Q2 2024 eHealth Inc Earnings Call

Please stand by, we're about to begin.

Unknown Executive: Good morning, everyone. And welcome to Ehealth Inc's conference call to discuss the company's second quarter financial, excuse me, second quarter, 2024 financial results. At this time, all participants have been placed in a listen-only mode.

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

Unknown Executive: The floor will be open for your questions following the prepared remarks.

Eli Newbrun: I will now turn the floor over to Eli Newbrun, Senior Investor Relations Manager. Please go ahead. Good morning, and thank you all for joining us today.

Unknown Executive: Good morning, and thank you all for joining us today. On the call today, Fran Soistman, Ehealth's Chief Executive Officer, and John Stelben, Chief Financial Officer, will discuss our second quarter 2024 financial results. Following these prepared remarks, we will open up the line for a Q&A session with industry analysts. As a reminder, this call is being recorded and webcast from the Investor Relations section of our website. A replay of the call will be available on our website later today.

Eli Newbrun: On the call today, Francis Soistman, Ehealth's Chief Executive Officer, and John Stelben, Chief Financial Officer, will discuss our second quarter 2024 financial results. Following these prepared remarks, we will open up the line for a Q&A session with industry analysts. As a reminder, this call is being recorded and webcast from the Investor Relations section of our website. A replay of the call will be available on our website later today. Today's press release, our historical financial news releases, and our filings with the SEC are also available on our Investor Relations site.

Speaker Change: 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.

Speaker Change: Today's press release, our historical financial news releases, and our filings with the SEC are also available on our Investor Relations site.

Eli Newbrun: We will be making forward-looking statements on this call about certain matters that are based upon management's current beliefs and expectations relating to future events impacting the company and our future financial or operating performance. Forward-looking statements on this call represent Ehealth's views as of today, and actual results could differ materially. We undertake no obligation to publicly address or update any forward-looking statements, except as required by law. The forward-looking statements we will be making during this call are subject to a number of uncertainties and risks, including but not limited to those described in today's press release and in our most recent annual report on Form 10-K and our subsequent filings with the SEC.

Speaker Change: 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.

Unknown Executive: Forward-looking statements on this call represent Ehealth's views as of today, and actual results could differ materially. We will also be discussing certain non-GAAP financial measures on this call. Management's definitions of these non-GAAP measures and reconciliations to the most directly comparable GAAP financial measures are included in today's press release. With that, I'll turn the call over to Francis.

Speaker Change: Forward looking statements on this call represent Ehealth's views as of today and actual results could differ materially.

Speaker Change: We undertake no obligation to publicly address or update any forward-looking statements except as required by law.

Eli Newbrun: We will also be discussing certain non-GAAP financial measures on this call. Management definitions of these non-GAAP measures and recommendations to the most directly comparable GAAP financial measures are included in today's press release.

Francis Soistman: With that, I'll turn the call over to François Smith. Thank you, Eli. Good morning, and thank you to everyone joining us today.

Speaker Change: With that, I'll turn the call over to Francis Soistman.

Francis Soistman: Thank you, Eli. Good morning and thank you to everyone joining us today.

Francis Soistman: Before we dive deeper into the discussion of the second quarter, I wanted to address the news we announced last night.

Francis Soistman: I will be retiring from my role as CEO by or before the second quarter of 2025 once the successor is on board. As you may recall, I came out of retirement three years ago to take on the CEO role in November of 2021. It has been a privilege to lead this company during this time. Since then, I am proud of the leadership team we've assembled during my tenure and the progress we have made in transforming Ehealth by creating a healthy and vibrant culture and evolving carrier relationships.

Francis Soistman: I will be retiring from my role as CEO by or before the second quarter of 2025 once the successor is on board. As you may recall, I came out of retirement three years ago to take on the CEO role in November of 2021. It has been a privilege to lead this company during this time. Since then, I am proud of the leadership team we've assembled during my tenure and the progress we have made transforming the health by creating a healthy and vibrant culture, evolving carrier relationships, enhancing focus on member retention, and deploying new technologies, to name a few.

Francis Soistman: As you may recall, I came out of retirement three years ago to take on the CEO role in November of 2021.

Francis Soistman: Since then, I am proud of the leadership team we've assembled during my tenure and the progress we have made transforming eHealth by creating a healthy and vibrant culture, evolving carrier relationships, enhancing focus on member retention, and deploying new technologies to name a few.

Francis Soistman: Over the past two years, we've achieved tremendous progress across key profitability metrics including GAAP net income, adjusted EBITDA, and operating cash flow.

Francis Soistman: Over the past two years, we've achieved tremendous progress across key profitability metrics, including gap net income, adjusted EBITDA, and operating cash flow. There are a few reasons that I made the decision to inform the board of my plans to retire.

Francis Soistman: Over the past two years, we've achieved tremendous progress across key profitability metrics, including gap net income, adjusted EBITDA, and operating cash flow.

Francis Soistman: With the business on solid footing and advancing steadily towards our three-year growth and profitability goals, now is the right time to announce my intention to retire as CEO in 2025. There are a few reasons that I made the decision to inform the board of my plans to retire. First, it was important for me to disclose this ahead of the start of the annual enrollment period on October 15th. I will continue to oversee the AP and OEP as I have always done in the past and intend to stay close to our consumers and carrier partners during this time. Importantly, I'm focusing on continuing our work to position the business to achieve our long-term financial and operating goals, including enhancing e-health capital structure.

Francis Soistman: With the business on solid footing and advancing steadily towards our three-year growth and profitability goals

Francis Soistman: Now is the right time to announce my intention to retire as CEO in 2025.

Francis Soistman: There are a few reasons that I made the decision to inform the board of my plans to retire. First, it was important for me to disclose this ahead of the start of the annual enrollment period on October 15th.

Francis Soistman: I will continue to oversee the AEP and OEP, as I have always done in the past, and intend to stay close to our consumers and carrier partners during this time.

Francis Soistman: Further, making this decision now provides the board the time it needs to cast a broad net and thoughtfully evaluate both internal and external candidates. I have full confidence in the e-health team, and I look forward to continuing to serve on the e-health board and helping guide our accomplishments in the years to come.

Francis Soistman: Further, making this decision now provides the board the time it needs to cast a broad net and thoughtfully evaluate both internal and external candidates. I have full confidence in the Ehealth team, and I look forward to continuing to serve on the Ehealth board and helping guide our accomplishments in the years to come. Ehealth delivered another quarter of strong execution and performance, including significant growth in application volume across our core agency model and carrier-dedicated Amplify platform.

Francis Soistman: Further, making this decision now provides the board the time it needs to cast a broad net and thoughtfully evaluate both internal and external candidates.

Francis Soistman: With that, I'll now cover some of the recent industry developments, our second quarter performance highlights, as well as the important work we're doing in preparation for the upcoming annual enrollment period. John Stelben will follow my remarks and walk you through our quarterly results and discuss annual guidance. E-health delivered another quarter of strong execution and performance, including significant growth and application volume across our core agency model and carrier dedicated Amplify platform. Our existing book of business continues to generate positive tail revenue driven by favorable retention and cash collection trends. On the expense side, we continue to find savings within our fixed cost base and improve per member acquisition cost in our Medicare agency business compared to Q2 a year ago.

Francis Soistman: John Stelben will follow my remarks and walk you through our quarterly results and discuss annual guidance.

Francis Soistman: Our existing book of business continues to generate positive tail revenue, driven by favorable retention and cash collection trends. On the expense side, we continue to find savings within our fixed cost base and improve per member acquisition costs in our Medicare agency business compared to Q2 a year ago. We also continue to fine-tune our brand-driven messaging and marketing materials, including new TV ads featuring eHealth spokesperson Eve. As we approach this AAP, we continue to hear commentary from large carriers about their focus on Medicare margins amid regulatory medical cost pressure.

