eHealth, Inc. (EHTH) Q4 2011 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2011 eHealth Incorporated Earnings Call. My name is Melanie, and I'll be your coordinator today. [Operator Instructions] As a reminder, today's meeting will be recorded. I would now like to turn the call over to Kate Sidorovich, eHealth's Director of Investor Relations. Please proceed.

Good afternoon, and thank you all for joining us today, either by phone or by webcast, for a discussion about eHealth, Inc.'s fourth quarter and fiscal year 2011 financial results. On the call this afternoon, we will have Gary Lauer, eHealth's President and Chief Executive Officer; and Stuart Huizinga, Chief Financial Officer. After management completes its remarks, we will open the line for questions. As a reminder, today's conference call is being recorded and will be webcast from the Investor Relations section of our website. A replay of the call will be available from the Investor Relations section of our website following the call. We will make forward-looking statements on this call. All statements other than statements of historical facts are forward-looking statements. The forward-looking statements made on this call will include statements regarding plans and projections for our Medicare business; projected lifetime Medicare member commissions; the size and growth of the Medicare market; submitted application and membership growth; the impact of commission rate reductions; changes in the health insurance industry; our investment in Medicare; earnings per share growth; the diversification of our business; seasonality and timing of our financial results; future cash taxes and tax rates; and all guidance for revenue, EBITDA, non-GAAP diluted earnings per share, stock-based compensation, and amortization of intangibles. Forward-looking statements are subject to risks and uncertainties that could cause actual results, developments and business decisions to differ materially from those contemplated by these statements. We describe these and other risks and uncertainties in our annual report on Form 10-K and quarterly reports on Form 10-Q filed with the Securities and Exchange Commission, which you may access through the SEC website or from the Investor Relations section of eHealth's website. Forward-looking statements made on this call represent the company's view as of today. You should not rely on these statements as representing our views in the future. We undertake no duty to update or revise any forward-looking statements made during this call, whether as a result of new information, future events or otherwise. We will be presenting certain financial measures from this call that will be considered non-GAAP under SEC Regulation G. For reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure, please refer to the finance -- to the information included in our press release and in our SEC filings, which can be found in the About Us section of our corporate website under the heading Investor Relations. And at this point, I will turn the call over to Gary Lauer.

