Introduction to Unaudited Pro Forma Combined Financial Statements

On June 5, 2019, the Health Insurance Innovations, Inc. (the “Company” or “HIIQ”) 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 Health Plan Intermediaries Holdings, LLC, a consolidated subsidiary of HIIQ, 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.

References to “we,” “our,” or “the Company” refer to HIIQ and its consolidated subsidiaries.

Description of Unaudited Pro Forma Combined Financial Statements

The following unaudited pro forma combined balance sheet as of March 31, 2019 combines our historical balance sheet as of March 31, 2019, as filed with the Securities and Exchange Commission (“SEC”) in our Quarterly Report on Form 10-Q, with TogetherHealth’s unaudited historical combined balance sheet of as of March 31, 2019, giving effect to the acquisition as if it had occurred on January 1, 2018, using the purchase method of accounting and applying the assumptions and adjustments described in the accompanying notes to the unaudited pro forma combined financial statements.

The unaudited pro forma combined statements of income for the three months ended March 31, 2019 and 2018 combine our historical consolidated statements of income for the three months ended March 31, 2019 and 2018, as filed with the SEC in our Quarterly Report’s on Form 10-Q, with TogetherHealth’s unaudited historical information for the same periods, giving effect to the acquisition as though it had occurred at the beginning of the period presented, January 1, 2018, using the purchase method of accounting and applying the assumptions and adjustments described in the accompanying footnotes to the unaudited pro forma combined financial statements. The pro forma calculations do not consider $424,000 of costs incurred by us related to the acquisition during the six months ended June 30, 2019.

The unaudited pro forma financial statements do not include the realization of any cost savings from operating efficiencies,

synergies or other restructuring activities which might result from the transaction. The unaudited pro forma financial statements should be read in conjunction with the historical financial statements and accompanying notes of TogetherHealth and HIIQ.

The unaudited pro forma financial statements should not be taken as representative of the future consolidated results of operations or financial condition of HIIQ.

Unaudited Pro Forma Combined Balance Sheet

As of March 31, 2019

($ in 000’s, except per share amounts)

	Health Insurance Innovations, Inc. Historical			TogetherHealth Historical			Pro Forma Adjustments			Pro Forma Combined
Assets
Current assets:
Cash and cash equivalents	$	6,483		$	3,498					$	9,981
Restricted cash		16,481			—						16,481
Accounts receivable, net, prepaid expenses and other current assets		1,727			1,023	(1)					2,750
Advanced commissions, net		30,063			—						30,063
Contract asset, net		166,858			—			1,746	(a)		168,604
Total current assets		221,612			4,521						227,879
Long-term contract asset, net		144,529			—			4,041	(a)		148,570
Property and equipment, net		4,859			21						4,880
Goodwill		41,076			—			54,662	(b)		95,738
Intangible assets, net		3,882			—			12,960	(c)		16,842
Deferred tax assets		26,385			—						26,385
Other assets		793			—						793
Total assets	$	443,136		$	4,542					$	521,087
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and accrued expenses	$	26,643		$	1,354					$	27,997
Commissions payable, net		102,817			—						102,817
Deferred revenue		227			—						227
Income taxes payable		18,038			—						18,038
Due to member		9,543			—						9,543
Contingent consideration		—			—			2,449	(d)		2,449
Other current liabilities		405			—						405
Total current liabilities		157,673			1,354						161,476
Long-term commissions payable, net		94,894			—						94,894
Long-term contingent consideration		—			—			10,975	(d)		10,975
Revolving line of credit		65,000			—			50,000	(e)		115,000
Due to member		26,210			—						26,210
Other liabilities		135			—						135
Total liabilities		343,912			1,354						408,690
Commitments and contingencies
Stockholders’ equity:
Class A common stock		15			—			1	(f)		16
Class B common stock		2			—						2
Preferred stock		—			—						—
Additional paid-in capital		93,340			—			11,783	(f)		105,123
Treasury stock, at cost		(108,758	)		—						(108,758	)
Retained earnings		82,135			3,188			(1,799	)(g)(a)		83,524
Total Health Insurance Innovations, Inc. stockholders’ equity		66,734			3,188						79,907
Noncontrolling interests		32,490			—						32,490
Total stockholders’ equity		99,224			3,188						112,397
Total liabilities and stockholders’ equity	$	443,136		$	4,542					$	521,087

Notes to the Adjustments to the Pro Forma Combined Balance Sheet:

(1)	Accounts receivable and other current assets of TogetherHealth are included within accounts receivable, net, prepaid expenses and other current assets on the combined financial statement line item.
(a)	To record the impact of TogetherHealth's adoption of Accounting Standards Codification 606 which would have been required as a public company subsidiary as of the date of the period presented.
(b)	To record the estimated value of acquired goodwill.
(c)	To record the estimated fair value of acquired identifiable intangible assets.
(d)	To record the estimated fair value of contingent consideration.
(e)	To account for the debt required to satisfy acquisition consideration.
(f)	To account for the issuance of HIIQ Class A common stock issued at closing of the acquisition as a component of the acquisition consideration, at fair value.
(g)	To eliminate the equity accounts of TogetherHealth.