John Stelben: Our existing book of business continue to generate positive tail revenue driven by favorable retention and cash collection trends.

John Stelben: On the expense side, we continue to find savings within our fixed cost base and improve per-member acquisition costs in our Medicare agency business compared to Q2 a year ago.

Francis Soistman: Excluding tail revenue in both periods, second quarter revenue grew 13% year over year, accompanied by a significant improvement in adjusted EBITDA and earnings on the same basis. As we move into the second half of 2024, preparations for the AP are now in full swing. We have begun training our new advisor classes, are adding innovative features to our consumer-facing online platform, and are rolling out new customer attention strategies and capabilities. We also continue to fine-tune our brand-driven messaging and marketing materials, including new TV ads featuring e-health spokesperson Eve. As we approach this AP, we continue to hear commentary from large carriers about their focus on Medicare margins amid regulatory and medical cost pressures.

John Stelben: Excluding tail revenue in both periods, second quarter revenue grew 13% year over year, accompanied by a significant improvement in adjusted EBITDA and earnings on the same basis.

John Stelben: As we move into the second half of 2024, preparations for the AEP are now in full swing.

John Stelben: We have begun training our new advisor classes, are adding innovative features to our consumer-facing online platform, and are rolling out new customer retention strategies and capabilities.

John Stelben: As we approach this AEP, we continue to hear commentary from large carriers about their focus on Medicare margins amid regulatory and medical cost pressures.

Francis Soistman: We expect for this trend to result in substantial changes to benefit packages, premiums, geographic coverage, and other key plan strategies. It is also important to note that there remain several important meetings with our large carrier partners to learn more details about their 2025 plan strategies. In this fluid environment, I want to emphasize that e-health's value proposition as a trusted advisor to beneficiaries and our omnicannel choice model are more relevant than ever. Combined with the continuing reduction in fulfillment capacity, with two new competitor exits in the past few months, we believe it creates an opportunity to drive strong consumer demand to our platform during the enrollment season.

John Stelben: It is also important to note that there remain several important meetings with our large carrier partners to learn more details about their 2025 plan strategies.

John Stelben: In this fluid environment, I want to emphasize that Ehealth's value propositions as a trusted advisor to beneficiaries and our omni-channel choice model are more relevant than ever.

Francis Soistman: The anticipated Medicare plan changes that I just described could have a substantial impact on beneficiaries.

John Stelben: The anticipated Medicare plan changes that I just described could have a substantial impact on beneficiaries.

Francis Soistman: Considering this, I personally sent a letter to CMS advocating for proactive steps to ensure seniors have adequate time to review their options, understand any modifications to their coverage and provider networks, and find plans that best fit their needs. Combined with the distracting election season and the late Thanksgiving holiday this year, we believe CMS should consider extending the AEP or establishing an incremental special enrollment period. With respect to recent regulatory activity in our space, earlier this year, Ehealth joined a lawsuit filed by the Council for Medicare Choice that resulted in a temporary stay on T. broker compensation provisions of the CMS 2025 Medicare Rule.

Francis Soistman: Considering this, I personally sent a letter to CMS advocating for proactive steps to ensure seniors have adequate time to review their options. We believe the stay also helps avoid a wide range of interpretations of the rule by our carrier partners.

John Stelben: Considering this, I personally sent a letter to CMS advocating for proactive steps to ensure seniors have adequate time to review their options.

John Stelben: understand any modifications to their coverage and provider networks and find plans that best fit their needs.

John Stelben: With respect to recent regulatory activity in our space, earlier this year, Ehealth joined a lawsuit filed by the Council for Medicare Choice that resulted in a temporary stay on key broker compensation provisions of the CMS 2025 Medicare rule.

Francis Soistman: While we believe that these provisions do not apply to our business, we view this as a positive outcome, as it signals to CMS that it has overstepped its authority and potentially discourages them from doing so in the future. We believe the stay also helps avoid a wide range of interpretations of the rule by our carrier partners, as they oversee compliance of their distribution channels based on their own interpretation of CMS regulations.

Francis Soistman: Moving now to our second quarter operational overview. In our Medicare segment, hiring and training of our new licensed benefit advisor classes is progressing well. This year's hiring ramp is not as steep compared to last year as we enter 2024 with a greater number of tenured advisors who will be staying on year-round. We are targeting closer to a 50-50 mix of tenured versus newly hired benefit advisors for this AEP. This compares to approximately 30% tenured and 70% new advisors last year. This mix shift has positive implications for our conversion rates. Further this year, we are supplementing our advisory capacity through the introduction of 1099 contracted licensed agents.

Francis Soistman: Moving now to our second quarter operational overview. In our Medicare segment, hiring and training of our new Licensed Benefit Advisor classes is progressing well. This compares to approximately 30% of tenured advisors and 70% of new advisors last year.

John Stelben: Moving now to our second quarter operational overview.

Francis Soistman: This makeshift has positive implications for our conversion rate. This includes further emphasis on the channels and audiences that work best for us, as well as the introduction of new partners and audiences, such as the Growing Chronic Special Need Plans, or CSNPs, population. Brand initiatives will again be front and center for our marketing organization. We believe our newly launched brand was a key differentiator last AEP, helping us gain immediate traction with beneficiaries who are typically inundated by repetitive generic messages and saw our ads as a breath of fresh air. On the product side, we continue to enhance user experience across our omni-channel platform.

John Stelben: Further, this year we are supplementing our advisory capacity through the introduction of 1099 contracted licensed agents.

Francis Soistman: As we prepare our organization for AEP, we continue to build on our brand initiatives and audience targeting strategies, leveraging important learnings from last year. This includes further emphasis on the channels and audiences that work best for us, as well as the introduction of new partners and audiences such as the growing chronic special lead plans or CCNIPs population. Brand initiatives will again be front and center for our marketing organization. We believe our newly launched brand was a key differentiator last AEP, helping us gain immediate traction with beneficiaries who are typically inundated by repetitive, generic messages and saw our ads as a breath of fresh air.

John Stelben: As we prepare our organization for AEP, we continue to build on our brand initiatives and audience targeting strategies, leveraging important learnings from last year.

John Stelben: This includes further emphasis on the channels and audiences that work best for us, as well as the introduction of new partners and audiences such as the growing Chronic Special Need Plans, or CSNPs, population.

John Stelben: We believe our newly launched brand was a key differentiator last AEP, helping us gain immediate traction with beneficiaries who are typically inundated by repetitive, generic messages, and saw our ads as a breath of fresh air.

Francis Soistman: In year two of deployment, we expect our branded messaging to grow even more impactful across our direct channels as we reinforce our consumer-centric image as a remarkably transparent shop, educate by and enroll platform. On the product side, we continue to enhance user experience across our omnichannel platform. We are updating our plan comparison tools to include a more extensive needs analysis up front and a simplified recommendation output aligned to customer specific needs. We are also adding features that simplify saving application progress online so that beneficiaries can return at their convenience to finish their enrollment. Our platform updates also have a particular focus on improving our mobile experience, as we are observing an increased number of seniors engaging with our site using their smartphones and tablets.

John Stelben: In year two of deployment, we expect our branded messaging to grow even more impactful across our direct channels as we reinforce our consumer-centric image as a remarkably transparent shop, educate, buy, and enroll platform.

John Stelben: On the product side, we continue to enhance user experience across our omni-channel platform.

Francis Soistman: We are updating our plan comparison tools to include a more extensive needs analysis up front and a simplified recommendation output aligned to customer-specific needs. Our platform updates also have a particular focus on improving our mobile experience, as we are observing an increased number of seniors engaging with our site using their smartphones and tablets.

John Stelben: We are updating our plan comparison tools to include a more extensive needs analysis up front and a simplified recommendation output aligned to customer specific needs.

