eHealth, Inc.

Please stand by. We're about to begin. Good morning, everyone, and welcome to eHealth Inc's conference call to discuss the company's second quarter financial, excuse me, second quarter 2024 financial results. At this time, all participants have been placed in a listen-only mode. The floor will be open for your questions following the prepared remarks. I will now turn the floor over to Eli Newbrun-Mentz, Senior Investor Relations Manager. Please go ahead.

Good morning and thank you all for joining us today. On the call today, Fran Soisman, eHealth's chief executive officer, and John Stelben, chief financial officer, will discuss our second quarter 2024 financial results. Following these prepared remarks, we will open up 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 eHealth's views as of today, and actual results could differ materially. We undertake no obligation to publicly address or update any forward-looking statements except as required by law. 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 definitions of these non-GAAP measures and reconciliation to the most directly comparable gap financial measures are included in today's press release. With that, I'll turn the call over to Fran Soisman. Thank you, Eli.

Good morning, and thank you to everyone joining us today. Before we dive deeper into the discussion of the second quarter, I wanted to address the news we announced last night. I will be retiring from my role as CEO by or before the second quarter of 2025, once a successor is on board. As you may recall, I came out of retirement three years ago to take on the CEO role in November of 2021. It has been a privilege to lead this company during this time. Since then, I am proud of the leadership team we've assembled during my tenure and the progress we have made transforming eHealth by creating a healthy and vibrant culture, evolving carrier relationships, enhancing focus on member retention, and deploying new technologies, to name a few. Over the past two years, we've achieved tremendous progress across key profitability metrics, including gap net income, adjusted EBITDA, and operating cash flow. With the business on solid footing and advancing steadily towards our three-year growth and profitability goals, now is the right time to announce my intention to retire as CEO in 2025. There are a few reasons that I made the decision to inform the board of my plans to retire. First, it was important for me to disclose this ahead of the start of the annual enrollment period on October 15th. I will continue to oversee the AEP and OEP as I have always done in the past and intend to stay close to our consumers and carrier partners during this time. Importantly, I'm focused on continuing our work to position the business to achieve our long-term financial and operating goals including enhancing eHealth's capital structure. Further, making this decision now provides the Board the time it needs to cast a broad net and thoughtfully evaluate both internal and external candidates. I have full confidence in the eHealth team, and I look forward to continuing to serve on the eHealth Board and helping guide our accomplishments in the years to come. With that, I'll now cover some of the recent industry developments, our second quarter performance highlights, as well as the important work we are doing in preparation for the upcoming annual enrollment period. John Stubman will follow my remarks and walk you through our quarterly results and discuss annual guidance. eHealth delivered another quarter of strong execution and performance, including significant growth in application volume across our core agency model and carrier-dedicated Amplify platform. Our existing book of business continue to generate positive tail revenue driven by favorable retention and cash collection trends. On the expense side, we continue to find savings within our fixed cost base and improve per member acquisition costs in our Medicare agency business compared to Q2 a year ago. Excluding tail revenue in both periods, second quarter revenue grew 13% year over year. accompanied by a significant improvement in adjusted EBITDA and earnings on the same basis. As we move into the second half of 2024, preparations for the AEP are now in full swing. We have begun training our new advisor classes, are adding innovative features to our consumer-facing online platform, and are rolling out new customer retention strategies and capabilities. We also continue to fine-tune our brand-driven messaging and marketing materials, including new TV ads featuring eHealth spokesperson, Eve. As we approach this AEP, we continue to hear commentary from large carriers about their focus on Medicare margins amid regulatory and medical cost pressures. We expect for this trend to result in substantial changes to benefit packages, premiums, geographic coverage, and other key plan strategies. It is also important to note that there remain several important meetings with our large carrier partners to learn more details about their 2025 plan strategies. In this fluid environment, I want to emphasize that eHealth's value proposition as a trusted advisor to beneficiaries and our omnicanal choice model are more relevant than ever. Combined with the continuing reduction in fulfillment capacity with two new competitor exits in the past few months, we believe this creates an opportunity to drive strong consumer demand to our platform during the enrollment season. The anticipated Medicare plan changes that I just described could have a substantial impact on beneficiaries. Considering this, I personally sent a letter to CMS advocating for proactive steps to ensure seniors have adequate time to review their options, understand any modifications to their coverage, provider networks and find plans that best fit their needs. Combined with the distracting election season and the late Thanksgiving holiday this year, we believe CMS should consider extending the AEP or establishing an incremental special enrollment period. With respect to recent regulatory activity in our space, earlier this year, eHealth joined a lawsuit filed by the Council for Medicare Choice. that resulted in a temporary stay on key broker compensation provisions of the CMS 2025 Medicare rule. While we believe that these provisions do not apply to our business, we view this as a positive outcome as it signals to CMS that it has overstepped its authority and potentially discourages them from doing so in the future. We believe the stay also helps avoid a wide range of interpretations of the rule by our carrier partners, as they oversee compliance of their distribution channels based on their own interpretation of CMS regulations. Moving now to our second quarter operational overview. In our Medicare segment, hiring and training of our new licensed benefit advisor classes is progressing well. This year's hiring ramp is not as steep compared to last year, as we enter 2024 with a greater number of tenured advisors who will be staying on year-round. We are targeting closer to a 50-50 mix of tenured versus newly hired benefit advisors for this AEP. This compares to approximately 30% tenured and 70% new advisors last year. This mix shift has positive implications for our conversion rates. Further, this year we are supplementing our advisory capacity through the introduction of 1099 contracted licensed agents. As we prepare our organization for AEP, we continue to build on our brand initiatives and audience targeting strategies, leveraging important learnings from last year. This includes further emphasis on the channels and audiences that work best for us, as well as the