GOHEALTH, INC. This section presents management's perspective on our financial condition and results of operations. The following discussion and analysis is intended to highlight and supplement data and information presented elsewhere in this Quarterly Report on Form 10-Q, including the unaudited condensed consolidated financial statements and related notes, and should be read in conjunction with the accompanying tables and our annual audited financial statement in our final prospectus for our initial public offering, or IPO, filed with theSecurities and Exchange Commission , or theSEC , onJuly 16, 2020 pursuant to Rule 424(b) under the Securities Act, or the Prospectus. To the extent that this discussion describes prior performance, the descriptions relate only to the periods listed, which may not be indicative of our future financial outcomes. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause results to differ materially from management's expectations. Factors that could cause such differences are discussed in the sections titled "Cautionary Note Regarding Forward-Looking Statements" and "Risk Factors." We assume no obligation to update any of these forward-looking statements. In certain cases, numbers and percentages in the tables below may not foot due to rounding. Overview We are a leading health insurance marketplace whose mission is to improve access to healthcare in America. Our proprietary technology platform leverages modern machine-learning algorithms powered by nearly two decades of insurance behavioral data to reimagine the optimal process for helping individuals find the best health insurance plan for their specific needs. Our differentiated combination of a vertically-integrated consumer acquisition platform and highly skilled and trained licensed agents, or agents, has enabled us to enroll millions of people in Medicare and individual and family plans since our inception. With over 10,000 Americans turning 65 years old every day and our track record of significant growth in net revenues in the Medicare space in the past five years, we believe we will continue to be one of the top choices for unbiased insurance advice to help navigate one of the most important purchasing decisions individuals make. Business Segments We have four operating segments: (i) Medicare-Internal, (ii) Medicare-External, (iii) Individual and Family Plans, or IFP and Other-Internal and (iv) IFP and Other-External. We organize the segments by product type, Medicare and IFP and Other, as well as by distribution channel, internal and external, as further described below. In addition, we separately report other expenses (classified as "Corporate expenses" in our financial statements), the primary components of which are corporate overhead expenses and shared service expenses that have not been allocated to the operating segments. The segment results provided herein may not be comparable to other companies. We refer to the Medicare-Internal and Medicare-External segments collectively as the "Medicare segments" and the IFP and Other-Internal and IFP and Other-External segments as the "IFP and Other segments." •Medicare-Internal. The Medicare-Internal segment relates to sales of products and plans byGoHealth -employed agents offering qualified prospects plans from multiple carriers,GoHealth -employed agents offering qualified prospects plans on a carrier-specific basis, or sales of products and plans through our online platform without the assistance of our agents, which we refer to as DIY. In this segment, we sell Medicare Advantage, Medicare Supplement, Medicare prescription drug plans, and Medicare Special Needs Plans, or SNPs. We earn revenue in this segment through commissions paid by carriers based on sales we generate, as well as enrollment fees, hourly fees and other fees for services performed for specific carriers and other partners. •Medicare-External. The Medicare-External segment relates to sales of products and plans underGoHealth's carrier contracts using an independent, national network of agents or external agencies, which are not employed byGoHealth . These agents utilize our technology and platform to enroll consumers in health insurance plans and provide us with a means to earn a return on leads that otherwise may have not been addressed. In this segment, we sell Medicare Advantage, Medicare Supplement, Medicare prescription drug plans, and SNPs. We earn revenue in this segment through commissions paid by carriers as a result of policy sales, as well as sales of consumer leads to external agencies. •IFP and Other-Internal. The IFP and Other-Internal segment relates to sales of products and plans byGoHealth -employed agents offering qualified prospects plans from multiple carriers,GoHealth -employed agents offering qualified prospects plans on a carrier-specific basis, or DIY. In this segment, we sell individual and family plans, dental plans, vision plans and other ancillary plans to individuals who are not Medicare-eligible. We earn revenue in this segment through commissions paid by carriers based on sales we generate, as well as enrollment fees, and hourly fees and other fees for services performed for specific carriers and other partners. •IFP and Other-External. The IFP and Other-External segment relates to sales of products and plans underGoHealth's carrier contracts using external agencies, who use agents that are not employed byGoHealth . These agents 33 -------------------------------------------------------------------------------- utilize our technology and platform to enroll consumers in health insurance plans. We also sell consumer leads generated by us to external agencies. In this segment, we sell individual and family plans, dental plans, vision plans and other ancillary plans to individuals who are not Medicare-eligible. We earn revenue in this segment through commissions paid by carriers as a result of policy sales, as well as sales of consumer leads to external agencies. The following table presents the percentages of revenues and profit (loss) generated by each of our operating segments for the periods indicated: Successor Predecessor Successor Predecessor Period from Period from September 13, 2019 Period from July 1, September 13, 2019 Period from January Three months ended through September 2019 through Nine months ended through
September 30, 2020 30, 2019 September 12, 2019 September 30, 2020 30, 2019 September 12, 2019
Percent of Revenues:
Medicare-Internal 81.9 % 71.8 % 55.9 % 73.3 % 71.8 % 44.2 %
Medicare-External 12.4 % 19.5 % 19.0 % 17.9 % 19.5 % 24.2 %
IFP and Other-Internal 3.8 % 3.9 % 12.7 % 5.1 % 3.9 % 16.4 %
IFP and Other-External 2.0 % 4.8 % 12.4 % 3.7 % 4.8 % 15.1 %
Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Percent of Profit (Loss):
Medicare-Internal 98.8 % 194.9 % 112.3 % 98.5 % 194.9 % 81.9 %
Medicare-External 1.4 % 57.2 % (23.2) % 0.7 % 57.2 % 10.0 %
IFP and Other-Internal (0.5) % (190.6) % 8.8 % 0.1 % (190.6) % 4.5 %
IFP and Other-External 0.3 % 38.6 % 2.1 % 0.6 % 38.6 % 3.6 %
Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
The Transactions
Our historical results of operations prior to the completion of the
Transactions, including the IPO, do not reflect certain items that we expect
will affect our results of operations and financial condition after giving
effect to the Transactions and the use of proceeds from the IPO.
Following the completion of the Transactions, GoHealth, Inc. became the sole
managing member of GoHealth Holdings, LLC . Although we have a minority economic
interest in GoHealth Holdings, LLC , we have the sole voting interest in, and
control of the business and affairs of, GoHealth Holdings, LLC and its direct
and indirect subsidiaries. As a result, GoHealth, Inc. consolidates GoHealth
Holdings, LLC and records significant non-controlling interest in a consolidated
entity in GoHealth, Inc.'s consolidated financial statements for the economic
interest in GoHealth Holdings, LLC held directly or indirectly by the Continuing
Equity Owners. As of September 30, 2020 , public investors collectively own 51.7%
of our outstanding Class A common stock, consisting of 43,500,000 shares of
Class A common stock. As of September 30, 2020 , GoHealth, Inc. owns 84,182,961
LLC Interests, representing 26.7% of the LLC Interests, the Founders
collectively own 97,301,472 LLC Interests, representing 30.9% of the LLC
Interests, Centerbridge owns 80,792,677 LLC Interests, representing 25.7% of the
LLC Interests, and the Continuing Equity Owners collectively own 52,628,532 LLC
Interests, representing 16.7% of the LLC Interests. Accordingly, as of September
30, 2020 , net income (loss) attributable to non-controlling interests represents
73.3% of the income (loss) before income tax benefit (expense) of GoHealth, Inc.
GoHealth, Inc. is a holding company that conducts no operations and its
principal asset is the LLC Interests we purchased from GoHealth Holdings, LLC .
GoHealth, Inc. is subject to U.S. federal, state and local income taxes with
respect to our allocable share of any taxable income of GoHealth Holdings, LLC
and is taxed at the prevailing corporate tax rates. In addition to tax expenses,
we also incur expenses related to our status as a public company, plus payment
obligations under the Tax Receivable Agreement, which could be significant. We
intend to cause GoHealth Holdings, LLC to make distributions to us in an amount
sufficient to allow us to pay these expenses and fund any payments due under the
Tax Receivable Agreement.
Response to COVID-19
With social distancing measures having been implemented to curtail the spread of
COVID-19, we successfully transitioned our agents and other employees to a work
from home working environment. We believe the investments we have made in our
technology infrastructure have allowed for a seamless transition to a remote
working environment without any material impacts
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to our business, highlighting the resilience of our business. We believe that a
business like ours is well-suited to navigate the current environment in which
consumers are particularly focused on healthcare issues and mortality and social
distancing requirements push consumers to conduct business remotely, while the
underlying demand dynamics for our core products remain unchanged. Additionally,
because of our remote agent platform, we believe agents will continue to be
attracted to our commission-based agent compensation model and the stable and
attractive source of income it can provide, thereby allowing us to continue to
retain and recruit agents. Further, as consumers become more comfortable with
conducting business remotely, we believe consumer adoption of distribution
models such as ours may continue to accelerate long after the COVID-19 pandemic
ends.
As a result of the COVID-19 pandemic, we have fully transitioned our existing
agents in Chicago , Salt Lake City and Charlotte to work from home, and have
since opened four new virtual sites in Tampa , Columbus , Phoenix and Dallas .
These locations were selected because of the depth of available licensed sales
talent and our ability to work closely with state regulators and their vendors
to expedite the licensing process for new agents and resolve delays related to
the COVID-19 pandemic.
