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spk03: Good afternoon, everyone, and welcome to eHealth, Inc.' 's conference call to discuss the company's first quarter 2022 financial results. At this time, all participants have been placed in a listen-only mode. The floor will open for your questions following the presentation. It is now my pleasure to turn the floor over to Eli Newbernman, Investor Relations Manager. Please go ahead.
spk07: Good afternoon, and thank you all for joining us today, either by phone or by webcast, for a discussion about eHealth, Inc.' 's first quarter 2022 financial results. On the call this afternoon, we have Fran Soisman, eHealth's Chief Executive Officer, and Christine Janowski, eHealth's Chief Financial Officer. After management completes its remarks, we will open the line for questions. As a reminder, today's conference call is being recorded and webcast from the investor relations 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, consumer demand, our competitive advantage, and market opportunity. Our expectations regarding trends in the Medicare distribution market. Our ability to increase agent productivity and improve customer satisfaction, retention, and other quality metrics. Our expectations regarding our online enrollments, member acquisition costs, and demand generation strategy. Our expectations regarding our individual and family business, including growth opportunities and our competitive advantage. our expectations regarding our financial performance, including the profitability of our business, cash flows, conversion rates, customer retention, seasonality, lifetime values, member estimates, and fixed and operating expenses, and our full-year 2022 financial guidance. Forward-looking statements on this call represent e-health 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 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 on 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. At this point, I will turn the call over to Francois.
spk06: Thank you, Eli, and good afternoon to everyone joining us today for our first quarter 2022 earnings call. During my prepared remarks, I will discuss our first quarter financial results, update you on our progress on the execution of the strategic plan that we laid out on last quarter's earnings call, and describe the early impact we're seeing from our enrollment quality initiatives. Our first quarter 22 revenue was in line with and adjusted EBITDA was ahead of our expectations. While the enrollment quality initiatives that we introduced in July of last year are still impacting telephonic conversion rates, we've also seen encouraging quality and retention metrics from the most recent annual enrollment period cohort, members that we enrolled during the fourth quarter with the policy effective date of January 1, 2022. The initial traction we are seeing through the early part of 2022, combined with positive carrier feedback, reinforces our belief that eHealth can establish itself as a leader in Medicare distribution as this market moves away from volume at all costs and towards growth built on a foundation of enrollment quality, enhanced consumer experience, and cash flow generation. One of the key priorities for me and the leadership team is to leverage this trend to enhance member economics and return the company to profitable growth. As an increasing number of Americans age into Medicare eligibility every day, we believe we are well positioned to connect them efficiently and appropriately with the best plans to serve their needs based on our broad plan selection, consumer-centric approach, and data-driven recommendation algorithms. Our omnichannel shopping and enrollment capabilities give eHealth an advantage in attracting a broad range of customers, including younger Medicare eligible, and new-to-MA enrollees. eHealth's online platform is also a differentiator for our individual, family, and small business segments, where more than 90 percent of enrollments are completed online with no agent assistance. In line with our strategic plan, we are slowing down our conventional telephonic enrollment growth while continuing to invest in online business to expand and capture market share. The number of visitors to our online Medicare platform topped 3.2 million in Q1, representing 24% year-over-year growth. First quarter total Medicare Advantage online unassisted applications grew to more than 11,000 submissions, up 50% compared to Q1 of 2021. In contrast, total Medicare Advantage enrollments, including telephonic and partially assisted applications, declined 22%. Q1-22, total revenues of $105 million was down 22 percent relative to Q1-21, primarily driven by telephonic conversion rates, which were down on a year-over-year basis. Gap net loss in the quarter was $33 million. Adjusted EBITDA for the first quarter was a loss of $25 million, compared to positive $17 million a year ago. During the quarter, we generated $47 million in operating cash flow. While we are not satisfied with the year-over-year declines in revenue and adjusted EBITDA, we are seeing a positive traction in CTM scores and retention characteristics from the new enrollments that we added during the 2022 annual enrollment period relative to the comparable