•“Centerbridge「中心橋」指代着特定的投資基金和與CCP III Cayman GP Ltd.及相關單位有關的其他實體，CCP III Cayman GP Ltd.是一家開曼群島特許公司，CCP III Cayman GP Ltd.擁有投票權（包括爲阻止股東持有A類普通股而成立的基金或實體）所形成的。
Less: Unamortized debt discount and issuance costs
(11,464)
(5,091)
Total debt
$
481,332
$
497,705
Less: Current portion of long-term debt
(65,000)
(75,000)
Total long-term debt
$
416,332
$
422,705
Future maturities of debt are $25.0 million of the Term Loan Facility due and payable during the fourth quarter of 2024, and $40.0 million of the Revolving Credit Facilities due and payable in 2025 upon maturity. The remaining balance of $416.3 million is subject to the Debt Refinancing described below.
Term Loan Facilities
During 2019, Norvax (the “Borrower”) entered into a first lien credit agreement (as amended from time to time, the “Credit Agreement”) which provided for, among other items as further described below, (i) $117.0 million of incremental term loans (the “Incremental Term Loan Facility”), (ii) a new class of incremental term loans (the “2021 Incremental Term Loans”) in an aggregate principal amount equal to $310.0 million and (iii) a new class of incremental term loans (the “2021-2 Incremental Term Loans”) in an aggregate principal amount equal to $100.0 million. The Company collectively refers to the Incremental Term Loan Facility, the 2021 Incremental Term Loans and the 2021-2 Incremental Term Loans as the “Term Loan Facilities.”
As of September 30, 2024, the Borrower had a principal amount of $99.5 million, $266.8 million and $86.5 million outstanding under the Incremental Term Loan Facility, the 2021 Incremental Term Loans and the 2021-2 Incremental Term Loans, respectively. As of December 31, 2023, the Borrower had a principal amount of $110.4 million, $296.3 million and $96.1 million
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outstanding under the Incremental Term Loan Facility, the 2021 Incremental Term Loans and the 2021-2 Incremental Term Loans, respectively. Per Amendment No. 11 to the Credit Agreement (“Amendment No. 11”), as further described below, the Term Loan Facilities all bear interest at either (i) ABR plus 7.0% per annum or (ii) SOFR plus 8.0% per annum. Prior to August 31, 2024, the Term Loan Facilities all bore interest at either (i) ABR plus 6.5% per annum or (ii) SOFR plus 7.5% per annum. The effective interest rate of the Term Loan Facilities was 13.4% as of September 30, 2024 and 13.0% as of December 31, 2023.
On March 12, 2024, the Borrower entered into Amendment No. 11. Pursuant to Amendment No. 11, the Borrower repaid $50.0 million and $25.0 million in borrowings under the Term Loan Facilities in April 2024 and October 2024, respectively. The remaining unpaid balance on the Term Loan Facilities, together with all accrued and unpaid interest thereon, is subject to the Debt Refinancing described below.
Revolving Credit Facilities
In addition to the Term Loan Facilities, the Credit Agreement provides for senior secured revolving credit facilities (collectively, the “Revolving Credit Facilities”). Prior to Amendment No. 11, the Revolving Credit Facilities were separated into two classes of revolving commitments consisting of Class A Revolving Commitments in the amount of $30.0 million (the “Class A Revolving Commitments”) and Class B Revolving Commitments in the amount of $170.0 million (the “Class B Revolving Commitments”), each maturing on September 13, 2024. In connection with Amendment No. 11, each existing lender under the Class A Revolving Commitments and the Class B Revolving Commitments received the option to extend the maturity of their respective commitments through June 30, 2025. Under the terms of Amendment No. 11, the lenders consenting to the extension formed a new tranche of Class A Revolving Commitments (the “New Class A Revolving Commitments”) and the non-consenting lenders remain part of the existing Class B Revolving Commitments (the “Remaining Class B Revolving Commitments”). Each consenting lender received a 50.0% commitment reduction, resulting in a total of $88.5 million available to the Borrower under the New Class A Revolving Commitments, with $23.0 million remaining available to the Borrower under the Remaining Class B Revolving Commitments. The New Class A Revolving Commitments mature on June 30, 2025 and bear interest at either ABR plus 5.5% per annum or SOFR plus 6.5% per annum. Amendment No. 11 also provides that if the Borrower undertakes a securitization transaction prior to the maturity of the New Class A Revolving Commitments, the New Class A Revolving Commitments will further be reduced by 50.0%. Prior to maturing on September 13, 2024, the Remaining Class B Revolving Commitments bore interest at either ABR plus 3.0% per annum or SOFR plus 4.0% per annum. After the Remaining Class B Revolving Commitments matured on September 13, 2024, the Revolving Credit Facilities included solely the New Class A Revolving Commitments.
The Borrower had $40.0 million outstanding under the Revolving Credit Facilities as of September 30, 2024 and no amounts outstanding under the Revolving Credit Facilities as of December 31, 2023. The Revolving Credit Facilities have a remaining capacity of $48.5 million and $200.0 million in the aggregate as of September 30, 2024 and December 31, 2023, respectively. The Borrower is required to pay a commitment fee of 0.5% per annum under the Revolving Credit Facilities.
The Borrower’s obligations under the Term Loan Facilities and Revolving Credit Facilities are guaranteed by Blizzard Midco, LLC and certain of the Borrower’s subsidiaries. All obligations under the Credit Agreement are secured by a first priority lien on substantially all of the assets of the Borrower, including a pledge of all of the equity interests of its subsidiaries. The Credit Agreement contains customary events of default and financial and non-financial covenants. In addition, Amendment No. 11 amended the Credit Agreement to, among other things, modify the financial covenant testing to be based on a Net Cash Leverage Ratio, as defined in Amendment No. 11, for reporting periods from December 31, 2023 and onwards. The Company is in compliance with all covenants as of September 30, 2024.
Debt Refinancing
On November 4, 2024, Blizzard Midco, LLC (“Blizzard Midco”), the Borrower and certain of their subsidiaries, entered into an Amendment and Restatement Agreement (the “Amendment and Restatement Agreement”), by and among Blizzard Midco, Borrower, each lender party thereto, Blue Owl Capital Corporation (the “Predecessor Agent”) and Blue Torch Finance, LLC in its capacities as the administrative agent and collateral agent (as successor in interest to the Predecessor Agent) (“Blue Torch”), which amended and restated the Credit Agreement (the “Amended and Restated Credit Agreement”).
The Amended and Restated Credit Agreement provides for a term loan facility in an aggregate principal amount of $475.0 million (the “New Term Loan Facility”), which full amount was borrowed by Borrower on November 4, 2024 (the “Effective Date”). The Amended and Restated Credit Agreement also provides for an additional revolving credit facility with a commitment amount of $35.0 million (the “Class A-1 Revolving Credit Facility”), which will be made available to the Borrower upon the termination of the existing Class A Revolving Commitments on or prior to June 30, 2025. The stated maturity date of the New Term Loan Facility is the five year anniversary of the Effective Date. The stated maturity date of the existing Class A Revolving Commitments is June 30, 2025 and the stated maturity date of the loans under the Class A-1 Revolving Credit Facility is November 4, 2029. The proceeds of the loans under the New Term Loan Facility (the “New Term Loans”) were used to repay and refinance existing indebtedness under the Amended and Restated Credit Agreement, to pay interest, fees and expenses related to the foregoing and to pay related transaction costs. The proceeds of any loans under the Class A-1 Revolving Credit Facility, once available,
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may be used to repay Class A Revolving Loans that remain outstanding on the maturity date of the Class A Revolving Commitments, to finance working capital needs and for general corporate purposes.
Blizzard Midco, the Borrower and certain other subsidiaries of the Company are guarantors of the Borrower’s obligations under the Amended and Restated Credit Agreement. In addition, the obligations of the Borrower under the Amended and Restated Credit Agreement and the other loan documents delivered in connection therewith are secured by a first priority lien on substantially all of such guarantors’ assets, including a pledge of all of the equity interests of each of their respective subsidiaries, in each case, subject to customary exceptions and limitations.
Upon requesting a borrowing under the Amended and Restated Credit Agreement, the Borrower may elect for either an ABR Borrowing (as defined in the Amended and Restated Credit Agreement) or a SOFR Borrowing (as defined in the Amended and Restated Credit Agreement). The borrowings under the Amended and Restated Credit Agreement comprising each ABR Borrowing will bear interest at (i) ABR plus (ii) a rate per annum equal to (a) 6.50% for any loans under the New Term Loan Facility or the Class A-1 Revolving Credit Facility or (b) 5.50% for any loans under the Class A Revolving Commitments on and after the Amendment No. 11 Effective Date (as defined in the Credit Agreement) or 6.25% for any New Term Loan Facility or Class A-1 Revolving Loan on or after the Class A Revolving Facility Termination Date (as defined in the Amended and Restated Credit Agreement) (provided no event of default has occurred and is continuing).
The borrowings under the Amended and Restated Credit Agreement comprising each SOFR Borrowing (as defined in the Amended and Restated Credit Agreement) will bear interest at (i) Adjusted Term SOFR for the interest period in effect for such borrowing, plus (ii) a rate per annum equal to (a) 7.50% for any loans under the New Term Loan Facility or the Class A-1 Revolving Credit Facility or (b) 6.50% for any Class A Revolving Loan on and after the Amendment No. 11 Effective Date or 7.25% for any New Term Loan Facility or Class A-1 Revolving Loan on or after the Class A Revolving Facility Termination Date (provided no event of default has occurred and is continuing).
Beginning on March 31, 2025, principal payments equal to 2.00% of the outstanding principal balance per annum of the New Term Loans will be paid in equal quarterly installments.
