Q1 2025 eHealth Inc Earnings Call
Speaker Change: Good morning, everyone, and welcome to Ehealth Inc's conference call to discuss the company's first quarter 2025 financial results. At this time, all participants have been placed in lesson only mode. The floor will open for your questions following the prepared remarks.
Speaker Change: I will now turn the floor over to Eli Newbrun Minz, Senior Investor Relations Manager. Please go ahead.
Eli Newbrun-Mintz: Good morning and thank you all for joining us. On the call today, Fran Soistman, Ehealth, Chief Executive Officer, and John Dolan, Chief Financial Officer, will discuss our first quarter 2025 financial results. Following these prepared remarks, we will open the line for a Q&A session with industry analysts.
Speaker Change: 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
Speaker Change: Today's best release, our historical financial news releases and our filings with the SEC are also available on our investor relations site.
Speaker Change: We will be making forward-looking statements on the 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.
Speaker Change: 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.
Speaker Change: 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 10K and our subsequent filings with the SEC.
Speaker Change: We will also be discussing certain non-GAAP financial measures on this call. Management's definitions of these non-GAAP measures and reconciliation to the most directly comparable GAAP financial measures are included in today's press release. With that, I will turn the call over to Francis Soistman.
Francis Soistman: Thank you Eli, and good morning everyone. Ehealth delivered another quarter of strong execution driving significant revenue and profitability growth year over year.
Francis Soistman: Medicare beneficiaries are navigating a complex and evolving plan landscape with significant benefit changes that became effective January 1 of this year. In this environment, our customer centric choice model is more relevant than ever.
Francis Soistman: During the first quarter, we increased our Medicare submissions to 22% compared to a year ago, while also expanding enrollment margins, reflecting ongoing progress and optimizing our sales and marketing processes, and growing consumer awareness of our brand.
Francis Soistman: First quarter revenue of 113.1 million grew 22%, gap net income was 2 million and adjusted to E-bid-Huff was 12.5 million.
Francis Soistman: We ended the quarter with 155.6 million in cash, cash equivalents, and short-term marketable securities, reflecting strong collections from new Medicare enrollments.
Francis Soistman: The most recent enrollment cycle encompassing the 4th quarter AP and the 1st quarter OEP served as a testament to the critical value of our services
Francis Soistman: Or Omni-Channel Marketplace and Power, hundreds of thousands of Medicare beneficiaries to explore their coverage choices, a complicated and highly consequential decision.
Francis Soistman: During these critical months, Ehealth was positioned to leverage elevated consumer demand due to our superior market positioning built on several key differentiators, including
Comprehensive and leading on each channel capabilities
Francis Soistman: An unwavering commitment to gold standard customer service that we believe sets us apart from industry alternatives, and our distinctive consumer brand that resonates with Medicare
Francis Soistman: Beyond driving new enrollment growth, providing exceptional service to our existing members, including the record-breaking cohort rolled last AEP, remains a strategic priority.
Francis Soistman: During the first quarter, we strengthen our retention initiatives, nearly doubling the size of our dedicated retention and customer service team.
Francis Soistman: Despite the strategic investment, our acquisition costs per approved Medicare member encompassing marketing and call center-related expenses decreased by 10% year over year.
Francis Soistman: In April , our industry saw two important developments, the release of Final Medicare Advantage and PDP rules, and the Final Medicare Advantage reimbursement rates for Plan Year 2026.
Francis Soistman: We see the final rules as striking the appropriate balance between protecting beneficiaries and acknowledging the value the quality, reputable brokers such as Ehealth offer seniors.
Francis Soistman: The private sector can effectively provide critical Medicare advisory and distribution services that no cost to taxpayers unlike government sponsored channels with budgets often measured in the hundreds of millions.
Francis Soistman: But Final Medicare Advantage, Carrier Reimbursement Rates, exceeded market expectations and were substantially higher than the preliminary rates indicated earlier this year.
Francis Soistman: This adjustment provides much needed relief to the broader Medicare Advantage industry, which has faced challenges from regulatory changes, increased medical costs, and elevated plan utilization.
Francis Soistman: While maximum broker commission rates have not yet been announced, they have historically correlated with movements in the final Medicare Advantage rates.