There are no comparable recent events which may provide guidance as to the
effect of the spread of COVID-19 and a global pandemic, and, as a result, the
ultimate impact of the COVID-19 outbreak or a similar health epidemic is highly
uncertain and subject to change. We do not yet know the full extent of the
impacts on our business, our operations or the global economy as a whole.
However, the effects could have a material impact on our results of operations.
See "Risk Factors-Risks Related to Our Business-The extent to which the COVID-19
outbreak and measures taken in response thereto impact our business, results of
operations and financial condition will depend on future developments, which are
highly uncertain and cannot be predicted."
Results of Operations
Three Months Ended September 30, 2020 Compared to the Period from July 1, 2019
through September 12, 2019 and the Period from September 13, 2019 through
September 30, 2019
The following table sets forth the components of our results of operations for
the periods indicated:
Successor Predecessor
Three Months Period from September 13, 2019 through Period from July 1, 2019 through September
Ended September 30, 2020 September 30, 2019 12, 2019
% of Net % of Net % of Net
(in thousands, except percentages) Dollars Revenues Dollars Revenues Dollars Revenues
Net revenues:
Commission $ 101,390 62.1 % $ 13,723 69.3 % $ 64,542 73.8 %
Enterprise 61,970 37.9 % 6,067 30.7 % 22,868 26.2 %
Net revenues 163,360 100.0 % 19,790 100.0 % 87,410 100.0 %
Operating expenses:
Cost of revenue 25,827 15.8 % 4,737 23.9 % 25,055 28.7 %
Marketing and advertising 62,848 38.5 % 7,140 36.1 % 21,332 24.4 %
Customer care and enrollment 52,896 32.4 % 4,625 23.4 % 19,396 22.2 %
Technology 39,520 24.2 % 518 2.6 % 31,856 36.4 %
General and administrative 156,551 95.8 % 2,286 11.6 % 65,123 74.5 %
Amortization of intangible assets 23,514 14.4 % 4,703 23.8 % - - %
Acquisition related transaction costs - - % 6,245 31.6 % 1,968 2.3 %
Total operating expenses 361,156 221.1 % 30,254 152.9 % 164,730 188.5 %
Loss from operations (197,796) (121.1) % (10,464) (52.9) % (77,320) (88.5) %
Interest expense 8,636 5.3 % 1,289 6.5 % 31 - %
Other (income) expense 2 - % (10) (0.1) % 67 0.1 %
Loss before income taxes (206,434) (126.4) % (11,743) (59.3) % (77,418) (88.6) %
Income tax (benefit) expense 62 - % (37) (0.2) % (78) (0.1) %
Net loss $ (206,496) (126.4) % $ (11,706) (59.2) % $ (77,340) (88.5) %
Net loss attributable to
noncontrolling interests (150,076) (91.9) % - - % - - %
Net loss attributable to GoHealth,
Inc. $ (56,420) (34.5) % $ (11,706) (59.2) % $ (77,340) (88.5) %
Non-GAAP Financial Measures:
EBITDA $ (173,021) $ (5,659) $ (76,183)
Adjusted EBITDA $ 39,284 $ 682 $ 15,569
Adjusted EBITDA margin 24.0 % 3.4 % 17.8 %
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EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin
We use supplemental measures of our performance that are derived from our
consolidated financial information, but which are not presented in our
consolidated financial statements prepared in accordance with GAAP. These
non-GAAP financial measures include net income (loss) before interest expense,
income tax expense (benefit) and depreciation and amortization expense, or
EBITDA; Adjusted EBITDA and Adjusted EBITDA margin. Adjusted EBITDA is the
primary financial performance measure used by management to evaluate its
business and monitor its results of operations.
Adjusted EBITDA represents EBITDA as further adjusted for share-based
compensation, expense related to the accelerated vesting of certain equity
awards, change in fair value of contingent consideration liability, Centerbridge
Acquisition costs, severance costs and incremental organizational costs in
connection with the IPO. Adjusted EBITDA margin represents Adjusted EBITDA
divided by net revenues.
We use non-GAAP financial measures to supplement financial information presented
on a GAAP basis. We believe that excluding certain items from our GAAP results
allows management to better understand our consolidated financial performance
from period to period and better project our future consolidated financial
performance as forecasts are developed at a level of detail different from that
used to prepare GAAP-based financial measures. Moreover, we believe these
non-GAAP financial measures provide our stakeholders with useful information to
help them evaluate our operating results by facilitating an enhanced
understanding of our operating performance and enabling them to make more
meaningful period to period comparisons. There are limitations to the use of the
non-GAAP financial measures presented in this Quarterly Report on Form 10-Q. For
example, our non-GAAP financial measures may not be comparable to similarly
titled measures of other companies. Other companies, including companies in our
industry, may calculate non-GAAP financial measures differently than we do,
limiting the usefulness of those measures for comparative purposes.
The non-GAAP financial measures are not meant to be considered as indicators of
performance in isolation from or as a substitute for net income (loss) prepared
in accordance with GAAP, and should be read only in conjunction with financial
information presented on a GAAP basis. Reconciliations of each of EBITDA and
Adjusted EBITDA to its most directly comparable GAAP financial measure, net
income (loss), are presented in the tables below in this Quarterly Report on
Form 10-Q. We encourage you to review the reconciliations in conjunction with
the presentation of the non-GAAP financial measures for each of the periods
presented. In future periods, we may exclude similar items, may incur income and
expenses similar to these excluded items and include other expenses, costs and
non-recurring items.
36
--------------------------------------------------------------------------------The following table sets forth the reconciliations of GAAP net loss to EBITDA and Adjusted EBITDA for the periods indicated:
Successor Predecessor
Three months Period from September Period from July
ended September 13, 2019 through 1, 2019 through
30, September 30, September 12,
(in thousands) 2020 2019 2019
Net revenues $ 163,360 $ 19,790 $ 87,410
Net loss $ (206,496) $ (11,706) $ (77,340)
Interest expense 8,636 1,289 31
Income tax expense (benefit) 62 (37) (78)
Depreciation and amortization expense 24,777 4,795 1,204
EBITDA (173,021) (5,659) (76,183)
Share-based compensation expense (1) 2,770 - -
Accelerated vesting of certain equity awards (2) 209,300 - 87,060
Centerbridge Acquisition costs (3) - 6,245 4,609
IPO transaction costs (4) 235 - -
Severance costs (5) - 96 83
Adjusted EBITDA $ 39,284 $ 682 $ 15,569
Adjusted EBITDA margin 24.0 % 3.4 % 17.8 %
____________
(1)Represents non-cash share-based compensation expense relating to stock
options, restricted stock units and time-vesting units.
(2)Represents non-cash share-based compensation expense relating to the
accelerated vesting of performance-vesting units in connection with the IPO for
the three months ended September 30, 2020 and the accelerated vesting of profit
interests and incentive share units in connection with the Centerbridge
Acquisition for the period from July 1, 2019 through September 12, 2019 .
(3)Represents legal, accounting, consulting, and other costs related to the
Centerbridge Acquisition.
(4)Represents legal, accounting, consulting, and other indirect costs associated
with the Company's IPO.
(5)Represents costs associated with the termination of employment.
Net Revenues
Commission Revenues
Commission revenues were $101.4 million for the three months ended September 30,
2020 compared to $64.5 million for the Period from July 1, 2019 through
September 12, 2019 , and $13.7 million for the Period from September 13, 2019
through September 30, 2019 , which was primarily attributable to increases in
commission revenues from the Medicare-Internal segment driven by a 63.8%
increase in Medicare commissionable Approved Submissions due to the
implementation of new marketing strategies to generate a greater number of
prospects, an improvement in the efficiency of our agents driven by improvements
in our technology, and the hiring of additional agents.
Enterprise Revenues
Enterprise revenues were $62.0 million for the three months ended September 30,
2020 compared to $22.9 million for the Period from July 1, 2019 through
September 12, 2019 , and $6.1 million for the Period from September 13, 2019
through September 30, 2019 , which was primarily attributable to an increase of
$38.3 million related to earned development funds for carrier -specific
marketing services and the expansion of carrier-specific sponsorships and
programs in our Medicare-Internal segment. The increase was partially offset by
a decline in consumer lead sales to external third parties in the IFP and
Other-External segment and the Medicare-External segment that totaled
$3.9 million , as we strategically shifted to generating consumer leads in the
internal channels.
See further analysis in "-Segment Information" below.
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Operating Expenses
Cost of Revenue
Cost of revenue was $25.8 million for the three months ended September 30, 2020
compared to $25.1 million for the Period from July 1, 2019 through September 12,
2019 , and $4.7 million for the Period from September 13, 2019 through September
30, 2019 . The decrease was primarily due to a 66.9% and a 6.7% decline in
commissionable Approved Submissions in the IFP and Other-External and
Medicare-External segments, respectively, which decreased the amount of expense
we recognized pursuant to our revenue-sharing agreements with external agents
and other partners.
Marketing and Advertising
Marketing and advertising expense was $62.8 million for the three months ended
September 30, 2020 compared to $21.3 million for the Period from July 1, 2019
through September 12, 2019 , and $7.1 million for the Period from September 13,
2019 through September 30, 2019 . Marketing and advertising expense for the three
months ended September 30, 2020 included $24.7 million of share-based
compensation expense relating to the accelerated vesting of performance-vesting
units in connection with the IPO. Absent this share-based compensation expense,
the increase was primarily due to an increase in our advertising costs for the
Medicare-Internal segment to generate more qualified prospects, which
contributed to a 63.8% increase in commissionable Approved Submissions in the
Medicare-Internal segment.
