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, 2021
OR
| 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
(Exact name of registrant as specified in its charter)
_________________________
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
| (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 | ||||||||||||
$0.0001 par value per share | ||||||||||||||
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 | ☐ | Smaller reporting company | |||||||||||||||
| ☒ | Emerging growth company | ||||||||||||||||
| Accelerated filer | ☐ | ||||||||||||||||
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 2, 2021, the registrant had 114,773,928 shares of Class A common stock, $0.0001 par value per share, outstanding and 205,934,452 shares of Class B common stock, $0.0001 par value per share, outstanding.
TABLE OF CONTENTS
| PAGE | ||||||||||||||
| PART I - FINANCIAL INFORMATION | ||||||||||||||
| ITEM 1. | ||||||||||||||
| ITEM 2. | ||||||||||||||
| ITEM 3. | ||||||||||||||
| ITEM 4. | ||||||||||||||
| PART II - OTHER INFORMATION | ||||||||||||||
| ITEM 1. | ||||||||||||||
| ITEM 1A. | ||||||||||||||
| ITEM 2. | ||||||||||||||
| ITEM 3. | ||||||||||||||
| ITEM 4. | ||||||||||||||
| ITEM 5. | ||||||||||||||
| ITEM 6. | ||||||||||||||
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, (“the Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended, (“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 but not limited to the following: the marketing and sale of Medicare plans are subject to numerous, complex and frequently changing laws, regulations and guidelines; our business may be harmed if we lose our relationships with carriers or if our relationships with carriers change; our failure to grow our customer base or retain our existing customers; the time and cost of training agents are significant and can increase during a period of high attrition; carriers may reduce the commissions paid to us and change their underwriting practices in ways that reduce the number of, or impact the renewal or approval rates of, insurance policies sold through our platform; significant consolidation in the health insurance industry could adversely alter our relationships with carriers; information technology system failures could interrupt our operations; factors that impact our estimate of LTV (as defined below) may be adversely impacted; our ability to sell Medicare-related health insurance plans is largely dependent on our licensed health insurance agents; changes and developments in the health insurance system and laws and regulations governing the health insurance markets; our ability to effectively advertise our products on a cost-effective basis or market the availability of our products through specific channels; the Founders and Centerbridge have significant influence over us, including control over decisions that require the approval of stockholders; and other important factors described in the section titled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-K”), the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report on Form 10-Q, and in our other filings with the Securities and Exchange Commission.
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).
| GoHealth, Inc. | 2021 Form 10-Q | 1 | ||||||
•“Centerbridge Acquisition” or “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 (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 (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, as further amended, 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, “Description Of Business And Significant Accounting Policies,” 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:
•“Adjusted EBITDA” represents, as applicable for the period, EBITDA as further adjusted for share-based compensation expense, accelerated vesting of certain equity awards, loss on extinguishment of debt, loss on sublease, non-recurring legal fees, change in fair value of contingent consideration liability, IPO transaction costs, and severance costs.
•“Adjusted EBITDA Margin” refers to Adjusted EBITDA divided by net revenues.
•“Approved Submissions” refer to Submitted Policies approved by carriers for the identified product during the indicated period.
| GoHealth, Inc. | 2021 Form 10-Q | 2 | ||||||
•“CAC” refers to the cost to convert a prospect into a customer less other non-commission carrier revenue for such period. CAC is comprised of cost of revenue, marketing and advertising expenses and customer care and enrollment expenses less enterprise revenue and is presented on a per commissionable Approved Submission basis.
•“EBITDA” represents net income (loss) before interest expense, income tax expense (benefit) and depreciation and amortization expense.
•“LTV” 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 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.
•“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 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, excluding revenue adjustments recorded in the period, but relating to performance obligations satisfied in prior periods, 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 enterprise revenue and is presented on a per commissionable Approved Submission basis.
•“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 Condensed Consolidated Financial Statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). These non-GAAP financial measures include 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.
