eHealth, Inc.

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.

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.

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.