SEC Filing | GoHealth

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

__________________________

FORM 10-Q

__________________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-39390

__________________________

GoHealth, Inc.

(Exact name of registrant as specified in its charter)

__________________________


Delaware			85-0563805
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)


214 West Huron St.		60654
Chicago,	Illinois
(Address of principal executive offices)		(Zip Code)

(312) 386-8200

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

__________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading
Symbol(s)

Name of each exchange
on which registered

Class A Common Stock,
$0.0001 par value per share

GOCO

The Nasdaq Global Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☐

Emerging growth company

☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 6, 2020, the registrant had 84,182,961 shares of Class A common stock, $0.0001 par value per share, outstanding and 236,997,109 shares of Class B common stock, $0.0001 par value per share, outstanding.

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		Page
PART I.	FINANCIAL INFORMATION	5
Item 1.	Financial Statements (Unaudited)	5
	GoHealth, Inc.	5
	Condensed consolidated statements of operations	5
	Condensed consolidated statements of comprehensive loss	6
	Condensed consolidated balance sheets	7
	Condensed consolidated statements of changes in s toc kholder s'/members’ equity	8
	Condensed consolidated statements of cash flows	12
	Notes to condensed consolidated financial statements	13
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	53
Item 4.	Controls and Procedures	54
PART II.	OTHER INFORMATION	55
Item 1.	Legal Proceedings	55
Item 1A.	Risk Factors	55
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	91
Item 3.	Defaults Upon Senior Securities	91
Item 4.	Mine Safety Disclosures	91
Item 5.	Other Information	91
Item 6.	Exhibits	91
	Signatures	93

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q may be forward-looking statements. Statements regarding our future results of operations and financial position, business strategy and plans and objectives of management for future operations, including, among others, statements regarding our expected growth, future capital expenditures and debt service obligations, are forward-looking statements.

In some cases, you can identify forward-looking statements by terms, such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.

These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of important factors that could cause actual results to differ materially from those in the forward-looking statements, including the factors described under the sections in this Quarterly Report on Form 10-Q titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

CERTAIN DEFINITIONS

As used in this Quarterly Report on Form 10-Q, unless the context otherwise requires:

•“we,” “us,” “our,” the “Company,” “GoHealth” and similar references refer: (1) following the consummation of the Transactions, including our initial public offering, or IPO, to GoHealth, Inc., and, unless otherwise stated, all of its direct and indirect subsidiaries, including GoHealth Holdings, LLC (formerly known as Blizzard Parent, LLC), and (2) prior to the completion of the Transactions, including our IPO, to GoHealth Holdings, LLC and, unless otherwise stated, all of its direct and indirect subsidiaries, or, as applicable, the Predecessor.

•“Blocker Company” refers to an entity affiliated with Centerbridge that was an indirect owner of LLC Interests in GoHealth Holdings, LLC prior to the Transactions and is taxable as a corporation for U.S. federal income tax purposes.

•“Blocker Shareholders” refer to entities affiliated with Centerbridge, the owners of the Blocker Company prior to the Transactions, who exchanged their interests in the Blocker Company for shares of our Class A common stock and cash in connection with the consummation of the Transactions.

•“Centerbridge” refers to Centerbridge Capital Partners III, L.P., our sponsor and a Delaware limited partnership, certain funds affiliated with Centerbridge Capital Partners III, L.P. and other entities over which Centerbridge Capital Partners III, L.P. has voting control (including any such fund or entity formed to hold shares of Class A common stock for the Blocker Shareholders).

•“Centerbridge Acquisition” refers to the acquisition, on September 13, 2019, by Centerbridge, indirectly through a subsidiary of GoHealth Holdings, LLC (formerly known as Blizzard Parent, LLC), an entity formed in contemplation of the acquisition, of a 100% interest in Norvax.

•“Continuing Equity Owners” refer collectively to direct or indirect holders of LLC Interests and our Class B common stock immediately following consummation of the Transactions, including Centerbridge, Norwest, NVX Holdings, our Founders, the Former Profits Unit Holders and certain executive officers, employees and other minority investors and their respective permitted transferees who may, following the consummation of our IPO, exchange at each of their respective options (subject in certain circumstances to time-based vesting requirements and certain other restrictions), in whole or in part from time to time, their LLC Interests (along with an equal number of shares of Class B common stock

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(and such shares shall be immediately cancelled)) for, at our election (determined solely by our independent directors (within the meaning of the listing rules of The Nasdaq Global Market, or the Nasdaq rules) who are disinterested), cash or newly-issued shares of our Class A common stock.

•“Founders” refer to Brandon M. Cruz, our Co-Founder and Chief Strategy Officer and Special Advisor to the Executive Team, and Clinton P. Jones, our Co-Founder and Chief Executive Officer.

•“Former Profits Unit Holders” refers collectively to certain of our directors and certain current and former officers and employees, in each case, who directly or indirectly held existing vested and unvested profits units, which were comprised of profits units that have time-based vesting conditions and profits units that have performance-based vesting conditions, of GoHealth Holdings, LLC pursuant to GoHealth Holdings, LLC’s existing profits unit plan and who received LLC Interests in exchange for their profits units in connection with the Transactions. LLC Interests received in exchange for unvested profits units remain subject to their existing time-based vesting requirements. Profit units with performance-based vesting conditions fully vested as such conditions were met in connection with our IPO.

