Q4 2023 eHealth Inc Earnings Call
Yes.
Operator: Good morning everyone, and welcome to Ehealth Inc.'s conference call to discuss the company's fourth quarter and fiscal 2023 financial results. At this time, all participants have been placed in a listen-only mode, and the floor will open for your questions following the prepared remarks. I will now turn the floor over to Eli Newbern-Mintz, Senior Investor Relations Manager. Please go ahead.
Speaker Change: Good morning, everyone and welcome to Ehealth, Inc Conference call to discuss the company's fourth quarter and fiscal 2023 financial results.
Speaker Change: At this time, all participants have been placed in a listen only mode and the floor will open for your questions. Following the prepared remarks, I will now turn the floor over to Elaine <unk> Senior Investor Relations manager. Please go ahead.
Speaker Change: Yeah.
Speaker Change: Yeah.
Michael Newshel: Good morning, and thank you all for joining us today. On the call today, Fran Soistman, Ehealth's Chief Executive Officer, and Jon Stelbin, Chief Financial Officer, will discuss our fourth quarter and fiscal year 2023 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.
Elaine: Good morning, and thank you all for joining us today on the call today, France, So Eastman Ehealth, Chief Executive Officer, and John <unk>, Chief Financial Officer will discuss our fourth quarter and fiscal year 2023 financial results. Following these prepared remarks, we will open up the line for a Q&A session with industry analysts.
Elaine: 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.
Michael Newshel: 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 and future filings or communications regarding our business or results.
Elaine: 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 <unk> views as of today and actual results could differ materially we undertake no obligation to publicly address or update any.
Elaine: Forward looking statements and future filings or communications regarding our business or results. The forward looking statements, we will be making during this call are subject to a number of uncertainties and risks, including but not limited to those described in today's press release and in our most recent annual report on Form 10-K, and our subsequent filings with the SEC.
Michael Newshel: 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 FDA. We will also be discussing certain non-GAAP financial measures on this call. Management's definitions of those non-GAAP measures and reconciliation to the most directly comparable GAAP financial measures are included in today's press release. With that, I'll turn the call over to Fransuy.
Elaine: We will also be discussing certain non-GAAP financial measures on this call managements definitions of those non-GAAP measures and reconciliation to the most directly comparable GAAP financial measures are included in today's press release with that I'll turn the call over to Francois.
Francois: Thank you Eli and good morning, everyone.
David K. Francis: Thank you, Eli, and good morning, everyone. Today we will discuss our fourth quarter and fiscal year 2023 results and our 2024 outlook. Our fourth-quarter results demonstrate the success of our transformation program and our company-wide AEP preparedness efforts. One of our primary goals this year was to return to fourth-quarter Medicare enrollment growth on a profitable basis and with a substantially enhanced operational foundation. I am pleased to announce that we have successfully accomplished this objective, delivering strong growth in Medicare enrollment and revenue, as well as a significant improvement in our profitability metrics compared to Q4 of 2022. Our execution in 2023 has positioned us well for this year with an expanded and more productive telesales organization supported by technology enhancements and continuous reinforcement of training, positive momentum, and our brand building initiatives, a wider and more diversified portfolio of marketing channels, and a promising start for Amplify, our new dedicated carrier business.
Francois: Today, we will discuss our fourth quarter and fiscal year 2023 results and 2020 for outlook.
Francois: Our fourth quarter results demonstrate the success of our transformation program and our companywide AEP preparedness efforts.
Francois: One of our primary goals. This year was to return to fourth quarter Medicare enrollment growth on a profitable basis and a substantially enhanced operational foundation I.
Francois: I am pleased to announce that we have successfully accomplish this objective delivering strong growth in Medicare enrollment and revenue as well as a significant improvement in our profitability metrics compared to Q4 of 2022.
Francois: Our execution in 2023 has positioned us well for this year with an expanded and more productive telesales organization supported by technology enhancements and continuous reinforcement of training positive momentum in our brand building initiatives.
Francois: A wider and more diversified portfolio of marketing channels and a promising start for amplify our new dedicated carrier business.
David K. Francis: We are excited to continue building on this foundation in 2024 as we plan to drive growth, further enhance our profitability metrics, and pursue business diversification. Before diving into our operational performance, I want to share some thoughts on the current industry landscape. Medicare Advantage has proven to be highly valued by seniors, with over 30 million Americans enrolled and continuous share gains relative to the traditional Medicare program. During this AEP, carriers continue to offer robust plan selection, strong provider networks, and attractive benefits. In fact, the average beneficiary had access to 43 Medicare Advantage plans, the largest number of options ever.
Francois: We are excited to continue building on this foundation in 2024, as we plan to drive growth further enhance our profitability metrics and pursue business diversification.
Speaker Change: Before diving into our operational performance I want to share some thoughts on the current industry landscape.
Speaker Change: Medicare advantage has proven to be highly valued by seniors with over 30 million Americans enrolled and continuous share gains relative to the traditional Medicare program.
Speaker Change: This AEP carriers continued to offer robust plan selection strong provider networks and attracted benefits in fact, the average beneficiary had access to forty-three Medicare advantage plans the largest number of options ever as of January 2020 for the individual Ma.
David K. Francis: As of January 2024, the individual MA market grew 2.3% sequentially and 9.4% year-over-year, representing a slight acceleration from last January when it grew 1.1% and 9.2%, respectively. The agnostic nature of our platform allows Ehealth to succeed by providing great selection and plan match advice to our customers, regardless of competitive and market share dynamics. This was evident in our fourth quarter MA enrollments, which grew 22% year-over-year ahead of overall market growth. Ehealth's value proposition is rooted in our customer-centric marketplace that provides beneficiaries with free access to data-powered tools and our staff of full-time benefit advisors who are licensed agents to help them find health insurance that best fits their needs.
Speaker Change: Market grew two 3% sequentially and nine 4% year over year, representing a slight acceleration from last January when it grew one 1% and nine 2% respectively.
Speaker Change: The agnostic nature of our platform allows ehealth to succeed by providing great selection and plan match advisory to our customers regardless of competitive market share dynamics.
Speaker Change: This was evident in our fourth quarter and the enrollments, which grew 22% year over year ahead of overall market growth.
Speaker Change: Health value proposition is rooted in our customer centric marketplace that provides beneficiaries with free access to data power tools and our staff a full time benefit advisors, who are licensed agents to help them find health insurance that best fits their needs.
David K. Francis: The increasingly local market focus of our sales and marketing strategies further enhances our ability to find optimal plan matches. Specifically, we are improving our ability to use the unique aspects of each market, such as provider and pharmacy networks, to give beneficiaries tailored plan recommendations. Moving into 2024, several national carriers have publicly commented on their plans to emphasize profit over enrollment growth this year. While it's premature to speculate on final plan filings for next AEP, we do expect changes in benefit structure and potential market exits by carrier. This sets the stage for more shopping and creates an opportunity for ehealth and our carrier-agnostic choice platform. We are fully prepared to assist beneficiaries in evaluating their options and choosing the right plan should their networks or benefits change. This may involve transitioning to a different plan or remaining with their coverage, depending on their individual needs.
Speaker Change: Increasingly local market focus of our sales and marketing strategy further enhances our ability to find optimal plan matches.
Speaker Change: Specifically, we are improving our ability to use the unique aspects of each market such as provider in pharmacy networks to get beneficiary tailored plan recommendations.
Speaker Change: Moving into 2020 for several national carriers have publicly commented on their plans to emphasize profit over enrollment growth. This year, while it is premature to speculate on final planned filings for next AEP, we do expect changes in benefit structure and potential market exits by carriers.
Speaker Change: This sets the stage for more shopping and creates an opportunity for ehealth and our carrier agnostic choice platform.
Speaker Change: We are fully prepared to assist beneficiaries in evaluating their options and choosing the right plan should their networks or benefits change.
Speaker Change: This may involve transitioning to a different plan or remaining with their coverage depending on their individual needs.
David K. Francis: Given our differentiated value proposition, we expect to grow in 2024 by gaining market share. What we see is a more rational marketplace, as reflected in our outlook. I also want to comment on the CMS proposal for Medicare policy and technical changes for contract year 2025. First and foremost, ehealth fully supports CMS's efforts to increase transparency and provide protections for Medicare beneficiaries. With respect to this specific proposal, the full scope and practical implications are not yet clear. Industry participants, including Ehealth, have already submitted comments seeking clarification and are raising important questions and concerns. Given the complexity and ambiguity of the proposal, combined with the nature of the commentary we are seeing, the implementation timeline and scope are uncertain.