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.
| GoHealth, Inc. | 2021 Form 10-Q | 3 | ||||||
| PART I - Financial Information | ||
| ITEM 1. FINANCIAL STATEMENTS. | ||
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
GOHEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts, unaudited)
| Three months ended Sep. 30, | Nine months ended Sep. 30, | |||||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||
| Net revenues: | ||||||||||||||||||||||||||
| Commission | $ | $ | $ | $ | ||||||||||||||||||||||
| Enterprise | ||||||||||||||||||||||||||
| Net revenues | ||||||||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||
| Cost of revenue | ||||||||||||||||||||||||||
| Marketing and advertising | ||||||||||||||||||||||||||
| Customer care and enrollment | ||||||||||||||||||||||||||
| Technology | ||||||||||||||||||||||||||
| General and administrative | ||||||||||||||||||||||||||
| Change in fair value of contingent consideration liability | ||||||||||||||||||||||||||
| Amortization of intangible assets | ||||||||||||||||||||||||||
| Total operating expenses | ||||||||||||||||||||||||||
| Income (loss) from operations | ( | ( | ( | ( | ||||||||||||||||||||||
| Interest expense | ||||||||||||||||||||||||||
| Loss on extinguishment of debt | ||||||||||||||||||||||||||
| Other (income) expense, net | ( | ( | ||||||||||||||||||||||||
| Income (loss) before income taxes | ( | ( | ( | ( | ||||||||||||||||||||||
| Income tax expense (benefit) | ( | ( | ||||||||||||||||||||||||
| Net income (loss) | ( | ( | ( | ( | ||||||||||||||||||||||
| Net income (loss) attributable to non-controlling interests | ( | ( | ( | ( | ||||||||||||||||||||||
| Net income (loss) attributable to GoHealth, Inc. | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
Net loss per share (Note 7): | ||||||||||||||||||||||||||
| Net loss per share of Class A common stock — basic and diluted (1) | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Weighted-average shares of Class A common stock outstanding — basic and diluted | ||||||||||||||||||||||||||
(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. | 2021 Form 10-Q | 4 | ||||||
GOHEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands, unaudited)
| Three months ended Sep. 30, | Nine months ended Sep. 30, | |||||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||
| Net income (loss) | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Other comprehensive income (loss): | ||||||||||||||||||||||||||
| Foreign currency translation adjustments | ( | ( | ||||||||||||||||||||||||
| Comprehensive income (loss) | ( | ( | ( | ( | ||||||||||||||||||||||
| Comprehensive income (loss) attributable to non-controlling interests | ( | ( | ( | ( | ||||||||||||||||||||||
| Comprehensive income (loss) attributable to GoHealth, Inc. | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.
| GoHealth, Inc. | 2021 Form 10-Q | 5 | ||||||
GOHEALTH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts, unaudited)
| Sep. 30, 2021 | Dec. 31, 2020 | |||||||||||||
| Assets | ||||||||||||||
| Current assets: | ||||||||||||||
| Cash and cash equivalents | $ | $ | ||||||||||||
Accounts receivable, net of allowance for doubtful accounts of $ | ||||||||||||||
| Receivable from NVX Holdings, Inc. | ||||||||||||||
| Commissions receivable - current | ||||||||||||||
| Prepaid expense and other current assets | ||||||||||||||
| Total current assets | ||||||||||||||
| Commissions receivable - non-current | ||||||||||||||
| Other long-term assets | ||||||||||||||
| Property, equipment, and capitalized software, net | ||||||||||||||
| Intangible assets, net | ||||||||||||||
| Goodwill | ||||||||||||||
| Total assets | $ | $ | ||||||||||||
| Liabilities and Stockholders’ Equity | ||||||||||||||
| Current liabilities: | ||||||||||||||
| Accounts payable | $ | $ | ||||||||||||
| Accrued liabilities | ||||||||||||||
| Commissions payable - current | ||||||||||||||
| Deferred revenue | ||||||||||||||
| Current portion of long-term debt | ||||||||||||||
| Other current liabilities | ||||||||||||||
| Total current liabilities | ||||||||||||||
| Non-current liabilities: | ||||||||||||||
| Commissions payable - non-current | ||||||||||||||
| Long-term debt, net of current portion | ||||||||||||||
| Other non-current liabilities | ||||||||||||||
| Total non-current liabilities | ||||||||||||||
Commitments and Contingencies (Note 10) | ||||||||||||||
| Stockholders’ equity: | ||||||||||||||
Class A common stock – $ | ||||||||||||||
Class B common stock – $ | ||||||||||||||
Preferred stock – $ | ||||||||||||||
| Additional paid-in capital | ||||||||||||||
| Accumulated other comprehensive income (loss) | ( | |||||||||||||
| Accumulated deficit | ( | ( | ||||||||||||
| Total stockholders’ equity attributable to GoHealth, Inc. | ||||||||||||||
| Non-controlling interests | ||||||||||||||
| Total stockholders’ equity | ||||||||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||||||||
The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.
