eHealth, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Q3 2020 eHealth, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. Please be advised that today's conference call is being recorded. I would now like to hand the conference over to your speaker today, Ms. Kate Sidorovich, your Vice President of Investor Relations. Thank you. Please go ahead, Min.

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 third quarter 2020 financial results. On the call this afternoon, we'll have Scott Flanders, eHealth Chief Executive Officer, and Derek Jung, Chief Financial Officer. After management completes its remarks, we'll open the line for questions. As a reminder, today's conference call is being recorded and webcast from the IR section of our website, and 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 expectations regarding online enrollments and our retention and recapture rates. Our investments in telesales capacity, internal agent counts, agent productivity tools and incentives, customer engagement and retention initiatives, and enhancements to our technology platform, as well as the expected positive financial and operational impact of our investments. Our expectations regarding the Medicare market opportunity, our direct-to-consumer broker channel, our online marketing and strategic partnership channels, The profitability of our business, seasonality, churn, lifetime values, plan persistency, member estimates, total acquisition cost per member, and operating expenses. And finally, our outlook for this annual enrollment period and our 2020 financial guidance. Forward-looking statements on this call represent eHealth's views as of today. You should not rely on these statements as representing our views in the future. We undertake no obligation or duty to update information contained in these forward-looking statements, whether as 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 report 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 IR 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. and at this point I will turn the call over to Scott Flanders.

Thank you, Kate, and welcome everyone. This has been a busy and successful quarter preparing for the most important Medicare selling season of the year and deploying our retention enhancement initiatives across the entire organization. We achieved substantial progress in both areas which are closely interrelated given that our focus this annual enrollment period is on driving growth by targeting high LTV, high margin enrollments. Our customer engagement and retention initiatives are expected to have long-lasting positive financial impact, but most importantly, they are aimed at further enhancing customer experience as they shop for, enroll, and start utilizing their Medicare plans. I will update you on the key initiatives and achievements that were made during the quarter in just a moment. But first, let me provide a summary of our third quarter financial results. Total revenue for the third quarter was $94.3 million. a 35% year-over-year increase. Our adjusted EBITDA was negative 13.3 million and our GAAP net loss was 14.5 million. These results were in line with our expectations for the quarter and reflect an investment made in our Medicare telesales capacity with an emphasis on expanding our in-house agent force as well as marketing investments ahead of the AEP. The number of third quarter Medicare approved members grew 17% compared to a year ago. This includes 28% year over year growth in approved Medicare Advantage members. MA enrollment growth was dominated by our online marketing and strategic partner channels, which grew well above the overall enrollment growth for the quarter, reflecting our emphasis on these high ROI channels with higher propensity to bring in consumers who are comfortable transacting online. Our third quarter Medicare major medical online enrollments, including fully unassisted and partially assisted online enrollments, grew 107% on a year-over-year basis in the third quarter. 36% of our applications for these products were submitted by our customers online. This was above our expectations and a meaningful increase compared to 21% in Q3 a year ago. Building on the momentum achieved in the third quarter and following a technology release conducted ahead of the AEP, which I'll cover in more detail in a moment, we currently expect 45 to 50% of our fourth quarter Medicare major medical applications to be submitted online. This is compared to 36% in Q4 of 2019. Our fulfillment mix has significant implications for the average policy persistency given that online enrollments tend to retain the product longer with first year retention rates higher by approximately 25 to 30% than members who enrolled telephonically. In addition to fulfilling more demand online, we've made significant changes to our telesales organization. We have broadened its mandate to focus on not only enrollment, but extending it to proactive post-enrollment engagement as customers start utilizing their Medicare policies. This strategy is deployed broadly through our training program, agent compensation structure, lead ranking and allocation, and our product and technology initiatives. As we announced last month, we have successfully completed staffing of our telesales organization ahead of the AEP and achieved a meaningful shift towards in-house sales capacity. This AEP, we will have 120% more internal agents compared to a year ago. In-house eHealth agents now represent roughly 45% of our total sales force compared to just 30% last AEP. Our internal agents have, on average, superior productivity rates and generate enrollments with higher average persistency compared to outsourced call center agents. As a result, We expect that this shift will have positive implications for our overall conversions and per member acquisition costs compared to a year ago, as well as for how well we retain members post-enrollment. The compensation structure of our in-house agents was also adjusted to link a significant portion of it to persistency of their enrollments. This aligns compensation strategy with our goals and gives agents who are producing positive retention outcomes Thank you for joining us today. as well as any planned structure changes we identify in the market. We deployed our first cohort of dedicated retention agents last month and have since observed encouraging early results of their efforts. We expanded this team above our initial expectations ahead of the AEP. Last month, we conducted a major technology release across the key areas of our customer engagement platform, further widening the