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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

~~___________________________________________________________~~__________________________________________________________

FORM 10-Q

~~__________________________________________________~~_________________________________________________________

(Mark One)

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

For the quarterly period ended ~~March~~June 3130, 2020

~~[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~or


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

For the transition period from ___________ to __________

Commission File Number: 1-35811

__________________________________________________________

Benefytt Technologies, Inc.

(Exact name of registrant as specified in its charter)

~~________________________________________________________~~ ___________________________________________________________


Delaware						46-1282634
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

3450 Buschwood Park Drive, Suite 200, Tampa, FL						33618
(Address of Principal Executive Offices)						(Zip Code)

(813) 397-1187

(Registrant’s telephone number, including area code)

Health Insurance Innovations, Inc.

15438 N. Florida Ave, Suite 201 Tampa, FL 33613

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

___________________________________________________________

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Stock, $0.001 par value

BFYT

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 ~~[X]~~☒ 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 and post such files). Yes ~~[X]~~☒ 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 definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer [☐ ] Emerging growth company [☐ ] Accelerated filer ~~[X]~~☒ Non-accelerated filer [☐ ] (Do not check if a smaller reporting company) Smaller reporting company ~~[ ]~~☐

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

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

As of August 5, 2020, the registrant had 13,579,927 shares of Class A common stock, $0.001 par value, outstanding and 687,667 shares of Class B common stock, $0.001 par value, outstanding.

CONTENTS

PART I—Financial Information	3	3
ITEM 1—Financial Statements	3	3
Condensed Consolidated Balance Sheets as of March 31, 2020 (Unaudited) and December 31, 2019	4
Condensed Consolidated Balance Sheets as of June 30, 2020 (Unaudited) and December 31, 2019		3
Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2020 and 2019 (Unaudited)	5
Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2020 and 2019 (Unaudited)		4
Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2020 and 2019 (Unaudited)	6
Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Six Months Ended June 30, 2020 and 2019 (Unaudited)		5
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2020 and 2019 (Unaudited)	8
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2019 (Unaudited)		7
Notes to Condensed Consolidated Financial Statements (Unaudited)	10	9
ITEM 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations	28	29
ITEM 3—Quantitative and Qualitative Disclosures About Market Risk	37	39
ITEM 4—Controls and Procedures	37	39
PART II—Other Information	39	41
ITEM 1—Legal Proceedings	39	41
ITEM 1A—Risk Factors	39	41
ITEM 2—Unregistered Sales of Equity Securities and Use of Proceeds	39	41
ITEM 3—Defaults Upon Senior Securities	40	42
ITEM 4—Mine Safety Disclosures	40	42
ITEM 5—Other Information	40	42
ITEM 6—Exhibits	40	43
Signatures	41	44

PART I—FINANCIAL INFORMATION

ITEM 1—FINANCIAL STATEMENTS

BENEFYTT TECHNOLOGIES, INC.Condensed Consolidated Balance Sheets ($ in thousands, except share and per share data)
	March 31, 2020			December 31, 2019
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	5,051		$	3,771
Restricted cash	16,030			17,788
Accounts receivable, net, prepaid expenses and other current assets	7,361			2,911
Income taxes receivable	23,018			18,210
Advanced commissions, net	40,524			45,250
Contract asset	172,554			184,474
Total current assets	264,538			272,404
Long-term contract asset	207,675			209,239
Property and equipment, net	5,494			5,415
Deferred tax asset	645			—
Right-of-use assets	16,568			496
Goodwill	94,814			135,182
Intangible assets, net	25,473			28,963
Other assets	2,623			159
Total assets	$	617,830		$	651,858
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and accrued expenses	$	45,568		$	51,477
Commissions payable	92,833			97,785
Contingent consideration, current	1,750			—
Current portion of long-term debt, net	9,488			10,684
Operating lease liabilities, current	1,466			237
Other current liabilities	296			557
Total current liabilities	151,401			160,740
Commissions payable, long-term	79,287			82,369
Contingent consideration, long-term	66,302			65,171
Debt, net, long-term	183,470			167,947
Due to member	34,142			29,121
Deferred tax liability, net	—			5,722
Operating lease liabilities, long-term	14,965			224
Other liabilities	330			590
Total liabilities	529,897			511,884
Commitments and contingencies (Note 14)
Stockholders’ equity:
Class A common stock (par value $0.001 per share, 100,000,000 shares authorized; 17,119,217 and 16,219,217 shares issued as of March 31, 2020 and December 31, 2019, respectively; 13,203,527 and 12,273,630 shares outstanding as of March 31, 2020 and December 31, 2019, respectively)	17			16
Class B common stock (par value $0.001 per share, 20,000,000 shares authorized; 1,016,667 and 1,916,667 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively)	1			2
Preferred stock (par value $0.001 per share, 5,000,000 shares authorized; no shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively)	—			—
Additional paid-in capital	131,943			118,465
Treasury stock, at cost (3,915,690 and 3,945,587 shares as of March 31, 2020 and December 31, 2019, respectively)	(125,643		)	(127,400		)
Retained earnings	66,152			110,418
Total Benefytt Technologies, Inc. stockholders’ equity	72,470			101,501
Noncontrolling interests	15,463			38,473
Total stockholders’ equity	87,933			139,974
Total liabilities and stockholders' equity	$	617,830		$	651,858

BENEFYTT TECHNOLOGIES, INC.

Condensed Consolidated Balance Sheets

($ in thousands, except share and per share data)


	June 30, 2020		December 31, 2019
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	13,640	$	3,771
Restricted cash	15,591		17,788
Accounts receivable, net, prepaid expenses and other current assets	4,187		2,911
Income taxes receivable	22,858		18,210
Advanced commissions, net	32,379		45,250
Contract asset	177,567		184,474
Total current assets	266,222		272,404
Long-term contract asset	190,861		209,239
Property and equipment, net	5,376		5,415
Deferred tax asset, net	4,290		—
Right-of-use assets	16,089		496
Goodwill	94,814		135,182
Intangible assets, net	21,733		28,963
Other assets	1,805		159
Total assets	$	601,190	$	651,858
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and accrued expenses	$	42,663	$	51,477
Commissions payable	85,631		97,785
Contingent consideration, current	3,611		—
Current portion of long-term debt, net	10,446		10,684
Operating lease liabilities, current	1,907		237
Other current liabilities	644		557
Total current liabilities	144,902		160,740
Commissions payable, long-term	65,208		82,369
Contingent consideration, long-term	64,234		65,171
Debt, net, long-term	195,709		167,947
Due to member	34,496		29,121
Deferred tax liability, net	—		5,722
Operating lease liabilities, long-term	14,454		224
Other liabilities	298		590
Total liabilities	519,301		511,884
Commitments and contingencies (Note 14)
Stockholders’ equity:
Class A common stock (par value $0.001 per share, 100,000,000 shares authorized; 17,141,345 and 16,219,217 shares issued as of June 30, 2020 and December 31, 2019, respectively; 13,233,640 and 12,273,630 shares outstanding as of June 30, 2020 and December 31, 2019, respectively)	17		16
Class B common stock (par value $0.001 per share, 20,000,000 shares authorized; 1,016,667 and 1,916,667 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively)	1		2
Preferred stock (par value $0.001 per share, 5,000,000 shares authorized; no shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively)	—		—
Additional paid-in capital	132,623		118,465
Treasury stock, at cost (3,907,705 and 3,945,587 shares as of June 30, 2020 and December 31, 2019, respectively)	(124,740)		(127,400)
Retained earnings	58,759		110,418
Total Benefytt Technologies, Inc. stockholders’ equity	66,660		101,501
Noncontrolling interests	15,229		38,473
Total stockholders’ equity	81,889		139,974
Total liabilities and stockholders' equity	$	601,190	$	651,858

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

BENEFYTT TECHNOLOGIES, INC.

Condensed Consolidated Statements of Operations (unaudited)

($ in thousands, except share and per share data)

	Three Months Ended March 31,
			Three Months Ended June 30,								Six Months Ended June 30,
	~~2020~~		2020		~~2019~~		2019		2020		2019
Revenues	$	~~71,561~~	$	52,106	$	~~87,326~~	$	58,356	$	123,667	$	145,682
Operating expenses:
Third-party commissions	~~32,770~~		20,480		~~60,671~~		26,910		53,250		87,581
Selling, general and administrative	~~27,946~~		20,309		~~15,597~~		18,586		48,255		34,183
Marketing and advertising	18,453				3,062
Loss on impairment			—				—		41,076		—
Credit card and ACH fees	1,417				1,523
Marketing and advertising			14,262				2,787		32,715		5,849
Depreciation and amortization	4,345				1,132
Credit card and ACH fees			1,316				1,582		2,733		3,105
Loss on impairment	41,076				—
Depreciation and amortization			4,807				1,639		9,152		2,771
Total operating expenses	~~126,007~~		61,174		~~81,985~~		51,504		187,181		133,489
(Loss) income from operations	~~(54,446~~		(9,068)		~~5,341~~		6,852		(63,514)		12,193
Other expense:
Interest expense	~~2,094~~		1,830		~~345~~		1,349		3,924		1,694
Fair value adjustment to contingent acquisition consideration	2,881				—
TRA expense			370				—		370		—
Other expense	—				17
Fair value adjustment to acquisition contingent consideration			(207)				—		2,674		—
Net (loss) income before income taxes	(59,421		)		4,979
Other expense			—				(17)		—		—
(Benefit) provision for income taxes	(9,606		)		2,797
Net (loss) income before income taxes			(11,061)				5,520		(70,482)		10,499
Net (loss) income	(49,815		)		2,182
(Benefit) provision for income taxes			(3,434)				2,290		(13,040)		5,087
Net (loss) income attributable to noncontrolling interests	(5,549		)		851
Net (loss) income			(7,627)				3,230		(57,442)		5,412
Net (loss) income attributable to Benefytt Technologies, Inc.	$	(44,266	)		$	1,331
Net (loss) income attributable to noncontrolling interests			(234)				943		(5,783)		1,794
Per share data:
Net (loss) income attributable to Benefytt Technologies, Inc.			$	(7,393)			$	2,287	$	(51,659)	$	3,618
Net (loss) income per share attributable to Benefytt Technologies, Inc.
Per share data:
Basic	$	(3.68	)		$	0.12
Net (loss) income per share attributable to Benefytt Technologies, Inc.
Diluted	$	(3.68	)		$	0.11
Basic			$	(0.60)			$	0.22	$	(4.24)	$	0.33
Weighted average Class A common shares outstanding
Diluted			$	(0.60)			$	0.20	$	(4.24)	$	0.30
Basic	12,023,121				11,388,490
Weighted average Class A common shares outstanding
Diluted	12,023,121				12,472,731
Basic			12,353,320				10,596,833		12,188,220		10,990,474
Diluted			12,353,320				11,487,774		12,188,220		11,978,065

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

BENEFYTT TECHNOLOGIES, INC.

Condensed Consolidated Statements of Changes in Stockholders’ Equity (unaudited)

($ in thousands, except share data)

	March 31, 2020				March 31, 2019
			Three Months Ended June 30,									Six Months Ended June 30,
Total Equity, Beginning of Period	$	139,974			$	143,468
			2020					2019		2020		2019
Class A Share Capital:
Total Equity, Beginning of Period			$	87,933				$	99,224	$	139,974	$	143,468
Beginning balance	16				14
Class A Share Capital:
Issuance of Class A common stock in a private offering	1				1
Beginning balance			17					15		16		14
Ending balance	$	17			$	15
Issuance of Class A common stock in a private offering			—					—		1		1
Class B Share Capital:
Issuance of Class A common stock for acquisition consideration			—					1		—		1
Beginning balance	$	2			$	3
Ending balance			$	17				$	16	17		16
Exchange of Series B Membership interests and exchange and cancellation of Class B common stock	(1		)		(1		)
Class B Share Capital:
Ending balance	$	1			$	2
Beginning balance			$	1				$	2	$	2	$	3
Additional paid-in capital:
Exchange of Series B Membership interests and exchange and cancellation of Class B common stock			—					—		(1)		(1)
Beginning balance	$	118,465			$	94,194
Ending balance			$	1				$	2	$	1	$	2
Issuance of Class A common stock in a private offering	13,972				1,848
Additional paid-in capital:
Issuance of Class A common stock from treasury	(1,517		)		(7		)
Beginning balance			$	131,943				$	93,340	$	118,465	$	94,194
Issuance of restricted shares from treasury	(1,766		)		(5,197		)
Issuance of Class A common stock in a private offering			147					—		14,119		1,848
Forfeitures of restricted stock held in treasury	—				587
Issuance of Class A common stock for acquisition consideration			—					11,783		—		11,783
Stock-based compensation	2,704				1,915
Issuance of Class A common stock from treasury			(1,538)					(395)		(3,055)		(402)
Contributions	85				—
Issuance of restricted shares from treasury			(480)					1		(2,246)		(5,196)
Ending balance	$	131,943			$	93,340
Forfeitures of restricted stock held in treasury			227					—		227		587
Treasury Stock:
Stock-based compensation			2,314					3,052		5,018		4,967
Beginning balance	$	(127,400	)		$	(67,185	)
Contributions			10					—		95		—
Repurchases of Class A common stock	—				(45,272		)
Ending balance			$	132,623				$	107,781	$	132,623	$	107,781
Class A common stock withheld in Treasury from restricted share vesting	(1,526		)		(918		)
Treasury Stock:
Forfeitures of restricted stock held in treasury	—				(587		)
Beginning balance			$	(125,643)				$	(108,758)	$	(127,400)	$	(67,185)
Issuance of restricted shares from treasury	1,766				5,197
Repurchases of Class A common stock			—					(18,644)		—		(63,916)
Issuance of Class A common stock from treasury	1,517				7
Class A common stock withheld in Treasury from restricted share vesting			(888)					(971)		(2,414)		(1,889)
Ending balance	$	(125,643	)		$	(108,758	)
Forfeitures of restricted stock held in treasury			(227)					—		(227)		(587)
Retained Earnings:
Issuance of restricted shares from treasury			480					(1)		2,246		5,196
Beginning balance	$	110,418			$	80,804
Issuance of Class A common stock from treasury			1,538					395		3,055		402
Net (loss) income	(44,266		)		1,331
Ending balance			$	(124,740)				$	(127,979)	$	(124,740)	$	(127,979)
Ending balance	$	66,152			$	82,135
Retained Earnings:
Equity Attributable to Non-controlling Interests:
Beginning balance			$	66,152				$	82,135	$	110,418	$	80,804
Beginning balance	$	38,473			$	35,638
Net (loss) income			(7,393)					2,287		(51,659)		3,618
Net (loss) income attributable to non-controlling interest	(5,549		)		851
Ending balance			$	58,759				$	84,422	$	58,759	$	84,422
Exchange of Series B Membership interest and exchange and cancellation of Class B common stock	(17,464		)		(1,757		)
Equity Attributable to Non-controlling Interests:
Contributions (distributions)	3				(2,242		)
Beginning balance			$	15,463				$	32,490	$	38,473	$	35,638
Ending balance	15,463				32,490
Net (loss) income attributable to non-controlling interest			(234)					943		(5,783)		1,794
Total Equity, End of Period	$	87,933			$	99,224
Exchange of Series B Membership interest and exchange and cancellation of Class B common stock			—					—		(17,464)		(1,757)
(Distributions) contributions			—					(326)		3		(2,568)
Ending balance			15,229					33,107		15,229		33,107
Total Equity, End of Period			$	81,889				$	97,349	$	81,889	$	97,349

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

BENEFYTT TECHNOLOGIES, INC.

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Continued)

(unaudited)

($ in thousands, except share data)

	March 31, 2020			March 31, 2019
			Three Months Ended June 30,					Six Months Ended June 30,
Class A Common Shares Outstanding:
			2020			2019	2020	2019
Beginning balance	12,273,630			12,387,349
Class A Common Shares Outstanding:
Repurchases of Class A common stock	—			(1,351,241	)
Beginning balance			13,203,527			11,512,687	12,273,630	12,387,349
Issuance of Class A common stock in a private offering	900,000			125,000
Repurchases of Class A common stock			—			(630,000)	—	(1,981,241)
Issuance of Class A common stock under equity compensation plan	—			250,000
Issuance of Class A common stock in a private offering			—			—	900,000	125,000
Issuance of Class A common stock from treasury	47,287			218
Issuance of Class A common stock for acquisition consideration			—			630,000	—	630,000
Issuance of restricted shares from treasury	55,000			157,000
Issuance of Class A common stock under equity compensation plan			22,128			288,393	22,128	538,393
Class A common stock withheld in treasury from restricted share vesting	(72,390	)		(33,700	)
Issuance of Class A common stock from treasury			47,955			12,018	95,242	12,236
Forfeitures of restricted stock held in treasury	—			(21,939	)
Issuance of restricted shares from treasury			15,000			—	70,000	157,000
Ending balance	13,203,527			11,512,687
Class A common stock withheld in treasury from restricted share vesting			(45,207)			(34,845)	(117,597)	(68,545)
Class B Common Shares Outstanding:
Forfeitures of restricted stock held in treasury			(9,763)			—	(9,763)	(21,939)
Beginning balance	1,916,667			2,541,667
Ending balance			13,233,640			11,778,253	13,233,640	11,778,253
Exchange of Series B Membership interests and exchange and cancellation of Class B common stock	(900,000	)		(125,000	)
Class B Common Shares Outstanding:
Ending balance	1,016,667			2,416,667
Beginning balance			1,016,667			2,416,667	1,916,667	2,541,667
Treasury Shares Outstanding:
Exchange of Series B Membership interests and exchange and cancellation of Class B common stock			—			—	(900,000)	(125,000)
Beginning balance	3,945,587			2,038,475
Ending balance			1,016,667			2,416,667	1,016,667	2,416,667
Repurchases of Class A common stock	—			1,351,241
Treasury Shares Outstanding:
Issuance of Class A common stock from treasury	(47,287	)		(218	)
Beginning balance			3,915,690			3,288,137	3,945,587	2,038,475
Issuance of restricted shares from treasury	(55,000	)		(157,000	)
Repurchases of Class A common stock			—			630,000	—	1,981,241
Forfeitures of restricted stock held in treasury	—			21,939
Issuance of Class A common stock from treasury			(47,955)			(12,018)	(95,242)	(12,236)
Class A common stock withheld in Treasury from restricted share vesting	72,390			33,700
Issuance of restricted shares from treasury			(15,000)			—	(70,000)	(157,000)
Ending balance	3,915,690			3,288,137
Forfeitures of restricted stock held in treasury			9,763			—	9,763	21,939
Class A common stock withheld in Treasury from restricted share vesting			45,207			34,845	117,597	68,545
Ending balance			3,907,705			3,940,964	3,907,705	3,940,964

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

BENEFYTT TECHNOLOGIES, INC.