Thank you all for joining us today as we report our fourth quarter and full year 2011 results. With many changes in our marketplace, 2011 was a dynamic and productive year for eHealth. During the year, we achieved tremendous progress across key aspects of our Medicare business and generated strong growth in Medicare related to demand, enrollment, revenues and commission-generating membership. In our Individual & Family Plan business, we absorbed health care reform-related reductions in broker commission rates, made corresponding adjustments to our marketing expenditures and continued to operate efficiently. And most importantly, in the face of many changes, we generated strong earnings and cash flow. Overall, eHealth is rapidly becoming a broader and more diversified company, both from a revenue and product offering standpoint. What I plan to do today is summarize our financial results for the fourth quarter and the year, walk you through our achievements in the Medicare business, discuss trends in our Individual & Family Plan business and conclude by making comments about our 2012 guidance. Revenue for the fourth quarter was $43.1 million, driven by strong contributions from our Medicare business. Earnings per share was $0.11 and cash flow from operations was $2.5 million. For the full year 2011, eHealth generated revenue of $152 million and earnings per share of $0.31, with total cash flow from operations for the year of $22.5 million. Our year-end cash balance was $124 million, which reflects approximately $7 million in share repurchases completed during the fourth quarter alone. We have no debt and our shares outstanding after the January 2012 completion of the buyback program were 19.4 million. As an update, through the 3 repurchase programs we've completed over the past 3 years, we have repurchased approximately 6.4 million shares and reduced our outstanding share count by 23% since late 2008 when the first repurchase program started. Our new and growing Medicare business produced sound results. As you know, our Medicare product business is a key strategic initiative for eHealth. We've made a significant investment in this business in 2011 and expect it to be an important contributor to our financial results in 2012. Given the importance of our Medicare product business, I'm going to devote a good deal of my comments on this call to this emerging business so that you have a better understanding of its composition. At the beginning of 2011, we indicated that we thought we could grow our annual Medicare revenue by approximately 80% compared to 2010. In fact, our total Medicare revenues grew close to 110% to approximately $20 million. Additionally, more than 25% of our total 2011 Medicare revenues of $20 million were commission revenues compared to 3% a year ago in 2010. Our diversified Internet-based customer acquisition expertise is proving to be a competitive advantage for us in the Medicare market. The number of seniors who came to our PlanPrescriber and eHealth Medicare websites during the Medicare Annual Enrollment Period was substantial and represented a significant increase compared to last year's AEP. The strong demand we generated was driven by marketing in areas where we have years of experience like paid and organic search. Additionally, innovative programs like our pharmacy partnership with Walmart also contributed to our increasing demand. As a reminder, when we first ventured into this Medicare business and acquired PlanPrescriber, almost all of the revenue being generated was based on selling leads, which were then converted into enrollments outside of eHealth. Our priority is building our Medicare business, and building our Medicare business has been the transition from this lead-based business into direct fulfillment and enrollment as we've done for years in our core individual business. During the fourth quarter, we achieved significant progress in this area, retaining for direct in-house fulfillment in excess of 40% of the entire demand that we generated. Our objective in 2012 is to continue to significantly increase the portion of demand that we retained for direct fulfillment. Remember that enrollments that we fulfill in-house as a broker typically generate a multiyear commission revenue stream compared to a onetime referral payment we receive for selling leads. As a result of our demand generation and conversion initiatives, Medicare membership and projected lifetime commission, we expect to receive from our Medicare members have increased significantly. As recently as February 15 of this year, yesterday, we had approximately 45,000 estimated members enrolled in various Medicare products. We define these Medicare member enrollments as individuals who are already generating or who we anticipate will be generating revenues for us. These 45,000 enrollments are a direct result of demand that we generated, and this demand was fulfilled through our costumer care center and a partner we work closely with. Approximately 60% of these total enrollments are in Medicare advantage plans. I'd like to note that both the PlanPrescriber and eHealth Medicare sites generate meaningful Medicare Advantage demand and conversions. As you know, a large portion of Medicare product sales occur during the Annual Enrollment Period in the fall, when seniors are allowed to switch plans. But don't assume because of this that Medicare sales only occur during this period and not during the rest of the year. The growing number of seniors are having their 65th birthday every day, at which time they can purchase a Medicare product as a new Medicare beneficiary. And in the first 45 days of 2012, we have seen significant growth in submitted applications for Medicare Advantage and Medicare Supplement products compared to just a year ago. Our Individual & Family Plans submitted applications volumes began to stabilize in the fourth quarter of 2011 after a challenging year. Fourth quarter Individual & Family Plans submitted applications declined 7% as compared to the fourth quarter a year ago, a significant improvement compared to the 20% decline in the third quarter of 2011. As a reminder, during 2011, we reduced our marketing spend, principally in the online advertising channel to better align our cost structure with the new commission rates. In the fourth quarter, our per unit cost of acquisition in the individual business declined approximately 12% compared to the fourth quarter a year ago. Notably, this is the lowest this metric has been since the second quarter of 2008. This cost of acquisition level is something we've been deliberately managing toward, knowing full well that our application growth would be adversely impacted. Most importantly, we have made good progress toward optimizing margins and member profitability. Stuart will provide more details on our cost of acquisition metric and how it's calculated. As we pass the one-year mark of the reduction in our commissions and marketing spend and also certain Affordable Care Act-related changes that impacted the health insurance market during 2011, we expect to see further improvements in our year-over-year submitted application growth rates in 2012. Our fourth quarter individual business revenue declined year-over-year as expected, driven by lower commission rates as a result of the medical loss ratio requirements from the Affordable Care act effective January 1, 2011. As you'll recall, most commission reductions were prospective. They will continue to negatively impact our revenue per member as individuals enrolled after January 2011 represent an increasing percentage of total membership. The average revenue per member is expected to reach its lowest point in early 2013, but we also are expecting to return to revenue growth in the individual business during 2013. It's clear to us that the health -- that health insurance is rapidly becoming a more consumer-centric business. Employees and their dependents continue to bear a higher cost of health care coverage and interest is growing in defined contribution models with paying for health insurance. The Medicare population is growing substantially, and a large portion of people over 65 are individual consumers of Medicare products. And as the cost of health care continues to rise, people are being forced to become more aware of the choices they need to make when it comes to health insurance and health care expenditures in general. We believe that in this rapidly changing environment, our ability to give consumers electronic, online access to a wide variety of health insurance solutions combined with our unique demand and awareness generating capabilities is critical. We're also pleased to announce that during the fourth quarter of 2011, one of the prominent payers in the Individual & Family Plan market, HCSC, decided to return to the eHealth platform after removing their product inventory in 2010. The company is now offering its Blue Cross and Blue Shield plans on eHealthInsurance.com in Texas and Illinois, and we have started generating applications for these products. In the fourth quarter, we also added Individual & Family Plans underwritten by Blue Cross, Blue Shield of Wyoming to our product offering. Our online product inventory has never been larger. We're also expanding the solution set that we offer to consumers. In addition to vision, student, dental and short-term policies, we are now piloting new ancillary products such as accident insurance and telemedicine products. Our goal is to provide eHealth customers with a comprehensive marketplace for all of their health insurance needs and increase the lifetime revenue per member. Stuart will provide in some detail our 2012 guidance, but I want to make some high-level comments regarding our outlook for this coming year. We expect that in 2012 we will return to revenue growth, driven by continuing expansion of our Medicare business. During 2012, we will continue to significantly invest in Medicare and we are targeting growth in our earnings per share as well. We're pleased with our outlook for 2012 and our expectations for top and bottom line growth despite meaningful commission reductions, which impacted our individual business. As eHealth grows, we project we will also become increasingly diversified with a higher percentage of revenues coming from areas adjacent to the individual commission-based business. And now, I'd like to call -- turn the call over to Stuart who will make comments about our financial performance. Stuart?