•“GoHealth Holdings, LLC Agreement” refers to GoHealth Holdings, LLC’s amended and restated limited liability company agreement, which became effective substantially concurrently with or prior to the consummation of our IPO.

•“LLC Interests” refer to the common units of GoHealth Holdings, LLC, including those that we purchased with a portion of the net proceeds from our IPO.

•“Norwest” refers to Norwest Equity Partners and certain funds affiliated with Norwest Equity Partners.

•“Norvax” or “Predecessor” refers to Norvax, LLC, a Delaware limited liability company and a subsidiary of GoHealth Holdings, LLC.

•“NVX Holdings” refers to NVX Holdings, Inc., a Delaware corporation that is controlled by the Founders.

•“Original Equity Owners” refer to the owners of LLC Interests in GoHealth Holdings, LLC prior to the consummation of the Transactions, collectively, which include Centerbridge, Norwest, our Founders and certain executive officers, employees and other minority investors.

•“Transactions” refer to our IPO and certain organizational transactions that were effected in connection with our IPO, and the application of the net proceeds therefrom. See Note 1 to the condensed consolidated financial statements for a description of the Transactions.

GoHealth, Inc. is a holding company and the sole managing member of GoHealth Holdings, LLC, and its principal asset consists of LLC Interests.

KEY TERMS AND PERFORMANCE INDICATORS; NON-GAAP FINANCIAL MEASURES

Throughout this Quarterly Report on Form 10-Q, we use a number of key terms and provide a number of key performance indicators used by management. We define these terms and key performance indicators as follows:

•“Approved Submissions” refer to Submitted Policies approved by carriers for the identified product during the indicated period.

•“Adjusted EBITDA” represents, as applicable for the period, EBITDA as further adjusted for share-based compensation expense, change in fair value of contingent consideration liability, Centerbridge Acquisition costs, severance costs and incremental organizational costs in connection with our IPO.

•“Adjusted EBITDA margin” refers to Adjusted EBITDA divided by net revenues.

•“Consumer interactions” refer to the number of times a consumer calls us or visits us online.

•“Consumer lead” refers to a consumer for which we have collected some personally identifiable information related to health insurance.

•“EBITDA” represents net income (loss) before interest expense, income tax expense (benefit) and depreciation and amortization expense.

•“Impressions” refer to the number of times our advertisement is shown to consumers through any medium, regardless of whether such consumers have viewed, clicked through or otherwise interacted with the advertisement.

•“LTV Per Approved Submission” refers to the Lifetime Value of Commissions per Approved Submission, which we define as (i) aggregate commissions estimated to be collected over the estimated life of all commissionable Approved

iii

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Submissions for the relevant period based on multiple factors, including but not limited to, contracted commission rates, carrier mix and expected policy persistency with applied constraints, divided by (ii) the number of commissionable Approved Submissions for such period.

•“LTV/CAC” refers to the Lifetime Value of Commissions per Consumer Acquisition Cost, which we define as (i) aggregate commissions estimated to be collected over the estimated life of all commissionable Approved Submissions for the relevant period based on multiple factors, including but not limited to, contracted commission rates, carrier mix and expected policy persistency with applied constraints, or LTV, divided by (ii) the cost to convert a prospect into a customer less other non-commission carrier revenue for such period, or CAC. CAC is comprised of cost of revenue, marketing and advertising expenses and customer care and enrollment expenses less other revenue and is presented on a per commissionable Approved Submission basis.

•“Qualified prospect” refers to a consumer that has confirmed an interest to us in shopping for health insurance over the phone, online or via live transfer to our agents, both through the internal and external channels.

•“Submitted Policies” refer to completed applications that, with respect to each such application, the consumer has authorized us to submit to the carrier.

We use supplemental measures of our performance that are derived from our consolidated financial information, but which are not presented in our consolidated financial statements prepared in accordance with GAAP. These non-GAAP financial measures include net income (loss) before interest expense, income tax expense (benefit) 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 its business and monitor its results of operations.

Adjusted EBITDA represents EBITDA as further adjusted for share-based compensation, expense related to the accelerated vesting of certain equity awards, change in fair value of contingent consideration liability, Centerbridge Acquisition costs, severance costs and incremental organizational costs in connection with the IPO. 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 enhanced understanding of our operating performance and enabling them to make more meaningful period to period comparisons. 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 net income (loss) prepared in accordance with GAAP, and should be read only in conjunction with financial information presented on a GAAP basis. Reconciliations of each of EBITDA and Adjusted EBITDA to its most directly comparable GAAP financial measure, net income (loss), 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 include other expenses, costs and non-recurring items.

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

GoHealth, Inc.