Condensed Consolidated Statements of Cash Flows (unaudited)

($ in thousands)

	Three Months Ended March 31,
			Six Months Ended June 30,
	~~2020~~		2020		~~2019~~			2019
Operating activities:
Net (loss) income	$	~~(49,815~~	)$	(57,442)	$	~~2,182~~		$	5,412
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Stock-based compensation	~~2,627~~		4,834		~~1,816~~			4,733
Fair value adjustment to contingent acquisition consideration	~~2,881~~		2,674		—			—
Loss on disposal of assets	73		459		—			—
Provision for allowance for doubtful accounts	~~116~~		277		13			—
Impairment of assets	~~41,076~~		41,076		—			—
Depreciation and amortization	~~4,345~~		9,152		~~1,132~~			2,771
Deferred financing costs	~~202~~		274		—			—
Deferred income taxes	~~(4,838~~		(8,257)		~~191~~			346
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable, prepaid expenses and other assets	~~(6,914~~		(2,922)		~~275~~			22
Decrease (increase) in advanced commissions	4,610				(196		)
Decrease in advanced commissions			12,594					1,916
Increase in income taxes receivable	~~(4,808~~		(4,648)		—			—
Increase in right-of-use asset	~~(16,072~~		(15,593)		~~(639~~		)	(625)
Decrease (increase) in contract asset	12,776				(13,327		)
Decrease in contract asset			24,577					5,213
Increase in lease liability	15,893				538
Increase (decrease) in lease liability			15,823					(544)
Decrease in accounts payable, accrued expenses and other liabilities	~~(5,353~~		(7,942)		~~(6,568~~		)	(5,025)
(Decrease) increase in commission payable	(8,034		)		6,387
Decrease in commission payable			(29,315)					(19,439)
Increase in income taxes payable, net	—				2,452
Decrease in income taxes payable, net			—					(3,739)
Net cash used in operating activities	(11,235		)		(5,744		)
Increase in due to member pursuant to tax receivable agreement			275					—
Investing activities:
Net cash used in operating activities			(14,104)					(8,959)
Business acquisition: release of hold-back	(1,000		)		—
Investing activities:
Capitalized internal-use software and website development costs	(501		)		(315		)
Business acquisition: release of hold-back			(1,000)					—
Purchases of property and equipment	(429		)		(109		)
Business acquisition, net of cash acquired			—					(47,319)
Net cash used in investing activities	(1,930		)		(424		)
Capitalized internal-use software and website development costs			(1,218)					(854)
Financing activities:
Purchases of property and equipment			(940)					(285)
Proceeds from borrowings under credit agreement	18,000				50,000
Net cash used in investing activities			(3,158)					(48,458)
Payments on borrowings under credit agreement	(3,875		)		—
Financing activities:
Payments related to tax withholding for share-based compensation	(1,526		)		(918		)
Proceeds from borrowings under credit agreement			33,000					198,094
Purchases of Class A common stock pursuant to share repurchase plan	—				(45,272		)
Payments on borrowings under credit agreement			(5,750)					(65,000)
Contributions (distributions)	88				(677		)
Payments related to tax withholding for share-based compensation			(2,414)					(1,889)
Net cash provided by financing activities	12,687				3,133
Purchases of Class A common stock pursuant to share repurchase plan			—					(63,916)
Net decrease in cash and cash equivalents, and restricted cash	(478		)		(3,035		)
Contributions (distributions)			98					(2,333)
Cash and cash equivalents, and restricted cash at beginning of period	21,559				25,999
Net cash provided by financing activities			24,934					64,956
Cash and cash equivalents, and restricted cash at end of period	$	21,081			$	22,964
Net increase in cash and cash equivalents, and restricted cash			7,672					7,539
Cash and cash equivalents, and restricted cash at beginning of period			21,559					25,999
Cash and cash equivalents, and restricted cash at end of period			$	29,231				$	33,538

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

BENEFYTT TECHNOLOGIES, INC.

Condensed Consolidated Statements of Cash Flows (Continued)

Supplemental Cash Flow Information (unaudited)

($ in thousands)

	Three Months Ended March 31,
			Six Months Ended June 30,
	~~2020~~		2020		~~2019~~			2019
Supplemental cash flow information:
Cash paid during the period for:
Income taxes, net	$	41	$	47	$	~~159~~		$	8,490
Interest	~~1,883~~		3,619		~~212~~			1,328
Non-cash investing activities:
Capitalized stock-based compensation	$	77	184		$	99		234
Non-cash financing activities:
Change in due to member related to Exchange Agreement	$	~~5,021~~	5,100		$	~~517~~		517
Change in deferred tax asset related to Exchange Agreement	~~(1,529~~		(1,755)		~~(609~~		)	(609)
Issuance of Class A common stock in a private offering related to Exchange Agreement	~~13,973~~		14,120		~~1,849~~			1,849
Exchange of Class B membership interests related to Exchange Agreement	~~(17,465~~		(17,465)		~~(1,758~~		)	(1,758)
Declared but unpaid distribution to member of Health Plan Intermediaries Holdings, LLC	—		—		~~1,565~~			235

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

BENEFYTT TECHNOLOGIES, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

1. Organization, Basis of Presentation and Summary of Significant Accounting Policies

Benefytt Technologies, Inc. ("BFYT") is a Delaware corporation that was incorporated on October 26, 2012 under the name Health Insurance Innovations, Inc. and that changed its name to Benefytt Technologies, Inc, on March 6, 2020. In this quarterly report, unless the context suggests otherwise, references to the "Company," "we," "us" and "our" refer to Benefytt Technologies, Inc. (formerly known as Health Insurance Innovations, Inc.) and its consolidated subsidiaries. The term "HPIH" refers to our majority owned subsidiary, Health Plan Intermediaries Holdings, LLC, on a stand-alone basis. The terms "HealthPocket" or "HP" refer to HealthPocket, Inc., which was acquired by HPIH on July 14, 2014 (and is now wholly owned by Health Insurance Innovations Holdings, LLC, or "HIIH," a wholly owned subsidiary of HPIH formed on December 17, 2018). The term "Benefytt Reinsurance" refers to Benefytt, LLC, a wholly owned subsidiary of HIIH which was formed on May 1, 2019. The term "TogetherHealth" collectively refers to the three subsidiaries TogetherHealth PAP, LLC, TogetherHealth Insurance, LLC, and Rx Helpline, LLC, which were acquired by HPIH on June 5, 2019, and are all wholly owned subsidiaries of HPIH. The term "TIB" refers to Total Insurance Brokers, LLC which was acquired on August 5, 2019 and is wholly owned by HPIH. The term "ASIA" refers to American Service Insurance Agency LLC, a wholly owned subsidiary which was acquired by HPIH on August 8, 2014. HP, HIIH, Benefytt Reinsurance, TogetherHealth, TIB, and ASIA are consolidated subsidiaries of HPIH, which is a consolidated subsidiary of BFYT.

Principles of Consolidation and Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the SEC for quarterly reports on Form 10-Q. Accordingly, they do not include all of the financial information and footnotes required by generally accepted accounting principles in the United States of America (“GAAP”) for complete financial statements. The information included in this quarterly report, including the interim condensed consolidated financial statements and the accompanying notes, should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. The year-end condensed balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP.

In the opinion of management, the accompanying condensed consolidated financial statements reflect all adjustments, which include only normal recurring adjustments, necessary to state fairly the financial position, results of operations, stockholders' equity, and cash flows of the Company. The condensed consolidated results for the three and six months ended ~~March 31~~June 30, 2020 are not necessarily indicative of the results to be expected for any subsequent interim period or for the year ending December 31, 2020.

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. These estimates also affect the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from estimates, and any such differences may be material to our financial statements.

We are not presently aware of any events or circumstances arising from the COVID-19 pandemic that would require us to update our estimates or judgments or revise the carrying value of our assets or liabilities. Our estimates may change, however, as new events occur and additional information is obtained,. ~~any~~Any such changes will be recognized in the condensed consolidated financial statements.

Reclassifications

Right of use assets and operating lease liabilities are now reported as separate line items on the condensed consolidated balance sheets. ~~Prior~~As ~~period~~of December 31, 2019, right of use assets were ~~previously~~ reported as a component of other assets and operating lease liabilities were reported as a component of other liabilities. These amounts have been reclassified to conform to the current period presentation.

Prior period marketing and advertising expenses included within the condensed consolidated statements of operations have been reclassified to conform to the current period presentation. The Company previously reported marketing and advertising expense as a component of selling, general and administrative expenses but now reports these expenses as a separate line item in the condensed consolidated statements of operations.9

Summary of Significant Accounting Policies

The following is an update to our significant accounting policies described in Note 1, Description of Business, Basis of Presentation, and Summary of Significant Accounting Policies, in our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019.

Financial Instruments - Credit Losses (Topic 326)

Allowance for Credit Losses - Advanced Commissions: The allowance for credit losses is a valuation account that is deducted from the gross amount of advanced commissions to present the net amount expected to be collected. Advanced Commissions are charged against the allowance when management believes that it is no longer collectible based on future collections of premium from each distributor's book of business. This allowance for credit losses is netted against our long-term advanced commissions which are classified within other assets on the condensed consolidated balance sheets.

Management estimates the allowance balance using relevant available information, from internal and external sources relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments are made for differences such as lower than estimated persistency of a distributor's book of business, changes in conditions, or other relevant factors. The allowance for credit loss is measured on a collective basis as similar risks characteristics exists. The adoption of this standard did not have a material impact on our condensed consolidated financial statements.

Recent Accounting Pronouncements

Recently adopted accounting pronouncements

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses, which amends the guidance for evaluating impairment of financial assets subject to risks such as contract assets, loans, receivables, and other financial assets. 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. ASU 2016-13 became effective for us on January 1, 2020. See Summary of Significant Accounting Polices within this Note 1 for further information.

Accounting pronouncements not yet adopted

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The objective of this ASU is to provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting due to the cessation of the London Interbank Offered Rate (LIBOR). The amendments in this update are effective for all entities as of March 12, 2020 through December 31, 2022. The Company is currently evaluating the effect of the adoption of this pronouncement on our financial statements and related disclosures and have not adopted any of the temporary optional guidance.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which clarifies and simplifies accounting for income taxes by eliminating certain exceptions for intraperiod tax allocation principles and the methodology for calculating income tax rates in an interim period, among other updates. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the effect of the adoption of this pronouncement on our financial statements and related disclosures.

The Company has reviewed all other issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on our financial statements.

1110

2. Business Combinations

TogetherHealth

On June 5, 2019, the Company entered into a Membership Interest Purchase Agreement (the "Purchase Agreement") with RxHelpline, LLC ("RXH"), TogetherHealth PAP, LLC ("THP"), TogetherHealth Insurance, LLC ("THI" and, collectively with RXH and THP, "TogetherHealth"), TogetherHealth Soup, L.P. ("Seller") and certain principals of TogetherHealth, pursuant to which HPIH purchased 100% of the outstanding limited liability company interests of TogetherHealth (the "Interests"). The closing of the transactions contemplated by the Purchase Agreement occurred on June 5, 2019, simultaneous with the signing of the Purchase Agreement.

The purchase price for the Interests under the Purchase Agreement was approximately $50.0 million in cash, subject to certain closing and post-closing adjustments (the "Cash Consideration"), the issuance of 630,000 shares of the Company's Class A common stock, and an earn-out agreement pursuant to which the Seller will receive payments over a five-year post-closing period equal to a percentage of the TogetherHealth's gross margin above specified thresholds. Pursuant to the Purchase Agreement, a portion of the cash consideration consisting of $2.5 million was held back by HPIH in order to fund payment of post-closing adjustments to the cash consideration and post-closing indemnification obligations of the parties. ofThe ~~which,~~Company has subsequently released $1.5 million, ~~has~~of ~~since~~which ~~been~~$1.0 million was released during the six months ended June 30, 2020. The shares issued pursuant to the Purchase Agreement are subject to lock-up agreements pursuant to which the holders thereof are restricted from selling or transferring such shares for a three-year period, subject to a release from the lock-up of one-third of the subject shares on each of the first three anniversary dates of the Purchase Agreement and subject to other release-acceleration provisions and customary exceptions.

This transaction is expected to provide us with additional benefits such as increased and ongoing sales referrals that we will use to convert to policies, or sell externally, which will help facilitate our entry into new markets and revenue streams, such as the market for the distribution of Medicare insurance products to individuals 65 years of age or older.

The following table summarizes the fair value of the consideration paid for the acquisition as of June 5, 2019 ($ in thousands):

Cash consideration(1)	$	~~49,852~~	$	49,852
Class A common stock, at fair value(2)	~~11,784~~		11,784
Earnout consideration, at fair value(3)	~~49,298~~		49,298
Settlement of intercompany balances	~~(560~~		(560)
Total consideration	$	~~110,374~~	$	110,374

⁽¹⁾ Cash consideration was $50.0 million, of which $2.5 million was withheld by HPIH for the payment of post-closing adjustments. Measurement period adjustments resulted in $148,000 for working capital adjustments.

⁽²⁾ The fair value of the Class A common stock derived from the market price of the stock, adjusted to include a discount for lack of marketability due to the trading restrictions pursuant to the Purchase Agreement.

⁽³⁾ Represents the fair value estimate of income-based contingent consideration, which may be realized by the sellers incrementally over five years after the closing date of the acquisition. The fair value of the contingent consideration arrangement as of the acquisition date was estimated using a risk-adjusted probability analysis. As of June 5th, 2019, management estimated the payments to be approximately $97.6 million over the five years however the maximum cash payout is unlimited.

~~For~~The ~~the~~assets ~~three~~acquired ~~months~~and ~~ended March 31, 2020,~~ the ~~Company updated its preliminary allocation of the purchase price of the assets and~~ liabilities assumed. ~~The assets and liabilities~~ in the final purchase price allocation are stated at fair value based on estimates of fair value using information and assumptions available which management believes are reasonable.

12The following table summarizes the allocation of the total purchase price for the acquisition ($ in thousands):

The following table summarizes the allocation of the total purchase price for the acquisition: ($ in thousands):


Cash	$	179
Accounts receivable and other assets⁽¹⁾	333
Contract asset⁽¹⁾⁽²⁾	12,798
Property, plant and equipment⁽¹⁾	34
Intangible asset - brand	430
Intangible asset - BPO relationship	24,700
Goodwill	72,660
Accounts payable, accrued expenses, and other liabilities⁽¹⁾	(760)
Total	$	110,374

Cash	$	179
Accounts receivable and other assets(1)	333
Contract asset(1)(2)	12,798
Property, plant and equipment(1)	34
Intangible asset - brand	430
Intangible asset - BPO relationship	24,700
Goodwill	72,660
Accounts payable, accrued expenses, and other liabilities(1)	(760		)
Total	$	110,374

⁽¹⁾The carrying value of accounts receivable, contract asset, property, plant and equipment, accounts payable and accrued expenses approximated fair value; as such, no adjustments to the accounts were recorded in association with the acquisition.

(2) Final ~~Current quarter~~ adjustments of $708,000 were made during the first quarter of 2020 due to revisions of collection estimates of policies in force. No adjustments were made during the three months ended June 30, 2020.

The goodwill allocated to the purchase price was calculated as the fair value of the consideration less the assets acquired and liabilities assumed. This value of goodwill is primarily related to the expected results of future operations of TogetherHealth, its existing operational processes, and the experience of the acquired executives. The amount of goodwill that is expected to be deductible for tax purposes is $48.5 million.

As a result of acquiring TogetherHealth, our condensed consolidated results of operations include the results of TogetherHealth since the acquisition date. TogetherHealth's revenues for the three and six months ended ~~March 31~~June 30, 2020 were $169.59 million and $26.3 million, respectively. For the three and six months ended ~~March 31~~June 30, 2020 pre-tax net loss was $24.03 million and $6.8 million, respectively. Pre-tax net loss for ~~the~~three ~~quarter~~and ~~ended~~six ~~March~~months 31ended June 30, 2020 includes $3.1 million and $6.2 million of amortization expense, respectively, associated with the ~~valuations of the~~ acquired intangible assets noted above.

The following unaudited pro forma financial information represents the consolidated financial information as if the acquisition had been included in our consolidated results beginning on the first day of the fiscal year prior to the acquisition date. The pro forma results have been calculated after adjusting the results of the acquired entities to remove intercompany transactions and transaction costs incurred and to reflect the additional amortization that would have been charged assuming the fair value adjustments to intangible assets had been applied on the first day of the fiscal year prior to the acquisition, together with the consequential tax effects. The pro forma results do not reflect any cost savings, operating synergies or revenue enhancements that the combined company may achieve as a result of the acquisitions; the costs to combine the companies' operations; or the costs necessary to achieve these costs savings, operating synergies and revenue enhancements. The pro forma results do not necessarily reflect the actual results of operations of the combined companies under our ownership and operation.

	($ in thousands, except per share data)Unaudited
	Three Months Ended March 31,
	2020			2019
Revenue	$	71,561		$	97,820
Net (loss) income before income taxes	(59,421		)	7,225
Net (loss) income	(49,815		)	3,889
Net (loss) income attributable to Benefytt Technologies, Inc.	(44,266		)	2,372
Net (loss) income per share - basic	(3.68		)	0.20
Net (loss) income per share - diluted	(3.68		)	0.18
Weighted average Class A common shares outstanding
Basic	12,023,121			12,018,490
Diluted	12,023,121			13,102,731

Other Acquisitions

On July 29, 2019, the Company entered into a Stock Purchase Agreement to acquire the interests of a corporation, which owned and operated HealthInsurance.com. The acquisition was accounted for as a purchase of an asset and classified as an intangible asset on the condensed consolidated balance sheet.

On August 5, 2019, the Company entered into a Membership Interest Purchase Agreement with TIB Florida Holdco, Inc. to acquire 100% of the outstanding limited liability company interests of TIB, a distribution company, to complement our entrance into the business of distributing Medicare. The $22.3 million purchase price of TIB was allocated to the identifiable assets acquired and liabilities assumed based on estimates of their fair value with the excess purchase price of $22.2 million recorded as goodwill. This value of goodwill is primarily related to the expected results of future operations of TIB. The purchase price included an earnout, with an estimated fair value as of August 5, 2019, of $19.3 million, estimated using a risk-based probability analysis. The earnout agreement stipulates payments of $1.0 million per year for the first three years, if certain gross margin thresholds are met, plus a percentage of the acquired company's gross margin above specified thresholds tofor bethe ~~paid~~first ~~over~~ five years. As of August 5, 2019, management estimated the payments to be approximately $72.5 million if all conditions are satisfied; however the maximum payout is unlimited.

3. Goodwill and Intangible Assets

AtExcept ~~the~~for ~~end~~items ofdetailed ~~February~~below ~~2020,~~there inhave ~~conjunction~~been ~~with~~no ~~the~~material ~~preparation~~changes ofto ~~the~~goodwill ~~2020~~and ~~annual~~intangible ~~guidance,~~assets ~~the~~as ~~Board~~reported ~~of Directors approved a significant change in our overall business strategy to accelerate growth~~ within the ~~Medicare segment. The~~ Company's ~~planned~~Annual toReport ~~de-emphasize~~on ~~its~~Form ~~IFP segment while maximizing cash flows and enhancing e~~10-~~commerce~~K ~~capabilities~~for ~~within~~the ~~IFP.~~year Byended ~~decreasing emphasis on new IFP business~~December 31, ~~the Company plans to use cash flows from the IFP segment to invest in accelerating growth of the Medicare segment~~2019.

AsDuring the ~~Company~~first ~~progressed~~quarter ~~with~~of ~~its plans to shift toward Medicare and away from IFP~~2020, ~~the~~in ~~Company~~conjunction ~~decreased~~with the ~~number~~preparation ~~and amount~~ of ~~advance~~the ~~commissions~~2020 ~~made~~annual toguidance, ~~certain~~the ~~third-party~~Board ~~distributors~~of ~~while~~Directors ~~redeploying~~approved ~~that capital to~~ a ~~limited~~significant ~~number~~change ofin our ~~highest-quality~~overall ~~IFP~~business ~~third-party~~strategy ~~distributors.~~to ~~This~~accelerate ~~action~~growth inwithin ~~conjunction with~~ the ~~planned~~Medicare ~~decrease in forecasted IFP revenue was deemed to be a triggering event for impairment testing~~segment. The Company ~~performed~~planned ~~a quantitative analysis as of February 29, 2020 using both market and income approaches (comparative company and discounted cash flow, respectively)~~ to ~~estimate~~de-emphasize ~~the~~its ~~fair~~IFP ~~value~~segment ofwhile ~~our~~maximizing ~~reporting units. Forecasts of future~~ cash flows ~~were based on our best estimate of future revenues~~ and ~~operating~~enhancing ~~expenses, based primarily on expected Company growth, pricing, market share, and general economic conditions, which at the time did not consider an estimate for the impact of COVID~~e-~~19,~~commerce ifcapabilities ~~any~~within IFP. AsBy adecreasing ~~result~~emphasis ofon ~~the~~new ~~impairment~~IFP ~~analysis~~business, the Company ~~determined~~plans ~~that~~to ~~the~~use ~~carrying~~cash ~~value of~~flows from the IFP segment ~~exceeded its fair value, such that the Company recorded a $41.1 million impairment charge~~ to ~~reduce~~invest ~~goodwill~~in ~~which~~accelerating isgrowth ~~recorded as loss on impairment on the condensed consolidated statement~~ of ~~operations. The loss on impairment has no impact on operating cash flows, debt covenants or on~~ the ~~metrics~~Medicare ~~for which the Company evaluates itself~~segment.