John Stelben: Our platform updates also have a particular focus on improving our mobile experience as we are observing an increased number of seniors engaging with our site using their smartphones and tablets.

Francis Soistman: Further, in Q2, we've expanded the pilot of our video enrollment tool, Live Advice, to additional benefit advisors. We have had encouraging anecdotal feedback on the product from both advisors and beneficiaries as a way to combine the convenience of a telephone enrollment with a personal touch of video interaction that helps build rapport and trust. We also expect this new capability to support our retention objectives by creating a more memorable experience and first impressions.

Francis Soistman: In addition, in Q2, we expanded the pilot of our video enrollment tool, LiveAdvise, to additional benefit advisors. We have had encouraging anecdotal feedback on the product from both advisors and beneficiaries as a way to combine the convenience of a telephone enrollment with a personal touch of video interaction that helps build rapport and trust. We also expect this new capability to support our retention objectives by creating a more memorable experience and first impression.

John Stelben: Further, in Q2, we expanded the pilot of our video enrollment tool, LiveAdvise, to additional benefit advisors.

John Stelben: We have had encouraging anecdotal feedback on the product from both advisors and beneficiaries as a way to combine the convenience of a telephone enrollment with a personal touch of video interaction that helps build rapport and trust.

John Stelben: We also expect this new capability to support our retention objectives by creating a more memorable experience and first impressions.

Francis Soistman: Turning to execution highlights, our Medicare Agency model delivered an outstanding second quarter, generating 9% year-over-year Medicare Advantage submission growth. This is driven by strong performance within our direct and affiliate marketing channels, combined with an increase in telephonic conversion rates. Our agency choice model remains a core offering for e-health as we strive to be the gold standard in health insurance distribution. Our ability to serve customers nationwide, supported by unbiased, carrier-agnostic recommendations, sets e-health apart. We believe this differentiation will be especially valuable in this upcoming enrollment cycle.

Francis Soistman: Turning to execution highlights, our Medicare agency model delivered an outstanding second quarter, generating 9% year-over-year Medicare Advantage submission growth. This was driven by strong performance within our direct and affiliate marketing channels, combined with an increase in telephonic conversion. Our ability to serve customers nationwide, supported by unbiased carrier agnostic recommendations, sets Ehealth apart. Our carrier-dedicated model continues to scale.

John Stelben: Turning to execution highlights, our Medicare agency model delivered an outstanding second quarter, generating 9% year-over-year Medicare Advantage submission growth.

John Stelben: This was driven by strong performance within our direct and affiliate marketing channels combined with an increase in telephonic conversion rates.

John Stelben: Our agency choice model remains a core offering for ehealth as we strive to be the gold standard in health insurance distribution.

John Stelben: Our ability to serve customers nationwide, supported by unbiased carrier agnostic recommendations, sets eHealth apart.

John Stelben: We believe this differentiation will be especially valuable in this upcoming enrollment cycle.

Francis Soistman: Moving now to amplify. Our carrier dedicated model continues to scale. The second quarter saw strong enrollment volumes and conversion rates for our amplified partners. We want boarded a new customer during the second quarter and have a robust pipeline of new partnerships, some of which we expect to launch ahead of this year's AEP. This is a small industry, and the high level of service we provide to our partners and their customers is resonating with carriers, creating additional opportunities for us to grow. Amplified generated 4.1 million in total revenue in Q2 and was the largest driver behind the 37 percent year-over-year growth in our non-commission or other revenue.

John Stelben: Moving now to Amplify.

Francis Soistman: The second quarter saw strong enrollment volumes and conversion rates for our amplified partners. We onboarded a new customer during the second quarter and have a robust pipeline of new partnerships, some of which we expect to launch ahead of this year's AEP. This is a small industry, and the high level of service we provide to our partners and their customers is resonating with carriers, creating additional opportunities for us to grow. This serves as a strong testament to the success of our business diversification strategy. Putting a bow on the discussion of our agency and amplify models.

Speaker Change: The second quarter saw strong enrollment volumes and conversion rates for our Amplified partners.

Speaker Change: This is a small industry, and the high level of service we provide to our partners and their customers is resonating with carriers, creating additional opportunities for us to grow.

Francis Soistman: This serves as a strong testament to the success of our business diversification strategy. Putting a bow on the discussion of our agency and amplify models, the two offerings provide a breadth of distribution services for our carrier partners. Our agency platform drives high volume, high quality enrollments from beneficiaries who value choice, comparison shopping, and omnichannel tools. This is a target market that carriers cannot reach through their internal direct-to-consumer sales. On the other side, amplify augment carrier fulfillment organizations in an efficient and compliant manner, which is critical in this highly regulated and seasonal industry. Both models offer carriers real-time in-flight into shopping and demand-trade.

Speaker Change: Putting a bow on the discussion of our agency and Amplify models, the two offerings provide a breadth of distribution services for our carrier partners.

Francis Soistman: What is important to consumers in plan selections and how their offerings track against competition by local market.

Francis Soistman: Now I will turn to retention, including our key initiatives in this area. Across our book of MA business, we are seeing stable to slightly improved member retention, which represents our ability to retain members on the Ehealth platform, regardless of whether they stay on the same plan or switch to a new one. Member-level retention represents an increasingly important operational focus as we anticipate greater levels of plan shopping and switching this AEP. This year, we are rolling out several new retention initiatives. First, we introduced a new tool called Match Monitor. This allows members to easily understand the implications of the annual notice of changes, which carriers send out ahead of the AEP.

Speaker Change: Now I will turn to retention, including our key initiatives in this area.

Francis Soistman: Across our book of MA Business, we are seeing stable to slightly improved member retention, which represents our ability to retain members on the eHealth platform regardless of whether they stay on the same plan or switch to a new one. This year, we are rolling out several new retention initiatives. First, we introduce the new tool called Match Monitor. This program is designed to provide value to our members beyond their health insurance coverage while building a stronger relationship with ehealth. Third, we recognize that the waiting period between an application and when a policy becomes effective can frequently be a source of anxiety.

Speaker Change: First, we introduce the new tool called Match Monitor.

Speaker Change: This allows members to easily understand the implications of the annual notice of changes which carriers send out ahead of the AEP, check if any of their critical benefits are impacted, and compare their current plan to other options in the area.

Francis Soistman: Check if any of their critical benefits are impacted and compare their current plans to other options in the area. Second, we continue to expand our loyalty program EPRS by adding new partners to the platform. This program is designed to provide value to our members beyond their health insurance coverage while building a stronger relationship with Ehealth. Third, we recognize that the waiting period between an application and when a policy becomes effective can frequently be a source of anxiety. To address this, we are introducing Ehealth application tracker, a tracking tool that displays the beneficiaries' real-time status of their applications as they progress from the initial sent phase to approval by carrier.

Speaker Change: This program is designed to provide value to our members beyond their health insurance coverage while building a stronger relationship with eHealth.

Speaker Change: Third, we recognize that the waiting period between an application and when a policy becomes effective can frequently be a source of anxiety.

Speaker Change: To address this, we're introducing eHealth Application Tracker, a tracking tool that displays to beneficiaries the real-time status of their applications as they progress from the initial scent phase to approval by carrier.

Francis Soistman: Finally, we continue to support a dedicated retention team that serves our existing members and offers tailored programs for dual special need plans or decimbs and other customer audiences identified as having elevated churn risk.

Speaker Change: Finally, we continue to support a dedicated retention team that serves our existing members and offers tailored programs for dual special need plans or DSMPS and other customer audiences identified as having elevated churn risk.