enrollment cohorts from the 2021 and 2020 annual enrollment periods. This is based on the preliminary data we have received to the end of April. The data suggests that although we have Comparatively lower telephonic conversion rate in Q1, resulting in lower volume, the enrollments we brought in are of higher quality that will lead to higher customer satisfaction, increased plan longevity, and over time, higher lifetime values. This progress on CTMs and retention for the newest MA cohort has helped fuel productive conversations with our carrier partners, who increasingly are emphasizing measures of enrollment quality in evaluating their channel partners. We see this as an opportunity to expand our relationships with carriers to adjacent areas given our common goal of improving the experience of beneficiaries through plan enrollment and utilization processes. Our data available through the end of April also indicates that during the AEP and OEP, we saw lower than expected persistency from some of our older MA cohorts. This impacted the overall persistency rates for our book of business and further highlighted the importance of operational changes we've introduced last year as the market environment and consumer behavior continues to evolve. It's important to note that some of the policy churn that we see is reflective of members switching plans but remaining on eHealth platform, continuing to generate commission revenue for us. Our 2021 recapture rate was approximately 9%. During the first quarter, we started to execute on the strategic plan I outlined on our previous earning calls. This concluded the rollout of the cost transformation program towards the end of the quarter. We are on track to generate approximately $60 million in annualized cost savings this year. Given that a large portion of total expected savings are coming from our variable acquisition spend, you will see the impact building up throughout the year. As part of the plan, we are taking a more thoughtful approach to every area of our operations. This includes focusing on marketing channels with best ROIs, driving more enrollments through our online fulfillment that is characterized by favorable member economics, retaining our best performing agents, and investing in their training and career path, and shifting our variable acquisition costs to geographic markets that have the highest financial and strategic value for us. Although we are in the very early stages of executing on the strategic plan, we are seeing positive signs, including an increase in our telephonic conversion rates in the first month of Q2 on a quarter-over-quarter basis, as well as against our expectations. This is an encouraging indicator given the conversions typically decline sequentially in Q2 following the completion of the open enrollment period on March 31st. Further initiatives are underway in our customer care centers aimed to continue lifting conversions while preserving the emphasis on quality. This includes increased agent specialization by product and geography, improvement of agent scripts to make them more consumer-friendly, and an outbound call program that allows and incentivizes agents to proactively work their pipeline during the downtimes, which can be especially impactful in Q2 and Q3. We also aim to extend agents' tenure with eHealth, which provides for a higher quality and more effective sales force. We expect that this year's agent mix will already be more mature compared to a year ago when we aggressively ramped up our internal agent force as we shifted away from the outsourced vendor model. We are encouraged by the progress we've made in our telesales, including conversion rates, and we'll continue to build on this as we prepare for the AEP. We're also making progress in our efforts to deliver our agents higher quality leads by improving our marketing strategies and operations. We began 2022 by bringing in new marketing leadership with a mission of greater collaboration between our digital and conventional marketing teams to create synergies between our diversified demand generation channels. This effort is supported by product and technology teams that are launching a series of omnichannel tools that allow seamless transition of customers between channels. To that end, we have launched online chat capabilities, staffed by licensed Medicare agents, and agent co-browsing capabilities with additional omnichannel tools in the pipeline. We are excited about these initiatives that further enhance our technology differentiation and create a stronger connection between the agent-driven and digital organizations. In our view, This omni-channel approach reflects the needs of seniors and consumers in general who are increasingly proficient online but demand flexibility in how they interact with the platform. This approach is critical to our company's mission of meeting customers on their terms, whether it's through a mobile device or laptop, by speaking to one of our licensed agents over the phone, or online chat or a combination of touch points. We are also deemphasizing the underperforming demand generating channels in favor of channels that bring in higher quality, higher ROI leads. In Q1, this meant taking the pedal off of our direct TV marketing channel and allocating