As the Company progressed with its plans to shift toward Medicare and away from IFP, the Company decreased the number and amount of advance commissions made to certain third-party distributors while redeploying that capital to a limited number of our highest-quality IFP third-party distributors. This action in conjunction with the planned decrease in forecasted IFP revenue was deemed to be a triggering event for impairment testing. The Company performed a quantitative analysis as of February 29, 2020 using both market and income approaches (comparative company and discounted cash flow, respectively) to estimate the fair value of our reporting units. Forecasts of future cash flows were based on our best estimate of future revenues and operating expenses, based primarily on expected Company growth, pricing, market share, and general economic conditions, which at the time did not consider an estimate for the impact of COVID-19, if any. As a result of the impairment analysis, the Company determined that the carrying value of the IFP segment exceeded its fair value, such that the Company recorded a $41.1 million impairment charge to reduce goodwill which is recorded as loss on impairment on the condensed consolidated statement of operations for the six months ended June 30, 2020. The loss on impairment has no impact on operating cash flows, debt covenants or on the metrics for which the Company evaluates itself.

The changes in the carrying amounts of goodwill were as follows ($ in thousands):

	~~IFP~~		IFP		~~Medicare~~		~~Total~~Medicare			Total
Balance as of December 31, 2019	$	~~41,076~~	$	41,076	$	~~94,106~~	$	~~135~~94,~~182~~106		$	135,182
Purchase accounting measurement period adjustment	—		—		~~708~~		708			708
Goodwill impairment adjustment	~~(41,076~~		(41,076)		—		~~(41,076~~—		)	(41,076)
Balance as of March 31, 2020	$	—			$	94,814	$	94,814
Balance as of June 30, 2020			$	—			$	94,814		$	94,814

WeAmortization ~~also~~expense ~~considered~~for ~~whether~~ the ~~carrying~~three ~~values~~and ofsix ~~definite~~months ~~lived~~ended ~~intangible~~June ~~assets~~30, ~~may~~2020 ~~not~~was be$3.7 million ~~recoverable~~and $7.2 million, respectively. No impairment was present for definite lived intangibles as of ~~March 31~~June 30, 2020 or December 31, 2019 ~~however, in evaluating the remaining estimated useful life, the Company revised its estimate to reduce HP's brand and customer relationship useful life to one remaining year~~.

4. Leases

The Company has operating leases for real estate and certain equipment. Our leases have remaining lease terms of one to seven years, some of which ~~includes~~include options to extend the lease for ~~up to~~ five years, and some of which include options tofor ~~terminate~~early ~~the lease within one year~~termination. The options however were not used in the determination of the lease term as it is not reasonably certain at this time that our renewal options will be exercised. The Company had four new operating leases; one for the Company's new corporate office and three additional leases that all commenced during the ~~three~~first ~~months~~quarter ~~ended~~of ~~March 31,~~ 2020.

As of ~~March~~June 3130, 2020 and December 31, 2019, the Company had right of use assets of approximately $16.61 million and $496,000, respectively, on the condensed consolidated balance sheet.

As of ~~March~~June 3130, 2020, current and non-current lease liabilities were approximately $1.59 million and $1514.05 million, respectively. As of December 31, 2019, current and non-current lease liabilities were approximately $237,000 and $224,000, respectively.

Operating lease expense was $~~505~~777,000 and $~~174~~173,000 for the three months ended ~~March~~June 3130, 2020 and 2019, respectively. ~~Short-term~~Operating lease expense ~~for the three months ended March 31, 2020~~ was $~~121~~1,282,000 and ~~was~~$347,000 ~~immaterial~~ for the ~~three~~six months ended ~~March 31~~June 30, ~~2019.~~2020 ~~The difference between the undiscounted cash flows~~ and ~~the~~2019, ~~operating~~respectively. Short-term lease ~~liabilities~~expense ~~recorded~~was onimmaterial for the ~~condensed~~three ~~consolidated~~and ~~balance~~six ~~sheet~~months asended ~~of March~~June 3130, 2020 isand ~~approximately $2.5 million compared to $30,000 as of December 31,~~ 2019.

The difference between the undiscounted cash flows and the operating lease liabilities recorded on the condensed consolidated balance sheet as of June 30, 2020 is approximately $2.4 million compared to $30,000 as of December 31, 2019.

Supplemental cash flow information related to operating leases were as follows ($ in thousands):

	March 31, 2020				March 31, 2019
			Six Months Ended June 30,
Cash paid within operating cash flows	$	546			$	210
			2020				2019
Cash paid within operating cash flows			$	919			$	370

The following table summarizes the maturities of operating lease liabilities as of ~~March~~June 3130, 2020, ($ in thousands):

Remainder of 2020	$	~~1,407~~	$	1,120
2021	~~2,787~~		2,792
2022	~~2,871~~		2,876
2023	~~2,652~~		2,654
2024	~~2,695~~		2,695
2025	~~2,760~~		2,760
Thereafter	~~3,788~~		3,789
Total lease payments	$	~~18,960~~	$	18,686

The weighted-average remaining lease term and discount rates are as follows:

March 31, 2020

December 31, 2019

June 30, 2020

December 31, 2019

Weighted-average remaining lease term

~~6.7 years~~

6.6 years

~~1.8 years~~

1.8 years

Weighted-average discount rate

~~4.09~~

3.95

~~6.25~~

4.31

~~As of March 31, 2020, the Company does not have any significant additional operating leases that have not yet commenced.~~ 13

15As of June 30, 2020, the Company does not have any significant additional operating leases that have not yet commenced.

5. Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consisted of the following ~~as of~~ ($ in thousands):

	March 31, 2020				December 31, 2019
			June 30, 2020				December 31, 2019
Carriers and vendors payable	$	~~15,706~~	$	15,499	$	~~17,876~~	$	17,876
Marketing and advertising costs	~~6,956~~		6,936		~~11,732~~		11,732
Professional fees	~~2,731~~		2,635		~~2,022~~		2,022
Customer care and enrollment costs	~~2,053~~		4,106		~~4,501~~		4,501
Legal fees and contingencies	~~11,968~~		8,812		~~5,511~~		5,511
Compensation and benefits	~~3,191~~		2,203		~~5,905~~		5,905
Acquisition costs	~~143~~		66		~~1,305~~		1,305
Other	~~2,820~~		2,406		~~2,625~~		2,625
Total accounts payable and accrued expenses	$	~~45,568~~	$	42,663	$	~~51,477~~	$	51,477

~~Legal~~Accrued ~~fees~~marketing ~~increased~~and ~~during~~advertising ~~the~~costs ~~three~~decreased ~~months~~significantly ~~ended~~due ~~March 31,~~to ~~2020 in part for~~ the ~~items~~seasonality ~~detailed~~of in the ~~Legal~~business ~~Proceedings~~surrounding ~~section~~Medicare's ofAnnual ~~Note~~Election ~~14, which includes a $2~~Period.8 ~~million~~Legal ~~settlement~~fees ~~accrual~~increased as ~~disclosed~~a ~~therein.~~result ~~Accrued~~of ~~compensation~~the ~~and~~Company's ~~benefits~~heightened ~~decreased~~efforts ~~due~~ to ~~payment~~resolve ofseveral ~~accrued~~outstanding ~~executive bonuses and continued severance payments for former HPIH executives, offset by additional amounts accrued for 2020 bonus payments~~matters.

Legal fees are now presented as a separate line item within the above table. These fees were previously reported as a component of professional fees and have been reclassified to conform to current period presentation.

6. Debt

Except for items detailed below there have been no material changes to debt as reported ~~with~~within the Company's ~~annual~~Annual ~~report~~Report ~~and~~on Form 10-K for the year ended December 31, 2019.

As of ~~March~~June 3130, 2020, we had a $~~194~~207.45 million outstanding balance from draws on the Credit Facility and there was ~~$15.0~~nothing ~~million~~ available to be drawn upon. As of December 31, 2019, we had a $180.3 million outstanding balance from draws on the ~~Senior~~ Credit Facility.

As of ~~March~~June 3130, 2020, and December 31, 2019, there was $~~244~~254,000 and $246,000, respectively, of accrued interest included in accounts payable and accrued expenses on the condensed consolidated balance sheets. ~~The Company is in compliance with all debt covenants.~~

The Company requested and the lender agreed to amend the financial covenants of the Credit Facility to increase the Consolidated Total Leverage Ratio, as defined within the Credit Facility, to 3.5:1 from 3.0:1 through September 30, 2020. The Company is in compliance with all debt covenants. For further information on the Credit Facility see Note 9 of the Company's Annual Report on Form 10-K for the year ended December 31, 2019.

The debt maturity schedule for our long-term debt is as follows ($ in thousands):

			~~As of~~								As of
	~~Issuance Date~~	~~Maturity~~Issuance Date	~~March 31, 2020~~			~~December~~Maturity ~~31, 2019~~Date			~~Rate~~		June 30, 2020		December 31, 2019		Rate
Non-current portion of line of credit	~~June 2019~~	~~2022~~June 2019	$	~~50,000~~		$2022	~~32,000~~		~~3.52~~	%	$	65,000	$	32,000	2.62	%
Non-current portion of term loan	~~June 2019~~	~~2021~~June ~~- 2022~~2019	~~134,062~~			~~136,875~~2021 - 2022			~~3.45~~	%	131,250		136,875		2.52	%
Non-current portion of unamortized debt issuance costs			~~(592~~		)	~~(928~~		)			(541)		(928)
			183,470			167,947
											195,709		167,947
Current portion of term loan	~~June 2019~~	~~2020~~June ~~- 2021~~2019	~~10,313~~			~~9,375~~2020 - 2021			~~3.45~~	%	11,250		9,375		2.41	%
Current portion of line of credit	~~June 2019~~	~~2020~~June 2019	—			~~2,000~~2020			—	%	—		2,000		—	%
Current portion of unamortized debt issuance costs			~~(825~~		)	~~(691~~		)			(804)		(691)
			$	~~192,958~~		$	~~178,631~~				$	206,155	$	178,631

The aggregate contractual maturities of debt for each of the five fiscal years are as follows ($ in thousands):


	Remainder of 2020		2021		2022		2023		2024		2025
Debt repayments	$	5,625	$	13,125	$	188,750	$	—	$	—	$	—

	2020				2021				2022				2023				2024
Debt repayments	$	7,500			$	13,125			$	173,750			$	—			$	—

7. Stockholders’ Equity

Except for the items detailed below, there have been no material changes to Stockholders' Equity as reported in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

Tax Obligation Settlements and Treasury Stock Transactions

Treasury stock is recorded pursuant to the surrender of shares by certain employees to satisfy statutory tax withholding obligations on vested restricted stock awards and the exercise of stock appreciation rights ("SARs"). In addition, certain forfeited stock-based awards are transferred to and recorded as treasury stock, and certain restricted stock awards may have been granted from shares in Treasury.

During the three and six months ended ~~March~~June 3130, 2020 ~~and 2019~~, there were 7245,~~390~~207 and 33117,~~700~~597 shares, respectively, transferred to Treasury for statutory tax withholding obligations as a result of ~~stock appreciation rights ("~~SARs") exercises or vested restricted stock awards. During the three and six months ended ~~March~~June 3130, ~~2020~~2019, there were ~~102~~34,~~287~~845 and 68,545 shares, ~~reissued~~respectively, ~~out~~transferred ofto Treasury for ~~issuances~~statutory oftax ~~stock~~withholding ~~related~~obligations toas a ~~combination~~result of SARs exercises ~~and~~or ~~grants~~vested ~~under~~restricted ~~our~~stock ~~Long Term Incentive Plan~~awards.

During the three and six months ended ~~March~~June 3130, 2020, there were no62,955 and 165,242 shares, ~~transferred~~respectively, tothat were reissued out of Treasury asfor issuances of stock related to a ~~result~~combination of ~~forfeitures~~exercises and grants under our Long Term Incentive Plan. During the three and six months ended June 30, 2019, there were 12,018 and 169,236 shares, respectively, that were reissued out of Treasury for issuances of stock ~~awards.~~related to a combination of exercises and grants under our Long Term Incentive Plan.

~~For~~During the three and six months ended ~~March~~June 3130, 2020 ~~and 2019~~, there were ~~cash~~9,763 ~~outflows~~shares transferred to Treasury as a result of $1forfeitures of stock awards.5 ~~million~~During ~~and~~the ~~$918~~three months ended June 30,~~000,~~ ~~respectively~~2019, tothere ~~cover~~were ~~the~~no ~~tax~~shares ~~obligations~~transferred ~~for~~to ~~the~~Treasury ~~settlement~~as a result of ~~share~~forfeitures ~~vesting~~of ~~and~~stock ~~exercises~~awards. ~~under~~During the ~~Company's~~six ~~Long~~months ~~Term~~ended ~~Incentive~~June ~~Plan.~~30, 2019, there were 21,939 shares transferred to Treasury as a result of forfeitures of stock awards

For the six months ended June 30, 2020 and 2019, there were cash outflows of $2.4 million and $1.9 million, respectively, to cover the tax obligations for the settlement of share vesting and exercises under the Company's Long Term Incentive Plan.

Share Repurchase Program

During the three and six months ended ~~March~~June 3130, 2020, there were no repurchases of our registered Class A common stock. During the ~~year~~three and six months ended ~~December 31~~June 30, 2019, we repurchased 630,000 and 1,981,241 shares, respectively, of our registered Class A common stock under the share repurchase program at an average price per share of $29.57 and $32.23, respectively.

Exchange Agreement

On January 22, 2020, the sole holders of our Class B common stock, Health Plan Intermediaries, LLC (“HPI”) and Health Plan Intermediaries Sub, LLC (“HPIS”), two companies owned and controlled by our founder Michael Kosloske, exchanged a total of 900,000 shares of Class B common stock and an equal number of Series B membership interests for 900,000 shares of Class A common stock. This transaction contributed to a 6.4% decrease in HPI and HPIS' collective economic interest in HPIH since December 31, 2019. See Note 16 within this quarterly report and Note 10 of our Annual Report on Form 10-K for the year ended December 31, 2019 for further information as it relates to the Exchange Agreement.

1715

8. Revenue

Disaggregated Revenue

The following ~~table~~tables ~~presents~~present our revenue, disaggregated by major product type and timing of revenue recognition ~~for the three months ended March 31, 2020~~ ($ in thousands):

	March 31, 2020								March 31, 2019
			Three Months Ended June 30, 2020																Three Months Ended June 30, 2019
	~~Sales and Marketing Services~~		Sales and Marketing Services		~~Member Management~~		~~Total~~Member Management		~~Sales and Marketing Services~~		Total		~~Member Management~~		~~Total~~Sales and Marketing Services		Member Management		Total
Revenue by Source
Commission revenue(1)
STM(2)	$	~~20,135~~	$	13,204	$	~~936~~	$	~~21,071~~946	$	~~32,319~~	$	14,150	$	~~884~~	$	3321,~~203~~758	$	1,014	$	22,772
HBIP	~~12,406~~		8,323		~~1,205~~		~~13,611~~907		~~28,329~~		9,230		~~1,797~~		3014,~~126~~152		1,691		15,843
Supplemental(2)	~~15,867~~		10,119		~~1,030~~		~~16,897~~968		~~21,394~~		11,087		~~1,112~~		2215,~~506~~522		1,143		16,665
Medicare	~~16,742~~		15,710		—		~~16,742~~—		—		15,710		—		—1,203		—		1,203
Services revenue	—		—		~~631~~		~~631~~567		—		567		~~1,168~~		~~1,168~~—		957		957
Consumer engagement revenue	~~2,281~~		801		—		~~2,281~~—		—		801		—		—916		—		916
Other revenues	~~328~~		561		—		~~328~~—		~~323~~		561		—		~~323~~—		—		—
Total revenue	$	~~67,759~~	$	48,718	$	~~3,802~~	$	713,~~561~~388	$	~~82,365~~	$	52,106	$	~~4,961~~	$	8753,~~326~~551	$	4,805	$	58,356
Timing of Revenue Recognition
Transferred at a point in time	$	~~67,759~~	$	48,718	$	—	$	~~67,759~~—	$	~~82,365~~	$	48,718	$	—	$	8253,~~365~~551	$	—	$	53,551
Transferred over time	—		—		~~3,802~~		3,~~802~~388		—		3,388		~~4,961~~		~~4,961~~—		4,805		4,805
Total revenue	$	~~67,759~~	$	48,718	$	~~3,802~~	$	713,~~561~~388	$	~~82,365~~	$	52,106	$	~~4,961~~	$	8753,~~326~~551	$	4,805	$	58,356

(1) For the purposes of disaggregated revenue presentation, when additional Discount Benefit products are sold with an STM, HBIP, or supplemental product, the associated revenue for the Discount Benefit products are reported within the STM, HBIP, or supplemental product category depicted within the table.

(2) The Company changed its presentation of brokerage revenue during the fourth quarter of 2019. Previously brokerage revenue was reported as a separate line item with the disaggregated revenue table however the Company has reclassified the revenue into the respective STM or supplemental category that the brokerage sales were associated with.

After our initial estimate and constraint of variable consideration is made, in accordance with ASC 606 the Company reassesses its estimate and constraint at the end of each reporting period. As more information about the underlying uncertainties becomes known the Company will make adjustments as required.16

The following table presents our revenue, disaggregated by major product type and timing of revenue recognition ($ in thousands):


	Six Months Ended June 30, 2020										Six Months Ended June 30, 2019
	Sales and Marketing Services		Member Management		Total		Sales and Marketing Services		Member Management		Total
Revenue by Source
Commission revenue⁽¹⁾
STM⁽²⁾	$	33,341	$	1,881	$	35,222	$	53,857	$	1,898	$	55,755
HBIP	20,729		2,112		22,841		42,480		3,488		45,968
Supplemental⁽²⁾	25,985		1,998		27,983		37,137		2,255		39,392
Medicare	32,452		—		32,452		1,203		—		1,203
Services revenue	—		1,198		1,198		—		2,125		2,125
Consumer engagement revenue	3,082		—		3,082		1,239		—		1,239
Other revenues	889		—		889		—		—		—
Total revenue	$	116,478	$	7,189	$	123,667	$	135,916	$	9,766	$	145,682

Timing of Revenue Recognition
Transferred at a point in time	$	116,478	$	—	$	116,478	$	135,916	$	—	$	135,916
Transferred over time	—		7,189		7,189		—		9,766		9,766
Total revenue	$	116,478	$	7,189	$	123,667	$	135,916	$	9,766	$	145,682

⁽¹⁾For the purposes of disaggregated revenue presentation, when additional Discount Benefit products are sold with an STM, HBIP, or supplemental product, the associated revenue for the Discount Benefit products are reported within the STM, HBIP, or supplemental product category depicted within the table.

⁽²⁾The Company changed its presentation of brokerage revenue during the fourth quarter of 2019. Previously brokerage revenue was reported as a separate line item with the disaggregated revenue table however the Company has reclassified the revenue into the respective STM or supplemental category that the brokerage sales were associated with.

Reassessment of Variable Consideration

For IFP product sales, during the three months ended ~~March~~June 3130, 2020, we recognized a $21.~~9 million~~1 ~~decrease~~million increase in revenue primarily as a result of alonger ~~decrease~~than inexpected durations related to the reassessment of variable consideration. ~~and~~During ~~changes~~the insix ~~estimate~~months ~~due~~ended toJune ~~lower~~30, ~~retention~~2020, ofwe ~~Health~~recognized ~~Benefit~~a $1.9 ~~Insurance~~million decrease ~~Plans~~in ~~("HBIP")~~revenue ~~and~~primarily ~~supplemental~~as ~~products~~a ~~sold~~result inof ~~the~~changes ~~fourth~~in ~~quarter~~estimates ofdue ~~2018~~to ~~and~~lower ~~the~~retention ~~first~~of ~~quarter~~Health ofBenefit ~~2019~~Insurance ~~which~~Plans ~~was~~("HBIP") ~~inconsistent~~and ~~with~~positive ~~our~~reassessments ~~historical~~as ~~experience~~previously described.

For Medicare product sales, adjustments to revenue during the three months ended ~~March~~June 3130, 2020 were immaterial. During the six months ended June 30, 2020, we recognized a $1.98 million decrease in revenue due to adjusting significant measurement estimates as a result of actual amounts received on plans sold during the 2019 Medicare Annual Election Period.

Commissions Expense - In connection with the reassessment of variable consideration, the Company also had a change in estimate for the three and six months ended ~~March~~June 3130, 2020 which decreased previously recorded commissions expense by $32.39 million and $6.1 million, respectively. The change in estimate related to lower retention on HBIP and supplemental products and the positive impact of lifetime value calculations within the prepaid commission arrangements.

The change in estimate related to lower retention on HBIP and supplemental products as described above, and the positive impact of lifetime value calculations within the prepaid commission arrangements.