Francis Soistman: Moving to our balance sheet, we continue to make progress with our advisors towards improving our capital structure. This continues to be one of our most important priorities this year, and we recognize that our investors have great interest in seeing us achieve this objective. We believe we have more than sufficient liquidity to execute on our three-year plan and continue to target positive free cash flow generation for the trail in 12-month period ending March 2025. We also believe we are well positioned to refinance or replace our blue torch term loan at equal or favorable rates before it becomes due early next year.

Speaker Change: This continues to be one of our most important priorities this year, and we recognize that our investors have great interest in seeing us achieve this objective.

Francis Soistman: We believe we have more than sufficient liquidity to execute on our three-year plan and continue to target positive free cash flow generation for the trailing 12-month period ending March 2025. We also believe we're well positioned to refinance or replace our Blue Torch term loan at equal or favorable rates before it becomes due early next year. We expect to be in a strong position to take advantage of this opportunity.

Speaker Change: We believe we have more than sufficient liquidity to execute on our three-year plan and continue to target positive free cash flow generation for the trailing 12-month period ending March 2025.

Speaker Change: We also believe we are well positioned to refinance or replace our Blue Torch term loan at equal or favorable rates before it becomes due early next year.

Francis Soistman: Based on our strong performance year to date, we are raising our guidance ranges for fiscal year 2024, as John will discuss shortly. Work is now underway to prepare our sales and marketing organizations for what is expected to be a highly dynamic fourth quarter with significant consumer shopping. We expect to be in a strong position to take advantage of this opportunity.

Speaker Change: Work is now underway to prepare our sales and marketing organizations for what is expected to be a highly dynamic fourth quarter with significant consumer shopping.

Speaker Change: We expect to be in a strong position to take advantage of this opportunity.

Francis Soistman: Before I turn the floor over to John Stelvin to provide his remarks, I would like to comment on the CFO transition process underway. This is John Stelvin's last earnings call, and I want to publicly acknowledge his important contributions to this organization. John came out of retirement two years ago to help implement our business transformation plan. He has brought new and important financial rigor and discipline that has greatly contributed to the operational and financial progress we've achieved over the past two years.

Francis Soistman: Before I turn the floor over to John Stelben to provide his remarks, I would like to comment on the CFO transition process underway. This is John Stelben's last earnings call, and I want to publicly acknowledge his important contributions to this organization. He has brought new and important financial rigor and discipline that has greatly contributed to the operational and financial progress we've achieved over the past two years. As we previously shared with you, John Dolan, who is currently Ehealth's Chief Accounting Officer, will be succeeding John Stelben as our CFO, effective August 31st. With that, I will turn the call over to John Stelben for financial remarks.

Speaker Change: This is John Stelben's last earnings call, and I want to publicly acknowledge his important contributions to this organization.

Speaker Change: John came out of retirement two years ago to help implement our business transformation plan. He has brought new and important financial rigor and discipline that has greatly contributed to the operational and financial progress we've achieved over the past two years.

John Stelben: It's been a pleasure and a privilege to have worked with John for more than 25 years, and I wish him all the best as he re-enters retirement. As we previously shared with you, John Golan, who is currently E-Health Chief Accounting Officer, will be succeeding John Stelben as our CFO effective August 31st. The transition is going beautifully, as anticipated, and I have great confidence that John Golan's leadership will be instrumental in sustaining the momentum of our financial performance. With that, I will turn the call over to John Stelben for financial remarks.

Speaker Change: It's been a pleasure and a privilege to have worked with John for more than 25 years, and I wish him all the best as he re-enters retirement.

Speaker Change: As we previously shared with you, John Dolan, who is currently Ehealth's Chief Accounting Officer, will be succeeding John Stelben as our CFO , effective August 31st.

Speaker Change: With that, I will turn the call over to John Stelben for financial remarks. John ? Thank you. Thank you. Thank you.

John Stelben: John? Thank you, Fran. Second quarter results were driven by strong execution in our Medicare segment and continued operating cost discipline across our organization. Based on our financial performance here today, we are increasing our 2024 annual guidance ranges. Across our agency choice and carrier dedicated platforms, E-Health drove a 16% increase in Medicare submissions year over year. Some of that volume is reflected in our approved membership metrics, while enrollments transacted under fee-based arrangements within Amplify, our carrier dedicated platform, flow through our non-commission or other revenue, which grew 37% year over year. I will elaborate on this in just a moment.

John Stelben: Thank you, Fran. Second quarter results were driven by strong execution in our Medicare segment and continued operating cost discipline across our organization. Across our agency choice and carrier-dedicated platforms, eHealth drove a 16% increase in Medicare submissions year over year. Some of that volume is reflected in our approved membership metric.

John Dolan: Thank you, Fran. Second quarter results were driven by strong execution in our Medicare segment and continued operating cost discipline across our organization.

John Dolan: Based on our financial performance here today, we are increasing our 2024 annual guidance ranges.

John Dolan: Across our agency choice and carrier dedicated platforms, Ehealth drove a 16% increase in Medicare submissions year-over-year.

John Stelben: While enrollments transacted under fee-based arrangements within Amplify, our carrier-dedicated platform, flow through our non-commissioned or other revenue, which grew 37% year over year. Total second quarter revenue was $65.9 million, a decline of 1% year over year. Total revenue across all products was $11.5 million, which compares to $18.7 million in Q2 of last year. Excluding TAIL, total revenue for the quarter increased 13% year over year. Our Medicare segment generated $59.2 million in revenue.

John Dolan: I will elaborate on this in just a moment.

John Stelben: Total second quarter revenue was 65.9 million, a decline of 1% year over year. Tail revenue across all products was 11.5 million, which compares to 18.7 million in Q2 of last year. Excluding tail, total revenue for the quarter increased 13% year over year. Our Medicare segment generated 59.2 million in revenue, an increase of 7% compared to the second quarter of 23. During the quarter, we recognized 10.7 million in positive net adjustment or tail revenue from our Medicare segment compared to 13.4 million a year ago. Excluding tail, Medicare revenue grew 16% year over year. Second quarter Medicare segment profit of 1.3 million improved from segment loss of 2.1 million last year as we scale Medicare revenue and improve member economics.

John Dolan: Total second quarter revenue was $65.9 million, a decline of 1% year-over-year.

John Dolan: Cale revenue across all products was $11.5 million, which compares to $18.7 million in Q2 of last year.

John Stelben: An increase of 7% compared to the second quarter of 23. During the quarter, we recognized $10.7 million in positive net adjustment or tail revenue from our Medicare segment, compared to $13.4 million a year ago. Excluding tail, Medicare revenue grew 16% year-over-year.

John Dolan: During the quarter, we recognized $10.7 million in positive net adjustment or tail revenue from our Medicare segment, compared to $13.4 million a year ago. Excluding tail, Medicare revenue grew 16% year over year.

John Stelben: Second quarter Medicare segment profit of $1.3 million improved from a segment loss of $2.1 million last year as we scale Medicare revenue and improve member economics. Excluding the impact of tail revenue, Medicare segment loss improved by $6.1 million year over year. Tuning to Medicare enrollments, last year we launched our carrier-dedicated fulfillment platform, Amplify. During the second quarter, we started to shift some of the Amplify arrangements that were structured as brokers of record, LTV-based enrollments to fee-based BPO arrangements.

John Dolan: Second quarter Medicare segment profit of $1.3 million improved from segment loss of $2.1 million last year as we scale Medicare revenue and improve member economics.

John Stelben: Excluding the impact of tail revenue, Medicare segment loss improved by 6.1 million year over year. Tuning to Medicare enrollments last year, we launched our carrier dedicated fulfillment platform, Amplify. During the second quarter, we started to shift some of the Amplify arrangements that were structured as broker of record, LTV-based enrollments, to C-based BPO arrangements. With BPO arrangements, e-health does not become a broker of record and instead gets paid a combination of base compensation to cover call center costs and conversion successes up front, which improves the timing of our cash flow. During this transition period, we will provide a view into submitted applications across both platforms, which redefine as an application sent by Ehealth to a carrier regardless of whether it comes from our agency choice or Amplify fulfillment model.