Undrawn amounts under the Class A Revolving Commitment continue to accrue a commitment fee at a rate per annum of 0.50% and undrawn amounts under the Class A-1 Revolving Credit Facility will accrue a commitment fee at a rate per annum of 1.00%, which will begin to accrue upon the termination of the Class A Revolving Commitments, in each case, payable in arrears on the last day of March, June, September and December of each year during the term of the applicable facility. In addition, undrawn amounts under any letters of credit issued under the Class A Revolving Commitment accrue participation fees, as well as a fronting fee payable to each issuing bank and other customary issuance and administration fees.
The Amended and Restated Credit Agreement contains customary covenants that, among other things, restrict the ability of the Borrower and its subsidiaries to incur additional indebtedness, incur additional liens, merge into or consolidate or amalgamate with any other person, make investments or acquisitions, sell assets, make dividends, distributions or other restricted payments, enter into transactions with affiliates, change the nature of its business, make accounting changes, or amend organizational documents.
The events of default under the Amended and Restated Credit Agreement include, among others, payment defaults, material breaches of representations or warranties, breaches of covenants, defaults under the related loan documents, cross defaults with certain other material indebtedness, bankruptcy and insolvency events, judgment defaults, certain events related to plans subject to the Employee Retirement Income Security Act of 1974, as amended, termination of or purported failure to create a valid and perfected lien on any material portion of collateral, cessation of any guarantees, change in control events and the extension by the Borrower of any loans under the Class A Revolving Commitments beyond June 30, 2025. The occurrence of an event of default could result in the termination of the lenders’ commitments, the acceleration of the Borrower’s obligations under the Amended and Restated Credit Agreement or the requirement to post cash collateral with respect to letters of credit.
In addition, the Amended and Restated Credit Agreement requires that the Borrower comply with certain financial maintenance covenants with respect to the Borrower’s Total Cash Leverage Ratio (as defined in the Amended and Restated Credit Agreement), Contract Asset Balance Coverage Ratio (as defined in the Amended and Restated Credit Agreement) and Liquidity (as defined in the Amended and Restated Credit Agreement).
5. STOCKHOLDERS' EQUITY
In connection with the Company’s IPO in July 2020, the Company’s board of directors (the “Board of Directors”) approved an amended and restated certificate of incorporation and amended and restated bylaws. The amended and restated certificate of incorporation authorizes the issuance of up to 1,100,000,000 shares of Class A common stock, 690,000,000 shares of Class B common stock and 20,000,000 shares of preferred stock, each having a par value of $0.0001 per share. The number of shares of Class B common stock authorized is reduced for redemptions and forfeitures as they occur.
The Company’s amended and restated certificate of incorporation and the GHH, LLC Agreement require the Company and GHH, LLC at all times to maintain a one-to-one ratio between the number of shares of Class A common stock issued by the Company
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and the number of LLC Interests owned by the Company, except as otherwise determined by the Company. Additionally, the Company’s amended and restated certificate of incorporation and the GHH, LLC Agreement require that the Company and GHH, LLC at all times maintain a one-to-one ratio between the number of shares of Class B common stock owned by the Continuing Equity Owners and their respective permitted transferees and the number of LLC Interests owned by the Continuing Equity Owners and their respective permitted transferees, except as otherwise determined by the Company. Only the Continuing Equity Owners and the permitted transferees of Class B common stock are permitted to hold shares of Class B common stock. Shares of Class B common stock are transferable for shares of Class A common stock only together with an equal number of LLC Interests.
Holders of shares of the Company’s Class A common stock are entitled to one vote for each share held of record on all matters submitted to a vote of stockholders. Each share of Class B common stock entitles its holders to one vote per share on all matters presented to the Company’s stockholders generally. Holders of shares of Class B common stock will vote together with holders of the Company’s Class A common stock as a single class on all matters presented to the Company’s stockholders for their vote or approval, except for certain amendments to the Company’s amended and restated certificate of incorporation or as otherwise required by applicable law or the amended and restated certificate of incorporation. Holders of the Class B common stock are not entitled to participate in any dividends declared by the Board of Directors. Under the terms of the Company’s amended and restated certificate of incorporation, the Company’s Board of Directors is authorized to direct the Company to issue shares of preferred stock in one or more series without stockholder approval. The Company’s Board of Directors has the discretion to determine the rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, of each series of preferred stock.
Under the Certificate of Designations, holders of the Series A redeemable convertible preferred stock are entitled to vote with the holders of the Class A common stock on an as-converted basis on all matters submitted to a vote of the holders of the Class A common stock. Notwithstanding the foregoing: (1) the lead Purchaser’s voting rights shall not exceed 9.99% of the voting rights associated with the issued and outstanding shares of capital stock of the Company at any time; and (2) the voting rights of the Purchasers holding Series A redeemable convertible preferred stock, voting on an as-converted basis with the holders of the Class A common stock and the holders of any other class or series of capital stock of the Company then entitled to vote, shall be capped at the maximum amount that would not result in requiring stockholder approval for the exercise of such voting rights pursuant to the Nasdaq Rules. The Series A-1 convertible preferred stock is not entitled to vote with the Class A common stock on matters submitted to a vote of the holders of the Class A common stock and will have no voting rights except as required by applicable law.
In addition, holders of the preferred stock are entitled to a separate class vote with respect to, among other things, amendments to the Company’s organizational documents that materially, adversely and disproportionately affect the Series A redeemable convertible preferred stock, authorizations or issuances by the Company of securities that are senior to or pari passu with the Series A redeemable convertible preferred stock and issuing any debt security (for the avoidance of doubt, excluding any draws under the Company’s Existing Credit Agreement referenced in the Certificate of Designations), if the Company’s Consolidated Total Net Debt (as defined in the Certificate of Designations) following such action would exceed four times the Company’s Consolidated EBITDA (as defined in the Certificate of Designations) for the Company’s most recently completed four consecutive fiscal quarters.
At any time following the fifth anniversary of the Closing Date, the Company may redeem the Series A redeemable convertible preferred stock, in whole or in part, for a per share amount in cash equal to the liquidation preference (reflecting increases for compounded dividends) thereof plus all accrued dividends as of the applicable redemption date. Upon certain change of control
GoHealth, Inc.
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events involving the Company, (i) a holder of the Series A redeemable convertible preferred stock may, so long as such payment would not otherwise result in a breach of, or event of default under, then-existing credit agreements, indentures or other financing arrangements, require the Company to purchase and (ii) subject to a holder’s right to convert its shares of Series A redeemable convertible preferred stock into Class A common stock or Series A-1 convertible preferred stock at the then-current conversion price, the Company may elect to purchase, all or a portion of such holder’s shares of Series A redeemable convertible preferred stock that have not been so converted, in each case at a purchase price per share of Series A redeemable convertible preferred stock, payable in cash, equal to (i) if the change of control effective date occurs at any time prior to the fifth anniversary of the Closing Date, 160.0% of a Purchaser’s original investment amount and (ii) if the change of control effective date occurs on or after the fifth anniversary of the Closing Date, the liquidation preference (reflecting increases for compounded dividends) of such share of Series A redeemable convertible preferred stock plus the accrued dividends in respect of such share of Series A redeemable convertible preferred stock as of the change of control purchase date.
The Purchasers have entered into a customary registration rights agreement with respect to shares of Class A common stock held by the Purchasers issued upon any future conversion of the Series A redeemable convertible preferred stock or Series A-1 convertible preferred stock.
In connection with the Issuance, the Company, as the managing member of GHH, LLC, caused GHH, LLC (i) to issue to the Company, in exchange for the proceeds from the Issuance, Series A preferred units and (ii) to authorize another series of preferred units, in each case having an aggregate liquidation preference and having terms substantially economically equivalent to the aggregate liquidation preference and the economic terms of the Series A redeemable convertible preferred stock and the Series A-1 convertible preferred stock, respectively, and entered into Amendment No. 2 to the GHH, LLC Agreement to effectuate the same.
The Company classifies the Series A redeemable convertible preferred stock and Series A-1 convertible preferred stock outside of permanent equity as temporary equity since the redemption of such shares is not solely within the Company’s control. The Company does not remeasure the redeemable convertible preferred stock because it is not currently redeemable and not probable of becoming redeemable. The redeemable convertible preferred stock was recorded at fair value upon issuance, net of issuance costs of $1.6 million.
6. SHARE-BASED COMPENSATION PLANS
The following table summarizes share-based compensation expense (benefit) by operating function for the periods presented:
Three months ended Sep. 30,
Nine months ended Sep. 30,
(in thousands)
2024
2023
2024
2023
Marketing and advertising
$
75
$
149
$
203
$
378
Consumer care and enrollment
189
519
841
1,847
Technology
293
676
780
2,365
General and administrative(1)
2,302
(1,889)
4,710
11,569
Total share-based compensation expense (benefit)
$
2,859
$
(545)
$
6,534
$
16,159
(1) For the three and nine months ended September 30, 2024 and 2023, share-based compensation expense (benefit) includes expense (benefit) related to the stock appreciation rights (“SARs”), which are liability classified awards.
7. NET INCOME (LOSS) PER SHARE
Basic income (loss) per share is computed by dividing net income (loss) attributable to common stockholders by the weighted-average number of shares of Class A common stock outstanding during the period. Diluted loss per share is computed giving effect to all potentially dilutive shares.
A reconciliation of the numerator and denominator used in the calculation of basic and diluted net income (loss) per share of Class A common stock is as follows:
GoHealth, Inc.
2024 Form 10-Q
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Three months ended Sep. 30,
Nine months ended Sep. 30,
(in thousands, except per share amounts)
2024
2023
2024
2023
Numerator:
Net income (loss)
$
15,366
$
(56,204)
$
(65,294)
$
(148,976)
Less: Net income (loss) attributable to non-controlling interests
8,591
(32,294)
(36,857)
(86,945)
Net income (loss) attributable to GoHealth, Inc.
