Ladies and gentlemen, and thank you for standing by. Welcome to the GoodRx Third Quarter 2022 Earnings Call. As a reminder, today's conference call is being recorded. I will now like to introduce your host for today's call, Whitney Notaro, Vice President of Investor Relations. Please go ahead.

Thank you, operator. Good afternoon, everyone and welcome to GoodRx’s earnings conference call for the third quarter of 2022. Joining me today are Doug Hirsch and Trevor Bezdek, our Co-Founders and Co-Chief Executive Officers; and Karsten Voermann, our Chief Financial Officer. Before we begin, I'd like to remind everyone that this call will contain forward-looking statements. All statements made on this call that do not relate to matters of historical fact should be considered forward-looking statements, including statements regarding management's plans, strategies, goals and objectives, our market opportunity, our anticipated financial performance, the impact of the grocer issue on our business and the impact of macroeconomic conditions on our future results of operation. These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties and other important factors. These factors may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Factors discussed in the Risk Factors section of our annual report on Form 10-K for the year ended December 31, 2021, as updated by our quarterly report on Form 10-Q for the quarter ended June 30, 2022, and our other filings with the Securities and Exchange Commission could cause actual results to differ materially from those indicated by the forward-looking statements made on this call. Any such forward-looking statements represent management's estimates as of the date of this call, and we disclaim any obligation to update these statements, even if subsequent events cause our views to change. In addition, we may also reference certain non-GAAP metrics, which are reconciled to the nearest GAAP metric in the company's earnings press release and accompanying slides, which can be found on the overview page of our Investor Relations website at investors.goodrx.com. I'd also like to remind everyone that a replay of this call will become available there shortly as well. With that, I'll turn it over to Doug.

Thank you, Whitney. Good afternoon everyone, and thank you for joining us. Today, we will be sharing our perspective on our recent performance, but I want to start off by discussing two of our most important priorities, which go hand in hand to help Americans get the healthcare they need at a price they can afford, and as we deliver on that mission to create value for our shareholders. During the last quarter, we made significant progress on both of these priorities. We furthered our mission by engaging even more deeply with all of our constituents and in particular with consumers and providers. We continue to stabilize and further grow our retail network, worked with retailers and pharmacy benefit managers on finding more ways to offer even better consumer prices, expanded our content offerings and enhanced our provider focused offerings to make it even easier for providers to be great advocates for GoodRx. Providers have brought millions of consumers to the GoodRx platform over the last decade, and we look forward to their future contributions in connection with the continued build out of our provider focused offerings. I will talk more about this shortly, but I wanted to first touch on the progress we've made toward driving value for shareholders. During the quarter, we significantly exceeded our own 3Q margin expectations with approximately 28% adjusted EBITDA margin. We drove better than expected growth, reaching $187.3 million in revenue in the quarter and continued our high cash conversion with $33.7 million in cash flow provided by operating activities. Most importantly, we enhanced the stability of and expanded our ecosystem of PBMs, retailers, healthcare providers and pharma manufacturers, all of which helped us deliver our third quarter results. Trevor will talk more about driving shareholder value shortly. Going forward, we are focused…

Thank you, Doug, and good afternoon everyone. Before getting into our third quarter results, I'm going to talk about the increasing strength of our retail, PBM and pharma manufacturer relationships as well as the health of our broader ecosystem. One of the main areas of investor interest on our second quarter earnings call was our retail network, so I'll begin there. Importantly, as we discussed during that earnings call in August, we've addressed the grocer issue and GoodRx discounts have since been welcomed at the grocer pharmacy's point of sale. With the exception of this particular grocer, volume across other pharmacies increased approximately 8% year-over-year and approximately 5% quarter-over-quarter. We continue to deepen our relationships with existing retailers and bring on new retailers. Historically, PBMs have contractual agreements with pharmacies and our business model has been tied to contractual agreements with PBMs and their relationships with pharmacies. Today, our approach involves selective direct contracting with pharmacies to complement the continued existing contractual agreements with our PBM customers. We believe our hybrid approach ensures stronger lines of communication and stronger relationships with our retailers. The elements of our business model and growth strategy are all interdependent. We strongly believe that our success of acquiring new consumers even more efficiently and knowing our consumers better. Through the initiatives Doug discussed will strengthen and provide us more control over our retail relationships. These more direct relationships have provided key insights into the unique challenges presented by the current macro environment and enable us to proactively collaborate on solutions to drive our mutual success and profitability. We're helping retailers drive their strategic initiatives and improve their unit economics while maintaining the strength of our own economics. With regard to strengthening our network, I’m happy to share the extension of our gold retail network with…