John Dolan: Excluding the impact of tail revenue, Medicare segment loss improved by 6.1 million year-over-year.

John Dolan: Tuning to Medicare enrollments, last year we launched our carrier dedicated fulfillment platform, Amplify.

John Dolan: During the second quarter, we started to shift some of the Amplify arrangements that were structured as broker of record, LTV-based enrollments, to fee-based BPO arrangements.

John Stelben: With BPO arrangements, Ehealth does not become a broker of record and instead gets paid a combination of base compensation to cover call center costs and conversion success fees up front, which improves the timing of our cash flow. During this transition period, we will provide a view into submitted applications across both platforms, which we define as an application sent by eHealth to a carrier, regardless of whether it comes from our agency choice or amplify fulfillment model.

John Dolan: With BPO arrangements, Ehealth does not become a broker of record and instead gets paid a combination of base compensation to cover call center costs and conversion success fees up front, which improves the timing of our cash flow.

John Stelben: As more Amplify partnerships transitions to fee-based arrangements, our success there can be best measured through growth of non-commissioned revenue. Total second quarter Medicare submissions grew 16 percent, including 17 percent growth for the Medicare Advantage plans, 25 percent growth for a Med Stop, and a 4.9 percent decline for prescription drug plans. Separating only commission-based enrollments, including our agency model and those amplified partnerships where we still operate as a broker of record. Medicare submissions increased 5 percent year-over-year, including 12 percent growth in MA submission. Medicare supplements submissions decline 44 percent year-over-year, reflecting a shift of a major Med Stop partner to a BPO model.

John Stelben: As more amplified partnerships transition to fee-based arrangements, our success there can be best measured through the growth of non-commissioned revenue. Total second quarter Medicare submissions grew 16%, including 17% growth for the Medicare Advantage plans, 25% growth for MedSupp, and a 4.9% decline for prescription drug plans. However, separating only commission-based enrollments, including our agency model and those amplified partnerships where we still operate as a broker of records. Medicare submissions increased 5% year-over-year, including 12% growth in MA submissions. Medicare supplement submissions declined 44% year-over-year, reflecting a shift of a major MedSupp partner to a BPO model.

John Dolan: As more Amplified Partnerships transition to fee-based arrangements, our success there can be best measured through growth of non-commissioned revenue.

John Dolan: Separating only commission-based enrollments including our agency model and those amplified partnerships where we still operate as a broker of record

John Dolan: Medicare submissions increased 5% year-over-year, including 12% growth in MA submissions.

John Stelben: Q2 Medicare Advantage lifetime value of 927 increased 4 percent year-over-year, reflective of continued improvement in commission payments per approved member, as well as reduction from 7 percent to 5.5 percent in constraint that we applied to estimated lifetime commissions for these plans. As you know, we recognize revenue for our commission-based products in accordance with U.S. Gap under ASC 606, where we record our initial revenue in a manner that makes significant negative reversals in future periods not probable. In order to satisfy that guideline, we, among other factors, apply a constraint to our LTVs generated by our actuarial models.

John Stelben: Q2 Medicare Advantage Lifetime Value of $927 increased 4% year-over-year, reflective of continued improvement in commission payments per approved member, as well as a reduction from 7% to 5.5% in the constraint that we apply to estimated lifetime commissions for these plans. As you know, we recognize revenue for our commission-based products in accordance with U.S. GAAP under ASC 606, where we record our initial revenue in a manner that makes significant negative reversals in future periods not probable. In order to satisfy that guideline, we, among other things, apply a constraint to our LTVs generated by our actuarial model.

John Dolan: As well as reduction from 7% to 5.5% in constraint that we apply to estimated lifetime commissions for these plans.

John Dolan: As you know, we recognize revenue for our commission-based products in accordance with U.S. GAAP under ASC 606.

John Dolan: In order to satisfy that guideline, we, among other factors, apply a constraint to our LTVs generated by our actuarial models.

John Stelben: During the second quarter, we performed our annual constraint review for all commission-based products. Our analysis concluded that we could reduce the constraint for Medicare Advantage products. This analysis produced a range of potential outcomes, and the decrease to 5.5 percent from 7 percent is at the more conservative end of the range that this process yielded. We believe this revision in constraint reflects improvements in our revenue recognition process and will continue to produce initial revenue estimates that satisfy the requirements of ASC 606. Long-term, we expect this change to bring our initial revenue recognition more in line with the lifetime cash collections of our MA approved members and reduce the amount of adjustment revenue we recognize in future periods.

John Stelben: During the second quarter, we performed our annual constraint review for all commission-based products. Our analysis concluded that we could reduce the constraint for Medicare Advantage products. This analysis produced a range of potential outcomes, and the decrease to 5.5% from 7% is at the more conservative end of the range that this process yielded. We believe this revision and constraint reflects improvements in our revenue recognition process and will continue to produce initial revenue estimates that satisfy the requirements of ASC 606.

John Dolan: Our analysis concluded that we could reduce the constraint for Medicare Advantage products.

John Dolan: This analysis produced a range of potential outcomes and the decrease to 5.5% from 7% is at the more conservative end of the range that this process yielded.

John Stelben: Long-term, we expect this change to bring our initial revenue recognition more in line with the lifetime cash collections of our MA-approved members and reduce the amount of adjustment revenue we recognize in future periods. In addition to the broader market dynamics and our proactive retention efforts that Fran described earlier, our marketing channel mix also has an impact on retention. For example, we are observing a trend of retention improvement from our direct branded channels. This could be an early indicator of the positive impact of our brand strategy.

John Dolan: Long-term, we expect this change to bring our initial revenue recognition more in line with the lifetime cash collections of our MA-approved members and reduce the amount of adjustment revenue we recognize in future periods.

John Stelben: Turning to Medicare member retention, Q2 is the most important quarter for understanding retention trends in our Book of Business, following the key enrollment in switching periods, AEP and OEP. Ultimately, our goal is to increase member persistency on our platform, regardless of whether a beneficiary remains on the same policy or switches plans as their needs evolve. Overall, retention across all Medicare Advantage member cohorts improves slightly for the trailing 12 months and at 6.30 compared to the trailing 12 month period and at 6.30 23. In addition to the broader market dynamics and our proactive retention efforts that we described earlier, our marketing channel MIX also has an impact on retention.

John Dolan: Turning to Medicare member retention, Q2 is the most important quarter for understanding retention trends in our book of business following the key enrollment and switching periods, AEP and OEP.

John Dolan: Overall retention across all Medicare Advantage member cohorts improved slightly for the trailing 12 months and at 630 compared to the trailing 12 month period and it's 630-23.

John Dolan: In addition to the broader market dynamics and our proactive retention efforts that Fran described earlier,

John Stelben: For example, we are observing a trend of retention improvement from our direct branded channels. This could be an early indicator of the positive impact of our brand strategies. Total acquisition costs for approved Medicare members improved 4% year-over-year in line with our expectations. As a reminder, second and third quarters are characterized by higher variable costs for approved member, relative to Q4 and Q1, as we start to prepare our sales and marketing organizations for the upcoming annual enrollment period. This investment is spread over seasonally low enrollment volumes in Q2, but we expect it will yield an attractive return for us later in the year.

John Stelben: Total acquisition costs per approved Medicare member improved 4% year-over-year in line with our expectations. As a reminder, second and third quarters are characterized by higher variable costs per approved member relative to Q4 and Q1 as we start to prepare our sales and marketing organizations for the upcoming annual enrollment period. This investment is spread over seasonally low enrollment volumes in Q2, but we expect it will yield an attractive return for us later in the year.