Customer Care and Enrollment
Customer care and enrollment expense was $52.9 million for the three months
ended September 30, 2020 compared to $19.4 million for the Period from July 1,
2019 through September 12, 2019 , and $4.6 million for the Period from September
13, 2019 through September 30, 2019 . Customer care and enrollment expense for
the three months ended September 30, 2020 included $11.5 million of share-based
compensation expense relating to the accelerated vesting of performance-vesting
units in connection with the IPO. Absent this share-based compensation expense,
the increase was primarily attributable to the hiring of additional agents in
the Medicare-Internal segment in order to drive the conversion of a greater
number of qualified prospects into commissionable Approved Submissions. As of
September 30, 2020 , we had 1,493 full time equivalent licensed agents compared
to 849 full time equivalent licensed agents as of September 30, 2019 .
Technology
Technology expense was $39.5 million for the three months ended September 30,
2020 compared to $31.9 million for the Period from July 1, 2019 through
September 12, 2019 , and $0.5 million for the Period from September 13, 2019
through September 30, 2019 . Technology expense for the three months ended
September 30, 2020 included $32.6 million of share-based compensation expense
relating to the accelerated vesting of performance-vesting units in connection
with the IPO. The period from July 1, 2019 through September 12, 2019 included
share-based compensation expense of $27.1 million in connection with the
accelerated vesting of certain legacy profit interests and legacy incentive
share units granted prior to the Centerbridge Acquisition. Absent the
share-based compensation expense, the increase was primarily attributable to the
hiring of additional employees in our technology and data science teams, and the
expansion of our business intelligence and analytics staffing in order to
support the growth of the Medicare-Internal segment.
General and Administrative
General and administrative expense was $156.6 million for the three months ended
September 30, 2020 compared to $65.1 million for the Period from July 1, 2019
through September 12, 2019 , and $2.3 million for the Period from September 13,
2019 through September 30, 2019 . General and administrative expense for the
three months ended September 30, 2020 included $140.6 million of share-based
compensation expense relating to the accelerated vesting of performance-vesting
units in connection with the IPO. The period from July 1, 2019 through September
12, 2019 included share-based compensation expense of $58.3 million in
connection with the accelerated vesting of certain legacy profit interests and
legacy incentive share units granted prior to the Centerbridge Acquisition.
Absent the share-based compensation expense, the increase in general and
administrative expense for the three months ended September 30, 2020 was
primarily due to investments in corporate infrastructure, such as legal, human
resources, and finance, to support the growth of the business.
Amortization of Intangible Assets
Amortization of intangible assets expense was $23.5 million for the three months
ended September 30, 2020 , compared to no amortization of intangible assets
expense for the Period from July 1, 2019 through September 12, 2019 , and $4.7
million for the Period from September 13, 2019 through September 30, 2019 .
Amortization of intangible assets expense relates to the
38
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amortization of developed technology and customer relationships that were
recognized as part of the purchase price allocation at the date of the
Centerbridge Acquisition.
Interest Expense
Interest expense was $8.6 million for the three months ended September 30, 2020
compared to $31 thousand for the Period from July 1, 2019 through September 12,
2019 , and $1.3 million for the Period from September 13, 2019 through September
30, 2019 . The increase was due to additional debt outstanding on our Credit
Facilities in connection with the Centerbridge Acquisition.
Adjusted EBITDA
Adjusted EBITDA was $39.3 million for the three months ended September 30, 2020
compared to $15.6 million for the Period from July 1, 2019 through September 12,
2019 , and $0.7 million for the Period from September 13, 2019 through September
30, 2019 . The increase was primarily due to an increase in commission revenues
in the Medicare segments as described above.
Nine Months Ended September 30, 2020 Compared to the Period from January 1, 2019
through September 12, 2019 and the Period from September 13, 2019 through
September 30, 2019
The following table sets forth the components of our results of operations for
the periods indicated:
Successor Predecessor
Period from September 13, 2019 through Period from
Nine months ended September 30, 2020 September 30, 2019
% of Net % of Net % of Net
(in thousands, except percentages) Dollars Revenues Dollars Revenues Dollars Revenues
Net revenues:
Commission $ 310,506 72.0 % $ 13,723 69.3 % $ 175,834 76.1 %
Enterprise 120,921 28.0 % 6,067 30.7 % 55,176 23.9 %
Net revenues 431,427 100.0 % 19,790 100.0 % 231,010 100.0 %
Operating expenses:
Cost of revenue 104,520 24.2 % 4,737 23.9 % 79,169 34.3 %
Marketing and advertising 110,556 25.6 % 7,140 36.1 % 37,769 16.3 %
Customer care and enrollment 105,267 24.4 % 4,625 23.4 % 49,149 21.3 %
Technology 49,818 11.5 % 518 2.6 % 40,312 17.5 %
General and administrative 177,400 41.1 % 2,286 11.6 % 79,219 34.3 %
Change in fair value of contingent
consideration liability 19,700 4.6 % - - % - - %
Amortization of intangible assets 70,543 16.4 % 4,703 23.8 % - - %
Acquisition related transaction costs - - % 6,245 31.6 % 2,267 1.0 %
Total operating expenses 637,804 147.8 % 30,254 152.9 % 287,885 124.6 %
Loss from operations (206,377) (47.8) % (10,464) (52.9) % (56,875) (24.6) %
Interest expense 24,378 5.7 % 1,289 6.5 % 140 0.1 %
Other (income) expense (494) (0.1) % (10) (0.1) % 114 - %
Loss before income taxes (230,261) (53.4) % (11,743) (59.3) % (57,129) (24.7) %
Income tax (benefit) expense 38 0.0 % (37) (0.2) % (66) - %
Net loss $ (230,299) (53.4) % $ (11,706) (59.2) % $ (57,063) (24.7) %
Net loss attributable to
noncontrolling interests (150,076) (34.8) % - - % - - %
Net loss attributable to GoHealth,
Inc. $ (80,223) (18.6) % $ (11,706) (59.2) % $ (57,063) (24.7) %
Non-GAAP Financial Measures:
EBITDA $ (132,441) $ (5,659) $ (52,742)
Adjusted EBITDA $ 101,141 $ 682 $ 39,973
Adjusted EBITDA margin 23.4 % 3.4 % 17.3 %
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The following table sets forth the reconciliations of GAAP net loss to EBITDA and Adjusted EBITDA for the periods indicated:
Successor Predecessor
Period from
Period from September January 1, 2019
Nine Months Ended 13, 2019 through through September
September 30, September 30, 12,
(in thousands) 2020 2019 2019
Net revenues $ 431,427 $ 19,790 $ 231,010
Net loss $ (230,299) $ (11,706) $ (57,063)
Interest expense 24,378 1,289 140
Income tax expense (benefit) 38 (37) (66)
Depreciation and amortization expense 73,442 4,795 4,247
EBITDA (132,441) (5,659) (52,742)
Share-based compensation expense (1) 3,846 - -
Accelerated vesting of certain equity awards (2) 209,300 - 87,060
Change in fair value of contingent consideration
liability (3) 19,700 - -
Centerbridge Acquisition costs (4) - 6,245 4,908
IPO transaction costs (5) 659 - -
Severance costs (6) 77 96 747
Adjusted EBITDA $ 101,141 $ 682 $ 39,973
Adjusted EBITDA margin 23.4 % 3.4 % 17.3 %
____________
(1)Represents non-cash share-based compensation expense relating to stock
options, restricted stock units and time-vesting units.
(2)Represents non-cash share-based compensation expense relating to the
accelerated vesting of performance-vesting units in connection with the IPO for
the nine months ended September 30, 2020 and the accelerated vesting of profit
interests and incentive share units in connection with the Centerbridge
Acquisition for the period from January 1, 2019 through September 12, 2019 .
(3)Represents the change in fair value of the contingent consideration liability
due to the predecessor owners of the Company arising from the Centerbridge
Acquisition.
(4)Represents legal, accounting, consulting, and other costs related to the
Centerbridge Acquisition.
(5)Represents legal, accounting, consulting, and other indirect costs associated
with the Company's IPO.
(6)Represents costs associated with the termination of employment.
Net Revenues
Commission Revenues
Commission revenues were $310.5 million for the nine months ended September 30,
2020 compared to $175.8 million for the Period from January 1, 2019 through
September 12, 2019 and $13.7 million for the Period from September 13, 2019
through September 30, 2019 , which was primarily attributable to increases in
commission revenue from (i) the Medicare-Internal segment driven by a 125.9%
increase in Medicare commissionable Approved Submissions due to the hiring of
additional agents, the increased utilization and efficiency of our agents and
the implementation of new marketing strategies to generate a greater number of
qualified prospects and (ii) the Medicare-External segment driven by a 38.4%
increase in commissionable Approved Submissions due to our ability to recruit
and onboard additional external agents to enroll consumers in Medicare plans
using our technology and platform.