Thank you, Trevor. Total revenue for the quarter decreased 4% year-over-year to $187.3 million, which exceeded our quarterly guidance of $185 million. Prescription transactions revenue decreased 16% year-over-year, which also came in above our expectations as ongoing business reviews with retailers have been positive and the dialogue continues and how we can further drive revenue. Importantly, with the exception of the particular grocer volume across other pharmacies increased 8% year-over-year and 5% quarter-over-quarter. MAC declined 9% year-over-year to $5.8 million, while PTR per MAC decreased approximately 70% year-over-year and 2% quarter over quarter. The PTR decrease was driven by the decrease in MAC and an ongoing shift in volume of prescription transactions to other retailers that impacted pricing as a result of the grocer impact and consumer engagement efforts that we previously discussed. We also experienced positive week-over-week growth at the grocer in the quarter, which was the first time since the end of the first quarter we saw positive week-over-week growth. We continue to be focused on user growth, pricing and consumer engagement. On the engagement front, the impact in the third quarter on conversion was less than we expected. As Doug and Trevor touched on, we’ll continue to roll out our engagement efforts in the fourth quarter and beyond. Turning to subscriptions. Subscription revenue remains strong, increasing 63% year-over-year, slightly exceeding our expectations. We ended the quarter with 1.1 million subscription plans, which was down 6% year-over-year, primarily due to the expected churn resulting from our fee increase in the first half of 2022 and an expected sequential decline in our subscription plans for Kroger Savings as a result of reduced marketing spend. When taking family subscriptions into account, 1.5 million total members benefited from our subscriptions offering during the quarter. The benefit from our Gold subscription fee…

We are excited about our future and the opportunities ahead, while also recognizing the near-term challenges we face. Our leadership team is committed to navigating these challenges. We’ll continue to focus on improving our profitability as measured by adjusted EBITDA, which we view as our number one goal. We are also focused on reaccelerating revenue growth in an efficient manner by leveraging our platform to expand margins following the cost reduction initiatives we began in the third quarter. We expect to see meaningful benefits over the long-term from our engagement efforts, along with our focus on investing in our fast growing Pharma Manufacturer Solutions platform. We are confident in our ability to achieve our goals of returning to high growth, while remaining highly profitable as we continue to deliver on our mission to help Americans get the healthcare they need at a price they can afford. Thank you again for joining us today. I’ll now turn it over to the operator for Q&A.

[Operator Instructions] One moment for our first question, and it comes from the line of George Hill with DB. Please go ahead, Mr. Hill, your line is open. One moment for our next question, please. Our next question comes from the line of Jailendra Singh with Truist. Please proceed.

Thanks and thanks for taking my questions. I know you guys are not providing 2023 guidance at this point, but are you willing to share some puts and takes you see for next year at this point? And how much visibly do you have on those factors at this point? Of course, grocer issue is one headwind on a year-over-year basis. But maybe share some additional puts and takes we should keep in mind for next year.

Sure. Thanks for the question, Jailendra. This is Karsten speaking. Great to hear from you, again. Yes, I think as we look into 2023 we do have some visibility, of course. I think the biggest areas of confidence come from the reality that we still feel like we’re barely penetrated into a prescription transactions TAM, number one. Our Manufacturer Solutions market and TAM is also very large, where we’re also lightly penetrated. And so those two tailwinds in particular are ones that we are highly focused on. I think in the interim period though, particularly with respect to Manufacturer Solutions, given what we’re seeing going on in the marketplace and how with pharma manufacturers taking longer to make decisions around marketing spend and being somewhat more focused on spend period in the fourth quarter, which could extend into 2023 as well. We will continue to monitor the situation between now and when we do our upcoming earning call at the beginning of 2023 to continue to refine our reviews on how that year will evolve.

One moment for our next question, please. It comes from the line of Michael Cherny with Bank of America. Your question, please.