Unaudited Pro Forma Combined Statement of Income

For the Three Months Ended March 31, 2019

($ in 000’s, except per share data)

	Health Insurance Innovations, Inc. Historical		TogetherHealth Historical		Pro Forma Adjustments			Pro Forma Combined
Revenues	$	87,326	$	7,331	$	722	(a)(b)	$	95,379
Operating expenses:
Third-party commissions		60,671		—		—			60,671
Credit card and ACH fees		1,523		—		—			1,523
Selling, general and administrative		18,659		6,824 (1)		(811	)(b)		24,672
Depreciation and amortization		1,132		—		914	(c)		2,046
Total operating expenses		81,985		6,824		103			88,912
Income from operations		5,341		507		619			6,467
Other expense (income):
Interest expense (income)		345		—		625	(d)		970
Other expense		17		—		—			17
Net income before income taxes		4,979		507		(6	)		5,480
Provision for income taxes		2,797		—		(1	)(e)		2,796
Net income		2,182		507		(5	)		2,684
Net income attributable to noncontrolling interests		851		—		(1	)(f)		850
Net income attributable to Health Insurance Innovations, Inc.	$	1,331	$	507	$	(4	)	$	1,834
Per share data:
Net income per share attributable to Health Insurance Innovations, Inc.
Basic	$	0.12						$	0.15
Diluted	$	0.11						$	0.14
Weighted average Class A common shares outstanding
Basic		11,388,490		—		630,000	(g)		12,018,490
Diluted		12,472,731		—		630,000	(g)		13,102,731

Notes to the Adjustments to the Pro Forma Combined Income Statement:

(1)	Advertising, customer care and enrollment, and selling, general, and administrative expenses of TogetherHealth are included within the combined selling, general and administrative financial statement line item.
(a)	To account for incremental TogetherHealth revenues of $1.5 million that would be recorded under Accounting Standards Codification 606 had they been acquired by HIIQ in January 2018.
(b)	To reclassify CC&E expenses reported under ASC 605 to a reduction of revenue as would be required under Accounting Standards Codification 606.
(c)	To record amortization expense on acquired intangible assets.
(d)	To account for interest expense that would have been incurred on borrowed funds required for acquisition assuming $50.0 million loan at 5.0% annual interest.
(e)	To record the income tax effect on the pro forma earnings before income taxes.
(f)	To adjust for the effects of the pro forma adjustments described herein on the allocation of net income to noncontrolling interests.
(g)	To account for the issuance of HIIQ Class A common stock issued at closing of the acquisition as a component of the acquisition consideration.

Unaudited Pro Forma Combined Statement of Income

For the Year Ended December 31, 2018

($ in 000’s, except per share data)

	Health Insurance Innovations, Inc. Historical		TogetherHealth Historical			Pro Forma Adjustments			Pro Forma Combined
Revenues	$	351,097	$	35,991		$	2,682	(a)(b)	$	389,770
Operating expenses:
Third-party commissions		234,777		—			—			234,777
Credit card and ACH fees		5,909		—			—			5,909
Selling, general and administrative		74,350		28,013	(1)		(1,572	)(b)		100,791
Depreciation and amortization		4,799		—			3,656	(c)		8,455
Total operating expenses		319,835		28,013			2,084			349,932
Income from operations		31,262		7,978			598			39,838
Other expense (income):
Interest expense (income)		25		—			2,500	(d)		2,525
TRA expense		1,471		—			—			1,471
Other expense		130		—			—			130
Net income before income taxes		29,636		7,978			(1,902	)		35,712
Provision for income taxes		10,672		—			(456	)(e)		10,216
Net income		18,964		7,978			(1,446	)		25,496
Net income attributable to noncontrolling interests		5,970		—			(383	)(f)		5,587
Net income attributable to Health Insurance Innovations, Inc.	$	12,994	$	7,978		$	(1,063	)	$	19,909
Per share data:
Net income per share attributable to Health Insurance Innovations, Inc.
Basic	$	1.07							$	1.55
Diluted	$	0.97							$	1.42
Weighted average Class A common shares outstanding
Basic		12,200,654		—			630,000	(g)		12,830,654
Diluted		13,376,265		—			630,000	(g)		14,006,265

Notes to the Adjustments to the Pro Forma Combined Income Statement:

(1)	Advertising, customer care and enrollment, and selling, general, and administrative expenses of TogetherHealth are included within the combined selling, general and administrative financial statement line item.
(a)	To account for incremental TogetherHealth revenues of $268,000 that would be recorded under Accounting Standards Codification 606 had they been acquired by HIIQ in January 2018.
(b)	To reclassify CC&E expenses reported under ASC 605 to a reduction of revenue as would be required under Accounting Standards Codification 606.
(c)	To record amortization expense on acquired intangible assets.
(d)	To account for interest expense that would have been incurred on borrowed funds required for acquisition assuming $50.0 million loan at 5.0% annual interest.
(e)	To record the income tax effect on the pro forma earnings before income taxes.
(f)	To adjust for the effects of the pro forma adjustments described herein on the allocation of net income to noncontrolling interests.
(g)	To account for the issuance of HIIQ Class A common stock issued at closing of the acquisition as a component of the acquisition consideration.