Francis Soistman: It remains premature to predict the landscape of the next annual enrollment period. Carriers are currently developing their 2026 bid strategies, including benefit structures and geographic market strategies for Medicare-avantage offerings.
Francis Soistman: We anticipate gaining a more comprehensive understanding of the upcoming AUP cycle, once spits are submitted.
Francis Soistman: Nevertheless, we firmly believe the CMS announcements constitute an important positive development for the entire Medicare Advantage ecosystem.
Francis Soistman: and commend the administration for its continued support of this program, which has been shown to deliver superior health outcomes compared to the traditional Medicare.
Moving now to our first quarter operation of performance.
Francis Soistman: Total Medicare submissions across for film at models grew 22% year-over-year
Francis Soistman: Within our agency fulfillment model, we maintain strong momentum with submitted MA applications of 26% year-over-year, driven by our effective marketing strategies and improvements in telephonic and online conversion range.
Francis Soistman: We recognize that the annual notice of change for ANOX can be confusing to seniors. In fact, not all beneficiaries of experienced coverage or provider network changes, which became effective, January 1, fully understood the impact until they started utilizing their
Francis Soistman: Inticipating this, we retained a larger number of license advisers going into OEP and were able to effectively support this continued strength and demand for our services.
Francis Soistman: During the quarter, we generated robust growth across all fulfillment channels spanning telephonic, pure enrollment, and online assistance.
Francis Soistman: Hybrid Enrollments for seniors utilize a combination of our proprietary online tools and license advice or support, experience the strongest growth at 38% year over year for submitted MA applications.
Francis Soistman: This demonstrates the advantage of our unique omnichannel features such as live-advised video conversations, online agent chat, plan-text proposals, and other integrated capabilities.
Francis Soistman: Our branded messaging continues to resonate with Medicare beneficiaries, helping to drive another meaningful year-over-year increase in contribution from direct channels compared to third-party lead sources.
Francis Soistman: Today, our brand strategy has primarily emphasized the advisor-driven customer experience highlighted by our Medicare matchmaker TV advertisements that receive excellent reception among target demographics.
Francis Soistman: As we approach next to AP, we will implement comprehensive initiatives to extend our brand identity to create a stronger, more visible connection between our trusted brand, our gold standard advisors, and our sophisticated online consumer platform.
Francis Soistman: Ehealth remains committed to maintaining our position as the technological leader of our industry.
Francis Soistman: Last week, we announced an innovative pilot program integrating artificial intelligence across components of our telephonic enrollment funnel. Initial results in customer feedback have been positive.
Francis Soistman: AI represents a powerful tool that has allowed us to provide valuable assistance to customers after hours and could enable us to deliver more timely customer service during peak enrollment days with industry-wide, telephonic wait times are typically long.
Francis Soistman: We plan to continue evaluating and refine these capabilities in preparation for the upcoming AEP.
In Q1, we maintained our proactive approach to member retention .
Francis Soistman: Overall, we are encouraged by early indicators, particularly our enhanced ability to recapture members who transition between plans while remaining on our platform. We will have a more comprehensive view of our retention performance in time for our next earnings call.
Francis Soistman: Ehealth continues to recede positive feedback from carrier partners regarding our quality scores, our strategic investments in retention initiatives, and the consistent enrollment volume growth we've delivered in recent quarters.
Francis Soistman: Several carriers have specifically highlighted the superior quality metrics associated with enrollments generated through our branded marketing channels.
Francis Soistman: We remain bullish on our diversification opportunities outside of our core MA capabilities
Francis Soistman: In Q1, we drove strong growth in our ancillary insurance products anchored by hospital and identity in debtful insurance plans.
Francis Soistman: Further, we achieve Medicare Supplements Submission Growth of 32 percent within our agency
Francis Soistman: We also continue to believe in the long-term potential of the individual coverage, health reimbursement arrangement or end-cre-market.
Francis Soistman: This product area is still very small in terms of its financial impact, but has expected to become a more meaningful contributor in 2026 and beyond as we work to create a best in-class, seamless process for B2B customers to gain value from our services.
Francis Soistman: The first quarter represents a strong start to the year. While we've seated our expectations with respect to earnings, we're not making any changes to guidance as it's simply too early in the annual cycle.