| GoHealth, Inc. | 2021 Form 10-Q | 6 | ||||||
GOHEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ / MEMBERS’ EQUITY
(in thousands, unaudited)
| Three months ended Sep. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Class A Common Stock | Class B Common Stock | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Non-Controlling Interest | Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at Jun. 30, 2021 | $ | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Class A common shares related to share-based compensation plans | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation expense | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Forfeitures of Time-Vesting Units | ( | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Redemption of LLC Interests | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at Sep. 30, 2021 | $ | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Three months ended Sep. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Class A Common Stock | Class B Common Stock | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Members’ Equity | Shares | Amount | Shares | Amount | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Non-Controlling Interest | Stockholders’/Members’ Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at Jun. 30, 2020 | $ | — | $ | — | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||||||||||||||||||||||||||||||
| Net loss prior to the Transactions | ( | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation expense prior to the Transactions | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment prior to the Transactions | ( | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Effect of the Transactions | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock sold in IPO, net of offering costs | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Effect of the Blocker Merger | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Effect of purchase of LLC Interests | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Settlement of Senior Preferred Earnout Units | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Assumption of contingent consideration liability by significant shareholder | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation expense upon vesting of performance-based profit units | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss subsequent to the Transactions | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation expense subsequent to the Transactions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment subsequent to the Transactions | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at Sep. 30, 2020 | $ | — | $ | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||
The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.
| GoHealth, Inc. | 2021 Form 10-Q | 7 | ||||||
GOHEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ / MEMBERS’ EQUITY
(in thousands, unaudited)
| Nine months ended Sep. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Class A Common Stock | Class B Common Stock | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Non-Controlling Interest | Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at Jan. 1, 2021 | $ | $ | $ | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Class A common shares related to share-based compensation plans | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation expense | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Forfeitures of Time-Vesting Units | ( | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Redemption of LLC Interests | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at Sep. 30, 2021 | $ | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Nine months ended Sep. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Class A Common Stock | Class B Common Stock | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Members’ Equity | Shares | Amount | Shares | Amount | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Non-Controlling Interest | Stockholders’/Members’ Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at Jan. 1, 2020 | $ | — | $ | — | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Senior Preferred Earnout Units | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Common Earnout Units | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common units | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss prior to the Transactions | ( | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation expense prior to the Transactions | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment prior to the Transactions | ( | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Effect of the Transactions | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock sold in IPO, net of offering costs | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Effect of the Blocker Merger | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Effect of purchase of LLC Interests | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Settlement of Senior Preferred Earnout Units | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Assumption of contingent consideration liability by significant shareholder | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation expense upon vesting of performance-based profit units | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss subsequent to the Transactions | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation expense subsequent to the Transactions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment subsequent to the Transactions | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at Sep. 30, 2020 | $ | — | $ | $ | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||
The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.
| GoHealth, Inc. | 2021 Form 10-Q | 8 | ||||||
GOHEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
| Nine months ended Sep. 30, | ||||||||||||||
| 2021 | 2020 | |||||||||||||
| Operating Activities | ||||||||||||||
| Net income (loss) | $ | ( | $ | ( | ||||||||||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||||||||
| Share-based compensation | ||||||||||||||
| Depreciation and amortization | ||||||||||||||
| Amortization of intangible assets | ||||||||||||||
| Amortization of debt discount and issuance costs | ||||||||||||||
| Change in fair value of contingent consideration | ||||||||||||||
| Loss on extinguishment of debt | ||||||||||||||
| Loss on sublease | ||||||||||||||