Condensed Consolidated Statements of Operations

(dollars in thousands, except share and per share amounts, unaudited)


	Successor				Predecessor		Successor				Predecessor
	Three months ended September 30, 2020		Period from September 13, 2019 through September 30, 2019		Period from July 1, 2019 through September 12, 2019		Nine months ended September 30, 2020		Period from September 13, 2019 through September 30, 2019		Period from January 1, 2019 through September 12, 2019
Net revenues:
Commission	$	101,390	$	13,723	$	64,542	$	310,506	$	13,723	$	175,834
Enterprise	61,970		6,067		22,868		120,921		6,067		55,176
Net revenues	163,360		19,790		87,410		431,427		19,790		231,010
Operating expenses:
Cost of revenue	25,827		4,737		25,055		104,520		4,737		79,169
Marketing and advertising	62,848		7,140		21,332		110,556		7,140		37,769
Customer care and enrollment	52,896		4,625		19,396		105,267		4,625		49,149
Technology	39,520		518		31,856		49,818		518		40,312
General and administrative	156,551		2,286		65,123		177,400		2,286		79,219
Change in fair value of contingent consideration liability	—		—		—		19,700		—		—
Amortization of intangible assets	23,514		4,703		—		70,543		4,703		—
Acquisition related transaction costs	—		6,245		1,968		—		6,245		2,267
Total operating expenses	361,156		30,254		164,730		637,804		30,254		287,885
Loss from operations	(197,796)		(10,464)		(77,320)		(206,377)		(10,464)		(56,875)
Interest expense	8,636		1,289		31		24,378		1,289		140
Other (income) expense	2		(10)		67		(494)		(10)		114
Loss before income taxes	(206,434)		(11,743)		(77,418)		(230,261)		(11,743)		(57,129)
Income tax (benefit) expense	62		(37)		(78)		38		(37)		(66)
Net loss	$	(206,496)	$	(11,706)	$	(77,340)	$	(230,299)	$	(11,706)	$	(57,063)
Net loss attributable to noncontrolling interests	(150,076)		—		—		(150,076)		—		—
Net loss attributable to GoHealth, Inc.	$	(56,420)	$	(11,706)	$	(77,340)	$	(80,223)	$	(11,706)	$	(57,063)
Net loss per share (Note 9):
Net loss per share of Class A common stock —basic and diluted (1)	$	(0.65)					$	(0.65)
Weighted-average shares of Class A common stock outstanding—basic and diluted	84,182,961						84,182,961

____________

(1)Net loss per share of Class A common stock—basic and diluted is the same for both the three and nine months ended September 30, 2020 as both periods are based on the post-IPO net loss from July 17, 2020 to September 30, 2020.

The accompanying notes are an integral part of these condensed consolidated financial statements.

GoHealth, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(dollars in thousands, unaudited)


	Successor				Predecessor		Successor				Predecessor
	Three months ended September 30, 2020		Period from September 13, 2019 through September 30, 2019		Period from July 1, 2019 through September 12, 2019		Nine months ended September 30, 2020		Period from September 13, 2019 through September 30, 2019		Period from January 1, 2019 through September 12, 2019
Net loss	$	(206,496)	$	(11,706)	$	(77,340)	$	(230,299)	$	(11,706)	$	(57,063)
Other comprehensive income (loss):
Foreign currency translation adjustments	(85)		(2)		21		13		(2)		(32)
Comprehensive loss	(206,581)		(11,708)		(77,319)		(230,286)		(11,708)		(57,095)
Comprehensive loss attributable to noncontrolling interests	(150,145)		—		—		(150,145)		—		—
Comprehensive loss attributable to GoHealth, Inc.	$	(56,436)	$	(11,708)	$	(77,319)	$	(80,141)	$	(11,708)	$	(57,095)

The accompanying notes are an integral part of these condensed consolidated financial statements.

GoHealth, Inc.

Condensed Consolidated Balance Sheets

(dollars in thousands, except share and per share amounts)


	Successor		Successor
	September 30, 2020		December 31, 2019
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	294,598	$	12,276
Accounts receivable, net of allowance for doubtful accounts of $522 in 2020 and $904 in 2019	7,921		24,461
Commissions receivable – current	95,122		101,078
Prepaid expenses and other current assets	19,530		5,954
Total current assets	417,171		143,769
Commissions receivable – non-current	405,697		281,853
Property, equipment, and capitalized software, net	15,463		6,339
Intangible assets, net	712,240		782,783
Goodwill	386,553		386,553
Other long-term assets	1,134		998
Total assets	$	1,938,258	$	1,602,295
Liabilities and stockholders/members’ equity
Current liabilities:
Accounts payable	$	9,181	$	13,582
Accrued liabilities	20,775		22,568
Commissions payable – current	52,029		56,003
Deferred revenue	55,406		15,218
Current portion of debt	4,170		3,000
Other current liabilities	3,765		2,694
Total current liabilities	145,326		113,065
Non-current liabilities:
Commissions payable – non-current	129,446		97,489
Long-term debt, net of current portion	396,817		288,233
Contingent consideration	—		242,700
Other non-current liabilities	3,500		664
Total non-current liabilities	529,763		629,086
Commitments and contingencies (Note 11)
Stockholders’/members’ equity:
Members’ interest	—		860,161
Class A common stock – $0.0001 par value; 1,100,000,000 shares authorized; 84,182,961 shares issued and outstanding at September 30, 2020	8		—
Class B common stock – $0.0001 par value; 619,003,717 shares authorized; 236,997,109 shares issued and outstanding at September 30, 2020	24		—
Preferred stock – $0.0001 par value; 20,000,000 shares authorized; no shares issued and outstanding at September 30, 2020	—		—
Additional paid-in capital	392,490		—
Accumulated other comprehensive loss	(85)		(17)
Accumulated deficit	(54,758)
Total stockholders’ equity attributable to GoHealth, Inc./members’ equity	337,679		860,144
Non-controlling interests	925,490		—
Total stockholders’/members’ equity	1,263,169		860,144
Total liabilities and stockholders’/members’ equity	$	1,938,258	$	1,602,295

The accompanying notes are an integral part of these condensed consolidated financial statements.

