eHealth, Inc.

Good morning, everyone, and welcome to eHealth, Inc.' 's conference call to discuss the company's first quarter 2023 financial results. At this time, all participants have been placed in listen-only mode. The floor will be open for your questions following the presentation. It is now my pleasure to turn the floor over to Eli Newborn-Mintz, Senior Investor Relations Manager. Please go ahead.

Good morning, and thank you all for joining us today. On the call this morning, Fran Swiceman, eHealth's Chief Executive Officer, and John Stelben, Chief Financial Officer, will discuss our first quarter 2023 financial results. Following these prepared remarks, we will open the line for a Q&A session with industry analysts. As a reminder, this 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 later today. Today's press release, our historical financial news releases, and our filings with the SEC are also available on our investor relations site. We will be making forward-looking statements on this call about certain matters that are based upon management's current beliefs and expectations relating to future events impacting the company and our future financial or operating performance. Forward-looking statements on this call represent e-health fees as of today, and actual results could differ materially. We undertake no obligation to publicly address or update any forward-looking statements and future filings or communications regarding our business or results. The forward-looking statements we will be making during this call are subject to a number of uncertainties and risks, including but not limited to those described in today's press release and in our most recent annual report on Form 10-K and our subsequent filings with the SEC. We will also be discussing certain non-GAAP financial measures on this call. Management's definition of these non-GAAP measures and reconciliation to the most directly comparable GAAP financial measures are included in today's press release. With that, I'll turn the call over to Fran Suyson.

Thank you, Eli, and thank you for joining us this morning for our first quarter 2023 earnings call. On this call, we will discuss the latest industry developments, review our first quarter results, and highlight key operational and strategic initiatives underway. I would also like to mention that we will be holding an analyst and investor day next Thursday, May 18th. At this event, you will hear from our extended leadership team and gain further insights into e-health strategy, operational goals, and key financial metrics based on our three-year financial outlook. We look forward to you joining us at this notable day for e-health. We delivered a strong first quarter performance, demonstrating the positive impact of the transformation plan we began to implement in Q2 of 2022. We entered the first quarter of this year on a significantly improved cost foundation compared to Q1 a year ago, while continuing to improve our telesales conversions, member economics, and enrollment quality. During the quarter, we rolled out phase two of our business transformation across key functional areas of the company. This includes expansion of our direct marketing channels and brand building efforts, initiatives to drive further productivity gains in our telesales organization, a cross-functional member retention program, and technology projects aimed at taking our omnichannel capabilities to the next level. We're also gaining traction in executing on our business diversification strategy as we prepare for a launch of a major Terrier dedicated deal later this year. I'll talk more about these initiatives in just a few minutes. But first, let me take a step back and remind you of our mission and differentiated value proposition. eHealth's mission is to expertly guide consumers through their health insurance options when, where, and how they prefer. Our value proposition is rooted in our customer-centric marketplace that provides beneficiaries with data-powered tools and access to our full-time licensed benefit advisors to help them find health insurance that best fits their needs. We're also differentiated through our extensive carrier agnostic business model. A critical component of eHealth business success depends on assisting beneficiaries through the shop, educate, advise, and enroll process. Our overarching goal is to match the beneficiary with a plan that best meets their financial, health, and lifestyle needs, regardless of which carrier is offering that particular plan. eHealth also provides consumers with a range of enrollment methods that fit their preferences. Customers can enroll in plans through our self-serve online platform, supported by chat or co-browsing capabilities, should they want professional help. Or they can complete their enrollment on the telephone with one of our licensed and trained benefit advisors, guiding them from the start to finish. Again, our goal is to meet the customers where they are and do everything we can to simplify their journey through the often confusing process of selecting health coverage. We remain bullish on the unique strengths of the Medicare Advantage market and our growth opportunity within it. Medicare Advantage has favorable demographic trends, bipartisan legislative support, and compared to traditional Medicare, it offers a significant value proposition and produces superior health outcomes. Because of these anchors, we are confident that this market will continue to be a key driver of our success. Throughout the past several months, we have closely observed a number of regulatory developments that took place in our sector, including CMS's issuance of new Medicare Advantage and Part D prescription rules, as well as the final 2024 Medicare Advantage rates. While rate changes were ultimately more favorable than contemplated by the advance notice, we anticipate that the slowdown in