Speaker Change: Our differentiated value proposition, we expect to grow in 2024 by gaining market share.
Speaker Change: What we see is a more rational marketplace as reflected in our outlook.
Speaker Change: I also want to comment on the Cms's proposal for Medicare policy and technical changes to contract to your 2025.
ehealth: First and foremost ehealth fully support Cms's efforts to increase transparency and provide protections for Medicare beneficiaries.
ehealth: With respect to this specific proposal the full scope and practical implications are not yet clear.
ehealth: Industry participants, including Ehealth have already submitted comments seeking clarification and are raising important questions and concerns.
ehealth: Given the complexity and ambiguity of the proposal combined with the nature of the commentary we are seeing.
ehealth: The implementation timeline and scope is uncertain.
ehealth: As we and other industry participants await clarification on many of the questions. We have raised it is plausible that this will not be finalized and implemented in 24, especially as it pertains to compensation issues.
David K. Francis: As we and other industry participants await clarification on many of the questions we have raised, it is plausible that this will not be finalized and implemented in 2024, especially as it pertains to compensation issues. It appears that at least one of the issues that CMS is trying to solve is Medicare market share consolidation, with certain national carriers getting larger. However, in our view, the manner in which they are approaching this trend may not result in CMS's desired impact.
ehealth: It appears that at least one of the issues that CMS is trying to solve is Medicare market share consolidation with certain national carriers getting larger.
ehealth: However, in our view the manner in which they are approaching this trend may not result in cms's desired impact.
ehealth: Brokers and agents bring choice to consumers Ehealth.
ehealth: Ehealth in particular represents over 55 Medicare carriers.
ehealth: What the carriers are gaining or losing share on our platforms speaks to the strength of their plan offerings and not their payments to ehealth.
ehealth: For example, <unk>.
ehealth: Stronger stars performance yields larger CMS rebates for carriers, allowing them to offer rich planned benefits and potentially attract more customers Nash.
David K. Francis: Brokers and agents bring choice to consumers. Ehealth, in particular, represents over 55 Medicare carriers. Whether carriers are gaining or losing share on our platform speaks to the strength of their plan offerings, and not their payments to ehealth. For example,
ehealth: National carriers have disproportionately larger geographic footprints in comparison to local and regional health plans.
ehealth: Similarly, we have observed that plans featuring value based care typically experienced greater provider network stability and as a result are more attracted to beneficiaries.
David K. Francis: Stronger stars performance yields larger CMS rebates for carriers, allowing them to offer rich plan benefits and potentially attract more customers. National carriers have disproportionately larger geographic footprints in comparison to local and regional health plans. Similarly, we have observed that plans featuring value-based care typically experience greater provider network stability, and as a result, are more attractive to beneficiaries. It's important to note that Ehealth's recommendation algorithm is blind to carrier payment arrangements.
ehealth: It's important to note that Ehealth recommendation algorithm is blind to carrier payment arrangements.
ehealth: <unk>.
ehealth: It is essential to assess the impact of the significant MA regulations implemented over the past two years around sales and marketing practices.
ehealth: We believe it is prudent to give the existing regulations and opportunity to demonstrate their effectiveness and evaluate their impact before introducing further changes base.
ehealth: Based on the public comments, we've reviewed other industry players agree with our assessment.
ehealth: Moving now to our fourth quarter operational performance.
ehealth: Throughout AEP, we emphasized the agility in our execution.
ehealth: We made dynamic resource shifts into the best performing areas, allowing us to deliver strong growth.
David K. Francis: In addition, it is essential to assess the impact of the significant MA regulations implemented over the past two years concerning sales and marketing practices. We believe it is prudent to give the existing regulations an opportunity to demonstrate their effectiveness and evaluate their impact before introducing further changes. Based on the public comments we've reviewed, other industry players agree with our assessment. Moving now to our fourth quarter operational performance. Throughout AEP, we emphasize agility in our execution. We made dynamic resource shifts into the best-performing areas, allowing us to deliver strong growth at an attractive margin, despite what many characterized as a challenging AEP environment. Specifically, we saw great results and leans into our branded marketing channels, including TV, page search, social media, and emails. A major contributor to the success of our direct marketing channels was our rebranding initiative, featuring an effective messaging strategy to support our efforts to cut through the clutter that we launched ahead of AEP. Our new TV campaigns had a particularly powerful impact.
ehealth: <unk> margins, despite what many characterized as a challenging AEP environment.
ehealth: Specifically, we saw great results and leaned into our branded marketing channels, including TV paid search social media and E mails.
ehealth: A major contributor to the success of our direct marketing channels was our rebranding initiative featuring an effective messaging strategy to support our efforts to cut through the clutter that we launched ahead of AEP.
ehealth: Our new TV campaigns had a particularly powerful impact.
ehealth: We believe our branding efforts combined with audience segmentation and targeting strategies can create a flywheel effect in future enrollment periods as we focus on increasing ehealth recognition nationwide as a trusted and unbiased Medicare matchmaker.
ehealth: During AEP, our telesales organization benefited from our enhanced training protocol and earlier hiring ramp.
ehealth: We were also pleased to witness the continued success of our local market model.
ehealth: This success further reinforces our belief that healthcare is local and that by specializing our benefit advisors can serve customer needs more effectively fourth quarter telephonic conversion rates were slightly down year over year, reflecting a significant mix shift towards non tenured advisors.
David K. Francis: We believe our branding efforts combined with audience segmentation and targeting strategies can create a flywheel effect in future enrollment periods as we focus on increasing ehealth recognition nationwide as a trusted and unbiased Medicare matchmaker. During AEP, our telesales organization benefited from our enhanced training protocol and earlier hiring. We're also pleased to witness the continued success of our local market model. The success further reinforces our belief that health care is local and that by specializing, our benefit advisors can serve customer needs more effectively. Fourth quarter telephonic conversion rates were slightly down year over year, reflecting a significant mixed shift toward non-tenured advisors.
Controlling for length of tenure, though.
ehealth: Allophonic conversion rates increased compared to last AEP puts the most substantial year over year conversion rate increase as seen with our newly hired advisers.
ehealth: We attribute this success to the implementation of our redesigned training program enhanced advisor scripts and ongoing professional development initiative called sales mastery University.
ehealth: And 24, we plan for tenured advisers to represent a larger percentage of our total adviser mix, which we expect to have a favorable impact on our telephonic conversions.
ehealth: In terms of online performance, our fourth quarter unassisted conversion rate increase more than 20% year over year, driven by further enhancements to our online user tools and stronger alignment between audience, driven marketing campaign and landing page experience.
David K. Francis: Controlling for length of tenure, though, telephonic conversion rates increased compared to last AEP, with the most substantial year-over-year conversion rate increases seen with our newly hired advisors. We attribute this success to the implementation of our redesigned training program, enhanced advisor scripts, and ongoing professional development initiatives called Sales Mastery University. In 2024, we plan for tenured advisors to represent a larger percentage of our total advisor mix, which we expect to have a favorable impact on our telephonic conversion. In terms of online performance, our fourth quarter unassisted conversion rate increased more than 20% year-over-year, driven by further enhancements to our online user tools and stronger alignment between audience-driven marketing campaigns and landing page experience. Another important development during the AEP was the successful expansion of our new dedicated carrier business, Amplify. Amplify is a revenue diversification initiative within our broader strategy of supplementing our core Medicare Advantage agency business with new margin-creative initiatives. Within the Amplify model, carriers generate and drive inbound calls to our dedicated advisors.
ehealth: Another important development during the AEP, whereas the successful expansion of our new dedicated carrier business amplified.
ehealth: Amplify is a revenue diversification initiative within our broader strategy of supplementing our core Medicare advantage agency business with new margin accretive initiatives.
ehealth: Within the amplify model carriers generate and drive inbound calls to our dedicated advisors. This reduces variable marketing investment needed to grow our revenue and earnings and improves our cash flow profile.
ehealth: It is also an opportunity to expand our value proposition to carrier partners.
ehealth: While we've delivered outstanding customer experience to our amplify partners and set successful foundation for this business.
ehealth: Volumes that we expected in this channel came in below forecast.
ehealth: This was reflective of AEP performance for those amplify carrier partners.
ehealth: During the quarter, we opportunistically shifted some of our resources, including call Center advisors towards our best performing channels in our agency model.
ehealth: Mitigating volume shortfall and amplified.
ehealth: Importantly, we came away with meaningful takeaways for forecasting and growing this business and have already added a significant new carrier contract for 2024.
ehealth: Amplify remains an attractive growth and diversification opportunity for Ehealth.
ehealth: Moving now to our retention initiatives.
ehealth: Through AEP, we maintained our steadfast focus on enrollment quality and customer experience.