Good evening. Thanks for taking the question. Congratulations on a nice result this quarter. I’d love to dive in a little bit on the Express Scripts announcement. Obviously a very important brand name PBM to work with to expand with. And I noticed the term you talked about relative to exclusive. Can you maybe just give us a sense on – again, not trying to get ahead on guidance, but how to think through how the progression of this relationship first came to fruition and then b, how we should see it start to filter through both in terms of the potential for revenue, potential for incremental costs into 2023 and beyond as it really ramps up.

Thank you, Michael for the question. We’re really pleased about this new collaboration with Express Scripts. It helps us support their mission to make prescription medicines more affordable for their members. Under this new program eligible Express Script members get access to GoodRx prices as part of their pharmacy benefit. So an eligible Express Script member gets seamless access to GoodRx prices for the eligible generic medication when the price is lower than their benefit price. This keeps visibility of the eligible member GoodRx claim within the pharmacy benefit. It enables out of pocket claims to count toward a member’s deductible, gives full visibility of the claim to the payer, and as you just brought up, we’re delighted that we were selected as Express Scripts exclusive partner for this program. We believe it’s really good recognition of our leadership in the prescription discount space of the strength of the GoodRx brand and of the trust consumers have in our technology. And this technology is powered by last year’s acquisition of RxNXT. The collaboration creates a new distribution channel for us. We believe that expands the market opportunity. It represents a way to efficiently gain many new incremental users. And this offering is anticipated to be available to Express Scripts commercial clients later this year and an early 2023.

Thank you. One moment for our next question. It comes from Eric Sheridan with Goldman Sachs. Please go ahead.

Thanks so much for taking the question. I want to hone in a little bit on some of the drivers of other revenue. In terms of like what you see coming out of this year and going into next year. We’ve talked a lot about marketing solutions and working more closely with the industry on the healthcare side to drive good outcomes for you as a platform and for them as companies. How could some of those budget conversations and dynamic continued to evolve as you move out of 2022 and into 2023 and supportive evidence of continuing to drive high ROI outcomes for marketers on the platform? Thanks so much.

Thanks for the great question. This is Karsten speaking here. Yes, I think we are very excited about the other revenues you characterized it, our Manufacturer Solutions line in particular as the biggest component of I think what you’re considering in there, the business in which we serve pharma manufacturers. And in that context, I think there are few points that are really critical here. The first point is that the TAM is huge. It’s about $30 billion TAM, split $20 million to healthcare providers and $10 million to consumers. And we hit both of those parts of the TAM very effectively for our manufacturers, so from that perspective that business continues to be very attractive to us. In the last 16 months alone, 865,000 prescribers have used GoodRx to look at medication prices, prescription discounts, et cetera, on behalf of their patients. So from that perspective, we remain highly bullish. I think in addition, the relationships we have both on the consumer and the provider front create a lot of value for us. The 90 NPS with providers and with consumers mean both sets of constituencies are hardly receptive to being approached and being served by us with respect to pharma manufacturers. We also have, as Trevor mentioned in the prepared remarks, significant volume. When you think of all of the monthly visitors that come to GoodRx’s platforms, which number in the tens of millions, those visitors are all visitors for whom pharma manufacturers benefit in particular because again, as Trevor said, we tend to be very deep in the funnel folks who are actually looking for a particular medication or a savings opportunity on it. We’ve also layered in provider mode, which is a tool that allows providers to, for example very rapidly share GoodRx discounts directly with…

Thank you. One moment for our next question please. And it comes from the line of Doug Anmuth with JPMorgan. Please proceed.

Thanks for taking the question. With discounts welcomed again in large grocer, can you just help us understand kind of how that’s playing out on the ground, the issue now loss revenue more functioning, less foot traffic, having to start over data prices were less compelling now. And have you had [indiscernible]. Thanks.