Remaining Performance Obligations

As of ~~March~~June 3130, 2020, approximately $1514.85 million of member management revenue is expected to be recognized over the next 60 months from the remaining performance obligations for IFP and supplemental contracts.

9. Stock-based Compensation

No SARs or stock options were granted during the three and six months ended ~~March~~June 3130, 2020 ~~and~~or 2019.

The following table summarizes restricted shares granted (in thousands):

	Three Months Ended March 31,
		Three Months Ended June 30,				Six Months Ended June 30,
	~~2020~~	2020	~~2019~~	2019	2020	2019
Restricted shares	55	37	~~260~~	224	92	484

The following table summarizes stock-based compensation expense ($ in thousands):

	Three Months Ended March 31,
			Three Months Ended June 30,									Six Months Ended June 30,
	~~2020~~		2020		~~2019~~			2019		2020		2019
Restricted shares	$	~~2,547~~	$	2,120	$	~~1,766~~		$	2,857	$	4,667	$	4,624
SARs	~~157~~		194		~~149~~			195		351		343
Less amounts capitalized for internal-use software(1)	(77		)		(99		)
Less amounts capitalized for internal-use software			(107)					(135)		(184)		(234)
Total	$	~~2,627~~	$	2,207	$	~~1,816~~		$	2,917	$	4,834	$	4,733

~~(1)~~The ~~See~~following ~~Property~~table ~~and~~summarizes ~~Equipment,~~unrecognized instock-based ~~Note~~compensation 1expense ofand ~~our~~the ~~Annual~~remaining ~~Report~~weighted onaverage ~~Form~~period 10over which such stock-Kbased ~~for~~compensation ~~the~~expense ~~year~~is ~~ended~~expected ~~December~~to ~~31,~~be ~~2019~~recognized ~~for~~as ~~further~~of ~~information~~June 30, on2020 ~~internal~~($ ~~use~~in ~~software.~~thousands):

The following table summarizes unrecognized stock-based compensation expense and the remaining weighted average period over which such stock-based compensation expense is expected to be recognized as of March 31, 2020 ($ in thousands):


	Unrecognized Expense		Weighted Average Remaining Years
Restricted shares	$	11,285	2.0
SARs	736		1.7
Total	$	12,021

	Unrecognized Expense		Weighted Average Remaining Years
Restricted shares	$	12,927	2.1
SARs	930		1.8
Total	$	13,857

The amounts in the table above do not include the cost of any additional awards that may be granted in future periods nor any changes in our forfeiture rate.

During the three and six months ended ~~March~~June 3130, 2020, there were 9363,~~750~~472 and 157,222 SARs exercised resulting in anrespective ~~increase~~increases of 47,~~287~~955 and 95,242 issued shares of Class A common stock. During the three and six months ended ~~March~~June 3130, 2019 there were ~~625~~152,007 and 152,632 SARs exercised resulting in anrespective ~~increase~~increases of ~~139~~74,195 and 74,334 shares of issued Class A common stock. ~~During the three months ended March 31, 2020 and 2019, there were 500 and 7,500 SARs forfeited, respectively.~~

During the three and six months ended ~~March~~June 3130, 2020 there were 500 and 1,000 SARs forfeited, respectively. During the three and six months ended June 30, 2019, there were no1,500 ~~options~~and ~~exercised~~9,000 orSARs forfeited, respectively.

During the three and six months ended ~~March~~June 3130, 2020, ~~there~~and ~~were no restricted stock awards issued for performance shares. During the three months ended March 31,~~ 2019, there were ~~147,000~~no ~~restricted~~options ~~stock~~exercised ~~awards~~or ~~issued for performance shares~~forfeited. ~~These awards were previously granted in which the performance metrics were contractually satisfied during the respective period.~~

WeDuring ~~recognized~~the ~~$600~~three and six months ended June 30,~~000~~ in2020, ~~income~~there ~~tax~~were ~~benefits~~no ~~from~~restricted stock~~-based~~ ~~activity~~awards issued for performance shares. During the three months ended ~~March~~June 3130, ~~2020~~2019, there were no restricted stock awards issued for performance shares. WeDuring ~~recognized~~the ~~income~~six ~~tax~~months ~~benefits~~ended ofJune ~~$74~~30, 2019 there were 147,000 ~~from~~restricted stock~~-based~~ ~~activity~~awards issued for performance shares. These awards were previously granted in which the ~~three~~performance ~~months~~metrics ~~ended~~were ~~March~~contractually ~~31,~~satisfied ~~2019~~during the respective period.

19We recognized $595,000 and $1.2 million respectively, in income tax benefits from stock-based activity for the three and six months ended June 30, 2020. We recognized income tax benefits of $293,000 and $367,000 respectively from stock-based activity for the three and six months ended June 30, 2019.

For the three and six months ended ~~March~~June 3130, 2020 ~~and 2019~~, we capitalized $77107,000 and $99184,000, respectively, of stock-based compensation expense related to the development of internal-use software. ~~See~~For ~~Notes~~the 1three and 5six ofmonths ~~our~~ended ~~Annual~~June ~~Report~~30, on2019, ~~Form~~we ~~10-K~~capitalized ~~for~~$135,000 ~~the~~and ~~year~~$234,000, ~~ended~~respectively, ~~December~~of ~~31,~~stock-based ~~2019~~compensation ~~for~~expense ~~further~~related ~~information~~to onthe ~~our~~development of internal-use software.

See Notes 1 and 5 of our Annual Report on Form 10-K for the year ended December 31, 2019 for further information on our internal-use software.

10. Net (Loss) Income per Share

The computations of basic and diluted net income per share attributable to BFYT were as follows ($ in thousands, except share and per share data):

	Three Months Ended March 31,
			Three Months Ended June 30,								Six Months Ended June 30,
	~~2020~~		2020		~~2019~~		2019		2020		2019
Basic net (loss) income attributable to Benefytt Technologies, Inc.	$	~~(44,266~~	)$	(7,393)	$	~~1,331~~	$	2,287	$	(51,659)	$	3,618
Weighted average shares—basic	~~12,023,121~~		12,353,320		~~11,388,490~~		10,596,833		12,188,220		10,990,474
Effect of dilutive securities:
Restricted shares	—		—		~~557,142~~		516,900		—		537,021
SARs	—		—		~~524,762~~		372,202		—		448,482
Stock options	—		—		~~2,337~~		1,839		—		2,088
Weighted average shares—diluted	~~12,023,121~~		12,353,320		~~12,472,731~~		11,487,774		12,188,220		11,978,065
Basic net (loss) income per share attributable to Benefytt Technologies, Inc.	$	~~(3.68~~	)$	(0.60)	$	~~0.12~~	$	0.22	$	(4.24)	$	0.33
Diluted net (loss) income per share attributable to Benefytt Technologies, Inc.	$	~~(3.68~~	)$	(0.60)	$	~~0.11~~	$	0.20	$	(4.24)	$	0.30

Potential common shares are included in the diluted per share calculation when dilutive. Potential common shares consist of Class A common stock issuable through unvested restricted stock grants and stock appreciation rights and are calculated using the treasury stock method.

The following securities were not included in the calculation of diluted net income per share because such inclusion would be anti-dilutive (in thousands):

	Three Months Ended March 31,
		Three Months Ended June 30,				Six Months Ended June 30,
	~~2020~~	2020	~~2019~~	2019	2020	2019
Restricted shares	~~719~~	672	38	45	697	83
SARs	~~334~~	246	7	5	285	12
Stock options	4	4	—	—	4	—

Additionally, potential common stock totaling 1,016,667 shares at ~~March~~June 3130, 2020 and 2,416,667 shares at ~~March~~June 3130, 2019 issuable under the exchange agreement were not included in diluted shares because such inclusion would be anti-dilutive. See Note 10 in our Annual Report on Form 10-K for the year ended December 31, 2019 for further details on the exchange agreement.

11. Income Taxes

BFYT is organized as a corporation and as of ~~March~~June 3130, 2020, is a 92.9% owner of HPIH, which is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a result, HPIH is not subject to federal and in most state jurisdictions entity level income taxation; however, any taxable income or loss generated by HPIH is passed through to and included in the taxable income or loss of its members, including BFYT, on a pro rata basis.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted and signed into law. The CARES Act includes several provisions for corporations including allowing companies to carryback certain Net Operating Losses (“NOLs”), increasing the amount of deductible interest, and increasing the amount of NOLs that corporations can use to offset income. The ~~respective~~ benefit and provision for income taxes for BFYT, inclusive of its allocable share of net taxable ~~income~~loss from HPIH, for the three and six months ended ~~March~~June 3130, 2020 ~~and 2019~~ was $93.64 million and $213.80 million, respectively, resulting in an effective tax ~~benefit/~~rate of 1631.20% and 5618.25%, respectively. The ~~effective~~provision ~~tax~~for ~~rate~~income ~~decreased~~taxes ~~primarily~~for ~~due~~BFYT, toinclusive ~~the~~of ~~change~~its inallocable ~~the~~share ~~valuation~~of ~~allowance~~net ~~during~~taxable ~~the~~income ~~three~~from ~~months ended March 31~~HPIH, ~~2019~~for ~~that increased~~ the ~~rate.~~three ~~The~~and ~~effective~~six ~~tax~~months ~~rate~~ended ~~for~~June ~~the~~30, ~~three~~2019 ~~months~~was ~~ended~~$2.3 million ~~March~~and 31$5.1 million, ~~2020~~respectively, isresulting ~~also~~in ~~lower~~an ~~than~~effective ~~the~~tax ~~federal~~provision ~~statutory~~ rate of 2141.5% ~~due~~and to48.5%, ~~an increase in the valuation allowance of HIIH~~respectively.

2019

~~HPIH~~The ~~wholly-owns~~effective ~~HIIH,~~tax arate ~~corporation~~decreased ~~that~~primarily ~~reports its U.S. federal and state income taxes separate from BFYT~~ due to the ~~Company’s~~change ~~ownership~~in ~~structure.~~the ~~Consequently,~~valuation ~~its~~allowance ~~federal~~during three and ~~state~~six ~~tax~~months ~~jurisdictions~~ended ~~are~~June ~~separate from those of BFYT~~30, ~~which prevents deferred tax assets and liabilities of BFYT and HIIH from offsetting one another~~2020. The effective tax rate for ~~each of~~ the three and six months ended ~~March~~June 3130, 2020 ~~and~~is ~~2019~~also ~~for~~different ~~HIIH~~than ~~was 0.0%, as we continue to maintain a full valuation allowance against~~ the ~~net~~federal ~~HIIH~~statutory ~~deferred~~rate ~~tax~~of ~~assets.~~21% Onprimarily adue ~~standalone~~to ~~basis, excluding~~ the ~~effects~~benefit ofreceived ~~HIIH’s~~from ~~effective tax rate,~~ the ~~effective~~NOL ~~tax~~carrybacks ~~rate~~from ~~for~~ the ~~three~~CARES ~~months~~Act ~~ended March 31, 2020~~ and ~~2019~~changes ~~for BFYT is 30.6% and 42.9%, respectively. The decrease primarily relates to the change~~ in the valuation allowance ~~during the three months ended March 31, 2019 that increased the rate off set by the Company’s discrete tax benefits primarily related to the provisions~~ of ~~the CARES Act, including changes allowing for NOL carryback~~HIIH.

HPIH wholly-owns HIIH, a corporation that reports its U.S. federal and state income taxes separate from BFYT due to the Company’s ownership structure. Consequently, its federal and state tax jurisdictions are separate from those of BFYT, which prevents deferred tax assets and liabilities of BFYT and HIIH from offsetting one another. The effective tax rate for each of the three and six months ended June 30, 2020 and 2019 for HIIH was 0.0%, as we continue to maintain a full valuation allowance against the net HIIH deferred tax assets.

On a standalone basis, excluding the effects of HIIH’s effective tax rate, the effective tax rate for the three and six months ended June 30, 2020 for BFYT is 27.3% and 34.2%, respectively. On a standalone basis, excluding the effects of HIIH’s effective tax rate, the effective tax rate for three and six months ended June 30, 2019 for BFYT is 39.4% and 41.2%, respectively.

The decrease compared to prior year primarily relates to the change in the valuation allowance during the three and six months ended June 30, 2020 that increased the rate off set by the Company’s discrete tax benefits primarily related to the provisions of the CARES Act, including changes allowing for NOL carryback.

Deferred taxes on our investment in HPIH are measured on the difference between the carrying amount of our investment in HPIH and the corresponding tax basis of this investment. We do not measure deferred taxes on differences within HPIH, as those differences inherently comprise our deferred taxes on our external investment in HPIH. Book to tax timing differences that exist in HPIH inherently affect BFYT’s deferred taxes as the outside basis difference changes.

For the three and six months ended ~~March~~June 3130, 2020 and 2019, respectively, we did not have a balance of gross unrecognized tax benefits, and as such, no amount would favorably affect the effective income tax rate in any future periods.

12. Fair Value Measurements

We measure and report financial assets and liabilities at fair value. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (referred to as 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 used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value of our financial assets and liabilities is determined by using three levels of input, which are defined as follows:

Level 1: Quoted prices in active markets for identical assets or liabilities;

Level 2: Quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability; and

Level 3: Unobservable inputs for the asset or liability.

The categorization of a financial instrument within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

We utilize the income approach to measure the fair value of our financial liabilities. As subjectivity exists with respect to many of the valuation techniques, the fair value estimates we have disclosed may not equal prices that we may ultimately realize if the assets are sold or the liabilities are settled with third parties. Below is a description of our valuation methods.

Contingent consideration for business acquisitions. Contingent consideration is related to the acquisitions of TogetherHealth and TIB as described in Note 2. The inputs include forecasts of future results, discount rates reflecting the credit risk, and the probability of the underlying outcome of the results required by TogetherHealth and TIB for us to make payments and the nature of such payments. The underlying outcomes are subject to the target results in the respective agreements. These liabilities are included in Level 3 of the fair value hierarchy. The fair values of our contingent consideration arrangements are sensitive to changes in forecasts and discount rates.

The carrying amounts of financial assets and liabilities reported in the accompanying condensed consolidated balance sheets for cash and cash equivalents, restricted cash, accounts receivable, advanced commissions, carriers and vendors payable, commissions payable, accounts payable and accrued expenses, and debt as of March 31, 2020 and December 31, 2019, respectively, approximate fair value because of the short-term duration of these instruments.

2120

Ascommissions payable, accounts payable and accrued expenses, and debt as of ~~March~~June 3130, 2020, ~~our~~and ~~liabilities~~December 31, ~~measured~~2019, atrespectively, approximate fair value ~~were~~because asof ~~follows~~the ($short-term induration ~~thousands):~~of these instruments.

	Carrying Value		Fair Value Measurement as of March 31, 2020
	as ofMarch 31, 2020		Level 1		Level 2		Level 3
Liabilities:
Contingent acquisition consideration	$	68,052	$	—	$	—	$	68,052
	$	68,052	$	—	$	—	$	68,052

As of June 30, 2020, our liabilities measured at fair value were as follows ($ in thousands):


	Carrying Value		Fair Value Measurement as of June 30, 2020
	as of June 30, 2020		Level 1		Level 2		Level 3
Liabilities:
Contingent acquisition consideration	$	67,845	$	—	$	—	$	67,845
	$	67,845	$	—	$	—	$	67,845

The following table sets forth changes in Level 3 financial liabilities ($ in thousands):

	Three Months Ended March 31,
			Three Months Ended June 30,								Six Months Ended June 30,
	~~2020~~		2020		~~2019~~		2019		2020		2019
Beginning balance	$	~~65,171~~	$	68,052	$	—	$	—	$	65,171	$	—
Fair value adjustment	~~2,881~~		(207)		—		—		2,674		—
Ending balance	$	~~68,052~~	$	67,845	$	—	$	—	$	67,845	$	—

Changes in the fair value of contingent consideration were driven by forecasted changes in the number of agents and marketing cost expectations. The change in fair value is included in fair value adjustment to contingent acquisition consideration on the accompanying condensed consolidated statements of operations.

13. Segment Reporting

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker ("CODM") in deciding how to allocate resources and in assessing performance. Our President and Chief Executive Officer is our named CODM. The CODM reviews our Company information based on the “management” approach. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of the Company’s reportable segments. The Company has two reportable operating segments within our operating platform: Medicare and IFP.

To determine the Company's reportable operating segments, we consider the nature of operating activities, economic characteristics, existence of separate senior management teams and the type of information used by the CODM to evaluate the results of operations. Components with similar economic characteristics, products and services, customers, distribution methods, and operational processes that operate in a similar regulatory environment are combined.

The accounting policies of the segments are the same as those described in Note 1, “Summary of Significant Accounting Policies” in our Annual Report on Form 10-K for the year ended December 31, 2019. The Company evaluates the performance of its reportable segments based on segment sales and segment operating income. Operating income for each segment includes sales to third parties and related operating expenses directly attributable to the segment. SG&A expenses are included in the segment in which the expenditures are incurred. Operating income for each segment excludes certain expenses managed outside the reportable segments which include various expenses such as corporate expenses, certain share-based compensation expenses, income taxes, various nonrecurring charges and other separately managed general and administrative costs. The Company does not include intercompany transfers between segments for management reporting purposes.

2221

The following table presents a summary of our operating results by segment ($ in thousands):

	Three Months Ended March 31, 2020
			Three Months Ended June 30, 2020		Six Months Ended June 30, 2020
Revenue
Medicare revenue	$	~~18,896~~	$	16,452	$	35,425
IFP revenue	~~52,665~~		35,654		88,242
Total revenue	~~71,561~~		52,106		123,667
Segment Profit
Medicare loss	~~(1,643~~		(2,631)		(4,227)
IFP profit	~~8,328~~		8,869		17,244
Total segment profit	~~6,685~~		6,238		13,017
Corporate	~~(5,752~~		(4,335)		(10,182)
Interest expense	~~(2,094~~		(1,830)		(3,924)
Depreciation and amortization	~~(4,345~~		(4,807)		(9,152)
Provision for income taxes	~~9,606~~		3,434		13,040
Loss on impairment	~~(41,076~~		)—		(41,076)
Stock-based compensation and related costs	~~(2,707~~		(2,309)		(5,016)
Fair value adjustment to contingent consideration	~~(2,881~~		)207		(2,674)
Transaction costs	~~(129~~		(23)		(151)
Indemnity and other legal costs	(7,092		)
Tax receivable agreement liability adjustment			(370)		(370)
Severance, restructuring and other	(30		)
Indemnity and other legal costs			(3,588)		(10,679)
Net loss	$	(49,815	)
Severance, restructuring and other			(244)		(275)
Net loss			$	(7,627)	$	(57,442)

For the three and six months ended June 30, 2019, the Company did not have material operations within the Medicare segment due to the timing of the Company's entrance into Medicare associated with the acquisition of TogetherHealth on June 5, 2019. Accordingly, such profit and loss allocations by segment were not made due to immateriality.

There are no material internal revenue transactions between our operating segments. Our CODM does not separately evaluate assets by segment, and therefore assets by segment are not presented.

The Company did not have Medicare operations prior to the June 5, 2019 acquisition of TogetherHealth and therefore a comparative period is not presented.

14. Commitments and Contingencies

Health Plan Intermediaries, LLC

HPI and its subsidiary HPIS, which are beneficially owned by Mr. Kosloske, a former director of the Company, are deemed to be related parties of the Company by virtue of their Series B Membership Interests in HPIH, of which we are the managing member. During the ~~three~~six months ended ~~March 31~~June 30, 2020, HPIH did not make any cash distributions for these entities related to estimated federal or state income taxes, pursuant to the operating agreement entered into by HPIH and HPI. No amounts were accrued for estimated federal and state taxes as of ~~March~~June 3130, 2020 or December 31, 2019. For the ~~three~~six months ended ~~March 31~~June 30, 2019, $677,000 in cash distributions were made for estimated federal and state income taxes. Pursuant to the operating agreement of HPIH, we determine when distributions will be made to the members of HPIH and the amount of any such distributions, except that HPIH is required by the operating agreement to make certain pro rata distributions to each member of HPIH quarterly on the basis of the assumed tax liabilities of the members. See Note 16 within this quarterly report and Note 17 of our Annual Report on Form 10-K for the year ended December 31, 2019 for further information as it relates to HPI and HPIS.