David K. Francis: This reduces variable marketing investment needed to grow our revenue and earnings and improves our cash flow profile. It is also an opportunity to expand our value proposition to carrier partners. While we've delivered outstanding customer experiences to our Amplify partners and set successful foundations for this business, volumes that we expected in this channel came in below forecast. This was reflective of AEP performance for those Amplify carrier parts.
ehealth: We continue to make progress in our member retention program through the Onboarding engagement and renewal phases of the customer journey.
ehealth: Strategies introduced this year included overhauling, the onboarding experience to be more tailored to each customer circumstances.
ehealth: The establishment of a loyalty program and.
ehealth: And increasingly intentional year round outreach to our existing members.
ehealth: The impact can be seen in the 11% year over year improvements to our fourth quarter M. A L. T V's, which reflects positive retention trends for last year's AEP cohort among other factors.
David K. Francis: During the quarter, we opportunistically shifted some of our resources, including call center advisors, towards our best performing channels in our agency model, mitigating volume shortfalls in Amplify. Importantly, we came away with meaningful takeaways for forecasting and growing this business and have already added a significant new carrier contract for 2024. Amplify remains an attractive growth and diversification opportunity for Ehealth. Moving now to our retention initiative. Through AEP, we maintained our steadfast focus on enrollment quality and customer experience. We continue to make progress in our member retention programs through the onboarding, engagement, and renewal phases of the customer journey. Strategies introduced this year include overhauling the onboarding experience to be more tailored to each customer's circumstances.
ehealth: It is also seen in the positive net adjustment revenue of just under $15 million that we recognized in 2023.
ehealth: John will cover these metrics in greater detail in.
ehealth: In terms of the early indicators of our enrollment quality for this cycle, we are experiencing stable trends relative to this time last year in terms of Cts performance and carrier feedback.
ehealth: Generally we are performing in line with internal call centers for some of our top carrier partners, which we view as a very positive indicator.
ehealth: In our earnings presentation, you can find our updated operational priorities for 2024.
I'll briefly address each of them now.
ehealth: First grow our revenues year over year by gaining share in the Medicare market and continuing our push for diversification. We also remain committed to increasing adjusted EBITDA profitability and building on last year's cash flow achievements.
ehealth: This will be accomplished through greater operational efficiencies.
David K. Francis: The establishment of a loyalty program and increasingly intentional year-round outreach to our existing members. The impact can be seen in the 11% year-over-year improvements in our fourth quarter MA LTVs, which reflect positive retention trends for last year's AEP cohort, among other factors. It is also seen in the positive net adjustment revenue of just under $50 million that we recognized in 2023. John will cover these metrics in greater detail.
ehealth: And further reductions in our fixed cost through opportunities, we identified as part of our 24 planning process.
ehealth: Second.
ehealth: Advance our local market focused omnichannel enrollment engine to drive higher conversions and greater LTV to CAC ratio in.
ehealth: In our Medicare choice model, specifically, we will continue working towards building a distinctive consumer brand a major competitive advantage in a sector, where no distributor enjoy strong brand awareness.
ehealth: This has become increasingly important given recent regulatory changes aimed at industry lead generation practices. We plan to continue diversifying our marketing channel mix with emphasis on scaling our direct branded channels as well as our best performing strategic partnerships.
David K. Francis: In terms of the early indicators of our enrollment quality for this cycle, we are experiencing stable trends relative to this time last year in terms of CTM performance and carrier feedback. Generally, we are performing in line with internal call centers for some of our top carrier partners, which we view as a very positive indicator. In our earnings presentation, you can find our updated operational priorities for 2024. I'll briefly address each of them now.
ehealth: Ehealth digital organization is constantly exploring ways of enhancing our beneficiaries experience with the goal of driving greater adoption of our online unassisted and Omnichannel tools.
ehealth: Our broader objective is to maintain the personal touch of an in person interaction between an adviser and beneficiary, while increasing efficiency through the use of technology.
ehealth: We were pioneers in introducing co browsing technology in our industry.
ehealth: And we're now thrilled to announce our newest innovation, which builds on that capability with plans to pilot in the second quarter.
David K. Francis: First, grow our revenues year over year by gaining share in the Medicare market and continuing our push for diversification. We also remain committed to increasing adjusted EBITDA profitability and building on last year's cash flow achievement. This will be accomplished through greater operational efficiency and further reductions in our fixed costs through opportunities we identified as part of our 24 planning process.
ehealth: Adviser in the room for error will allow beneficiaries to see their advisor via video as they navigate the platform and look at available plan options together.
ehealth: Establishing connectivity to beneficiaries is often the key to building credibility confidence and trust ultimately leading to stronger conversion performance.
ehealth: Looking ahead, we plan to continue building out our competitive moat advancing our position as a technology leader in this space.
David K. Francis: Advance our local market-focused, omni-channel enrollment engine to drive higher conversions and a greater LTV-to-CAC ratio in our Medicare Choice model. Specifically, we will continue working towards building a distinctive consumer brand, a major competitive advantage in a sector where no distributor enjoys strong brand awareness.
ehealth: <unk> <unk>.
ehealth: Launched the next phase of our member loyalty and retention strategy.
ehealth: As I covered earlier, we made encouraging progress on our retention goals and are beginning to reap the rewards of that progress in the form of higher Ltvs and positive net adjustment revenue. The second phase of our retention strategy involves developing a single unified view of the member across their full journey with Ehealth.
ehealth: This includes tracking all channels and interactions with our platform, including lead nurturing service support and value added programs.
David K. Francis: This has become increasingly important given recent regulatory changes aimed at industry-lead generation practices. We plan to continue diversifying our marketing channel mix with emphasis on scaling our direct branded channels, as well as our best performing strategic partnerships. Ehealth's digital organization is constantly exploring ways of enhancing our beneficiaries' experience with the goal of driving greater adoption of our online, unassisted, and omni-channel tools. Our broader objective is to maintain the personal touch of an in-person interaction between an advisor and beneficiary while increasing efficiency through the use of technology. We were pioneers in introducing co-browsing technology in our industry, and we're now thrilled to announce our newest innovation, which builds on that capability with plans to pilot in the second quarter. Advisor in the Room, or AIR, will allow beneficiaries to see their advisor via video as they navigate the platform and look at available plan options together.
ehealth: We'll be making our retention initiatives increasingly personalized to each member's unique situations and needs.
ehealth: Fourth.
ehealth: Drive our <unk> strategy and fortify the organizational foundation that supports our strategic partners and direct to employer opportunities.
ehealth: This includes scaling our dedicated carrier business, expanding our value proposition for strategic partners and growing our employer offering from our legacy focus on small businesses to a broader audience of employers that can benefit from our services.
ehealth: Fifth and finally.
ehealth: Enhanced ehealth comprehensive product portfolio beyond Medicare advantage agency business to drive year round growth.
ehealth: The business transformation that we launched two years ago focused primarily on our core Medicare advantage business investing in new revenue streams and innovative products is an important part of our future growth strategy, specifically, we plan to scale existing products and services, including Med Sup Medicare ancillary vikram.
ehealth: An employer and individual plants.
ehealth: Ehealth was originally established as an online insurance marketplace catering to individuals under the age of 65 and small businesses. However, our strategy shifted rapidly towards Medicare after the implementation of the Affordable Care Act.
David K. Francis: Establishing connectivity to beneficiaries is often the key to building credibility, confidence, and trust, ultimately leading to stronger conversion performance. Looking ahead, we plan to continue building out our competitive mode, advancing our position as a technology leader in the space. Third, launch the next phase of our member loyalty and retention strategy. As I covered earlier, we made encouraging progress on our retention goals and are beginning to reap the rewards of that progress in the form of higher LTVs and positive net adjustment revenue. The second phase of our retention strategy involves developing a single, unified view of the member across their full journey with eHealth. This includes tracking all channels and interactions with our platform, including lead nurturing, service, support, and value-added programs.
ehealth: The landscape now is rapidly evolving presenting us with a compelling opportunity to reclaim our leadership position through our employer and individual business segment.