introduction of new partners and audiences, such as the growing chronic special need plans, or CSNPs, population. Brand initiatives will again be front and center for our marketing organization. We believe our newly launched brand was a key differentiator last AEP, helping us gain immediate traction with beneficiaries who are typically inundated by repetitive, generic messages and saw our ads as a breath of fresh air. In year two of deployment, we expect our branded messaging to grow even more impactful across our direct channels as we reinforce our consumer-centric image as a remarkably transparent shop, educate, buy, and enroll platform. On the product side, we continue to enhance user experience across our omni-channel platform. We are updating our plan comparison tools to include a more extensive needs analysis upfront and a simplified recommendation output aligned to customer-specific needs. We are also adding features that simplify saving application progress online so that beneficiaries can return at their convenience to finish their enrollment. Our platform updates also have a particular focus on improving our mobile experience as we are observing an increased number of seniors engaging with our site using their smartphones and tablets. Further, in Q2, we expanded the pilot of our video enrollment tool, LiveAdvise, to additional benefit advisors. We have had encouraging anecdotal feedback on the product from both advisors and beneficiaries as a way to combine the convenience of a telephone enrollment with a personal touch of video interaction that helps build rapport and trust. We also expect this new capability to support our retention objectives by creating a more memorable experience and first impressions. Turning to execution highlights, our Medicare agency model delivered an outstanding second quarter, generating 9% year-over-year Medicare Advantage submission growth. This was driven by strong performance within our direct and affiliate marketing channels, combined with an increase in telephonic conversion rates. Our agency choice model remains a core offering for eHealth as we strive to be the gold standard in health insurance distribution. Our ability to serve customers nationwide, supported by unbiased carrier agnostic recommendations, sets eHealth apart. We believe this differentiation will be especially valuable in this upcoming enrollment cycle. Moving now to Amplify. Our carrier-dedicated model continues to scale. The second quarter saw strong enrollment volumes and conversion rates for our Amplify partners. We onboarded a new customer during the second quarter and have a robust pipeline of new partnerships, some of which we expect to launch ahead of this year's AEP. This is a small industry, and the high level of service we provide to our partners and their customers is resonating with carriers creating additional opportunities for us to grow. Amplify generated $4.1 million in total revenue in Q2 and was the largest driver behind the 37% year-over-year growth in our non-commissioned or other revenue. This serves as a strong testament to the success of our business diversification strategy. Putting a bow on the discussion of our agency and Amplify models, the two offerings provide a breadth of distribution services for our carrier partners. Our agency platform drives high volume, high quality enrollments from beneficiaries who value choice, comparison shopping, and omni-channel tools. This is a target market that carriers cannot reach through their internal direct-to-consumer sales. On the other side, Amplify augments carrier fulfillment organizations in an efficient and compliant manner, which is critical in this highly regulated and seasonal industry. Both models offer carriers real-time insight into shopping and demand trends, what is important to consumers in plan selection, and how their offerings track against competition by local market. Now I will turn to retention, including our key initiatives in this area. Across our book of MA business, we are seeing stable to slightly improved member retention, which represents our ability to retain members on the eHealth platform regardless of whether they stay on the same plan or switch to a new one. Member-level retention represents an increasingly important operational focus as we anticipate greater levels of planned shopping and switching this AEP. This year, we are rolling out several new retention initiatives. First, we introduced a new tool called Match Monitor. This allows members to easily understand the implications of the annual notice of changes which carriers send out ahead of the AEP, check if any of their critical benefits are impacted, and compare their current plan to other options in the area. Second, we continue to expand our loyalty program, ePerks, by adding new partners to the platform. This program is designed to provide value to our members beyond their health insurance coverage while building a stronger relationship with eHealth. Third, we recognize that the waiting period between an application and when a policy becomes effective can frequently be a source of anxiety. To address this, we're introducing eHealth Application Tracker, a tracking tool that displays to beneficiaries the real-time status of their application as they progress from the initial sent phase to approval by carrier. Finally, we continue to support a dedicated retention team that serves our existing members and offers tailored programs for dual special need plans, or DSMIPs, and other customer audiences identified as having elevated churn risk. Moving to our balance sheet, we continue to make progress with our advisors towards improving our capital structure. This continues to be one of our most important priorities this year, and we recognize that our investors have great interest in seeing us achieve this objective. We believe we have more than sufficient liquidity to execute on our three-year plan and continue to target positive free cash flow generation for the trailing 12-month period ending March 2025. We also believe we are well positioned to refinance or replace our Blue Torch term loan at equal or favorable rates before it becomes due early next year. Based on our strong performance year to date, we are raising our guidance ranges for fiscal year 2024, as John will discuss shortly. Work is now underway to prepare our sales and marketing organizations for what is expected to be a highly dynamic fourth quarter with significant consumer shopping. We expect to be in a strong position to take advantage of this opportunity. Before I turn the floor over to John Stelvan to provide his remarks, I would like to comment on the CFO transition process underway. This is John Stelvan's last earnings call, and I want to publicly acknowledge his important contributions to this organization. John came out of retirement two years ago to help implement our business transformation plan. He has brought new and important financial rigor and discipline that has greatly contributed to the operational and financial progress we've achieved over the past two years. It's been a pleasure and a privilege to have worked with John for more than 25 years, and I wish him all the best as he reenters retirement. As we previously shared with you, John Dolan, who is currently eHealth's Chief Accounting Officer, will be succeeding John Stelvan as our CFO effective August 31st. The transition is going beautifully as anticipated, and I have great confidence that John Dolan's leadership will be instrumental in sustaining the momentum of our financial performance. With that, I will turn the call over to John Stelvan for financial remarks. John?