6,775
(23,910)
(28,437)
(62,031)
Less: Dividends accumulated on redeemable convertible preferred stock
923
892
2,722
2,675
Net income (loss) attributable to common stockholders - basic
5,852
(24,802)
(31,159)
(64,706)
Effect of dilutive securities:
Add: Dividends accumulated on redeemable convertible preferred stock
923
—
—
—
Net income (loss) attributable to common stockholders - diluted
6,775
(24,802)
(31,159)
(64,706)
Denominator:
Weighted-average shares of Class A common stock outstanding—basic
10,077
9,489
9,922
9,194
Effect of dilutive securities:
Equity awards
424
—
—
—
Redeemable convertible preferred stock
4,079
—
—
—
Weighted-average shares of Class A common stock outstanding—dilutive
14,580
9,489
9,922
9,194
Net loss per share of Class A common stock—basic
$
0.58
$
(2.61)
$
(3.14)
$
(7.04)
Net loss per share of Class A common stock—dilutive
$
0.46
$
(2.61)
$
(3.14)
$
(7.04)
The following number of shares were excluded from the calculation of diluted income (loss) per share of Class A common stock because the effect of including such potentially dilutive shares would have been antidilutive:
Sep. 30,
(in thousands)
2024
2023
Equity awards
2,479
2,125
Redeemable convertible preferred stock
3,989
3,873
Class B common stock
12,775
12,817
Shares of Class B common stock do not share in earnings and are not participating securities. Accordingly, separate presentation of loss per share of Class B common stock under the two-class method has not been presented. Shares of Series A redeemable convertible preferred stock are not participating securities as holders receive a contractual dividend. Accordingly, separate presentation of loss per share of Series A redeemable convertible preferred stock under the two-class method has not been presented.
8. INCOME TAXES
The Company is taxed as a corporation for income tax purposes and is subject to federal, state and local taxes on the income allocated to it from GHH, LLC based upon the Company’s economic interest in GHH, LLC. The Company is the sole managing member of GHH, LLC and, as a result, consolidates the financial results of GHH, LLC. GHH, LLC is a limited liability company taxed as a partnership for income tax purposes and the subsidiaries of GHH, LLC are limited liability companies for income tax purposes except for a foreign subsidiary, which is treated as a foreign disregarded entity. As a partnership, GHH, LLC does not pay any federal income taxes, as income or loss is included in the tax returns of the individual members. Prior to April 1, 2023, certain of the Company’s wholly-owned entities were taxed as corporations and subject to federal and state income taxes in the jurisdictions in which they operated. Additionally, the Company’s foreign subsidiary is subject to foreign income taxes in the jurisdiction in which it operates. The accruals for such taxes are included in the Condensed Consolidated Financial Statements.
The Company’s effective tax rate for the three and nine months ended September 30, 2024 was (0.07)% and 0.19%, respectively. The Company’s effective tax rate for the three and nine months ended September 30, 2023 was 0.19% and 0.15%, respectively. The effective tax rate for each period is lower than the statutory tax rate primarily due to the effect of loss entities for which the Company excludes from its annual effective tax rate calculation and loss attributable to non-controlling interests.
Tax Receivable Agreement
In connection with the IPO, the Company entered into a Tax Receivable Agreement with GHH, LLC, the Continuing Equity Owners and the Blocker Shareholders that will provide for the payment by the Company to the Continuing Equity Owners and the Blocker Shareholders of 85% of the amount of tax benefits, if any, that the Company actually realizes (or in some circumstances is deemed to realize). The amounts payable under the Tax Receivable Agreement will vary depending upon a
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number of factors, including the amount, character and timing of the taxable income of the Company in the future. As of both September 30, 2024 and December 31, 2023 the liability related to the Tax Receivable Agreement was $0.8 million. Should the Company determine that any additional Tax Receivable Agreement liability is considered probable at a future date based on new information, any changes will be recorded within earnings at that time.
9. REVENUE
Revenue Recognition for Variable Consideration
The Company’s variable consideration includes the expected amount of initial commissions received from the health plan partners and any renewal commissions to be paid on such placement as long as the policyholder remains with the same insurance product, also known as the total estimated LTV of the policy. The consideration is variable based on the estimated amount of time a policy will remain in force, which is based on historical experience or health plan partner experience to the extent available, industry data and expectations as to future retention rates. Additionally, the Company considers the application of a constraint and only recognizes the amount of variable consideration that it believes is probable that it will be entitled to receive and will not be subject to a significant revenue reversal in the future.
On a quarterly basis, the Company re-estimates LTV at a vintage level for outstanding vintages, which takes into account cash received as compared to the original estimates and reviews and monitors changes in the data used to estimate LTV. Changes in LTV may result in an increase or a decrease to revenue and a corresponding change to commissions receivable. The Company analyzes these differences and to the extent the Company believes differences in the estimates are indicative of a change to prior period LTVs, the Company will adjust revenue for the affected vintages at the time such determination is made and when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. For the three and nine months ended September 30, 2024 and 2023, the Company recorded no revenue adjustments.
Disaggregation of Revenue
The table below depicts the disaggregation of revenue and is consistent with how the Company evaluates its financial performance:
Three months ended Sep. 30,
Nine months ended Sep. 30,
(in thousands)
2024
2023
2024
2023
Medicare Revenue
Agency Revenue
Commission Revenue(1)
$
77,868
$
76,579
$
228,154
$
261,513
Partner Marketing and Other Revenue
14,408
21,300
47,926
71,619
Total Agency Revenue
92,276
97,879
276,080
333,132
Non-Agency Revenue
24,377
33,510
130,723
106,586
Total Medicare Revenue
116,653
131,389
406,803
439,718
Other Revenue
Non-Encompass BPO Services Revenue
—
—
—
9,322
Other Revenue
1,639
648
2,959
8,934
Total Other Revenue
1,639
648
2,959
18,256
Total Net Revenues
$
118,292
$
132,037
$
409,762
$
457,974
(1)Commission revenue excludes commissions generated through the Company’s Non-Encompass BPO Services as well as from the sale of individual and family plan insurance products.
Medicare Revenue: The primary services provided by the Company relate to the sale and administration of Medicare insurance products through either the agency model or the non-agency model. The agency model refers to the commission revenue and partner marketing and other revenue the Company receives when GoHealth agents or the Company’s independent network of outsourced agents, or external agents, enroll the consumer and submit the policy application to the health plan partner, becoming the agent of record. The Company recognizes commission revenue from the sale of insurance products at the point when health plan partners approve an insurance application produced by the Company. The Company records as commission revenue the expected amount of initial commissions received from the health plan partners and any renewal commissions to be paid on such placement as long as the policyholder remains with the same insurance product, which represents the LTV it expects to receive for selling the product after the health plan partner approves an application. As part of its estimation process, the Company constrains revenue such that the amount of revenue recognized is the amount the Company believes is probable will not result in a significant reversal in the future. The Company is also compensated by its health plan partners for providing marketing services over a predetermined measurement period, which the Company records as partner marketing and other revenue. The Company recognizes these revenues over the measurement period as insurance applications produced by the
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Company are generated. The Company generally gets paid a fixed fee per application, with the amount of variable consideration resolved within 90 days of the application.
Non-agency revenue refers to services provided by the Company that support enrollment and engagement activities in which the Company is not the agent of record. The non-agency model moves away from the agency structure in that cash is collected in advance or in close proximity to the point in time revenue is recognized. Non-agency revenue includes enrollment and engagement services through Encompass Connect and Encompass Engage. Encompass Connect is designed to provide enrollment related services to participating partners. The Company is compensated for generating and transferring leads to the health plan partners, at which time the health plan partner representative will enroll and submit the application, becoming the agent of record. Revenue is recognized at the point in time the lead is transferred, with the amount of variable consideration generally resolved within 90 days of when the related policy effectuates. The Company does not receive commissions or fees on subsequent renewals generated from the transferred leads. Encompass Engage includes post-enrollment member outreach and engagement services, including facilitating an onboarding experience customized to a member’s plan and health needs. The Company recognizes Encompass Engage revenue at the point in time that the service is provided based on member retention and providing post-enrollment services.
Other Revenue: Other revenue is comprised of Non-Encompass BPO Services, which refers to programs in which GoHealth-employed agents are dedicated to certain health plans and agencies the Company partners with outside of the Encompass operating model. These services include commission revenue and partner marketing and other revenue that is directly attributable to Non-Encompass BPO Services. The remaining revenue relates primarily to revenue generated from the sale of individual and family plan insurance products and ancillary services.
Contract Assets and Liabilities
The Company records contract assets and contract liabilities from contracts with customers as it relates to commissions receivable, commissions payable and deferred revenue. Commissions receivable represents estimated variable consideration for commissions to be received from health plan partners for performance obligations that have been satisfied. Commissions payable represents estimated commissions to be paid to the Company’s external partners.
The Company had unbilled receivables for performance-based enrollment fees and non-agency revenue, as well as prepaid expenses for revenue share, as of September 30, 2024 and December 31, 2023 of $7.2 million and $36.0 million, respectively, which are recorded in prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets. In addition, the Company had accrued payments for revenue share as of September 30, 2024 and December 31, 2023 of $10.3 million and $14.8 million, respectively, which are recorded in accrued liabilities on the Condensed Consolidated Balance Sheets. There are no other contract assets or contract liabilities recorded by the Company.
Deferred revenue includes amounts collected for partner marketing services and non-agency revenue in advance of the Company satisfying its performance obligations for such customers. The decrease in deferred revenue during the nine months ended September 30, 2024 compared to December 31, 2023 was primarily due to less cash received as of September 30, 2024 compared to December 31, 2023 for marketing, administrative and enrollment fees in advance of performing such services that the Company expects to satisfy within the next twelve months. During the three months ended September 30, 2024, the Company recognized revenue that was recorded in deferred revenue on the Condensed Consolidated Balance Sheets at the beginning of the respective fiscal year of $7.6 million. During the three months ended September 30, 2023, the Company recognized no revenue that was recorded in deferred revenue on the Condensed Consolidated Balance Sheets at the beginning of the respective fiscal year. During the nine months ended September 30, 2024 and 2023, the Company recognized revenue that was recorded in deferred revenue on the Condensed Consolidated Balance Sheets at the beginning of the respective fiscal year of $51.1 million and $45.3 million, respectively.