There are a few particular themes that drive our conviction and our non <unk> business lines.
ehealth: The first is growth trends within the individual exchanges fueled by Medicaid Redetermination.
ehealth: Handed product offerings from leading carriers and attractive pricing and subsidies.
ehealth: Next we see aircraft or individual coverage health reimbursement arrangements as.
As a potential significant opportunity lifted by rising premiums for employer coverage and the growing consumer amortization of health care.
ehealth: Within Medicare, we believe that Medicare supplement is an additional diversification opportunity as we may see an uptick in demand for these plans in certain demographics as carriers pare down their benefits and focus on margins in that product line.
ehealth: In conclusion, when I joined the company in November of 2021, we established a set of important goals and commitments.
David K. Francis: We will be making our retention initiatives increasingly personalized to each member's unique situation and needs, forward, Drive our B2B strategy and fortify the organizational foundation that supports our strategic partners and direct to employer opportunities. This includes scaling our dedicated carrier business, expanding our value proposition for strategic partners, and growing our employer offering from our legacy focus on small businesses to a broader audience of employers that can benefit from our services. Fifth, and finally.
Through the successful implementation of our business transformation and cost reduction programs, we have effectively fulfill these commitments as evidenced by our 2023 results.
ehealth: As we move forward, we're setting new commitment aligned with our strategic priorities in 2024 financial guidance.
I look forward to reporting on our achievements of these objectives.
ehealth: Additionally, I want to recognize the strong culture that we have fostered here at Ehealth and the significant contributions made by our employees and management team.
David K. Francis: Enhance Ehealth's comprehensive product portfolio beyond Medicare Advantage agency business to drive year-round growth. The business transformation that we launched two years ago focused primarily on our core Medicare Advantage business. Investing in new revenue streams and innovative products is an important part of our future growth strategy. Specifically, we plan to scale existing products and services, including MedSup, Medicare ancillaries, ICRA, and employer and individual plans. Ehealth was originally established as an online insurance marketplace catering to individuals under the age of 65 and small businesses.
ehealth: And now I will turn the call over to Jon who will cover our financial performance in greater detail and discuss our 2024 guidance John.
Jon: Thank you Fran and good morning.
Jon: Fourth quarter results reflect significant year over year improvements across our critical financial and operating metrics.
Jon: Medicare segment profit consolidated GAAP net income and adjusted EBITDA, all improved significantly compared to Q4 a year ago.
Jon: Importantly, fourth quarter and full year 2023, operating cash flow exceeded our expectations, reflecting favorable retention trends in our Medicare book of business among other factors.
David K. Francis: However, our strategy shifted rapidly towards Medicare after the implementation of the Affordable Care Act. The landscape is now rapidly evolving, presenting us with a compelling opportunity to reclaim our leadership position through our employer and individual business segments. There are a few particular themes that drive our conviction in our non-MA business life.
Jon: Fourth quarter 'twenty, three revenue was $247 7 million, representing 26% year over year growth driven by strong performance within our Medicare segment.
Jon: Fourth quarter Medicare segment revenue was $233 7 million up 30% year over year, reflecting approved member growth, increasing our ltvs and <unk>.
David K. Francis: The first is growth trends within individual exchanges fueled by Medicaid redetermination, expanded product offerings from leading carriers, and attractive pricing and subsidies. Next, we see ICRA, or the Individual Coverage Health Reimbursement Arrangement, as a potential significant opportunity fueled by rising premiums for employer coverage and the growing consumerization of healthcare. Within Medicare, we believe that Medicare Supplement is an additional diversification opportunity as we may see an uptick in demand for these plans in certain demographics as carriers pare down their MA benefits and focus on margins in that product line.
Jon: Positive net adjustment or tail revenue.
Jon: Excluding tail revenue in both periods Q4, 23 total revenue grew 25% and Medicare segment revenue grew 28% compared to Q4 of 'twenty two.
Jon: Fourth quarter Medicare advantage approved members were approximately 160000, an increase of 22% year over year.
Jon: Total Medicare approved members grew 16% year over year to approximately 187000, reflecting growth in Medicare advantage and Medicare supplement enrollments and a decline in part D applications, which we view as part of our continued market wide shift.
David K. Francis: In conclusion, when I joined the company in November of 2021, we established a set of important goals and commitments. Through the successful implementation of our business transformation and cost reduction programs, we have effectively fulfilled these commitments, as evidenced by our 2023 results. As we move forward, we're setting new commitments aligned with our strategic priorities and 2024 financial guidance. I look forward to reporting on our achievements of these objectives.
Jon: From Standalone drug claims.
Jon: Fourth quarter, Medicare advantage lifetime value increased 11% year over year to 1151.
Jon: The increase in our MAA LTV is primarily reflective of improved retention on the AEP cohort, we enrolled in Q4 of 'twenty, two as well as favorable carrier mix and contract mix.
John: Additionally, I want to recognize the strong culture that we have fostered here at Ehealth and the significant contributions made by our employees and management teams. And now I will turn the call over to John, who will cover our financial performance in greater detail and discuss our 2024 guidance.
Jon: Positive persistency dynamics on your existing book of business.
Jon: Along with strong cash collections also drove positive tailed revenue during the quarter.
Speaker Change: I'd now like to spend a moment, explaining the interdependencies between several important metrics of our business.
Speaker Change: Member retention.
John: Thank you, Fran, and good morning. Our fourth quarter results reflect significant year-over-year improvements across our critical financial and operating metrics. Medicare Segment profit, Consolidated Gap Net Income, and Adjusted EBITDA all improved significantly compared to Q4 a year ago. Importantly, fourth quarter and full year 2023 operating cash flow exceeded our expectations, reflecting favorable retention trends in our Medicare book of business, among other factors. Fourth quarter 23 revenue was $247.7 million, representing 26% year-over-year growth, driven by strong performance within our Medicare segment. Fourth quarter Medicare segment revenue was $233.7 million, up 30% year over year, reflecting approved member growth.
Speaker Change: <unk> time values net adjustment or tail revenue and cash flow.
Speaker Change: In accordance with U S GAAP, specifically accounting standard 606.
Speaker Change: We record our initial revenue in a manner that makes significant negative reversals in future periods not probable.
Speaker Change: In order to satisfy this guideline we among other factors apply a 7% constraint to the Medicare advantage ltvs generated by our actuarial models.
Speaker Change: That means if future cash receipts are in line with initial unconstrained estimates, we would expect to recognize revenue over the life of that cohort.
Speaker Change: While there may be other factors in our initial revenue estimates that could lead to future tail.
Speaker Change: Meaning adjustments that are either positive or negative.
Speaker Change: These are the basics of our revenue recognition process.
Speaker Change: Between 2021, and 2023 initial revenue was constrained by approximately $90 million across all products, which is the difference between our revenue recorded on a constraint basis over that period.
John: An increase in our MALTVs and Positive Net Adjustment or TAIL revenue. Excluding tail revenue in both periods, Q4'23 total revenue grew 25%, and Medicare segment revenue grew 28% compared to Q4'22. In the fourth quarter, Medicare Advantage approved members were approximately 160,000, an increase of 22% year over year. Total Medicare approved members grew 16% year over year to approximately 187,000, reflecting growth in Medicare Advantage and Medicare Supplement enrollments and a decline in Part D applications, which we view as part of a continued market-wide shift away from standalone drug plans. The fourth quarter Medicare Advantage lifetime value increased 11% year over year to $1,151.
Speaker Change: What we would've estimated.
Speaker Change: Im constrained basis.
Speaker Change: Some of that has already come through its tail in 2023 and prior years.
Speaker Change: And based on my previous statements, we see a high likelihood of future recovery stemming from these constraints.
Speaker Change: Assuming cohort performance in line with our unconstrained expectations.
Speaker Change: Again.
Speaker Change: Given our accounting policy to broke initial revenue and a constrained manner.
Speaker Change: At accordance with U S GAAP under ASC 606.
Speaker Change: Positive tail is an expected outcome of this process.
Speaker Change: Positive tail revenue in a given year speaks to stable or improving retention trends and commission rates within our member base and is a testament to the high quality of our contract asset receivable.