Thanks, Gary, and good afternoon, everyone. I'll start by reviewing our financial results for the fourth quarter and calendar year 2011. Our fourth quarter revenue was $43.1 million and our 2011 annual revenue was $151.6 million. Commission revenue for the fourth quarter, which includes commissions we generated in our Medicare business, was $31.3 million. Other revenue, which includes sponsorship, eCommerce On-Demand, Government Systems and Medicare lead revenue, was $11.8 million. For the quarter, our total other revenue plus Medicare commissions represented over 36% of total revenue compared to approximately 22% of revenue in the fourth quarter of 2010. Fourth quarter 2011 Medicare revenue was approximately $12.5 million. I'd like to note that our fourth quarter revenue declined 4% compared to the fourth quarter of 2010 revenue of $44.7 million as adjusted for a onetime revenue item in Q4 2010. As a reminder, in 2010, our fourth quarter and full year results included a onetime revenue item of approximately $6 million or $0.15 on an earnings per share basis, reflecting a commission prepayment that we received from one of our carrier partners on a number of existing policies and members. The 4% year-over-year decline in fourth quarter revenues was attributed primarily to a $2.9 million decrease in commission revenues resulting from the impact of the reduction in our Individual & Family Plan commission rates, which became effective in January of 2011. This reduction in IFP commissions however was partially offset by our strong results in our emerging Medicare business, including growth in our Medicare commission and referral-based revenues. In the fourth quarter, our individual and family major medical plans submitted applications declined 7% year-over-year, which was a marked improvement from the 3 prior quarters. And as Gary mentioned, in 2012, our submitted application growth rates are expected to further improve. In fact, we are currently planning flat to low single-digit growth in IFP submitted applications for the full year 2012 compared to 2011. Our total estimated membership at the end of the quarter was approximately 815,500 members, which represents 5% growth of our estimated membership reported at the end of the fourth quarter of 2010. The number of revenue-generating Individual & Family Plan members declined 1%, while the number of other members increased 44%, driven by growth in Medicare enrollments and certain ancillary products. We expect the uninterrupted year-over-year total membership growth to continue into 2012. And now I'd like to review our operating expenses for the quarter. Excluding stock-based compensation and the amortization of acquired intangibles, our non-GAAP operating expenses increased relative to the comparable period a year ago. This increase is driven mainly by our investment in the Medicare business, which is primarily focused in the areas of marketing and advertising and customer care and enrollment. The impact of this investment was partially offset by our initiatives to reduce the acquisition and customer care cost in the individual business and by lower Individual & Family Plan application volume during the quarter relative to Q4 2010. Fourth quarter 2011 non-GAAP marketing and advertising expense, which excludes stock-based compensation expense, was 42% of revenue. This represented an increase compared to 34% of revenue in Q4 2010 excluding stock-based compensation and the onetime revenue item of $6 million, which I described earlier. Higher marketing and advertising expense during the quarter reflected strong annual growth and demand generated by our Medicare platforms. Similar to our individual business, in Medicare, we expense our costs related to member acquisition upfront, but recognize revenues over the lifetime of that member. As Gary mentioned, demand for our Medicare products grew significantly on an annual basis during the quarter, driving an increase in Medicare-related marketing and advertising spend of over $5 million versus Q4 2010. In the individual business, we continue to reduce our marketing spend, both on an aggregate and on a per unit basis relative to 2010. On a per unit basis, our cost of acquisition excluding Medicare costs, measured as our total marketing and advertising expense per individual on an Individual & Family Plan submitted application, declined to its lowest level since the second quarter of 2008. This represents a 12% decline from the fourth quarter a year ago. For the full year 2011, our GAAP marketing and advertising expense as a percent of revenue was 37.5% within the target range of 37% to 39% that we set at the beginning of the year. Our non-GAAP customer care and enrollment cost as a percentage of revenue, excluding stock-based compensation and the $6 million onetime revenue item in 2010, increased from 12% in the fourth quarter of 2010 to 