Francis Soistman: AP remains our key volume quarter despite the increased significance of Q1 this year. Additionally, we are awaiting several important data points pertaining to the industry outlook, including carrier benefit designs, their AP strategies, and broker-commissioned rates among others.
Francis Soistman: As we transition into Q2, we anticipate challenging year-over-year comparison through regulatory changes in total special need plans or decennets, enrollment rules.
Francis Soistman: These factors are fully incorporated into our forecast for Q2 and Q3 as well as our comprehensive 20-25 guidance.
Francis Soistman: New to Medicare enrollments will constitute an especially important consumer segment for us in Q2 and Q3.
Francis Soistman: We believe we are well positioned to succeed with these beneficiaries given our advanced technological capabilities and sophisticated audience targeting strategies.
Francis Soistman: Other eligible audiences who can enroll outside the standard AP know a few windows, such as beneficiaries qualifying for chronic special needs plans or ceased it.
Francis Soistman: and seniors who have recently relocated or retired will also be important for our enrollment and volume throughout the next two quarters.
Francis Soistman: With our eye on the critical fourth quarter, we are already starting our preparations for the next AET, including ramping and training our advisory force, developing the marketing and media plans to continue to scale our brand, and meeting with carriers to discuss how we can best support their strategies this year.
Francis Soistman: Before I turn the call over to our CFO , I would like to acknowledge and comment on the Department of Justice complaint announced last week, naming EHealth and several other players in our industry.
Francis Soistman: We've first disclosed the government's investigation into this matter in early 2022. Since then, the company has fully cooperated with the Department of Justice to demonstrate that we are conducting and having the past conducted, our business affairs consistently with federal regulations.
Francis Soistman: Our legal team has spent the last week reviewing the complaint and we strongly believe the key claims of the complaint are without merit and we intend to challenge them vigorously
Francis Soistman: It's also important to note that the claims asserted in the complaint are allegations only that there have been no determinations of liability and Ehealth has not taken a litigation
Francis Soistman: Finally, I want to re-emphasize e-health stats as commitment to our customers to provide free unbiased expert advice as they navigate complexities of the healthcare environment.
Francis Soistman: We are an organization that places a high value of integrity and transparency [inaudible]
Francis Soistman: Our mission to expertly guide consumers through their health insurance and related options when, where, and how they prefer is critical to what we do at Ehealth and contribute to our operational decisions on a daily basis.
Francis Soistman: I'll now turn the call over to John Dolan, who will cover our financial results in greater detail. John ?
John Dolan: Thank you, friend. Good morning, everyone. Our first quarter results reflect strong Medicare volume growth accompanied by a year-over-year enrollment margin expansion.
John Dolan: This performance allowed us to achieve significant improvements in our key profitability metrics including gap net income, Joseph Debra, a Medicare segment profit compared to the first quarter of 2024.
John Dolan: As I review our first quarter results, all comparisons will be on a year-over-year basis
John Dolan: First quarter revenue of $113.1 million, for which 22% driven primarily by increased Medicare enrollments and positive net adjustment revenue, retail revenue of $10.25 million compared to 2.5 million in the prior year.
Medicare segment revenue was 103.7 million, it increased 26%.
John Dolan: Medicare submissions across agency and ample five fulfillment models grew 22 percent with our agency model delivering particularly strong submission growth of 25 percent.
John Dolan: Our Medicare segment generated 8 million of tail revenue, the majority of which was generated by our medsup and PDP folks at business.
John Dolan: Medicare Non-Commission Revenue was 13.9 million, a 20% increase driven mostly by greater fee-based revenue from Amplify compared to last year as we transitioned the majority of that business to a non-broker record fee-based payment model in March of 2024.
John Dolan: Medicare segment grossed profit of $35.7 million, represented an exceptional increase of 62% powered by revenue growth and enhanced unit economics.
John Dolan: Our Medicare Preunit acquisition costs continue to decline year-over-year, demonstrating our ongoing ability to refine and optimize our customer acquisition approach.
John Dolan: Notably, our direct channels, particularly our branded marking campaigns, have consistently delivered premium lead quality.