John: The increase in our MALTV is primarily reflective of improved retention in the AEP cohort we enrolled in Q4 of 22, as well as favorable carrier mix and contract mix. Additionally, positive Persistency Dynamics on our existing book of business, along with strong cash collections, also drove positive tail revenue during the quarter. I'd now like to spend a moment explaining the interdependencies between several important metrics of our business, member retention, lifetime values, Net Adjustment or Tail Revenue, and Cash Flow, in accordance with U.S. GAAP, specifically Accounting Standard 606. We record our initial revenue in a manner that makes significant negative reversals in future periods not probable. In order to satisfy this guideline, we, among other things, apply a 7% constraint to the Medicare Advantage LTVs generated by our actuarial model.
Speaker Change: And 'twenty three we recognized total tail revenue of $48 1 million, including $15 6 million in the fourth quarter.
Speaker Change: This compares to a $6 4 million in fiscal year, 'twenty, two and $11 1 million in Q4 of 'twenty two.
Speaker Change: The strong cash performance of our existing book of business combined with continued cost discipline also drove our outperformance on the operating cash flow, which came in well above guidance range for the full year 2023.
Speaker Change: In sum tailed revenue is a reflection of key operational trends in our business and not simply an accounting notion.
Speaker Change: Strong enrollment quality also contributed to the increased fourth quarter and a unit margin measured as the spread between LTV and total variable marketing and see any cost per approved member.
John: That means if future cash receipts are in line with initial unconstrained estimates, we would expect to recognize tail revenue over the life of that cohort. While there may be other factors in our initial revenue estimates that could lead to future tail, meaning adjustments that are either positive or negative, these are the basics of our revenue recognition process. Between 2021 and 2023, initial revenue was constrained by approximately $90 million across all products, which is the difference between our revenue recorded on a constrained basis over that period and what we would have estimated on an unconstrained basis. Some of that has already come through as a tail in 2023 and prior years. And based on my previous statement... We see a high likelihood of future recovery stemming from these constraints, assuming cohort performance is in line with our unconstrained expectations.
Speaker Change: As you can see in our earnings presentation, we achieved significant margin expansion in Q4, 'twenty two and built on that improvement in the fourth quarter of 'twenty three.
Speaker Change: Taking a closer look at enrollment margins fourth quarter see any per <unk> equivalent approved member increased 25% year over year.
Speaker Change: This was driven by a meaningfully larger advisor base relative to last year.
Speaker Change: Including a larger contribution from non tenured advisers, coupled with lower volumes than anticipated and our carrier dedicated and strategic partner channels.
Speaker Change: While our year over year Q4 approved apps grew 16% overall for Medicare and 22% for Medicare advantage.
Speaker Change: Ehealth staffed in anticipation of even higher volumes.
John: And again, given our accounting policy to book initial revenue in a constrained manner, in accordance with U.S. GAAP under ASC 606, positive tail revenue in a given year speaks to stable or improving retention trends and commission rates within our member base and is a testament to the high quality of our contract asset receivables. In 23, we recognized total TAIL revenue of $48.1 million, including $15.6 million in the fourth quarter.
Speaker Change: Medicare variable marketing costs per <unk> equivalent approved member decreased by 3% year over year.
Speaker Change: This was the result of a more measured approach to spend and the high quality leads from our direct channels, which we believe is indicative of the positive impact our rebrand.
Speaker Change: This AEP also saw a greater coordination between our marketing campaigns and online customer experience, which was one of the drivers behind an increase of more than 20% in online unassisted conversions.
John: This compares to a tail of $6.4 million in fiscal year 22 and $11.1 million in Q4 of 22. The strong cash performance of our existing book of business, combined with continued cost discipline, also drove our outperformance on operating cash flow, which came in well above the guidance range for the full year 2023. In sum, tail revenue is a reflection of key operational trends in our business and not simply an accounting notion.
Speaker Change: Overall.
Speaker Change: First quarter total acquisition costs per MAA equivalent approved member with $779, an increase of 7% year over year.
Speaker Change: Q4, 'twenty three enrollment margin with 32% compared to 29% in Q4 of 'twenty, two and 12% in Q4 of 'twenty one.
John: Strong enrollment quality also contributed to the increased fourth quarter MA unit margin, measured as the spread between LTV and total variable marketing and CC&E cost per approved member. As you can see in our earnings presentation, we achieved significant margin expansion in Q4 of 22 and built on that improvement in the fourth quarter of 23. Taking a closer look at enrollment margins, fourth quarter CC&E per MA equivalent approved member increased 25% year over year.
Speaker Change: We expect to make further improvements in this metric going forward.
Speaker Change: A combination of enrollment margin expansion fixed cost savings until revenue contributed to a 27.1 million year over year increase in our fourth quarter Medicare segment profit.
Speaker Change: Which was $80 3 million compared to $53 2 million in Q4 of 'twenty two.
Speaker Change: I'll now move to our Eni segment.
Speaker Change: As Fran discussed we are investing in this area to reset the foundation of our legacy business and are broadening its scope.
John: This was driven by our meaningfully larger advisor base relative to last year, including a larger contribution from non-tenured advisors, coupled with lower volumes than anticipated in our carrier dedicated and strategic partner channels. While our year-over-year Q4 approved apps grew 16% overall for Medicare and 22% for Medicare Advantage, Ehealth staffed in anticipation of even higher volumes. Medicare variable marketing costs per MA equivalent approved member decreased by 3% year over year.
Speaker Change: Fourth quarter segment revenue was $14 million.
Speaker Change: Decrease of 12% year over year, driven primarily by a decline in enrollments year over year and roughly flat ltvs.
Speaker Change: This segment did generate $4 8 million in town revenue as we continue observing favorable retention trends on our major medical ISP products.
Speaker Change: Fourth quarter segment profit was $7 1 million compared to $9 2 million a year ago.
Speaker Change: Despite a smaller contribution to our overall revenue relative to Medicare. This segment continues to generate attractive margins.
John: This was a result of a more measured approach to spend and the high quality leads from our direct channels, which we believe is indicative of the positive impact of our rebrand. This AEP also saw greater coordination between our marketing campaigns and the online customer experience, which was one of the drivers behind an increase of more than 20% in online unassisted conversions. Overall, the fourth quarter total acquisition cost per MA equivalent approved member was $779, an increase of 7% year-over-year.
Speaker Change: We believe can be scaled going forward.
Speaker Change: Moving to our operating expenses and consolidated profitability metrics.
Speaker Change: Total fourth quarter non-GAAP operating expense.
Speaker Change: Which excludes stock based compensation and the impairment and restructuring charges.
Speaker Change: It was $182 8, million% to 20% increase compared to Q4 'twenty two.
Speaker Change: This reflects roughly flat fixed costs, which we define as the combination of technology and content fixed marketing and general and administrative.
John: Q4'23 enrollment margin was 32% compared to 29% in Q4'22 and 12% in Q4'21. We expect to make further improvements in this metric going forward. A combination of enrollment margin expansion, fixed cost savings, and tail revenue contributed to a $27.1 million year-over-year increase in our fourth quarter Medicare segment profit, which is $80.3 million compared to $53.2 million in Q4 of 2022. I'll now move to our E&I segment. As Fran discussed, we are investing in this area to reset the foundation of our legacy business and are broadening its scope. Fourth quarter segment revenue was $14 million, a decrease of 12% year-over-year, driven primarily by a decline in enrollments year-over-year and roughly flat LTVs. The segment did generate $4.8 million in TAIL revenue as we continue observing favorable retention trends on our major medical IFP products. Fourth quarter segment profit was $7.1 million compared to $9.2 million a year ago.
Speaker Change: And on the variable cost side, our investments in demand generation and the advisor compensation as we.
Speaker Change: Turn to enrollment growth in our Medicare segment.
Speaker Change: The increase in our non-GAAP marketing and advertising expense was smaller than our year over year increase in enrollment growth.
Speaker Change: Reflecting greater effectiveness of our demand generation strategies.
Speaker Change: Total Q4, non-GAAP <unk> expense grew 47%, reflecting an increase in advisor head count within our agency and dedicated carrier businesses.
Speaker Change: On a consolidated basis fourth quarter GAAP net income was $52 2 million compared to $27 million in Q4, a year ago.
Speaker Change: Fourth quarter, adjusted EBITDA was $69 6 million.
Speaker Change: An increase of 41% from $49 5 million in Q4 of 'twenty two.