| Other non-cash items | ( | ( | ||||||||||||
| Changes in assets and liabilities: | ||||||||||||||
| Accounts receivable | ||||||||||||||
| Commissions receivable | ( | ( | ||||||||||||
| Prepaid expenses and other assets | ( | |||||||||||||
| Accounts payable | ( | |||||||||||||
| Accrued liabilities | ( | |||||||||||||
| Deferred revenue | ( | |||||||||||||
| Commissions payable | ||||||||||||||
| Other liabilities | ||||||||||||||
| Net cash (used in) provided by operating activities | ( | |||||||||||||
| Investing Activities | ||||||||||||||
| Purchases of property, equipment and software | ( | ( | ||||||||||||
| Net cash used in investing activities | ( | ( | ||||||||||||
| Financing Activities | ||||||||||||||
| Proceeds from borrowings | ||||||||||||||
| Repayment of borrowings | ( | ( | ||||||||||||
| Call premium paid for debt extinguishment | ( | |||||||||||||
| Debt issuance cost payments | ( | ( | ||||||||||||
| Principal payments under capital lease obligations | ( | ( | ||||||||||||
| Cash received on advancement to NVX Holdings, Inc. | ||||||||||||||
| Proceeds from issuance of Class A common stock sold in initial public offering, net of offering costs | ||||||||||||||
| Payment of partial consideration to Blocker Shareholders in the Blocker Merger | ( | |||||||||||||
| Purchase of LLC Interests from Continuing Equity Owners | ( | |||||||||||||
| Settlement of Senior Preferred Earnout Units | ( | |||||||||||||
| Proceeds received upon issuance of common units | ||||||||||||||
| Net cash provided by financing activities | ||||||||||||||
| Effect of exchange rate changes on cash and cash equivalents | ( | ( | ||||||||||||
| Increase (decrease) in cash and cash equivalents | ( | |||||||||||||
| Cash and cash equivalents at beginning of period | ||||||||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||||||||
| Supplemental Disclosure of Cash Flow Information | ||||||||||||||
| Non-cash investing and financing activities: | ||||||||||||||
| Purchases of property, equipment and software included in accounts payable | $ | $ | ||||||||||||
| Issuance of Senior Preferred Earnout Units to settle contingent consideration liability | $ | $ | ||||||||||||
| Issuance of common A and B units to settle contingent consideration liability | $ | $ | ||||||||||||
| Net issuance of Class A and Class B common stock in connection with the Transactions | $ | $ | ||||||||||||
| Settlement of contingent consideration liability | $ | $ | ||||||||||||
The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.
| GoHealth, Inc. | 2021 Form 10-Q | 9 | ||||||
GOHEALTH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except 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 and Medicare-focused digital health company whose mission is to improve access to 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 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 shares of the Company's Class B common stock, including the issuance of 229,399 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 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 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 40,683 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 25,480 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; and
| GoHealth, Inc. | 2021 Form 10-Q | 10 | ||||||
•the Company entered into (1) a stockholders’ agreement with Centerbridge and NVX Holdings, Inc., (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 Condensed Consolidated Financial Statements and reports a non-controlling interest for the economic interest in GHH, LLC held by the Continuing Equity Owners. Substantially concurrently with the consummation of the IPO, the existing limited liability company agreement of GHH, LLC was amended and restated to, among other things, recapitalize its capital structure by creating a single new class of units (the “common units”) and provide for a right of redemption of common units (subject in certain circumstances to time-based vesting requirements and certain other restrictions) in exchange for, at the Company’s election, cash or newly-issued shares of Class A common stock on a one -for-one basis. In connection with any redemption, the Company will receive a corresponding number of common units, increasing the Company’s total ownership interest in GHH, LLC.
Immediately following the completion of the Transactions and the IPO, the Company owned 26.8 % of the economic interests in GHH, LLC, while the Continuing Equity Owners owned the remaining 73.2 % of the economic interests in GHH, LLC. Net income and loss is allocated to the Continuing Equity Owners on a pro rata basis, assuming that any Class B common units that are subject to time-based vesting requirements are fully vested.
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 into 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”).
Use of Estimates
The preparation of the Condensed Consolidated Financial Statements in conformity with 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, 2020.
Seasonality
A greater number of the Company’s Medicare-related health insurance plans are sold in its fourth quarter during the Medicare annual enrollment period when Medicare-eligible individuals are permitted to change their Medicare Advantage and Medicare Part D prescription drug coverage for the following year. As a result, the Company’s Medicare plan-related commission revenue is typically highest in the Company’s fourth quarter.
The majority of the Company’s individual and family health insurance plans are sold in its fourth quarter during the annual open enrollment period as defined under the federal Patient Protection and ACA and related amendments in the Health Care and
| GoHealth, Inc. | 2021 Form 10-Q | 11 | ||||||
Recent Accounting Pronouncements
Recent Accounting Pronouncements Not Yet Adopted
The Company qualifies as an “emerging growth company” pursuant to the provisions of the Jumpstart Our Business Startups Act (“JOBS Act”). The JOBS Act allows an emerging growth company to delay adoption of new or revised accounting standards applicable to public companies until such standards are applicable to private companies. The Company has elected to use the adoption dates applicable to private companies. In the event that the Company no longer meets the requirements of being an emerging growth company, the effective adoption dates of such standards would be that of non-emerging growth companies.