Tax Receivable Agreement

As of ~~March~~June 3130, 2020, Series B Membership Interests, together with an equal number of shares of Class B common stock have been exchanged for a total of 7,650,000 shares of Class A common stock subsequent to the IPO. As of ~~March~~June 3130, 2020, as a result of these exchanges, we have recorded a liability of $34.15 million pursuant to the Tax Receivable Agreement ("TRA") and is included in long-term liabilities on the accompanying condensed consolidated balance sheets. We have determined that this amount is probable of being paid based on our estimates of future taxable income. This liability represents the share of tax benefits

2322

is included in long-term liabilities on the accompanying condensed consolidated balance sheets. We have determined that this amount is probable of being paid based on our estimates of future taxable income. This liability represents the share of tax benefits payable to the entities beneficially owned by Mr. Kosloske, if we generate sufficient taxable income in the future. As of ~~March~~June 3130, 2020, we have made $3.7 million of cumulative payments under the TRA. See Note 16 within this quarterly report and Note 17 of our Annual Report on Form 10-K for the year ended December 31, 2019 for further information as it relates to the TRA.

Legal Proceedings

The Company is subject to legal proceedings, claims, and liabilities that arise in the ordinary course of business. The Company accrues losses associated with legal claims when such losses are probable and reasonably estimable. If the Company determines that a loss is probable and cannot estimate a specific amount for that loss, but can estimate a range of loss, the best estimate within the range is accrued. If no amount within the range is a better estimate than any other, the minimum amount of the range is accrued. Estimates are adjusted as additional information becomes available or circumstances change. Legal defense costs associated with loss contingencies are expensed in the period incurred. In addition to ordinary-course litigation that the Company does not believe to be material, the Company is a party to the proceedings and matters described below:

State Regulatory Examinations

Massachusetts Regulatory Inquiry

The Company received notification of a civil investigative demand from the Massachusetts Attorney General's Office ("MAG") on June 16, 2016. The MAG requested certain information and documents from the Company to review the Company's practices relating to its compliance with Massachusetts laws and regulations to ensure that they are neither deceptive nor constitute unfair trade practices. The Company has made various personnel available for depositions with the MAG. The MAG asked the Company to certify the completeness of the discovery responses provided to the MAG, and while the Company believes it has complied, the MAG nevertheless moved to compel additional documents and testimony from the Company. The court agreed with the MAG and ordered the Company to produce additional documents and provide further depositions. The Company's ~~has~~appeal ~~appealed~~against this decision, ~~and~~was ~~the~~declined ~~initial arguments for the appeal will be heard~~ on ~~May~~administrative ~~14, 2020~~grounds.

The Company otherwise continues to cooperate with the MAG in the interest of bringing the matter to an agreeable conclusion. It is still too early to assess whether the MAG's investigation will result in a material impact on the Company. The Company believes that based on the nature of the allegations raised by the MAG, a loss arising from the future assessment of a civil penalty against the Company is probable. Notwithstanding, due to the procedural stage of the investigative process, the settlement of another party (a carrier) for the same set of allegations, and the fact that the Company has not received evidentiary material from the MAG, the Company is currently unable to estimate the amount of any potential civil penalty or determine a range of potential loss under the MAG's investigation of the Company.

California Regulatory Action

On August 29, 2018, the Company received an Order to Show Cause and Notice of Hearing from the California Department of Insurance (the "Department") and following proactive engagement by the Company, the Department withdrew its order and issued a subpoena to the Company and certain insurers to allow it to gather more information. The subpoenas relate to whether certain policyholders were eligible to purchase hospital benefit plans. The Company has provided data and documents and continues to cooperate with the Department's inquiry.

Claims by individuals that involve independently licensed third-party insurance agencies and their agents, and independent insurance carriers, in which the Company is named as a co-defendant

In a case styled as Charles M. Butler, III and ~~Chole~~Chloe Butler v. Unified Life Ins. Co., et al., Case No. 17-cv-00050-SPW-TJC, U.S. District Court for the District of Montana (Billings Div.) ("Butler case"), in which allegations of misrepresentation and claims handling were made against an independent third-party insurance agency and an insurance carrier, the plaintiff also named the Company as a party. The Company was served on May 11, 2017 and is vigorously asserting defenses against the claims.

In a case styled as Carter v. Companion Life Insurance Company et al., Case No. 18-cv-350, U.S. District Court for the District of Alabama ("Carter complaint"), in which allegations were made against an insurance carrier relating to the handling of claims where the plaintiff also named the Company as a party. The Carter complaint was received on March 20, 2018 ~~and an amended complaint was subsequently filed on July 6, 2018~~. The Company is vigorously asserting defenses against the claims.

In a case styled as David Diaz, et al. v. Health Plan Intermediaries Holdings, LLC, et al., Case No. 18-cv-04240, U.S. District Court for the District of Arizona, filed on August 21, 2018, the two plaintiffs allege misrepresentation relating to the sale of an insurance policy that later allegedly did not cover hospital bills. The insurance agent who sold the policy was an employee of the Company's wholly-owned subsidiary, ASIA, and that agent is also named as a co-defendant. The Company and the individual 23

24In a case styled as David Diaz, et al. v. Health Plan Intermediaries Holdings, LLC, et al., Case No. 18-cv-04240, U.S. District Court for the District of Arizona, filed on August 21, 2018, the two plaintiffs allege misrepresentation relating to the sale of an insurance policy that later allegedly did not cover hospital bills. The insurance agent who sold the policy was an employee of the Company's wholly-owned subsidiary, ASIA, and that agent is also named as a co-defendant. The Company and the individual defendant have answered a subsequently amended complaint and rejected the substantive allegations. Discovery is ongoing. The Company is vigorously asserting defenses against the claims.

~~defendant~~In ~~have~~a ~~answered~~case astyled ~~subsequently~~as ~~amended~~Aiello ~~complaint~~v. Lifeshield National Insurance Company, et al., Case No. 19-020396, in the Circuit Court of the 17th Judicial Circuit, Broward County, Florida, dated October 10, 2019, the plaintiff alleges that needed medical care was declined, requiring him to pay out-of-pocket medical bills, and ~~rejected~~seeks reimbursement for the ~~substantive~~alleged ~~allegations~~unpaid bills and unspecified damages. ~~Discovery~~The isCompany’s ~~ongoing~~prevailed on its Motion to Dismiss on June 29, 2020 with the Court dismissing the Amended Complaint. The plaintiff has 30 days to file a second amended complaint if he wants to proceed. The Company iswill continue to vigorously ~~asserting~~assert defenses against ~~the~~any future claims.

In a case styled as ~~Aiello~~Ketayi, vet. ~~Lifeshield~~al. ~~National~~v. ~~Insurance~~Health ~~Company~~Enrollment Group, et. al., Case No. 1920-~~020396~~cv-01198, in the ~~Circuit~~U.S. District Court offor the ~~17th~~Southern ~~Judicial~~District ~~Circuit~~of California, ~~Broward~~dated ~~County~~June 26, ~~Florida~~2020, ~~dated~~styled ~~October~~as 10a class action but not yet certified, ~~2019~~plaintiffs allege misrepresentation, RICO, conspiracy and other state law claims relating to the ~~plaintiff~~sale ~~alleges~~of an insurance policy that ~~needed~~allegedly ~~medical~~did ~~care~~not ~~was~~cover ~~declined~~hospital bills. Once served, ~~requiring~~the ~~him~~Company towill ~~pay~~vigorously ~~out~~assert defenses against the claims. In a similar case styled as Griffin, et. al. v. Benefytt Technologies, Inc. et. al., Case No. 20-ofcv-~~pocket~~00630, ~~medical~~in ~~bills,~~the ~~and~~U.S. ~~seeks~~District ~~reimbursement~~Court for the ~~alleged~~Northern ~~unpaid~~District ~~bills~~of ~~and~~Alabama, ~~unspecified~~dated ~~damages.~~May ~~The~~5, 2020, styled as a class action but not yet certified, the plaintiffs allege similar claims, and the Company iswill vigorously ~~asserting~~asset defenses against ~~the claims~~them.

In a case styled as Griffin, et al., v. Benefytt Technologies, Inc., Case No. 20-cv-00630, U.S. District Court for the Northern District of Alabama, dated May 5, 2020, styled as a class action but not yet certified, two plaintiffs allege misrepresentation, RICO, other claims relating to the sale of an insurance policy that allegedly did not cover medical bills. The Company is vigorously asserting defenses against the claims.

The Company has also received claims from insureds relating to lack of carrier coverage, claims handling, and alleged deceptive sales practices relating to carriers with which we do business. In each of these individual insureds' claims, the Company attempts to dismiss, challenge, or resolve the claims as quickly as possible. While it is reasonably possible that a loss may arise from any of the above matters, the amount of such loss is not known or estimable at this time.

Other

Purported Securities Class Action Lawsuits

In September 2017, three putative securities class action lawsuits were filed against the Company and certain of its current and former executive officers. The cases were styled Cioe Investments Inc. v. Health Insurance Innovations, Inc., Gavin Southwell, and Michael Hershberger, Case No. 1:17-cv-05316-NG-ST, filed in the U.S. District Court for the Eastern District of New York on September 11, 2017; Michael Vigorito v. Health Insurance Innovations, Inc., Gavin Southwell, and Michael Hershberger, Case No. 1:17-cv-06962, filed in the U.S. District Court for the Southern District of New York on September 13, 2017; and Shilpi Kavra v. Health Insurance Innovations, Inc., Patrick McNamee, Gavin Southwell, and Michael Hershberger, Case No. 8:17-cv-02186-EAK-MAP, filed in the U.S. District Court for the Middle District of Florida on September 21, 2017. All three of the foregoing actions (the "Securities Actions") were filed after a decline in the trading price of the Company's common stock following the release of a report authored by a short-seller of the Company's common stock raising questions about, among other things, the Company's public disclosures relating to the Company's regulatory examinations and regulatory compliance. All three of the Securities Actions contained substantially similar allegations to those raised in the short-seller report alleging that the Company made materially false or misleading statements or omissions relating to regulatory compliance matters, particularly regarding the Company's application for a third-party administrator license in the State of Florida, which was issued by the State on February 14, 2018.

In November and December 2017, the Cioe Investments and Vigorito cases were transferred to the U.S. District Court for the Middle District of Florida, and on December 28, 2017, they were consolidated with the Kavra matter under the case caption, In re Health Insurance Innovations Securities Litigation, Case No. 8:17-cv-02186-EAK-MAP (M.D. Fla.). On February 6, 2018, the court appointed Robert Rector as lead plaintiff and appointed lead counsel, and lead plaintiff filed a consolidated complaint on March 23, 2018. The consolidated complaint, which dropped Patrick McNamee as a defendant and added Michael Kosloske as a defendant, largely sets forth the same factual allegations as the initially filed Securities Actions filed in September 2017 and added allegations relating to alleged materially false statements and omissions relating to the regulatory proceeding previously initiated against the Company by the Montana State Auditor, Commissioner of Securities and Insurance (the "CSI") which proceeding was dismissed on October 31, 2017. The complaint also adds allegations regarding insider stock sales by Messrs. Kosloske and Hershberger. The consolidated complaint alleges violations of Section 10(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), SEC Rule 10b-5, and Section 20(a) of the Exchange Act. According to the consolidated complaint, the lead plaintiff in the action is seeking an undetermined amount of damages, interest, attorneys' fees and costs on behalf of a putative class of individuals and entities that acquired shares of the Company's common stock during a period ending September 11, 2017. On May 7, 2018, the Company and co-defendants filed a motion to dismiss all claims. On March 29, 2019, the court sua sponte ordered mandatory mediation before United States Magistrate Judge Christopher Tuite, which did not result in a settlement. On June 28, 2019, the court granted in part, and denied in part, the motion to dismiss, and dismissed all claims against Messrs. Southwell and Kosloske. Discovery commenced, and the Company opposed Plaintiff’s motion to certify the putative class. The parties have since reached an agreement in principle to resolve the matter without any admission of liability or fault on the part of the Company or any of its current or former personnel for a settlement payment of $2.8 million to be funded by the Company’s insurers. This resolution remains subject both to formal documentation of the terms of the parties’ agreement and to Court approval. The settlement is recorded within accounts payable and accrued expenses and the related insurance recoverable is recorded in accounts receivable, net, prepaid expenses and other current assets on the condensed consolidated balance sheets.

proceeding previously initiated against the Company by the Montana State Auditor, Commissioner of Securities and Insurance (the "CSI") which proceeding was dismissed on October 31, 2017. The complaint also adds allegations regarding insider stock sales by Messrs. Kosloske and Hershberger. The consolidated complaint alleges violations of Section 10(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), SEC Rule 10b-5, and Section 20(a) of the Exchange Act. According to the consolidated complaint, the lead plaintiff in the action is seeking an undetermined amount of damages, interest, attorneys' fees and costs on behalf of a putative class of individuals and entities that acquired shares of the Company's common stock during a period ending September 11, 2017. On May 7, 2018, the Company and co-defendants filed a motion to dismiss all claims. On March 29, 2019, the court sua sponte ordered mandatory mediation before United States Magistrate Judge Christopher Tuite, which did not result in a settlement. On June 28, 2019, the court granted in part, and denied in part, the motion to dismiss, and dismissed all claims against Messrs. Southwell and Kosloske. Discovery commenced, and the Company opposed Plaintiff’s motion to certify the putative class. The parties reached an agreement to resolve the matter without any admission of liability or fault on the part of the Company or any of its current or former personnel for a settlement payment of $2.8 million funded by the Company’s insurers.

On February 18, 2019, a putative class action lawsuit styled Julian Keippel v. Health Insurance Innovations, Inc., Gavin Southwell, and Michael D. Hershberger, Case No. 8:19-cv-00421, was filed against the Company, its chief executive officer, and chief financial officer in the U.S. District Court for the Middle District of Florida. According to the complaint, the plaintiff in the action is seeking an undetermined amount of damages, interest, attorneys' fees, and costs on behalf of a putative class of individuals and entities that acquired shares of the Company's common stock during the period February 28, 2018 through November 27, 2018. The complaint alleges that the Company made materially false and/or misleading statements and/or material omissions during the purported class period relating to the Company's relationship with third parties, particularly Health Benefits One LLC/Simple Health Plans and affiliates. The complaint alleges that, among other things, the Company failed to disclose to investors that a substantial portion of the Company's revenues were derived from third parties who allegedly used deceptive tactics to sell the Company's products and that regulatory scrutiny of such third parties would materially impact the Company's operations. The complaint alleges violations of Section 10(b) and Section 20(a) of the Securities Exchange Act and Rule 10b-5 promulgated under the Securities Exchange Act. On May 13, 2019, the court appointed lead plaintiff Oklahoma Municipal Retirement Fund and City of Birmingham Retirement and Relief System and lead counsel Saxena White P.A. The lead plaintiff filed a consolidated amended complaint on July 19, 2019. The consolidated complaint incorporated the allegations from the first complaint and added allegations of alleged materially false or misleading statements or material omissions relating to alleged deficiencies in the Company's compliance and customer service programs and the number of complaints the Company received from consumers relating to third parties, particularly Health Benefits One LLC/Simple Health and affiliates. The complaint also adds allegations regarding insider stock sales by Messrs. Southwell and Hershberger. The plaintiffs are seeking an undetermined amount of damages, interest, attorneys' fees and costs on behalf of putative classes of individuals and entities that acquired shares of the Company's common stock during a purported class period of September 25, 2017 through April 11, 2019. On August 28, 2019, the Company moved to dismiss the action, which the court denied on November 4, 2019. The case is currently in discovery. The lead plaintiffs filed a motion for class certification on May 21, 2020, Defendants filed a response on July 2, 2020, and the lead plaintiffs’ reply is due on August 13, 2020. The Company intends to vigorously defend against these claims. While it is reasonably possible that a loss may arise from this matter, the amount of such loss is not known or estimable at this time.

In July 2020, two putative securities class actions were filed against the Company and certain of its current executive officers. The cases are styled Patrick Plumley v. Benefytt Technologies, Inc., Paul E. Avery, Robert Murley, Anthon J. Barkett, John Fichthorn, Peggy B. Scott, Gavin Southwell, Paul Gabos, Daylight Beta Parent Corp, and Daylight Beta Corp., Case No. 20-cv-01017, filed on July 28, 2020, in the United States District Court District of Delaware; and Shine v. Benefytt Technologies, Inc., Paul E. Avery, Robert Murley, Anthony J. Barkett, John Fichthorn, Peggy B. Scott, Gavin Southwell and Paul Gabos, Case No. 20-cv-05976, filed on July 31, 2020, in United States District Court Southern District of New York. Both of the foregoing actions (the “July Securities Actions”) were filed after the July 13, 2020 announcement that the Company had entered into an agreement and plan of merger with Daylight Beta Parent Corp. and Daylight Beta Corp., affiliates of Madison Dearborn Partners, LLC (collectively, “MDP”), pursuant to which, among other things, MDP has commenced a tender offer to purchase all of the Company’s outstanding Class A common stock at a price of $31.00 per share in cash, which is scheduled to expire on August 20, 2020 (the “Proposed Transaction”). Both complaints allege, among other things, violation of the Exchange Act and that the Schedule 14D-9 recommendation statement filed by the Company with the United States Securities and Exchange Commission on or about July 24, 2020 (the “Recommendation Statement”) contains material misstatements and omissions concerning the Proposed Transaction in violation of the federal securities laws. The Company intends to vigorously defend against these claims.

and entities that acquired shares of the Company's common stock during the period February 28, 2018 through November 27, 2018. The complaint alleges that the Company made materially false and/or misleading statements and/or material omissions during the purported class period relating to the Company's relationship with third parties, particularly Health Benefits One LLC/Simple Health Plans and affiliates. The complaint alleges that, among other things, the Company failed to disclose to investors that a substantial portion of the Company's revenues were derived from third parties who allegedly used deceptive tactics to sell the Company's products and that regulatory scrutiny of such third parties would materially impact the Company's operations. The complaint alleges violations of Section 10(b) and Section 20(a) of the Securities Exchange Act and Rule 10b-5 promulgated under the Securities Exchange Act. On May 13, 2019, the court appointed lead plaintiff Oklahoma Municipal Retirement Fund and City of Birmingham Retirement and Relief System and lead counsel Saxena White P.A. The lead plaintiff filed a consolidated amended complaint on July 19, 2019. The consolidated complaint incorporated the allegations from the first complaint and added allegations of alleged materially false or misleading statements or material omissions relating to alleged deficiencies in the Company's compliance and customer service programs and the number of complaints the Company received from consumers relating to third parties, particularly Health Benefits One LLC/Simple Health and affiliates. The complaint also adds allegations regarding insider stock sales by Messrs. Southwell and Hershberger. The plaintiffs are seeking an undetermined amount of damages, interest, attorneys' fees and costs on behalf of putative classes of individuals and entities that acquired shares of the Company's common stock during a purported class period of September 25, 2017 through April 11, 2019. On August 28, 2019, the Company moved to dismiss the action, which the court denied on November 4, 2019. The case is currently in discovery. The Company intends to vigorously defend against these claims.

Putative Derivative Action Lawsuits and Stockholder Matters

Two individuals, Ian DiFalco and Dayle Daniels, filed separate but similar derivative action complaints on April 5 and April 6, 2018, respectively, in the U.S. District Court for the District of Delaware (Case No. Case No. 1:18-cv-00519) naming most of the Company's directors and executive officers at such time as defendants. The derivative complaints assert alleged violations of Section 14(a) of the Exchange Act, Section 10(b) of the Exchange Act and Rule 10b-5, and Section 20(a) of the Exchange Act, and claims for alleged breach of fiduciary duties, alleged unjust enrichment, alleged abuse of control, alleged gross mismanagement, and alleged waste of corporate assets. The factual allegations in the complaints are based largely on the allegations in the above-described In re Health Insurance Innovations Securities Litigation. The plaintiffs are seeking declaratory relief, direction to reform and improve corporate governance and internal procedures, and an undetermined amount of damages, restitution, interest, and attorneys' fees and costs. OnThe DiFalco and Daniels cases have been consolidated, and on June 5, 2018, the court entered an order staying the litigation pending resolution of the In re Health Insurance Innovations Securities Litigation,. ~~and~~As as a result of the agreement in principle to ~~such~~settle ~~action~~the asSecurities ~~described above~~Litigation, a mediation was held in the ~~parties~~Derivative Actions on May 27, 2020. The matter has not been resolved. Certain plaintiffs have ~~scheduled~~moved ato ~~mediation~~lift ~~for~~the ~~late~~stay ~~May~~and to be appointed lead plaintiff/lead counsel. Defendants’ responses to those motions are due August 31, 2020. Otherwise, defendants intend to vigorously defend against these claims. While it is reasonably possible that a loss may arise from this matter, the amount of such loss is not known or estimable at this time.