Commissions Receivable
Commissions receivable activity is summarized as follows:
Nine months ended Sep. 30,
(in thousands)
2024
2023
Beginning balance
$
911,697
$
1,031,433
Commission revenue(1)
231,479
266,393
Cash receipts
(336,054)
(402,116)
Allowance for credit loss
77
43
Acquisition of business
$
90,525
$
—
Ending balance
$
897,724
$
895,753
Less: Commissions receivable - current
270,383
285,922
Commissions receivable - non-current
$
627,341
$
609,831
GoHealth, Inc.
2024 Form 10-Q
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(1)Commission revenue includes commissions generated through the Company’s Non-Encompass BPO Services as well as from the sale of individual and family plan insurance products.
The Company’s contracts with health plan partners expose it to credit risk because a financial loss could be incurred if the counterparty does not fulfill its financial obligation. While the Company is exposed to credit losses due to the potential non-performance of its counterparties, the Company considers this risk to be remote. The Company estimates the allowance for credit losses using available information from internal and external sources related to historical experiences, current conditions and forecasts. Estimates of loss are determined by using historical collections data as well as historical information obtained through research and review of other peer companies. The estimated exposure of default is determined by applying these internal and external factors to the commission receivable balances. The Company estimates the maximum credit risk in determining the commissions receivable amount recorded on the Condensed Consolidated Balance Sheets.
Significant Customers
The following table presents health plan partners representing 10% or more of the Company’s total net revenues for the periods indicated:
Three months ended Sep. 30,
Nine months ended Sep. 30,
2024
2023
2024
2023
Humana
31.7
%
44.1
%
23.6
%
40.6
%
United
25.9
%
19.8
%
20.5
%
20.2
%
Elevance Health
18.2
%
19.9
%
19.5
%
18.3
%
Centene
10.0
%
6.6
%
9.4
%
7.2
%
Aetna
6.3
%
5.8
%
20.8
%
5.8
%
Concentration of Credit Risk
The Company does not require collateral or other security in granting credit. As of September 30, 2024, three customers each represented 10% or more of the Company’s total accounts receivable and unbilled receivables and, in aggregate, represented 72.7%, or $8.5 million, of the combined total. As of December 31, 2023, three customers each represented 10% or more of the Company’s total accounts receivable and unbilled receivables and, in aggregate, represented 88.3%, or $32.1 million, of the combined total. Unbilled receivables are included in prepaid expense and other current assets on the Condensed Consolidated Balance Sheets.
10. LEASES
The Company has entered into operating agreements with lease periods expiring between 2025 and 2032. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term.
Components of lease expense are as follows, all recorded within operating expenses in the Condensed Consolidated Statement of Operations:
Three months ended Sep. 30,
Nine months ended Sep. 30,
(in thousands)
2024
2023
2024
2023
Operating lease cost
1,859
1,831
5,806
5,879
Short-term lease cost(1)
9
14
46
47
Variable lease cost(2)
55
604
326
858
Sublease income
(689)
(396)
(1,865)
(1,181)
Total net lease expense
$
1,234
$
2,053
$
4,313
$
5,603
(1)Includes costs related to leases, which at the commencement date, have a lease term of 12 months or less.
(2)Includes costs incurred by the Company for the right to use an underlying asset that vary because of changes in facts or circumstances occurring after the commencement date, other than the passage of time.
As part of the Company’s continued cost savings initiatives, the Company is actively looking to terminate or sublease certain office spaces and call centers. These actions resulted in operating lease impairment charges of $2.7 million for the nine months ended September 30, 2023. The Company recorded no operating lease impairment charges for the three and nine months ended September 30, 2024 and the three months ended September 30, 2023. Refer to Note 2, “Fair Value Measurements” for further details.
As of September 30, 2024, future minimum lease payments for operating leases consisted of the following:
GoHealth, Inc.
2024 Form 10-Q
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(in thousands)
Operating Leases
Remainder of 2024
$
1,990
2025
9,357
2026
8,162
2027
8,260
2028
7,296
Thereafter
20,693
Total lease payments
$
55,758
Less: Imputed interest
(14,030)
Present value of lease liabilities
$
41,728
Supplemental cash flow information related to leases are as follows:
Three months ended Sep. 30,
Nine months ended Sep. 30,
(in thousands)
2024
2023
2024
2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
$
2,216
$
3,075
$
7,659
$
10,123
Non-cash activity:
Operating lease assets obtained in exchange for new lease obligations(1)
$
1,361
$
6,735
$
1,361
$
6,735
(1)For the three and nine months ended September 30, 2024, the Company recognized operating lease assets arising from operating leases of an acquiree. Refer to Note 14, “Acquisitions” for more information. For the three and nine months ended September 30, 2023, the Company entered into a lease agreement for its corporate headquarters in Chicago, Illinois, which commenced on July 5, 2023.
The weighted average remaining operating lease term and discount rate are as follows:
Sep. 30,
2024
2023
Weighted average remaining lease term
6.6 years
7.2 years
Weighted average discount rate
9.2
%
8.9
%
11. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
In September 2020, three purported securities class action complaints were filed in the U.S. District Court for the Northern District of Illinois against the Company, certain of its officers and directors, and certain underwriters, private equity firms and investment vehicles alleging that the Registration Statement filed in connection with the IPO was negligently prepared and, as a result, contained untrue statements of material fact, omitted material facts necessary to make the statements contained therein not misleading and failed to make necessary disclosures required under the rules and regulations governing its preparation, including the Securities Act of 1933 (the “Securities Class Action”). Compensatory damages and reasonable costs and expenses incurred in the Securities Class Action were sought by the plaintiffs. On December 10, 2020, the court in the earliest filed action consolidated the three complaints, appointed lead plaintiffs and lead counsel for the consolidated action, and captioned the consolidated action “In re GoHealth, Inc. Securities Litigation.” On February 25, 2021, lead plaintiffs filed a consolidated complaint. In December 2023, the parties notified the court that they had reached an agreement in principle to settle the Securities Class Action. On February 7, 2024, the plaintiffs filed an application with the court seeking preliminary approval of the parties’ proposed settlement, which application was granted by the court on February 27, 2024. The terms of the parties’ settlement agreement are contained in the settlement documents filed with the court on February 7, 2024. On May 22, 2024, the Court granted its final approval of the settlement, fully resolving the Securities Class Action.
On May 19, 2021, a derivative action (the “Derivative Action”) was filed in the U.S. District Court for the Northern District of Illinois, purportedly on behalf of the Company and against certain of the Company’s officers and directors, alleging breaches of fiduciary duty and other claims, based on substantially the same factual allegations as in the Securities Class Action. On June 6, 2022, the Derivative Action was stayed pursuant to the parties’ stipulation. The settlement in the Securities Class Action will not resolve the Derivative Action. The Company is contesting the Derivative Action, but may pursue settlement negotiations, as it deems appropriate.
Although outcomes of unresolved cases are uncertain until final disposition, the Company establishes an accrual for such matters when a loss is deemed to be probable and reasonably estimable. The Company previously disclosed that it recorded a $12.0 million accrual for the Securities Class Action and the Derivative Action. On March 13, 2024, the Company paid $10.5
GoHealth, Inc.
2024 Form 10-Q
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million toward the Securities Class Action settlement. This payment was the remaining amount of the retention amount for which the Company was responsible under its applicable directors’ and officers’ liability insurance policies. The Company does not expect to make any further contribution to the settlement amount in the Securities Class Action. The remaining settlement amount waspaid by the Company’s insurance carriers under the applicable insurance policies and pursuant to the terms of the approved settlement.
12. RELATED PARTY TRANSACTIONS
The Company is party to various lease agreements with 214 W Huron LLC, 220 W Huron Street Holdings LLC, 215 W Superior LLC and Wilson Tech 5, LLC, each of which is controlled by significant stockholders of the Company, to lease its former corporate offices in Chicago, Illinois and offices in Lindon, Utah. The Company pays rent, operating expenses, maintenance and utilities under the terms of the leases. For the three and nine months ended September 30, 2024, the Company made aggregate lease payments of $1.3 million and $4.3 million, respectively. For the three and nine months ended September 30, 2023, the Company made aggregate lease payments of $1.5 million and $4.5 million, respectively. The lease agreement with 214 W Huron LLC expired during the nine months ended September 30, 2024.
13. RESTRUCTURING COSTS
During the second and third quarters of fiscal year 2022, the Company implemented restructuring initiatives as part of its strategic transformation to drive efficiency and optimize costs. On June 3, 2022, the Board of Directors approved the separation and replacement of key management roles, including Chief Operating Officer, Chief Financial Officer, Chief Strategy Officer and President. On August 9, 2022, the Company eliminated 828 full-time positions, representing approximately 23.7% of the workforce, primarily within the consumer care and enrollment group. The majority of the restructuring charges incurred relate to employee termination benefits and will be settled in cash through the first quarter of 2025. The restructuring activities related to this plan were materially complete as of December 31, 2022. The Company evaluates restructuring charges in accordance with ASC 420 Exit or Disposal Cost Obligations and ASC 712 Compensation—Nonretirement Post-Employment Benefits.
The Company incurred no restructuring and other related charges during the three and nine months ended September 30, 2024 and 2023.
The following table provides the changes in the Company’s restructuring and other related charges that will be settled in cash, included in accrued liabilities on the Condensed Consolidated Balance Sheets:
Nine months ended Sep. 30,
(in thousands)
2024
2023
Beginning balance
$
645
$
2,083
Charges incurred
—
—
Cash paid
(558)
(1,138)
Ending balance
$
87
$
945
14. ACQUISITIONS
On September 30, 2024 (the “Acquisition Date”), the Company completed the acquisition of e-TeleQuote Insurance, Inc. (“e-TeleQuote”), a health insurance marketplace that helps Medicare beneficiaries compare Medicare Advantage and Medicare Supplement plans and enroll in the plan that is right for them. The acquisition increases the Company’s agent base without the need for further hiring, thus expanding its operational capacity.