15% in the fourth quarter of 2011, reflecting an expansion of our customer care team and related expenses in the Medicare space. Excluding Medicare, our customer care and enrollment costs would have declined versus Q4 2010. Going forward, we expect that our customer care and enrollment costs will peak in the fourth quarter during which Medicare Annual Enrollment takes place and moderate in Q1 as we pare down our customer care staff. Fourth quarter non-GAAP operating income, excluding stock-based compensation and the amortization of acquired intangibles, was 15% of revenue or $6.6 million, down from 27% of revenue or $12.2 million in the fourth quarter a year ago, excluding the onetime revenue item I described earlier. EBITDA for the fourth quarter of 2011 was $7.2 million as compared to EBITDA of $12.8 million for the fourth quarter of 2010 excluding the onetime item. In 2011, we continued to benefit from past net operating loss carryforwards, which reduced the cash taxes we paid relative to what we record as expense in our GAAP income statement. In 2012, we expect to pay higher cash taxes and become a full cash taxpayer by 2013. For 2012, we expect our GAAP tax rate to be in the range of 45% to 48%, while we expect to pay cash taxes of just over 40%. This compares to a cash tax rate of 13% in 2011. Fourth quarter 2011 GAAP earnings per share were $0.11 and full year 2011 GAAP EPS was $0.31, on the low end of our guidance range of $0.31 to $0.40 due primarily to our decision to invest more aggressively in Medicare starting in the third quarter and to fulfill more Medicare demand directly in-house. We chose to do this because direct in-house fulfillment represents a significantly higher revenue stream compared to the monetization of leads. Our cash flow from operations was $2.5 million compared to $3.6 million in the fourth quarter of 2010. For the year, our cash flow was $22.5 million, up from $20.5 million in 2010. Capital expenditures for the fourth quarter of 2011 were proximally $500,000 and were approximately $2.4 million for the full year. I would now like to comment on the balance sheet. Our cash balance was approximately $123.6 million at December 31, 2011, reflecting $25 million of stock repurchased during 2011 under stock repurchase programs. In January 2012, we completed our most recent $30 million share repurchase program at an average per share price of $13.78. We have now accumulatively acquired $90 million worth or 6.4 million shares of our stock pursuant to 3 share repurchase programs. Our guidance for 2012 is as follows. We're forecasting revenues for 2012 to be in the range of $150 million to $156 million. We expect 2012 EBITDA to be in the range of $21 million to $26 million. We calculate EBITDA by adding stock-based compensation and depreciation and amortization, including the amortization of acquired intangibles to our GAAP operating income. Starting with 2012, we are providing EPS guidance on a non-GAAP basis, excluding stock-based compensation, amortization of intangibles and the estimated tax benefit to both, to align our guidance closer with the underlying operating performance and practices of our peers. Non-GAAP diluted EPS for 2012 calculated on this basis is expected to be in the range of $0.56 to $0.66 per share compared to 2011 non-GAAP EPS of $0.59. For the full year 2012, stock-based compensation is expected to be approximately $6.5 million to $8 million and the amortization of intangibles is expected to be approximately $1.7 million in 2012. The effective tax rate for these items is approximately 34% to 36%. In addition to guidance, I would like to make some further comments regarding our outlook. We're pleased to be able to project a return to revenue and EPS growth this year. However, we do not expect this growth to be linear, and it's important to understand the new seasonal patterns emerging in our business. Because of the changes in the commission structure in the individual business and our fast-growing Medicare business, the seasonality of our revenues and earnings is changing. For example, we expect that our revenues will decline in the first and second quarters in mid to high single-digit percentage ranges compared to the same quarters in 2011. We expect that we will grow revenues on an annual basis in the third and fourth quarters and also for the full year 2012 as indicated by the midpoint of our guidance. Also, because of revenue and expense timing to our Medicare business, we expect that earnings will be back-end loaded towards the fourth quarter and be slightly better than breakeven in the first quarter of 2012. I want to remind you that these comments on our guidance are based on current indications for our business, which may change at any time. We undertake no obligation to update these comments or our guidance. And now we'd like to open up the call for questions. Operator?

