Q2 2022 eHealth Inc Earnings Call

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Good afternoon, everyone and welcome to the Ehealth, Inc Conference call to discuss the company's second quarter 2022 financial results at this time, all participants have been placed in listen mode.

Floor will be open to your questions. Following the presentation. It is my pleasure to turn the floor over to Ely, New Brian Mitts Senior Investor Relations manager. Please go ahead.

Thank you operator.

Good afternoon, and thank you all for joining us today, either by phone or by webcast for a discussion about Ehealth Inc's second quarter 2020 to financial results on the call. This afternoon, we have France, or Spain, Ehealth, Chief Executive Officer, and Christine Janofsky Ehealth 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 includes statements regarding future events beliefs and expectations, including statements relating to our expectations regarding trends in the healthcare industry.

Health care insurance distribution industry consumer demand, our competitive advantage and market opportunities, our expectations regarding our Medicare and individual and family businesses, including our Medicare enrollment and other product offerings, our expectations regarding our ability to improve customer conversion.

Customer retention and other quality metrics, our expectations regarding our marketing channels or telephone and online enrollments are e-commerce platform and our member acquisition strategy.

Vacation related to our short and long term strategies operating plan and financial goals, including our transformation initiatives, our expectations regarding our financial performance, including the profitability of our business cash flows conversion rates customer retention and lifetime values member estimates and fixed and operating expenses and our full year.

2022 financial guidance.

Looking statements on this call represent <unk> 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 some of 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'll be presenting certain financial measures on this call that are considered non-GAAP under SEC regulation G.

A reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure. Please refer to the information included in our earnings release issued today 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 France.

Okay.

Thank you and good afternoon to everyone joining us today for our second quarter 'twenty two earnings call.

During my prepared remarks, I will provide an update on our progress in implementing our strategic initiatives.

<unk> second quarter financial and operating results.

This is our outlook for the remainder of the year.

I'd like to begin with some higher level thoughts on our industry.

The one line in Telesales health insurance distribution industry has faced multiple challenges over the past few years that have required the key players including Ehealth.

Can a conscious changes to our enrollment growth strategies, including a shift in approach to demand generation to achieve enrollment margins that support the economics of this business.

Other top priorities for our industry include increasing member retention.

Continuously enhancing beneficiary experience.

Maintaining a solid compliance track record as regulatory requirements evolve.

The businesses that respond to these challenges effectively will be rewarded with deeper relationships with our customers and carrier partners.

And as the industry continues to evolve.

We believe growth will return along with more stable financial performance.

We believe customers deserve a trusted and unbiased adviser and shopping platform offering a broad selection of quality carrier options to meet their personal health insurance needs and preferences.

Further consumer needs and expectations range from do it yourself to limited assistance for dice before agents assistance to the customer or caregiver.

Consumers also choose to interact with brokers and a variety of ways, including by telephone.

Online on assistant using a computer or mobile device.

We're a hybrid online agent assisted process.

Health is listening to consumer preferences regarding the shopping experience for their health insurance needs.

Built a robust and convenient omni channel platform that continues to evolve today.

Ehealth, Medicare and individual and family businesses provide significant value to both beneficiaries in carriers and remain attractive growth opportunities.

Our comprehensive omnichannel shopping and enrollment platform and our expertise in using data science to simplify complex and personally impactful decisions regarding health insurance.

Foundational to our value proposition, which is built to meet consumers on their terms.

We believe that Ehealth will maintain and strengthen its leadership position.

In the large and growing direct to consumer health insurance distribution industry.

As we implement our impactful new short and long term transformational initiatives identified in the past year.

I'll now move on to our second quarter progress and performance.

In Q2, we continued to execute on the six point operating plan that we've outlined on our prior earnings calls and.

And took further steps.

Our cost savings journey.

Currently we are on track to deliver more than $60 million in annualized cost savings through targeted reductions in both variable and fixed costs.

In the second quarter, we implemented targeted workforce reduction while maintaining strong expertise in areas of our strategic focus we.

We have also conducted a thorough review of each marketing campaign in partnership phasing out those arrangements that did not fit our member acquisition cost criteria.

Additionally.

As part of our cost savings initiatives, we have set a course to significantly reduced our real estate footprint.

Has it become a virtual first workplace.

This will eliminate a large fixed cost center over time.

The primary goal of these cost savings initiatives remains unchanged returning to profitable growth and cash flow generation on an accelerated timeline.

We are also seeing signs of a more rational approach to marketing spend in enrollment growth in the broader Medicare distribution industry.

Based on these observations and to further our goal of eliminating the underperforming customer acquisition channels. We've.

We've made the decision to reduce our investment in telesales capacity and variable marketing in the second half of the year relative to the original operating plan.

This means we expect to have fewer Medicare advantage enrollments, while achieving the same or better profitability on these enrollments by focusing on the highest ROI channels and increasing lead conversion rates.

In the second quarter, we recognized the revenue impairment of $8 7 million caused mostly by lower than expected retention within Medicare cohorts goal during the first half of 2021.

Before the implementation of our enrollment quality initiatives.

The revenue impairment and our new lower marketing spend plan for the year informed the lower revenue guidance range, while GAAP net income and adjusted EBITDA guidance ranges were lowered by the net amount of the impairment.

Conversely, our lower cost outlook for the year is also the reason that we are increasing our guidance for total cash flow outflow.

Because cash flow is not an ASC 606 item it is not impacted by the impairment.

These revised numbers can be found on our earnings press release and earnings slides.

Christine will provide more context for the impairment.

Our new outlook for this year later on the call.

At this point I'd like to revisit each of the six areas of our operating plan and discuss our execution progress each of them.

First as I mentioned, we are on track to achieve above and beyond our planned reductions in cost structure and working to identify additional areas of savings for the second half of 2022 into 2023.

Second we are deploying marketing dollars in a way that we expect will drive better unit economics.

Including the optimization of our marketing mix to focus on channels, where we hold strong competitive differentiation.

In accordance with this goal we have further reduced our investment in the direct TV channel.

Coming AEP, our investments in Directv will be branded and limited to specific geographies, where we see the best opportunity and we plan to build on this approach in the coming years absolute dollar investment in the lead aggregator channel declined significantly in the second quarter compared to a year ago, but.

A meaningful portion of our overall channel mix.

Moving into the AAP we.

We will be dramatically, reducing the contribution from this channel maintaining only those lead generator relationships that fit our LTV to CAC targets in the second half of 2022, we plan to ramp our exposure to the online advertising channels direct mail and email marketing as well as lead nurturing where we for.

Example, will leverage hundreds of thousands of online applications that are left partially completed every quarter.

The emphasis on targeted marketing through audience segmentation and promoting the Ehealth brand will apply broadly across our marketing initiatives going forward. Additionally, we look forward to announcing our new chief marketing officer in the coming weeks. This critical new hire will be leading the next stage of our omnichannel demand generation strategy.

Third as previously shared we are slowing down or telephonic enrollment growth this year, while emphasizing agent training and retention initiatives piloting a local market centric model and increasing the contribution from dedicated carrier arrangements to derisk, our marketing strategy and boost conversion rates, while our telephonic.

Conversion rates remain impacted by the enrollment quality initiatives introduced last year.

Did track ahead of our expectations in the second quarter.

We are also seeing continuing traction with our quality metrics our carrier partners have acknowledged our success in executing on the commitments, we made coming out of the 2021 AEP to improve quality through <unk> reductions as.

As the cohort enrolled during the 2020 to AEP has demonstrated lower Cts and better retention.

We're following through on our quality commitments with impactful actions that have further strengthened our carrier relationships.

In addition, we believe that sustained improvements in CTF metrics is a leading indicator for customer satisfaction and improve retention performance for our new enrollments.

In fact members who we enroll during the most recent AEP continues to track significantly better relative to prior AEP cohorts in terms of persistency.

Year to date lapse rate on R. 22, AEP cohort is approximately 10% better than what we observe with the 'twenty one AEP cohort at the same time a year ago.

Head of the AAP, we're putting in place a number of programs aimed at further improving agent performance. One of these programs is Ehealth University.

