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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
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☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2022
OR
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☐ | 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)
_________________________
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Delaware | 85-0563805 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
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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:
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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.
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Large accelerated filer | | ☐ | Smaller reporting company | | ☒ |
Non-accelerated filer | | ☒ | 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 August 8, 2022, the registrant had 132,157,355 shares of Class A common stock, $0.0001 par value per share, outstanding and 197,128,400 shares of Class B common stock, $0.0001 par value per share, outstanding.
TABLE OF CONTENTS | | | | | | | | | | | | | | |
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PART I - FINANCIAL INFORMATION |
ITEM 1. | | | | |
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ITEM 2. | | | | |
ITEM 3. | | | | |
ITEM 4. | | | | |
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PART II - OTHER INFORMATION |
ITEM 1. | | | | |
ITEM 1A. | | | | |
ITEM 2. | | | | |
ITEM 3. | | | | |
ITEM 4. | | | | |
ITEM 5. | | | | |
ITEM 6. | | | | |
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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, (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; 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; factors that impact our estimate of LTV (as defined below) may be adversely impacted; our management and independent auditors have identified a material weakness in our internal controls over financial reporting, and we may be unable to develop, implement and maintain appropriate controls in future periods, which may lead to errors or omissions in our financial statements; the potential delisting of our common stock from the Nasdaq Global Market (“NASDAQ”); volatility in general economic conditions, including inflation, interest rates, and other commodity prices and exchange rates may impact our financial position and performance; we currently depend on a small group of carriers for a substantial portion of our revenue; information technology system failures could interrupt our operations; our ability to sell Medicare-related health insurance plans is largely dependent on our licensed health insurance agents; operating and growing our business may require additional capital; our strategic focus on cash flow optimization may lead to decreased revenue or otherwise adversely affect our business; we may lose key employees or fail to attract qualified employees; our operations may be adversely impacted by a reduction in employee headcount or other similar actions; the Founders (as defined below) and Centerbridge (as defined below) 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, 2021 (the “2021 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 to GoHealth, Inc., and, unless otherwise stated, all of its direct and indirect subsidiaries, including GoHealth Holdings, LLC (formerly known as Blizzard Parent, LLC).
•“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., 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
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GoHealth, Inc. | 2022 Form 10-Q | 1 |
voting control (including any such fund or entity formed to hold shares of Class A common stock for the Blocker Shareholders).
•“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 Equity Partners, 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 Non-Executive Co-Chair of the Board, and Clinton P. Jones, our Co-Founder and Executive Chair of the Board.
•“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.
•“Norvax” 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.
•“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.
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 certain items discussed in Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
•“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.
•“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 other revenue and is presented on a per commissionable Approved Submission basis.
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GoHealth, Inc. | 2022 Form 10-Q | 2 |
•“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 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, excluding revenue adjustments recorded in the period, but relating to performance obligations satisfied in prior periods, 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, excluding cost of revenue adjustments recorded in the period, but relating to performance obligations satisfied in prior periods, 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.