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Enterprise Revenues
Enterprise revenues were $120.9 million for the nine months ended September 30,
2020 compared to $55.2 million for the Period from January 1, 2019 through
September 12, 2019 and $6.1 million for the Period from September 13, 2019
through September 30, 2019 , which was primarily attributable to an increase of
$79.9 million related to earned development funds for carrier -specific
marketing services and the expansion of carrier-specific sponsorships and
programs in our Medicare-Internal segment. The increase was partially offset by
a decline in consumer lead sales to external third parties in our IFP and
Other-External Segment and the Medicare-External segment that totaled $13.4
million , as we strategically shifted to generating consumer leads in the
internal channels.
See further analysis in "-Segment Information" below.
Operating Expenses
Cost of Revenue
Cost of revenue was $104.5 million for the nine months ended September 30, 2020
compared to $79.2 million for the Period from January 1, 2019 through September
12, 2019 and $4.7 million for the Period from September 13, 2019 through
September 30, 2019 . The increase was primarily due to a 38.4% increase in
commissionable Approved Submissions in the Medicare-External segment, which
increased the amount of expense we recognized pursuant to our revenue-sharing
agreements with external agents and other partners.
Marketing and Advertising
Marketing and advertising expense was $110.6 million for the nine months ended
September 30, 2020 compared to $37.8 million for the Period from January 1, 2019
through September 12, 2019 and $7.1 million for the Period from September 13,
2019 through September 30, 2019 . Marketing and advertising expense for the nine
months ended September 30, 2020 included $24.7 million of share-based
compensation expense relating to the accelerated vesting of performance-vesting
units in connection with the IPO. Absent this share-based compensation expense,
the increase was primarily due to an increase in our advertising costs for the
Medicare-Internal segment to generate more qualified prospects, which
contributed to a 125.9% increase in Medicare-Internal commissionable Approved
Submissions.
Customer Care and Enrollment
Customer care and enrollment expense was $105.3 million for the nine months
ended September 30, 2020 compared to $49.1 million for the Period from January
1, 2019 through September 12, 2019 and $4.6 million for the Period from
September 13, 2019 through September 30, 2019 . Customer care and enrollment
expense for the nine months ended September 30, 2020 included $11.5 million of
share-based compensation expense relating to the accelerated vesting of
performance-vesting units in connection with the IPO. Absent this share-based
compensation expense, the increase was primarily attributable to the hiring of
additional agents in the Medicare-Internal segment in order to drive the
conversion of a greater number of qualified prospects into commissionable
Approved Submissions. As of September 30, 2020 , we had 1,493 full time
equivalent licensed agents compared to 849 full time equivalent licensed agents
as of September 30, 2019 .
Technology
Technology expense was $49.8 million for the nine months ended September 30,
2020 compared to $40.3 million for the Period from January 1, 2019 through
September 12, 2019 and $0.5 million for the Period from September 13, 2019
through September 30, 2019 . Technology expense for the nine months ended
September 30, 2020 included $32.6 million of share-based compensation expense
relating to the accelerated vesting of performance-vesting units in connection
with the IPO. The period from January 1, 2019 through September 12, 2019
included share-based compensation expense of $27.1 million in connection with
the accelerated vesting of certain legacy profit interests and legacy incentive
share units granted prior to the Centerbridge Acquisition. Absent the
share-based compensation expense, the increase was primarily attributable to the
hiring of additional employees in our technology and data science teams, and the
expansion of our business intelligence and analytics staffing in order to
support the growth of the Medicare-Internal segment.
General and Administrative
General and administrative expense was $177.4 million for the nine months ended
September 30, 2020 compared to $79.2 million for the Period from January 1, 2019
through September 12, 2019 and $2.3 million for the Period from September 13,
2019 through September 30, 2019 . General and administrative expense for the nine
months ended September 30, 2020 included
41
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$140.6 million of share-based compensation expense relating to the accelerated
vesting of performance-vesting units in connection with the IPO. General and
administrative expense for the period from January 1, 2019 through September 12,
2019 included share-based compensation expense of $58.3 million in connection
with the accelerated vesting of certain legacy profit interests and legacy
incentive share units granted prior to the Centerbridge Acquisition. Absent the
share-based compensation expense, the increase in general and administrative
expense for the nine months ended September 30, 2020 was primarily due to
investments in corporate infrastructure, such as legal, human resources, and
finance, to support the growth of the business.
Change in Fair Value of Contingent Consideration Liability
Change in fair value of contingent consideration liability was $19.7 million for
the nine months ended September 30, 2020 and relates to the earnout liability
incurred in connection with the Centerbridge Acquisition, in which we agreed to
pay additional consideration if certain financial targets are achieved. We had
no earnout liability for the Period from January 1, 2019 through September 12,
2019 or for the Period from September 13, 2019 through September 30, 2019 .
Amortization of Intangible Assets
Amortization of intangible assets expense was $70.5 million for the nine months
ended September 30, 2020 compared to no amortization of intangible assets
expense for the Period from January 1, 2019 through September 12, 2019 , and $4.7
million for the Period from September 13, 2019 through September 30, 2019 , and
relates to the amortization of developed technology and customer relationships
that were recognized as part of the purchase price allocation at the date of the
Centerbridge Acquisition.
Interest Expense
Interest expense was $24.4 million for the nine months ended September 30, 2020
compared to $0.1 million for the Period from January 1, 2019 through September
12, 2019 and $1.3 million for the Period from September 13, 2019 through
September 30, 2019 . The increase was due to additional debt outstanding on the
Credit Facilities in connection with the Centerbridge Acquisition.
Adjusted EBITDA
Adjusted EBITDA was $101.1 million for the nine months ended September 30, 2020
compared to $40.0 million for the Period from January 1, 2019 through September
12, 2019 and $0.7 million for the Period from September 13, 2019 through
September 30, 2019 . The increase was primarily due to an increase in commission
revenues in the Medicare segments as described above.
Segment Information
Our operating segments have been determined in accordance with Accounting
Standards Codification, or ASC, 280, Segment Reporting. We have four operating
segments: Medicare-Internal, Medicare-External, IFP and Other-Internal, and IFP
and Other-External. In addition, we separately report other expenses (classified
as "Corporate expense" in the following table), the primary components of which
are corporate overhead expenses and shared service expenses that have not been
allocated to the operating segments, as they are not the responsibility of
segment operating management. The segment measurements provided to and evaluated
by the chief operating decision maker are described in the notes to the interim
condensed consolidated financial statements included elsewhere in this Quarterly
Report on Form 10-Q. These results should be considered in addition to, not as a
substitute for, results reported in accordance with GAAP.
42
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Three Months Ended September 30, 2020 Compared to the Period from July 1, 2019
through September 12, 2019 and the Period from September 13, 2019 through
September 30, 2019
Successor Predecessor
Period from September 13, 2019 through Period from July 1, 2019 through
Three Months Ended September 30, 2020 September 30, 2019 September 12, 2019
% of % of % of
Total Total Total
(in thousands, except percentages) Dollars Revenues Dollars Revenues Dollars Revenues
Net revenues:
Medicare-Internal $ 133,723 81.9 % $ 14,208 71.8 % $ 48,872 55.9 %
Medicare-External 20,252 12.4 % 3,865 19.5 % 16,577 19.0 %
IFP and Other-Internal 6,147 3.8 % 764 3.9 % 11,129 12.7 %
IFP and Other-External 3,238 2.0 % 953 4.8 % 10,832 12.4 %
Total revenues 163,360 100.0 % 19,790 100.0 % 87,410 100.0 %
Segment profit (loss):
Medicare-Internal 49,464 30.3 % 2,500 12.6 % 20,218 23.1 %
Medicare-External 720 0.4 % 734 3.7 % (4,178) (4.8) %
IFP and Other-Internal (245) (0.1) % (2,446) (12.4) % 1,583 1.8 %
IFP and Other-External 147 0.1 % 495 2.5 % 378 0.4 %
Total segment profit 50,086 30.7 % 1,283 6.5 % 18,001 20.6 %
Corporate expense (1) 224,368 137.3 % 799 4.0 % 93,353 106.8 %
Amortization of intangible assets 23,514 14.4 % 4,703 23.8 % - - %
Transaction costs - - % 6,245 31.6 % 1,968 2.3 %
Interest expense 8,636 5.3 % 1,289 6.5 % 31 - %
Other (income) expense 2 - % (10) (0.1) % 67 0.1 %
Loss before income taxes $ (206,434) (126.4) % $ (11,743) (59.3) % $ (77,418) (88.6) %
____________
(1)The three months ended September 30, 2020 includes $2.8 million of
share-based compensation expense related to Time-Vesting Units, stock options
and restricted stock units, and $209.3 million of share-based compensation
expense associated with the accelerated vesting of the Performance-Vesting Units
in connection with the IPO. The Period from July 1, 2019 through September 12,
2019 includes the Class C share-based compensation and incentive share plan
expense recorded in connection with the Acquisition, and which totaled $87.1
million .