The Company obtained control of e-TeleQuote through two steps, which are accounted for as a single transaction under the acquisition method under ASC 805. On August 30, 2024, e-TeleQuote Holdings, LLC (“Subscriber”), a wholly-owned subsidiary of the Company, entered into a Purchase & Subscription Agreement (the “Subscription Agreement”), by and between Subscriber and e-TeleQuote. Pursuant to the Subscription Agreement, on September 30, 2024 the Subscriber subscribed for and acquired newly issued shares of e-TeleQuote’s common stock representing approximately 18.9% of e-TeleQuote’s outstanding common stock post-acquisition. On the Acquisition Date, e-TeleQuote’s former parent company irrevocably and permanently surrendered and relinquished all rights in e-TeleQuote without receipt of consideration. As a result, the Company obtained a 100% equity interest in e-TeleQuote.
The Company obtained control of e-TeleQuote without the transfer of consideration. On the Acquisition Date, the Company recognized a gain on bargain purchase of $77.4 million, which is included in the line item “Gain on bargain purchase” in the Condensed Consolidated Statements of Operations. The gain represents the excess of the acquisition-date fair value of the net assets acquired over the acquisition-date fair value of the consideration transferred. The Company determined the gain on bargain purchase is appropriate as the seller’s board of directors previously authorized the abandonment of the seller’s ownership in e-TeleQuote with a target date of September 30, 2024.
GoHealth, Inc.
2024 Form 10-Q
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During the measurement period of up to one year from the Acquisition Date, the Company will record adjustments identified, if any, to the acquisition-date fair values of assets acquired and liabilities assumed with the corresponding offset to gain on bargain purchase. Upon the conclusion of the measurement period, any subsequent adjustments will be included in the Company's Condensed Consolidated Statements of Operations.
The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed on the Acquisition Date:
(in thousands)
September 30, 2024
Cash and cash equivalents
$
17,536
Accounts receivable
2,013
Commissions receivable - current
17,200
Prepaid expense and other current assets
1,293
Commissions receivable - non-current
73,325
Operating lease ROU asset
1,361
Other long-term assets
198
Property, plant and equipment, net
329
Total identifiable assets acquired
113,255
Accounts payable
1,695
Accrued liabilities
7,448
Short-term operating lease liability
318
Long-term operating lease liability
1,042
Deferred tax liabilities
25,000
Other non-current liabilities
389
Total liabilities assumed
35,892
Net identifiable assets acquired
77,363
Gain on bargain purchase
(77,363)
Net assets acquired
$
—
The Company incurred acquisition-related costs of $0.9 million during the three and nine months ended September 30, 2024 for legal fees and other professional services which were expensed as incurred and included in general and administrative expenses in the Condensed Consolidated Statements of Operations.
The results of operations of e-TeleQuote since the Acquisition Date have been included in the Company’s Condensed Consolidated Financial Statements. e-TeleQuote contributed no revenue or net income to the Company’s consolidated results for the three and nine months ended September 30, 2024.
Supplemental Pro Forma Financial Information
The following table presents certain unaudited pro forma financial information for the combined entity as if the e-TeleQuote acquisition occurred on January 1, 2023. The unaudited pro forma financial information for the periods presented is provided for illustrative purposes only and is not necessarily indicative of the historical results of operations had the acquisition occurred on January 1, 2023, nor is it indicative of the results of operations in future periods.
Three months ended Sep. 30,
Nine months ended Sep. 30,
(in thousands)
2024
2023
2024
2023
Net revenues
$
121,275
$
145,473
$
432,045
$
505,010
Net income (loss)
$
12,065
$
(60,725)
$
(87,653)
$
(158,689)
The unaudited pro forma financial information is based on estimates and assumptions that have been made solely for purposes of developing such unaudited pro forma information. These pro forma amounts include the impact of certain pro forma adjustments related to (i) acquisition-related costs, (ii) amortization of the acquiree’s intangible assets before the Acquisition Date and (iii) impairment charges related to the acquiree’s intangible assets and goodwill before the Acquisition Date. The impact of other pro forma adjustments are not material.
GoHealth, Inc.
2024 Form 10-Q
25
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS.
This section presents management’s perspective on our financial condition and results of operations. The following discussion and analysis is intended to highlight and supplement data and information presented elsewhere in this Quarterly Report on Form 10-Q, including the Condensed Consolidated Financial Statements and related Notes, and should be read in conjunction with the accompanying tables. To the extent that this discussion describes prior performance, the descriptions relate only to the periods listed, which may not be indicative of our future financial outcomes. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause results to differ materially from management’s expectations. Factors that could cause such differences are discussed in the section titled “Cautionary Note Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q, and the sections titled “Cautionary Note Regarding Forward-Looking Statements,” “Summary Risk Factors” and “Risk Factors” in our 2023 Annual Report on Form 10-K. The risks and uncertainties described in our 2023 Annual Report on Form 10-K are not the only risks and uncertainties we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also materially adversely affect our business, financial condition, or results of operations. We assume no obligation to update any of these forward-looking statements.
Unless otherwise noted, all dollars are in thousands. In certain cases, numbers and percentages in the tables below may not foot due to rounding.
Overview
We are a leading health insurance marketplace and Medicare-focused digital health company whose purpose is to compassionately ensure consumers’ peace of mind when making healthcare decisions so they can focus on living life. With a widely scalable end-to-end platform and substantial presence in the Medicare landscape, we believe we are uniquely positioned as a trusted partner to the 65 million Medicare-eligible Americans, as well as the 11,000 Americans becoming eligible each day, as they navigate one of life's most important purchasing decisions. For many of these consumers, enrolling in a health insurance plan is confusing and difficult. Seemingly small differences between health plans may lead to significant out-of-pocket costs or lack of access to critical providers and medicines. We aim to simplify the process by offering education, comparison guidance, transparency and choice. This includes providing a large selection of leading health plan choices, advice informed by consumers’ specific needs, transparency of health plan benefits and fit, assistance accessing available government subsidies and a high-touch consumer care team. We partner with health plans across the nation that provide access to high quality health plans across all 50 states and the District of Columbia.
Update on Business Trends and Strategy
GoHealth has evolved from a traditional Medicare enrollment company to a Medicare engagement company, focusing on forging high-quality relationships with our consumers. This shift emphasizes a more integrated and interactive approach to consumer care and reflects how our Encompass operating model, which is now operating at scale with all key health plan partners, puts the consumer at the center of all our activities including how we market, support enrollment activities, provide administrative services, utilize our proprietary technology and ultimately deliver a high-quality solution to those we serve. We believe our end-to-end Encompass model offers a differentiated way for Medicare beneficiaries to navigate the complex Medicare Advantage plan selection process and begin to utilize their new plan benefits with greater confidence.
The Encompass operating model supports all Medicare services, including agency and non-agency revenue. Agency revenue refers to the commission revenue and partner marketing and other revenue we receive when GoHealth’s internal agents or our external agents enroll the consumer and submit the policy application to the health plan partner, becoming the agent of record. Non-agency revenue refers to services we provide that support enrollment and engagement activities in which GoHealth is not the agent of record. During the second quarter of 2023 we began offering these enrollment and engagement services to our external agents, which we refer to as our vConnect program. The non-agency model moves away from the agency structure in that cash is collected in advance or in close proximity to the point in time revenue is recognized.
The enrollment and engagement services offered through our non-agency model are strategically designed to enhance the consumer experience, reflecting our focus on building trusted, long-term relationships with our consumers. Non-agency revenue slightly decreased from 25.5% of total Medicare revenue for the three months ended September 30, 2023 to 20.9% of total Medicare revenue for the three months ended September 30, 2024. The shift from non-agency to agency revenue is a result of changing carrier mix within the non-agency channel. Non-agency revenue increased from 24.2% of total Medicare revenue for the nine months ended September 30, 2023 to 32.1% of total Medicare revenue during the nine months ended September 30, 2024. The mix of agency and non-agency contracts is dependent on the plans most suitable for the consumers we serve and is impacted by changing market dynamics as further described below.
We continue to refine our Encompass operating model through investments in technology. Last year, we introduced PlanFit CheckUp, utilizing analytics from nearly thirty million consumer touchpoints and machine learning to help our licensed agents accurately match consumers with the best Medicare plans for their needs. PlanFit CheckUp enables consumers to regularly assess the appropriateness of their current plan through a data-driven customized process, guided by the trusted expertise of a
GoHealth, Inc.
2024 Form 10-Q
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licensed GoHealth agent. In addition to further developing PlanFit Checkups, we are investing in technologies like Customer 360. Customer 360 provides a unified view of the consumer across every touchpoint to ensure high-quality, personalized service at every point of the consumer journey.
This year, driven by artificial intelligence and automation, we are focusing on streamlining processes and improving call handle times. As part of this effort, we launched Encompass Express, an enhanced, consumer-centric operating model built on the foundation of our original Encompass workflow. Encompass Express includes streamlined scripting and hand-offs, utilizing technology-driven standardization and automation to deliver efficiency and enhance the consumer experience while maintaining quality.
In the 2023 Medicare annual enrollment period (“AEP”) we observed a unique set of market dynamics where for the first time in recent years the health plan partners on average made very little change to benefits, with many reducing benefits for the average Medicare consumer. As a result, we observed higher shopping but lower switching. In response to these observed market dynamics we enhanced our targeted marketing efforts to identify consumers in need of new health plan options.
The introduction in April 2024 of the Centers for Medicare and Medicaid Services (“CMS”) final rate notice on commissions for the 2025 plan year and the Final 2025 Marketing Rule (the “CMS Final Rule”) has implications for Medicare Advantage plans, potentially affecting benefit structures and necessitating more dynamic consumer shopping behaviors during the upcoming AEP. We continue to enhance our targeted marketing efforts to help health plan partners achieve targeted growth in specific markets and products. As the landscape becomes more complex, we believe GoHealth’s role as a reliable guide becomes increasingly critical. We are analyzing the implications of the CMS Final Rule with our health plan partners and closely monitoring its effects on the Medicare landscape, including as it may relate to availability of special enrollment periods for special needs plans. Further discussion of how changes and developments in the laws and regulations governing the health insurance markets in the U.S. could materially affect our business, operating results, financial condition and qualified prospects is included under the heading “Item 1A. Risk Factors” in our 2023 Annual Report on Form 10-K.