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GoHealth, Inc. | 2022 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 Jun. 30, | | Six months ended Jun. 30, |
| | 2022 | | 2021 | | 2022 | | 2021 |
Net revenues: | | | | | | | | |
Commission | | $ | 118,038 | | | $ | 147,508 | | | $ | 327,677 | | | $ | 321,489 | |
Enterprise | | 40,616 | | | 49,394 | | | 101,570 | | | 79,592 | |
Net revenues | | 158,654 | | | 196,902 | | | 429,247 | | | 401,081 | |
Operating expenses: | | | | | | | | |
Cost of revenue | | 51,074 | | | 37,442 | | | 118,997 | | | 85,817 | |
Marketing and advertising | | 44,714 | | | 55,735 | | | 128,747 | | | 110,219 | |
Customer care and enrollment | | 66,542 | | | 61,927 | | | 144,997 | | | 109,021 | |
Technology | | 10,749 | | | 11,983 | | | 23,508 | | | 21,600 | |
General and administrative | | 38,106 | | | 25,297 | | | 67,323 | | | 44,982 | |
| | | | | | | | |
Amortization of intangible assets | | 23,515 | | | 23,515 | | | 47,029 | | | 47,029 | |
| | | | | | | | |
Operating lease impairment charges | | 24,995 | | | — | | | 24,995 | | | — | |
Total operating expenses | | 259,695 | | | 215,899 | | | 555,596 | | | 418,668 | |
Income (loss) from operations | | (101,041) | | | (18,997) | | | (126,349) | | | (17,587) | |
Interest expense | | 12,724 | | | 8,277 | | | 24,122 | | | 16,965 | |
Loss on extinguishment of debt | | — | | | 11,935 | | | — | | | 11,935 | |
Other (income) expense, net | | (13) | | | 44 | | | 50 | | | 57 | |
Income (loss) before income taxes | | (113,752) | | | (39,253) | | | (150,521) | | | (46,544) | |
Income tax (benefit) expense | | — | | | (32) | | | 472 | | | (63) | |
Net income (loss) | | (113,752) | | | (39,221) | | | (150,993) | | | (46,481) | |
Net income (loss) attributable to non-controlling interests | | (69,933) | | | (27,217) | | | (93,691) | | | (32,390) | |
Net income (loss) attributable to GoHealth, Inc. | | $ | (43,819) | | | $ | (12,004) | | | $ | (57,302) | | | $ | (14,091) | |
Net loss per share (Note 7): | | | | | | | | |
Net loss per share of Class A common stock — basic and diluted | | $ | (0.35) | | | $ | (0.12) | | | $ | (0.48) | | | $ | (0.14) | |
Weighted-average shares of Class A common stock outstanding — basic and diluted | | 124,440 | | | 102,300 | | | 120,346 | | | 97,349 | |
The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements
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GoHealth, Inc. | 2022 Form 10-Q | 4 |
GOHEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands, unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended Jun. 30, | | Six months ended Jun. 30, |
| | 2022 | | 2021 | | 2022 | | 2021 |
Net income (loss) | | $ | (113,752) | | | $ | (39,221) | | | $ | (150,993) | | | $ | (46,481) | |
Other comprehensive income (loss): | | | | | | | | |
Foreign currency translation adjustments | | (345) | | | (106) | | | (462) | | | (99) | |
Comprehensive income (loss) | | (114,097) | | | (39,327) | | | (151,455) | | | (46,580) | |
Comprehensive income (loss) attributable to non-controlling interests | | (70,145) | | | (27,291) | | | (93,978) | | | (32,459) | |
Comprehensive income (loss) attributable to GoHealth, Inc. | | $ | (43,952) | | | $ | (12,036) | | | $ | (57,477) | | | $ | (14,121) | |
The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.
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GoHealth, Inc. | 2022 Form 10-Q | 5 |
GOHEALTH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts, unaudited)
| | | | | | | | | | | | | | |
| | Jun. 30, 2022 | | Dec. 31, 2021 |
Assets | | | | |
Current assets: | | | | |
Cash and cash equivalents | | $ | 76,156 | | | $ | 84,361 | |
Accounts receivable, net of allowance for doubtful accounts of $905 in 2022 and $558 in 2021 | | 38,250 | | | 17,276 | |
| | | | |
Commissions receivable - current | | 198,647 | | | 268,663 | |
Prepaid expense and other current assets | | 19,955 | | | 58,695 | |