Which is a higher touch training model meant to help agents enhance their sales skills. In addition to obtaining required Medicare plan and regional market knowledge.

Our product team also made significant progress this quarter iterating on it and testing enhancements to our selling process.

In Q2, we successfully launched an online chat tool powered by licensed agents and piloted a co browsing feature that allows our agents and customers to screen share for a more effective navigation of the enrollment experience.

We are seeing early positive an impact on conversion rates for customers, who took advantage of these new tools.

This is an example of improving the experience for our agents and customers during the selling process as we frequently hear from beneficiaries.

I wanted to be able to see the plans in front of them as an agent is describing the available plan options.

As we ramp for the AEP, we are building an agent base that is leaner and more agile than in past years.

Supplementing with a small number of third party agents.

Collecting our revised outlook and focus on the most profitable enrollments, we have reduced our hiring targets. This year and are currently expecting a year over year reduction in fourth quarter agent head count.

The fourth element of our operational plan is to continue growing our online business reinforcing our tech differentiation through targeted investment in our E Commerce platform.

I continue to believe that one of our most important competitive moats is our seamless omnichannel enrollment platform led by scalable online enrollment capabilities we.

We believe that beneficiaries find tremendous value in our end to end enrollment capabilities.

That it is critical to maintain and advance this point of differentiation.

As we have pulled back on our variable marketing spend across the organization.

In the second quarter, we also temporarily scale back the amount of leads we generated through paid online advertising.

While we continue to grow our Q2 online unassisted Medicare advantage enrollment, 15% year over year. This represented a slower rate of growth compared to prior quarters.

The fifth element of our plan is to work with our carrier partners to pursue revenue opportunities.

Value creation beyond the traditional broker of record model.

This includes collaborating on ways to enhance beneficiary experience post enrollment, including joint member engagement and support initiatives.

That officiary experience as one of the top priorities for carriers and we're seeing early interest in these joint programs that could drive revenue other than broker compensation.

Yeah.

Finally, the six point is to pursue cost effective diversification initiatives.

On the ISP side, we are pursuing the emerging individual consumer health reimbursement arrangement or aircraft.

Opportunity, which allows employers to fund <unk> premiums for their workforce as an affordable alternative small business coverage.

In the second quarter, we intentionally decided to keep our powder dry in order to ramp our spend in the fourth quarter. When we see the largest potential for scaling it grow enrollments.

We're also experimenting with ancillary products that target our existing Medicare customer base, such as hospital indemnity products as well as dental vision and hearing products with the potential for additional products, where we see opportunity.

And finally, we are evaluating new areas of expansion that represent a departure from our current products and services.

We expect any diversification initiatives that we undertake after initial testing to have a more favorable first year cash flow profile relative to M&A sale.

Moving to the second quarter financial results.

Total revenue was $50 4 million GAAP net loss was $37 5 million adjusted.

Adjusted EBITDA for the second quarter was a loss of $33 3 million.

Ended the quarter with $801 6 million in commission receivables.

Second quarter core operational performance exceeded our revenue and adjusted EBITDA expectations, driven primarily by better than expected telephonic conversion rates in the Medicare business.

As I mentioned earlier in the second quarter. We also recorded an $8 $7 million negative adjustment in revenue, which impacted overall results.

While we are seeing better retention on the newer Medicare advantage cohorts enrolling after we introduce the call verification step in July of 2021, some of the older cohorts have churned at elevated rates.

Excluding the impact of the negative revenue adjustment, our second quarter revenue was $59 1 million and adjusted EBITDA loss was $24 6 million.

Despite recording this negative tail stemming from older Medicare cohorts.

It is still true that the enrollment quality initiatives implemented last July our serving their intended purpose of creating a better overall customer experience, while increasing persistency and decreasing CPM rates.

As part of our transformation initiatives, we are working on strategies for enhancing <unk> capital structure and meeting our long term capital needs.

We expect to be able to discuss this in greater detail later this year.

We also plan to feature some of the initiatives from our three year strategic business plan, along with revenue growth and cash flow outlook.

What I was asked to lead Ehealth I was anticipating making leadership changes following the same team building playbook.

It has worked for me in the past, namely building a team with complementary skill bought into our mission and vision and committed to putting the company first.

I believe we are in the final stages of completing this goal.

With that as context in conjunction with our second quarter results. We filed an 8-K announcing the departure of our Chief Digital Officer, Philip Morelock. We appreciate Phillips contributions to Ehealth during the past four years.

The search for a new digital and technology leader is underway and I'm confident we'll continue to attract great talent to complete the transformation of the leadership team.

In the first half of 2022, we welcomed new executives to our management team, including our Chief operating Officer, Chief Transformation Officer, Rhonda <unk>, our new General Counsel gathering Bellini and Chief Accounting Officer, John <unk> and <unk>.

We plan to announce the appointment of our new Chief marketing officer before the end of the month.

I'm excited to have these critical hires in place as their energy and enthusiasm is contagious throughout the entire organization.

While we are still in the midst of executing our transformation plan my confidence at Ehealth strategy and positioning to take advantage of the attractive Medicare advantage opportunity remains unwavering.

I am confident that the operational technology and marketing changes, we are making have ehealth on the right track to reach our goal of sustainable profitable growth and deliver value to our shareholders.

I'll now pass the Florida, Christine to discuss our financial results and outlook for the second half of 2022 and greater detail Christine.

Thank you Fran and good afternoon, everyone.

Our core operational results for the second quarter before the impact of a revenue adjustment exceeded our expectations driven primarily by telephonic conversion rates that were favorable to our internal financial plan.

At the same time, our year over year comparisons for conversion rates revenue and profitability continue to be impacted by the changes in the enrollment process that we introduced in July of last year.

The net impact of the negative revenue adjustment from prior period enrollment was $8 7 million across all products with the largest impact coming from our Medicare book of business.

Based on our implementation of ASC 606, we have guardrails in place that trigger a negative adjustment if cumulative churn.

Cohort exceeds a certain threshold.

This adjustment applies even if a cohort is early in its life.

Ken over time track to the original Ltvs as it matures.

The goal with our guardrails is to adjust our receivables in real time and prevent any sizeable revisions down the road.

Notably we do not use the same review policy with respect to positive now.

We are far more conservative in applying positive tail to our financial performance.

Instead <unk>.

Positive tail is typically recognized only after we have three years of persistency observations on a cohort.

As a result, we have a sizable.

Unrecognized sort of tail on our Medicare book of business.

Within our Medicare segment second quarter Medicare advantage approved enrollments were approximately 51500 or eight year over year decrease of 34%.

This made up the majority of our approximately 59400 and total Medicare enrollments, which were down 35% relative to Q2 2021.

The year over year decline in enrollments reflected a reduction in variable marketing spend and lower call conversion rates.

Q2 is the last full quarter that compares our current results.

<unk> quarters with higher agent productivity, a year ago before the enrollment and verification step and modified enrolment scripts were introduced.

We ended the quarter with estimated total Medicare advantage paying membership.

590000.

Compared to approximately 563000 at the end of Q2 2021.

And they ltvs of $886 declined 2% on a year over year basis, driven primarily by the lower retention rate, we saw within cohorts enrolled during the first half of 2021.

These cohorts were also the main contributors to the negative revenue adjustment that we booked in the quarter.

All in Medicare advantage customer acquisition costs, including variable marketing and agent related expense was $896.

This represented a sequential decline from $986 in Q1 of this year.

Driven by a 25% quarter over quarter decline in marketing costs per approved member Andrew.

Reflecting our strategy of a more targeted deployment of the marketing budget and limiting marketing spend within lower ROI channels.

As Fran mentioned in the second quarter, we significantly reduced our dollar spend for Directv and portions of the third party lead Gen channel.

Going forward, we will continue to enhance the marketing mix prioritizing member profitability over enrollment growth.

Second quarter Medicare advantage online unassisted applications grew 15% on a year over year basis to just over 7000 applications.

Similar to our overall marketing strategy, we are eliminating the lower performing areas of online advertising spend with a goal of continued growth in this channel in 2023.

Medicare segment revenue was $41 1 million down 44% from the year ago quarter.