additional resources to our online advertising and partner marketing channels compared to Q1 a year ago while we work towards creating the optimal channel mix that will be aligned with our broader strategic goals. While we have currently reduced our reliance on direct channel with DRTV, contributing less than 1% of total applications in Q1, we are reevaluating our longer-term strategy for the entire direct channel, including direct mail, television, and email efforts. Maintaining some exposure to these channels is important given our target demographic, and we are assessing, among other things, the impact of building out differentiated branded programs in these areas to replace generic campaigns, as well as tailoring a message to specific segments of the population to address their unique needs and preferences. We are also evaluating the spillover impact that our investment in the direct channel might have on other channels such as digital and overall consumer awareness of e-health. Our online platform continues to play an important role in our long-term strategy as the combination of assisted and unassisted online submissions have made up the majority of our submitted Medicare applications for the past two consecutive quarters. We continue to observe favorable unit economics, including a larger proportion of high LTV new to MA enrollments through our online channels. As unassisted online applications continue to grow as a percentage of total submitted apps, this will also contribute to greater scalability of our business and mitigate the impact of telephonic conversions on the overall performance of the company. During the second and third quarters, we plan to focus on testing our demand generation initiatives to design the optimal channel mix for the AEP and building a right-sized agent force that is trained and resourced for success. We also expect to use the upcoming quarters to explore opportunities to supplement our Medicare Advantage revenue by further emphasizing our MedSupp, IFP, and ancillary business lines. I look forward to updating you on those efforts as the year progresses. As a reminder, the following six priorities, as described in last quarter's earnings call, are the foundational principles of our 2022 operating plan. Number one, through transformative changes, reduce our cost structure while focusing on operational efficiency and excellence through reengineering and reorganizing. Two, deploy marketing dollars in a way that will drive better economics. This includes optimizing our marketing channel mix to cut lowest ROI initiatives and focus on channels where we hold strong competitive differentiation. Three, slow down conventional telephonic enrollment growth, pivot to more overflow telesales carrier arrangements, which requires less investment in lead generation, and execute a local market-centric telesales model. Four, continue growing our online business and enhancing our e-commerce platform and through a highly disciplined approach to technology investment. Five, work with carrier partners to find additional ways to create value, including joint quality and retention initiatives. And six, pursue cost-effective diversification initiatives, including stronger emphasis on our IFP and ancillary products. As we execute on these initiatives, the improvement in Medicare member margins, as characterized by the spread between lifetime values and total acquisition costs is one of the key goals for myself and the team. Enhancing unit economics combined with fixed-cost rationalization is at the core of our plan of returning to profitable growth and pursuing continuing margin expansion after that. We are in the process of finalizing our three-year strategic financial plan through 2025, and we'll be presenting it to our board of directors in June for their input and approval. Based on this timing, we plan to share our longer-term financial goals with investors in the second half of this year. I'll now turn the call to Christine for some additional detail on our financials.
spk02: Thank you, Fran, and good afternoon, everybody. We delivered first-quarter top-line results that were in line with and profitability results slightly ahead of our expectations. driven mostly by the positive impact of increased carrier advertising revenue. At the same time, revenue and profitability metrics declined on a year-over-year basis, reflecting primarily lower caliphonic conversion rates compared to Q1 of 2021. First quarter 2022 total revenue was $105.3 million, down 22% on a year-over-year basis. Gap net loss for the first quarter was $32.7 million compared to a net loss of $0.8 million in the first quarter of 2021. Adjusted EBITDA was negative $24.8 million down from positive $17.3 million in Q1 2021. First quarter Medicare revenue of 95.1 million declined 21% compared to a year ago, driven primarily by a 22% decrease in approved Medicare members. Total Medicare approved applications were 95.8 thousand, including 82.4 thousand Medicare Advantage approved applications which decreased year over year by 23%. The enrollment quality initiatives that we implemented in July of last year continue to impact the rate at which our customer care agents convert telephonic leads into submitted Medicare applications. First quarter