John Dolan: As a reminder,

John Stelben: Member level metrics we provide, including acquisition costs per member, exclude submissions and associated costs under our BPO model where e-health is not the broker of record. With respect to our employer individual segment, second quarter revenue was $6.6 million with segment profit of $900,000. This compares to segment revenue of $11.3 million and segment profit of $6.9 million in Q2, 2023. One of the main drivers of the year-over-year decrease in segment revenue and profit was the decline in tail revenue of $4.5 million year-over-year. Enrollment volumes also declined year-over-year, partially offset by greater LTVs in qualified individual health plans, ancillary, and small business products.

John Stelben: Member level metrics we provide, including acquisition costs per member, exclude submissions and associated costs under our BPO model, where Ehealth. With respect to our employer individual segment, second quarter revenue was $6.6 million, with segment profit of $900,000. One of the main drivers of the year-over-year decrease in segment revenue and profit was the decline in tail revenue of 4.5 million year-over-year. Enrollment volumes also declined year-over-year, partially offset by higher LTVs in qualified individual health plans, ancillary, and small business products.

John Dolan: Member-level metrics we provide, including acquisition costs per member, exclude submissions and associated costs under our BPO model, where Ehealth is not the broker of record.

Speaker Change: One of the main drivers of the year-over-year decrease in segment revenue and profit was the decline in tail revenue of 4.5 million year-over-year.

Speaker Change: Enrollment volumes also declined year over year, partially offset by greater LTVs in qualified individual health plans, ancillary and small business products.

John Stelben: Excluding tail, revenue was down 4 percent year-over-year, and segment profitability decreased by $1.5 million.

John Stelben: Recall from the Q1 earnings call, similar to the Medicare transformation begun in Q2 of 2022, we are taking the same approach to our employer individual business with a goal of returning to growth in Q4 of. We're moving to our fixed cost, non-GAAP K&C decreased 8% and non-GAAP G&A decreased 10%. These year-over-year savings were driven by our disciplined approach to expense management. Fixed cost leverage is expected to be one of the several key drivers for adjusted EBITDA growth over the next three years as we scale our business. On the gap side, Q2 reflects 3 million in restructuring and impairment charges.

Speaker Change: Recall from the Q1 earnest call.

John Stelben: Moving to our fixed costs, non-GAAP TNC decreased 8% and non-GAAP GNA decreased 10%. On the GAAP side, Q2 reflects $3 million in restructuring and impairment charges. This includes $1.9 million in lease impairments as we continue to reduce our physical footprint as part of our remote burst strategy, as well as $1.1 million in severed costs related to personnel reduction.

Speaker Change: Fixed cost leverage is expected to be one of the several key drivers for adjusted EBITDA growth over the next three years as we scale our business.

Speaker Change: On the GAP side, Q2 reflects $3 million in restructuring and impairment charges.

John Stelben: This includes 1.9 million in lease impairments as we continue to reduce our physical footprint as part of our remote-first strategy, as well as 1.1 million in severed costs related to personal reductions. On a consolidated basis, second quarter GAAP net loss of 28 million compares to a loss of 23.5 million a year ago, and adjusted EBITDA of negative 15.5 million compares to a negative 14.8 million in Q2 of 23. Excluding the impact of restructuring and impairment charges in tail, net loss improved by 3.4 million, and adjusted EBITDA improved 6.5 million on a year-over-year basis. Operating cash flow with negative 32.2 million compared to negative 9.4 million in Q2 2023.

Speaker Change: Second quarter gap net loss of $28 million compares to a loss of $23.5 million a year ago and adjusted EBITDA of negative $15.5 million compares to a negative $14.8 million in Q2 of 2023.

John Stelben: Changing cash flow was primarily driven by higher payouts of previously accrued performance bonus relative to what was accrued in 22 and paid in 2023, as well as timing related to deferred revenue. Recall that in Q1 our deferred revenue was up over $8 million versus the prior year quarter. After achieving positive operating cash flow for the trailing 12 months ended March 24, we continued to target positive free cash flow for the trailing 12-month period ending March 2025. He also ended the quarter with 151.1 million in cash, cash equivalents, and marketable securities on our balance sheet. Our combined short and long-term commission's receivable balance of $831.9 million as of June 30 of this year compares to $789.6 million as of June 30, 2023.

John Stelben: Changing cash flow was primarily driven by higher payouts of previously accrued performance bonuses relative to what was accrued in 22 and paid in 2023, as well as timing related to deferred revenue. Recall that in Q1, our deferred revenue was up over $8 million versus the prior year quarter. Ehealth ended the quarter with $151.1 million in cash, cash equivalents, and marketable securities on our balance sheet. Our combined short- and long-term commissions receivable balance of $831.9 million as of June 30th of this year compares to $789.6 million as of June 30th, 2023. Total cash collections, including commission and non-commission, are up $15.7 million on a year-to-date basis compared to the same period a year ago.

Speaker Change: Change in cash flow was primarily driven by higher payouts of previously accrued performance bonus relative to what was accrued in 22 and paid in 2023, as well as timing related to deferred revenue.

Speaker Change: Recall that in Q1 our deferred revenue was up over $8 million versus the prior year quarter.

Speaker Change: After achieving positive operating cash flow for the trailing 12 months ended March 24, we continue to target positive free cash flow for the trailing 12 month period ending March 2025.

Speaker Change: Ehealth ended the quarter with $151.1 million in cash, cash equivalents and marketable securities on our balance sheet.

Speaker Change: Our combined short- and long-term commissions receivable balance of $831.9 million

John Stelben: Total cash collections, including commission and non-commission, are up 15.7 million on a year-to-date basis compared to the same period a year ago. Commission cash collections continue to exceed initial estimates, resulting in cumulative tail revenue and related contract asset increase of 215 million since 2018. Going forward as amplified fee-based enrollments become a larger proportion of our enrollment mix. We will be adding fewer dollars to our commission receivable light item while at the same time taking advantage of a more favorable cash flow profile of these arrangements. We are raising our guidance ranges to reflect strong performance and greater tail revenue here today.

John Stelben: Commissioned cash collections continue to exceed initial estimates, resulting in cumulative tail revenue and related contract asset increases of $215 million since 2018. Going forward, as amplifified fee-based enrollments become a larger proportion of our enrollment mix, we will be adding fewer dollars to our commission receivable line item, while at the same time taking advantage of a more favorable cash flow profile of these arrangements. Moving now toward 2024.

Speaker Change: Commissioned cash collections continue to exceed initial estimates resulting in cumulative tail revenue and related contract asset increase of 215 million since 2018.

John Stelben: We are raising our guidance ranges to reflect strong performance and greater tail revenue year to date. However, as is our typical approach to guidance, we are not making any changes to our underlying expectations for the rest of the year, given the significant impact of the eight weeks of the AEP on the overall financial results. We see a significant opportunity ahead of us this enrollment cycle with favorable industry dynamics underway, as described by Fran. We feel confident about our progress in preparing the organization for this important selling season.

Speaker Change: We are raising our guidance ranges to reflect strong performance and greater tail revenue year-to-date.

John Stelben: As is our typical approach to guidance, we are not making any changes to our underlying expectations for the rest of the year given the significant impact of the eight weeks of the AEP on the overall financial results. We see a significant opportunity ahead of us this enrollment cycle with stavable industry dynamics underway, as described by Fran. We feel confident about our progress in preparing the organization for this important selling season. We are reserving the option to re-invest some of our expected revenue upside during this AEP, given unique opportunities this macro environment might offer. As a result, we are increasing our adjusted EBITDA ranges by a lower amount relative to revenue.

Speaker Change: As is our typical approach to guidance, we are not making any changes to our underlying expectations for the rest of the year, given the significant impact of the eight weeks of the AEP on the overall financial results.