Net Revenues
Net revenues for the Medicare-Internal segment were $133.7 million for the three
months ended September 30, 2020 compared to $48.9 million for the Period from
July 1, 2019 through September 12, 2019 and $14.2 million for the Period from
September 13, 2019 through September 30, 2019 , which was primarily driven by the
hiring of additional agents and the increased utilization and efficiency of our
agents, which contributed to a 63.8% increase in commissionable Approved
Submissions. As of September 30, 2020 , we had 1,493 full time equivalent
licensed agents compared to 849 full time equivalent licensed agents as of
September 30, 2019 . In addition to increasing our agent count, we were able to
increase the efficiency of our agents due to improvements in our technology. Net
revenues also increased in this segment due to the implementation of new
marketing strategies to generate a greater number of qualified prospects and due
to an increase in non-commission revenues. Net revenues for the
Medicare-External segment were $20.3 million for the three months ended
September 30, 2020 compared to $16.6 million for the Period from July 1, 2019
through September 12, 2019 and $3.9 million for the Period from September 13,
2019 through September 30, 2019 , which was driven by a decline in consumer lead
sales to external third parties, as we strategically shifted to generating
consumer leads in the internal channels.
Net revenues for the IFP and Other-Internal segment were $6.1 million for the
three months ended September 30, 2020 compared to $11.1 million for the Period
from July 1, 2019 through September 12, 2019 and $0.8 million for the Period
from September 13, 2019 through September 30, 2019 . Net revenues for the IFP and
Other-External segment were $3.2 million for the three months ended
September 30, 2020 compared to $10.8 million for the Period from July 1, 2019
through September 12, 2019 and $1.0 million for the Period from September 13,
2019 through September 30, 2019 . For each of the IFP and Other segments, the
decreases were primarily driven by a change in product mix sold within the IFP
and Other segments.
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Segment Profit (Loss)
Segment profit (loss) is calculated as total revenue for the applicable segment
less direct and allocated cost of revenue, marketing and advertising, customer
care and enrollment, technology and general and administrative operating
expenses, excluding change in fair value of contingent consideration liability,
amortization of intangibles assets, share-based compensation, transaction costs,
interest expense, and other expense (income).
Segment profit for the Medicare-Internal segment was $49.5 million for the three
months ended September 30, 2020 compared to $20.2 million for the Period from
July 1, 2019 through September 12, 2019 and $2.5 million for the Period from
September 13, 2019 through September 30, 2019 . The increase was primarily driven
by the increase of Medicare commissionable Approved Submissions, which was
primarily attributable to (i) improvements in our LeadScore and call-routing
technologies allowing our agents to successfully convert more consumer leads
into customers and (ii) an expansion of the diversity and breadth of our
omni-channel marketing efforts, which enabled the acquisition of higher quality
prospects.
Segment profit (loss) for the Medicare-External segment was $0.7 million for the
three months ended September 30, 2020 compared to $(4.2) million for the Period
from July 1, 2019 through September 12, 2019 and $0.7 million for the Period
from September 13, 2019 through September 30, 2019 . The increase was primarily
driven by a decline in marketing and advertising spend in the Medicare-External
Segment, as we strategically shifted to generating consumer leads in the
internal channels.
Segment profit (loss) for the IFP and Other-Internal segment was $0.2
million for the three months ended September 30, 2020 compared to segment profit
of $1.6 million for the Period from July 1, 2019 through September 12, 2019 and
$(2.4) million for the Period from September 13, 2019 through September 30,
2019 . The decrease in segment loss was primarily driven by a change in product
mix sold by agents for IFP and Other plans and improved marketing efficiencies.
Segment profit for the IFP and Other-External segment was $0.1 million for the
three months ended September 30, 2020 compared to $0.4 million for the Period
from July 1, 2019 through September 12, 2019 and $0.5 million for the Period
from September 13, 2019 through September 30, 2019 . The decrease in segment
profit was primarily driven by a change in product mix sold within the IFP and
Other-External segment.
44-------------------------------------------------------------------------------- Nine Months EndedSeptember 30, 2020 Compared to the Period fromJanuary 1, 2019 throughSeptember 12, 2019 and the Period fromSeptember 13, 2019 throughSeptember 30, 2019 Successor Predecessor Period fromSeptember 13, 2019 through Period from January
1, 2019 through
Nine Months Ended September 30, 2020 September 30, 2019 September 12, 2019
% of % of % of
Total Total Total
(in thousands, except percentages) Dollars Revenues Dollars Revenues Dollars Revenues
Net revenues:
Medicare-Internal $ 316,211 73.3 % $ 14,208 71.8 % $ 102,196 44.2 %
Medicare-External 77,305 17.9 % 3,865 19.5 % 55,981 24.2 %
IFP and Other-Internal 21,798 5.1 % 764 3.9 % 37,909 16.4 %
IFP and Other-External 16,113 3.7 % 953 4.8 % 34,924 15.1 %
Total revenues 431,427 100.0 % 19,790 100.0 % 231,010 100.0 %
Segment profit (loss):
Medicare-Internal 123,946 28.7 % 2,500 12.6 % 40,024 17.3 %
Medicare-External 892 0.2 % 734 3.7 % 4,893 2.1 %
IFP and Other-Internal 181 - % (2,446) (12.4) % 2,195 1.0 %
IFP and Other-External 789 0.2 % 495 2.5 % 1,748 0.8 %
Total segment profit 125,808 29.2 % 1,283 6.5 % 48,860 21.2 %
Corporate expense (1) 241,942 56.1 % 799 4.0 % 103,469 44.8 %
Change in fair value of contingent
consideration liability 19,700 4.6 % - - % - - %
Amortization of intangible assets 70,543 16.4 % 4,703 23.8 % - - %
Transaction Costs - - % 6,245 31.6 % 2,267 1.0 %
Interest expense 24,378 5.7 % 1,289 6.5 % 140 0.1 %
Other (income) expense (494) (0.1) % (10) (0.1) % 114 - %
Loss before income taxes $ (230,261) (53.4) % $ (11,743) (59.3) % $ (57,129) (24.7) %
____________
(1)The nine months ended September 30, 2020 include $3.8 million of share-based
compensation expense related to Time-Vesting Units, stock options and restricted
stock units, and $209.3 million of share-based compensation expense associated
with the accelerated vesting of the Performance-Vesting Units in connection with
the IPO. The Period from January 1, 2019 through September 12, 2019 includes the
Class C share-based compensation and incentive share plan expense recorded in
connection with the Acquisition, and which totaled $87.1 million .
Net Revenues
Net revenues for the Medicare-Internal segment were $316.2 million for the nine
months ended September 30, 2020 compared to $102.2 million for the Period from
January 1, 2019 through September 12, 2019 and $14.2 million for the Period from
September 13, 2019 through September 30, 2019 , which was primarily driven by the
hiring of additional agents and the increased utilization and efficiency of our
agents, which contributed to a 125.9% increase in commissionable Approved
Submissions. As of September 30, 2020 , we had 1,493 full time equivalent
licensed agents compared to 849 full time equivalent licensed agents as of
September 30, 2019 . In addition to increasing our agent count, we were able to
increase the efficiency of our agents due to improvements in our technology. Net
revenues also increased in this segment due to the implementation of new
marketing strategies to generate a greater number of qualified prospects and due
to an increase in non-commission revenues. Net revenues for the
Medicare-External segment were $77.3 million for the nine months ended
September 30, 2020 compared to $56.0 million for the Period from January 1, 2019
through September 12, 2019 and $3.9 million for the Period from September 13,
2019 through September 30, 2019 , which was primarily driven by a 38.4% increase
in commissionable Approved Submissions in the Medicare-External segment due to
our ability to recruit and onboard additional external agents to enroll
consumers in Medicare plans using our technology and platform.
Net revenues for the IFP and Other-Internal segment were $21.8 million for the
nine months ended September 30, 2020 compared to $37.9 million for the Period
from January 1, 2019 through September 12, 2019 and $0.8 million for the Period
from September 13, 2019 through September 30, 2019 . Net revenues for the IFP and
Other-External segment were $16.1 million for the nine months ended
September 30, 2020 compared to $34.9 million for the Period from January 1, 2019
through September 12, 2019 and $1.0 million for the Period from September 13,
2019 through September 30, 2019 . For each of the IFP and Other segments, the
decreases were primarily driven by a change in product mix sold within the IFP
and Other segments.
45
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Segment Profit (Loss)
Segment profit for the Medicare-Internal segment was $123.9 million for the nine
months ended September 30, 2020 compared to $40.0 million for the Period from
January 1, 2019 through September 12, 2019 and $2.5 million for the Period from
September 13, 2019 through September 30, 2019 . The increase was primarily driven
by the increase of Medicare commissionable Approved Submissions, which was
primarily attributable to (i) improvements in our LeadScore and call-routing
technologies allowing our agents to successfully convert more qualified
prospects into Submitted Policies and (ii) improved marketing efficiencies
driven by our rapid test-and-learn approach across our marketing channels, as
well as an expansion of the diversity and breadth of our omni-channel marketing
efforts, which together enabled the acquisition of higher quality prospects.
Segment profit for the Medicare-External segment was $0.9 million for the nine
months ended September 30, 2020 compared to $4.9 million for the Period from
January 1, 2019 through September 12, 2019 and $0.7 million for the Period from
September 13, 2019 through September 30, 2019 . The decrease was primarily driven
by a 38.4% increase in commissionable Approved Submissions in the
Medicare-External segment and agreements with external agents and other partners
that had a higher revenue-sharing percentage as compared to prior agreements.
Segment profit (loss) for the IFP and Other-Internal segment was $0.2
million for the nine months ended September 30, 2020 compared to $2.2 million
for the Period from January 1, 2019 through September 12, 2019 and $(2.4)
million for the Period from September 13, 2019 through September 30, 2019 . The
decrease was primarily driven by a change in product mix sold by agents for IFP
and Other plans.