Thank you, Doug. It was a little hard to hear you, so I’ll do my best to touch on each part of that question. But to the grocer issue was addressed in August, as we’ve discussed, GoodRx discounts have since been welcomed at Kroger Pharmacy’s point of sale. During third quarter, we are pleased to see, with the exception of the particular grocer, that volumes did increase 5% quarter-over-quarter. We are also happy that we are now seeing week-over-week increases in volume at Kroger, as well as increases in subscribers for Kroger Savings Club. We did have a step down in volume because of the disruption, and that’s why we really brought up these in the prepared remarks this – these topics of how we are strengthening the retail network. And we think we’ve made really good headway on that front in this period that we have made more direct relationships with retailers. We have continued to maintain our really strong PBM marketplace. But in addition, we are selectively direct contracting with pharmacies and including many of the largest chains. That hybrid model really lets us ensure network stability, the – we want to make sure we don’t have and we anticipate – we don’t anticipate having any similar issue. Because partly, because these direct relationships enable us to collaborate on solutions to drive success. We also think this allows us to be have deeper – these direct relationships allow deeper and stickier relationships, marketing partnerships, and just there are a variety of incremental opportunities there.

Thank you. One moment for our next question, please. It comes from Stephanie Davis with SVB Securities. Please go ahead.

Hey guys, thank you for taking my question. I want to ask a little bit about the new profitability focus, just in light of both the press release and prepared remarks really point to a greater focus on cash conversion. So, could you walk us through your early thoughts on areas that could merit step back in investments and business lines that conversely could merit a bit of a step up just in light of that focus?

Sure, I can take that to start, Stephanie, this is Karsten speaking, and I think others may jump in because they see it. There are really two parts here. One’s the focus on flow through of EBITDA and cash, and the other is the focus on opportunities for growth going forward. So focusing on the first part of the question initially, yes, you heard us quite correctly. I think the risk we undertook at the end of August in particular and the refocusing and prioritization that allowed us to do also is a manifestation of the focus you mentioned. We took a really careful review of our business and its structure involved key leaders across the entire organization and realigned the organization to operate really more efficiently and effectively as well. And that was consistent we felt like with our comments during our second quarter earnings call already where we said that we’d focus on earnings and cash conversion as well as on revenue growth at that point too. These elements, particularly EBITDA and cash conversion are largely in our control. And I think our reality is that even by focusing on greater efficiency, we don’t trade off a significant amount of forward looking growth. You see us still creating new offerings like provider mode, which I’m sure we’ll talk about further and then Q&A that’s highly impactful. And you’ve seen when we look at things like MAC counts for example, those MAC counts despite the grocer issue remain stable even as we’re able to successfully cut back marketing as a percent of revenue and also an absolute dollar terms when you look at the sales and marketing line as well. I think the reality is that the strength of the brand we’ve built and the fact that we’re the scale player in certainly many of the faces we operate, such as our prescription transactions and subscriptions, combined savings offerings mean that we can leverage what we’ve already built to still be able to grow quite effectively, but also more efficiently than we used to. In terms of growth areas going forward, I’ll start, but I’m sure others on the team will jump in as well. And as we’ve talked about in the past, we remain incredibly bullish on pharma manufacturers solutions particularly over a multi quarter sort of evolution. I think in any given quarter that can be some fluctuation, but over multiple quarters, it continues to be an incredibly attractive business. The shift of that business towards digital, which of course benefits us plus the sheer size of the TAM, which were relatively low penetration into today. And the recent reports that have come out from the sell side where interviews of pharma manufacturers indicate that spend will only go up into next year and the shift to digital will only continue into next year for example, also encourage us to be very, very bullish across the broader pharma manufacturer solutions offering in particular.

And this is Doug, I’ll jump in and talk a little bit about some of the things we’re excited about with regard to engaging with our, both our consumers as well as physicians more and more tightly. As we deepen our relationship, we’re seeing much higher LTV and repeat claim usage for engaged consumers versus our baseline. When we know our consumers better, it allows us to anticipate and respond to more of their healthcare needs and play a more active role in all aspects of our care, not just at the pharmacy counter. And when we know GoodRx user better, we can guide users to the retailer that best fits their needs. We can communicate price improvements for their client prescriptions. We can set reminders to engage with their provider or their pharmacy for prescription refills. Really it allows us to leverage our data to create new products and tools. For example, the medicine cabinet [ph], which we’ve recently rolled out and I’m very, very excited about. As a result and really the punch line of this is that we anticipate increasing the value to each of our users and therefore the ARPU associated with all the offerings, both our prescription related core as well as our subscription businesses, and also from pharma manufacturer solutions like Karsten mentioned.