telephonic conversions were down approximately 30% compared to Q1 of 2021. our first quarter following an aggressive pivot to an internal agent force and before the enrollment quality initiatives were implemented. In addition to having an impact on our enrollment volume, lower telephonic conversions also drove up our per-member acquisition costs as a year-over-year increase in marketing and call center spend resulted in fewer applications compared to a year ago. We also saw an increase in lead costs in some of our demand generation channels. Our current LTV to CAC spread is not acceptable to us, and improving member profitability is at the core of our strategic plans. We expect to lower our per-member acquisition costs in the second half of the year compared to a year ago through a combination of cutting marketing spend in channels generating enrollments below our margin goals and increasing our conversion rates in the call center. In fact, our conversion rates second quarter to date increased sequentially compared to Q1. We are encouraged by this early performance as typically we would expect telephonic conversion rates to decline sequentially entering Q2 rather than increase. Our online business continues to generate strong growth at attractive conversions with 50% growth in Medicare Advantage applications submitted online, unassisted, compared to a year ago. Online unassisted submissions in Q1 made up 11.5% of Medicare Advantage apps, up from just 6% in Q1 2021. Q1 Medicare sponsorship revenue was $10.5 million, or an 88% increase compared to Q1 2021. This increase in sponsorship revenue was mostly driven by timing relative to the prior year when we received the majority of carrier sponsorship dollars in the second half of the year. It is also a recognition of significant effort that eHealth has put into enrollment quality in collaboration with our carrier partners. Medicare segment loss was 14.8 million compared to a segment profit of 24.5 million in Q1 of 2021. The difference in segment profit year over year was driven primarily by conversion rates in our call center, as well as fixed cost run rate associated with the shift to a fully in-house agent model. Acquisition cost per approved MA member was $986, or a 56% increase from $631 in the year-ago quarter. We arrive at this number by taking the sum of CC&E per approved MA member and variable marketing cost per approved MA member. While our acquisition cost per approved member increased compared to Q1 a year ago, Our fixed cost, or the combination of GAAP, tech and content, and G&A, declined 14% year over year. We expect our cost transformation initiatives to generate additional leverage for our fixed costs as we progress through fiscal 2022. Total estimated MA membership increased 9% on a year over year basis to 586,000 total members. TTM cash collections per estimated MA equivalent paying member also increased to $441 from $431 in Q1 of 2021. Trailing 12-month commission's cash collections in our Medicare business were over 325.3 million, up 8% year over year. As discussed on the Q4 call, These numbers tell an important story about the size, quality, and cash-generating potential of our book of business. Moving to some of the preliminary retention trends we observed during the AP and OEP. Approved applications for the cohort with a policy effective date of January 1, 2022, have a retention rate more than 10% better through the first four active months than the comparable 2021 and 2020 cohorts over that same time period. Additionally, CTM scores for this new cohort have shown significant year-over-year improvement, with select carriers sharing with us that scores for this cohort have improved two-fold compared to last year. While we still believe there is work to do to keep our newest cohort engaged and retained on their plans, this initial data is encouraging evidence of the efficacy of our new approach to enrollments focused on quality and long-term retention. The improved retention characteristics for our newest cohort of enrollments was offset by an increase in lapses for some of the older cohorts, as we have observed increased marketing in the industry leading to higher switching behavior in cohorts enrolled prior to our quality enhancement initiative. Our Medicare Advantage recapture rate for 2021 was 9.4%. This metric shows the percentage of eHealth customers who changed plans but remained within our enrollment ecosystem either telephonically or online. It is an important measure of customer loyalty and value added from the perspective of the beneficiary. As we transact a larger share of our enrollments online and grow the number of members on our customer center platform, we expect the cost of recapture to trend down, providing for increasingly attractive member-level economics. Medicare Advantage LTVs of $948 declined 2% year-over-year, reflecting reduced persistency on some of our older cohorts. As a reminder, under 606, LTVs are driven by historical retention data going back three years. We continue to expect flat MA LTVs for fiscal year 2022. Residual or tail revenue in the Medicare segment was flat year over year at around $50,000, in line with our expectations. It was $3.5 million for the company on a consolidated basis, mostly driven by our