An individual stockholder, Melvyn Klein, filed a derivative action complaint on June 26, 2019, in the U.S. District Court for the District of Delaware naming as defendants Gavin TD. Southwell, former director Michael W. Kosloske, director Paul E. Avery, director Anthony J. Barkett, director Paul Gabos, director Robert Murley, former director Bruce Telkamp, former director Sheldon Wang, and former officer Michael D. Hershberger (Case No. 1:19-cv-01206). The derivative complaint asserts alleged violations of Section 14(a) of the Securities Exchange Act, Section 10(b) of the Exchange Act and Rule 10b-5, and Section 20(a) of the Exchange Act, and claims for alleged breach of fiduciary duties, alleged unjust enrichment, and alleged waste of corporate assets. The factual allegations in the complaint are largely the same as the allegations in the above-described DiFalco and Daniels derivative action. The Plaintiff is seeking declaratory relief, direction to reform and improve corporate governance and internal procedures, and an undetermined amount of damages, interest, and attorneys' fees and costs. This action has been consolidated with the above-described DiFalco and Daniels actions (collectively “Consolidated Derivative matter”) and is subject to the stay entered into on June 5, 2018. ~~and~~A mediation was held on May 27,2020. The matter has not been resolved. Certain plaintiffs have moved to lift the ~~above-described~~stay ~~mediation~~and ~~planned~~to ~~for~~be ~~late~~appointed ~~May~~lead plaintiff/lead counsel. Defendants’ responses to those motions are due August 31, 2020. Otherwise the Company intends to vigorously defend against these claims. While it is reasonably possible that a loss may arise from this matter, the amount of such loss is not known or estimable at this time.

In November 2019, the Company received a demand letter on behalf of stockholder Rebecca Leary demanding under Section 220 of the Delaware General Corporation Law that the Company allow Ms. Leary the right to inspect certain Company documents. The letter states that Ms. Leary is making the demand to, inter alia, investigate whether the members of the Company’s Board of Directors breached their fiduciary duties in connection with an alleged failure to ensure that the Company’s sales practices complied with applicable laws and regulations. On December 6, 2019, counsel to the Company responded to the demand by, inter alia, denying that the stockholder had demonstrated a proper purpose for the inspection but agreeing to produce a limited set of documents, which were delivered to counsel to the stockholder in February 2020. On May 15, 2020, Leary filed a putative shareholder derivative complaint asserting alleged violations of Section 14(a) of the Securities Exchange Act, Section 10(b) of the Exchange Act and Rule 10b-5, and Section 20(a) of the Exchange Act, and claims for alleged insider trading, breach of fiduciary duties, and for contribution and indemnification. The Plaintiff is seeking declaratory relief, direction to reform and improve corporate governance and internal procedures, disgorgement of profits realized from allegedly illegal stock sales, and an undetermined amount of damages, restitution, interest, and attorneys’ fees and costs (Rebecca Leary, derivatively on behalf of Benefytt Technologies Inc., formerly known as Health Insurance Innovations, Inc.,v. Paul E. Avery, Anthony J. Barkett, Ellen M. Duffield, John A. Fichthorn, Paul G. Gabos, Michael D. Hershberger, Michael W. Kosloske, Patrick R. McNamee, Robert S. Murley, Peggy B. Scott, Gavin D. Southwell, Bruce A. Telkamp and Sheldon Wang, Case No. 20-664 (D. Del.)). On May 19, 2020 Plaintiff in the action filed a motion for an Order Consolidating the case with the Consolidated Derivative Action, Appointing co-lead and local counsel and lifting the stay in the action. A mediation was held on May 27. 2020. The action has not been resolved. Opposition papers to Plaintiff’s motion are due August 31, 2020. Defendants intend to vigorously defend against these claims. While it is reasonably possible that a loss may arise from this matter, the amount of such loss is not known or estimable at this time.

Telephone Consumer Protection Act

The Company has received a number of private-party claims relating to telephonic-sales calls allegedly conducted by independent third-party distributors. Generally, these claims assert that the Company violated the Telephone Consumer Protection Act ("TCPA"), although the Company does not engage in the alleged activities. In fact, the Company maintains ~~internal and external compliance staff and processes to monitor independent third-party distributor compliance. Historically, the Company has~~

internal and external compliance staff and processes to monitor independent third-party distributor compliance. Historically, the Company has been successful at obtaining dismissals or settling the claims for immaterial amounts. The Company continues to vigorously defend itself in pending cases, some styled as purported class-actions, filed by what has been determined to be serial-professional plaintiffs or serial TCPA attorneys such as those cases filed by Kenneth Moser, Robert Hossfeld, Mary Bilek, ~~Chrisopher~~Barbara ~~Bilek~~Mohon, ~~Barbara~~Hanna ~~Mohon~~Thuo (filed June 4, 2020), Anthony Reo (filed April 3, 2020), and ~~Ken~~Bryan ~~Johansen~~Reo (filed April 3, 2020). On August 7, 2019, the U.S. District Court for the Southern District of California (Case No. 17-CV-1127) certified two classes in the Moser case, and the Company timely appealed the Court’s Order on the Motion for Class Certification. The parties are awaiting a ruling on such.

The Company has received other complaints for alleged TCPA violations from other claimants, the majority of which are not lawsuits. The Company believes many of these individuals to be professional plaintiffs and not common consumers. The Company maintains an internal legal department that, among other things, reviews these claims as they arise, coordinates the Company’s response to such, and supports outside counsel when litigation defense is required. While these types of claims have previously settled, been dismissed, or resolved without any material effect on the Company, there is a possibility in the future that one or more of the above cases could have a material effect. The Company commonly uses outside legal counsel to defend against such claims and requires that the independent third-party distributors who are related to any such claims provide indemnification and reimbursement to the Company for the costs associated with these Claims.

Health Benefits One, LLC (Simple Health)

On November 1, 2018, the Company received notice that a lawsuit styled as Federal Trade Commission v. Simple Health Plans, et al. was filed against an independent third-party distributor and its principal, along with their related companies. The Company is not a party to this case. A temporary restraining order ("TRO") was granted by the United States District Court, Southern District of Florida, against Simple Health Plans, LLC and certain of its affiliates, appointing a receiver (the "Receiver") and imposing other restrictions against the defendants in this case. On November 1, 2018, the Company terminated its relationship with all of the defendants, has been in communication and working cooperatively with the appointed Receiver and the FTC. In coordination with the FTC and the appointed Receiver, the Company continues to transfer funds to the Receiver that would otherwise be due to Simple Health, and the Company and FTC successfully notified all consumers of their ongoing insurance options.

Separate from the FTC case against Simple Health, a proposed class action, but not yet certified, styled as Belin et. al. v. Health Insurance Innovations, Inc., et. al., Case No. 19-cv-61430, was filed in the U.S. District Court for the Southern District of Florida on June 7, 2019. The case alleges that the Company conspired with Simple Health using a theory of the Racketeer Influenced and Corrupt Organizations Act along with other claims and seeks unspecified damages. The Company's Motion to Dismiss was partially denied and the Company intends to vigorously defend against the claims. The Company filed its Answer and Affirmative Defenses on June 22, 2020, and mediation is scheduled for August 18, 2020. The Company continues to vigorously defend against the Claims. While it is reasonably possible that a loss may arise from this matter, the amount of such loss is not known or estimable at this time.

Other matters

We enter into agreements in the ordinary course of business that may require us to indemnify other parties for claims brought by a third-party. From time to time, we have received requests for indemnification. Presently the Company is managing and responding to both formal demands and informal requests for indemnification and defense from a number of carriers related to the Company's settled market conduct examination, states' investigations into carriers relating to agent licensing, private party lawsuits, and the TCPA claims identified above. Management cannot reasonably estimate any potential losses, but these claims could result in a material liability for us.

15. Related Party Transactions

There have been no material changes to the Related Party Transaction disclosures made in our Annual Report on Form 10-K for the year ended December 31, 2019.

16. Subsequent Events

On May 11, 2020 the Company elected to increase its borrowings under our Credit Facility to enhance our liquidity and provide maximum financial flexibility as the effects of the COVID-19 pandemic continue to evolve and impact the global financial markets. The Company withdrew the remaining available $15.0 million and the Credit Facility is fully drawn.

As further disclosed in Note 14, the Company has reached an agreement in principle to resolve the matter In re Health Insurance Innovations Securities Litigation without any admission of liability or fault on the part of the Company or any of its current or former personnel for a settlement payment of $2.8 million to be funded by the Company’s insurers. This resolution remains subject both to formal documentation of the terms of the parties’ agreement and to Court approval. The settlement is

~~recorded~~16. ~~within~~Subsequent accounts payable and accrued expenses and the related insurance recoverable is recorded in accounts receivable, net, prepaid expenses and other current assets on the condensed consolidated balance sheets.Events

Class B Share Exchange

On July 8, 2020, HPI and HPIS exchanged a collective total of 329,000 shares of Class B common stock and an equal number of Series B membership interests for 329,000 shares of Class A common stock. This transaction resulted in a 2.3% decrease in HPI and HPIS' collective economic interest in HPIH.

Merger Agreement

On July 12, 2020, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Daylight Beta Parent Corp., a Delaware corporation (“Parent”), and Daylight Beta Corp., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”), each affiliates of certain investment funds advised by Madison Dearborn Partners, LLC pursuant to which Merger Sub will, on the terms and subject to the conditions set forth therein, conduct a tender offer for all of the Company’s Class A Common Stock and Class B Common Stock and, following acceptance of the tendered shares, merge with and into the Company.

Pursuant to the Merger Agreement, upon the terms and subject to the conditions set forth therein, Parent will cause Merger Sub to commence a cash tender offer (the “Offer”) to purchase all of (i) the shares of the Company’s Class A Common Stock, par value $0.001 per share (the “Class A Shares”), at a price per Class A Share of $31.00, payable net to the seller in cash, without interest, subject to any required withholding taxes and (ii) the shares of the Company’s Class B Common Stock, par value $0.001 per share, at a price per Class B Share of $0.00.

Exchange Agreement

On July 12, 2020, the Company entered into an Exchange Agreement (the “2020 Exchange Agreement”) with Parent, HPI, HPIS, and together with HPI, (the “Series B Members”) and HPIH pursuant to which, among other things, on or prior to the expiry of the Offer, (i) (A) the Series B Membership Interests of HPIH held by each Series B Member will be exchanged for Class A Shares and such holders’ Class B Shares will be automatically cancelled and (B) each Series B Member will thereafter tender all Shares held or controlled by such Series B Member and its affiliates pursuant to the Offer (which Shares following such exchange will be comprised solely of Class A Shares) and (ii) the Registration Rights Agreement, dated as of February 13, 2013, between the Company and the Series B Members will be terminated pursuant to the terms of the 2020 Exchange Agreement.

TRA Termination Agreement

On July 12, 2020, the Company entered into a TRA Termination Agreement (the “TRA Termination Agreement”) with HPI, HPIS and HPIH pursuant to which, among other things, at the effective time of the merger, the TRA, dated as of February 13, 2013, among the Company, HPIH and the Series B Members will be terminated and the amount payable in connection with the merger pursuant to the TRA, which has been mutually agreed to be $40.0 million, will become payable, in each case, pursuant to the terms of the TRA Termination Agreement. Under the TRA, the Company previously agreed to make certain payments to the Series B Members based upon the reduction of the Company’s liability for U.S. federal, state and local income taxes arising from adjustments to the Company’s basis in its assets and imputed interest.

For further information on the Merger Agreement, the 2020 Exchange Agreement, or the TRA Termination Agreement, see the Company's Current Report on Form 8-K filed with the Securities Exchange Commission on July 13, 2020.

ITEM 2—MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

We have made statements in the Management’s Discussion and Analysis of Financial Condition and Results of Operations below and in other sections of this report that are forward-looking statements. All statements other than statements of historical fact included in this quarterly report are forward-looking statements. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “may,” “might,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to risks, uncertainties, and assumptions about us, may include projections of our future financial performance, our anticipated growth strategies, anticipated trends in our business, future and continued regulatory matters and compliance, and other future events or circumstances. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements, and other future events or circumstances to differ materially from the results, level of activity, performance or achievements, events or circumstances expressed or implied by the forward-looking statements, including those factors discussed in “Part I. – Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019 and those factors discussed in “Part II – Item 1A. Risk Factors” below.

We cannot guarantee future results, level of activity, performance, achievements, events, or circumstances. We are under no duty to update any of these forward-looking statements after the date of this report to conform our prior statements to actual results or revised expectations.

Overview

We are a health insurance technology company that primarily engages in the development and operation of private e-commerce health insurance marketplaces, consumer engagement platforms, agency technology systems, and insurance policy administration platforms.

By leveraging existing and emerging platforms and technologies, Benefytt offers a range of Medicare-related insurance plans from many of the nation’'s leading carriers as well as other types of health insurance and supplemental products that meet the needs of consumers. Benefytt’'s direct-to-consumer site, HealthInsurance.com, provides seniors and Medicare-eligible consumers the ability to access powerful online comparison tools and educational resources that enable efficient self-guided navigation of available Medicare health insurance options.

COVID-19 Update

Although COVID-19 is currently not material to our results of operations, there is uncertainty relating to the potential future impact on our business. The extent to which COVID-19 impacts our operations, or our ability to obtain financing should we require it, will depend on future developments which are uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions taken by governments and private businesses to contain COVID-19, among others. If the disruptions posed by COVID-19 continue for an extended period of time, financial markets may not be available to the Company for raising capital in order to fund future growth or to refinance its existing credit

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others. If the disruptions posed by COVID-19 continue for an extended period of time, financial markets may not be available to the Company for raising capital in order to fund future growth or to refinance its existing credit facility currently due in May of 2022. Should the company not be able to obtain financing when required, in the amounts necessary or under terms which are economically feasible, we may be required to reduce planned future growth and/or the scope of our operations.

Operating Segments

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker ("CODM"), or decision-making group, in deciding how to allocate resources and in assessing performance. Our President and Chief Executive Officer is our named CODM. As of December 31, 2019, the Company determined that we have two reportable segments within our operating platform, Medicare and IFP. The Company periodically reviews the structure of our organization and CODM communications to assess the continued appropriateness of our segment reporting. The CODM reviews our financial information in a manner substantially similar to the accompanying consolidated financial statements with emphasis on Medicare and IFP as two distinct operating segments. The Medicare and IFP segments are described further below:

Medicare - The Medicare segment consists of consumer engagement activities which generate leads that we both sell to third-parties and feed to our business process outsourcing partners ("BPO") and captive distribution channels to support the distribution of a range of Medicare-related health insurance plans, including Medicare Advantage, Medicare Supplement, and Medicare Part D prescription drug plans.

IFP - The IFP segment focuses on the sale and service of individual and family health insurance plans ("IFP") which encompasses short-term medical ("STM") insurance plans and health benefit insurance plans ("HBIP"). We also offer supplemental products which include a variety of additional insurance and non-insurance products that are frequently purchased as supplements to IFPs.

The adoption of the revenue recognition standard (ASC 606) highlighted the seasonality of our revenues. We generally expect to recognize greater revenue in the first quarter of each year as a result of the increase in submitted policies during the open enrollment period established by the Patient Protection and Affordable Care Act ("PPACA") and continued seasonal increases in revenue during the fourth quarter due to the Medicare annual election period and PPACA open enrollment period. However, with the de-emphasis of IFP, revenue for the three and six months ended ~~March~~June 3130, 2020 compared to 2019 decreased as expected.

Executive Overview of ~~First~~Second Quarter 2020 Results

~~Our~~Three ~~key~~Months ~~metrics~~Ended ~~and~~June ~~financial~~30, ~~results for~~ 2020 ~~are~~ ascompared ~~follows:~~to the Three Months Ended June 30, 2019

Our key metrics and financial results for the second quarter of 2020 are as follows:

Medicare Distribution

•Revenue ~~First quarter revenue~~ from our Medicare segment was $1816.95 million for the three months ended June 30, 2020.

•The ~~First~~Medicare ~~quarter~~segment reported a loss of $2.6 million for the ~~Medicare~~three ~~segment~~months ~~was~~ended ~~$1.6~~June ~~million~~30, 2020.

Expected Duration Units

• Expected duration units submitted for Medicare were ~~826~~736,100 for the three months ended ~~March~~June 3130, 2020.

IFP Sales

•Second ~~First~~ quarter revenue from our IFP segment was $5235.7 million, a decrease of 3938.79%.

•Second ~~First~~ quarter ~~profit~~income for the IFP segment was $8.39 million, a decrease of 1035.18%.

Expected Duration Units

• Expected duration units of submitted IFPs were ~~867~~525,~~900~~100 and ~~1.3 million~~988,000, respectively, for the three months ended ~~March~~June 3130, 2020 and 2019, a decrease of 3346.09%.

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Financial Results

• Revenue was $7152.61 million, compared to revenue of $8758.34 million in 2019, a decrease of 1810.17%.

• Net loss was $447.3 6 million, compared to net income of $1.3 .2 million in 2019, a decrease of ~~3,426~~336%.

• Adjusted EBITDA was $~~933~~1.9 million,~~000,~~ compared to $913.38 million in 2019, a decrease of 8986.92%.

• GAAP diluted loss per share was $30.6860, compared to earnings per share of $0.1120 in 2019, a decrease of ~~3,445~~400%.

• Adjusted earnings per share was $0.0105 compared to adjusted earnings per share of $0.4371 in 2019, a decrease of 9793.70%.

We continue to focus on our top initiatives: (i) expanding our entrance into the Medicare space, (ii) improving the lifetime value of policies sold, (iii) new carrier relationships, (iv) expanding compliant distribution, (v) improving the member experience, and (vi) enhancing technology.

Key Business Metrics

We rely upon the following key business metrics to evaluate our business performance and facilitate long-term strategic planning:

Revenues. Our revenues primarily consist of commissions and fees earned for the lifetime value of Medicare and IFP products issued to members, referral fees, and fees for discount benefit plans paid by members as a direct result of our enrollment services, brokerage services, member management, lead sales, or referral sales. Revenues reported by the Company are net of risk premiums remitted to insurance carriers and fees paid for discount benefit plans.

Commission rates that we receive for the sale of products are agreed to in advance with the relevant contracted party and vary between contract and policy type. Under our compensation arrangements, the commission rate schedule that is in effect on the policy effective date governs the commissions over the life of the policy. We continue to receive a commission payment as a member renews their policy, or until a plan expires or is terminated.

Expected Duration Units. An expected duration unit represents the cumulative number of months the Company expects to collect from each policy submitted during the period. This metric is important because the vast majority of our revenues are recognized up front at the time the policy is sold. This portion of revenue represents the total amount of commissions we expect to collect over the life of each policy sold. Our expected duration units are an important indicator of our revenues. We have included expected duration units in this report because it is a key measure used by our management to understand and evaluate our core revenue performance and trends, to prepare our annual budget, and to develop short- and long-term operational plans. In particular, the inclusion of expected duration units can provide a useful measure for period-to-period comparisons of our business. Expected duration units has limitations as an analytical tool, and it should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP.