Segment profit for the IFP and Other-External segment was $0.8 million for the
nine months ended September 30, 2020 compared to $1.7 million for the Period
from January 1, 2019 through September 12, 2019 and $0.5 million for the Period
from September 13, 2019 through September 30, 2019 . The decrease was driven by a
change in product mix sold by external agencies.
Key Business and Operating Metrics by Segment
In addition to traditional financial metrics, we rely upon certain business and
operating metrics to evaluate our business performance and facilitate our
operations. Below are the most relevant business and operating metrics for each
segment, except for EBITDA and Adjusted EBITDA, which are not presented on a
segment basis.
Medicare Segments
Lifetime Value of Commissions per Consumer Acquisition Cost
Lifetime value of commissions per consumer acquisition cost, or LTV/CAC,
represents (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 qualified prospect
into a Submitted Policy (comprised of cost of revenue, marketing and advertising
expenses and customer care and enrollment expenses) 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. The estimate of the future renewal commissions is determined
by using the contracted renewal commission rates constrained by a
persistency-adjusted renewal period. The persistency-adjusted renewal period is
determined based on our historical experience and available industry and
insurance carrier historical data. Persistency-adjustments allow us to estimate
renewal revenue only to the extent probable that a material reversal in revenue
would not be expected to occur. These factors may result in varying values from
period to period. See "Risk Factors-Risks Related to Our Business-Our operating
results may be adversely impacted by factors that impact our estimate of LTV."
The LTV/CAC for the Medicare-Internal segment was 3.7x (with a CAC of $20.9
million ) for the three months ended September 30, 2020 , 3.4x (with a CAC of
$10.2 million ) for the Period from July 1, 2019 through September 12, 2019 and
1.4x (with a CAC of $6.7 million ) for the Period from September 13, 2019 through
September 30, 2019 . The increase in LTV/CAC is attributable to a decrease in CAC
per commissionable Approved Submission due to improvements in our LeadScore and
call-routing technologies allowing our agents to successfully convert more
qualified prospects into Submitted Policies. Improved marketing efficiencies
driven by our rapid test-and-learn approach across our marketing channels and
expansion of the diversity and breadth of our omni-channel marketing efforts
also contributed to an increase in LTV/CAC by enabling the acquisition of higher
quality prospects at a lower effective cost per submission.
46
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The LTV/CAC for the Medicare-Internal segment was 3.0x (with a CAC of $71.5
million ) for the nine months ended September 30, 2020 , 2.7x (with a CAC of $30.7
million ) for the Period from January 1, 2019 through September 12, 2019 and 1.4x
(with a CAC of $6.7 million ) for the Period from September 13, 2019 through
September 30, 2019 . The increase in LTV/CAC is attributable to the same factors
described above.
Submitted Policies
Submitted Policies represent completed applications that, with respect to each
such application, the consumer has authorized us to submit to the carrier. The
applicant may need to take additional actions, including providing subsequent
information before the application is reviewed by the carrier.
The following table presents the number of Submitted Policies by product for the
Medicare segments for the periods indicated, split between those submissions
that are commissionable (compensated through commissions received from carriers)
and those that are non-commissionable (compensated via hourly fees and
enrollment fees):
Successor Predecessor Successor Predecessor
Period from Period from
September 13, September 13, Period from
2019 through Period from July 2019 through January 1, 2019
Three Months Ended September 30, 1, 2019 through Nine Months Ended September 30, through September
September 30, 2020 2019 September 12, 2019 September 30, 2020 2019 12, 2019
Medicare Advantage 97,675 13,608 51,078 314,088 13,608 134,173
Medicare Supplement 1,245 763 3,091 6,164 763 11,205
Prescription Drug Plans 2,006 452 2,217 6,437 452 7,675
Total Medicare-Commissionable 100,926 14,823 56,386 326,689 14,823 153,053
Medicare Advantage 6,472 1,005 2,338 20,806 1,005 4,240
Medicare Supplement 1,716 234 635 5,262 234 1,051
Prescription Drug Plans 1,034 155 335 2,787 155 471
Total Medicare-Non Commissionable 9,222 1,394 3,308 28,855 1,394 5,762
Total Medicare Submitted Policies 110,148 16,217 59,694 355,544 16,217 158,815
Total Medicare Submitted Policies were 110,148 for the three months ended
September 30, 2020 , 59,694 for the Period from July 1, 2019 through September
12, 2019 and 16,217 for the Period from September 13, 2019 through September 30,
2019 . The increase is attributable to improved multichannel marketing strategies
that allowed us to generate a greater number of high quality prospects, along
with increased efficiency of our agents. Agent efficiency increased due to the
implementation of more efficient marketing strategies and improvements in our
LeadScore and call-routing technologies, which allowed our agents to increase
the number of qualified prospects they are able to talk to and improve the rate
at which a qualified prospect converts to a Submitted Policy. Additionally, the
expansion of our facilities to accommodate additional agents and the hiring of
additional agents also contributed to the increase in Submitted Policies. We
were also able to drive an increase in total Submitted Policies in the
Medicare-External segment due to our ability to recruit and onboard additional
external agents to enroll consumers in Medicare plans using our technology and
platform.
Total Medicare Submitted Policies were 355,544 for the nine months ended
September 30, 2020 , 158,815 for the Period from January 1, 2019 through
September 12, 2019 and 16,217 for the Period from September 13, 2019 through
September 30, 2019 . The increase is attributable to the same factors as
described above.
Approved Submissions
Approved Submissions represent Submitted Policies approved by carriers for the
identified product during the indicated period. Not all Approved Submissions
will go in force, as some individuals we enroll may not ultimately pay their
insurance premiums or may switch out of a policy within the disenrollment period
during the first 90 days of the policy. In general, the relationship between
Submitted Policies and Approved Submissions has been steady over time.
Therefore, factors impacting the number of Submitted Policies also impact the
number of Approved Submissions.
47
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The following tables present the number of Approved Submissions by product
relating to commissionable policies for each of the Medicare segments for the
periods indicated. Only commissionable policies are used to calculate our LTV.
Medicare-Internal
Successor Predecessor Successor Predecessor
Period from Period from
September 13, Period from July September 13, Period from
2019 through 1, 2019 through 2019 through January 1, 2019
Three Months Ended September 30, September 12, Nine Months Ended September 30, through September
September 30, 2020 2019 2019 September 30, 2020 2019 12, 2019
Medicare Advantage 77,186 8,940 36,270 228,612 8,940 86,544
Medicare Supplement 315 199 944 1,602 199 3,198
Prescription Drug Plans 1,574 313 1,611 5,319 313 5,078
Medicare-Internal Commissionable
Approved Submissions 79,075 9,452 38,825 235,533 9,452 94,820
Medicare-Internal commissionable Approved Submissions were 79,075 for the three
months ended September 30, 2020 , 38,825 for the Period from July 1, 2019 through
September 12, 2019 and 9,452 for the Period from September 13, 2019 through
September 30, 2019 . The increase was attributable to the hiring of additional
agents (including the expansion of our facilities to accommodate additional
agents), the increased efficiency of our agents due to technology improvements
and improved multichannel marketing strategies that allowed us to generate a
greater number of high quality prospects.
Medicare-Internal commissionable Approved Submissions were 235,533 for the nine
months ended September 30, 2020 , 94,820 for the Period from January 1, 2019
through September 12, 2019 and 9,452 for the Period from September 13, 2019
through September 30, 2019 . The increase was attributable to the same factors as
described above.
Medicare-External
Successor Predecessor Successor Predecessor
Period from Period from
September 13, Period from July September 13, Period from
2019 through 1, 2019 through 2019 through January 1, 2019
Three Months Ended September 30, September 12, Nine Months Ended September 30, through September
September 30, 2020 2019 2019 September 30, 2020 2019 12, 2019
Medicare Advantage 19,390 3,441 15,551 80,656 3,441 48,341
Medicare Supplement 844 466 1,852 4,035 466 7,065
Prescription Drug Plans 352 139 606 1,206 139 2,597
Medicare-External Commissionable
Approved Submissions 20,586 4,046 18,009 85,897 4,046 58,003
Medicare-External commissionable Approved Submissions were 20,586 for the three
months ended September 30, 2020 , 18,009 for the Period from July 1, 2019 through
September 12, 2019 and 4,046 for the Period from September 13, 2019 through
September 30, 2019 . The decrease is attributable to a strategic shift to
generating consumer leads in the internal channels.
Medicare-External commissionable Approved Submissions were 85,897 for the nine
months ended September 30, 2020 , 58,003 for the Period from January 1, 2019
through September 12, 2019 and 4,046 for the Period from September 13, 2019
through September 30, 2019 . The increase in Medicare-External commissionable
Approved Submissions was attributable to our ability to recruit and onboard
additional external agents to enroll consumers in Medicare plans.
Lifetime Value of Commissions per Approved Submission
Lifetime value of commissions per commissionable Approved Submission, or LTV per
Approved Submission, represents (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, divided by (ii) the number of commissionable Approved
Submissions for such period. LTV per Approved Submission is equal to the sum of
the commission revenue due upon the initial sale of a policy, and when
applicable, an estimate of future renewal commissions per commissionable
Approved Submissions. The estimate of the future renewal commissions is
determined by using the contracted renewal commission rates constrained by a
persistency-adjusted renewal period. The persistency-adjusted renewal period is
determined based on our historical experience and available industry and carrier
historical data. Persistency-adjustments allow us to estimate renewal revenue
only to the extent
48
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probable that a material reversal in revenue would not be expected to occur.