small business segment. Turning to our individual, family, and small business segment, first quarter revenue for the segment was $10.2 million, a 23% decrease compared to a year ago. This was primarily driven by a lower positive tail adjustment revenue in the segment, which declined to $3 million from $5.3 million in Q1 2021. The individual, family, and small business segment generated segment profit of $5.3 million compared to $8 million in the first quarter of 2021. Now I would like to review our operating expenses and some of the cost rationalization measures we are taking. First quarter tech and content expense declined 15%, while G&A expense declined 13% compared to a year ago. yielding roughly $6 million in total fixed cost savings. Moving to our variable costs, customer care and enrollment costs grew 23% and marketing and advertising grew 15% compared to a year ago. The increase in CC&E expense reflects higher agent headcount that we had in Q1 compared to a year ago. As a reminder, last year we pivoted aggressively to an in-house telesales model cutting the majority of our outsourced agents following the conclusion of the fourth quarter AEP. Marketing spend increased through a combination of our investments in leads for our online business as well as demand generation for our telesale segment to maintain utilization of our agent headcount. As Fran shared earlier, Starting in Q2, you will see a gradual reduction in our variable expenses across marketing and customer care and enrollment. We expect a decline of over $50 million in our variable spend in 2022 on a GAAP basis with the overall goal of $60 million in cost savings, including fixed costs compared to full year 2021. Our first quarter cash flow from operations was 47.1 million compared to 43 million for the first quarter of 2021. Because of the seasonality of cash collection dynamics in the industry, the first quarter is typically our strongest in terms of cash generation. As of March 31st, we had 232 million in cash, cash equivalents, and marketable securities with $70 million of debt following last quarter's financing agreement with Blue Torch. Our balance sheet also reflects a significant commissions receivable balance of approximately $831 million that is comprised of $204 million that we expect to collect over the next 12 months and $627 million in long-term commissions receivable. This compares with total commissions receivable of $742 million as of March 31st, 2021. We are reaffirming our 2022 annual guidance expectations, which are 2022 total revenue in the range of $448 million to $470 million, gap net loss for 2022 in the range of $106 million to $83 million, adjusted EBITDA in the range of negative $64 million to negative $37 million, and total cash flow excluding the impact of our $70 million term loan and associated costs is expected to be in the range of negative $140 million to negative $120 million. Given that Q2 is the last quarter when we are comparing against the period last year before the enrollment quality measures were introduced, We are expecting a continued decline in revenue and EBITDA compared to 2021. This is consistent with our financial and operational plan for the year to slow down growth. We expect a year-over-year decline in revenue in excess of the year-over-year decline we saw in Q1 due to our deliberate plan to reduce call center headcount and marketing costs in the second quarter. we continue to expect lower telephonic conversion rates to negatively affect adjusted EBITDA. As Fran mentioned, we are currently in the process of building our three-year plan through 2025 and will be sharing appropriate components of our longer-term vision with investors later this year. This plan will be built with the explicit goal of returning to profitable growth and reaching cash flow positive on a trailing 12-month basis as quickly as possible. With that, I'd like to turn the call back over to the operator for Q&A.
spk03: Certainly. Ladies and gentlemen, if you have a question at this time, please press star then 1 on your touch-tone telephone. If your question has been answered and you'd like to remove yourself from the queue, please press the pound key. Our first question comes from the line of Elizabeth Anderson from Evercore ISI. Your question, please.
spk10: Hi, guys. Thanks so much for the question. So one question I had on the quarter was improving the unassisted online signups. What was the sort of driver in that? How did you sort of push people more towards that? Or maybe you didn't push them, they went themselves? Like, can you talk to us about some of the dynamics that happened in that market? Or was it purely like a mechanical thing because the assisted signups declined? Thank you.
spk06: Hi, Elizabeth. It's Fran. Nice to hear your voice. Thanks for the question. Our digital platform continues to be one of the best stories at eHealth, both unassisted and assisted. And I would say that we continue to refine our SEO, SEM, and all of our marketing strategies to support that digital asset, and it continues to contribute in a very meaningful way to e-health's growth in a much more financially viable way. So I wouldn't say there's any single contributor. It's a combination of our marketing optimization strategy with that asset.