Speaker Change: For the full year 2023, total revenue was $452 9, million% to 12% increase year over year, and 1% increase ex town.
Total 2023, Medicare advantage approved members for 291000, representing a decrease of 4% and total 2023 Medicare approved members were 337000, representing a decrease of 7%.
John: Despite its small contribution to our overall revenue relative to Medicare, this segment continues to generate attractive margins that we believe can be scaled going forward. Moving to our operating expenses and consolidated profitability metrics, Total fourth-quarter, non-gapped operating revenue, which excludes stock-based compensation and impairment and restructuring charges, was $182.8 million, a 20% increase compared to Q4 of 2022. This reflects roughly flat fixed costs, which we define as the combination of technology and content, fixed marketing, and general and administrative.
Speaker Change: Recall that we entered 2023 on a much lower run rate in terms of our advisor head count and demand generation spend versus prior year.
Speaker Change: This is reflective of our significant cost reductions implemented in April 22, and our focus on execution of the business transformation plan, while temporarily pulling back on growth.
Speaker Change: As a result, the first quarters of the year showed year over year enrollment declines combined with improved profitability on both an adjusted EBITDA and GAAP net income basis.
John: And on the variable cost side, our investments in demand generation and advisor compensation as we return to enrollment growth in our Medicare segment. The increase in our non-gap marketing and advertising expense was smaller than our year-over-year increase in MA enrollment growth, reflecting greater effectiveness of our demand generation strategy. Total Q4 non-GAAP CCME expense grew 47%, reflecting an increase in advisor headcount within our agency and dedicated carrier business. On a consolidated basis, fourth quarter gap net income was $52.2 million compared to $20.7 million in Q4 a year ago. The fourth quarter adjusted EBITDA was $69.6 million.
Speaker Change: On a year over year basis.
Speaker Change: School year 'twenty three GAAP net income improved 65 million to a GAAP net loss of $28 2 million.
Speaker Change: And adjusted EBITDA improved $55 7 million to $14 1 million compared to fiscal year, 'twenty, two or an improvement of $29 1 million and $14 1 million, respectively. When excluding channel revenue.
Speaker Change: Moving to cash flow fiscal year 'twenty three operating cash flow was a negative $6 7 million well ahead of the high end of our guidance range and a significant improvement relative to fiscal 'twenty two operating cash flow.
John: An increase of 41% from $49.5 million in Q4 of 2022. For the full year 2023, total revenue was $452.9 million, a 12% increase year-over-year and 1% increase ex-tail. Total 2023 Medicare Advantage approved members were 291,000, representing a decrease of 4%. And total 2023 Medicare approved members were 337,000, representing a decrease of 7%.
Speaker Change: Negative $26 9 million.
Speaker Change: As I mentioned earlier it is critical to understand the increase in LTV estimates and recognition of tail revenue are a direct result of collecting cash at or above our constraint to expectations.
Speaker Change: Fourth quarter operating cash flow is negative $33 4 million versus a negative $18 6 million in Q4 of 22.
Speaker Change: As a reminder, fourth quarter reflects our investment in AEP related enrollment growth while the majority of initial commission payments from these policies come in during Q1.
John: Recall that we entered 2023 on a much lower run rate in terms of our advisor headcount and demand generation spend versus the prior year. This is reflective of our significant cost reductions implemented in April 22 and our focus on execution of the business transformation plan while temporarily pulling back on growth. As a result, the first quarters of the year show year-over-year enrollment declines, combined with improved profitability on both an adjusted EBITDA and GAP-Net income basis. Fiscal year 23, gap net income improved $60.5 million to a gap net loss of $28.2 million, and Adjusted EBITDA improved $55.7 million to $14.1 million compared to FY22, or improvements of $29.1 million and $14.1 million, respectively, when Moving on to cash flow.
Speaker Change: We ended the year with $121 7 million in cash cash equivalents in marketable securities.
Speaker Change: We believe we have more than sufficient liquidity to continue delivering on our operational and financial objectives.
Speaker Change: The ending position.
Speaker Change: Of combined short and long term contract asset receivable with $918 million up from $884 million a year ago.
Speaker Change: This reflects Q4 enrollment growth and the upward revisions to our contract asset.
Speaker Change: Slow through our income statement in the form of tail revenue.
Speaker Change: I'll now review our financial guidance for 2024.
Speaker Change: We expect total revenue to be in the range of $450 million to $475 million.
Speaker Change: We expect GAAP net loss to be in the range of $40 million to 'twenty earnings.
Speaker Change: We expect adjusted EBITDA to be in the range of negative 5 million to positive $20 million.
John: Fiscal year 23 operating cash flow was negative $6.7 million, well ahead of the high end of our guidance range and a significant improvement relative to fiscal 22 operating cash flow of negative $26.9 million. As I mentioned earlier, it is critical to understand that increases in LTV estimates and recognition of TAIL revenue are a direct result of collecting cash at or above our constrained expectations. Fourth quarter operating cash flow is negative $33.4 million versus a negative $18.6 million in Q4 of 22. As a reminder, fourth quarter reflects our investment in AEP-related enrollment growth, while the majority of initial commission payments from these policies come in during Q1. We ended the year with $121.7 million in cash, cash equivalents, and marketable securities.
Speaker Change: Operating cash flow is expected to be in the range of negative <unk> 15 to negative $5 million.
Speaker Change: These ranges are based on our plans to continue growing Medicare enrollments across our agency and carrier dedicated platforms.
Speaker Change: Our guidance also reflects the positive impact from adviser mix shift towards a greater percentage of tenured advisors.
Speaker Change: A large cohort of first year advisors, we hired in 'twenty three enters their second year with Ehealth.
Speaker Change: We are also expecting a positive impact from the expansion of our best performing marketing channels and continued traction of our brand strategy.
Speaker Change: 2020 for revenue guidance ranges include an estimate for positive net adjustment revenue in the range of zero to $15 million.
John: We believe we have more than sufficient liquidity to continue delivering on our operational and financial objectives. The ending position of combined short and long-term contract asset receivable was $918 million, up from $884 million a year ago. This reflects Q4 enrollment growth and upward revisions to our contract asset that flow through our income statement in the form of tail revenue. I'll now review our financial guidance for 2024. We expect total revenue to be in the range of $450 to $475 million. We expect GAAP net loss to be in the range of $40 million to $20 million. We expect adjusted EBITDA to be in the range of negative $5 million to positive $20 million. Operating cash flow is expected to be in the range of negative $15 to negative $5 million.
Speaker Change: Reflecting a potential tail revenue that was previously constrained.
Speaker Change: This again speaks to the stability of our member cohorts and ultimately the quality of our enrollments.
Speaker Change: Excluding the impact of town in both years, the midpoint of our 2024 guidance reflects approximately 12% year over year revenue growth and a substantial improvement in GAAP net income and adjusted EBIDTA.
Similar to last year, we expect that all of our positive adjusted EBITDA will be generated in the fourth quarter of 24, reflecting the seasonality of the Medicare business.
Speaker Change: Fiscal year 2020 for cash flow guidance reflects our investment in Medicare enrollment growth and business diversification.
Speaker Change: We expect to be around breakeven operating cash flow for the trailing 12 months ended March 2024 and to generate positive operating cash flow for the trailing 12 months ending March 25.
John: These ranges are based on our plans to continue growing Medicare enrollments across our agency and carrier dedicated platforms. Our guidance also reflects the positive impact from an advisor mix shift towards a greater percentage of tenured advisors as the large cohort of first-year advisors we hired in 23 enters their second year with Ehealth. We are also expecting a positive impact from the expansion of our best-performing marketing channels and continued traction of our brand strategy. 2024 Revenue Guidance ranges include an estimate for positive net adjustment revenue in the range of $0 to $15 million, reflective of potential tail revenue that was previously constrained. This again speaks to the stability of our member cohorts and, ultimately, the quality of our enrollment.
Speaker Change: This compares to negative $13 2 million, we reported for the trailing 12 months ended March 2023.
Speaker Change: Looking ahead to Q1 of 'twenty four on an ex <unk> basis, we expect revenue to increase in the teens relative to the first quarter of 'twenty, three reflecting our larger benefited advisor count and enrollment volume.
Speaker Change: We also expect a slight year over year improvement in profitability.
Speaker Change: Operator, please open the line for Q&A.