Thank you. One moment for our next question please. It comes from the line of Craig Hettenbach with Morgan Stanley. Please proceed.

Yes, thanks. Just following back on the pharma manufacturing solutions particularly related to the TAM, are there any anecdotes you can share or update us on, whether it’s your penetration with top 20 pharma? Or just any statistics in terms of just kind of where that business stands today? And then also had a quick question on just the prescription business, what you were seeing for core utilization trends kind of through the end of October?

Sure. So, I think couple questions sort of embedded there. First of all, this is Karsten speaking again; I’ll tackle the manufacturer solutions part. So on our business, as we’ve said before, while we’re deeply penetrated into the top pharma manufacturers, in fact, we’re in top 19 of the top 20 today, we see significant opportunity to continue to grow those relationships as well as to grow beyond that top 20 by quite a bit. So first of all, in the context of the top 20, while we are in top 19 of the top lens, the number of solutions we’re offering to manufacturers and the number of medications at each manufacturer that we’re able to help drive volume on those opportunities continue to grow overtime. And we’ve been excited about the progress we’ve made in deepening those relationships and taking advantage of those opportunities to expand the number of brands we serve and expand the number of different solutions they’re using from GoodRx. In fact, that also ties into the acquisition we did earlier in the year on vitaCare, because vitaCare is really an offering that allows us to be involved in almost the entirety of the prescription cycle. From the moment the healthcare provider writes the prescription through to the period when the consumers actually benefiting from receiving it at the pharmacy, including managing a lot of the complexity that exists, particularly for insured patients around things like step therapies and preauthorization and the like. So our ability to become more deeply involved with these manufacturers in the top 20 very high. Then secondly, we’re penetrated into approximately call it 10% or 15% of U.S. manufacturers period. So there’s still an amazing amount of runway ahead of us to penetrate into more manufacturers as well. So, we’re excited…

Thank you. One moment for our next question. And it comes from the line of Jonathan Yong with Credit Suisse. Please proceed.

Hey, thanks for taking my question. Just on the grocer impact, for 3Q, you’re estimating that the impact was a $40 million headwind, but then you’re also mentioning that you’re seeing week-on-week improvement from that particular grocer. But if I look at your 4Q guide, you’re essentially guiding for little improvement on a sequential basis. So, can you help me reconcile the guide and your commentary on the improvement, and is this a function of conservatism on your end? And alongside that, should we think that this $40 million gap closes as we move into 2023 and deeper into 2023? Thanks.

Sure. Yes. Let me first of all start by the – with beginning of your question and bridging the commentary. So while we talked about a roughly $40 million impact in the last quarter for the grocer and we’re anticipating similar size impact going forward that’s a function of a couple different things. I think the first is that, well we are seeing some week-on-week growth associated with the grocer. The week-on-week growth is often extraordinarily small base relative to what it used to be. So, when you look at the grocer as having historically represented approximately 20% of volume, just shy of 25% of revenue to where they are today that much lower percentage today in the very low single-digits, even if it’s growing slightly, doesn’t really impact the aggregate number – dollar number associated with the amount of revenue that we’ve forgotten with the grocer. So again, it’s a relative small scale today, even though growing doesn’t have a significant impact on the gap that’s left in association with the grocers historical levels of contribution to our revenue at, like I said, just shy of 25%. I think to the other part of your question, which goes to how that could evolve going forward and whether the gap will close? I think there are a couple of dynamics to articulate. The first is that while we’re excited about the momentum that we have with the grocer and we’re excited about the ubiquity of availability of GoodRx, we think it’s important that you can use GoodRx at any of the large pharmacies across the country. At the same time, the reality is that I don’t think we expect to see volume levels for the grocer anywhere close to historical ones. Meaning that we don’t see a return to 20%-ish of volume and nearly 25% of revenue. And that’s a function of a few factors, including the reality that pricing at the grocer used to be highly advantaged relative to other retailers. And because of that, given that we’re a marketplace, many of our users went to the lowest price, which was that particular grocer. Now, that they’re often not the lowest price anymore, the return of the volume to that particular pharmacy, I think we see is unlikely at anywhere close to historical levels that pharmacy represents low single-digits of total volume in the market as a whole from a market share perspective. And it wouldn’t expect them to over index going forward. Therefore, I don’t think we see the share getting anywhere close to as big as it was historically. I hope that’s helpful?