GoHealth, Inc.

Condensed Consolidated Statements of Changes in Stockholders'/Members’ Equity

(dollars and shares in thousands, unaudited)


	Three Months Ended September 30, 2020
			Class A Common Stock			Class B Common Stock
	Members’ Equity		Shares	Amount		Shares	Amount		Additional Paid-in Capital		Retained Earnings (Deficit)		Accumulated Other Comprehensive (Loss) Income		Non-Controlling Interest		Stockholders’/Members’ Equity
Successor:
Balance at June 30, 2020	$	1,047,513									$	—					$	—
Net loss prior to the Transactions	(1,662)																—
Share-based compensation expense prior to the Transactions	106																—
Foreign currency translation adjustment prior to the Transactions	(155)																—
Effect of the Transactions	(1,045,802)					307,980	31		(524,977)						1,570,748		1,045,802
Issuance of common stock sold in IPO, net of offering costs			43,500	4					852,403								852,407
Effect of the Blocker Merger			40,683	4		(45,503)	(5)								(96,164)		(96,165)
Effect of purchase of LLC Interests						(25,480)	(2)								(508,318)		(508,320)
Settlement of Senior Preferred Earnout Units															(100,000)		(100,000)
Assumption of contingent consideration liability by significant shareholder									62,400								62,400
Share-based compensation expense upon vesting of performance-based profit units															209,300		209,300
Net loss subsequent to the Transactions											(54,758)				(150,076)		(204,834)
Share-based compensation expense subsequent to the Transactions									2,664								2,664
Foreign currency translation adjustment subsequent to the Transactions													(85)				(85)
Balance at September 30, 2020	$	—	84,183	$	8	236,997	$	24	$	392,490	$	(54,758)	$	(85)	$	925,490	$	1,263,169

	Period from September 13, 2019 through September 30, 2019
Successor:
Balance at September 13, 2019	$	847,263															$	847,263
Other	(3,545)																(3,545)
Foreign currency translation adjustment													(2)				(2)
Net loss	(11,706)																(11,706)
Balance at September 30, 2019	$	832,012	—	$	—	—	$	—	$	—	$	—	$	(2)	$	—	$	832,010

GoHealth, Inc.

Condensed Consolidated Statements of Changes in Stockholders'/Members’ Equity (continued)

(dollars and shares in thousands, unaudited)


	Period from July 1, 2019 through September 12, 2019
			Class A Common Stock			Class B Common Stock
	Members’ Equity		Shares	Amount		Shares	Amount		Additional Paid-in Capital		Retained Earnings (Deficit)		Accumulated Other Comprehensive (Loss) Income		Non-Controlling Interest		Members’ Equity
Predecessor:
Balance at July 1, 2019	$	2,435									$	(298,824)	$	(39)			$	(296,428)
Redeemable Class B unit accretion											(8,405)						(8,405)
Conversion of Redeemable Class B Units	384,404																384,404
Foreign currency translation adjustment													21				21
Net loss											(77,340)						(77,340)
Balance at September 12, 2019	$	386,839	—	$	—	—	$	—	$	—	$	(384,569)	$	(18)	$	—	$	2,252

The accompanying notes are an integral part of these condensed consolidated financial statements.

GoHealth, Inc.

Condensed Consolidated Statements of Changes in Stockholders'/Members’ Equity (continued)

(dollars and shares in thousands, unaudited)


	Nine Months Ended September 30, 2020
			Class A Common Stock			Class B Common Stock
	Members’ Equity		Shares	Amount		Shares	Amount		Additional Paid-in Capital		Retained Earnings (Deficit)		Accumulated Other Comprehensive (Loss) Income		Non-Controlling Interest		Stockholders’/Members’ Equity
Successor:
Balance at January 1, 2020	$	860,144															$	—
Issuance of Senior Preferred Earnout units	100,000																—
Issuance of Common Earnout Units	100,000																—
Issuance of Common Units	10,000																—
Net loss prior to the Transactions	(25,465)																—
Share-based compensation expense prior to the Transactions	1,182																—
Foreign currency translation adjustment prior to the Transactions	(59)																—
Effect of the Transactions	(1,045,802)					307,980	31		(524,977)						1,570,748		1,045,802
Issuance of common stock sold in IPO, net of offering costs			43,500	4					852,403								852,407
Effect of the Blocker Merger			40,683	4		(45,503)	(5)								(96,164)		(96,165)
Effect of purchase of LLC Interests						(25,480)	(2)								(508,318)		(508,320)
Settlement of Senior Preferred Earnout Units															(100,000)		(100,000)
Assumption of contingent consideration liability by significant shareholder									62,400								62,400
Share-based compensation expense upon vesting of performance-based profit units															209,300		209,300
Net loss subsequent to the Transactions											(54,758)				(150,076)		(204,834)
Share-based compensation expense subsequent to the Transactions									2,664								2,664
Foreign currency translation adjustment subsequent to the Transactions													(85)				(85)
Balance at September 30, 2020	$	—	84,183	$	8	236,997	$	24	$	392,490	$	(54,758)	$	(85)	$	925,490	$	1,263,169

GoHealth, Inc.