Speaker Change: We see a significant opportunity ahead of us this enrollment cycle, with favorable industry dynamics underway, as described by Fran.

Fran: We feel confident about our progress in preparing the organization for this important selling season.

John Stelben: We are reserving the option to reinvest some of our expected revenue upside during this AEP, given the unique opportunities this macro environment might offer. As a result, we are increasing our adjusted EBITDA ranges by a lower amount relative to revenue. Our new guidance ranges are as follows. Total revenue for 24 is now expected to be in the range of $470 to $495 million compared to our prior guidance range of $450 to $475 million.

Speaker Change: We are reserving the option to reinvest some of our expected revenue upside during this AEP given unique opportunities this macro environment might offer.

John Stelben: Our new guidance ranges are as follows. Total revenue for 24 is now expected to be in the range of 470 to 495 million, compared to our prior guidance range of 450 to 475 million. GapNet loss for 2024 is now expected to be in the range of negative 36.5 to negative 22 million, compared to our prior guidance of negative 40 to negative 20 million. Adjusted EBITDA for 24 is now expected to be in the range of 7.5 million to 25 million, compared to our prior guidance range of negative 5 to positive 20 million. Operating cash flow for 2024 is now expected to be in the range of negative $10 million to break even compared to our prior guidance range of negative $15 million to negative $5 million.

John Stelben: Gap net loss for 2024 is now expected to be in the range of negative 36.5 to negative 22 million compared to our prior guidance of negative 40 to negative 20 million. Adjusted EBITDA for 2024 is now expected to be in the range of $7.5 million to $25 million, adjusted for a prior guidance range of negative 5 to positive 20 million. Operating cash flow for 2024 is now expected to be in the range of negative 10 million to break even, compared to our prior guidance range of negative 15 million to negative 5 million.

Speaker Change: Our new guidance ranges are as follows.

Speaker Change: Gap net loss for 2024 is now expected to be in the range of negative 36.5 to negative 22 million compared to our prior guidance of negative 40 to negative 20 million.

Speaker Change: compared to our prior guidance range of negative 15 million to negative 5 million.

John Stelben: With respect to tail revenue, initial guidance for 24 included a range of 0 to 15 million. As of June 3024, we have recognized 14 million of tail, which is near the high end of our range. While we cannot predict future tail uncertainty, it is fair to project we could see another 0 to 6 million of tail recognized in the back half of the year. As such, we are updating the range for total 2024 positive net adjustment revenue to be between 14 million and 20 million. Looking ahead to Q3, excluding tail revenue, we expect revenue to grow in the mid-single digit percentage range and for adjusted EBITDA to also improve in the mid-single digit percentage range as we continue to ramp up our advisor force and make other preparations for the AEP.

John Stelben: With respect to tail revenue, initial guidance for 24 included a range of $0 to $15 million. As of June 30, 2024, we have recognized 14 million of tail revenue, which is near the high end of our range. While we cannot predict future tail with certainty, it is fair to project we could see another zero to six million of tail recognized in the back half of the year. As such, we are updating the range for total 2024 positive net adjustment revenue to be between $14 million and $20 million.

Speaker Change: As of June 30, 2024, we have recognized 14 million of tail, which is near the high end of our range.

Speaker Change: While we cannot predict future tail with certainty, it is fair to project we could see another zero to six million of tail recognized in the back half of the year.

Speaker Change: As such, we are updating the range for total 2024 positive net adjustment revenue to be between $14 million and $20 million.

John Stelben: Looking ahead to Q3, excluding TAIL revenue, we expect revenue to grow in the mid-single-digit percentage range and for adjusted EBITDA to also improve in the mid-single-digit percentage range as we continue to ramp up our advisor force and make other preparations for the AEP. As eHealth moves into the critical second half of the year, we are doing so from a position of strength and preparedness. John Dolan's ability to continue to lead our finance organization and support the strategic plan. He brings a wealth of financial expertise and leadership ability that set him up well to be a successful CFO through this transition and beyond. Operator, please open up the line for Q&A.

Speaker Change: Looking ahead to Q3, excluding tail revenue.

Speaker Change: and for Adjusted EBITDA to also improve in the mid-single-digit percentage range as we continue to ramp up our advisor force and make other preparations for the AEP.

John Stelben: As eHealth moves into the critical second half of the year, we are doing so from a position of strength and prepared. I am proud of the tremendous progress has come achieved in the past two years and the management team that Fran brought together. As this will be my final earnings call of Ehealth, I will add that I am also completely confident in our incoming CFO. John Dole's ability to continue to lead our finance organization and support the strategic plan. He brings a wealth of financial expertise and leadership ability that sets him up well to be a successful CFO through this transition and beyond.

Speaker Change: I am proud of the tremendous progress this company achieved in the past two years and the management team Fran brought together.

Speaker Change: As this will be my final earnings call with Ehealth, I will add that I am also completely confident in our incoming CFO .

John Dolan: John Dolan's ability to continue to lead our finance organization and support the strategic plan.

John Stelben: He is on the call this morning and will be participating in Q&A. I would also like to thank all my finance colleagues for their support and results during my tenure at Ehealth.

Unknown Executive: Operator, please open up the line for Q&A. Gentlemen, thank you for your remarks, and to our phone audience joining today. At this time, if you would like to ask a question, press star and one on your telephone keypad. Pressing star and one will place your line into a queue, and I will open your lines one at a time.

Operator: Gentlemen, thank you for your remarks. And to our phone audience joining us today, at this time, if you would like to ask a question, press stars and one on your telephone keypad. Pressing star one will place your line into a queue, and I will open your lines one at a time. A reminder that if you're joining today on a speakerphone, please return to your handset to provide the best audio quality. Once again, ladies and gentlemen, that is star number one. If you would like to ask a question, we'll hear first from George Sutton at Craig Hallam.

Speaker Change: Pressing star 1 will place your line into a queue and I will open your lines one at a time. A reminder that if you're joining today on a speakerphone, please return to your handset to provide the best audio quality.

Unknown Executive: A reminder that if you are joining today on a speaker phone, please return to your handset to provide the best audio quality. Once again, ladies and gentlemen, that is star and one if you would like to ask a question.

George Sutton: We will hear first from George Sutton at Craig Hallum. Thank you. Fran and John, congrats on your moves. They say AP seasons are like dog years, so I think we have all proven that.

George Sutton: So I wanted to talk, Fran, if we could, about the political spend within the context of how you are going to go to market this AP. Obviously, there typically will be a bit of a crowding out of marketing dollars. How do you shift your budgets to try to deal with that, and have you gotten any feedback from your letters to CMS to really encourage a longer shopping season?

Francis Soistman: Good morning, George. Hey, thank you.

Francis Soistman: Let me start with the first question regarding the national election. We have experienced this before. He went back and looked at how this played out four years ago. Because of our omnichannel capabilities, we use multiple channels for each beneficiary. PV is problematic in those first three weeks of AUD because of the national election. Then it opens up. So we'll shift more of our dollars to direct mail and SEO and SEM and paid search and other channels that generally aren't as affected by the national election as PV is.

Speaker Change: Good morning, George, hey, thank you.

Speaker Change: And, you know, because of our omni-channel capabilities, we use multiple channels to reach beneficiaries. ED is problematic in those first three weeks of AEB because of the national election.

Francis Soistman: And as far as CMS's reaction, I've had two communications with CMS on this topic. They've not; they've acknowledged what I outlined as sort of the proverbial perfect storm, with more shopping likely to occur this year and the national election and Thanksgiving coming late in November, and AP ending on the Saturday. I mean, all those factors, I think, are going to make it a little more challenging for beneficiaries to get through. So adding five or six days on the back end just sort of makes sense. We know we can't go too much beyond that because... Careers need to get ID cards out in advance of January 1.