[Operator Instructions] And our first question comes from the line of Richard Fetyko with Janney Capital.

A couple of questions on the Medicare investments in 2012. Will they be -- continue to primarily be in marketing, advertising and some customer enrollment? And then, what is your estimated lifetime value of a customer now in the Medicare segment? And then lastly, on the commission per revenue, I think you reported $38.47, which was up sequentially. I was just curious, we've hit the bottom in that and we should see that trend higher as the Medicare piece of business continues to increase as a percentage of total?

Richard, it's Gary. Just in terms of investment categories. Clearly, marketing and advertising, both in terms of just the sheer volume we invest there, as well as more broadening and diversification of what we do. Secondly, technology. As we continue to work to make the consumer experience for seniors even a better and more appealing one than it's already been. And thirdly, customer care. Just as we continue to generate more demand, we need more fulfillment capability and more support as well. So those would be the 3 areas. Marketing, advertising, technology and customer care. I'll let Stuart talk about quantifying.

Yes, from a dollar standpoint, the largest cost by far is the variable costs of the marketing, advertising and the customer care and enrollment. Marketing and advertising being the larger one, just like it was this year, but very much on the variable side. As to lifetime value of a member in Medicare, we haven't published a number there. But one thing I can point back to is on our last call, we mentioned that Medicare Advantage products, as an example, can generate from $1,500 to $2,000 a member over a 5- to 6-year life. Our contracts that our carriers are typically a 5- to 6-year contract that they pay us. So as long as a member stays on a policy for that 5 or 6 years, that can be $1,500 to $2,000 for a member, so very attractive relative to our IFP product. You mentioned the average commission per member. That did tick up a little in Q4, that's largely driven by the Medicare sales in Q4. Underneath all that, the individual and family commission per member continues to decline as the commission reductions from a year ago or beginning of Q1 2011 continue to work their way through our membership base and become a bigger and bigger percentage of our overall membership for IFP. That commission per member should continue to decline across 2012. As we mentioned, that should bottom out at the early beginning of 2013.

Got it. And then lastly, if I may, actually, on the Medicare side, just curious, do you think you could have generated more demand if you had more product and where is the status in terms of the carrier relationships on the Medicare side? Just curious what the bottlenecks are or were you sort of maxed out in terms of customer service as well?