Total current assets | | 333,008 | | | 428,995 | |
Commissions receivable - non-current | | 961,999 | | | 993,844 | |
Operating lease ROU asset | | 22,987 | | | 23,462 | |
Other long-term assets | | 2,437 | | | 3,608 | |
Property, equipment, and capitalized software, net | | 29,986 | | | 24,273 | |
Intangible assets, net | | 547,640 | | | 594,669 | |
| | | | |
Total assets | | $ | 1,898,057 | | | $ | 2,068,851 | |
Liabilities and Stockholders’ Equity | | | | |
Current liabilities: | | | | |
Accounts payable | | $ | 14,641 | | | $ | 39,843 | |
Accrued liabilities | | 33,234 | | | 52,788 | |
Commissions payable - current | | 60,294 | | | 104,160 | |
Short-term operating lease liability | | 9,998 | | | 6,126 | |
Deferred revenue | | 2,691 | | | 536 | |
Current portion of long-term debt | | 5,270 | | | 5,270 | |
Other current liabilities | | 15,764 | | | 8,344 | |
Total current liabilities | | 141,892 | | | 217,067 | |
Non-current liabilities: | | | | |
Commissions payable - non-current | | 291,990 | | | 274,403 | |
Long-term operating lease liability | | 40,947 | | | 19,776 | |
Long-term debt, net of current portion | | 662,018 | | | 665,115 | |
| | | | |
Other non-current liabilities | | 2,889 | | | — | |
Total non-current liabilities | | 997,844 | | | 959,294 | |
Commitments and Contingencies (Note 11) | | | | |
Stockholders’ equity: | | | | |
| | | | |
Class A common stock – $0.0001 par value; 1,100,000 shares authorized; 131,965 and 115,487 shares issued; 131,776 and 115,487 shares outstanding at June 30, 2022 and December 31, 2021, respectively. | | 13 | | | 11 | |
Class B common stock – $0.0001 par value; 579,555 and 587,360 shares authorized; 197,547 and 205,352 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively. | | 20 | | | 21 | |
Preferred stock – $0.0001 par value; 20,000 shares authorized; no shares issued and outstanding at June 30, 2022 and December 31, 2021. | | — | | | — | |
Treasury stock – at cost; 189 shares of Class A common stock at June 30, 2022 | | (344) | | | — | |
Additional paid-in capital | | 612,627 | | | 561,447 | |
Accumulated other comprehensive income (loss) | | (234) | | | (59) | |
Accumulated deficit | | (265,619) | | | (208,317) | |
Total stockholders’ equity attributable to GoHealth, Inc. | | 346,463 | | | 353,103 | |
Non-controlling interests | | 411,858 | | | 539,387 | |
Total stockholders’ equity | | 758,321 | | | 892,490 | |
Total liabilities and stockholders’ equity | | $ | 1,898,057 | | | $ | 2,068,851 | |
The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.
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GoHealth, Inc. | 2022 Form 10-Q | 6 |
GOHEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(in thousands, unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended Jun. 30, 2022 |
| | Class A Common Stock | | Class B Common Stock | | Treasury Stock | | | | | | | | | | |
| | Shares | | Amount | | Shares | | Amount | | Shares | | Amount | | Additional Paid-In Capital | | Accumulated Deficit | | Accumulated Other Comprehensive Income (Loss) | | Non-Controlling Interest | | Stockholders’ Equity |
Balance at Apr. 1, 2022 | | 121,944 | | | $ | 12 | | | 199,338 | | | $ | 20 | | | (169) | | | $ | (329) | | | $ | 583,323 | | | $ | (221,800) | | | $ | (101) | | | $ | 498,833 | | | $ | 859,958 | |
Net loss | | | | | | | | | | | | | | | | (43,819) | | | | | (69,933) | | | (113,752) | |
Issuance of Class A common shares related to share-based compensation plans | | 8,427 | | | 1 | | | | | | | | | | | 336 | | | | | | | | | 337 | |
Share-based compensation expense | | | | | | | | | | | | | | 12,138 | | | | | | | | | 12,138 | |
Foreign currency translation adjustment | | | | | | | | | | | | | | | | | | (133) | | | (212) | | | (345) | |
Class A common shares repurchased for employee tax withholdings | | | | | | | | | | (20) | | | (15) | | | | | | | | | | | (15) | |