Medicare segment loss was $25 3 million in the second quarter compared to a loss of $17 8 million in Q2 2021.

Individual family and small business segment revenue was $9 3 million with segment profit of $4 3 million.

Compared to $23 3 million and $17 9 million respectively.

Two of last year.

The year over year decline in segment revenue and profitability is attributable primarily to a reduction in <unk> revenue.

As a reminder, in Q2 of last year, we recorded a significant positive revenue adjustment of $15 8 million in the segment.

Yeah.

I S. P. Enrollments were also down on an absolute basis, partially offset by another quarter of significant year over year increases in lifetime values of individual products.

As Fran mentioned, we will be deploying the largest portion of our annual ISP budget in Q4, when the open enrollment period takes place.

We also see the most meaningful growth opportunities in the fourth quarter.

Moving now to our expenses.

In the second quarter total GAAP operating expense was $95 9 million.

21%.

From $121 9 million in Q2 2021.

The decrease in total Opex was driven primarily by year over year decreases of $12 8 million or 35%.

Variable marketing expense and $9 2 million or 24% in cc any costs.

On the fixed cost side second content spend declined 13% year over year to $17 8 million.

G&A decreased 5% to $17 2 million for the quarter.

We also gained leverage from a decrease of $1 9 million or 24% of our fixed marketing costs.

For the full year, we expect a decline of over $60 million and full year operating expenses relative to 2021.

We ended the quarter with $199 2 million in cash cash equivalents and marketable securities and $65 4 million of debt.

Our balance sheet also reflects a commissions receivable balance of 801 6 million that is comprised of $201 3 million that we expect to collect over the next 12 months and $600 3 million in long term commissions receivable.

This compares with total commissions receivable of $755 6 million as of June 32021.

Operating cash flow for the second quarter was negative 25 8 million.

Compared to negative $32 1 million a year ago.

Trailing 12 month Medicare Commission cash collections were $323 5 million, an increase of 1% compared to a year ago.

We're in the process of planning capital structure strategies that will support our operational plan.

As we assess potential capital solutions we.

Diligently considering all potential impacts of these solutions on our shareholders and we will select a solution that gives us the best opportunity to create long term shareholder value.

We look forward to updating you on our progress as appropriate.

Turning to the outlook for the rest of the year.

During the quarter, we made the decision to reduce our variable marketing spend in the second half of the year relative to our original plan.

The objective is to further optimize our marketing mix and focus on the most profitable and strategically important channels.

We made a corresponding adjustment to our agent head count goals for this AEP.

The net impact of this plan is a lower overall enrollment and revenue outlook with adjusted EBITDA and GAAP net loss in line with the original operating plan net of the negative revenue adjustment that we recognized this quarter.

Our new lower spending plan for the year. We will also have a significant positive effect on our cash flow.

Because our Medicare membership base, which grew 5% in Q2.

Can use to generate steady cash receipts a significant amount of these cost savings will have a direct positive impact on our total cash flow.

In addition to our lowered revenue outlook based on these operational decisions. We are also lowering our revenue adjusted EBITDA and net loss guidance to reflect the negative revenue adjustment we recognized in Q2.

The revenue adjustment is a noncash item and does not impact our expectations for total cash outflow for the year.

Our new guidance ranges are as follows.

Yeah.

Total revenue for 2022 is now expected to be in the range of $375 million to $395 million compared to our prior guidance range of 448 million to $470 million.

Yeah.

Net loss for 2022 is now expected to be in the range of $115 million to $92 million compared to our prior guidance range of $106 million to $83 million.

Adjusted EBITDA for 2022 is now expected to be in the range of negative <unk> 73 to negative $45 million.

<unk> to our prior guidance range of negative <unk> 64 to negative $37 million.

Total cash outflow for 2022, excluding the impact of our $70 million term loan and associated cost is now expected to be in the range of 110.

To $90 million compared to our prior guidance range of $140 million to $120 million.

Looking to the upcoming third quarter, we expect revenue to be relatively flat sequentially, while adjusted EBITDA is expected to decline sequentially.

Reflecting targeted marketing investment and telesales ramp ahead of this year's AEP.

I sure, France confidence and the transformational progress we are making at Ehealth.

In addition to driving cash flow upside in 2022 never revised operating plan creates leverage beyond this year by further rationalizing our demand generation strategy in line with what we are observing in the broader market and allowing us to enter 2023.

A lower cost run rate, including a stronger and Nimbler telesales organization.

With that I'll turn it over to the operator to open up for Q&A.

Thank you at this time I would like to remind everyone in order to ask a question. Please press star and then the number one on your telephone keypad.

Your first question will come from Elizabeth Anderson with Evercore.

Hey, guys. Thanks, so much for the question.

So a couple of questions maybe I appreciate you're giving us the updated churn numbers on the.

The newest cohort.

I'm just trying to think of for people, who are just trying to sort of I know, we've been sort of so accustomed to like fixating on that over the years.

One when do you think that like as we sort of think through the newer cohorts and the impact that they have on that total churn number is that like a 'twenty 'twenty three of it before we start to see those churn numbers on a year over year basis.

<unk> moved lower just help us think about that because I know that that's something that sort of incrementally always makes people nervous when it when they see it moving up.

Hi, This is fran thanks for joining us.

I think.

Following the.

Yeah.

Follow sort of each each years life, if you will or caught up.

Raj the January one.

Cycle.

Think of it as a measurement over 12 months period, I mean, we can do a quarterly but.

I think looking at it over 12 months is probably a more credible.

The next real credible measurement will be January of 'twenty three.

When it goes.

Cohort goes through.

The next annual election period.

And then there again through the OE P.

And then the next measurement period beyond that would be January of 'twenty four.

I think there is a kind of a key milestones.

Okay. That's really helpful. And then as we think about CCD I appreciate youre talking through the quality initiatives.

One can you comment on the overall hiring environment now.

How are you.

It is I know, it's sort of early days for the full AP, but but how that's trending sort of to plan and then when do you.

Sort of lapped the implementation of the quality initiatives you put in place last year, because I would think that that would then sort of the comparison at least on that.

Medicare advantage and things conversion would become easier right is that the right way to think about that.

Let me take the second question first.

This quality initiatives went into effect during the third quarter of 2001.

So the measurement year over year would begin this third quarter.

So it will be able to do an apples to apples comparison.

And going forward.

As far as the.

The dynamics in terms of agent recruiting.

Recognizing that we are now a remote first.

Organization, and we're not sort of.

So any one geography, where we're looking to recruit agents.

This greater flexibility and I would say that largely our needs have been met.

Provided our.

Our assumptions regarding agents attrition holdup of course.

I would say that they are tracking pretty much to plan.

And Thats.

<unk> is here.

Comment as well, our chief operating officer oversees our telesales operations.

And I think that the training is going really well.

Do you expect for graduation rates being higher than it has been historically and that's because we changed the way that we are onboarding the agents with a more personal.

Hiring with the supervisor is ultimately going to be responsible for that that particular agent being the one who is doing the hiring as opposed to a recruiter. So there's just a whole process has been re-engineered. So Brian do you want to.

Thank you so we acknowledged.

This year.

That would be your leverage at a very low cost environment.

Yes.

We were preparing for EEP and the new Asian class well acknowledged and.

Try to our best too.

As far as substitute.

In person interaction.

Yes.

With the.

Within the trading and liquidity pool.

The increased number of <unk> and uhm.

Interaction of new agents.

And as the season of agents with the management team all the way from supervisor to VP of sales.

That seem to be giving us early indicators of increased.

The higher start.

And.

All of those.

Stronger focus on agent training, especially early on.

It's given us the biopsy Gardner.

We expect the performance during the at least the numbers in Asia for sure.

Got it that's helpful. Thank you very much.

Yeah.

Our next question comes from Daniel gross slate with Citigroup.

Hi, guys. Thanks for taking the question.

I just wanted to go to the unassisted online.

Enrollees in Medicare and Medicare advantage. So it <unk> it was up around 12% year over year, if I look back at <unk> was up around 50% and then back in <unk> 'twenty. One it was up around 80% I'm just curious if youre seeing.

Any.

