00 of up to 5% of the shares of Class A common stock offered by our Prospectus, to certain individuals through a directed share program, including our directors, employees and certain other individuals identified by management.
Indemnification Agreements
We have entered into, and plan on entering into, indemnification agreements with each of our directors and executive officers.
Independence of the Board of Directors
We are a “controlled company” under the rules of the Nasdaq Stock Market. As a result, we qualify for exemptions from, and have elected not to comply with, certain corporate governance requirements under the rules, including the requirements that within one year of the completion of our IPO, we have a board that is composed of majority of “independent directors,” as defined under the rules, and a compensation committee and a nominating and corporate governance committee that are composed entirely of independent directors. Even though we are a controlled company, we are required to comply with the rules of the SEC and the Nasdaq Stock Market relating to the membership, qualifications and operations of the audit committee.
The rules of the Nasdaq Stock Market define a “controlled company” as a company of which more than 50% of the voting power for the election of directors is held by an individual, a group or another company. Pursuant to our Stockholders Agreement, the parties to that agreement beneficially own 94.8% of the combined voting power of our Class A and Class B common stock as of the date of this Annual Report on Form 10-K. Accordingly, we qualify as a “controlled company” and rely on the controlled company exemption from the director independence requirements of the Nasdaq Stock Market relating to the board of directors, compensation committee and nominating and corporate governance committee. If we cease to be a controlled company and the Class A common stock continues to be listed on the Nasdaq Global Select Market, we will be required to comply with these requirements by the date our status as a controlled company changes or within specified transition periods applicable to certain provisions, as the case may be.
121
In making its independence determinations, the board of directors reviewed and discussed information provided by the directors with regard to each director’s business and personal activities and any relationships they have with us and our management, including with respect to their ownership of our Class A common stock and Class B common stock. As a result of this review, our board of directors determined that Christopher Adams, Julie Bradley, Dipanjan Deb, Adam Karol, Jacqueline Kosecoff, Stephen LeSieur, Gregory Mondre and Agnes Rey-Giraud are “independent directors” as defined under the applicable rules and regulations of the SEC and the listing requirements and rules of The Nasdaq Stock Market, representing eight of our ten directors. Each of Mr. Bezdek and Mr. Hirsch is not an independent director due to his employment as Co-Chief Executive Officer of the Company.
In addition, two members of the Audit Committee (Ms. Bradley and Ms. Rey-Giraud) meet the heightened independence standards required for audit committee members under the Nasdaq Stock Market rules and SEC rules. Mr. Karol does not meet the heightened independence standards under the Nasdaq Stock Market rules and SEC rules and the Company is relying on the phase in period provided in Rule 10A-3 available for newly public companies for one year from the date of effectiveness of the registration statement. Each member of the Compensation Committee (Mr. Deb, Ms. Kosecoff and Mr. Mondre) meets the heightened independence standards required for compensation committee members under the Nasdaq rules and SEC rules. Except for Mr. Bezdek, each member of the Nominating and Corporate Governance Committee (Mr. Adams and Mr. Mondre) is also independent under the Nasdaq rules.
Item 14. Principal Accountant Fees and Services.
The information required by this Item is incorporated by reference to the definitive Proxy Statement for our 2021 Annual Meeting of Stockholders, which will be filed with the SEC no later than 120 days after December 31, 2020.
122
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a)(1) Financial Statements
Our consolidated financial statements are included in this Annual Report on Form 10-K beginning on page F-1.
(a)(2) Financial Statement Schedules
All financial statement schedules have been omitted because they are not applicable, not material or because the information required is already included in the consolidated financial statements or the notes thereto.
(a)(3) Exhibits
The exhibits listed below are filed as part of this Annual Report on Form 10-K or are incorporated herein by reference, in each case as indicated below.
Incorporated by Reference Filed/
4.3 Description of Capital Stock *
123
Incorporated by Reference Filed/
10.10† Offer Letter for Bansi Nagji, dated March 28, 2020 *
10.11† Offer Letter for Karsten Voermann, effective February 12, 2020 *
124
Incorporated by Reference Filed/
21.1 List of Subsidiaries of GoodRx Holdings, Inc. *
31.1 Rule 13a-14(a)/15d-14(a) Certification of Co-Chief Executive Officer *
31.2 Rule 13a-14(a)/15d-14(a) Certification of Co-Chief Executive Officer *
31.3 Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer *
32.1 Section 1350 Certification of Co-Chief Executive Officer **
32.2 Section 1350 Certification of Co-Chief Executive Officer **
32.3 Section 1350 Certification of Chief Financial Officer **
101.INS XBRL Instance Document *
101.SCH XBRL Taxonomy Extension Schema Document *
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document *
101.LAB XBRL Taxonomy Extension Label Linkbase Document *
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document *
101.DEF XBRL Taxonomy Extension Definition Linkbase Document *
* Filed herewith.
** Furnished herewith.
† Indicates management contract or compensatory plan.
Item 16. Form 10-K Summary.
None.
125
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
GOODRX HOLDINGS, INC.
Date: March 11, 2021 By: /s/ Karsten Voermann
Karsten Voermann
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.
Name Title Date
/s/ Douglas Hirsch Co-Chief Executive Officer March 11, 2021
Douglas Hirsch (principal executive officer)
/s/ Trevor Bezdek Co-Chief Executive Officer March 11, 2021
Trevor Bezdek (principal executive officer)
/s/ Karsten Voermann Chief Financial Officer March 11, 2021
Karsten Voermann (principal financial and accounting officer)
/s/ Christopher Adams Director March 11, 2021
Christopher Adams
/s/ Julie Bradley Director March 11, 2021
Julie Bradley
/s/ Dipanjan Deb Director March 11, 2021
Dipanjan Deb
/s/ Adam Karol Director March 11, 2021
Adam Karol
/s/ Jacqueline Kosecoff Director March 11, 2021
Jacqueline Kosecoff
/s/ Stephen LeSieur Director March 11, 2021
Stephen LeSieur
/s/ Gregory Mondre Director March 11, 2021
Gregory Mondre
/s/ Agnes Rey-Giraud Director March 11, 2021
Agnes Rey-Giraud
126
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Registered Public Accounting Firm F-2
Consolidated Balance Sheets F-3
Consolidated Statements of Operations F-4
Consolidated Statements of Cash Flows F-6
Notes to Consolidated Financial Statements F-8
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of GoodRx Holdings, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of GoodRx Holdings, Inc. and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations, of changes in redeemable convertible preferred stock and stockholders’ equity (deficit), and of cash flows for each of the three years in the period ended December 31, 2020, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America.
Change in Accounting Principle
As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Los Angeles, California
March 11, 2021
We have served as the Company's auditor since 2018.
F-2
GoodRx Holdings, Inc.
Consolidated Balance Sheets
December 31,
(in thousands, except par values) 2020 2019
Assets
Current assets
Restricted cash 2,900 —
Prepaid expenses and other current assets 46,048 12,403
Current liabilities