Speaker Change: Thank you and at this time, if you would like to ask a question. Please press star and then one on your telephone keypad you may remove yourself from the queue at any time by pressing star two.
John: Excluding the impact of TAIL in both years, the midpoint of our 2024 guidance reflects approximately 12 percent year-over-year revenue growth and a substantial improvement in gap net income and adjusted EVA jobs. Similar to last year, we expect that all our positive adjusted EBITDA will be generated in the fourth quarter of 2024, reflecting the seasonality of the Medicare business. Fiscal year 2024 cash flow guidance reflects our investment in Medicare enrollment growth and business diversification. We expect to be around break-even operating cash flow for the trailing 12 months ended March 2024 and to generate positive operating cash flow for the trailing 12 months ending March 25. This compares to negative 13.2 million we reported for the trailing 12 months ended March of 2023.
Speaker Change: Once again that is star one to ask a question and our first question will come from George Sutton with Craig Hallum. Please go ahead.
George Sutton: Thank you and I appreciate all the details on the call.
George Sutton: You wrote a very interesting open letter to CMS and I'm, just curious what sort of a response you got from.
George Sutton: Both carriers and and if any from CMS relative to the thought that let's give some of these changes a chance to actually be able to evaluate if they work before we make a lot of other changes and you had some other interesting ideas just curious the response you got.
Speaker Change: Good morning, George good to hear you.
Speaker Change: Thanks for the question.
Speaker Change: That letter.
Speaker Change: Really think of that as sort of an op, Ed and we use the social media.
Speaker Change: And it got a lot of attention and overwhelming support for being.
Speaker Change: A very well number one addressing <unk>.
John: Looking ahead to Q1 of 24, on an ex-tail basis, we expect revenue to increase in the teens relative to the first quarter of 23, reflecting our larger Benefit Advisor count and enrollment volume. We also expect a slight year-over-year improvement in profitability. Operator, please open the line for Q&A. Thank you, and at this time, if you would like to ask a question, please press star and then 1 on your telephone keypad. You may remove yourself from the queue at any time by pressing star 2.
Speaker Change: Addressing the concerns are.
Speaker Change: About the AEP process, and then secondly, the regulatory environment, where.
Speaker Change: More regulatory changes follow.
Speaker Change: Before.
Speaker Change: For the new year before those that were put in place in the previous year have time too.
Speaker Change: So really affect outcome.
Speaker Change: I haven't received anything from CMS I didn't expect to.
Speaker Change: Carriers.
Speaker Change: Largely supported because they face the same challenges in terms of year after year their surgery and so it's a question that was a major surgery or.
Operator: Once again, that is star number one to ask a question, and our first question will come from George Sutton with Craig Hallam. Please go ahead. Thank you, and I appreciate all the details on the call. Fran, you wrote a very interesting open letter to CMS, and I'm just curious what sort of a response you got from both carriers and, if any, from CMS, relative to the thought that, you know, let's give some of these changes a chance to actually be able to evaluate if they work before we make a lot of other changes. You had some other interesting ideas. I was just curious about the response you got.
Speaker Change: Or or less invasive surgery, but nevertheless, it's disruptive it's expensive.
Speaker Change: And the yen.
Speaker Change: There tends to be unintended consequences to beneficiary usually through.
Speaker Change: Mark infusion, so it doesn't clear things up but actually oftentimes muddies the water some more.
Speaker Change: They don't like beneficiary don't like.
Speaker Change: Three minutes of disclaimers.
Speaker Change: Right right out of the gate I mean think about it but that's the world we live in right now and it's not very customer friendly.
Speaker Change: I am a senior I think you know that.
Speaker Change: A lot of friends, who are my same age span and I talked with them frequently about their experiences and so it's not just one person's opinion, it's fairly widespread.
David K. Francis: Good morning, George. It's good to hear from you. Thanks for the question. You know, that letter was really, think of that as sort of an op-ed, and we use it on social media. And it got a lot of attention and overwhelming support for being, well, number one, addressing the concerns about the AEP process. And then, secondly, the regulatory environment where more regulatory changes follow before the new year before those that were put in place in the previous year have time to really affect outcomes. I haven't received anything from CMS. I didn't expect to, but carriers largely support it because they face the same challenges in terms of year after year their surgery. It's a question of whether it's major surgery or less invasive surgery, but nevertheless, it's disruptive, it's expensive, and in the end, there tends to be unintended consequences for beneficiaries, usually through more confusion.
Speaker Change: But my my.
Speaker Change: My goal was to start a dialogue I didn't expect the seismic shift initially, but I do think it has been received well.
Speaker Change: By carriers I will let you know that our public policy Advisory Council. We have two former governors that serve on that advisory Council and they have pendant op Ed that will follow mine, so that will be coming out.
Speaker Change: Likely this week and these are two highly respected former governors.
Speaker Change: One representing Democratic policy, one representing Republican policy, but they are absolutely in lock step.
Speaker Change: This regulatory environment, and giving regulations a chance to.
Speaker Change: Effect before new ones follow so let me let me see if that answers your question.
Speaker Change: Oh, that's great and I'll just I'm here to tell you that I think you would be relatively young for our U S presidential candidates for what that's worth.
Speaker Change: Yes.
David K. Francis: So it doesn't clear things up, it actually oftentimes muddies the water some more. They don't like it, beneficiaries don't like it. Three minutes of disclaimers, right out of the gate. I mean, think about it.
Speaker Change: I.
Speaker Change: I did want to talk about your comment about profitability over enrollment from the carriers, which is obviously something they've been clear about you can read that as carriers are planning to spend less money to try to go after a larger audience, which I wouldnt see as positive for you I believe you were suggesting that it could increase the amount of shopping because the quality.
David K. Francis: But that's the world we live in right now, and it's not very customer-friendly. I am a senior, I think you know that. And I have a lot of friends who are my same age.
David K. Francis: And I talk with them frequently about their experiences. And so it's not just one person's opinion. It's fairly widespread.
Speaker Change: One of the options for the beneficiaries would not necessarily be as exciting and therefore more more moving around is that effectively what you're saying.
David K. Francis: But my goal was to start a dialogue. I initially didn't expect a seismic shift. But I do think it has been received well by carriers. I will let you know that on our Public Policy Advisory Council, we have two former governors that serve on that Advisory Council, and they have penned an op-ed that will follow mine. So that will be coming out likely this week. And these are two highly respected former governors, one representing Democratic policy, one representing Republican policy, but they're absolutely in lockstep on this regulatory environment and giving regulations a chance to take effect before new ones follow.
Speaker Change: I think you've captured it largely George.
Speaker Change: You know I spent.
Speaker Change: Most of my career on the carrier side.
Speaker Change: No the playbook.
Speaker Change: When these situations occur and.
Speaker Change: I think it will likely play itself out again and that is that they're very disciplined about.
Speaker Change: Where they grow and how they.
Speaker Change: So I think that win.
Speaker Change: Reis get tough.
Speaker Change: Margins get pressured.
Speaker Change: You will see.
Speaker Change: In markets, where star scores are closer to three and a half so lets say then versus 445.
David K. Francis: So let me see if that answers your question. That's great. And I'll just, I'm here to tell you that I think you would be relatively young for a U.S. presidential candidate, for what that's worth.
Speaker Change: We're gonna see more benefit changes there.
Speaker Change: That's going to create some volatility with beneficiaries and an opportunity to see if there is a 455 star plan alternatives that they should consider that.
David K. Francis: I did want to talk about your comment about profitability over enrollment from the carriers, which is obviously something they've been clear about. You can read that as carriers are planning to spend less money to try to go after a larger audience, which I wouldn't see as positive for you. I believe you are suggesting that it could increase the amount of shopping because the quality of the options for the beneficiaries would not necessarily be as exciting and, therefore, more people moving around. Is that effectively what you're saying? I think you've captured it largely, George.
Speaker Change: That's still preserves the rich supplemental benefits, but they've grown accustomed to over the last few years I think that.
Speaker Change: The the national carriers will be very strategic in where they focus the growth and where they can see share.
Speaker Change: Does there need to be the provider dynamics have changed they don't have the unit cost.
Speaker Change: Yes.
Speaker Change: The favorability that they may have had previously so I think we will see some.
Speaker Change: See some market exits I do think that.
Speaker Change: Preservation of the zero dollar premium products will continue to be Paramount.