The headwinds in this channel specifically, obviously, it's growing nice for you, but at a slower rate versus a historical and how should we think about that.

Unassisted online for this upcoming AEP should we assume that's going to be a significant step down to last year's AEP growth, which was around 53%.

Hi, Daniel.

<unk>.

<unk>.

We've been very careful about our marketing spend in terms of even on the online your online on our system.

There is multiple.

Wave that money can be directed to.

Generate traffic to our online platform.

Yes.

Spend was.

Redirected.

Those areas that we felt we were going to get.

The greatest lift.

And the highest conversion.

He is more targeted.

We do expect.

Healthy growth from our online channel for the AEP.

We're not prepared to provide the guidance quite yet on what we think that will help.

Ultimately look like in terms of.

Compelled comparator to last year's AEP.

It is an important contributor to the overall story here at <unk>.

So, we'll we'll provide maybe a little more guidance in the near future.

Okay great.

And some of your competitors have spoken about growing revenue outside of core Medicare commissions I'm curious.

It's not something you've talked about much but I'm curious what levers you can pull to grow outside of commissions. If you plan maybe not this year, but next year, you're after do you plan on investing in new more predictable revenue streams.

Well I want to make sure I understand the question, but there is other.

I would say somewhat related to the.

Medicare advantage business that were also compensated for.

Not particular to that there is other things that we already provide in the way of.

Services.

But we are.

In discussions with several carriers.

About that I would say they value in terms of.

Improving persistency.

Of their membership.

We can generate revenue as a result of that so the short answer is yes, we are definitely looking at that and see that as revenue opportunities that would be.

It wouldn't be 606 related revenue would be 605 related revenue.

<unk>.

Perhaps it would be more predictable.

Alright, I appreciate the color Brent.

Yeah.

Your next question comes from Tobey Sommer with Truest Securities.

Thank you.

Under the new lower gross plan do you expect to Ehealth to remain in the.

Top tier for the major carriers.

The lower volume levels of sales that you expect.

Hi, Tobey Fran again.

For joining.

I think when we look at our partnership with the top carriers.

We evaluate those relationships based upon the net meaning that.

The volume and the retention combined with <unk>.

Putting a lot of attention on reducing the churn.

And improving the quality driving continue to drive the Cts.

Progress on.

And that's been noted by several of our carrier partners.

We will remain quiet.

Relevant with with our carrier partners.

Perhaps will be less relevant with some of the smaller ones.

As we put more focus on some of the larger ones. So I would say that's the trade off.

Okay.

You mentioned I think in the prepared remarks, a comment about that.

Others in the market are also being more.

Sort of Scoop scrutinizing their marketing spend how can you tell that our competitors are also pulling back on their expectations for growth.

Well, we are relying on what they're saying publicly.

We're going to take them at their word.

Okay, so, but there's nothing in the marketplace as you see it or there are other signs that you can see.

In your day to day business activity that's occurring.

Not quite yet, but we would potentially see a reduction in traffic.

Our web site and a lot of our competitors agencies our website too.

We'll come to providers.

Uh huh.

Thank you.

Do that using article they had no other.

Are you doing.

Yep.

Okay and then.

CMS front Oh.

It was a little under a year ago for AEP, where there was a letter sent to remind everybody.

The rules of the road for marketing sort of good behavior.

Do you expect anything this year.

How's the dialogue and interaction bandwidth regulators.

Yeah.

Well.

I don't want to go too.

<unk>.

On the linear and makes them.

Precedent.

You may or may not do I think they realized.

That came out last October .

And the process.

Not really.

Got it.

Yeah.

So I hand, the call later this week.

Secondly, administrator, but.

Yes.

We felt that we had in China.

So this is kind of okay.

Jim on what's going on there.

This world.

No.

In my mind.

Ill.

Sure.

Okay.

Hopefully you can avoid those kinds of situations.

Thank you.

Your next question comes from Ben Hendrix, with RBC capital market.

Hey, Thanks, guys I was wondering if you could give us any more information as you increasingly seem to be targeting your market variable marketing spend towards those higher ROI areas. If there are any characteristics as we kind of start applying that the spending that you are doing in the third quarter. If there are any kind of.

Cure characteristics specific characteristics you can offer that differentiate these higher ROI channels versus those that you're deemphasizing.

Hi, Ben.

<unk>.

I would.

Probably limit my comments right now I mean, I think it's fair to say that.

We have utilized right now.

Two proprietary.

Yes.

Less about the channel more.

How do you convey that message because theres a lot of there's a lot of traffic.

As you know during the season.

Yes.

The message and then how do you make sure you're.

Your message stands out.

The rest of that.

For sure.

Pick up the phone and dialed.

Right.

And that's really what we're focused on.

How do we can reach our audience.

What message resonate.

And there are certain channels that are just.

I would say for affected more than others.

So that's our.

Our owners.

Got you. Thank you and just one more last quarter, you mentioned that you had a strong online completion rate around 90% for ISP and you've called out the aircraft opportunity and now given that we've seen the extended Reconciliate reconciliation bill passed that extended the subsidies for.

For ACA plans I was wondering if you could have any early thoughts on where you think your <unk> mix might go over the next couple of years. Thanks.

Yes.

<unk>.

I think the business will continue to be an important part of our portfolio I think.

Yes.

From a particular right.

Hey, Melissa.

Very eager to see what we can achieve.

The fourth quarter and first quarter.

Great.

I think it's an intriguing product that.

Could be.

Helpful to small businesses.

So.

Very bullish on that.

Okay.

Great opportunities with state exchanges.

But.

We remain encouraged to play a firearm.

Thank you.

Okay.

Yes.

And our final question comes from George Sutton with Craig Hallum.

Hey, Thank you. This is Adam on for George a friend and in your remarks, you mentioned the goal to get to a profitable growth on an accelerated timeline I'm curious if there's any specific items that you could focus on that.

That would either speed up or slow down that timeline in your in your mind.

Hi, Adam Thanks for joining I think we're really pulling all those levers right now.

We have worked very diligently to.

Take out cost.

Great progress there.

We continue to work to improve the conversion rates for example on our tele sales as well as our online.

And the marketing optimization will remain a focus.

So we're pulling all the right levers we have to continue to make important progress there.

I think it's basically it comes down to the time.

To get to that optimal level and continue to take out more costs.

And I think.

Clinical shape, but it's about turning the corner and I think we're getting closer and closer to turning that corner.

Great and just one more for me with respect to the <unk> opportunity.

Any potential way to size, what do you think that may be relative to other opportunities for this year and what you think it could potentially grow into it I know, it's rather early for it but any any type of thoughts would be helpful.

Well I'd love to stick my neck out, but my general counsel is sitting here and shooting he looks at me, so I'm going to have to divest.

Does that question a bit let's just say this that.

It's been sized on a national scale and there is some slide by a couple of different experts and the numbers range by.

Pretty substantial.

Level so.

I think that when we talk about later this year when we talk about the revenue growth.

Opportunity.

Perhaps I can be a little more specific.

Well, let me say that I'm very bullish on it I think that.

It's been a great game.

Traction and momentum over the next two to three years.

Small employers.

Realized what it can do and how it can be utilized in terms of it doesn't necessarily have to solve all of their needs to consol part of earnings.

And.

They have a strategy and the strategy that ehealth.

Can certainly help them work through.

It's a great tool.

Rachel.

So.

I'll just leave it as I am very bullish.

Yes.

There are no further questions at this time.

Mr Sweetman.

I would like to turn the call over to you.

Well. Thank you operator first I'd like to leave you with a few closing thoughts.

As the team continues to make important changes in nearly every aspect of our business towards the goal of returning the company to profitable growth.

Positive cash flow as quickly as possible.

Every day, we're making important progress on our strategic plan and our operational priorities.

Now that we're at the end of the day here on August eight T minus 68 days at the beginning of AEP.

And our readiness is tracking to plan and we.

We look forward some of our follow up conversations and continuing to share updates on our progress this year.

You again for joining us this afternoon.

Operator.

Goodbye.

This concludes the <unk> 2022 second quarter.

Conference results you may now disconnect.

[music].

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[music].

[music].