On September 30, 2024, we completed the acquisition of e-TeleQuote Insurance, Inc. (“e-TeleQuote”), a health insurance marketplace that helps Medicare beneficiaries compare Medicare Advantage and Medicare Supplement plans and enroll in the plan that is right for them. The addition of e-TeleQuote expands our agent capacity, allowing us to meet the high demand for Medicare Advantage shopping without the need for further hiring, thus optimizing our customer acquisition efforts. Through the integration of e-TeleQuote’s licensed agents into our independent network of external agents, we believe we are well-positioned to leverage this expanded agent base, strengthening our market position and expanding our capacity to deliver high-quality consumer experiences.
Additionally, the Company made the strategic decision to exit its Non-Encompass BPO Services, or services in which we dedicate certain agents to specific health plan partners and agencies outside of the Encompass model, to focus on our core business. The exit was completed during the second quarter of 2023. Non-Encompass BPO Services contributed no revenue during the three months ended September 30, 2023. During the nine months ended September 30, 2023, Non-Encompass BPO Services contributed $9.3 million of net revenues.
Ownership
GoHealth, Inc. is the sole managing member of GHH, LLC. Although we have a minority economic interest in GHH, LLC, we have the sole voting interest in, and control of the business and affairs of, GHH, LLC and its direct and indirect subsidiaries. As a result, GoHealth, Inc. consolidates GHH, LLC and records significant non-controlling interest in a consolidated entity in GoHealth, Inc.’s Condensed Consolidated Financial Statements for the economic interest in GHH, LLC held directly or indirectly by the Continuing Equity Owners. The weighted average ownership percentages for the applicable reporting periods are used to attribute net income (loss) and other comprehensive income (loss) to the Company and the non-controlling interest holders. The non-controlling interest holders' weighted average ownership percentage for the three and nine months ended September 30, 2024 was 55.9% and 56.3%, respectively. The non-controlling interest holders' weighted average ownership percentages for the three and nine months ended September 30, 2023 were 57.5% and 58.5%, respectively.
The percentage ownership of total shares of Class A and Class B common stock issued and outstanding as of September 30, 2024, is as follows:
GoHealth, Inc.
2024 Form 10-Q
27
The percentage of ownership noted above is inclusive of only Class A and Class B common stock issued and outstanding. It does not include the Series A redeemable convertible preferred stock or the impact of any conversion of such, should a conversion occur. For more information on the Series A redeemable convertible preferred stock, please refer to Note 5, “Stockholders' Equity” of the Notes to the Condensed Consolidated Financial Statements.
GoHealth, Inc. is subject to U.S. federal, state and local income taxes with respect to our allocable share of any taxable income of GHH, LLC and is taxed at the prevailing corporate tax rates. In addition to tax expenses, we also incur expenses related to our status as a public company, plus payment obligations under the Tax Receivable Agreement (“TRA”), which could be significant. We intend to cause GHH, LLC to make distributions to us in an amount sufficient to allow us to pay these expenses and fund any payments due under the TRA.
GoHealth, Inc.
2024 Form 10-Q
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Results of Operations
The following is our consolidated results of operations for the three and nine months ended September 30, 2024 and 2023:
Three months ended Sep. 30,
Nine months ended Sep. 30,
(in thousands)
2024
2023
2024
2023
Net revenues
118,292
132,037
409,762
457,974
Operating expenses:
Revenue share
19,683
35,992
78,376
117,876
Marketing and advertising
45,270
39,416
136,049
124,428
Consumer care and enrollment
45,556
46,472
132,731
134,035
Technology
9,801
11,652
28,921
31,706
General and administrative
17,140
12,967
50,457
73,440
Amortization of intangible assets
23,514
23,514
70,542
70,543
Operating lease impairment charges
—
—
—
2,687
Total operating expenses
160,964
170,013
497,076
554,715
Income (loss) from operations
(42,672)
(37,976)
(87,314)
(96,741)
Interest expense
19,086
17,565
55,133
51,721
Gain on bargain purchase
(77,363)
—
(77,363)
—
Other (income) expense, net
250
771
332
739
Income (loss) before income taxes
15,355
(56,312)
(65,416)
(149,201)
Income tax (benefit) expense
(11)
(108)
(122)
(225)
Net income (loss)
15,366
(56,204)
(65,294)
(148,976)
Net income (loss) attributable to non-controlling interests
8,591
(32,294)
(36,857)
(86,945)
Net income (loss) attributable to GoHealth, Inc.
$
6,775
$
(23,910)
$
(28,437)
$
(62,031)
Net Income (Loss) Margin
13.0
%
(42.6)
%
(15.9)
%
(32.5)
%
Non-GAAP financial measures:
EBITDA
$
60,860
$
(12,482)
$
68,679
$
(18,580)
Adjusted EBITDA
$
(12,106)
$
(11,475)
$
2,479
$
18,091
Adjusted EBITDA Margin
(10.2)
%
(8.7)
%
0.6
%
4.0
%
The following is our net revenues for the three and nine months ended September 30, 2024 and 2023:
Net Revenues
Three months ended Sep. 30,
2024
2023
$ Change
% Change
$
118,292
$
132,037
$
(13,745)
(10.4)
%
Nine months ended Sep. 30,
2024
2023
$ Change
% Change
$
409,762
$
457,974
$
(48,212)
(10.5)
%
The decrease for the three months ended September 30, 2024 compared to the prior year period was primarily attributable to a shift from non-agency to agency revenue as a result of changing carrier mix within the non-agency channel. Within agency revenue, there was a decline in LTV rates due to lower persistency, as well as a decrease in partner marketing and other revenue, which includes the marketing services GoHealth provides to its health plan partners. The decrease for the nine months ended September 30, 2024 compared to the prior year period was primarily attributable to a decrease in agency revenue driven by a decline in Submissions generated by our external agents. The decrease was further attributable to a decline in LTV rates due to lower persistency, as well as a decrease in revenues associated with the strategic decision to exit our Non-Encompass BPO Services, which was completed during the second quarter of 2023. The decrease was partially offset by an increase in non-agency revenue.
The following are our key components of operating expenses and results thereof for the three and nine months ended September 30, 2024 and 2023:
GoHealth, Inc.
2024 Form 10-Q
29
Revenue share
Three months ended Sep. 30,
% of Net Revenues
2024
2023
$ Change
% Change
2024
2023
$
19,683
$
35,992
$
(16,309)
(45.3)
%
16.6%
27.3%
Nine months ended Sep. 30,
% of Net Revenues
2024
2023
$ Change
% Change
2024
2023
$
78,376
$
117,876
$
(39,500)
(33.5)
%
19.1%
25.7%
The decreases for both the three and nine months ended September 30, 2024 compared to the prior year periods were primarily driven by a decrease in Submissions generated by our external agents, which decreased the amount of expense we recognized pursuant to our revenue-sharing agreements with our external partners. The decreases were partially offset by increases in expense recognized pursuant to the revenue-sharing components of our vConnect program, which launched during the second quarter of 2023 but did not operate at full scale until the beginning of the 2023 AEP.
Marketing and advertising expense
Three months ended Sep. 30,
% of Net Revenues
2024
2023
$ Change
% Change
2024
2023
$
45,270
$
39,416
$
5,854
14.9
%
38.3%
29.9%
Nine months ended Sep. 30,
% of Net Revenues
2024
2023
$ Change
% Change
2024
2023
$
136,049
$
124,428
$
11,621
9.3
%
33.2%
27.2%
The increases for the three and nine months ended September 30, 2024 compared to the prior year periods were primarily attributable to an increase in our marketing and advertising spend to generate more qualified prospects, which contributed to an increase in Submissions generated by our internal agents. The increases were partially offset by the decline in payments to our external marketing partners driven by a decline in Submissions generated by our external agents.
Consumer care and enrollment
Three months ended Sep. 30,
% of Net Revenues
2024
2023
$ Change
% Change
2024
2023
$
45,556
$
46,472
$
(916)
(2.0)
%
38.5%
35.2%
Nine months ended Sep. 30,
% of Net Revenues
2024
2023
$ Change
% Change
2024
2023
$
132,731
$
134,035
$
(1,304)
(1.0)
%
32.4%
29.3%
The slight decreases for the three and nine months ended September 30, 2024 compared to the prior year periods were primarily attributable to a reduced agent headcount and the realization of strategic cost saving initiatives.
Technology expense
Three months ended Sep. 30,
% of Net Revenues
2024
2023
$ Change
% Change
2024
2023
$
9,801
$
11,652
$
(1,851)
(15.9)
%
8.3%
8.8%
Nine months ended Sep. 30,
% of Net Revenues
2024
2023
$ Change
% Change
2024
2023
$
28,921
$
31,706
$
(2,785)
(8.8)
%
7.1%
6.9%
The decreases for both the three and nine months ended September 30, 2024 compared to the prior year periods were primarily attributable to reduced headcounts in our technology support functions.
General and administrative expense
Three months ended Sep. 30,
% of Net Revenues
2024
2023
$ Change
% Change
2024
2023
17,140
12,967
$
4,173
32.2
%
14.5%
9.8%
Nine months ended Sep. 30,
% of Net Revenues
2024
2023
$ Change
% Change
2024
2023
$
50,457
$
73,440
$
(22,983)
(31.3)
%
12.3%
16.0%
GoHealth, Inc.
