eHealth, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the Q2 2020 eHealth, Inc. earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star then 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star then 0. I would now like to hand the conference over to your speaker today, Ms. Kate Sidorovich, Vice President of eHealth Investor Relations. Thank you. Please go ahead.

Thank you. Good afternoon, and thank you all for joining us today, either by phone or by webcast, for a discussion about eHealth, Inc.'s second quarter 2020 financial results. On the call this afternoon, we'll have Scott Flanders, eHealth Chief Executive Officer, Tim Hannon, Chief Revenue Officer, and Derek Jung, Chief Financial Officer. After management completes its remarks, we'll open the lines for questions. As a reminder, today's conference call is being recorded and webcast from the IR section of our website. A replay of the call will be available on our website following the call. We will be making forward-looking statements on this call that include statements regarding future events, beliefs, and expectations, including statements relating to our expectations regarding our Medicare business, including Medicare enrollment growth, consumer demand, our competitive advantage, our carrier relationships, and our expectations regarding online enrollment. Our plans to invest in the Medicare business, including marketing initiatives and enhancements to our technology platform, our Medicare growth strategy, including our customer acquisition and demand generation strategy, customer retention efforts, online engagement, agent productivity, and talent acquisition strategy. Our expectations regarding our direct-to-consumer platform, The benefits of our customer care agent remote model, the profitability of our business, seasonality, churn, lifetime value, operating expenses, including fixed and variable costs, and the impact of COVID-19 on our business. And finally, our member estimates, revised 2020 full-year guidance, our outlook for the third and fourth quarters of 2020, and our revised five-year financial plan and the contents of such guidance and growth plan. Forward-looking statements. on this call represent e-health views as of today. You should not rely on the statements as representing our views in the future. We want to take no obligation or duty to update information contained in the forward-looking statements, whether it's a result of new information, future events, or otherwise. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in our forward-looking statements. We describe these and other risks and uncertainties in our annual reports on Form 10-K and quarterly reports on Form 10-Q filed with the Securities and Exchange Commission, which you may access through the SEC website or from the Investor Relations section of our website. We will be presenting certain financial measures on this call that are considered non-GAAP under SEC Regulation G. For reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure, please refer to the information included in our press release and in our SEC filings, which can be found in the About Us section of our corporate website under the heading Investor Relations. However, we have not reconciled our projected EBITDA in 2024 to our projected GAAP net income because we cannot reasonably predict certain items in the reconciliation, such as stock-based compensation expense and provision for income taxes. And the reconciliation is not available without unreasonable effort. And at this point, I will turn the call over to our CEO, Scott Glenders.

SCOTT GLENDERS Thank you, Kate, and welcome, everyone. We continue to operate in unprecedented and challenging times. Access to the proper health care is critical and our mission to connect every person with the highest quality, most affordable health insurance for their life circumstances is more relevant and important than ever. This is especially difficult time for e-health customers who are mostly seniors, a group that is disproportionately impacted by the ongoing pandemic. I'd like to thank our team for their hard work and dedication to helping those customers and continuing to fulfill our mission. We're going to use this call to discuss our second quarter results, provide you with our updated 2020 annual guidance, and the key points of our revised five-year financial plan. We will also discuss the strategies we are implementing to position the business for continued profitable growth. In the second quarter, eHealth delivered strong revenue and Medicare enrollment growth. Consumer demand on our platform remained robust and our agent productivity increased compared to a year ago, driven by internal initiatives and favorable market dynamics. The number of second quarter Medicare approved members grew ahead of our expectations. This includes a 65% year-over-year growth in approved Medicare Advantage members. We achieved this enrollment growth while also reducing our total acquisition costs per approved Medicare member, allowing us to once again exceed our internal forecast for revenue and earnings. It's also worth highlighting that 30% of our second quarter applications for Medicare major medical products were submitted by our customers online, compared to just 11% a year ago. This includes unassisted, and partially agent-assisted online enrollments. On an absolute basis, the total number of applications for Medicare major medical products submitted online grew over 300% compared to the second quarter of 2019. Later, I'll talk about some of the initiatives we have underway to continue exploiting our online opportunities. Total revenue for the second quarter was $88.8 million. a 35% year-over-year increase. Our adjusted EBITDA was $1.7 million and our GAAP net loss was $3.4 million. Medicare revenue of $80.4 million grew 54% compared to a year ago. During the quarter, we completed our operational planning for the upcoming annual enrollment period and updated our financial forecast for the year. We are anticipating a strong, fast-paced AEP with robust Medicare Advantage plan selection and an acceleration in market share gains by tech-enabled direct-to-consumer platforms. This year, we're building on our success and knowledge gained over the last two AEPs with significant enhancements planned across all key functions. First, our Medicare agent productivity is expected to increase significantly this AEP by 10% compared to a year ago. This will be driven by new technology deployment, enhanced lead ranking allocation systems, and a larger percent of in-house agents, including our remote agent force. Second, we plan to further increase our online enrollment penetration. With online Medicare enrollments coming in substantially ahead of our forecast in the second quarter, we are increasing our full-year 2020 targets for online enrollments from 34% to 37% of total applications for Medicare major medical products. This includes for unassisted and partially agent-assisted online enrollments. And in combination with higher agent productivity, it is expected to drive a significant year-over-year reduction in our customer care and enrollment costs per approved member. Third, we will continue our strong multichannel demand generation strategy with increased reliance on data analytics and a growing contribution from our strategic partner channel, including a number of important new partners. We believe our partner channel is a major differentiator for eHealth.