Good afternoon, everyone and welcome to the Ehealth, Inc Conference call to discuss the company's second quarter 2022 financial results. At this time, all participants have been placed in listen mode.

The floor will be open to your questions. Following the presentation. It is my pleasure to turn the floor over to Ely, New Brian Mitts Senior Investor Relations manager. Please go ahead.

Thank you operator.

Good afternoon, and thank you all for joining us today, either by phone or by webcast for a discussion about Ehealth Inc's second quarter 2020 to financial results on the call. This afternoon, we have friends. So I spend helps chief Executive Officer, and Christine Janovsky Ehealth 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 won't be making forward looking statements on this call that includes statements regarding future events beliefs and expectations, including statements relating to our expectations regarding trends in the health care industry, and the health care insurance distribution industry consumer demand, our competitive advantage and market opportunities our expectations regarding.

Our Medicare and individual and family businesses, including our Medicare enrollment and other product offerings, our expectations regarding our ability to improve customer conversion.

Customer retention and other quality metrics, our expectations regarding our marketing channels or telephone and online enrollments are e-commerce platform and our member acquisition strategy.

Our expectations related to our short and long term strategies operating plan and financial goals, including our transformation initiatives, our expectations regarding our financial performance, including the profitability of our business cash flows conversion rates customer retention lifetime values member estimates and fixed and operating expenses and are full.

Year 2022 financial guidance forward.

Forward looking statements on this call represent <unk> 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 some of 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'll be presenting certain financial measures on this call that are considered non-GAAP under SEC regulation G.

A reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure. Please refer to the information included in our earnings release issued today 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 franchise.

Okay.

Thank you and good afternoon to everyone joining us today for our second quarter 'twenty two earnings call.

In my prepared remarks, I will provide an update on our progress in implementing our strategic initiatives.

<unk> second quarter financial and operating results.

This is our outlook for the remainder of the year.

I'd like to begin with some higher level thoughts on our industry.

The one line in Telesales health insurance distribution industry has faced multiple challenges over the past few years and have required the key players including Ehealth.

Can a conscious changes to our enrolment growth strategies, including a shift in approach to demand generation to achieve enrollment margins that support the economics of this business.

Other top priorities for our industry includes increasing member retention.

Continuously enhancing beneficiary experience.

Maintaining a solid compliance track record as regulatory requirements evolve.

The businesses that respond to these challenges effectively will be rewarded with deeper relationships with our customers and carrier partners.

And as the industry continues to evolve.

We believe growth will return along with more stable financial performance.

We believe customers deserve a trusted and unbiased adviser and shopping platform offering a broad selection of quality carrier options to meet their personal health insurance needs and preferences.

Further consumer needs and expectations range from do it yourself to limited assistance or advice before.

Before agents assistance to the customer or caregiver.

Consumers also choose to interact with brokers and a variety of ways, including by telephone.

Your line on assistant using a computer or mobile device.

But through a hybrid online agent assisted process.

Ehealth is listening to consumer preferences regarding the shopping experience for their health insurance needs.

We've built a robust and convenient omnichannel platform that continues to evolve today.

Ehealth, Medicare and individual and family businesses provide significant value to both beneficiaries in carriers and remain an attractive growth opportunities.

Our comprehensive omnichannel shopping and enrollment platform and our expertise in using data science to simplify complex and personally impactful decisions regarding health insurance are foundational to our value proposition.

Which is built to meet consumers on their terms.

We believe that Ehealth will maintain and strengthen its leadership position in the large and growing direct to consumer health insurance distribution industry.

As we implement our impactful new short and long term transformational initiatives identified in the past year.

I'll now moving on to our second quarter progress and performance.

In Q2, we continued to execute on the six point operating plan that we've outlined on our prior earnings calls.

Took further steps in our cost savings journey.

Currently we are on track to deliver more than $60 million in annualized cost savings through targeted reductions in both variable and fixed cost.

In the second quarter, we implemented a targeted workforce reduction while maintaining strong expertise in areas of our strategic focus.

We have also conducted a thorough review of each marketing campaign in partnership phasing out those arrangements that did not fit our member acquisition cost criteria.

Additionally, as.

As part of our cost savings initiatives, we have set a course to significantly reduced our real estate footprint.

It become a virtual first workplace.

This will eliminate a large fixed cost center over time.

The primary goal of these cost savings initiatives remains unchanged returning to profitable growth and cash flow generation on an accelerated timeline.

We are also seeing signs of a more rational approach to marketing spend in enrollment growth in the broader Medicare distribution industry.

Based on these observations and to further our goal of eliminating the underperforming customer acquisition channels.

We've made the decision to reduce our investment in telesales capacity and variable marketing in the second half of the year relative to the original operating plan.

This means we expect to have fewer Medicare advantage enrollments, while achieving the same or better profitability on these enrollment.

<unk> on the highest ROI channels and increasing lead conversion rates.

In the second quarter, we recognized the revenue impairment of $8 7 million caused mostly by lower than expected retention within Medicare cohorts enrolled during the first half of 2021.

Before the implementation of our enrollment quality initiatives.

The revenue impairment and our new lower marketing spend plan for the year and form the lower revenue guidance range, while GAAP net income and adjusted EBITDA guidance ranges were lowered by the net amount of the impairment.

Conversely, our lower cost outlook for the year is also the reason that we are increasing our guidance for total cash flow outflow.

Because cash flow is not an ASC 606 item it is not impacted by the impairment.

These revised numbers can be found in our earnings press release and earnings slides.

Christine will provide more context for the impairment.

Our new outlook for this year later on the call.

At this point I'd like to revisit each of the six areas of our operating plan and discuss our execution progress each of them.

First as I mentioned, we are on track to achieve above and beyond our planned reductions in cost structure and working to identify additional areas of savings for the second half of 2022 into 2023.

Second we are deploying marketing dollars in a way that we expect will drive better unit economics.

<unk> the optimization of our marketing mix to focus on channels, where we hold strong competitive differentiation.

In accordance with this goal.

We have further reduced our investment in the direct TV channel.

For the upcoming AEP, our investments in Directv will be branded and limited to specific geographies, where we see the best opportunity and we plan to build on this approach in the coming years absolute dollar investment in the lead aggregator channel declined significantly in the second quarter compared to a year ago.

It remains a meaningful portion of our overall channel mix.

Moving into the AAP.

We will be dramatically, reducing the contribution from this channel maintaining only those lead generator relationships that fit our LTV to CAC targets in the second half of 2022, we plan to ramp our exposure to the online advertising channels direct mail and email marketing as well as lead nurturing where are we.

An example will leverage hundreds of thousands of online applications that are left partially completed at every quarter.

The emphasis on targeted marketing through audience segmentation and promoting the Ehealth brand will apply broadly across our marketing initiatives going forward. Additionally, we look forward to announcing our new chief marketing officer in the coming weeks. This critical new hire will be leading the next stage of our Omnichannel demand generation strategy third as proved.

As we shared we're slowing down our telefonica enrollment growth this year.

At the sizing agent training and retention initiatives piloting a local market centric model and increasing the contribution from dedicated carrier arrangements to derisk, our marketing strategy and boost conversion rates, while our telephonic conversion rates remain impacted by the enrollment quality initiatives introduced last year.

They did track ahead of our expectations in the second quarter.

We're also seeing continuing traction with our quality metrics our carrier partners have acknowledged our success in executing on the commitments, we made coming out of the 2021 AEP to improve quality through <unk> reductions as.

As the cohort enrolled during the 2022.

As demonstrated with lower <unk> and better retention.

We're following through on our quality commitments with impactful actions that have further strengthened our carrier relationships.

In addition.

We believe that sustained improvements in CTF metrics is a leading indicator for customer satisfaction and improve retention performance for our new enrollments.

Fact members, who we enroll during the most recent AEP continues to track significantly better relative to prior AAP cohorts in terms of persistency.

Year to date lapse rate on R. 22, AEP cohort is approximately 10% better than what we observed with the 'twenty one AEP cohort at the same time a year ago ahead of the AAP, we're putting in place a number of programs aimed at further improving agent performance. One of these programs is Ehealth University.