John Dolan: This total lead volume contributed from direct channels has increased, you've seen a corresponding positive impact on our online and telephonic conversion rates.
John Dolan: First quarter, total acquisition costs for MA equivalent approved member improved 10% year-over-year.
John Dolan: Within this metric, we achieved a 14% improvement in CC&E costs per MA equivalent approved member, despite increased investments in member retention initiatives, which largely have little contribution to new enrollment volume.
John Dolan: We also saw a 5% improvement in first quarter variable marketing costs for MA equivalent approved member.
John Dolan: M-A-L-T-V to climb 5%, primarily influenced by retention trends in prior Q-1 cohorts.
John Dolan: Medicare Supplement LTV grew 31 percent year-rear, reflecting a favorable shift in carrier
John Dolan: First quarter ratio of LTV to variable market and cost per approved Medicare member was 2.3x
John Dolan: Our fully allocated LTV to CAC ratio, which also includes all of our call center expenses
Both ratios were flat on a year-over-year basis.
John Dolan: Retention remains a key strategic initiative and we are allocating resources to support our existing member base during this dynamic period in the MA industry.
John Dolan: While we will not have a full view into our post-OEP member retention until later this year, we can share early insights on the dynamics we're observing.
John Dolan: As anticipated, we've seen increased switching activity during this AEP and OEP cycle.
John Dolan: These trends align with our expectations, and we remain confident that our commission-receivable asset incorporates sufficient conservatism to account for this volatility.
John Dolan: We are also encouraged by better than expected cash collections from our book of business we've seen here to date.
John Dolan: With respect to Tell Revenue, we have not encountered any developments that alter our expectations for the full year.
John Dolan: Accordingly, we are raising the low end of our 2020 bug range for tail revenue to reflect our first quarter performance.
John Dolan: Our updated 2025 tail revenue range is 11 million to 20 million.
John Dolan: Our cumulative tail revenue recognized from Q1 of 2018 through Q1 of this year now stands at 234 million, a testament to the strength and reliability of our receivable.
John Dolan: Our employer and individual segment produce revenue of 9.4 million in Q1 with a segment gross profit of 6 million.
John Dolan: Within this segment, we are seeing concurrent trends of encouraging signs within an ancillary and echra opportunities, while at the same time legacy products remain in decline a larger revenue basis than the smaller but growing products.
John Dolan: First quarter net income was 2 million compared to a net loss of 17 million a year ago.
John Dolan: Adjusted EBITDA was 12.5 million compared to negative 1.7 million in Q1 of 2024.
John Dolan: Adjusted EBITDA exceeded our expectations, both excluding and including the tail revenue we recognized in the quarter, driven partially by favorable enrollment margins as well as timing benefits related to operating expense recognition.
non-GAAP Operating Expense was 104.5 million up 6%.
John Dolan: Total non-GAAP marketing and advertising expense increased by just 7% relative to Medicare volume growth of nearly three times that rate.
John Dolan: non-GAAP technology content decreased by 3% while non-GAAP general and administrative decreased by 8%
John Dolan: This positive trend in operating expense performance provides strategic flexibility to the remainder of the year.
John Dolan: Depending on the selling environment in the second half, we may have let to reinvest some of this upside into customer acquisition.
John Dolan: Operating cash flow in Q1 was 77.1 million, up from 70.8 million last year.
John Dolan: So the 12 month ended March 31st, 2025, operating cash flow was negative 12 million, reflecting our decision to lean into strong consumer demand in the quarter of last year, and again in this first quarter.
John Dolan: Following the robust cash collections of the first quarter, Ehealth ended March with cash, cash equivalence and short-term marketable securities of $155.6 million.
John Dolan: Combining short-term and long-term receivables are ending commissions receivable balances 923.3 million. This compares to 845.3 million as of March 31st, 2024.
John Dolan: Looking ahead, we are reiterating our annual guidance ranges for fiscal 2025. Our first quarter enrollments came in within our expectations, while revenue and earnings benefited from timing of tail revenue recognized during the quarter, and favorable operating expenses relative to our expectations.
John Dolan: As Fran mentioned, while we have seen positive early signs to the Medicare macro environment that goes forward in the year, it is too early to tell how this upcoming enrollment cycle, including plan offerings in the amount of consumer shopping will compare to last year's.