spk10: Got it. And one thing I know across the broader sort of healthcare and DTC healthcare kind of space is there's been a concern about marketing channels and spend in that, you know, obviously you pointed to improving spend and sort of better ROI on some of the marketing channels. Can you help us think through sort of like what's an example of one of those channels and sort of how you expect to sort of pivot to those different channels over the course of the year?
spk06: Yeah, I'll start. Philip Morlock is here, and I'll ask him to share a little more detail. You're right. The cost of acquisition continues to be a challenge, not just for us, but I think everyone in the sector, as well as carriers. I've talked to some carrier partners, and they, too, are experiencing some challenges with respect to lead gen cost. And I would say there's no one particular channel that I would say is sort of the darling right now. I think they're all under some degree of pressure, some under more pressure than others. Um, and I, there's, you know, probably a number of different theories that, you know, I could point to in terms of what may be contributing to that competition certainly plays into it. Um, and, uh, uh, supply demand certainly. And as a, you know, a big component of the competition, um, I would say that as we have continued to try to meet consumers where they want to be met, even with our digital platform, we are learning that there are some elements in terms of the technology that we bring to bear, whether it's a differentiation between someone who is utilizing a personal computer versus a mobile phone it produces some different outcomes. And even how we buy the leads for those different pieces of technology can alter the performance both on the sales side and the retention side. So the more you drill down into the detail, both on the sales and the performance, Persistency, you learn more and more about just how dynamic this business is. So let me ask Philip to expand on that.
spk08: Actually, that was well said. And the only thing I would really add to that is investment in our data platform is cumulative in nature. We have added to our data capabilities pretty robustly over the past two or three years. And so our knowledge of this market and the different marketing channels and data that we've collected over time allows us to be nimble in response to the signal that Fran was talking about that we get from consumers and from the market. So we can rapidly do some channels when necessary, and we can optimize our experience for the different segments of visitors that we get into our platforms.
spk10: Got it. One last one for me. I know you said the churn for the new cohort is about 10 percentage points better than we were previously expecting. It did look like the overall churn went up about 300 basis points year over year. So is it just that it's going to take us another sort of year until we have enough new people that have been signed up with a sort of higher quality metrics that will sort of swamp, you know, overcome some of those maybe older cohorts that have been churning at higher rates? I guess my question is would you expect what sort of the timeline that you now expect churn numbers to start improving?
spk06: Liz, it's Fran again. I'll start and I'll ask Christine to share her perspective as well. Again, you know, as we continue to drill down on the churn, we uncovered something that was truly interesting. with respect to churn this year. In our prepared remarks, we mentioned that we did have some positives with respect to the first year, and that indicated that our quality initiatives are indeed working. Some of the older cohorts did churn at a higher rate than we had seen in the past, but when we drill down further, we identified a particular carrier that historically had been performing well above the average in a favorable manner. In other words, their persistency was greater than the average. This time progressed to the mean, so to speak, and performed consistent with the average. And that one carrier really drove largely the change in the persistency for our book of business, this one carrier. So it's not a systemic issue. One large carrier can really move the needle, good or bad.
spk11: Got it. And the factor that you pointed out, Elizabeth, is also important. The fact that the most recent AP cohort is smaller in size compared to some of the historical AP cohorts. So as we see more of those members coming in post-enrollment, quality improvements, they'll start impacting the overall churn numbers more significantly.
spk10: Got it. No, that makes sense. Thank you guys very much.
spk03: Thank you. Our next question comes from the line of Jonathan Young from Credit Suisse. Your question, please.
spk01: Thanks for taking my question. I guess some of the MCOs have talked about reducing their dependence on third-party brokers on a go-forward basis. I guess has this manifested in your conversations with your carrier partners, and how does this affect your thinking about the go-forward plan for this year and future AEPs?