Which is a higher touch training model meant to help agents enhance their sales skills. In addition to obtaining required Medicare plan and regional market knowledge.

Our product team also made significant progress this quarter iterating on and testing enhancements to our selling process.

In Q2, we successfully launched an online chat tool powered by licensed agents and pilot co browsing feature that allows our agents and customers to screen share for a more effective navigation of the enrollment experience.

We are seeing early positive impact on conversion rates for customers, who took advantage of these new tools.

This is an example of improving the experience for our agents and customers during the selling process as we frequently hear from beneficiaries.

I wanted to be able to see the plans in front of them as an agent is describing the available plan options.

As we ramp for the AEP, we are building an agent base that is leaner and more agile than in past years.

Supplementing with a small number of third party agents.

Selecting our revised outlook and focus on the most profitable enrollments, we have reduced our hiring targets. This year and are currently expecting a year over year reduction in fourth quarter agent head count.

The fourth element of our operational plan is to continue growing our online business reinforcing our tech differentiation through a targeted investment in our E Commerce platform.

I continue to believe that one of our most important competitive moats is our seamless omnichannel enrollment platform led by scalable online enrollment capabilities.

We believe that beneficiaries find tremendous value in our end to end enrollment capabilities.

It is critical to maintain and advance this point of differentiation.

As we have pulled back on our variable marketing spend across the organization.

In the second quarter, we also temporarily scale back the amount of leads we generated through paid online advertising.

While we continue to grow our Q2 online unassisted Medicare advantage enrollments, 15% year over year. This represented a slower rate of growth compared to prior quarters.

The fifth element of our plan is to work with our carrier partners to pursue revenue opportunities.

Value creation beyond the traditional broker of record model.

This includes collaborating on ways to enhance beneficiary experience post enrollment, including joint member engagement and support initiatives.

That officiary experience as one of the top priorities for carriers and we're seeing early interest in these joint programs that could drive revenue other than broker compensation.

Yeah.

Finally, the six point is to pursue cost effective diversification initiatives.

On the ISP side, we are pursuing the emerging individual consumer health reimbursement arrangement or aircraft.

Opportunity, which allows employers to fund <unk> premiums for their workforce as an affordable alternative small business coverage.

In the second quarter, we intentionally decided to keep our powder dry in order to ramp our spend in the fourth quarter, where we see the largest potential for scaling it grow enrollments.

We're also experimenting with ancillary products that target our existing Medicare customer base, such as hospital indemnity products as well as dental vision and hearing products with the potential for additional products, where we see opportunity.

And finally, we are evaluating new areas of expansion that represent a departure from our current products and services.

We expect any diversification initiatives that we undertake after initial testing to have a more favorable first year cash flow profile relative to an M&A sale.

Moving to the second quarter financial results total revenue was $50 4 million GAAP net loss was $37 5 million.

Justice EBITDA for the second quarter was a loss of $33 3 million.

We ended the quarter with $801 6 million in commission receivables.

Second quarter core operational performance exceeded our revenue and adjusted EBITDA expectations, driven primarily by better than expected telephonic conversion rates in the Medicare business.

As I mentioned earlier in the second quarter, we also recorded at.

At $8 $7 million negative adjustment in revenue, which impacted overall results.

While we are seeing better retention on the newer Medicare advantage cohorts enrolled after we introduce the call verification step in July of 2021, some of the older cohorts have churned at elevated rates.

Excluding the impact of the negative revenue adjustment, our second quarter revenue was $59 1 million and adjusted EBITDA loss was $24 6 million.

Despite recording this negative tail stemming from older Medicare cohorts.

It's still true that the enrollment quality initiatives implemented last July our serving their intended purpose of creating a better overall customer experience, while increasing persistency and decreasing CPM rates.

As part of our transformation initiatives, we are working on strategies for enhancing el's capital structure and meeting our long term capital needs.

We expect to be able to discuss this in greater detail. Later this year. We also plan to feature some of the initiatives from our three year strategic business plan, along with revenue growth and cash flow outlook.

What I was asked to lead Ehealth I was anticipating making leadership changes following the same team building playbook.

It has worked for me in the past, namely building a team with complementary skill bought into our mission and vision and committed to putting the company first.

I believe we are in the final stages of completing this goal.

With that as context in conjunction with our second quarter results. We filed an 8-K announcing the departure of our Chief Digital Officer Phillip Morelock. We appreciate Phillips contributions to Ehealth during the past four years.

A search for a new digital and technology leader is underway and I am confident we will continue to attract great talent to complete the transformation of the leadership team.

In the first half of 2022, we welcomed new executives to our management team, including our Chief operating Officer, Chief Transformation Officer run a very our new General Counsel Gavin Gleamy.

Chief Accounting Officer, John Doe.

Additionally, we plan to announce the appointment of our new Chief marketing officer before the end of the month.

I'm excited to have these critical hires in place as their energy and enthusiasm is contagious throughout the entire organization.

While we are still in the midst of executing our transformation plan my confidence at Ehealth strategy and positioning to take advantage of the attractive Medicare advantage opportunity remains unwavering.

I am confident that the operational technology and marketing changes, we are making have ehealth on the right track to reach our goal of sustainable profitable growth and deliver value to our shareholders.

I'll now pass the Florida, Christine to discuss our financial results and outlook.

Second half of 2022 and greater detail Christine.

Yeah.

Thank you Fran and good afternoon, everyone.

Our core operational results for the second quarter before the impact of the revenue adjustment exceeded our expectations driven primarily by telephonic conversion rates that were favorable to our internal financial plan.

At the same time, our year over year comparisons for conversion rates revenue and profitability continue to be impacted by the changes in the enrollment process that we introduced in July of last year.

The net impact of the negative revenue adjustment from prior period enrollments was $8 7 million across all products with the largest impact coming from our Medicare book of business.

Based on our implementation of ASC 600 effects, we have guardrails in place that trigger a negative adjustment if cumulative churn on a cohort exceeds a certain threshold.

This adjustment applies even if a cohort is early in its life and Ken over time track to the original Ltvs as it matures.

The goal with our guardrails is to adjust our receivables in real time and prevent any sizeable revisions down the road.

Notably we do not use the same review policy with respect to positive revenue.

We are far more conservative in applying positive tail to our financial performance.

Instead positive tail is typically recognized only after we have three years of persistency observations on a cohort.

As a result, we have a sizable on.

<unk> recognized as it is.

On our Medicare book of business.

Within our Medicare segment second quarter Medicare advantage approved enrollments were approximately 51500 or a year over year decrease of 34%.

This made up the majority of our approximately 59400 and total Medicare enrollments, which were down 35% relative to Q2 2021.

The year over year decline in enrollments reflected a reduction in variable marketing spend and lower call conversion rates.

Q2 is the last full quarter that compares our current results against quarters with higher agent productivity, a year ago before the enrollment and verification steps and modified enrolment scripts were introduced.

We ended the quarter with estimated total Medicare advantage membership.

590000.

Compared to approximately 563000 at the end of Q2 2021.

Okay.

Ltvs of $886 declined 2% on a year over year basis, driven primarily by the lower retention rate, we saw within cohorts enrolled during the first half of 2021.

These cohorts were also the main contributors to the negative revenue adjustment that we booked in the quarter.

All in Medicare advantage customer acquisition costs.

<unk> variable marketing and Egypt related expense was $896.

This represented a sequential decline from $986 in Q1, this year driven by a 25% quarter over quarter decline in marketing costs per approved member.

And reflecting our strategy of a more targeted deployment of the marketing budget and limiting marketing spend within lower ROI channels.

As Fran mentioned in the second quarter, we significantly reduced our dollar spend for Directv and portions of the third party lead Gen channel.

Going forward, we will continue to enhance the marketing mix prioritizing member profitability over enrollment growth.

Second quarter Medicare advantage online unassisted applications grew 15% on a year over year basis to just over 7000 applications.

Similar to our overall marketing strategy, we are eliminating the lower performing areas.

Line advertising spend with a goal of continued growth in this channel in 2023.

Medicare segment revenue was $41 1 million down 44% from the year ago quarter.