Yes, Richard, it's Gary. I'd say that the opportunities are still very, very significant in this business for several reasons. One is just the sheer number of people that are aging in. Secondly, related to that, that people are just living longer. And thirdly, for us specifically, is our ability to fulfill. We certainly had more product inventory and more carriers in this past Annual Enrollment Period than we did a year ago. But frankly, still not as much as we would like to have or need. As you know, we invested in ramp up in our customer care operations. But as I indicated in my comments, we're very pleased that 40% of all the demand we generated we're able to fulfill in-house. But when you think about that, that's not a big number, so we've got a lot of headroom there in terms of opportunity to fulfill a lot more in-house. And then, from what we saw last year and what we're seeing in the beginning of this year, as I commented as well, from a demand standpoint, we think we can also significantly increase the demand that we have the opportunity to fulfill as well. So clearly, the business, as it's growing, hasn't reached the point that we want it at in terms of our ability to fulfill all this demand that we generated, and we continue to generate demand at a fast increasing rate as well. But we don't look at that as bottlenecks or challenges as much as we do as just sheer opportunity that's staring us in the face here.

Our next question comes from the line of Jim Friedland with Cowen.

Given that the IFP business is becoming the legacy business now and that Medicare really has some pretty exciting economics around it, are you guys being too conservative in terms of EBITDA generation? Is it worth it to put more marketing dollars into all 3 of the areas, but -- or sorry, more investment dollars into all 3 of the areas that you just mentioned, particularly marketing? Or do you feel it has to be a little bit more gradual because you need to get on more participating plans and you can't put the pedal to the metal? And I asked that question just because Wall Street has already baked in relatively low expectations on growth, so the expectation levels might allow you to be more aggressive on the investment front.

Yes, Jim, first, I would respectfully disagree about the nature of the individual business. We don't see it as a legacy business at all. It's still the major revenue generator for us. We still generate a large volume of applications and members. In fact, the largest in the business. And just that, that market that we're facing there continues to get larger. I just saw a Gallup survey that was released 2 days ago. It's very interesting, and I'll just read to you the highlights. 46 -- 44.6% of Americans receive health insurance from their employer in 2011 compared to 45.8% in 2010. In 2008, 49.2% of Americans receive insurance from their employers. So people getting employer-based insurance, just the sheer numbers are going down per Gallup. We see that in the places as well the individual business getting larger. And then with the Affordable Care Act, and not to get all into policy, but if you're willing to assume that the Affordable Care Act survives, the Supreme Court and the election this year and so on, you get to 2014, you're looking at a very, very large individual market opportunity as well. So I just want to make a point there, we're very focused on that and feel really good about it. In the fourth quarter, we're quite satisfied with the 7% decline in applications because the cost of acquisition is as low as it's been in 3 years for us, and we didn't -- not something we stumbled on. We have been highly, highly focused on that and we think we're going to make really, some very good progress this year in terms of the application volumes compared to last year at a, what we think is a very favorable cost of acquisitions. So this is still a very profitable business on both an aggregate and a per unit basis, and will continue to be and we've got a lot of focus on that. Now on the Medicare side of things, yes, this is, I mean, you can probably tell from our comments, we're very enthused about this. It is very adjacent, very adjacent to what we've built in the individual business. It's taking advantage of the same core technologies, it takes advantage of the same, same expertise in the science we have developed in terms of our demand generation, which we think is a big differentiator for us here. And we think the fourth -- the AEP, the Annual Enrollment Period, the volumes we generated illustrate that. And as you saw last year, we decided in the middle of the year to invest more deeply in Medicare and we did in the third quarter. And certainly, as we see opportunity this year, we're going to continue to run with that. We think with what we described today for guidance, it allows us to generate a very significant demand curve in the Medicare side of the business and still deliver the kinds of earnings and revenue that we're talking about and do the same thing in the individual business. What we're most focused on, I would tell you, in this Medicare business, isn't so much how much we spend to generate demand, and that's very important, but rather taking that demand and converting more of it in-house directly because then we have a member that's going to generate a revenue for us for years to come. And the revenue value of someone -- of a senior that directly fulfills and enrolls through us compared to us selling a lead is, it's several orders of magnitude. That's a big part of the focus right now. We're already generating an awful lot of demand. Being able to fulfill more of that demand in-house, you're going to see us going to get -- there's a lot of leverage in that.