David K. Francis: You know, I spent most of my career on the carrier side, and I sort of know the playbook when these situations occur. And I think it'll likely play itself out again. And that is that they're very disciplined about where they grow and how. So I think that when the race gets tough... Margins get pressured, you will see in markets where star scores are closer to three and a half, let's say, than versus four, four and a half. You're going to see more benefit changes there. That's going to create some volatility with beneficiaries and an opportunity for them to see if there's a four and a half, five star plan alternative that they should consider that still preserves, you know, the rich supplemental benefits that they've grown accustomed to over the last few years.
Speaker Change: It is.
Speaker Change: It eliminates the barrier to sales and introducing a premium to someone that heretofore has had zero dollar monthly premium would be very disruptive and I think carriers will avoid that at all costs.
Speaker Change: Perfect. Thanks for the thoughts.
Speaker Change: And thank you for the question.
Speaker Change: Our next question will come from Ben Hendrix with RBC capital. Please go ahead.
Speaker Change: Hi, This is Michael Murray on for Ben.
Michael Murray: So you guys saw declines in EMEA approved members. This year, just given lower agent head count and I'm, sorry, if I missed this but do you anticipate increasing head count this year.
Michael we actually grew.
Michael Murray: Year over year.
David K. Francis: I think that the national carriers will be very strategic in where they focus their growth and where they concede share because there could be provider dynamics have changed; they don't have the unit costs or favorability that they may have had previously. So I think we'll see some, you know, some market exits. I do think that preservation of the $0 premium product will continue to be paramount. It is, you know, it eliminates the barrier to sales, and introducing a premium to someone that's been here for four has had zero dollar monthly premium would be very disruptive, and I think carriers will avoid that at all costs.
Michael Murray: In the fourth quarter, so and Thats when the full effects of our.
Michael Murray: Marketing reengineering.
Michael Murray: When in place we were.
Michael Murray: Marketing was the last area of transformation.
Michael Murray: By design, because it started with bringing on a new leader in.
Michael Murray: In November of 'twenty to Michel Barbell, so rebuilding hurricane.
Michael Murray: Implementing new strategies, we saw that play out very very nicely in the fourth quarter, So I'm thrilled with.
Michael Murray: That demonstration of great progress.
Michael Murray: The agent counts.
Michael Murray: It's going to be a little different in 'twenty four 'twenty three because of our amplify business. So we will be growing our agent.
Michael Murray: <unk> resources are amplified because we're bringing on our business new.
George Sutton: Perfect. Thanks for the thoughts. Thanks for the question. Our next question will come from Ben Hendricks with RBC Capital. Please go ahead. Hi, this is Michael Murray on behalf of Ben.
Michael Murray: Nice new customer.
Michael Murray: But we'll be on the agency side will be relatively flat.
Okay and then.
David K. Francis: So you guys saw a decline in MA approved members this year, just given lower agent headcount, and I'm sorry if I missed this, but do you anticipate increasing headcount this year? Well, Michael, we actually grew year over year in the fourth quarter. So, and that's when the full effect of our marketing reengineering went in place. You know, marketing was the last area of transformation by design because it started with bringing on a new leader in November of 22, Michelle Barbeau. So rebuilding her team, implementing new strategies, we saw that play out very, very nicely in the fourth quarter.
Speaker Change: Also let me also point out Michael.
Speaker Change: While we will be relatively flat to a modest increase.
Speaker Change: The tenured.
Speaker Change: Our relationship to new agents will be much better in other words, we'll have a larger proportion of our agent base with.
Michael Murray: More experience than what we had in 2023, where we had a large influx of new agents. So that's deliberate and we believe that's going to help with conversion performance.
At the upcoming AEP, yes, Michael folks what the enrollments to grow again this year, probably very similar to the midpoint of the revenue growth that was provided in the guidance.
David K. Francis: So I'm thrilled with that demonstration of great progress. The AG Count is going to be a little different in 24 than 23 because of our Amplify business. So we will be growing our agent resources for Amplify because we're bringing in a new business, a nice new customer, but we'll be on the agency side relatively flat. Okay, and then also, let me also point out, Michael, that while we will be relatively flat to a modest increase, the tenured relationship to new agents will be much better. In other words, we'll have a larger proportion of our agent base with more experience than what we had in 2023, when we had a large influx of new agents. So that's deliberate, and we believe that's going to help with conversion performance at the upcoming AEP.
Michael Murray: We don't break hotspot as well this spread between amplify which is the double quarter Chiara is there enough on.
Michael Murray: A choice, but to all our overall it will be sort of in that ballpark.
Speaker Change: Okay. That's really helpful. And then just a quick one on the cost side.
Speaker Change: Regarding customer care and enrollment that increase those costs increase throughout the year.
Speaker Change: I wanted to see how we should be thinking about that for 2024.
Speaker Change: Jonathan Yeah in the 'twenty 'twenty four guidance again, as Fran mentioned earlier on the agency side.
Jonathan: Well the agent counts will.
Jonathan: We will be up a little bit year over year.
Jonathan: The growth is predominantly in.
Jonathan: In the amplify business.
Jonathan: Due to the new customer contract and some other dynamics in there I would say that yeah.
David K. Francis: Yeah, Michael, so expect enrollments to grow again this year and probably very similar to the midpoint of the revenue growth that was provided in the guidance. We don't break out how this will be spread between Amplify, which is the dedicated care unit, and our agency choice, but the overall growth will be sort of in that ballpark. Okay, that's really helpful. And then just a quick one on the cost side, regarding customer care and enrollment, you know, that increased; those costs increased throughout the year. I wanted to see how we should be thinking about that for 2024. Yeah, in the 2024 guidance, again, as Fran mentioned earlier, on the agency side, while the agent counts will be up a little bit year over year, the growth is predominantly in the amplifified business. Due to the new customer contract and some other dynamics in there, I would say that year over year, the absolute increase in CC&E will be less than what you saw in absolute terms in 2023.
Jonathan: Year over year, the absolute increase in <unk> will be less than what you saw in absolute terms in 'twenty three over.
Jonathan: 'twenty two.
Speaker Change: Okay. That's helpful. Thank you.
Speaker Change: Yes.
Speaker Change: I was just going to say you should expect we do expect to see continued expansion.
Speaker Change: In our LTV to CAC.
Speaker Change: On the MAA in the fourth quarter of 24 versus fourth quarter of 2003.
Speaker Change: Okay. Thank you.
Speaker Change: And again that is star one if you would like to ask a question.
France Weisman: And with no further questions I would like to turn the call back to France, Weisman for any additional or closing remarks.
France Weisman: Well, thank you operator.
France Weisman: I want to thank everyone again for joining our earnings call as we continue to build momentum in 2024, I am confident in this organization's ability to navigate our dynamic industry and seize new opportunities throughout the year.
France, Weisman: This is a battle tested team that brings discipline to everything we do with the courage to make changes where necessary.
France, Weisman: As he helped build on our foundation of steady profitable growth, we will continue to innovate to reflect the needs of beneficiaries and our carrier partners and we look forward to updating you on our progress in the coming quarters. Thank you very much.
John: Okay, that's helpful. Thank you. I was just going to say, we do expect to see continued expansion in our LTV to CAC on MA in the fourth quarter of 24 versus the fourth quarter of 23. Okay, thank you. And again, that is star number one if you would like to ask a question.
Speaker Change: And that will conclude today's goodbye. Thank you for your participation and you may now disconnect.
Speaker Change: [music].
David K. Francis: And with no further questions, I'd like to turn the call back to Fran Soysen for any additional or closing remarks. Thank you, operator. Well, I want to thank everyone again for joining our earnings call. As we continue to build momentum in 2024, I am confident in this organization's ability to navigate our dynamic industry and seize new opportunities throughout the year. This is a battle-tested team that brings discipline to everything we do with the courage to make changes when necessary. As Ehealth builds on our foundation of steady, profitable growth, we will continue to innovate to reflect the needs of beneficiaries and our carrier partners.
Speaker Change:
Speaker Change: Mhm.
Speaker Change: [music].
Speaker Change: Hum.
[music].
Speaker Change: Hum.
Speaker Change: [music].
Speaker Change: Mhm.
Speaker Change: [music].
Speaker Change: Hum.
Speaker Change: Oh.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: [music].
Operator: We look forward to updating you on our progress in the coming quarters. Thank you very much. And that will conclude today's conference. Thank you for your participation, and you may now disconnect.
Speaker Change: Hum.