2024 Form 10-Q
30
The increase for the three months ended September 30, 2024 compared to the prior year period was primarily attributable to an increase in share-based compensation expense and an increase in legal fees, partially offset by reduced headcounts. The decrease for the nine months ended September 30, 2024 compared to the prior year period was primarily attributable to a decrease in expense related to legal fees for the Securities Class Action, share-based compensation expense and reduced headcounts.
Amortization of intangible assets
Three months ended Sep. 30,
% of Net Revenues
2024
2023
$ Change
% Change
2024
2023
23,514
23,514
$
—
—
%
19.9%
17.8%
Nine months ended Sep. 30,
% of Net Revenues
2024
2023
$ Change
% Change
2024
2023
$
70,542
$
70,543
$
(1)
—
%
17.2%
15.4%
Amortization of intangible assets expense was $23.5 million for both the three months ended September 30, 2024 and 2023 and $70.5 million for both the nine months ended September 30, 2024 and 2023. Amortization of intangible assets expense relates to the amortization of developed technology and customer relationships.
Interest expense
Three months ended Sep. 30,
% of Net Revenues
2024
2023
$ Change
% Change
2024
2023
19,086
17,565
$
1,521
8.7
%
16.1%
13.3%
Nine months ended Sep. 30,
% of Net Revenues
2024
2023
$ Change
% Change
2024
2023
$
55,133
$
51,721
$
3,412
6.6
%
13.5%
11.3%
The increases for the three and nine months ended September 30, 2024 compared to the prior year periods were primarily attributable to an increase in amortization expense related to debt issuance costs and an increase in interest rates related to our Term Loan Facilities, partially offset by interest savings related to the $50.0 million reduction of principal related to our Term Loan Facilities.
Gain on bargain purchase
Three months ended Sep. 30,
% of Net Revenues
2024
2023
$ Change
% Change
2024
2023
(77,363)
—
$
(77,363)
NM
(65.4)%
—%
Nine months ended Sep. 30,
% of Net Revenues
2024
2023
$ Change
% Change
2024
2023
$
(77,363)
$
—
$
(77,363)
NM
(18.9)%
—%
NM = Not meaningful
We recognized a gain on bargain purchase of $77.4 million for both the three and nine months ended September 30, 2024 related to the e-TeleQuote acquisition. The gain represents the excess of the acquisition-date fair value of the net assets acquired over the acquisition-date fair value of the consideration transferred.
Non-GAAP Financial Measures
We use supplemental measures of our performance that are derived from our consolidated financial information but which are not presented in our Condensed Consolidated Financial Statements prepared in accordance with GAAP. These non-GAAP financial measures include net income (loss) before interest expense, income tax (benefit) expense and depreciation and amortization expense, or EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin. Adjusted EBITDA is the primary financial performance measure used by management to evaluate the business and to monitor its results of operations. Adjusted EBITDA represents, as applicable for the period, EBITDA as further adjusted for certain items summarized in the table furnished below. Adjusted EBITDA Margin represents Adjusted EBITDA divided by net revenues.
We use non-GAAP financial measures to supplement financial information presented on a GAAP basis. We believe that excluding certain items from our GAAP results allows management to better understand our consolidated financial performance from period to period and better project our future consolidated financial performance as forecasts are developed at a level of detail different from that used to prepare GAAP-based financial measures. Moreover, we believe these non-GAAP financial measures provide our stakeholders with useful information to help them evaluate our operating results by facilitating an
GoHealth, Inc.
2024 Form 10-Q
31
enhanced understanding of our operating performance and enabling them to make more meaningful period to period comparisons. Adjusted EBITDA is used as a basis for certain compensation programs sponsored by the Company. There are limitations to the use of the non-GAAP financial measures presented in this Quarterly Report on Form 10-Q. For example, our non-GAAP financial measures may not be comparable to similarly titled measures of other companies. Other companies, including companies in our industry, may calculate non-GAAP financial measures differently than we do, limiting the usefulness of those measures for comparative purposes.
The non-GAAP financial measures are not meant to be considered as indicators of performance in isolation from or as a substitute for the most directly comparable measures prepared in accordance with GAAP and should be read only in conjunction with financial information presented on a GAAP basis. Reconciliations of EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin to their most directly comparable GAAP financial measures are presented in the tables below in this Quarterly Report on Form 10-Q. We encourage you to review the reconciliations in conjunction with the presentation of the non-GAAP financial measures for each of the periods presented. In future periods, we may exclude similar items, may incur income and expenses similar to these excluded items and may include other expenses, costs and non-routine items.
The following table sets forth the reconciliations of GAAP net income (loss) to EBITDA and Adjusted EBITDA for the periods presented:
Three months ended Sep. 30,
Nine months ended Sep. 30,
Non-GAAP Financial Measures
2024
2023
2024
2023
Net revenues
$
118,292
$
132,037
$
409,762
$
457,974
Net income (loss)
15,366
(56,204)
(65,294)
(148,976)
Interest expense
19,086
17,565
55,133
51,721
Income tax expense (benefit)
(11)
(108)
(122)
(225)
Depreciation and amortization expense
26,419
26,265
78,962
78,900
EBITDA
60,860
(12,482)
68,679
(18,580)
Gain on bargain purchase(1)
(77,363)
—
(77,363)
—
Share-based compensation expense (benefit)(2)
2,859
(545)
6,534
16,159
Professional services(3)
818
1,213
818
1,213
Legal fees(4)
654
339
1,331
14,692
Severance costs(5)
66
—
2,480
1,920
Operating lease impairment charges(6)
—
—
—
2,687
Adjusted EBITDA
$
(12,106)
$
(11,475)
$
2,479
$
18,091
Net Income (Loss) Margin
13.0
%
(42.6)
%
(15.9)
%
(32.5)
%
Adjusted EBITDA Margin
(10.2)
%
(8.7)
%
0.6
%
4.0
%
(1)Represents the excess of the acquisition-date fair value of the net assets acquired over the acquisition-date fair value of the consideration transferred related to the acquisition of e-TeleQuote, as further described in Note 14, Acquisitions.
(2)Represents non-cash share-based compensation expense (benefit) relating to equity awards as well as share-based compensation expense (benefit) relating to liability classified awards that will be settled in cash.
(3)Represents costs primarily associated with non-recurring consulting fees and other professional services.
(4)Represents legal fees, settlement accruals and other expenses related to certain acquisitions, litigation, Credit Agreement amendments and other non-routine legal or regulatory matters as described in Note 4, “Long-Term Debt” and Note 11, “Commitments and Contingencies” of the Notes to the Condensed Consolidated Financial Statements.
(5)Represents severance costs and other fees associated with a reduction in workforce unrelated to restructuring activities.
(6)Represents operating lease impairment charges, reducing the carrying value of the associated ROU assets and leasehold improvements to the estimated fair values.
Adjusted EBITDA
Three months ended Sep. 30,
% of Net Revenues
2024
2023
$ Change
% Change
2024
2023
$
(12,106)
$
(11,475)
$
(631)
(5.5)
%
(10.2)
%
(8.7)
%
Nine months ended Sep. 30,
% of Net Revenues
2024
2023
$ Change
% Change
2024
2023
$
2,479
$
18,091
$
(15,612)
(86.3)
%
0.6
%
4.0
%
The decreases for the three and nine months ended September 30, 2024 compared to the prior year periods were primarily due to period-over-period declines in net revenues, partially offset by realized operational efficiencies as a result of our focus on driving high-quality Medicare services for our consumers through the Encompass operating model. Our improved operating efficiencies were enabled by reduced headcount, targeted marketing and enhancements in our proprietary technology.
Key Business Performance and Operating Metrics
GoHealth, Inc.
2024 Form 10-Q
32
In addition to traditional financial metrics, we rely upon certain business and operating metrics to evaluate our business performance and facilitate our operations. The most relevant business and operating metrics for our single operating and reportable segment are furnished in the tables below.
Submissions
Submissions are counted when an individual either (i) completes an application with our licensed agent that is submitted to the health plan partner and subsequently approved by the health plan partner during the indicated period, excluding applications through our Non-Encompass BPO Services or (ii) is transferred by our agent to the health plan partner through the Encompass marketplace during the indicated period. Not all Submissions will go into effect, as some individuals may fail to enroll or once enrolled may switch out of a policy within the disenrollment period during the first 90 days of the policy.
The following table presents the number of Submissions for the periods presented:
Submissions
Three months ended Sep. 30,
2024
2023
Change
% Change
166,195
161,550
4,645
2.9
%
Nine months ended Sep. 30,
2024
2023
Change
% Change
534,737
538,032
(3,295)
(0.6)
%
The increase for the three months ended September 30, 2024 compared to the prior year period was primarily attributable to an increase in Submissions generated by GoHealth’s internal network of agents, powered by our enhanced targeted marketing efforts and investment in technology. The increase was partially offset by a decrease in Submissions generated by our external agents. The decrease for the nine months ended September 30, 2024 compared to the prior year period was primarily attributable to a decrease in Submissions generated by our external agents due to broader market pressures impacting our external broker partners, partially offset by an increase in Submissions generated by GoHealth’s internal network of agents.
Sales Per Submission
Sales per Submission is an operating metric that represents the average performance of Submissions generated during the reporting period. Sales per Submission refers to (x) the sum of (i) aggregate commissions estimated to be collected over the estimated life of all commissionable Submissions for the relevant period based on multiple factors, including but not limited to, contracted commission rates, health plan partner mix and expected policy persistency with applied constraints, excluding revenue adjustments recorded in the period, but relating to performance obligations satisfied in prior periods, (ii) non-agency revenue and (iii) partner marketing and other revenue, divided by (y) the number of Submissions for such period. Sales per Submission measures revenues only from the Submissions generated in the period and excludes items that are unrelated to such Submissions.
Sales per Submission is not meant to be considered as an indicator of financial performance in isolation from or as a substitute for the Company’s net revenues. Management uses this metric to measure the performance of the Submissions generated in a reporting period by reviewing and presenting average performance on a per Submission basis over time.