One moment for our next question please. And it comes from the line of Young Lee [ph] with Evercore ISI. Please proceed.

Great, thank you. I have a couple questions. One, just to clarify on the pharma solution comment of deal timing push-out. Just to clarify, is it just like, do you expect that to be kind of a push-out in timing? Or do you see an overall pullback in the marketing spend from front of pharmaceuticals? And also the second on the $45 million to $50 million in Q4, how much of that is from the customer engagement and initiatives? Because I think that’s mentioned in the letter as well. And when do you expect that to become a tailwind rather than a headwind? Thank you.

Sure. Thanks for the great questions Jang. So first of all to the questions around pharma manufacturer solutions and the timing and quantum of market revenue is probably the best way of putting it. To take it at the general level before getting specific to GoodRx, I think our view is that the market as a whole continues to be one that’s growing rapidly and in an attractive direction for us. And what I mean by that is the latest studies that I’ve read that came out of the sell side over the last couple weeks indicate based on interviews that the pharma spend market on medication advertising, broadly speaking and awareness access and adherence solutions more broadly is expected to grow in the mid single-digits next year. That’s, I think in itself very attractive to us that mid single-digit growth. I think what makes it even more attractive is the continued shift to digital that pharma manufacturers are indicating they’re continuing to be committed to make, because that shift to digital in years, particularly to GoodRx’s benefit, given our relatively unique ability to be able to both target healthcare providers and consumers and to target healthcare providers and consumers in a very specific way. So for example, healthcare providers buy specialty, which is one of the benefits that we’ve been able to reap from our provider mode offering as well as the investments we’re making in healthcare provider related solutions. So in those two dimensions, I think we see the reality is one in which timing may be more questionable than it was in the past, but the overall attractiveness of the market for GoodRx’s as high as it ever was, potentially even higher with the continued shift to digital now being confirmed, I think through the recent surveys…

Thank you. One moment for our next question. It comes from the line of Sandy Draper with Guggenheim Partners. Please proceed.

Thank you very much. A lot of the questions have been asked and appreciate all the answers. Maybe just one last drill down on the pharma manufacturer solution side. Just trying to think through, there were some comments you made at a recent, or back in September I believe it was about still expecting that business to maybe even double this year. And so while you’re still growing nicely, it’s obviously slowed down fairly quickly. So, I’m just trying to think if you can give some commentary around like average tenure of the programs you’re working, how long it is. What, just trying to think about visibility and how much of this is coming out of more of the consumer facing versus physician side. Just trying to understand, I understand the long-term view of the market and think that is positive, but just trying to turn the visibility, how it switches off that quickly, unless it’s really customer concentration or maybe just much shorter duration contracts than I may have expected? Thanks.

Hey Sandy, it’d be great to speak with you and thanks for the question as well. This is Karsten again. I think the best way to articulate it is when we look at sort of pharma’s man sol’s performance for the first nine months of the year, it’s up about 81%. So just shy of or somewhat shy of doubling. I think earlier this year we said we expected it to close to double for the year. That held largely true through the first nine months. I think for the fourth quarter. We’re really seeing a macro environment that’s shifted a little bit versus where it was. And again, I think we see that as something that delays revenue more than anything else. I think the other aspect of that is that, if deals are delayed, then the delivery on them also gets pushed out. And of course the deliveries where and when you can recognize the revenue on them. In terms of deal duration and in terms of concentration on our pharma manufacturer solutions business it’s not a business where anyone customer accounts for even a large minority of revenue let alone a majority. The customer dispersion is very, very high with very few of them trying to think if any of them in the double digits, but very few of them in double digit percentage of revenue. But what we do see is that certain kinds of offerings made by manufacturers and made by others who leverage or manufacture solutions offerings are more episodic or they can be tied to a particular time of year. For example, we have historically worked with entities that are seeking to support Medicare open enrollment, Medicare open enrollment spend happens predominantly in the third quarter versus say the fourth quarter or the…

Thank you. One moment for our next question, please. It comes from the line of Steve Valiquette with Barclays. Please proceed.

