Overview
There may be a recovery in prescription volume emerging for GoodRx, but it is not evident in the 1Q21 earnings print. We expected 1Q21 MAU to be 5,978 and higher than the 5,710 GDRX reported. They put up a slight beat and raised the full year guidance by a token $5M.
Guidance for 2Q21 and 2021 is in- line with consensus and looks decently positive, but management guided Other Revenue to 20% of the total which implies the Prescription Services at $139-$142M, lower than consensus of $144M.
There were positives and there is really good evidence guidance will prove to be low, but the evidence in the earnings release and call is thin. They did say MAU in March was 6.1M , better than our estimate and that the 1Q21 was suppressed by the February reading at 5.2M, which was impacted by winter storms and fewer days. There were also several comments that volume was picking up, almost accidentally, and contradicting their guidance that they would not see the impact of deferred care until the second half of 2021. If the March MAU level of 6.1M continues they’ll easily clear guidance and come in well ahead of the the Prescription Services revenue estimate of $144M. While we appreciate the the potential for Other Revenue to drive revenues through subscriptions, telehealth, and pharma services, it needs to be in the context of a strengthening base business, not the key driver.
Outlook
We think the core long case remains, and we heard several confirmatory data points on the call that agree with our data and anecdotes. The core problem as we see it is the transition to subscriptions and how to model the impact from lower MAU. Subscriptions increased from 801K in 1Q21 to 931K sequentially, and according to management commentary, should be worth more on a per member basis than non-subscriber monthly average users, although we don't see the evidence in the reported numbers. We still expect meaningful acceleration in demand emerging now and thrughout the rest of the year.
While the quarter was not perfect, we don't think the wheels have come completely off the GDRX story. However, in the context of rising inflation concerns, high multiple growth stocks have been for sale, good ones but especially ones with hair on them. We suspect decelerating estimate momentum has played a role in the sell off as well. While we cut several of our longs earlier in the year, we expected GDRX to benefit from pent-up demand. The question remains what to do from here, move on or wait. For now we are going to wait and keep GDRX as an active long. We'll continue to monitor data for continuing signs of accelerating utilization, and look forward to the turn in estimate momentum we expect to begin in June 2021.
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Thomas Tobin
Managing Director
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