reimbursement rate growth, combined with recent fluctuations in star ratings, will likely lead to shifts in carrier competitive dynamics during the upcoming AEP. Importantly, the impact will vary by state and county. We believe e-health's carrier agnostic model, local market focus, and ability to offer a broad selection of plans sourced from large national carriers as well as smaller regional carriers will be key for delivering strong performance in this evolving environment while providing the best value to beneficiaries. Our emphasis on fostering member loyalty and retention, regardless of whether the beneficiary stays on the same policy or uses our platform to find a new one, is an important part of succeeding in this market. With respect to the 2024 MA and Part D prescription rules, we believe they are generally in line with the recent trends towards greater emphasis by regulators and carriers on the beneficiary experience and enrollment quality. This includes increased scrutiny over marketing materials, and sales practices for Medicare products. Most rules are aligned with our own goals as we support rigorous protections for the customers we serve. Ultimately, we expect these rules and the corresponding operating adjustments to move the industry even further towards rationalization of marketing activities, which we started to observe last AEP. We are still working with carriers and CMS to clarify some of the provisions of the rules, however, is important to note that we began planning changes to our Excel sales and marketing processes starting when the proposed rules were first released in December of last year. While we do have some concerns that these rules could create additional complexities and new inconveniences for beneficiaries in the near term, we continue to believe that our omnichannel platform offers significant value compared to other distribution channels in making the process of selecting and enrolling into Medicare coverage as seamless as possible. We believe this will be especially true under the new regulations. For example, our concierge-like model for telephonic and online assisted enrollments can effectively accommodate appointment setting if needed. In fact, a large share of our telesales enrollments at the beginning of each AEP are typically driven by appointment. Further, we expect e-health to have access to physical locations where customer walk-ins can be accommodated through a combination of technology and agent support. For customers who don't require agent assistance and prefer to do their own research, we are unique in our choice model offering that includes end-to-end self-service online enrollment. Finally, we plan to continue to grow our carrier dedicated arrangements and are prepared to fulfill that demand in a fully compliant way and within the guidelines set by each carrier. After we receive clarity on the provisions of the rules that we still have some questions about, we plan to move rapidly to implement any required changes well ahead of the AEP when the rules take effect. The bottom line is that we remain confident in the attractive MA market opportunity and our ability to serve customers in this market. Moving now to our financial and operating results. Our first quarter revenue and enrollment volume are generally in line with our expectations. At the same time, we delivered better than expected earnings driven by two factors. One, a positive impact in cost elimination and reduction efforts, and two, a meaningful improvement in our telephonic conversion rates, which for the first quarter increased 21% year over year. The quality of our enrollments also continued to improve as reflected in stable earning data related to our member retention during the critical AEP and OEP shopping cycle as well as improvement in CTN scores. As a reminder, CTN stands for Medicare Complaint Tracking Module and reflects beneficiary complaints filed directly with CMS. eHealth observed another 50% year-over-year decrease in its CTN rates from Q1 of 22 to Q1 of 23, based on data available to date. Many of our key carrier partners have recognized this important service improvement. First quarter revenue was 73.7 million, a 30% year-over-year decline reflecting the optimization of our variable marketing expense and agent headcount to drive stronger LTV to CAC ratios compared to first quarter a year ago. At the same time, our GAAP net loss and adjusted EBITDA improved substantially on a year-over-year basis by approximately 13 million and 12 million, respectively. Our cash flow from operations increased 29% compared to Q1 of 2022, driven in part by the improvement in net loss compared to a year ago, and better than expected renewal cash payments on our existing members, both of which are encouraging outcomes. We ended the quarter with $203 million in cash, cash equivalent, and marketable securities, more than sufficient to execute on our operational plans through 2023 and beyond. We will share more about our cash flow expectations for 2024 and 2025 at our upcoming Analyst and Investor Day on the 18th of this month. Now turning to our operational and strategic initiatives underway. As a reminder, on the last earnings call, we laid out four operational priorities for 2023. First, to continue to build on last year's progress within eHealth's omnichannel marketing and lead generation engine. Second, to improve conversion rates across our entire enrollment platform regardless of how the customer chooses to interact with eHealth. to introduce the next phase of our customer retention strategy, and finally, four, to further diversify eHealth's revenue streams. This year, we plan to return to enrollment growth driven by a demand generation strategy that focuses on audience segmentation and targeting, differentiated messaging, and gradual scaling of our direct and strategic partner marketing channels as we reduce our reliance on lead