Great. Hi, good afternoon. Thanks everyone for taking the question. So just wanted to walk through a scenario or two for a moment. Anything, as you alluded to on this call; you reiterated the communication from August that the grocery dispute was resolved and your direct relationships with retailers such as grocers as a key positive development. However, I think some in the investment community became a little bit confused when, Kroger announced back on September 30th that their dispute between themselves and the Express Scripts was still not resolved and without a resolution by December 31, their commercial contract would be terminated. So, I guess really the scenario question now is, what would be the expected impact that GoodRx in 2023, if that Kroger Express Scripts PBM contract is terminated on 12/31/22, if any. And then does either your direct contracts with brochures either mitigate that or shield that, or does your new collaboration with Express Scripts, shield you or [indiscernible] you from that scenario I just mentioned? Just trying to get clarity around that September 30 press release from Kroger/Express Scripts. Thanks.

Yes, thank you very much for the question. I’m not, that anything between Kroger and Express Scripts, we don’t anticipate would affect our business. As we mentioned GoodRx is accepted at almost all pharmas in the U.S. We addressed the grocer issue and GoodRx discounts are welcome at Kroger. We’ve been pleased with that growth we’ve been seeing. What I guess, I’d like to highlight again, how we’ve been going forth strengthening our retail relationships, because we view that as incredibly important. We’re selectively as a direct contracting with a growing number of pharmacies, including many of the largest chains that hybrid model lets us ensure network stability and these direct relationships let us collaborate on various solutions. All of this has led to continued strengthening of those relationships, have led us work on strategic initiatives together. We’re driving traffics to retailer locations. We’re driving additional merchandise spend for, there’s for customers who are in places, in stores not using their pharmacy, we’re getting them to use their pharmacies, we’re driving additional adherence. So, we’re driving all these additional benefits. We’re also, have been making good headways to this hybrid effort to improve unit economics for retailers while also balancing that against the strength of our own economics, which continue to be strong as you know as partially evidenced by our strong margins. And these direct relationships as I mentioned, open up these opportunities for just stickier partnerships that we think will be incremental. So, we’re really pleased that we think we have may strengthen this further. We’re also seeing new additions to the retail network, such as the addition of Giant Eagle to the gold retail network, which adds additional geographical coverage. And I hope that answers the question?

Thank you. One moment for our next question. It comes from the line of Stan Berenshteyn with Wells Fargo. Please go ahead.

Hi, thanks for so much for taking my questions. So, as we’re thinking about next year, can you maybe remind us when the Kroger Savings Club contract is up for renewal? And can you maybe walk us through the revenue visibility you have in the event that the contract is sunset [ph]? Thanks so much.

Sure. Stan, great to speak with you. Karsten here. I think that couple points to make, a couple earnings calls ago we talked about the scale of the Kroger Savings Club that we support as a proportion of our subscription to revenue. And the reality is that the Kroger Savings Club is very small, both as a proportion of our subscriptions revenue and our proportion of our total revenue. So from that perspective really wanted to shed light on the fact that the massive majority of our subscription revenue comes from our own Gold program. That said the current agreement with Kroger run through July of 2023. And we’re enrolling new members right now on annual plans. Of course, we’re past July of 2022 at this point. So, I think that’s a good indicator of the nature of the relationship with Kroger that we’re continuing to add annual members and plan servicing them through at least mid-2024 at this point. But again KSC doesn’t really swing the needle or move the needle on our business overall, relative to our own business, though, that’s given all that, I think the bottom line for us is we’re extremely pleased that Kroger is still working with us on KSC. Number one, we’re extremely pleased that GoodRx discounts are welcomed at Kroger. Number two, again, as I said earlier in response to another question, ubiquity of availability of GoodRx is key. And especially now to the question, that I think that got asked by Steve a few minutes ago too. Having GoodRx available at Kroger is critical, especially if, ESI and other offerings aren’t as available as they used to be.

Thank you. One moment for our next question, please. And it comes from the line of Scott Schoenhaus with KeyBanc.

Hi team. I wanted to follow up on the provider mode that launched last month combined with the EHR. You said you’re partnering with. How do you see this growing into 2023 and what does this translate into the pharma manufacturing growth? Is this price differently for your pharma manufacturing clients versus your legacy revenue stream? Thanks.