The numerator of Sales per Submission includes revenues generated by Submissions produced in the reporting period through both our agency and non-agency models. The mix of agency and non-agency contracts could impact Sales per Submission. The Company has a portfolio of agency and non-agency contracts, varying by health plan partner and product, and the mix of these contracts is dependent on the plans most suitable for the consumers we serve.
Agency revenue refers to the expected amount of initial commission revenue and any renewal commissions to be paid from the health plan partners on such placement as long as the policyholder remains with the same insurance product. The estimate of the future renewal commissions is determined by using the contracted renewal commission rates constrained by a persistency-adjusted renewal period. The persistency-adjusted renewal period is determined based on our historical experience and available industry and health plan partner historical data. Persistency adjustments allow us to estimate renewal revenue only to the extent probable that a material reversal in revenue would not be expected to occur. These factors may result in varying values from period to period. See “Risk Factors—Risks Related to Our Business—Our operating results may be adversely impacted by factors that impact our estimate of LTV” in our 2023 Annual Report on Form 10-K.
Agency revenue includes partner marketing revenue, in which the Company is compensated by its health plan partners for providing marketing services over a predetermined measurement period. The Company recognizes partner marketing revenue over the measurement period as Submissions are generated and generally gets paid a fixed fee per Submission that results in either a policy effectuating or staying in-force through the rapid disenrollment period, or 90 days post-effectuation.
Non-agency revenue refers to enrollment and engagement services for which cash is collected in advance or in close proximity to the point in time revenue is recognized, with the amount of variable consideration generally resolved within 90 days of when the related policy effectuates. The Company does not receive commissions or fees on subsequent renewals for non-agency Submissions. For more information on the Company’s agency and non-agency revenue, refer to Note 9, “Revenue.”
GoHealth, Inc.
2024 Form 10-Q
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The following table presents the Sales per Submission for the periods presented:
Sales Per Submission
Three months ended Sep. 30,
2024
2023
$ Change
% Change
$
702
$
813
$
(111)
(13.7)
%
Nine months ended Sep. 30,
2024
2023
$ Change
% Change
$
761
$
817
$
(56)
(6.9)
%
The decreases for both the three and nine months ended September 30, 2024 compared to the prior year periods were primarily attributable to a shift from non-agency to agency revenue as a result of changing carrier mix within the non-agency channel. The decreases were further attributable to a decline in LTV rates due to lower persistency.
Direct Operating Cost Per Submission
Direct Operating Cost per Submission is an operating metric that represents the average performance of Submissions generated during the reporting period. Direct Operating Cost per Submission measures costs directly attributable to Submissions generated in the period and excludes costs that are indirect or fixed. The numerator of Direct Operating Cost per Submission, referred to as Direct Operating Cost of Submission, is the portion of the respective operating expenses for revenue share, marketing and advertising and consumer care and enrollment that are directly related to the Submissions generated in the reporting period. Management uses this metric to measure the cost of the Submissions generated in a reporting period by reviewing and presenting average cost on a per Submission basis over time.
Revenue share represents variable expense related to agency and non-agency Submissions generated in the reporting period by our external agents with whom we have a revenue-sharing arrangement. These amounts exclude items that are unrelated to Submissions generated in the reporting period such as the impact to revenue share resulting from revenue adjustments recorded in the period, but relating to performance obligations satisfied in prior periods by our external agents. Marketing and advertising expense consists primarily of expenses associated with acquiring consumers through the Company’s direct, online advertising and marketing partner channels as well as through online, television and direct mail advertisements. A significant portion of our marketing and advertising expenses is driven by the number of health insurance applications submitted through us. Such costs are direct and variable with Submissions. These amounts exclude items that are unrelated to Submissions generated in the reporting period such as share-based compensation expense. Consumer care and enrollment expenses primarily consist of compensation and benefits costs for enrollment personnel who assist consumers during the health plan enrollment and application processes and such expenses are generally variable with Submissions. These amounts exclude items that are unrelated to Submissions generated in the reporting period such as share-based compensation expense and Non-Encompass BPO Services.
The following table presents the Direct Operating Cost per Submission for the periods presented:
Direct Operating Cost Per Submission
Three months ended Sep. 30,
2024
2023
$ Change
% Change
$
663
$
745
$
(82)
(11.0)
%
Nine months ended Sep. 30,
2024
2023
$ Change
% Change
$
647
$
679
$
(32)
(4.7)
%
The decreases in Direct Operating Cost per Submission for the three and nine months ended September 30, 2024 compared to the prior year periods were primarily attributable to a decrease in expense recognized pursuant to our revenue-sharing agreements with our external partners, partially offset by an increase in marketing and advertising expense related to our investments in targeted marketing efforts. Our focus on Direct Operating Cost per Submission enables us to effectively manage expenses and investment in a highly regulated industry where benefits change annually, contracting dynamics change annually and consumer behavior can vary.
Sales/Direct Operating Cost of Submission
Sales/Direct Operating Cost of Submission represents the numerator of Sales per Submission, as defined above, divided by Direct Operating Cost of Submission, as defined above.
The following are our Direct Operating Cost of Submission (in thousands) and Sales/Direct Operating Cost of Submission for the periods presented:
GoHealth, Inc.
2024 Form 10-Q
34
Three months ended Sep. 30,
Nine months ended Sep. 30,
2024
2023
2024
2023
Direct Operating Cost of Submission
$
110,245
$
120,362
$
346,112
$
365,612
Sales/Direct Operating Cost of Submission
1.1
1.1
1.2
1.2
The decreases in Direct Operating Cost of Submission for both the three and nine months ended September 30, 2024 compared to the prior year periods were primarily attributable to a decrease in expense recognized pursuant to our revenue-sharing agreements with our external partners, partially offset by an increase in marketing and advertising expense related to our investments in targeted marketing efforts.
Sales/Direct Operating Cost of Submission was 1.1 for both the three months ended September 30, 2024 and 2023 and 1.2 for both the nine months ended September 30, 2024 and 2023.
Liquidity and Capital Resources
Overview
Our liquidity needs primarily include working capital and debt service requirements. At September 30, 2024, cash and cash equivalents totaled $35.5 million. We believe that our current sources of liquidity, which include cash and cash equivalents and funds available under the Credit Facilities, as further described below, will be sufficient to meet our projected operating and debt service requirements for at least the next twelve months. Short-term liquidity needs will primarily be funded through the Revolving Credit Facilities, as further described below, if necessary. To the extent that our current liquidity is insufficient to fund future activities, we may need to raise additional funds, which may include the sale of equity securities or through debt financing arrangements. The incurrence of additional debt financing would result in debt service obligations and any future instruments governing such debt could provide for operating and financing covenants that could restrict our operations.
The following table presents a summary of cash flows for the nine months ended September 30, 2024 and 2023:
Nine months ended Sep. 30,
(in thousands)
2024
2023
Net cash provided by (used in) operating activities
$
(36,211)
$
37,840
Net cash provided by (used in) investing activities
6,025
(8,087)
Net cash provided by (used in) financing activities
(25,064)
(20,019)
Operating Activities
Cash provided by (used in) operating activities primarily consists of net income (loss) adjusted for certain non-cash items including share-based compensation, depreciation and amortization, amortization of intangible assets, amortization of debt discount and issuance costs, operating lease impairment charges, non-cash lease expense and the effect of changes in working capital and other activities.
Collection of commissions receivable depends upon the timing of the receipt of commission payments. If there were to be a delay in receiving a commission payment from a health plan partner within a quarter, the operating cash flows for that quarter could be adversely impacted.
Upon requesting a borrowing under the Amended and Restated Credit Agreement, the Borrower may elect for either an ABR Borrowing (as defined in the Amended and Restated Credit Agreement) or a SOFR Borrowing (as defined in the Amended and Restated Credit Agreement). The borrowings under the Amended and Restated Credit Agreement comprising each ABR Borrowing will bear interest at (i) ABR plus (ii) a rate per annum equal to (a) 6.50% for any loans under the New Term Loan Facility or the Class A-1 Revolving Credit Facility or (b) 5.50% for any loans under the Class A Revolving Commitments on and after the Amendment No. 11 Effective Date (as defined in the Credit Agreement) or 6.25% for any New Term Loan Facility or Class A-1 Revolving Loan on or after the Class A Revolving Facility Termination Date (as defined in the Amended and Restated Credit Agreement) (provided no event of default has occurred and is continuing).
The borrowings under the Amended and Restated Credit Agreement comprising each SOFR Borrowing (as defined in the Amended and Restated Credit Agreement) will bear interest at (i) Adjusted Term SOFR for the interest period in effect for such borrowing, plus (ii) a rate per annum equal to (a) 7.50% for any loans under the New Term Loan Facility or the Class A-1 Revolving Credit Facility or (b) 6.50% for any Class A Revolving Loan on and after the Amendment No. 11 Effective Date or 7.25% for any New Term Loan Facility or Class A-1 Revolving Loan on or after the Class A Revolving Facility Termination Date (provided no event of default has occurred and is continuing).
Beginning on March 31, 2025, principal payments equal to 2.00% of the outstanding principal balance per annum of the New Term Loans will be paid in equal quarterly installments.
See Note 4, “Long-Term Debt,” to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for additional information regarding the Company’s Term Loan Facilities, Revolving Credit Facilities and debt refinancing.
Recent Accounting Pronouncements
For a discussion of new accounting pronouncements recently adopted and not yet adopted, see Part 1, Note 1, “Description of Business and Significant Accounting Policies,” to the Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q.
Critical Accounting Policies and Estimates
The preparation of the Condensed Consolidated Financial Statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets, liabilities and the disclosure of contingent assets and liabilities. We regularly assess these estimates; however, actual amounts could differ from those estimates. The impact of changes in estimates is recorded in the period in which they become known.
Our critical accounting policies are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in our 2023 Annual Report on Form 10-K. During the three and nine months ended September 30, 2024, there were no material changes to our critical accounting policies from those discussed in our 2023 Annual Report on Form 10-K.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As a smaller reporting company, we are not required to include disclosure under this item.
