GoodRx’s Earnings: A GAAP Miss, but Adjusted Gains Keep the Momentum?

GoodRx Holdings (GDRX) reported its Q1 2025 earnings with mixed results, sparking a debate about whether the company’s stock is worth a second look. While the adjusted EPS hit expectations, the GAAP EPS came in far below what investors might have anticipated, creating a classic case of “glass half-full or half-empty.” Let’s break down the numbers and what they mean for investors.

The Numbers: GAAP vs. Adjusted Reality

The key issue here is accounting terminology. GoodRx reported a GAAP EPS of $0.03, which is technically a “miss” if we assume analysts were focused on that metric. But the adjusted EPS—which excludes stock-based compensation and other one-time costs—was $0.09, exactly matching the Zacks Consensus Estimate. This distinction is critical.

• Revenue: $203 million, up 3% year-over-year. The company narrowly beat revenue estimates by $0.4 million, a +0.19% surprise.
• Adjusted EBITDA: $69.8 million, a 11% jump from Q1 2024, with margins expanding to 34.4% (vs. 31.7% last year). This shows cost discipline.

The problem? Cash flow. Operating cash flow collapsed 78% to $9.4 million, a red flag. The company cited “working capital timing,” but investors will want to see this stabilize.

What’s Driving the Results?

Let’s dissect the segments:

1. Prescription Transactions: Grew 2% to $148.9 million, but monthly active consumers (MACs) dropped 4% to 6.4 million. Fewer users are using the platform, likely due to retail pharmacy shifts like Kroger pulling out of its partnership.
2. Subscription Revenue: Fell 7% to $21 million as the Kroger Savings Club ended.
3. Pharma Manufacturer Solutions: Soared 17% to $28.6 million. This segment is now 14% of revenue, up from 12% last year—a bright spot.

The Elephant in the Room: Debt and Buybacks

GoodRx spent $100.9 million buying back 23.3 million shares in Q1, reducing its remaining buyback capacity to $189 million. Meanwhile, total debt rose to $498.8 million, up from $486.7 million at year-end.

This is a high-risk move if cash flow remains weak. The company’s cash reserves dropped to $301 million, down from $448 million in December 2024. If revenue growth stalls, servicing that debt could become a burden.

Guidance: Confidence in Adjusted Metrics

GoodRx maintained its full-year revenue guidance of $810–$840 million and raised its Adjusted EBITDA target to $273–$287 million. CEO Wendy Barnes emphasized “strategic initiatives” and “leadership stability,” while CFO Chris McGinnis admitted macroeconomic factors (e.g., consumer spending, drug policy changes) could still hurt.

The Q2 outlook is cautiously optimistic: revenue is expected to exceed Q1’s $203 million, with margins holding steady.

The Bottom Line: Hold the Stock, but Keep an Eye on Cash

Here’s why I’m cautiously bullish:
- The adjusted metrics are strong, and the company is executing in pharma solutions—a growth area.
- The $0.09 adjusted EPS hit expectations, and the stock is priced for this level of performance.
- The buyback shows confidence, but only if cash flow improves.

However, three red flags remain:
1. Declining MACs: If users keep leaving, subscription revenue will suffer.
2. Cash flow collapse: A 78% drop is alarming.
3. Debt load: Investors need clarity on how the company plans to manage rising obligations.

Conclusion: A Stock for the Long Game

GoodRx’s Q1 results are a mixed bag, but the adjusted EPS hit and margin expansion suggest the company is improving its profitability. The GAAP miss is forgivable if it’s due to one-time costs or accounting quirks.

Investors should hold the stock but demand answers on two fronts:
1. Can cash flow rebound?
2. Can MACs stabilize?

At current prices, GoodRx is a hold for now. If the company can turn cash flow around and grow pharma solutions, this could be a buy. But until then, tread carefully—the pharmacy landscape is shifting, and GoodRx needs to adapt faster.

Final Take: Hold GDRX for now. Wait for Q2 results to confirm the rebound.