John Dolan: We also want to maintain the flexibility to reinvest apart or all of the first quarter expense capability later in the year, depending on what we see in the market.
John Dolan: In terms of our outlook for second quarter, as we discussed on the last underneath call, our typical seasonality will be amplified by newly implemented restrictions on these SNP enrollments outside of the main enrollment periods.
John Dolan: Q2 earnings will also reflect increased costs associated with our initial advisor ramp and other preparations ahead of the AEP.
John Dolan: Further, a meaningful portion of the tail revenue we recognized in Q1 was a timing shift from Q2 relative to our forecast. As a result, we currently expect second quarter revenue to be in the mid-40s and millions of dollars.
John Dolan: with adjusted EBITDA laws in the mid-30s and millions of dollars.
John Dolan: As we look forward, we are highly encouraged by the underlying strength of our Q1 results. We believe these achievements, coupled with our strategic initiatives focused on brand development, retention optimization, technological advancement, and call center operations, positions us exceptionally well to achieve our goals for this year and beyond.
Operator, please open the line for questions [inaudible]
Speaker Change: Thank you, ladies and gentlemen. We will now begin the question and answer session. Should you have a question? Please press star, followed by one on your touchstone phone. You will hear a prompt that your hand has been raised. If you wish to decline from the ruling process, please press star, followed by two. And if you're using a speaker phone, please lift your handset before pressing any keys. One moment for your first question. Thank you. Thank you.
Speaker Change: Your first question comes from Ben Hendrix with RBC Capital Markets. Please go ahead.
Ben Hendricks: Great, thank you very much. You're grasped on a strong quarter. I just wanted to ask a question about kind of the MA landscape. We we saw that
Ben Hendricks: Carrier Elevants may have taken, I guess, a non-rate action, removing all of its Medicare Advantage plans from online marketing platforms effective here in May. Just wanted to get your take on that move, how impactful it's going to be to the remainder of the year, if that impacts it all, and how common is that type of action?
among the MA carriers in this environment. Thanks.
Good morning, Van. Thanks for the question.
You know, the macro environment continues to evolve to evolve.
Speaker Change: Not to get into the specifics with with elevants, but you know, I think it really speaks to why EEL strategy has really been focused on significant choice.
Speaker Change: So we're not totally dependent on one carrier or two carriers to drive our performance. We have nearly 50 Medicare advantage carrier relationships across the country. Great representation in all geographies.
Speaker Change: So, I would concede, it's somewhat unusual to see this kind of action or activity at state of the season, but these are seasonally low quarters.
Speaker Change: Historically, Q2 and Q3, and I would envision that they'll revisit their decision in preparation for the 2026 AEP.
Thank you very much.
Speaker Change: Your next question comes from George Sutton with Craig Hallam. Please go ahead.
Speaker Change: Hey, good morning, guys. This is Logan on for George. Thanks for taking my question. Maybe one for you, friend, to start. Obviously you've talked about a better regulatory environment for a while now.
Speaker Change: and the reimbursement rate. Notice last month certainly seems to be our first to the case of that.
I'd be curious to get your thoughts. I'm like
Beyond that, maybe what do you look for?
Speaker Change: in terms of more specific you guys with those final rule notices that you guys think.
Speaker Change: Would help you guys kind of from an operational standpoint kind of improving the experience for beneficiaries than also obviously we don't just follow through the financials But just what do you look for next?
Good morning, Logan. Thanks for the question.
Speaker Change: You know, we're cautiously optimistic of the evolving events going back to the combination of the regulatory, more certainty and not seeing a consecutive year of new regulation requirements.
Speaker Change: It's a, I think it's great to see that the administration, the new administration has followed through with its commitment to
Speaker Change: Look at the regulatory environment and see opportunities to diminish the regulatory requirements and businesses, whether it's in our industry or others.
Speaker Change: So, the fact that there wasn't new, and that some of the proposed regulations were not adopted, was very encouraging.