Medicare segment loss was $25 3 million in the second quarter compared to a loss of $17 8 million in Q2 2021.

Individual family and small business segment revenue was $9 3 million with segment profit of $4 3 million.

Compared to $23 3 million and $17 9 million respectively.

Q2 of last year.

The year over year decline in segment revenue and profitability is attributable primarily to a reduction in tail revenue.

As a reminder, in Q2 of last year, we recorded a significant positive revenue adjustment of $15 8 million in the segment.

ISP enrollments were also down on an absolute basis, partially offset by another quarter of significant year over year increases in lifetime values of individual products.

As Fran mentioned we.

We'll be deploying the largest portion of our annual ISP budget in Q4, when the open enrollment period takes place.

We also see the most meaningful opportunities in the fourth quarter.

Moving now to our expenses.

In the second quarter total GAAP operating expense was $95 9 million.

21%.

From $121 9 billion in Q2 2021.

The decrease in total Opex was driven primarily by year over year decreases of $12 8 million or 35%.

Variable marketing expense and $9 2 million or 24% in <unk> costs.

On the fixed cost side second content spend declined 13% year over year to $17 8 million.

While G&A decreased 5% to $17 2 million for the quarter.

We also gained leverage from a decrease of $1 9 million or 24% of our fixed marketing costs.

For the full year, we expect a decline of over $60 million and full year operating expenses relative to 2021.

We ended the quarter with $199 2 million in cash cash equivalents and marketable securities and $65 4 million of debt.

Our balance sheet also reflects a commissions receivable balance of 801 6 million that is comprised of $201 3 million that we expect to collect over the next 12 months and $603 million and long term commission for favorable.

This compares with total commissions receivable of $755 6 million as of June 32021.

Operating cash flow for the second quarter was negative 25 8 million.

Paired to negative $32 1 million a year ago.

Trailing 12 month Medicare Commission cash collections were $323 5 million, an increase of 1% compared to a year ago.

We are in the process of planning capital structure strategies that will support our operational plan.

As we assess potential capital solutions, we are diligently considering all potential impacts of the solution on our shareholders and we will select the solution that gives us the best opportunity to create long term shareholder value.

We look forward to updating you on our progress as appropriate.

Turning to the outlook for the rest of the year.

During the quarter, we made the decision to reduce our variable marketing spend in the second half of the year relative to our original plan.

The objective is to further optimize our marketing mix and focus on the most profitable and strategically important channels.

We made a corresponding adjustment to our agent head count goals for this AEP.

The net impact of this plan is a lower overall enrollment and revenue outlook with adjusted EBITDA and GAAP net loss in line with the original operating plan.

Net of the negative revenue adjustment that we recognized this quarter.

Our new lower spending plan for the year. We will also have a significant positive effect on our cash flow.

Because our Medicare membership base, which grew 5% in Q2 continues to generate steady cash receipts a significant amount of these cost savings will have a direct positive impact on our total cash flow.

In addition to our lowered revenue outlook based on these operational decisions. We are also lowering our revenue adjusted EBITDA and net loss guidance to reflect the negative revenue adjustment we recognized in Q2.

The revenue adjustment is a noncash item and does not impact our expectations for total cash outflow for the year.

Our new guidance ranges are as follows.

Total revenue for 2022 is now expected to be in the range of $375 million to $395 million compared to our prior guidance range of 448 million to $470 million.

Yeah.

Net loss for 2022 is now expected to be in the range of 115 to 92 million.

Paired to our prior guidance range of $106 million to $83 million.

Adjusted EBITDA for 2022 is now expected to be in the range of negative <unk> 73 to negative $45 million compared to our prior guidance range of negative <unk> 64 to <unk>.

<unk> $37 million.

Total cash outflow for 2022, excluding the impact of our $70 million term loan and associated cost is now expected to be in the range of 110 to.

To $90 million compared to our prior guidance range of $140 million to $120 million.

Looking to the upcoming third quarter, we expect revenue to be relatively flat sequentially, while adjusted EBITDA is expected to decline sequentially.

Reflecting targeted marketing investment and telesales ramp ahead of this year's AEP.

I sure, France confidence and the transformational progress we are making at Ehealth.

In addition to driving cash flow upside in 2022 never revised operating plan creates leverage beyond this year by further rationalizing our demand generation strategy in line with what we are observing in the broader market and allowing us to enter 2023 on a.

Lower cost run rate, including a stronger and Nimbler telesales organization.

With that I'll turn it over to the operator to open up for Q&A.

Thank you at this time I would like to remind everyone in order to ask a question. Please press star and then the number one on your telephone keypad.

Your first question will come from Elizabeth Anderson with Evercore.

Hey, guys. Thanks, so much further question.

So a couple of questions maybe.

I appreciate you're giving us the updated.

Churn numbers on the.

The newest cohort.

I'm just trying to think of for people, who are just trying to sort of I know, we've been sort of so accustomed to like fixating on that over the years.

When when do you think that like the as we sort of think through the newer cohorts and the impact that they have on that total churn number is that like a 'twenty 'twenty three of it before we start to see those numbers on a year over year basis.

Move lower just help us think about that because they know that that's something that sort of incrementally always makes people nervous when it when they see it moving up.

Hi, This is fran thanks for joining us.

I think if you fall.

Paulo.

<unk>.

Follow sort of each each years life. If you will are caught up.

A tranche the January one.

<unk> cycle.

Think of it as a measurement over 12 months period, I mean, we do a quarterly but.

I think looking at it over 12 months is probably a more credible.

The next real credible measurement will be January of 'twenty three.

When when that when that cohort goes through.

The next annual election period.

And then there again through the OAP.

And then the next measurement period beyond that would be January of 'twenty four.

I think there is a kind of a key milestones.

Okay. That's really helpful and then as we think about.

I appreciate youre talking through the quality initiatives that you've been mentioning.

Can you comment on the overall hiring environment now.

How you are.

It is I know, it's sort of early days for the full AEP, but but how that's trending sort of to plan and then when do you.

Sort of lapped the implementation of the quality initiatives you put in place last year, because I would think that that would then sort of the comparison at least on the on the Medicare.

[noise] advantage and things conversion would become easier right is that the right way to think about that.

Let me take the second question first.

This quality initiative went into effect during the third quarter of 2001.

So the measurement year over year would begin this third quarter.

It will be able to do an apples to apples comparison.

And going forward.

Far as the.

The dynamics in terms of agent recruiting.

Recognizing that we are now a remote first.

Organization, and we're not sort of.

Beholden to any one geography, when we're looking to recruit agents that gives us greater flexibility and I would say that largely our needs have been met.

Provided our.

Our assumptions regarding agents.

Tricia and hold up of course.

So I would say that they are tracking pretty much to plan.

Yeah.

And that's.

Earlier this year.

And the comment as well, our chief operating officer oversees our tele sales operations.

But I think that the training is going really well.

Do you expect for graduation rates being higher than it has been historically and that's because we've changed the way that we are onboarding the agents with a more personal.

Hiring with the supervisor, who ultimately are going to be.

Before that that particular agent being the one who is doing the hiring as opposed to a recruiter. So there's just a whole process has been re-engineered. So Brian do you want to.

Thank you so we acknowledged.

This year that will be.

Your reservation and many more.

Good.

So we.

We were prepared for EEP and uhm.

We acknowledge that.

Sure.

Try try to our best too.

So it's really a substitute.

In person interaction.

Office with the.

Within the trading in April .

We increased our refresh for us within Uhm.

The interaction of new agents.

These are the agents with the management team all the way from supervisor to EPS sales.

There seem to be giving us early indicators of increased.

The higher start.

<unk>.

And.

On those.

A stronger focus on agent training, especially early on.

Stimulus with biopsy garden.

The expected performance during the recent originations for sure.

Got it that's helpful. Thank you very much.

Yeah.

Our next question comes from Daniel gross slate with Citigroup.

Hi, guys. Thanks for taking the question.

I just wanted to go to the unassisted online.

Enrollees in Medicare and Medicare advantage, so in <unk>, it was up around 12% year over year.

Back at <unk> was up around 50% and then back in <unk> 'twenty. One it was up around 80% I'm just curious if youre seeing.