These factors may result in varying values from period to period. LTV per
Approved Submission represents commissions only from policies sold during the
period, but excludes policies originally submitted in prior periods.
The following table presents the LTV per Approved Submission by product for the
Medicare segments for the periods indicated:
Successor Predecessor Successor Predecessor
Period from Period from Period from Period from
September 13, July 1, 2019 September 13, January 1, 2019
2019 through through 2019 through through
Three Months Ended September 30, September 12, Nine Months Ended September 30, September 12,
September 30, 2020 2019 2019 September 30, 2020 2019 2019
Medicare Advantage $ 987 $ 1,013 $ 922 $ 913 $ 1,013 $ 888
Medicare Supplement $ 934 $ 951 $ 846 $ 929 $ 951 $ 911
Prescription Drug Plans $ 215 $ 200 $ 198 $ 216 $ 200 $ 194
LTV per Approved Submission for Medicare Advantage was $987 for the three months
ended September 30, 2020 , $922 for the Period from July 1, 2019 through
September 12, 2019 and $1,013 for the Period from September 13, 2019 through
September 30, 2019 primarily due to an increase in CMS-approved commission rates
and a more diverse carrier base allowing us to offer more products and plans
that could satisfy a diverse range of needs contributing to more long-term
customer satisfaction with their policy. LTV per Approved Submission for
Medicare Supplement was $934 for the three months ended September 30, 2020 , $846
for the Period from July 1, 2019 through September 12, 2019 and $951 for the
Period from September 13, 2019 through September 30, 2019 due to favorable
changes in carrier mix. LTV per Approved Submission for prescription drug plans
was $215 for the three months ended September 30, 2020 , $198 for the Period from
July 1, 2019 through September 12, 2019 and $200 for the Period from September
13, 2019 through September 30, 2019 primarily due to improved persistency rates
and carrier mix shifts.
LTV per Approved Submission for Medicare Advantage was $913 for the nine months
ended September 30, 2020 , $888 for the Period from January 1, 2019 through
September 12, 2019 and $1,013 for the Period from September 13, 2019 through
September 30, 2019 due to a shift in carrier mix, offset by an increase in
CMS-approved commission rates and a more diverse carrier base allowing us to
offer more products and plans that contributed to more long-term customer
satisfaction. LTV per Approved Submission for Medicare Supplement was $929 for
the nine months ended September 30, 2020 , $911 for the Period from January 1,
2019 through September 12, 2019 and $951 for the Period from September 13, 2019
through September 30, 2019 primarily due to changes in carrier mix, offset by
decreases in the estimates of plan persistency. LTV per Approved Submission for
prescription drug plans was $216 for the nine months ended September 30, 2020 ,
$194 for the Period from January 1, 2019 through September 12, 2019 and $200 for
the Period from September 13, 2019 through September 30, 2019 primarily due to
improved persistency rates and carrier mix shifts.
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IFP and Other Segments
Submitted Policies
Submitted Policies represent the number of completed applications that, with
respect to each such application, the consumer has authorized us to submit to
the carrier. The applicant may need to take additional actions, including
providing subsequent information before the application is reviewed by the
carrier.
Total Submitted Policies for the IFP and Other segments were 20,313 for the
three months ended September 30, 2020 , 42,906 for the Period from July 1, 2019
through September 12, 2019 and 1,379 for the Period from September 13, 2019
through September 30, 2019 due to a change in strategy to prioritize agents and
marketing and advertising spend in the Medicare segments instead of IFP and
Other.
Total Submitted Policies for the IFP and Other segments were 83,366 for the nine
months ended September 30, 2020 , 150,544 for the Period from January 1, 2019
through September 12, 2019 and 1,379 for the Period from September 13, 2019
through September 30, 2019 due to a change in strategy to prioritize agents and
marketing and advertising spend in the Medicare segments instead of IFP and
Other.
Liquidity and Capital Resources
Overview
Our liquidity needs primarily include working capital and debt service
requirements. As of September 30, 2020 , cash and cash equivalents totaled $294.6
million . On July 17, 2020 , we completed our IPO, which resulted in the issuance
and sale of 43,500,000 shares of common stock at the IPO price of $21.00 , and
generating net proceeds of $852.4 million after deducting underwriting discounts
and other offering costs. We believe that our current sources of liquidity,
which include cash and funds available under the Credit Facilities, as described
further below, will be sufficient to meet our projected operating and debt
service requirements for at least the next 12 months. Short-term liquidity needs
will primarily be funded through the Aggregate Revolving Credit Facility, as
described further below, portion of the Credit Facilities. As of September 30,
2020 , we had no amounts outstanding under the Aggregate Revolving Credit
Facility and had a remaining capacity of $58.0 million . To the extent that our
current liquidity is insufficient to fund future activities, we may need to
raise additional funds, which may include the sale of equity securities or
through debt financing arrangements. The incurrence of additional debt financing
would result in debt service obligations, and any future instruments governing
such debt could provide for operating and financing covenants that could
restrict our operations.
The following table presents a summary of cash flows for the nine months ended
September 30, 2020 , the Period from January 1, 2019 through September 12, 2019
and the Period from September 13, 2019 through September 30, 2019 :
Successor Predecessor
Period from
Period from January 1, 2019
Nine Months September 13, 2019 through
Ended September through September September 12,
30, 2020 30, 2019 2019
(in thousands)
Net cash provided by operating activities $ 28,835 $ 16,143 $ 9,281
Net cash used in investing activities $ (12,023) $ (808,404) $ (5,597)
Net cash provided by (used in) financing activities $ 265,578 $ 831,710 $ (3,449)
Operating Activities
Cash provided by operating activities primarily consists of net loss adjusted
for certain non-cash items including share-based compensation; depreciation and
amortization; amortization of intangible assets; change in the fair value of
contingent consideration; and amortization of debt discount and issuance costs
and the effect of changes in working capital and other activities.
Collection of commissions receivable depends upon the timing of the receipt of
commission payments. If there were to be a delay in receiving a commission
payment from a carrier within a quarter, the operating cash flows for that
quarter could be adversely impacted.
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A significant portion of marketing and advertising expense is driven by the
number of qualified prospects required to generate the insurance applications
submitted to carriers. Marketing and advertising costs are expensed and
generally paid as incurred and since commission revenue is recognized upon
approval of a submission but commission payments are paid to us over time, there
are working capital requirements to fund the upfront cost of acquiring new
policies.
Net cash provided by operating activities was $28.8 million for the nine months
ended September 30, 2020 , which consisted of $230.3 million in net loss and
adjustments for non-cash items of $306.9 million , offset by the effect of
changes in operating assets and liabilities representing a $47.8 million use of
cash. The change in operating assets and liabilities was primarily driven by an
increase in commissions receivable of $117.9 million , partially offset by an
increase in deferred revenue of $40.2 million and an increase in commissions
payable of $28.0 million . The increases in commissions receivable and
commissions payable were each driven by increases in Medicare commissionable
Approved Submissions. The increase in deferred revenue represents
carrier-specific marketing development funds received in advance of satisfying
the related performance obligation.
Net cash provided by operating activities was $9.3 million for the Period from
January 1, 2019 through September 12, 2019 , and primarily consisted of $57.1
million in net loss and adjustments for non-cash items of $91.5 million , offset
by the effect of changes in operating assets and liabilities representing a
$25.1 million use of cash. The change in operating assets and liabilities was
primarily driven by commissions receivable of $63.4 million , offset by increases
in commissions payables of $19.2 million , which were each driven by increases in
Medicare commissionable Approved Submissions.
Net cash provided by operating activities was $16.1 million for the Period from
September 13, 2019 through September 30, 2019 , which consisted of $11.7 million
in net loss and adjustments for non-cash items of $5.2 million , offset by the
effect of changes in operating assets and liabilities representing $22.7 million
in cash. The change in operating assets and liabilities was primarily driven by
an increase in deferred revenue of $18.1 million , an increase in other
liabilities of $13.7 million and an increase in commissions payable of $8.3
million , partially offset by an increase in commissions receivable of $15.4
million . The increase in deferred revenue represents carrier-specific marketing
development funds received in advance. The increases in commissions receivable
and commissions payable were each driven by increases in Medicare commissionable
Approved Submissions.
Investing Activities
Net cash used in investing activities was $12.0 million for the nine months
ended September 30, 2020 and consisted of capitalized internal-use software
related to new technology, software, and systems and purchases of property and
equipment.
Net cash used in investing activities was $5.6 million for the Period from
January 1, 2019 through September 12, 2019 and was primarily attributable to
capitalized internal-use software related to new technology, software, and
systems.
Net cash used in investing activities of $808.4 million for the Period from
September 13, 2019 through September 30, 2019 was primarily attributable to the
Centerbridge Acquisition, which was comprised of $807.6 million of net cash used
in investing activities.