spk06: Hi, Jonathan. Thanks for the question. You know, I would characterize our relationships with our carrier partners as very good. We have regular conversations. I know everyone uses the term partnership kind of loosely, but I really do believe we have a partnership relationship with most, if not nearly all, of our key carriers. Those key is described as having a significant volume. They're collaborative. We try to solve a common challenge, and that is retention. We're very aligned. You know, we follow 606 accounting. Carriers don't, but they think like 606. They're all about lifetime value. We just happen to reflect that with respect to the way we book revenue. So we are very aligned, and while there may be talk about this, And maybe some will follow through. I don't know whether they would do it, you know, across the board, but we're having more collaborative conversations about how we work together to improve the retention and always focused on improving the beneficiary experience. That's really what's paramount for us and for the carrier partners that we work with.
spk01: Okay. And then you mentioned cutting marketing and advertising spend in 2H22. I guess to what extent is there flexibility within the guidance that by reducing this advertising spend that there won't be share loss kind of greater than you expect, or do you expect to effectively offset that by higher persistency, et cetera? Or how are you thinking about the dynamic of cutting that advertising along with membership growth?
spk06: Sure. Again, I'll ask Christine to share her thoughts on this as well. We baked that into our plan, and we've reflected that in improved conversion rates, which we are working on now and ramping up towards a higher expectation as we get into the fourth quarter AEP season, and a lot of things We'll make that happen. It's not just, you know, marketing optimization. It's our operating model training of our, you know, further training of our agents, lead gen changes, improving the quality of our lead generation. I mean, there's a whole host of things that have to occur to improve the conversion rates. So that's all baked into our assumptions today. So it's not on a wing and a prayer by any means. Christine, you want to?
spk02: Sure. No, thank you, Fran, and thank you, Jonathan, for the question. I would absolutely agree with Fran and also what you said. It's a combination of different factors, and as we think about those variable costs related to marketing and CC&E, you know, we'll start to realize some of those optimization savings in Q2 with the majority of that more being realized in the back half of the year, largely concentrated in Q4. As a reminder, when we head into the AAP in Q4, that's where our largest spend is from a marketing perspective. So it's a combination of factors around the operating model, optimizing marketing, focusing on those right channels to provide the right ROI as we head into the AAP season.
spk11: Jonathan, just to quickly mention, you know, we obviously cannot speak on behalf of the entire market, but it seems like that our peers will also be moving to a more rational approach to spending. This growth, accelerated growth, came at a marketing cost that probably moving forward will not be sustainable. So that will mitigate some of the market share impact as well.
spk03: Okay, great. Thanks. Thank you. Our next question comes from the line of George Sutton from Craig Hallam. Your question, please.
spk04: Thank you. Fran, you mentioned the positive carrier feedback you've had to your new quality initiatives, and I'm curious if you can go into any more detail there. Certainly, Humana in particular has been somewhat open about their concerns about the third-party broker channel, and I sense that you're getting some different feedback from them given some of these initiatives. Could you walk through that?
spk06: Sure, George. Thanks for the question. We're very pleased with the progress we're making, but, you know, we keep the champagne on ice. The CTMs, I mean, it really does take, I would say, a joint effort between, you know, in our case, eHealth and our carrier partners because We have to be in lockstep working together. It's not something that, you know, there are certainly many things we can control ourselves, but we get a much better outcome when we are working together with our carrier partners to make sure that there's a, you know, what are the real friction points and how can we resolve those or eliminate those friction points. The feedback we're getting from, I would say, all of the major carrier partners, and we do regular check-ins, this isn't qualitative. This is quantitative as well. I mean, there's demonstrated reductions in CTMs on a per-thousand basis, not minimal. It's pretty significant. And we're getting the pats on the backs as well. But like I said, you never declare success. You've got to keep working it every day. So I don't want to call out any one carrier. I think that it's fair to say that we work at this with all of our carrier partners because every beneficiary should have the same experience.
spk04: Right. By the way, I certainly congratulate you on your reduction in investment in telephonic and increased investment focused on online. I think that's the way to go. I'm curious because on the training side, which affects the telephonic side, again, it seems the carriers are talking about somehow influencing some of that training. And I'm just curious, how much do you feel is in your control versus out of your control as we go into this next season?