Forfeitures of Time-Vesting Units | | | | | | (197) | | | — | | | | | | | | | | | | | | | — | |
Redemption of LLC Interests | | 1,594 | | | — | | | (1,594) | | | — | | | | | | | 16,830 | | | | | | | (16,830) | | | — | |
Balance at Jun. 30, 2022 | | 131,965 | | | $ | 13 | | | 197,547 | | | $ | 20 | | | (189) | | | $ | (344) | | | $ | 612,627 | | | $ | (265,619) | | | $ | (234) | | | $ | 411,858 | | | $ | 758,321 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended Jun. 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 Apr. 1, 2021 | | 98,518 | | | $ | 10 | | | 222,606 | | | $ | 22 | | | $ | 465,936 | | | $ | (21,047) | | | $ | 19 | | | $ | 951,472 | | | $ | 1,396,412 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Net loss | | | | | | | | | | | | (12,004) | | | | | (27,217) | | | (39,221) | | | | | |
Issuance of Class A common shares related to share-based compensation plans | | 62 | | | — | | | | | | | 476 | | | | | | | | | 476 | | | | | |
Share-based compensation expense | | | | | | | | | | 7,599 | | | | | | | | | 7,599 | | | | | |
Foreign currency translation adjustment | | | | | | | | | | | | | | (32) | | | (74) | | | (106) | | | | | |
Forfeitures of Time-Vesting Units | | | | | | (373) | | | — | | | | | | | | | | | — | | | | | |
Redemption of LLC Interests | | 6,738 | | | — | | | (6,738) | | | — | | | 29,678 | | | | | | | (29,678) | | | — | | | | | |
Balance at Jun. 30, 2021 | | 105,318 | | | $ | 10 | | | 215,495 | | | $ | 22 | | | 503,689 | | | $ | (33,051) | | | $ | (13) | | | $ | 894,503 | | | $ | 1,365,160 | | | | | |
The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.
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GoHealth, Inc. | 2022 Form 10-Q | 7 |
GOHEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(in thousands, unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six months ended Jun. 30, 2022 |
| | Class A Common Stock | | Class B Common Stock | | Treasury Stock | | | | | | | | | | |
| | Shares | | Amount | | Shares | | Amount | | Shares | | Amount | | Additional Paid-In Capital | | Accumulated Deficit | | Accumulated Other Comprehensive Income (Loss) | | Non-Controlling Interest | | Stockholders’ Equity |
Balance at Jan. 1, 2022 | | 115,487 | | | $ | 11 | | | 205,352 | | | $ | 21 | | | — | | | $ | — | | | $ | 561,447 | | | $ | (208,317) | | | $ | (59) | | | $ | 539,387 | | | $ | 892,490 | |
Net loss | | | | | | | | | | | | | | | | (57,302) | | | | | (93,691) | | | (150,993) | |
Issuance of Class A common shares related to share-based compensation plans | | 8,940 | | | 1 | | | | | | | | | | | 336 | | | | | | | | | 337 | |
Share-based compensation expense | | | | | | | | | | | | | | 17,293 | | | | | | | | | 17,293 | |
Foreign currency translation adjustment | | | | | | | | | | | | | | | | | | (175) | | | (287) | | | (462) | |
Class A common shares repurchased for employee tax withholdings | | | | | | | | | | (189) | | | (344) | | | | | | | | | | | (344) | |
Forfeitures of Time-Vesting Units | | | | | | (267) | | | — | | | | | | | | | | | | | | | — | |
Redemption of LLC Interests | | 7,538 | | | 1 | | | (7,538) | | | (1) | | | | | | | 33,551 | | | | | | | (33,551) | | | — | |
Balance at Jun. 30, 2022 | | 131,965 | | | $ | 13 | | | 197,547 | | | $ | 20 | | | (189) | | | $ | (344) | | | $ | 612,627 | | | $ | (265,619) | | | $ | (234) | | | $ | 411,858 | | | $ | 758,321 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended Jun. 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 | | 84,196 | | | $ | 8 | | | 236,997 | | | $ | 24 | | | $ | 399,169 | | | $ | (18,802) | | | $ | 17 | | | $ | 1,018,739 | | | $ | 1,399,155 | | | | | | |
Cumulative impact of Topic 842 | | | | | | | | | | | | (17) | | | | | (46) | | | (63) | | | | | | |
Cumulative impact of Topic 326 | | | | | | | | | | | | (141) | | | | | (398) | | | (539) | | | | | | |
Net income (loss) | | | | | | | | | | | | (14,091) | | | | | (32,390) | | | (46,481) | | | | | | |