competitive moat between eHealth and the more traditional in-person and telephonic-only brokers. This latest technology release takes customer experience to the next level through personalized data-driven plan recommendations and a unified experience that allows seniors to move seamlessly between our online platform and agent interaction, whether telephonically or through text and emails. Underlying this 360 consumer experience is a customer-centered technology which we released last month and is unmatched in our industry. Using our customer-centered tool, consumers can create a secure personal profile containing their physician, preferred pharmacy, drug and other key medical and personal data that is accessible both through our online platform and by agents when they are interacting with the customer. This tool, which has already been adopted by thousands of our customers since last month's launch, not only provides for a better enrollment process but also facilitates future interaction and post-transaction engagement, including plan analysis should customer needs or plan structure change. We believe this capability will have a significant positive impact on our online enrollment volumes, customer retention, and importantly, member recapture rates. Within our telephony systems, we changed the process for lead ranking and allocation to align it closer with our strategic and financial goals including increased emphasis on retention. In the past, leads were ranked based on their estimated conversion rates with highest converting leads allocated to our best agents. For this AEP, we are taking a more holistic view of demand generation, assigning lead scores based on estimated LTVs in addition to conversion rates. On the demand side of the equation, our market opportunity is continuing to expand. with CMS projecting another year of strong 10% Medicare Advantage enrollment growth. This AEP, seniors have an even broader selection of high quality affordable plans with many major carriers expanding their geographic coverage. This will also be an AEP different from any other prior year given COVID and its impact on consumer behavior. Many seniors are likely to feel more comfortable with telephonic, or an online interaction instead of a face-to-face broker visit. And this can prove to be another meaningful tailwind for the direct-to-consumer broker channel. Finally, the shift to online is here and it's real. We are seeing it in our enrollment numbers and in overall patterns of consumer behavior on our platform. This dynamic is expected to have a strong, positive impact on our competitive positioning, consumer value proposition, and our member economics. And we feel confident in our ability to leverage these powerful industry trends by driving demand on our platform at attractive acquisition costs. Our approach to marketing is opportunistic. We are proactively shifting investments across channels to maximize return on our marketing dollars and meet our internal targets for LTV to total acquisition costs per member ratio. We believe that momentum in our online marketing and strategic partnership channels seen in Q3 will continue into AEP and will result in these channels growing above our total fourth quarter Medicare enrollment growth. As I mentioned earlier, these channels are more likely to bring in consumers who are comfortable transacting online compared to more traditional marketing initiatives such as direct TV and mail. In addition, Members originating in our strategic partner channel tend to have higher than average retention rates, regardless of whether they were enrolled telephonically or online. Our partners are increasingly recognizing our value proposition. They appreciate that we offer access to the largest plan selection among the DTC brokers and the ability to provide a seamless experience for their customers by safely and securely pre-populating the customers' doctors, preferred pharmacy and drug data through our proprietary personal code technology for either an end-to-end online or telephonic enrollment on the eHealth platform. More partners are digitally integrating with us for this AP, which is expected to be another meaningful driver of online enrollments. For Q4, we expect the partner channel will grow in excess of 80% driven by new relationships, as well as expanding relationships with existing partners, including large national retailers such as Walgreens and Costco. In addition to partnering with major national chains, we are going deeper into the pharmacy and provider channel. We have now extended our platform to serve thousands of independent and community pharmacies and providers nationwide. Before I turn the call over to Derrick, I'd like to address churn dynamics on our platform. Churn levels for Medicare Advantage plans have stabilized in the third quarter, with the trailing 12-month churn flat sequentially at 42%. Importantly, the absolute levels of churn have declined significantly compared to first and second quarters. In the third quarter, an estimated 30,000 Medicare Advantage members churned compared to 87,000 and 54,000 in Q1 and Q2, respectively. You should expect to see the initial impact of the comprehensive retention program that we put in place reflected in this metric in the first quarter of 2021. As these initiatives mature and impact an increasing number of customers on the eHealth platform, we expect to see a continuing improvement in our member retention and recapture rates. In conclusion, I'm pleased with our accomplishments this quarter. We entered the annual enrollment period from a position of strength. and are expecting to generate significant Medicare enrollment while reducing our per member acquisition costs, a powerful combination. We are also focused on enrollment quality and expect that members that we enroll this AEP will on average stay on their policies longer and generate higher lifetime commissions compared to the AEP a year ago as a direct result of the retention and customer engagement initiatives that we put in place. As always, our customers are at the center of everything we do at eHealth, and we are acutely focused on enhancing and simplifying their experience by meeting them where they want to be, whether online through interaction with our licensed agent or customer care specialist, or through a hybrid agent-assisted online enrollment. I believe the work we've done so far this year has positioned us uniquely well in this large and growing market to capitalize on the opportunity at hand. I will now turn the call over to Derrick Young, who will go over our financial results in greater detail.