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842). The guidance specifies that lessees will need to recognize a right-of-use asset and a lease liability for virtually all their leases except those which meet the definition of a short-term lease. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or financing. Classification will be based on criteria that are similar to those applied in current lease accounting, but without explicit bright lines. As the Company expects to lose its emerging growth company (“EGC”) status as of December 31, 2021, the new guidance will be effective January 1, 2021 and will be applied in the Company’s Annual Report on Form 10-K for the year ending December 31, 2021. The Company expects to elect the optional transition method which allows entities to continue to apply historical accounting guidance in the comparative periods presented in the year of adoption. At transition, lessees and lessors may elect to apply a package of practical expedients permitting entities not to reassess: (i) whether any expired or existing contracts are or contain leases; (ii) lease classification for any expired or existing leases and (iii) whether initial direct costs for any expired or existing leases qualify for capitalization under the amended guidance. These practical expedients must be elected as a package and consistently applied. The Company expects to apply the package of practical expedients upon adoption. While we are still finalizing the impact this guidance will have on our consolidated financial statements, based on our lease portfolio as of January 1, 2021, the Company expects it will record right-of-use assets and lease liabilities, primarily related to real estate, in a range of $25 30
In November 2019, the FASB issued ASU 2019-11, Financial Instruments – Credit Losses (Topic 326), which amends the guidance for accounting for assets that are potentially subject to credit risk. The amendments affect contract assets, loans, debt securities, trade receivables, net investments in leases, off-balance-sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. As the Company expects to lose its EGC status as of December 31, 2021, the new guidance will be effective January 1, 2021 and will be applied in the Company’s Annual Report on Form 10-K for the year ending December 31, 2021. The Company is currently evaluating the new guidance to determine the impact it will have on its Condensed Consolidated Financial Statements and related disclosures.
In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740). The guidance simplifies the accounting for income taxes. As the Company expects to lose its EGC status as of December 31, 2021, the new guidance will be effective January 1, 2021 and will be applied in the Company’s Annual Report on Form 10-K for the year ending December 31, 2021. The Company is currently evaluating the guidance to determine the impact it will have on its Condensed Consolidated Financial Statements and related disclosures.
2. FAIR VALUE MEASUREMENTS
The Company defines fair value as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques the Company uses to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Company classifies the inputs used to measure fair value into the following hierarchy:
| Level 1 Inputs | Unadjusted quoted prices in active markets for identical assets or liabilities. | |||||||
| Level 2 Inputs | Unadjusted quoted prices in active markets for similar assets or liabilities; unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability. | |||||||
| Level 3 Inputs | Unobservable inputs for the asset or liability. | |||||||
Fair Value Measurements
In connection with the Acquisition, GHH, LLC agreed to pay additional contingent consideration if certain financial targets are achieved. The fair value of the contingent consideration liability was measured using a Monte Carlo simulation and is discounted
| GoHealth, Inc. | 2021 Form 10-Q | 12 | ||||||
using a rate that appropriately captures the risk associated with the obligation. In connection with the IPO, a significant shareholder assumed the outstanding contingent consideration liability and the Company recorded the settlement of the $62.4 million liability as an increase to additional paid-in capital. The following table sets forth the changes to the fair value of the contingent consideration for the nine months ended September 30, 2020.
| (in thousands) | ||||||||
| Balance at Dec. 31, 2019 | $ | |||||||
| Settlement of 2019 earnout | ( | |||||||
| 2020 earnout fair value adjustment | ||||||||
| Settlement of 2020 earnout | ( | |||||||
| Balance at Sep. 30, 2020 | $ | |||||||
The carrying amount of certain financial instruments, including cash and cash equivalents, accounts receivable, unbilled receivables, commissions receivable, accounts payable, accrued expenses, and commissions payable approximate fair value due to the short maturity of these instruments. Commissions receivable are recorded at constrained lifetime values. The carrying value of debt approximates fair value due to the variable nature of interest rates.
3. GOODWILL AND INTANGIBLE ASSETS, NET
Goodwill
During 2019, the Company allocated $380.3 million and $6.2 million of the goodwill recognized in connection with the Acquisition to its Medicare—Internal segment and Medicare—External segment, respectively, based on an estimate of the relative fair value of each reportable segment.
The Company tests goodwill for impairment at the reporting unit level annually on November 30th and whenever events or circumstances make it more likely than not that an impairment may have occurred. A reporting unit is an operating segment or one level below an operating segment to which goodwill is assigned when initially recorded. The Company has four reporting units, which are the same as its four operating segments.