Any.

Headwinds in this channel specifically, obviously, it's growing nice for you, but at a slower rate versus historical and how should we think about that.

Unassisted online for this upcoming AEP should we assume that's going to be a significant step down to last year's AEP growth, which was around 53%.

Hi, Daniel.

The.

We've been very.

Careful about our marketing spend in terms of even on the online your online an assistant.

There is multiple.

Ways that that money can be directed to.

Generate traffic to our online platform.

Yes.

Spend was.

Redirected to.

Those areas that we felt we were going to get.

The greatest lift.

And the highest conversion.

So it is.

More targeted.

We do expect.

Healthy growth from our online channel.

P.

We're not prepared to provide the guidance quite yet on what we think that will help.

Ultimately look like in terms of what or how.

Comparator to last year's AEP.

It is an important contributor to the overall story here at <unk>.

So we'll provide maybe a little more guidance in the near future.

Okay great.

Some of your competitors have spoken about growing revenue outside of core Medicare commissions I'm curious.

It's not something you've talked about much but I'm curious what levers you can pull to grow outside of commissions. If you plan maybe not this year, but next year Youre. After if you plan on investing in new more predictable revenue streams.

Well I want to make sure I understand the question because there is other.

I would say, it's somewhat related to the.

Medicare advantage business that were also compensated for that particular piece of that there.

There's other things that we already provide in the way of.

Services.

That we are in.

In discussions with several carriers.

About I would say they value in terms of.

Improving persistency.

Of their membership.

We can generate revenue as a result of that so the short answer is yes, we are definitely looking at that and see that as revenue opportunities.

<unk>.

It wouldn't be six X related revenue would be 605 related revenue.

<unk>.

Perhaps it would be more predictable.

Alright, I appreciate the color Brent.

Your next question comes from Tobey Sommer with <unk> Securities.

Thank you.

Under the new lower gross plan do you expect <unk> to remain in the.

Top tier for the major carriers, given the lower volume levels of sales that you expect.

Hi, Tobey Fran again, thanks for joining.

I think when we look at our partnership with top carriers.

You bet.

Wait those relationships based upon their net meaning.

Meaning that.

Yes.

Volume and the retention combined we're putting a lot of attention on.

Do you see the churn.

Improving the quality of driving continue to drive the Cts.

So great progress on.

And that's been noted by several of our carrier partners.

So.

We will remain quite realm.

Our relevance with with our carrier partners.

Perhaps will be less relevant with some of the smaller ones.

As we put more focus on some of the larger ones. So I would say thats the trade off.

Okay.

You mentioned I think in the prepared remarks, a comment about so.

Others in the market are also being more.

Sort of Scoop scrutinizing their marketing spend how can you tell that.

Competitors are also pulling back on their expectations for growth.

While we are relying on what they are saying publicly.

We're going to take them at their word.

Okay. So, but there is nothing in the marketplace as you see it or there are other signs that you can see.

In your day to day business activity that's occurring.

Not quite yet, but we would potentially see a reduction in traffic on our website and a lot of our categorization shoot our website too.

A couple of providers.

Sure.

Because they can do that using article.

<unk> been doing.

Yep.

Okay and then.

CMS front.

It was a little under a year ago for AEP, where there was a letter sent to remind everybody.

The rules of the road for marketing and sort of good behavior.

Do you expect anything this year.

How's the dialogue and interaction bandwidth regulators.

Okay.

Well.

Don't want to.

Two on <unk>.

Linear makes us.

Precedent.

You may or may not do I think they realize.

That came out.

We're quite late in the process.

Thanks.

But again.

So I grabbed the call later this week.

The administrator.

Yes.

Sure.

We felt that we had in China.

So this is to.

Catch them off of whats going on there.

Sure.

This world.

No.

In my mind.

The dialogue.

Okay.

Hopefully, we can avoid those kinds of situations.

Thank you.

Your next question comes from Ben Hendrix, with RBC capital market.

Hey, Thanks, guys I was wondering if you could give us any more information as you increasingly seem to be targeting your market variable marketing spend towards this higher ROI areas. If there are any characteristics as we kind of start applying that the spending that you are doing in the third quarter. If there are any kind of.

Cure characteristics specific characteristics you can offer that differentiate these higher ROI channels versus those that you're deemphasizing.

Hi, Ben.

I would.

Probably limit my comments right now I mean, I think it's fair to say that.

We have utilized right now.

Terry.

Yes.

Less about channel more.

How do you convey that message because theres a lot of a lot of traffic.

As you know George.

Okay.

Yes.

The message to convey how do we make sure.

Your message.

The rest of that.

Yes for sure.

Pick up the phone.

Youre going to rain.

And that's really what we're focused on.

How do we reach our audiences.

It's just been a revenue.

So.

And there are certain channels that are just.

Sure.

Perfect it more than others.

So thats, where we are.

Our focus.

Got you. Thank you and just one more last quarter, you mentioned that you had a strong online completion rate around 90% for ISP and you've called out the aircraft opportunity and now given that we've seen the extended Reconciliate reconciliation bill passed that extended the subsidies for.

For ACA plans I was wondering if you could have any early thoughts on where you think your RFP mix might go over the next couple of years. Thanks.

Yes.

I think the ISP.

The business will continue to be an important part of our portfolio I think.

Yes.

In particular right.

I still remain bullish on it.

You're going to see what we can achieve.

The fourth quarter first quarter.

Great.

I think it's an intriguing product.

Could be.

Helpful to small businesses.

So.

Very bullish on that.

I still think that there is.

Great opportunities with state exchanges.

But.

We remain encouraged to play a firearm.

Thank you.

Okay.

Yes.

And our final question comes from George Sutton with Craig Hallum.

Hey, Thank you. This is Adam on for George threat and in your remarks, you mentioned the goal to get to a profitable growth on an accelerated timeline I'm curious if there's any specific items that you could focus on.

That would either speed up or slow down that timeline in your in your mind.

Hi, Adam Thanks for joining.

We're we're really pulling all those levers right now.

We have worked very diligently to.

Take out cost we've made great progress there.

We continue to work to improve the conversion rates for example on our tele sales as well as our online.

And the marketing optimization will remain a focus.

We're pulling all the right levers we have to continue to make important progress there.

I think it's basically it comes down to the time.

Takes to get to that optimal level and continue to take out more costs.

And I think.

Clinical shape, but it's about turning the corner and I think we're getting closer and closer to turning that corner.

Great and just one more from me with respect to the <unk> opportunity.

Any potential way to size, what do you think that may be relative to other opportunities for this year and what do you think it could potentially grow into it I know, it's rather early for it but any any type of thoughts would be helpful.

Well I'd love to stick my neck out, but my general counsel is sitting here and shooting looks at Nissan.

And I have to.

Dodge that question a bit let's just say this that.

It's been sized on a national scale and there is some side by a couple of different experts and the numbers range by.

Pretty substantial.

Level so.

I think that when we talk about later this year, we talk about the revenue growth.

Opportunities.

Perhaps I can be a little more specific.

Yes.

Let me say that I'm very bullish on it I think that.

It's going to create gain.

<unk> and momentum over the next two to three years.

Small employers.

Realized what it can do how it can be utilized in terms of it doesn't necessarily have to solve all of their needs can solve harder learnings.

And.

If they have a strategy and a strategy that.

Can certainly help them work through.

It's a great tool.

Rachel.

So.

I'll just leave it as I'm very bullish.

Yes.

There are no further questions at this time.

Mr Sweetman.

I would like to turn the call over to you.

Well. Thank you operator first I'd like to leave you with a few closing thoughts.

<unk> team continues to make important changes in nearly every aspect of our business towards our goal of returning the company to profitable growth.

Positive cash flow as quickly as possible.

Every day, we're making important progress on our strategic plan and our operational priorities.

Now that we're at the end of the day here on August eight T minus 68 days at the beginning of AEP.

And our readiness is tracking to plan.

So we look forward to our follow up conversations and continuing to share updates on our progress this year.

Thank you again for joining us this afternoon.

Operator.

This concludes the <unk> 2022.

<unk> quarter.

Conference results you may now disconnect.