Condensed Consolidated Statements of Changes in Stockholders'/Members’ Equity (continued)

(dollars and shares in thousands, unaudited)


	Period from January 1, 2019 through September 12, 2019
			Class A Common Stock				Class B Common Stock
	Members’ Equity		Shares		Amount		Shares		Amount		Additional Paid-in Capital		Retained Earnings (Deficit)		Accumulated Other Comprehensive (Loss) Income		Non-Controlling Interest		Members’ Equity
Predecessor:
Balance at January 1, 2019	$	2,435											$	(189,102)	$	14			$	(186,653)
Redeemable Class B unit accretion													(138,404)						(138,404)
Conversion of Redeemable Class B Units	384,404																		384,404
Foreign currency translation adjustment															(32)				(32)
Net loss													(57,063)						(57,063)
Balance at September 12, 2019	$	386,839	$	—	$	—	$	—	$	—	$	—	$	(384,569)	$	(18)	$	—	$	2,252

GoHealth, Inc.

Condensed Consolidated Statements of Cash Flows

(dollars in thousands, unaudited)


	Successor				Predecessor
	Nine Months Ended September 30, 2020		Period from September 13, 2019 through September 30, 2019		Period from January 1, 2019 through September 12, 2019
Operating activities:
Net loss	$	(230,299)	$	(11,706)	$	(57,063)
Adjustments to reconcile net loss to net cash provided by operating activities:
Share-based compensation	213,146		—		87,060
Depreciation and amortization	2,899		92		4,247
Amortization of intangible assets	70,543		4,703		—
Amortization of debt discount and issuance costs	1,744		79		—
Change in fair value of contingent consideration	19,700		—		—
Other non-cash items	(1,100)		285		150
Changes in assets and liabilities:
Accounts receivable	17,552		(122)		(108)
Commissions receivable	(117,888)		(15,405)		(63,448)
Prepaid expenses and other assets	(13,576)		(140)		1,325
Accounts payable	(4,402)		3,276		(1,981)
Accrued liabilities	(1,793)		(5,028)		17,860
Deferred revenue	40,188		18,098		1,926
Commissions payable	27,983		8,283		19,228
Other liabilities	4,138		13,728		85
Net cash provided by operating activities	28,835		16,143		9,281
Investing activities:
Acquisition of business, net of cash	—		(807,591)		—
Purchases of property, equipment and software	(12,023)		(813)		(5,597)
Net cash used in investing activities	(12,023)		(808,404)		(5,597)
Financing activities:
Proceeds from issuance of Class A common stock sold in initial public offering, net of offering costs	852,407		—		—
Payment of partial consideration to Blocker Shareholders in the Blocker Merger	(96,165)		—		—
Purchase of LLC Interests from Continuing Equity Owners	(508,320)		—		—
Settlement of Senior Preferred Earnout Units	(100,000)		—		—
Proceeds received upon issuance of preferred units	—		541,263		—
Proceeds received upon issuance of common units	10,000		—		—
Borrowings under term loans	117,000		300,000		—
Principal payments under term loans	(2,835)		—		—
Borrowings under revolving credit facilities	—		—		56,534
Payments under revolving credit facilities	—		—		(59,915)
Debt issuance cost payments	(6,291)		(9,283)		—
Principal payments under capital lease obligations	(218)		(270)		(68)
Net cash provided by (used in) financing activities	265,578		831,710		(3,449)
Effect of exchange rate changes on cash	(68)		(2)		(32)
Increase in cash and cash equivalents	282,322		39,447		203
Cash and cash equivalents at beginning of period	12,276		708		505
Cash and cash equivalents at end of period	$	294,598	$	40,155	$	708
Supplemental disclosure of cash flow information:
Non-cash investing and financing activities:
Purchases of property, equipment and software included in accounts payable	$	1,104	$	277	$	113
Purchases of property, equipment and software under capital leases	$	—	$	—	$	744
Issuance of senior preferred earnout units to settle contingent consideration liability	$	100,000	$	—	$	—
Issuance of common A and B units to settle contingent consideration liability	$	100,000	$	—	$	—
Net issuance of Class A and Class B common stock in connection with the Transactions	$	30	$	—	$	—
Settlement of contingent consideration liability	$	62,400	$	—	$	—

The accompanying notes are an integral part of these condensed consolidated financial statements.

GoHealth, Inc.

Notes to Condensed Consolidated Financial Statements

(tabular amounts in thousands, except share and per share amounts)

(unaudited)

1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Description of Business

GoHealth, Inc. (the “Company”) is a leading health insurance marketplace whose mission is to improve healthcare in America. The Company works with insurance carriers to provide solutions to efficiently enroll individuals in health insurance plans. The Company’s proprietary technology platform leverages modern machine-learning algorithms powered by nearly two decades of insurance purchasing behavior to reimagine the optimal process for helping individuals find the best health insurance plan for their specific needs. The Company’s insurance agents leverage the power of its vertically integrated customer acquisition platform to enroll members in Medicare and individual and family plans. Certain of the Company’s operations do business as GoHealth, LLC (“GoHealth”), a wholly owned subsidiary of the Company that was founded in 2001.