Issuance of Class A common shares related to share-based compensation plans | | 74 | | | — | | | | | | | 476 | | | | | | | | | 476 | | | | | | |
Share-based compensation expense | | | | | | | | | | 12,711 | | | | | | | | | 12,711 | | | | | | |
Foreign currency translation adjustment | | | | | | | | | | | | | | (30) | | | (69) | | | (99) | | | | | | |
Forfeitures of Time-Vesting Units | | | | | | (454) | | | — | | | | | | | | | | | — | | | | | | |
Redemption of LLC Interests | | 21,048 | | | 2 | | | (21,048) | | | (2) | | | 91,333 | | | | | | | (91,333) | | | — | | | | | | |
Balance at Jun. 30, 2021 | | 105,318 | | | $ | 10 | | | 215,495 | | | $ | 22 | | | $ | 503,689 | | | $ | (33,051) | | | $ | (13) | | | $ | 894,503 | | | $ | 1,365,160 | | | | | | |
The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.
| | | | | | | | |
GoHealth, Inc. | 2022 Form 10-Q | 8 |
GOHEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
| | | | | | | | | | | | | | |
| | Six months ended Jun. 30, |
| | 2022 | | 2021 |
Operating Activities | | | | |
Net loss | | $ | (150,993) | | | $ | (46,481) | |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | | | | |
Share-based compensation | | 17,293 | | | 12,711 | |
Depreciation and amortization | | 5,330 | | | 4,076 | |
Amortization of intangible assets | | 47,029 | | | 47,029 | |
Amortization of debt discount and issuance costs | | 1,381 | | | 1,262 | |
| | | | |
Loss on extinguishment of debt | | — | | | 11,935 | |
| | | | |
Operating lease impairment charges | | 24,995 | | | — | |
Non-cash lease expense | | 2,862 | | | 2,451 | |
Other non-cash items | | 29 | | | (846) | |
Changes in assets and liabilities: | | | | |
Accounts receivable | | (21,119) | | | (2,702) | |
Commissions receivable | | 101,928 | | | (63,675) | |
Prepaid expenses and other assets | | 39,795 | | | (11,778) | |
Accounts payable | | (25,885) | | | 6,114 | |
Accrued liabilities | | (19,898) | | | 3,993 | |
Deferred revenue | | 2,155 | | | (36) | |
Commissions payable | | (26,279) | | | 4,742 | |
Operating lease liabilities | | (2,993) | | | (2,406) | |
Other liabilities | | 10,747 | | | 1,361 | |
Net cash provided by (used in) operating activities | | 6,377 | | | (32,250) | |
Investing Activities | | | | |
| | | | |
Purchases of property, equipment and software | | (9,658) | | | (7,909) | |
Net cash used in investing activities | | (9,658) | | | (7,909) | |
Financing Activities | | | | |
Proceeds from borrowings | | — | | | 310,000 | |
Repayment of borrowings | | (2,635) | | | (296,835) | |
Call premium paid for debt extinguishment | | — | | | (5,910) | |
| | | | |
| | | | |
| | | | |
Debt issuance cost payments | | (1,725) | | | (1,608) | |
Principal payments under finance lease obligations | | (103) | | | (154) | |
| | | | |
Cash received on advancement to NVX Holdings, Inc. | | — | | | 3,395 | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
Net cash (used in) provided by financing activities | | (4,463) | | | 8,888 | |
Effect of exchange rate changes on cash and cash equivalents | | (461) | | | (100) | |
Increase (decrease) in cash and cash equivalents | | (8,205) | | | (31,371) | |
Cash and cash equivalents at beginning of period | | 84,361 | | | 144,234 | |
Cash and cash equivalents at end of period | | $ | 76,156 | | | $ | 112,863 | |
Supplemental Disclosure of Cash Flow Information | | | | |
Non-cash investing and financing activities: | | | | |
Purchases of property, equipment and software included in accounts payable | | $ | 683 | | | $ | 2,233 | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements.
| | | | | | | | |
GoHealth, Inc. | 2022 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 the Company’s initial public offering (the “IPO”) 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"). Following the IPO and 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 IPO (as defined below), 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.