Speaker Change: Similarly on the rate environment, the past four years has been a tough rate environment for the carrier industry and the increase was beyond what was expected but probably still falls short of [inaudible]
Speaker Change: They're full requirements that said we expect that those will be less
Speaker Change: Wallotility in the 2026 AEP season, but again, it never remains to be seen as we get closer to understanding their good strategies and what they've actually done.
Speaker Change: Lastly, our commission rates are also determined by CMS and the time frame for those changes typically falls in the month of June . I don't expect that to change this year.
Align with what's happening on the carrier rate side.
Speaker Change: So that could be encouraging news. We've not built that into our budget or forecast.
Speaker Change: So, you know, that remains to be seen, but, you know, clearly some important check-in points, most importantly, by far would be the fifth strategy.
Speaker Change: Okay, understood and then maybe a quick follow up to that in an environment where we get maybe a few positive rates in a row does that change your thoughts about amplifier maybe where that could go and then maybe just in general can you can you give us an update on on that front anything you've changed or any updates you've made
Speaker Change: Great question, Logan, thanks. Amplify was created of that was based on what we saw with mainly some of the large and mid-size Medicare Adventist organizations that
Speaker Change: Didn't want to have to create their own internal capability for what we have demonstrated we're very, very good at [inaudible]
Speaker Change: So I think it will continue to evolve. I believe it will continue to be new opportunities in his dear respect as of the rate environment.
Speaker Change: You know, it's operating call centers is quite complex and it's also very seasonal.
Speaker Change: So, you know, given the changes with the special election periods, the DSNEPs and Q2 and Q3, I think, frankly, it would motivate organizations to look at an outsourced solution so they're not carrying that fixed cost.
Speaker Change: in low seasonal quarters. So I actually think it will continue to evolve nicely.
Got it. Appreciate the color. That's all for me.
Thanks, Logan.
Speaker Change: Ladies and gentlemen, as a reminder, if you do have any questions, please press star followed by one. Your next question comes from Jonathan Yong with UBS. Please go ahead.
Speaker Change: Hey, thanks for taking a question here. I guess kind of going to the litigation. I guess have you seen any change in carrier?
Discussion in terms of what they-
Speaker Change: are going to do in terms of marketing, just given kind of the focus from the DOJ and some of the commentary from the administration in regards to this and what this may mean for you.
Speaker Change: Good morning, Jonathan. Thanks for the question. It's really too soon. As you know, this news broke last Thursday and clearly will be conversation that they typically are. We talk with our carrier partners with great frequency, but nothing to report as of now. Um, you know, look at the
It's important to point out that some carriers are very...
Speaker Change: Supportive of sponsorship programs, others don't participate in sponsorship programs, so it's not an industry-wide situation, so I think that I would say the callout is limited to really a handful of carriers that have historically utilized sponsorship programs.
Speaker Change: Drive attention or kind of move away from the kind of core commission stream product, again just given some of the focus on on this from CMS just broadly thanks.
Speaker Change: Yes, great question. You know, I would characterize what we do today is still in its infancy, and it's limited to a few carriers and programs can
consists of onboarding assistance, some provider scheduling services.
Speaker Change: Some HRA services, nothing widespread and nothing of great significance. So, you know, it's not a very meaningful component of our revenue structure today.
For as far as retention, you know, we have found [inaudible]
It's really a great question.
Speaker Change: The more things you can do for beneficiaries, the more memorable you become, particularly if they see it as that in great value So it does play a role, but it's small at this point, so I can't say that it's moved the needle with respect to retention, but theoretically we believe it does it does help [inaudible]
Okay, great. Thanks.
Speaker Change: There are no further questions at this time. I'd now like to turn the call back to Francis Soistman for some closing remarks. Please go ahead.
Francis Soistman: Thanks, operator. Well, thank you all again for your time. Thanks for the questions and your continued support.
Speaker Change: We're very pleased with our strong performance in the first quarter, which reflects the hard work and dedication of our entire team.
Speaker Change: The progress we've made across our strategic priorities reinforces our confidence in the path ahead.
Speaker Change: As we look to the rest of the year, we remain focused, very committed, and confident in our ability to continue delivering value for our customers, our employees, and our shareholders. So again, we appreciate this important partnership and look forward to updating you again next quarter. Thank you.
Goodbye.
Speaker Change: Ladies and gentlemen, this now concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a great day.