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The following table presents expected duration units by product type:

	~~Expected Duration Units by Product Type~~	Expected Duration Units by Product Type
	Three Months Ended March 31,
		Three Months Ended June 30,									Six Months Ended June 30,
	~~2020~~	2020	~~2019~~	~~Change (%)~~		2019	Change (%)		2020	2019	Change (%)
Medicare(1)
Medicare Advantage	~~774,600~~	684,000	—	—		—	—	%	1,469,000	—	—	%
Medicare Supplement	~~15,400~~	15,200	—	—		—	—	%	30,700	—	—	%
Medicare Part D	~~9,100~~	11,300	—	—		—	—	%	20,500	—	—	%
Supplementals	~~27,000~~	25,600	—	—		—	—	%	53,400	—	—	%
Total Medicare	~~826,100~~	736,100	—	—		—	—	%	1,573,600	—	—	%
IFP
STM <12 Months	~~22,100~~	12,200	~~45,000~~	~~(50.9~~	)%	38,400	(68.2)	%	34,269	83,370	(58.9)	%
STM ≥ 12 Months	~~243,000~~	159,600	~~298,300~~	~~(18.5~~	)%	207,400	(23.0)	%	426,644	505,697	(15.6)	%
Total STM	~~265,100~~	171,800	~~343,300~~	~~(22.8~~	)%	245,800	(30.1)	%	460,913	589,067	(21.8)	%
Health Benefit Plans	~~171,200~~	81,200	~~336,700~~	~~(49.2~~	)%	270,600	(70.0)	%	270,300	607,200	(55.5)	%
Supplementals	~~431,600~~	272,100	~~615,500~~	~~(29.9~~	)%	471,600	(42.3)	%	676,000	570,500	18.5	%
Total IFP	~~867,900~~	525,100	~~1,295,500~~	~~(33.0~~	)%	988,000	(46.9)	%	1,407,213	1,766,767	(20.4)	%
Total Expected Duration Units	~~1,694,000~~	1,261,200	~~1,295,500~~	~~30.8~~	%	988,000	27.7	%	2,980,813	1,766,767	68.7	%

(1)For ~~The~~the three and six months ended June 30, 2019, the Company did not ~~begin~~have ~~selling~~material operations within the Medicare ~~products~~segment ~~until~~due to the ~~second~~timing ~~quarter~~ of ~~2019~~the ~~which~~Company's ~~was~~entrance ~~marked~~into byMedicare associated with the acquisition of TogetherHealth on June 5, 2019. Accordingly, the comparative period has been excluded due to immateriality.

Submitted and Approved Applications. Our submitted applications are an important input of our expected revenues when included in context with the corresponding expected average duration of the submitted application. A member may be enrolled in more than one policy or discount benefit plan simultaneously. Submitted applications will differ from the amount of approved applications. Approved applications represent the number of submitted applications that were approved by the relevant insurance carrier for the identified product during the relevant period. Medicare approved applications are calculated assuming a 92% conversion of submitted applications. We have included submitted and approved applications in this report because in conjunction with expected duration units, they are key measures used by our management to understand and evaluate our core revenue performance and trends, to prepare our annual budget and to develop short- and long-term operational plans. In particular, the inclusion of submitted and approved applications can provide as useful measures for period-to-period comparisons of our business.

The following table presents submitted applications by product type:

	~~Submitted Applications by Product Type~~	Submitted Applications by Product Type
	Three Months Ended March 31,
		Three Months Ended June 30,									Six Months Ended June 30,
	~~2020~~	2020	~~2019~~	~~Change (%)~~		2019	Change (%)		2020	2019	Change (%)
Medicare
Medicare(1)
Medicare Advantage	~~20,000~~	17,700	—	—		—	—	%	37,900	—	—	%
Medicare Supplement	~~400~~	400	—	—		—	—	%	800	—	—	%
Medicare Part D	~~200~~	300	—	—		—	—	%	500	—	—	%
Supplementals	~~700~~	700	—	—		—	—	%	1,300	—	—	%
Total Medicare	~~21,300~~	19,100	—	—		—	—	%	40,500	—	—	%
IFP
STM <12 Months	~~5,300~~	3,000	~~11,200~~	~~(52.7~~	)%	9,700	(69.1)	%	8,300	20,800	(60.1)	%
STM ≥ 12 Months	~~23,100~~	16,300	~~29,200~~	~~(20.9~~	)%	20,000	(18.5)	%	39,400	49,200	(19.9)	%
Total STM	~~28,400~~	19,300	~~40,400~~	~~(29.7~~	)%	29,700	(35.0)	%	47,700	70,000	(31.9)	%
Health Benefit Plans	~~17,800~~	9,300	~~35,300~~	~~(49.6~~	)%	30,800	(69.8)	%	27,100	66,100	(59.0)	%
Supplementals	~~47,400~~	31,900	~~67,700~~	~~(30.0~~	)%	55,900	(42.9)	%	79,300	123,600	(35.8)	%
Total IFP	~~93,600~~	60,500	~~143,400~~	~~(34.7~~	)%	116,400	(48.0)	%	154,100	259,700	(40.7)	%
Total Submitted Applications	~~114,900~~	79,600	~~143,400~~	~~(19.9~~	)%	116,400	(31.6)	%	194,600	259,700	(25.1)	%

31(1)For the three and six months ended June 30, 2019, the Company did not have material operations within the Medicare segment due to the timing of the Company's entrance into Medicare associated with the acquisition of TogetherHealth on June 5, 2019. Accordingly, the comparative period has been excluded due to immateriality.

The following table presents approved applications by product type:

	~~Approved Applications by Product Type~~	Approved Applications by Product Type
	Three Months Ended March 31,
		Three Months Ended June 30,									Six Months Ended June 30,
	~~2020~~	2020	~~2019~~	~~Change (%)~~		2019	Change (%)		2020	2019	Change (%)
Medicare
Medicare(1)
Medicare Advantage	~~18,400~~	16,300	—	—		—	—	%	34,900	—	—	%
Medicare Supplement	~~400~~	400	—	—		—	—	%	700	—	—	%
Medicare Part D	~~200~~	300	—	—		—	—	%	500	—	—	%
Supplementals	~~600~~	600	—	—		—	—	%	1,200	—	—	%
Total Medicare	~~19,600~~	17,600	—	—		—	—	%	37,300	—	—	%
IFP
STM <12 Months	~~5,300~~	3,000	~~11,200~~	~~(52.7~~	)%	9,700	(69.1)	%	8,300	20,800	(60.1)	%
STM ≥ 12 Months	~~23,100~~	16,300	~~29,200~~	~~(20.9~~	)%	20,000	(18.5)	%	39,400	49,200	(19.9)	%
Total STM	~~28,400~~	19,300	~~40,400~~	~~(29.7~~	)%	29,700	(35.0)	%	47,700	70,000	(31.9)	%
Health Benefit Plans	~~17,800~~	9,300	~~35,300~~	~~(49.6~~	)%	30,800	(69.8)	%	27,100	66,100	(59.0)	%
Supplementals	~~47,400~~	31,900	~~67,700~~	~~(30.0~~	)%	55,900	(42.9)	%	79,300	123,600	(35.8)	%
Total IFP	~~93,600~~	60,500	~~143,400~~	~~(34.7~~	)%	116,400	(48.0)	%	154,100	259,700	(40.7)	%
Total Approved Applications	~~113,200~~	78,100	~~143,400~~	~~(21.1~~	)%	116,400	(32.9)	%	191,400	259,700	(26.3)	%

~~Constrained Lifetime Value per Approved Application~~ (~~"CLTV"~~1).For Wethe ~~have~~three ~~included CLTV in this report because it is a key measure used by our management to understand~~ and ~~evaluate~~six ~~our~~months ~~core~~ended ~~revenue~~June ~~performance and trends~~30, ~~to prepare our annual budget~~2019, ~~and~~the toCompany ~~develop~~did ~~short-~~not ~~and~~have ~~long-term~~material ~~operational~~operations ~~plans.~~within ~~CLTV is~~ the ~~constrained~~Medicare ~~lifetime~~segment ~~value~~due ~~of both the sales and marketing, and member management performance obligations, expected~~ to ~~be recognized over~~ the ~~life~~timing of the ~~products, divided by the number of approved applications received during the reporting period. Total CLTV excludes the fulfillment-only applications that represent low margin products where the~~ Company's ~~outsourced~~entrance ~~all sales and marketing obligations and some of its member management services. We believe that excluding these fulfillment-only applications from CLTV provides greater insight~~ into ~~our~~Medicare ~~core~~associated ~~operations.~~with ~~The~~the ~~inclusion~~acquisition of ~~CLTV~~TogetherHealth ~~can~~on ~~provide~~June ~~a useful measure for period-to-period comparisons of our business. CLTV has limitations as an analytical tool~~5, ~~and it should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP~~2019. ~~Prior to the adoption of CLTV~~ Accordingly, the ~~Company~~comparative ~~used~~period ~~Constrained~~has ~~Lifetime~~been ~~Value~~excluded ~~per~~due Submitted Application ("LVSA") as a key metric. While there is little distinction between submitted and approved applications for IFP, approved applications are a more useful metric for management with respect to ~~Medicare products and therefore now uses CLTV as a substitute for LVSA~~immateriality.

~~The following tables present the~~ Constrained Lifetime Value per Approved Application ("CLTV"). ~~per~~We ~~approved~~have ~~application~~included CLTV in this report because it is a key measure used by our management to understand and evaluate our core revenue performance and trends, to prepare our annual budget, and to develop short- and long-term operational plans. CLTV is the constrained lifetime value of both the sales and marketing, and member management performance obligations, expected to be recognized over the life of the products, divided by ~~product~~the ~~type~~number ($of inapproved ~~thousands):~~applications received during the reporting period. Total CLTV excludes the fulfillment-only applications that represent low margin products where the Company outsourced all sales and marketing obligations and some of

	Three Months Ended March 31,
	2020		2019		Change (%)
Medicare(1)	$	1,065	$	—	—	%
Short Term Medical<12 months	352		354		(0.6	)%
Short Term Medical ≥12 months	832		1,019		(18.4	)%
Total STM	746		843		(11.5	)%
Health Benefit Plans	908		865		5.0	%
Supplemental	329		329		—	%

~~(1)~~its member management services. We believe that excluding these fulfillment-only applications from CLTV ~~per~~provides ~~approved~~greater ~~application~~insight ~~for~~into ~~Medicare~~our iscore ~~presented~~operations. ~~gross~~The inclusion of ~~customer~~CLTV ~~care~~can provide a useful measure for period-to-period comparisons of our business. CLTV has limitations as an analytical tool, and ~~enrollment~~it ~~expenses~~should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Prior to the adoption of CLTV, the Company used Constrained Lifetime Value per Submitted Application ("~~CC&E~~LVSA") as a key metric. ~~Including~~While ~~CC&E,~~there ~~Medicare~~is ~~CLTV~~little ~~per~~distinction between submitted ~~application~~and approved applications for ~~the~~IFP, ~~three~~approved ~~months~~applications ~~ended~~are ~~March~~a ~~31,~~more ~~2020~~useful ~~was~~metric ~~$893~~for management with respect to Medicare products and therefore now uses CLTV as a substitute for LVSA.

32The following table presents the CLTV per approved application, by product type ($ in thousands):

The following tables present expense metrics per approved application, by product type ($ in thousands):


	Three Months Ended June 30,										Six Months Ended June 30,
	2020		2019		Change (%)		2020		2019		Change (%)
Medicare⁽¹⁾	$	1,143	$	—	—	%	$	1,102	$	—	—	%
Short Term Medical<12 months	371		267		39.0	%	370		417		(11.3)	%
Short Term Medical ≥12 months	732		655		11.8	%	796		1,070		(25.6)	%
Total STM	676		549		23.1	%	724		887		(18.4)	%
Health Benefit Plans	778		614		26.7	%	878		842		4.3	%
Supplemental	281		329		(14.6)	%	310		334		(7.2)	%

	Three Months Ended March 31, 2020
Medicare variable marketing cost per approved application(1)	$	672
Medicare variable CC&E cost per approved application(2)	305
Total Medicare cost per approved member	$	977

⁽¹⁾CLTV per approved application for Medicare is presented gross of customer care and enrollment expenses ("CC&E"). Including CC&E, Medicare CLTV per submitted application for the three and six months ended June 30, 2020 was $879 and $886, respectively.

~~(1)~~The ~~Medicare~~following ~~variable~~table ~~marketing~~presents ~~cost~~expense metrics per approved application, ~~includes direct costs incurred in member acquisition for all Medicare products from our direct marketing partners and online advertising channels divided~~ by ~~Medicare~~product ~~approved~~type ~~applications~~($ in ~~each period.~~thousands):

(2) Medicare CC&E cost per approved application includes compensation and benefits costs for personnel engaged in assistance to applicants during the enrollment process divided by Medicare approved applications in each period. CC&E costs include amounts netted against revenue for certain Medicare BPO relationships.


	Three Months Ended June 30, 2020		Six Months Ended June 30, 2020
Medicare variable marketing cost per approved application⁽¹⁾	$	680	$	676
Medicare variable CC&E cost per approved application⁽²⁾	504		399
Total Medicare cost per approved member⁽³⁾	$	1,184	$	1,075

⁽¹⁾Medicare variable marketing cost per approved application includes direct costs incurred in member acquisition for all Medicare products from our direct marketing partners and online advertising channels divided by Medicare approved applications in each period.

⁽²⁾Medicare CC&E cost per approved application includes compensation and benefits costs for personnel engaged in assistance to applicants during the enrollment process divided by Medicare approved applications in each period. CC&E costs include amounts netted against revenue for certain Medicare BPO relationships.

⁽³⁾For the three and six months ended June 30, 2019, the Company did not have material operations within the Medicare segment due to the timing of the Company's entrance into Medicare associated with the acquisition of TogetherHealth on June 5, 2019. Accordingly, the comparative period has been excluded due to immateriality.

EBITDA. We define this metric as net income before interest, income taxes, and depreciation and amortization. We have included EBITDA in this report because it is a key measure used by our management and board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short- and long-term operational plans. In particular, the exclusion of certain expenses in calculating EBITDA can provide a useful measure for period-to-period comparisons of our business. However, EBITDA does not represent, and should not be considered as, an alternative to net income or cash flows from operations, each as determined in accordance with GAAP. Other companies may calculate EBITDA differently than we do. EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP.

Adjusted EBITDA. To calculate adjusted EBITDA, we calculate EBITDA, which is then further adjusted for items such as stock-based compensation and related costs, and items that are not part of regular operating activities, including tax receivable adjustments, fair value adjustments to contingent consideration, indemnity and other legal costs, and severance, restructuring, and acquisition costs. Adjusted EBITDA does not represent, and should not be considered as, an alternative to net income or cash flows from operations, each as determined in accordance with GAAP. We have presented adjusted EBITDA because we consider it an important supplemental measure of our performance and believe that it is frequently used by analysts, investors and other interested parties in the evaluation of companies. Other companies may calculate adjusted EBITDA ~~differently than we do. Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP.~~

differently than we do. Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP.

The following table presents a reconciliation of net income to EBITDA and adjusted EBITDA ($ in thousands):

	Three Months Ended March 31,
			Three Months Ended June 30,								Six Months Ended June 30,
	~~2020~~		2020		~~2019~~		2019		2020		2019
Net (loss) income	$	~~(49,815~~	)$	(7,627)	$	~~2,182~~	$	3,230	$	(57,442)	$	5,412
Interest expense	~~2,094~~		1,830		~~345~~		1,349		3,924		1,694
Depreciation and amortization	~~4,345~~		4,807		~~1,132~~		1,639		9,152		2,771
(Benefit) provision for income taxes	~~(9,606~~		(3,434)		~~2,797~~		2,290		(13,040)		5,087
EBITDA	~~(52,982~~		(4,424)		~~6,456~~		8,508		(57,406)		14,964
Loss on impairment	~~41,076~~		—		—		—		41,076		—
Stock-based compensation and related costs	~~2,707~~		2,309		~~1,861~~		2,987		5,016		4,849
Fair value adjustment to contingent consideration	~~2,881~~		(207)		—		—		2,674		—
Transaction costs	~~129~~		23		~~273~~		1,086		151		1,360
Indemnity and other legal costs	7,092				672
Tax receivable agreement liability adjustment			370				—		370		—
Severance, restructuring and other	30				3
Indemnity and other legal costs			3,588				903		10,679		1,575
Adjusted EBITDA	$	933			$	9,265
Severance, restructuring and other			244				338		275		341
Adjusted EBITDA			$	1,903			$	13,822	$	2,835	$	23,089

Adjusted Net Income. To calculate adjusted net income, we calculate net income then add back amortization (but not depreciation), interest, tax expense, items such as stock-based compensation and related costs, and other items that are not part of regular operating activities, including, tax receivable adjustments, fair value adjustments to contingent consideration, indemnity and other legal costs, severance, restructuring, and acquisition costs. From adjusted pre-tax net income, we apply a pro forma tax expense calculated at an assumed rate of 24%, which consists of the maximum federal corporate rate of 21%, with an assumed 3% state tax rate. We have included adjusted net income in this report because it is a key performance measure used by our management to understand and evaluate our core operating performance and trends and because we believe it is frequently used by analysts, investors, and other interested parties in their evaluation of the Company. Other companies may calculate this measure differently than we do. Adjusted net income has limitations as an analytical tool, and you should not consider it in isolation or substitution for earnings per share as reported under GAAP.

management to understand and evaluate our core operating performance and trends and because we believe it is frequently used by analysts, investors, and other interested parties in their evaluation of the Company. Other companies may calculate this measure differently than we do. Adjusted net income has limitations as an analytical tool, and you should not consider it in isolation or substitution for earnings per share as reported under GAAP.

Adjusted Net Income per Share. Adjusted net income per share is computed by dividing adjusted net income by the total number of weighted-average diluted Class A and weighted-average Class B shares of our common stock for each period. We have included adjusted net income per share in this report because it is a key measure used by our management to understand and evaluate our core operating performance and trends and because we believe it is frequently used by analysts, investors, and other interested parties in the evaluation of companies. Other companies may calculate this measure differently than we do. Adjusted net income per share has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for earnings per share as reported under GAAP.

The following table presents a reconciliation of net income to adjusted net income and adjusted net income per share (in thousands, except per share data):

	Three Months Ended March 31,
			Three Months Ended June 30,									Six Months Ended June 30,
	~~2020~~		2020		~~2019~~			2019		2020		2019
Net (loss) income	$	~~(49,815~~	)$	(7,627)	$	~~2,182~~		$	3,230	$	(57,442)	$	5,412
Interest expense	~~2,094~~		1,830		~~345~~			1,349		3,924		1,694
Amortization	~~3,505~~		3,740		~~335~~			864		7,245		1,199
(Benefit) provision for income taxes	~~(9,606~~		(3,434)		~~2,797~~			2,290		(13,040)		5,087
Loss on impairment	~~41,076~~		—		—			—		41,076		—
Stock-based compensation and related costs	~~2,707~~		2,309		~~1,861~~			2,987		5,016		4,849
Fair value adjustment to contingent consideration	~~2,881~~		(207)		—			—		2,674		—
Transaction costs	129				273
Tax receivable agreement liability adjustment			370					—		370		—
Indemnity and other legal costs	7,092				672
Transaction costs			23					1,086		151		1,360
Severance, restructuring and other charges	30				3
Indemnity and other legal costs			3,588					903		10,679		1,575
Adjusted pre-tax income	93				8,468
Severance, restructuring and other charges			244					338		275		341
Pro forma income taxes	(22		)		(2,032		)
Adjusted pre-tax income			836					13,047		928		21,517
Adjusted net income	$	71			$	6,436
Pro forma income taxes			(201)					(3,131)		(223)		(5,164)
Total weighted average diluted share count	13,247				15,000
Adjusted net income			$	635				$	9,916	$	705	$	16,353
Adjusted net income per share	$	0.01			$	0.43
Total weighted average diluted share count			13,370					13,903		13,309		14,863
Adjusted net income per share			$	0.05				$	0.71	$	0.05	$	1.10

Results of Operations

Comparison of Three and Six Months Ended ~~March~~June 3130, 2020 and 2019

Revenues

Revenues for the three months ended ~~March~~June 3130, 2020 were $7152.61 million, a decrease of $156.83 million, or 1810.17%, compared to the same period in 2019. ~~The~~Revenues ~~decrease~~for ~~in revenue compared to prior year was primarily due to~~ the ~~increased~~six ~~focus~~months onended ~~Medicare~~June ~~and~~30, ~~the~~2020 ~~de-emphasis~~were ~~of IFP~~$123.7 ~~The~~million, ~~Company realized slightly lower revenues due to~~ a ~~lower~~decrease ~~response~~of ~~rate~~$22.0 tomillion, ~~marketing~~or ~~and advertising efforts~~15.1%, ~~which~~compared ~~the Company believes~~ to bethe ansame ~~indirect~~period ~~effect~~in ~~of COVID-19~~2019.

The decrease in revenue compared to prior year was primarily due to the increased focus on Medicare and the de-emphasis of IFP. The Company realized slightly lower Medicare revenues due to a lower response rate to marketing and advertising efforts, which the Company believes to be an indirect effect of COVID-19.

Third-party Commissions

Our third-party commissions consist of fees and commissions paid to third-party distributors for selling our products to members. Third-party commissions, as a percentage of revenue, will vary based on the mix of sales between AgileHealthInsurance.com and our third-party distributors.