aggregators. During the quarter, we also launched the first phase of our branded content strategy. We're currently market testing our materials with scale deployment of these materials planned for the AEP. We also started building targeted campaigns aimed at distinct Medicare audiences, including new to Medicare members, MedSupp, et cetera, in recognition of varying needs, interests, and preferences. Essential to our marketing strategy is maintaining agility, which allows us to opportunistically lean into channels that are yielding quality leads at attractive LTV to CAC ratios. At the same time, we are prepared to pull back on marketing spend at any time and drop savings to the bottom line should we not see sufficient opportunities that satisfy our target enrollment margin. Online conversions remained a major focus for the company this year. We achieved significant improvement in telephonic conversions over the past six months and are planning to replicate this success online. Millions of prospective customers come to our online marketplace to learn more about the Medicare program, research coverage available in their county, and compare plan options. Even a modest increase in visits that result in sent applications would be a meaningful financial lever given the large size of our online audience. Last year, we introduced new omnichannel tools including online chat and agent co-browsing features on our e-commerce platform and are now working on additional ways to make our marketplace experience even more convenient and navigational. This includes a planned release of video chat with our licensed agents, enhancements to our mobile platform, which is growing in share of total site visits relative to desktop, as well as improving targeted user experience at key points of our online funnel. Our product team is also closely collaborating with the marketing organization to provide customized online experience in support of audience-centric campaigns, as well as our major strategic partnerships. Thriving increased member retention is a key element of our three-year strategy in our 2023 operating plan. Achieving meaningful retention improvements requires close alignment and collaboration between our marketing, telesales, and technology teams. We believe that relationship building starts from the very first touchpoint with a customer, continues throughout their entire experience on our platform, and carries on long after we complete the enrollment. Our next stage of retention activities is built on the same concept of personalized, one size does not fit all approach as our new marketing strategy. We are building customer relationships on a local market basis and tailoring outreach based on our predictive models that identify members that are at risk for churn. Still further, we plan to expand the scope of our post-enrollment engagement services that are proven to both improve member experience and drive stronger retention. On the revenue diversification side, we are making progress in building out our dedicated carrier arrangements that are typically characterized by favorable cash flow timing compared to our core business and allows us to generate revenue without deploying our own marketing resources. As we shared on our last earnings call, earlier this year we won an RFP with one of our major carrier partners. that will be supported internally by a team of dedicated eHealth agents. In Q1, we started ramping our benefit advisory resources in support of this revenue model. Within our individual family and small business segment, we continue to see a positive LTV trend as average duration of these plans continues to increase. We also observe strong renewal activity with our small business groups. With respect to the IFP macro environment, We expect the Medicaid redetermination cycle related to the federal government's ending of the COVID-19 emergency to serve as a potential driver of incremental IFP enrollment and have incorporated that trend into our 23 guidance. It is estimated that around 15 million Medicaid and SHIP members will be disenrolled between April of 23 and May of 2024. And a subset of that group is expected to be eligible for zero or low premium IFP plans based on their incomes. We believe our rich history and deep expertise in the IFP market uniquely positions us to help these individuals navigate their coverage options. Based on our encouraging first quarter results, we are reaffirming the guidance ranges we gave on last quarter's earnings call. Our year-to-date performance puts us in a strong position as we continue to execute on our strategic and operational goals. At the same time, it's important to recognize that we expect to generate all of our projected 23 positive adjusted EBITDA during the fourth quarter. The vast majority of our year over year revenue growth projected for 23 is also forecasted to occur in Q4. So while we are pleased with our first quarter performance, we also acknowledge the important work ahead of us to achieve our 2023 plan. Following our seasonally strongest cash collection quarter, we remain confident in our ability to strengthen our balance sheet through continued execution. Lastly, through the strong performance of our human resources organization and department leaders throughout the business, eHealth continues to progress towards creating a best-in-class corporate culture. Through a host of enrichment programs, benefits, and communication initiatives, we have significantly improved employee engagement, which in turn is driving strong performance across the organization. We look forward to hosting you in person and digitally during our upcoming Analyst and Investor Day on May 18th. eHealth's leadership team is excited about the current trajectory of the business, and I personally look forward to showcasing this strong team that we've assembled. I will now turn the call over to our CFO, John Stelben. John?