The Company was incorporated in Delaware on March 27, 2020 for the purpose of facilitating an initial public offering and other related transactions in order to carry on the business of GoHealth Holdings, LLC (formerly known as Blizzard Parent, LLC), a Delaware limited liability company, and its wholly owned subsidiaries (collectively, "GHH, LLC"). On July 17, 2020, the Company completed an initial public offering of 43,500,000 shares of its Class A common stock at a public offering price of $21.00 per share (“the IPO”), receiving approximately $852.4 million in net proceeds, after deducting the underwriting discount and offering expenses.

Pursuant to a reorganization into a holding company structure, the Company is a holding company and its principal asset is a controlling equity interest in GHH, LLC. As the sole managing member of GHH, LLC, the Company operates and controls all of the business and affairs of GHH, LLC, and through GHH, LLC and its subsidiaries, conducts its business.

Basis of Presentation and Significant Accounting Policies

In connection with the Company’s IPO, the Company completed a series of organizational transactions (the “Transactions”). The Transactions included:

•The amendment and restatement of the existing limited liability company agreement of GHH, LLC to, among other things, (1) recapitalize all existing ownership interests in GHH, LLC (including profits units awarded under the existing limited liability company agreement of GHH, LLC) and (2) appoint the Company as the sole managing member of GHH, LLC upon its acquisition of LLC Interests in connection with the IPO;

•The amendment and restatement of the Company’s certificate of incorporation to, among other things, provide for (1) Class A common stock, with each share of the Company’s Class A common stock entitling its holder to economic rights and one vote per share on all matters presented to stockholders generally and (2) Class B common stock, with each share of the Company’s Class B common stock being a non-economic share but entitling its holder to one vote per share on all matters presented to stockholders generally (provided that shares of Class B common stock may only be held by the Continuing Equity Owners and their respective permitted transferees);

•The issuance of 307,980,070 shares of the Company's Class B common stock, including the issuance of 229,399,322 such shares to the Continuing Equity Owners, which is equal to the number of LLC Interests held directly or indirectly by such Continuing Equity Owners immediately following the Transactions, for nominal consideration;

•The issuance of 43,500,000 shares of the Company’s Class A common stock to the purchasers in the IPO in exchange for net proceeds, after taking into account the underwriting discount and offering expenses payable by the Company, of approximately $852.4 million;

•The acquisition by the Company of the Blocker Company in a merger transaction (the “Blocker Merger”), which Blocker Company held 45,503,276 LLC interests and a corresponding amount of the Company’s Class B common stock (which shares were cancelled after the Blocker Merger), in exchange for 40,682,961 shares of the Company’s Class A common stock and payment of $96.2 million in cash to Blocker Shareholders;

•The use of the remaining net proceeds from the IPO to (i) pay $508.3 million in cash to redeem 25,479,685 LLC Interests held directly or indirectly by the Continuing Equity Owners, (ii) satisfy in full $100.0 million in aggregate face amount of senior preferred earnout units in connection with the Transactions, and (iii) use for general corporate purposes.

•The Company entered into (1) a stockholders’ agreement with Centerbridge and NVX Holdings, (2) a registration rights agreement with certain of the Continuing Equity Owners and (3) a tax receivable agreement with GHH, LLC, the Continuing Equity Owners and the Blocker Shareholders.

In connection with the IPO, the Company became the sole managing member of GHH, LLC and controls the management of GHH, LLC. As a result, the Company consolidates GHH, LLC’s financial results in its consolidated financial statements and reports a 73.3% non-controlling interest for the economic interest in GHH, LLC held by the Continuing Equity Owners. As of September 30, 2020, the Company owned approximately 26.7% of GHH, LLC.

The Transactions were considered transactions between entities under common control. As a result, the financial statements for periods prior to the IPO and the Transactions have been adjusted to combine the previously separate entities for presentation purposes.

GHH, LLC is a holding company with no operating assets or operations and was formed to acquire a 100% equity interest in Norvax, LLC (“Norvax”). On May 6, 2020, Blizzard Parent, LLC changed its name to GoHealth Holdings, LLC. GHH, LLC owns 100% of Blizzard Midco, LLC, which owns 100% of Norvax. For all of the periods reported in these condensed consolidated financial statements, GHH, LLC has not and does not have any material operations on a standalone basis, and all of the operations of GHH, LLC are carried out by Norvax. On August 15, 2019, GHH, LLC entered a series of arrangements to acquire 100% of the equity interest in Norvax. On September 13, 2019, Blizzard Merger Sub LLC, a transitory merger company of Blizzard Midco, LLC, merged into Norvax, with Norvax continuing as the surviving limited liability company and GHH, LLC's operating entity (the “Acquisition”).

As a result of the Acquisition, which is discussed further in Note 2 – Acquisition, Norvax was determined to be the accounting acquirer and Norvax’s historical assets and liabilities are reflected at fair value as of the acquisition date. The financial information for the period after September 13, 2019, represents the condensed consolidated financial information of the “Successor” company. Prior to September 13, 2019, the condensed consolidated financial statements include the accounts of the “Predecessor” company. Due to the change in the basis of accounting resulting from the application of the acquisition method of accounting, the Predecessor’s condensed consolidated financial statements and the Successor’s condensed consolidated financial statements are not necessarily comparable.