spk06: I would say we feel very much in control. You know, we own it. We're accountable. Even though there is an oversight responsibility that the carriers have because they – you know, they have the contractual relationship with CMS, but, you know, there's no doubt that we are responsible and accountable, and we, you know, I'd say we work in a very collaborative manner to keep our carrier partners in touch and always up to speed with what we're doing. So, you know, they're There's no surprises. I don't know if I'm really answering the question, but I'm kind of surprised. I didn't know there was something going on. I have Bob here, and Bob, I don't think there's anything we've been told that's changing on that perspective.
spk05: No, it's a very collaborative process with carriers. We definitely share with them our training programs. They do offer their input to the training programs and best practices as well. So they do offer some good input. We try to incorporate that into our training practices, but we absolutely do control, you know, the outcome of that experience in the call center.
spk06: All of our calls are recorded. So they can audit.
spk04: Nothing e-health specific. This is more what carriers have talked about. But last question, if I could. And really off of Kate's point that there is a reduced amount of spend likely to be seen across the board from a lot of different players, it really suggests, again, to those of us watching this, there's just too many players. And I'm just curious if you can give any thoughts on consolidation in the space as you see it likely or not.
spk06: Well, you know, it remains to be seen what's going to happen in this sector. I think the sector is sort of in an inflection point. Yeah, we're focused on e-health. You know, we are working on our cost structure, working on our marketing optimization, working on our carrier-partner relationships and taking care of our beneficiaries every day, and that's plenty to keep us busy. So, you know, we'll see how things shake out.
spk04: I understand. Thank you.
spk03: Thank you. As a reminder, ladies and gentlemen, if you have a question at this time, please press star then one. Our next question comes from the line of Daniel Ghostlight from Citi. Your question, please. Hi, guys.
spk09: Thanks for taking the question. You've now had an AEP and OEP under your belt with some of your new quality initiatives that initially weighed on. productivity during AEP, and we'll continue to weigh on productivity, but I'm wondering if you can comment specifically on the trends in productivity you've seen from this OEP from agents hired during AEP. And what I'm really looking for is a type of quantification of productivity, whether it's conversion rates and talk times, this OEP, and again, from those agents hired during AEP versus perhaps some new agents hired during OEP. Okay. any uplift in productivity you're seeing this OEP?
spk06: Daniel, we may be unique. I mean, we have reduced our agent force towards the end of OEP. So, you know, perhaps we're somewhat unique. We were, frankly, we were overstaffed for OEP given the volume of calls that we had, and I'm not happy about that situation. We had, I think, a little too much idle capacity, truth be known, and that will not happen again. So, we took action in early part of Q2. So, I can't give you a good answer to that for us, because we .
spk09: Got it. Okay. So it sounds like you were a little overstaffed during OEP, kept some unproductive agents on board, which have since been cut. Can you disclose how many agents you currently have?
spk11: Daniel, we don't provide that information. We did speak about cutting or at least not hiring any additional agents into the AEP. So the current plan that's underlying the guidance really relies on the current headcount being more productive in terms of conversion rates and also online continuing to grow at pretty significant double-digit growth rates. But we don't disclose specific numbers.
spk09: Yep. Okay. And then just turning to the IFP segment, we have Medicaid redeterminations likely coming back in the second half of this year. I'm curious how you're factoring in the potential to recapture some of those folks who are rolling off of Medicaid and into the exchanges. Is that factored into your guidance at all?
spk06: Good question, Daniel. It really isn't. We don't focus too much on the QHP side as much as, I mean, well, we work with the state exchanges, of course, where we can, but we're focused more on the small group and the individual consumer HRAs. That's where, you know, there's more growth opportunities. So if it does materialize, we'll be ready, but we didn't bake it into our forecast. And as you know, IFP... ebbs and flows with the economy. When the economy is under pressure, you generally see the enrollment grow. So we didn't make any crazy assumptions about, you know, there would be a big recession and enrollment would take off. So we played it pretty conservative. Yep, makes sense. Thank you.
spk03: Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Fran Soisman for any further remarks.
spk06: Thank you, Operator, and I just want to thank everyone for joining us this afternoon, and we'll be talking soon.
spk03: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.
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