Unknown Speaker: and I'm All those factors, I think, are going to make it a little more challenging for beneficiaries to get through. So adding five or six days on the back end just sort of makes sense. We know we can't go too much beyond that because

Speaker Change: and I'm

Speaker Change: Two communications with CMS on this topic.

Francis Soistman: So there's a natural cutoff in order to avoid unintended consequences. They've listened; they've acknowledged unclear whether they're going to act.

Francis Soistman: So I will, you know, continue to encourage that, and there'll be a by-line coming out in the next few weeks from me encouraging action sooner rather than later.

Speaker Change: from me encouraging action sooner rather than later.

John Stelben: Good luck with that. And I'm just curious, John, you had mentioned you reserve the right to reinvest some upside that you could see from this AEP. Is that a, are you effectively saying that we see a lot of shopping that will occur, and we want to be prepared with potentially more marketing dollars to take advantage of that? Is that effectively what you're saying?

Unknown Speaker: Good luck with that. And I'm just curious, John. You had mentioned you reserve the right to reinvest some upside that you could see from this AEP. Is that a. Are you effectively saying that we see a lot of shopping that will occur and we want to be prepared with potentially more marketing dollars to take advantage of that? Is that effectively what you're saying?

Unknown Speaker: George, yes, I would say that plus, depending on how this AEP unfolds, you could potentially.

John Stelben: George, yes, it's, I would say that plus, you know, depending on how this AEP unfolds, you could potentially see acquisition costs rise, do some of the factors that you mentioned in your first question, a friend. So we're going to be, you know, as a company, we're going to be nimble as we see opportunities where we can lean into channels. We will, and we look at this and Michelle can expand on this, but, you know, we really look at how we spend the money in the channel based on LTV attacks or poets. And so it's possible we could see profitable growth coming up in channels with potentially slightly lower but still very positive LTV to catch.

Speaker Change: So, we're going to be, you know, as a company,

John Stelben: So it's, you know, fourth quarter is the earnings and fourth quarter are multiples of what are annual earnings are. And so we're just going to be nimble and be prepared, and we're trying to get guidance out there that, you know, provides for a range of opportunity, profitable growth opportunity. Understand.

Speaker Change: LTV to CAT. So, thank you.

Speaker Change: The earnings in fourth quarter are multiples of what our annual earnings are, and so we're just going to be nimble and be prepared, and we're trying to give guidance out there that, you know, provides for a range of

Speaker Change: Opportunity, Profitable Growth Opportunity.

George Sutton: Okay, John, that's been good to work with you. Thanks, guys.

George Hill: Once again to our phone audience, that is star and one, if you would like to ask a question. Next, we'll hear from George Hill with Deutsche Bank.

Speaker Change: Once again to our phone audience, that is star and one if you would like to ask a question. Next we'll hear from George Hill with Deutsche Bank.

George Hill: Hey, good morning, guys. And Fran, I just wanted to wish you all. I appreciate you guys taking the question, and I'll confess during a list of earnings morning. I missed a good portion of the prepared commentary.

George Hill: Hey good morning guys and Fran I just wanted to wish you well. I appreciate you guys taking the question and I'll confess during a blistering earnings morning I missed a good portion of the prepared commentary.

George Hill: I just was wondering if you guys would be willing to comment on kind of the expected turn that you guys think you're going to see for the 2025 AETA. Like all the managed care plans are clearly talking about a lot of disruption in the market with a lot of the plans talking about, you know, high single digit, maybe even low double digit member attrition and just kind of like thinking about how do you and then my fault on that would be like, how do you guys think about gaining share and look to be a volatile market coming up in October.

Speaker Change: Like all the manage care plans are clearly talking about a lot of disruption in the market. A lot of the plans talking about, you know, high single digits, maybe even low double digit member attrition. And just kind of like thinking about how do you and then my follow up on that would be like, how do you guys think about gain and share and will it be a volatile market coming up in October ? Thanks.

George Hill: Thanks.

Francis Soistman: Good morning, George. Thanks for the good wishes, and thanks for the question. We have made retention one of our key strategic priorities, and work was underway 18 months ago to start that journey. We're making good progress of the introduction of a loyalty program. We've got special initiatives around the annual notice of change, you know, and being proactive and helping beneficiaries navigate that. We have new tools that I think we're going to be very helpful to address what will likely be a large demand for shopping this year. So, you know, protecting the book is critically important.

Francis Soistman: Good morning, George. Thanks for the good wishes. And thanks for the question. You know, we have made retention one of our key strategic priorities. And work was underway 18 months ago to start that journey. We're making good progress with the introduction of a loyalty program, and we've got special initiatives around the annual notice of change, you know, and being proactive and helping beneficiaries navigate that. We have new tools that I think are going to be very helpful to address what will likely be a large demand for shopping this year.

Speaker Change: Being proactive and helping beneficiaries navigate that, we have new tools that I think are going to be very helpful to address what will likely be a large demand for shopping this year. So, you know, protecting the book.

Francis Soistman: So, you know, protecting the book. Ehealth is critically important. No one's confused about that here at Ehealth. So proactivity is the key. We do think there's an opportunity to grow share combination of capacity, and lower prices in our industry, and we think we're going to see significantly more shopping this year. which is typically disruptive but opportunistic for us to make sure that beneficiaries have a soft landing with an alternative plan. So we're all over it. I don't want to understate its importance. You're absolutely right. Retention is critical, but I also feel confident in the strategies and the tools that we've developed to prepare for this event.

Francis Soistman: No one's confused about that year at EHealth, so proactivity is the key. We do think there's an opportunity to grow share combination of capacity, lowering in our industry. And we think we're going to see significantly more shopping this year. There will be market actions, which are typically disruptive but opportunistic for us to make sure that beneficiaries have a soft landing with an alternative plan. So, we're all over it. I don't want to understate the importance. You're absolutely right; retention is critical, but I also feel confident in the strategies and the tools that we develop to prepare for this event.

Speaker Change: is critically important. No one's confused about that here at Ehealth. So proactivity is the key. We do think there's an opportunity to grow share. Combination of capacity,

Speaker Change: to make sure that beneficiaries have a soft landing with an alternative.

Unknown Executive: Thank you. And once again, we'll pause for just a moment to make sure that everyone in our audience has an opportunity to press star and one if you would like to ask a question. And it appears we have no signals from our phone audience.

Eli Newbrun: I am pleased to turn the floor back to Mr. Foistman for any additional or closing remarks. Thank you, operator. Thank you again, everyone. I know it's a busy morning for you all. Appreciate your participation. Appreciate the continued interest in Ehealth. You've heard today. Evidence of strong momentum that started multiple quarters ago and continues to this day. The energy level and the intensity of our focus for a successful AAP is great. And I remain confident that we'll be prepared for the opportunity to lie ahead. So thank you once again.

Operator: Thank you, operator. Thank you again, everyone. I know it's a busy morning for you all.

Francis Soistman: I appreciate your participation. I appreciate the continued interest in ehealth. You've heard today, evidence of strong momentum that started multiple quarters ago and continues to this day. The energy level and the intensity of our focus for a successful AAP are great, and I remain confident that we'll be prepared for the opportunities that lie ahead. So thank you once again.

Speaker Change: You've heard today evidence of strong momentum that started multiple quarters ago and continues to this day. The energy level and the intensity of our focus for a successful AAP is great, and I remain confident that we'll be prepared for the opportunities that lie ahead. So thank you once again.

Unknown Executive: Ladies and gentlemen, this does conclude today's teleconference, and we thank you all for your participation. You may now disconnect your lines. Goodbye.

Speaker Change: Ladies and gentlemen, this does conclude today's teleconference and we thank you all for your participation. You may now disconnect your lines.

Francis Soistman: Goodbye.

Speaker Change: ♪♪ ♪♪ ♪♪ ♪♪