The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information, but do not include all information and footnote disclosures required under U.S. GAAP for annual financial statements. In the opinion of management, the interim condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the Company’s financial position, results of operations and cash flows as of the dates and for the periods presented. All intercompany transactions and balances are eliminated in consolidation.

These interim financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the prospectus dated July 14, 2020, filed with the Securities and Exchange Commission (“SEC”) in accordance with Rule 424(b) of the Securities Act of 1933, as amended, on July 16, 2020. Interim results are not necessarily indicative of results for the full fiscal year due to seasonality and other factors.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting periods. The Company bases its estimates on historical experience and on various other assumptions that management believes are reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates. There have been no material changes to the Company’s significant accounting policies as discussed in the notes to the Company’s audited consolidated financial statements as of and for the year ended December 31, 2019.

Cash and Cash Equivalents

The Company considers all investments with an original maturity of 90 days or less from the date of purchase to be cash equivalents. Cash includes all deposits in banks. The Company maintains its cash balances at financial institutions in the United States and Europe.

Cash accounts in the United States are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. As of September 30, 2020 and December 31, 2019, the Company’s cash balances in the United States exceeded the FDIC-insured limits by $294.3 million and $12.0 million, respectively. The Company also has an immaterial amount of cash held in Europe to fund its Slovakian operations. The Company does not believe it is exposed to any significant risk with respect to cash balances.

Concentration of Credit Risk

The Company does not require collateral or other security in granting credit. As of September 30, 2020, three customers each represented 10% or more of the Company’s total accounts receivable and, in aggregate, represented 94%, or $7.5 million, of the Company’s total accounts receivable. As of December 31, 2019, five customers each represented 10% or more of the Company’s total accounts receivable and, in aggregate, represented 87%, or $21.2 million, of the Company’s total accounts receivable.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are recorded at the invoiced amount and typically do not bear interest. The Company provides allowances for doubtful accounts related to accounts receivable for estimated losses resulting from the inability of its customers to make required payments. The Company takes into consideration the overall quality of the receivables portfolio, along with specifically identified customer risks in establishing allowances. Accounts receivable are charged off against the allowance for doubtful accounts when it is determined the receivable is uncollectible.

Commissions Receivable

Commissions receivable are contract assets that represent estimated variable consideration for renewal commissions to be received from insurance carriers for performance obligations that have been satisfied. The current portion of commissions receivable are future renewal commissions expected to be received within one year, while the non-current portion of commissions receivable are expected to be received beyond one year. The Company assesses impairment for uncollectible consideration when information available indicates it is probable that an asset has been impaired. There were no impairments recorded during the three and nine months ended September 30, 2020, the period from July 1, 2019 through September 12, 2019, the period from September 13, 2019 through September 30, 2019, or the period from January 1, 2019 through September 12, 2019.

Deferred Offering Costs

Deferred offering costs consist of legal, accounting and other fees relating to the IPO. Deferred offering costs totaling $7.7 million at June 30, 2020, included in prepaid expenses and other assets, were offset against the proceeds upon the completion of the IPO in July 2020. Total offering costs relating to the IPO were $61.1 million, including the underwriting discount.

Revenue Recognition

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASC 606, requiring an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services.

The Company is compensated by the receipt of commission payments from health insurance carriers whose health insurance policies are purchased through the Company’s ecommerce platforms or customer care centers. The Company also generates revenue from non-commission revenue sources, which it refers to as enterprise revenue and which include providing dedicated insurance agent resources for carrier-specific programs, sales of insurance leads to other marketing agencies and carriers, and the implementation and use of the Company’s platform. The Company accounts for payments made under certain carrier-specific arrangements as deductions to revenue.

The core principle of ASC 606 is to recognize revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration the entity expects to be entitled to in exchange for those goods or services. Accordingly, the Company recognizes revenue for its services in accordance with the following five steps outlined in ASC 606:

•Identification of the contract, or contracts, with a customer. A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies the payment terms related to these goods or services, (ii) the contract has commercial substance and, (iii) the Company determines that collection of substantially all consideration for goods or services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. Payment of commissions typically commences within 60 days from the policy effective date. Payment terms from non-commission revenue are typically 30 days from the invoice date.

•Identification of the performance obligations in the contract. Performance obligations promised in a contract are identified based on the goods or services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the goods or services either on their own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the goods or services is separately identifiable from other promises in the contract.

•Determination of the transaction price. The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring goods or services to the customer.

•Allocation of the transaction price to the performance obligations in the contract. If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price (“SSP”) basis.

•Recognition of revenue when, or as, the Company satisfies a performance obligation. The Company satisfies performance obligations either over time or at a point in time, as discussed in further detail below. Revenue is recognized at the time the related performance obligation is satisfied by transferring the promised good or service to the customer.

Commission Revenue

The Company recognizes commission revenue from the sale of insurance products at the point when carriers approve an insurance application produced by the Company. The Company records as commission revenue the expected amount of commissions received from the insurance carriers and any renewal commissions to be paid on such placement as long as the policyholder remains with the same insurance product. The Company defines its customer to be the health insurance carrier.