Third-party commissions for the three months ended ~~March~~June 3130, 2020 were $3220.85 million, a decrease of $276.94 million, or 4623.09%, compared to the three months ended ~~March~~June 3130, 2019. Third-party commissions ~~represented 45.8% of revenues~~ for the ~~three~~six months ended ~~March~~June 3130, 2020 were $53.3 million, asa ~~compared~~decrease toof 69$34.5%3 ofmillion, ~~revenues~~or ~~for~~39.2%, compared to the ~~three~~six months ended ~~March~~June 3130, 2019. ~~The decrease~~

34Third-party commissions represented 39.3% of revenues for the three months ended June 30, 2020, as compared to 46.1% of revenues for the three months ended June 30, 2019. Third-party commissions represented 43.1% of revenues for the six months ended June 30, 2020, as compared to 60.1% of revenues for the six months ended June 30, 2019.

The decrease in third-party commissions was primarily due to the continued planned diversification of our revenue mix towards Medicare, which do not have an associated commissions expense.

Selling, General and Administrative Expense

Our SG&A expenses primarily consist of personnel costs, which include salaries, bonuses, commissions, stock-based compensation, payroll taxes and benefits. SG&A expenses also include certain costs associated with obtaining new distributor relationships. In addition, these expenses also include expenses for outside professional services and technology expenses, including legal, audit and financial services, and the maintenance of our administrative technology platform and marketing costs for online advertising.

SG&A expense for the three months ended ~~March~~June 3130, 2020 was $2720.93 million. This represents an increase of $121.7 million, or 9.3%, compared to the three months ended June 30, 2019. SG&A expense for the six months ended June 30, 2020 was $48.3 million. This represents an increase of $14.1 million, or 7941.2%, compared to the ~~three~~six months ended ~~March~~June 3130, 2019. The increase in SG&A was primarily attributable to increased legal fees, staffing, training and professional fees associated with the continued expansion of the Medicare segment.

SG&A expense represented 39.10% of revenues for the three months ended ~~March~~June 3130, 2020 and 1731.98% of revenues for the three months ended ~~March~~June 3130, 2019. SG&A expense represented 39.0% of revenues for the six months ended June 30, 2020 and 23.5% of revenues for the six months ended June 30, 2019.

Marketing and Advertising Expense

Marketing and advertising expense for the three months ended ~~March~~June 3130, 2020 was $1814.53 million. This represents an increase of $1511.45 million, or ~~502~~412%.6 Marketing and advertising expense for the six months ended June 30, 2020 was $32.7 million. This represents an increase of $26.9 million, or 459%. The increase in marketing and advertising expenses was primarily attributable to the Company's Medicare segment and the up-front expense of lead generation.

~~The~~Marketing ~~increase in marketing~~ and advertising ~~expenses~~expense ~~was~~represented ~~primarily~~27.4% ~~attributable~~of torevenues for the ~~Company's~~three ~~Medicare~~months ~~segment~~ended June 30, 2020 and 4.8% of revenues for the ~~up-front~~three months ended June 30, 2019. Marketing and advertising expense ofrepresented ~~lead~~26.5% ~~generation~~for the six months ended June 30, 2020 and 4.0% of revenues for the six months ended June 30, 2019.

Provision for Income Taxes

For the three months ended ~~March~~June 3130, 2020 and 2019, we recorded a benefit for income taxes of $93.64 million compared to a provision of $2.83 million, reflecting effective tax benefit/rate of 1631.20% and 5641.25%, respectively. ~~See~~For ~~Note~~the 11six ofmonths ~~the~~ended ~~accompanying~~June ~~condensed~~30, ~~financial~~2020 ~~statements~~and ~~for~~2019, ~~further~~we ~~information~~recorded ona benefit for income taxes ~~and~~of ~~the~~$13.0 million compared to a provision of $5.1 million, reflecting effective tax ~~rates~~benefit/rate of 18.5% and 48.5%, respectively.

See Note 11 of the accompanying condensed financial statements for further information on income taxes and the effective tax rates.

Noncontrolling Interest

We are the sole managing member of HPIH and have 100% of the voting rights and control. As of ~~March~~June 3130, 2020, we had an 92.9% economic interest in HPIH, whereas Health Plan Intermediaries, LLC (“HPI”) and Health Plan Intermediaries Sub, LLC (“HPIS”), two entities owned and controlled by our founder Michael Kosloske, had the remaining 7.1% economic interest in HPIH. HPI and HPIS’ interest in HPIH is reflected as a noncontrolling interest in our accompanying condensed consolidated financial statements. During the ~~three~~six months ended ~~March~~June 3130, 2020, Mr. Kosloske exchanged a total of 900,000 shares of Class B common stock and an equal number of Series B membership interests. This transaction contributed to the 6.3% decrease in HPI and HPIS' collective economic interest in HPIH since December 31, 2019. See Note 10 of the Annual Report on Form 10-K for the year ended December 31, 2019 for further information on the Exchange Agreement.

Net loss/income attributable to BFYT for the three and six months ended ~~March~~June 3130, 2020, and 2019 included BFYT’s share of its consolidated entities’ net income and loss.

3537

Liquidity and Capital Resources

General

As of ~~March~~June 3130, 2020, we had $513.16 million of cash and cash equivalents. We believe that in addition to cash generated from operations and our current cash and cash equivalents, the Company will require the use of other sources of liquidity within the next 12 months. This may include utilizing expected tax refunds, ~~additional draws from its existing Senior Credit Facility~~ and additional modifications to ~~its~~our advanced commission program, among other things. Under the Company's current Senior Credit Facility, there are specific covenants that limit the total amount of indebtedness relative to the Company's trailing twelve month ~~Adjusted~~Consolidated EBITDA., ~~Such~~as ~~ratio~~defined ~~maximum~~within isthe ~~currently~~Credit ~~set at 3~~Facility.5X ~~for~~The ~~the~~Company ~~first~~requested and ~~second~~the ~~quarter~~lender ofagreed ~~2020~~to ~~and~~amend ~~adjusts~~the ~~down~~financial tocovenants ~~3.0X~~of ~~starting in~~ the ~~third~~Credit ~~quarter~~Facility ofto ~~2020.~~increase ~~The~~the ~~Company~~Consolidated ~~reported~~Total aLeverage ~~total~~Ratio, ~~consolidated~~as ~~debt~~defined towithin ~~trailing~~the ~~twelve~~Credit ~~month~~Facility, ~~Adjusted~~to ~~EBITDA~~3.5:1 offrom 23.~~59X~~0:1 ~~for~~through ~~the~~September ~~period ended March 31~~30, 2020. ~~and~~The ~~currently~~Company ~~expects~~is ~~to remain~~ in compliance with ~~the~~all debt covenants. ~~Due~~For tofurther information on the ~~nature~~Credit ofFacility ~~the~~see ~~seasonality~~Note 9 of the Company's ~~earnings,~~Annual aReport ~~large~~on ~~percentage~~Form of10-K ~~which~~for ~~occur in~~ the ~~fourth~~year ~~quarter~~ended ~~each~~December ~~year~~31, ~~the Company may seek an amendment to the Senior Credit Facility related to this covenant in order to provide it with increased operating flexibility throughout 2020~~2019.

Our Indebtedness

As of ~~March~~June 3130, 2020, we had a $~~194~~207.45 million outstanding balance from draws on the Senior Credit Facility and ~~$15.0~~ ~~million~~ there was no remaining balance available to be drawn upon. As of December 31, 2019, we had $180.3 million outstanding from draws on the revolving line of credit. The Company was in compliance with all covenants for all periods. See Note 6 to the condensed consolidated financial statements for additional details on our Senior Credit Facility.

Cash Flows

The following summary of cash flows for the periods indicated has been derived from our condensed consolidated financial statements included elsewhere in this report:

	Three Months Ended March 31,
			Six Months Ended June 30,
	~~2020~~		2020		~~2019~~			2019
Cash (used in) provided by:
Operating activities	$	~~(11,235~~	)$	(14,104)	$	~~(5,744~~	)	$	(8,959)
Investing activities	~~(1,930~~		(3,158)		~~(424~~		)	(48,458)
Financing activities	~~12,687~~		24,934		~~3,133~~			64,956

Cash Flows from Operating Activities

Cash flows from operating activities during the ~~three~~six months ended ~~March~~June 3130, 2020 decreased compared to the ~~three~~six months ended ~~March~~June 3130, 2019 primarily due to the ~~continuation~~increased ofcosts ~~the~~associated ~~advanced~~with ~~commission~~marketing ~~program~~and advertising due to ~~select~~the ~~distributors~~expansion into Medicare, and aincreased ~~collective~~corporate ~~decrease~~spend, inincluding ~~both~~legal ~~commissions payable~~ and ~~accounts~~professional ~~payable~~fees, ~~accrued~~ and ~~other liabilities of $16~~payroll.~~4 million.~~

Cash Flows from Investing Activities

Our cash outflows from investing activities for the ~~three~~six months ended ~~March~~June 3130, 2020 ~~increased~~decreased compared to the ~~three~~six months ended ~~March~~June 3130, 2019 ~~due~~as to the ~~$1.0~~prior ~~million~~year ~~payment~~reflects of the ~~hold-back~~cash outflows related to the acquisition of TogetherHealth. Outflows ~~also~~related ~~increased due~~ to ~~increased~~purchases ~~capitalization~~ of ~~internal-use~~property ~~software~~and ~~costs~~equipment ~~and~~were $940,000 which increased ~~purchases~~over ofthe ~~property~~prior ~~and~~year ~~equipment~~largely ~~related~~due to costs associated with the relocation of the Company's corporate office.

Cash Flows from Financing Activities

Cash provided by financing activities during the ~~three~~six months ended ~~March~~June 3130, 2020 ~~increased~~decreased compared to the ~~three~~six months ended ~~March~~June 3130, 2019. ~~This increase was~~ primarily driven by ~~net~~the ~~cash~~prior ~~inflows~~year's ~~from~~net borrowings against the credit facility of $14133.1 million compared to the current year's net borrowing of $27.3 million. In the prior year, cash provided by financing activities was decreased by $64.0 million due to repurchases of the Company's Class A common stock.

Off-Balance Sheet Arrangements

Through ~~March~~June 3130, 2020, we had not entered into any material off-balance sheet arrangements.

3638

Critical Accounting Policies and Estimates

Our financial statements are prepared in accordance with GAAP. The preparation of these financial statements require management to make estimates, assumptions, and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the applicable periods. We base our estimates, assumptions, and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances. Different assumptions and judgments could change the estimates used in the preparation of our financial statements, which, in turn, could change the results from those reported. We evaluate our estimates, assumptions, and judgments on an ongoing basis.

The critical accounting estimates, assumptions, and judgments that we believe have the most significant impact on our financial statements are described in Note 1 to the accompanying condensed consolidated financial statements, the Notes to the Consolidated Financial Statements included in Part IV, Item 15 and Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 under the heading “Critical Accounting Policies and Estimates.” There have been no material changes to the Company’s critical accounting policies and estimates since the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

Recent Accounting Pronouncements

Note 1 to the condensed consolidated financial statements contains a discussion of recently issued accounting pronouncements and their impact or potential future impact on the Company’s financial results, if determinable, under the sub-heading “Recent Accounting Pronouncements.”

Legal and Other Contingencies

The Company is subject to legal proceedings, claims, and liabilities that arise in the ordinary course of business. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors. The Company accrues for losses associated with legal claims when such losses are probable and reasonably estimable. If the Company determines that a loss is probable and cannot estimate a specific amount for that loss, but can estimate a range of loss, the best estimate within the range is accrued. If no amount within the range is a better estimate than any other, the minimum amount of the range is accrued. Estimates are adjusted as additional information becomes available or circumstances change. Legal defense costs associated with loss contingencies are expensed in the period incurred. For a further detailed discussion surrounding legal and other contingencies, see Note 14 "Commitments and Contingencies."

ITEM 3—QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Except for the broad effects of COVID-19 and its negative impact on the global economy and financial markets, there have been no material changes to the Company's quantitative and qualitative disclosures about market risks as disclosed in Item 7A. "Quantitative and Qualitative Disclosures About Market Risks," in our Annual Report on Form 10-K for the year ended December 31, 2019.

ITEM 4—CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer (principal executive officer) and our Chief Financial Officer (principal financial officer), evaluated the effectiveness of our disclosure controls and procedures as of ~~March~~June 3130, 2020. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of ~~March~~June 3130, 2020, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective.

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Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting during the quarter ended ~~March~~June 3130, 2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. We have not experienced any material impact to our internal controls over financial reporting despite the fact that most of our employees are working remotely due to the COVID-19 pandemic. We are continually monitoring and assessing the COVID-19 situation on our internal controls to minimize the impact on their design and operating effectiveness.

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PART II—OTHER INFORMATION

ITEM 1—LEGAL PROCEEDINGS

Legal Proceedings are set forth under Note 14 "Commitments and Contingencies" included in Part I, Item 1 of this Quarterly Report on Form 10-Q and are incorporated herein by reference.

ITEM 1A—RISK FACTORS

The following presents updates and additions to the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019:

Our business, results of operations, and financial condition may be impacted by the recent coronavirus (COVID-19) outbreak.

The global spread of COVID-19 has created significant volatility and uncertainty. While our employees currently have the ability and are encouraged to work remotely, such measures may have an impact on employee attendance or productivity, which, along with the possibility of employees’ illness, may adversely affect our operations. Although COVID-19 is currently not material to our results of operations, there is uncertainty relating to the potential future impact on our business. The extent to which COVID-19 impacts our operations, or our ability to obtain financing should we require it, will depend on future developments which are uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions taken by governments and private businesses to contain COVID-19 to treat its impact, among others. If the disruptions posed by COVID-19 continue for an extended period of time, financial markets may not be available to the Company for raising capital in order to fund future growth or to refinance its existing credit facility currently due in May of 2022. Should the Company not be able to obtain financing when required, in the amounts necessary or under terms which are economically feasible, we may be required to reduce planned future growth and/or the scope of our operations.

ITEM 2—UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

There were no unregistered sales of equity securities during the ~~three~~six months ended ~~March~~June 3130, 2020.

Issuer Purchases of Equity Securities

Share Repurchase Program

On October 13, 2017, the Company's Board of Directors authorized a share repurchase program for up to $50.0 million of the Company's outstanding Class A Common Stock, which was increased to $200.0 million by the Board of Directors on March 14, 2019. The share repurchase authorization permits the Company to periodically repurchase shares for cash through October 2020 in open market purchases, block transactions and privately negotiated transactions in accordance with applicable federal securities laws. The actual timing, number and value of shares repurchased under the program will be determined by the Company's management at its discretion and will depend on a number of factors, including the market price of the Company's common stock, general market and economic conditions, regulatory requirements, capital availability and compliance with the terms of the Company's credit facility. Repurchases under the program will be funded from one or a combination of existing cash balances, future free cash flow, and indebtedness. There is no guarantee as to the number of shares that will be repurchased, and the repurchase program may be extended, suspended or discontinued at any time without notice at the Company's discretion.

During the ~~three~~six months ended ~~March~~June 3130, 2020, there were no shares repurchased under the repurchase program.

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Employee Awards

Pursuant to certain restricted stock award agreements, we allow the surrender of restricted shares by certain employees to satisfy statutory tax withholding obligations on the vesting or exercise of stock awards. During the ~~three~~six months ended ~~March~~June 3130, 2020, there were 72117,~~390~~597 shares withheld to satisfy statutory tax withholding on vested restricted stock awards.

The following table sets forth information with respect to repurchases of shares of our Class A common stock during the fiscal quarter ended ~~March~~June 3130, 2020:

Periods	~~Total Number of Shares Purchased(1)~~	~~Average Price Paid Per Share~~	Total Number of Shares Purchased(1)	~~Total Number of Shares Purchased as Part of Publicly Announced Plans~~	~~Dollar~~Average ~~Value~~Price ofPaid ~~Shares~~Per ~~That May Yet Be Purchased Under the Plan~~Share		Total Number of Shares Purchased as Part of Publicly Announced Plans	Dollar Value of Shares That May Yet Be Purchased Under the Plan
January 1, 2020 through January 31, 2020	52,038	$	19.29	—	$	75,277,082
April 1, 2020 through April 30, 2020			—		$	—	—	$	75,277,082
February 1, 2020 through February 29, 2020	—	$	—	—	$	75,277,082
May 1, 2020 through May 31, 2020			11,239		$	23.83	—	$	75,277,082
March 1, 2020 through March 31, 2020	20,352	$	25.67	—	$	75,277,082
June 1, 2020 through June 30, 2020			33,968		$	18.64	—	$	75,277,082
Total	~~72,390~~		45,207	—			—

(1) Includes shares that were surrendered by employees to satisfy statutory tax withholding obligations in connection with the vesting or exercise of stock-based compensation awards.

ITEM 3—DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4—MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5—OTHER INFORMATION

None.

ITEM 6—EXHIBITS

The following exhibits are filed herewith or incorporated by reference herein:

Exhibit No.	~~Description~~	Description
3.1	Certificate of Amendment to the Amended and Restated Certificate of Incorporation. Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on March 6, 2020.
2.1		Agreement and Plan of Merger, dated as of July 12, 2020, by and among Benefytt Technologies, Inc., Daylight Beta Parent Corp. and Daylight Beta Corp. Incorporated by reference to Exhibit 2.1 to the Form 8-K filed on July 13, 2020.
3.2	Second Amended and Restated Bylaws of Benefytt Technologies, Inc. Incorporated by reference to Exhibit 3.2 to Current Report on Form 8-K filed on March 6, 2020.
10.1		Exchange Agreement, dated as of July 12, 2020, by and among Daylight Beta Parent Corp., Health Plan Intermediaries, LLC, Health Plan Intermediaries Sub, LLC, Benefytt Technologies, Inc. and Health Plan Intermediaries Holdings, LLC. Incorporated by reference to Exhibit 10.1 to the Form 8-K filed on July 13, 2020.
31.1*	Certification of Principal Executive Officer pursuant to Rule 13a-14(a).
10.2		TRA Termination Agreement, dated as of July 12, 2020, by and among Health Plan Intermediaries, LLC, Health Plan Intermediaries Sub, LLC, Benefytt Technologies, Inc. and Health Plan Intermediaries Holdings, LLC. Incorporated by reference to Exhibit 10.2 to the Form 8-K filed on July 13, 2020.
31.2*	Certification of Principal Financial Officer pursuant to Rule 13a-14(a).
31.1*		Certification of Principal Executive Officer pursuant to Rule 13a-14(a).
32**	Section 1350 Certifications
31.2*		Certification of Principal Financial Officer pursuant to Rule 13a-14(a).
100.INS	XBRL Instance Document
32**		Section 1350 Certifications
101.SCH	XBRL Taxonomy Extension Schema Document
100.INS		XBRL Instance Document
101.CAL	XBRL Taxonomy Calculation Linkbase Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.LAB	XBRL Taxonomy Label Linkbase Document
101.CAL		XBRL Taxonomy Calculation Linkbase Document
101.PRE	XBRL Taxonomy Presentation Linkbase Document
101.LAB		XBRL Taxonomy Label Linkbase Document
101.DEF	XBRL Taxonomy Definition Document
101.PRE		XBRL Taxonomy Presentation Linkbase Document
101.DEF		XBRL Taxonomy Definition Document

* Document is filed with this Quarterly Report on Form 10-Q.

** Document is furnished with this Quarterly Report on Form 10-Q.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	~~BENEFYTT TECHNOLOGIES, INC.~~	BENEFYTT TECHNOLOGIES, INC.
May 11, 2020	/s/ Gavin D. Southwell
August 10, 2020		/s/ Gavin D. Southwell
	~~GAVIN D. SOUTHWELL~~	GAVIN D. SOUTHWELL
	~~PRESIDENT AND CHIEF EXECUTIVE OFFICER~~	PRESIDENT AND CHIEF EXECUTIVE OFFICER
	~~(PRINCIPAL EXECUTIVE OFFICER)~~	(PRINCIPAL EXECUTIVE OFFICER)
May 11, 2020	/s/ Erik M. Helding
August 10, 2020		/s/ Erik M. Helding
	~~ERIK M. HELDING~~	ERIK M. HELDING
	~~CHIEF FINANCIAL OFFICER, SECRETARY, AND TREASURER~~	CHIEF FINANCIAL OFFICER, SECRETARY, AND TREASURER
	~~(PRINCIPAL FINANCIAL OFFICER)~~	(PRINCIPAL FINANCIAL OFFICER)

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