Financing Activities
Net cash provided by financing activities of $265.6 million for the nine months
ended September 30, 2020 was due to proceeds from the issuance of Class A common
stock sold in the IPO, net of offering costs, of $852.4 million . Of the $852.4
million of IPO proceeds, $508.3 million was used to purchase LLC Interests,
$100.0 million was used to settle the Senior Preferred Earnout Units, and $96.2
million was used as partial consideration for the Blocker Merger. Additionally,
the Company made borrowings of $117.0 million under the Incremental Term Loan
Facility during the nine months ended September 30, 2020 .
Net cash used in financing activities of $3.4 million for the Period from
January 1, 2019 through September 12, 2019 was due to repayments of $59.9
million under our predecessor revolving credit facility, offset by borrowings of
$56.5 million under the same facility.
Net cash provided by financing activities was $831.7 million for the Period from
September 13, 2019 through September 30, 2019 . This was comprised of $541.3
million for the issuance of preferred units in connection with the Centerbridge
Acquisition, $300.0 million from borrowings under the Term Loan Facility,
partially offset by debt issuance costs and payments of capital lease
obligations.
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Credit Facilities
On September 13, 2019 , in connection with the Centerbridge Acquisition, Norvax
entered into a first lien credit agreement (the "Credit Agreement") which
provides for a (i) $300.0 million aggregate principal amount senior secured term
loan facility (the "Term Loan Facility") and (ii) $30.0 million aggregate
principal amount senior secured revolving credit facility (the "Revolving Credit
Facility").
On March 20, 2020 , the Company entered into an amendment to the Credit
Agreement, which provided $117.0 million of incremental term loans (the
"Incremental Term Loan Facility").
On May 7, 2020 , the Company entered into a second amendment to the Credit
Agreement, which provided $20.0 million of incremental revolving credit, (the
"Incremental Revolving Credit Facility").
On June 11, 2020 , the Company entered into a third amendment to the Credit
Agreement, which provided $8.0 million of incremental revolving credit, (the
"Incremental No. 3 Revolving Credit Facility").
We collectively refer to the Term Loan Facility, the Revolving Credit Facility,
the Incremental Term Loan Facility, the Incremental Revolving Credit Facility,
and the Incremental No. 3 Revolving Credit Facility as the "Credit Facilities".
As of September 30, 2020 , we had principal amounts totaling $297.0 million
outstanding under the Term Loan Facility and $116.4 million outstanding under
the Incremental Term Loan Facility (collectively the "Aggregate Term Loan
Facility"). We had no amounts outstanding under the Revolving Credit Facility,
the Incremental Revolving Credit Facility, or the Incremental No. 3 Revolving
Credit Facility (collectively the "Aggregate Revolving Credit Facility"). The
Aggregate Revolving Credit Facility had a remaining capacity of $58.0 million as
of September 30, 2020 .
Contractual Obligations
There have been no material changes to our contractual obligations from those
described in the Prospectus.
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements, as defined in
Regulation S-K.
Recent Accounting Pronouncements
For a discussion of new accounting pronouncements recently adopted and not yet
adopted, see the Note 1 to the unaudited condensed consolidated financial
statements included elsewhere in this Quarterly Report on Form 10-Q.
Seasonality
The Medicare annual enrollment period occurs from October 15th to December 7th .
As a result, we experience an increase in the number of submitted
Medicare-related applications during the fourth quarter and an increase in
expense related to the Medicare segments during the third and fourth quarters.
Additionally, as a result of the annual Medicare Advantage open enrollment
period that occurs from January 1st to March 31st , commission revenue is
typically second-highest in our first quarter. The individual and family health
insurance open enrollment period runs from November 1st through December 15th of
each year for most states, and we expect the number of approved applications for
individual and family health insurance to be higher in the fourth quarter
compared to other quarters of the year as a result. A significant portion of our
marketing and advertising expenses is driven by the number of health insurance
applications submitted through us. Marketing and advertising expenses are
generally higher in the fourth quarter during the Medicare annual enrollment
period, but because commissions from approved customers are paid to us over
time, our operating cash flows could be adversely impacted by a substantial
increase in marketing and advertising expenses as a result of a higher volume of
applications submitted during the fourth quarter or positively impacted by a
substantial decline in marketing and advertising expenses as a result of lower
volume of applications submitted during the fourth quarter.
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Critical Accounting Policies and Estimates
The preparation of consolidated financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported
amounts of revenues, expenses, assets, and liabilities and disclosure of
contingent assets and liabilities in our financial statements. We regularly
assess these estimates; however, actual amounts could differ from those
estimates. The most significant items involving management's estimates include
estimates of revenue recognition, commissions receivable, and commissions
payable. The impact of changes in estimates is recorded in the period in which
they become known.
An accounting policy is considered to be critical if the nature of the estimates
or assumptions is material due to the levels of subjectivity and judgment
necessary to account for highly uncertain matters or the susceptibility of such
matters to change, and the effect of the estimates and assumptions on financial
condition or operating performance. The accounting policies we believe to
reflect our more significant estimates, judgments and assumptions that are most
critical to understanding and evaluating our reported financial results are:
revenue recognition, commissions receivable, and commissions payable.
Our critical accounting policies are described under the heading "Management's
Discussion and Analysis of Financial Condition and Results of
Operations-Critical Accounting Policies" in our Prospectus and the notes to the
unaudited interim consolidated financial statements appearing elsewhere in this
Quarterly Report on Form 10-Q. During the three months ended September 30, 2020 ,
there were no material changes to our critical accounting policies from those
discussed in our Prospectus.
JOBS Act
We qualify as an "emerging growth company" pursuant to the provisions of the
JOBS Act, enacted on April 5, 2012 . Section 102 of the JOBS Act provides that an
"emerging growth company" can take advantage of the extended transition period
provided in Section 7(a)(2)(B) of the Securities Act for complying with new or
revised accounting standards. We are electing to delay the adoption of new or
revised accounting standards, and as a result, we may not comply with new or
revised accounting standards on the relevant dates on which adoption of such
standards is required for non-emerging growth companies. As a result, our
consolidated financial statements may not be comparable to companies that comply
with new or revised accounting pronouncements as of public company effective
dates.
We are in the process of evaluating the benefits of relying on other exemptions
and reduced reporting requirements provided by the JOBS Act. Subject to certain
conditions set forth in the JOBS Act, if as an emerging growth company we choose
to rely on such exemptions, we may not be required to, among other things,
(1) provide an auditor's attestation report on our systems of internal controls
over financial reporting pursuant to Section 404, (2) provide all of the
compensation disclosure that may be required of non-emerging growth public
companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act of
2010, or the Dodd-Frank Act, (3) comply with the requirement of the PCAOB
regarding the communication of critical audit matters in the auditor's report on
the financial statements, and (4) disclose certain executive
compensation-related items, such as the correlation between executive
compensation and performance and comparisons of the Chief Executive Officer's
compensation to median employee compensation. These exemptions will apply until
we no longer meet the requirements of being an emerging growth company. We will
remain an emerging growth company until the earlier of (a) the last day of the
fiscal year (i) following the fifth anniversary of the completion of our IPO,
(ii) in which we have total annual gross revenue of at least $1.07 billion or
(iii) in which we are deemed to be a large accelerated filer, which means the
market value of our common stock that is held by non-affiliates exceeds
$700.0 million as of the last business day of our prior second fiscal quarter,
and (b) the date on which we have issued more than $1.0 billion in
non-convertible debt over a rolling 36-month period.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
In the normal course of business, we are subject to market risks. Market risk
represents the risk of loss that may impact our financial position due to
adverse changes in financial market prices and rates. Financial instruments that
are exposed to concentrations of credit risk primarily consist of accounts and
commissions receivable. We do not require collateral or other security for
receivables, but believe the potential for collection issues with any customers
was minimal as of September 30, 2020 , based on the lack of collection issues in
the past and the high financial standards we require of customers. As of
September 30, 2020 , three customers each represented 10% or more of the
Company's total accounts receivable and, in aggregate, represented 94%, or
$7.5 million , of the Company's total accounts receivable. As of December 31,
2019 , five customers each represented 10% or more of the Company's total
accounts receivable and, in aggregate, represented 87%, or $21.2 million , of the
Company's total accounts receivable. No other customers represented 10% or more
of the Company's total accounts receivable at September 30, 2020 and
December 31, 2019 .
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Interest Rate Risk
As of September 30, 2020 , we had cash of $294.6 million deposited in
non-interest bearing accounts with major banks with limited to no-interest rate
risk. We do not enter into investments for trading or speculative purposes and
have not used any derivative financial instruments to manage interest rate risk
exposure.
See "Risk Factors-Risks Related to Our Indebtedness-Developments with respect to
LIBOR may affect our borrowings under our Credit Facilities" for additional
information.
Item 4. Controls and Procedures.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating our disclosure controls and procedures, management
recognizes that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control
objectives. In addition, the design of disclosure controls and procedures must
reflect the fact that there are resource constraints and that management is
required to apply judgment in evaluating the benefits of possible controls and
procedures relative to their costs.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our chief executive officer and chief
financial officer, evaluated, as of the end of the period covered by this
Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act).
Based on that evaluation, our principal executive officer and principal
financial officer concluded that our disclosure controls and procedures were
effective at the reasonable assurance level as of September 30, 2020 .
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting
identified in management's evaluation pursuant to Rules 13a-15(d) or 15d-15(d)
of the Exchange Act during the quarter ended September 30, 2020 that materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
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