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.
GHH, LLC is a holding company with no operating assets or operations and was formed to acquire a 100% equity interest in 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.
The accompanying Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information, but do not include all information and footnote disclosures required under 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. Certain prior period amounts have been reclassified to conform with the current period presentation. Effective on December 31, 2021, we lost our emerging growth company ("EGC") status, which accelerated the adoption of Accounting Standards Update (“ASU”) 2016-02, Leases and ASU 2019-11, Financial Instruments – Credit Losses. As a result, we recast our previously reported consolidated financial statements effective January 1, 2021 to reflect the adoption of these standards.
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
| | | | | | | | |
GoHealth, Inc. | 2022 Form 10-Q | 10 |
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, 2021.
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 Education Reconciliation Act. Individuals and families generally are not able to purchase individual and family health insurance outside of the open enrollment period, unless they qualify for a special enrollment period as a result of certain qualifying events, such as losing employer-sponsored health insurance or moving to another state. As a result, the Company’s individual and family plan-related commission revenue is typically highest in the Company’s fourth quarter.
Recent Accounting Pronouncements
Recently Adopted Accounting Pronouncements
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. The Company adopted the new guidance effective January 1, 2021. The Company elected 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 applied the package of practical expedients upon adoption. As a result of adopting this standard, on January 1, 2021, the Company recorded lease liabilities of $29.3 million, right-of-use assets of $28.0 million, and an immaterial cumulative catch-up adjustment to opening equity. The adoption of this new standard did not have a material impact on the Company’s consolidated statements of operations, comprehensive income (loss), or cash flows. The Company has included expanded disclosures on the condensed consolidated balance sheets and in Note 10 to the Condensed Consolidated Financial Statements.
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. The Company adopted the new guidance effective January 1, 2021. As a result of adopting this standard, on January 1, 2021, the Company recorded a cumulative adjustment to opening equity of $0.5 million. The adoption of this new standard did not have a material impact on the Company’s consolidated statements of operations, comprehensive income (loss), or cash flows.
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
| | | | | | | | |
GoHealth, Inc. | 2022 Form 10-Q | 11 |
The carrying amount of certain financial instruments, including cash and cash equivalents, accounts receivable, unbilled receivables, accounts payable, and accrued expenses approximate fair value due to the short maturity of these instruments. The carrying value of debt approximates fair value due to the variable nature of interest rates.
As part of the Company’s continued cost savings initiatives, the Company is actively looking to terminate or sublease certain office spaces and call centers. These actions resulted in a $25.0 million operating lease impairment charge for the three and six months ended June 30, 2022, reducing the carrying value of the associated ROU assets and leasehold improvements to the estimated fair values. The fair value was estimated using a discounted cash flows approach on forecasted future cash flows expected to be derived from the property based on current sublease market rent, which is considered a level 3 input in the fair value hierarchy. A 5% increase or decrease to the market rent per square foot input would increase or decrease the estimated fair value and resulting impairment charge by approximately $1.0 million.
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.
Fourth Quarter 2021 Goodwill Impairment Charges
During the annual enrollment period in the fourth quarter of 2021, the Company and the broader industry experienced an increase in consumer shopping which led to lower policy persistency than anticipated and resulted in lower LTV performance. Additionally, operating margins in the fourth quarter of 2021 declined significantly, which was primarily driven by tight labor markets and resulted in higher than expected customer care and enrollment costs. As such and in connection with the Company’s annual and long-range planning process, which coincided with the Company’s annual goodwill impairment test as of November 30, 2021, the Company determined the Medicare— Internal and Medicare— External reporting units’ financial performance were lower than previously anticipated. As a result, the Company’s quantitative goodwill impairment test indicated that the fair values of the Medicare— Internal and Medicare— External reporting units no longer exceeded their carrying values, and the Company recognized goodwill impairment charges of $380.3 million and $6.2 million for the Medicare-Internal and Medicare— External reporting units, respectively, representing the full amount of goodwill associated with these reporting units.