There was no
Intangible Assets
The gross carrying amounts, accumulated amortization and net carrying amounts of the Company’s definite-lived amortizable intangible assets, as well as its indefinite-lived intangible trade names, are as follows:
| Sep. 30, 2021 | ||||||||||||||||||||
| (in thousands) | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||||||
| Developed technology | $ | $ | $ | |||||||||||||||||
| Customer relationships | ||||||||||||||||||||
| Total intangible assets subject to amortization | $ | $ | $ | |||||||||||||||||
| Indefinite-lived trade names | ||||||||||||||||||||
| Total intangible assets | $ | |||||||||||||||||||
| Dec. 31, 2020 | ||||||||||||||||||||
| (in thousands) | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||||||
| Developed technology | $ | $ | $ | |||||||||||||||||
| Customer relationships | ||||||||||||||||||||
| Total intangible assets subject to amortization | $ | $ | $ | |||||||||||||||||
| Indefinite-lived trade names | ||||||||||||||||||||
| Total intangible assets | $ | |||||||||||||||||||
There was no
| GoHealth, Inc. | 2021 Form 10-Q | 13 | ||||||
As of September 30, 2021, expected amortization expense related to intangible assets for each of the five succeeding years is as follows:
| (in thousands) | Developed Technology | Customer Relationships | Total | |||||||||||||||||
| Remainder of 2021 | $ | $ | $ | |||||||||||||||||
| 2022 | ||||||||||||||||||||
| 2023 | ||||||||||||||||||||
| 2024 | ||||||||||||||||||||
| 2025 | ||||||||||||||||||||
| Thereafter | ||||||||||||||||||||
| Total | $ | $ | $ | |||||||||||||||||
4. LONG-TERM DEBT
The Company’s long-term debt consisted of the following:
| (in thousands) | Sep. 30, 2021 | Dec. 31, 2020 | ||||||||||||
| Term Loan Facilities | $ | $ | ||||||||||||
| Revolving Credit Facilities | ||||||||||||||
| Less: Unamortized debt discount and issuance costs | ( | ( | ||||||||||||
| Total debt | $ | $ | ||||||||||||
| Less: Current portion of long-term debt | ( | ( | ||||||||||||
| Total long-term debt | $ | $ | ||||||||||||
Term Loan Facilities
On September 13, 2019, in connection with the Acquisition, Norvax (“the Borrower”) entered into a first lien credit agreement (the “Credit Agreement”) which provided for a $300.0 million aggregate principal amount senior secured term loan facility (the “Initial Term Loan Facility”). During 2020, the Company entered into a series of amendments to the Credit Agreement to provide for, among other items as further described below, $117.0 million of incremental term loans (the “Incremental Term Loan Facility”).
On June 11, 2021, the Company entered into Amendment No. 5 to the Credit Agreement and Incremental Facility Agreement (“Amendment No. 5”). Amendment No. 5 creates a new class of incremental term loans (the “2021 Incremental Term Loans”) in an aggregate principal amount equal to $310.0 million, which was used to refinance $295.5 million of outstanding principal under the Initial Term Loan Facility, pay the related accrued interest and fund the prepayment premium. In connection with Amendment No. 5 and the refinancing of the Initial Term Loan, the Company recognized an $11.9 million loss on debt extinguishment, representing the 2 % prepayment premium of $5.9 million and the write-down of deferred financing costs and debt discounts of $6.0 million. The Company incurred $1.7 million of debt issuance costs associated with Amendment No. 5, which are being amortized over the life of the debt to interest expense using the effective interest method.
The Company collectively refers to the Initial Term Loan Facility, the Incremental Term Loan Facility, and the 2021 Incremental Term Loans as the “Term Loan Facilities”.
As of September 30, 2021, the Company had a principal amount of $115.2 million and $309.2 million outstanding under the Incremental Term Loan Facility and the 2021 Incremental Term Loans, respectively. As of December 31, 2020, the Company had a principal amount of $296.3 million and $116.1 million outstanding under the Initial Term Loan Facility and Incremental Term Loan Facility, respectively. The Incremental Term Loan Facility effective interest rate was 7.5 5.0 % at September 30, 2021. The Initial Term Loan Facility effective interest rate was 7.5 % at December 31, 2020.
Borrowings under the Incremental Term Loan Facility are, at the option of the Borrower, either (i) alternate base rate (“ABR”) plus 5.50 % per annum or (ii) LIBOR plus 6.50 % per annum. The 2021 Incremental Term Loans bear interest at either (i) ABR plus 3.00 % per annum or (ii) LIBOR plus