Sure. When we look at maybe I’ll – I’m going to speak a bit generally about what we’re doing with provider mode and why we think it’s valuable and how we’re monetizing it. So GoodRx provider mode, is part of this GoodRx providers we’ve been talking about, so GoodRx providers, is all of these offerings we have for healthcare providers, including provider mode flipMD from GoodRx and our general work with more than 400,000 HCPs and HCP offices actively distribute GoodEx materials. So provider mode is this technology platform that we launched last month and it has a number of advantages and provides a number of advantages to HCP and related parties to help consumers, help patients get through the healthcare journey, get access to medication, be adherence medication. So one of the advantages with provider mode is we’ve expanded access from prescribers to all HCPs, including nurses, medical assistants and front office staff, all of these participants are really important in helping get patients to the right solutions. And provider mode also include this redesigned prescription savings flow that gives a faster, more customized experience to get users to help the providers get their patients medication. This is super synergistic both across our prescription discount business and the pharma manufacturer solutions business, because we’re trying to help patients get all their medications, generic brands, specialty and get access to them. This gets monetized through increased use of prescription discounts and it gets monetized through the pharma manufacturer solutions. Some of our pharma manufacturer solutions deals, I believe this is part of your question are for both our consumer and HCP offerings. And then we have other deals that are specifically an HCP deal, for example.

Thank you. One moment for our next question, please. It comes from the line of Robert Simmons with D.A. Davidson. Please go ahead.

Hey guys, thanks for taking the question. So it’s understandable and expected that they’re going down now, but when do you think the number of subscription plans will trough and start to go up again on a quarter-over-quarter basis?

Yes, thank you for the question. So subscription revenue grew 63% year-over-year to $26.5 million for the quarter. As we’ve discussed, we’ve sort of made the decision to tighten the focus of it to the patients, to chronic care – chronic patient take with chronic conditions more, more tightly. And that has been the focus and that price increase has worked. I believe as we expected with the, the amount of people decreasing sort of within or better than our expectations there, but we continue to work on that program and are optimizing it. And so you’ll see some continued improvements there as we try to make that program applicable a broader and broader set of users and start increasing subscriber numbers again.

Thank you. One moment for our next question, please. It comes from the line of Kevin Caliendo with UBS. Please proceed.

Thank you. Thanks for getting me in. I noticed the capitalized software number jumped in 3Q and the run rate, this year is a lot higher than last year. I’m just wondering if this is the run rate we should be working off of going forward, or is it going to continue to accelerate as you make investments in software? Just thinking about how to model that and the driver of it?

Sure. So thanks for the great question. First of all, Kevin in terms of cap soft we’re, we spent a lot of time over the prior year’s continuing to focus on managing and maintaining our base code, building new infrastructure to allow us to develop faster and taking on other initiatives of the, like I think what you’re seeing, particularly since Mark Hall joined us to Head product, you’re seeing a shift in which we’re now focused very, very hard on delivering direct value to healthcare providers through things like the provider mode that Trevor talked about and new offerings for consumers too. And as we do that, as we continue to drive these new offerings and focus very heavily on creating new products and new features, the capitalization rate has crept up just a little bit. And that’s really a function of the great work that’s being done to serve consumers, consumers better.

And yes, what I want to highlight there though is we are just laser focused on driving efficient growth and driving margin expansion. And, the series of actions we’ve been taking is what enabled us to exceed expectations this quarter, in particular on adjusted EBITDA. So two things I want to highlight. We did complete the organizational realignment, the reduction in fourth in August to rely on ourselves. While that had some, hard tradeoffs, it’s we believe that was executed very well and that we are now operating even more effectively in getting products out the door quickly. We also have made really good headway on marketing efficiency. We’ve reduced advertising spend and heading into Q4 while maintaining relatively stable max. So the strength of our brand and just the really solid work being done there has showed us that we can be more efficient there and we continue to see opportunities there. And then my final comment is this is a macro environment where GoodRx really shines. The need for affordability is really only increasing as employers cut back some spending. And as consumers need affordability solutions, this, this is what we made GoodRx for. We are here, in these slightly harder times to help consumers to get them the medications they really need to keep people adherent to their medications to produce better health outcomes. So we’re happy we can provide that. Thank you.

Thank you. And with that, ladies and gentlemen, we conclude the Q&A and program for today. We thank you for participating and you may now disconnect. Thank you.