The Company typically enters into contractual agency relationships with health insurance carriers that are non-exclusive and terminable on short notice by either party for any reason. In addition, health insurance carriers often can terminate or amend agreements unilaterally on short notice, including provisions in agreements relating to the commission rates paid to the Company by the health insurance carriers. The amendment or termination of an agreement the Company has with a health insurance carrier may adversely impact the commissions it is paid on health insurance plans purchased from the carrier.

Compensation in the form of commissions is received from insurance carriers for the multiple types of insurance products sold by the Company on behalf of the carriers. For Medicare and non-Medicare eligible products, commission revenue generally represents a percentage of the premium amount expected to be collected by the carrier while the policyholder is enrolled in the insurance product, including renewal periods. The Company’s performance obligation is complete when a carrier has received and approved an insurance application. As such, the Company recognizes revenue at this point in time, which represents the total estimated lifetime commissions it expects to receive for selling the product after the carrier approves an application, net of an estimated constraint. The Company’s consideration is variable based on the amount of time it estimates a policy will remain in force. The Company estimates the amount of variable consideration that it expects to receive based on historical experience or carrier experience to the extent available, industry data, and expectations as to future retention rates. Additionally, the Company considers application of the 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. The Company monitors and updates this estimate at each reporting date. The Company does not have any remaining performance obligations in its commission contracts with customers.

The Company utilizes a practical expedient to estimate commission revenue for each insurance product by applying the use of a portfolio approach to group approved members by the effective month of the relevant policy (referred to as a “cohort”). This

allows the Company to estimate the commissions it expects to collect for each cohort by evaluating various factors, including but not limited to, contracted commission rates, carrier mix, and expected member churn.

The Company’s variable consideration includes estimated and constrained lifetime values as the “constrained LTV” for the plans. The Company’s estimate of commission revenue for each product line is based on a number of assumptions, which include, but are not limited to, estimating conversion of an approved applicant to a paying policyholder, forecasting persistency and forecasting the commission amounts likely to be received per policyholder. These assumptions are based on historical trends and incorporate management’s judgment in interpreting those trends and in applying constraints.

On a quarterly basis, the Company re-estimates LTV at a cohort level for outstanding cohorts, reviews and monitors changes in the data used to estimate LTV, as well as the cash received for each cohort as compared to the original estimates. The difference between cash received for each cohort and the respective estimated LTV can be significant and may or may not be indicative of the need to adjust revenue for prior period cohorts. Changes in LTV may result in an increase or a decrease to revenue and a corresponding increase or decrease to commissions receivable. The Company analyzes these differences and, to the extent the Company believes differences in the estimates of the cash received are indicative of an increase or decrease to prior period LTVs, the Company will adjust revenue for the affected cohorts 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, 2020, the Company did not recognize any revenue adjustment related to prior period cohorts.

Enterprise Revenue

The Company refers to all non-commission revenue collectively as enterprise revenue, which includes the services and products described below.

Within the Company’s Medicare and Individual Family Plans, or IFP and Other segments, the Company provides trained licensed agents dedicated to carrier programs that assist in producing health insurance policies, typically prior to and during the annual enrollment period. The Company is compensated for the hours incurred on the carrier program at the time hours are incurred as well as performance-based enrollment fees relating to the Company enrolling individuals into health insurance plans. The Company recognizes revenue as control transfers over the term of the contract.

The Company recognizes revenue at a point in time resulting from the sale of leads to third parties and independent agents. The Company generates this revenue through the sale of leads sourced through its marketing efforts.

The Company provides certain customers access to its technology platform, where it charges for the implementation and monthly access to the software. This application allows carriers the use of the Company’s e-commerce platform to offer their own health insurance policies on their websites and agents to utilize the Company’s technology to power their online quoting, content and application submission processes. Typically, the Company is paid a one-time implementation fee, which it recognizes as control is transferred on a straight-line basis over the estimated term of the customer relationship (generally the initial term of the agreement), commencing once the technology is available for use by the third party.

The Company also provides services to its members and other customers in the Medicare—Internal and External segments related to its Encompass Platform. The Encompass Platform offerings include value-based care provider engagement, health risk assessments, social determinants of health screening, and preferred pharmacy programs. The Company recognizes revenue as it satisfies the related performance obligation.

Additionally, the Company earns development funds, based on delivering call volumes or providing marketing services to certain insurance carriers. The Company recognizes revenue as it satisfies the related performance obligation.

Disaggregation of Revenue

The table below depicts the disaggregation of revenue by product, and is consistent with how the Company evaluates its financial performance:


	Successor				Predecessor		Successor				Predecessor
	Three months ended September 30, 2020		Period from September 13, 2019 through September 30, 2019		Period from July 1, 2019 through September 12, 2019		Nine months ended September 30, 2020		Period from September 13, 2019 through September 30, 2019		Period from January 1, 2019 through September 12, 2019
Commission revenue:
Medicare
Medicare Advantage	$	95,334	$	12,543	$	47,765	$	282,251	$	12,543	$	119,828
Medicare Supplement	1,083		633		2,366		5,237		633		9,354
Prescription Drug Plans	414		90		439		1,409		90		1,486
Total Medicare	96,831		13,266		50,570