The quantitative goodwill impairment test performed by the Company as of November 30, 2021, included significant level 3 fair value estimates and assumptions including, among others, cash flow projections and selecting an appropriate discount rate.
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:
| | | | | | | | | | | | | | | | | | | | |
| | Jun. 30, 2022 |
(in thousands) | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount |
Developed technology | | $ | 496,000 | | | $ | 198,400 | | | $ | 297,600 | |
Customer relationships | | 232,000 | | | 64,960 | | | 167,040 | |
Total intangible assets subject to amortization | | $ | 728,000 | | | $ | 263,360 | | | $ | 464,640 | |
Indefinite-lived trade names | | | | | | 83,000 | |
Total intangible assets | | | | | | $ | 547,640 | |
| | | | | | | | |
GoHealth, Inc. | 2022 Form 10-Q | 12 |
| | | | | | | | | | | | | | | | | | | | |
| | Dec. 31, 2021 |
(in thousands) | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount |
Developed technology | | $ | 496,000 | | | $ | 162,971 | | | $ | 333,029 | |
Customer relationships | | 232,000 | | | 53,360 | | | 178,640 | |
Total intangible assets subject to amortization | | $ | 728,000 | | | $ | 216,331 | | | $ | 511,669 | |
Indefinite-lived trade names | | | | | | 83,000 | |
Total intangible assets | | | | | | $ | 594,669 | |
There was no impairment of intangible assets for the three and six months ended June 30, 2022 and 2021.
As of June 30, 2022, 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 2022 | | $ | 35,429 | | | $ | 11,600 | | | $ | 47,029 | |
2023 | | 70,857 | | | 23,200 | | | 94,057 | |
2024 | | 70,857 | | | 23,200 | | | 94,057 | |
2025 | | 70,857 | | | 23,200 | | | 94,057 | |
2026 | | 49,600 | | | 23,200 | | | 72,800 | |
Thereafter | | — | | | 62,640 | | | 62,640 | |
Total | | $ | 297,600 | | | $ | 167,040 | | | $ | 464,640 | |
4. LONG-TERM DEBT
The Company’s long-term debt consisted of the following:
| | | | | | | | | | | | | | |
(in thousands) | | Jun. 30, 2022 | | Dec. 31, 2021 |
Term Loan Facilities | | $ | 520,768 | | | $ | 523,403 | |
Revolving Credit Facilities | | 155,000 | | | 155,000 | |
Less: Unamortized debt discount and issuance costs | | (8,480) | | | (8,018) | |
Total debt | | $ | 667,288 | | | $ | 670,385 | |
Less: Current portion of long-term debt | | (5,270) | | | (5,270) | |
Total long-term debt | | $ | 662,018 | | | $ | 665,115 | |
Term Loan Facilities
On September 13, 2019, 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 created 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.
On November 10, 2021, the Company entered into Amendment No. 6 to the Credit Agreement and Incremental Facility Agreement (“Amendment No. 6”). Amendment No. 6 provided $100.0 million of incremental term loans (the “2021-2 Incremental Term Loans”). The Company incurred $2.5 million of debt issuance costs associated with Amendment No. 6, 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, Incremental Term Loan Facility, the 2021 Incremental Term Loans, and the 2021-2 Incremental Term Loans as the “Term Loan Facilities”.
| | | | | | | | |
GoHealth, Inc. | 2022 Form 10-Q | 13 |
As of June 30, 2022, the Company had a principal amount of $114.4 million, $306.9 million, and $99.5 million outstanding under the Incremental Term Loan Facility, the 2021 Incremental Term Loans, and the 2021-2 Incremental Term Loans, respectively. As of December 31, 2021, the Company had a principal amount of $115.0 million $308.4 million, and $