Our next question comes from line of Nathaniel Schindler with Bank of America.

I wanted to see if you could give me a little more color on your guidance for the year with your 4% growth at the midpoint. How much of that is due to Medicare, the $20 million? And how that -- it was in this year and how fast is that growing again next year?

Yes, most of that growth is from Medicare. In that, Individual & Family, we expect it to decline given my earlier comments about the average commission per member and the rate reductions working their way through. That should continue to reduce our revenues from Individual & Family this year, and so the net-net of those is pretty much made up by the Medicare being higher than that decline.

[Operator Instructions] Our next question comes from the line of Robert Coolbrith with ThinkEquity.

Sorry I jumped on late, so I hope some of these won't be repetitive. A few questions. The 40% in-house fulfillment in the quarter, could you give us a comparable figure on that from last year?

Less than half of that.

Okay, great. Then...

I just had to look here.

Sorry. Then looking at application sourcing, we saw that the partner channel, I think embedded in the quarter, wondering if that is mainly Walmart or if you could just comment generally also on the sourcing mix there.

Well, yes, the mix is interesting. Walmart was an important contributor and will continue to be. And as a reminder, Walmart is the largest pharmacy in the country and we're deeply embedded with Walmart at walmart.com in their pharmacy offering especially to seniors. We generated quite a bit of demand simply through our efforts on both paid as well as natural search. We generated quite a bit of demand through PlanPrescriber and a number of different demand generation offerings online that we have with and through PlanPrescriber. We generated some demand through eHealth Medicare, which we're pleased with. We generated some very, very good demand simply, once again, using some of the time and tested marketing sources and channels that we have in the company like media, and specifically, public relations. We published quite a bit in the Medicare area, informational kinds of things for seniors and so on to help give them information and knowledge about making decisions and choices, so we're able to drive demand to us directly just like we do in the individual business as well. So it's a combination of those things. And that wide and broad combination of marketing activities, almost all of which are online, we'll continue to expand in this business for us.

Great. And one follow-up, one final follow-up in the same vein. I just wonder if you could give us an update on the search and your marketing environment on the IFP space. Is that rationalized a little bit at this point? Also just maybe generally a little more color on how you're doing in SEM and SEO in Medicare. Have a lot of your historical advantages sort of ported over to Medicare. And just on the -- what do you think of the sort of the competitiveness of your competitors in Medicare versus in the IFP space in terms of their ability to market successfully through channel partners or through search?

Yes, on the Individual & Family side, we feel we are seeing rationalization there beginning to kick in, and I think that's reflected in the cost acquisition comments that we're making, the year-over-year declines that we're seeing, just starting to see the market begin to digest some of the things that happened over the past year here, so we're happy to see that.

On the SEO and the SEM side of things, yes, that's very important for us on Medicare. We believe that that's a science inside of our business and our company in terms of how we've managed it for years in the individual business. It's been predominantly Google, although it's MSN and Yahoo! for us in the individual business. It's similar in the senior market in the Medicare business. We do all of this essentially in-house, and it was a very important point of acquisition for us, consumer acquisition during the AEP and will continue to be. We manage a lot of keywords there. We do a lot of things to optimize ourselves in the natural area of search and in SEO. From a competitive standpoint, it's a competitive environment there. You're competing with a lot of the carriers who are trying to market and sell their products directly or at least brand themselves. You may have noticed in the fall it wasn't unusual to be watching CNN or FOX News or some of these other cable outlets and see Humana and Aetna and WellPoint and on and on and AARP, United AARP advertising because that's really the season there, and we see some of that in the world of search as well. But I will tell you, because we have most of now -- many of those large brand names, as they are spending an awful lot of money to advertise there and so on, we also get lift from that as well, which helps us with SEO and SEM and our other activities as well. So it's multichannel, it's varied -- the other comment I'll make about the competitors as we -- there is no national online resource to go by products for Medicare expect medicare.gov, which is the federal government exchange. And it's one of the things that frankly was a bit surprising to us as we looked at this business a few years ago. We think it's a big, big window of opportunity. We're doing everything we can to run through that right now. But most of these products are placed where they have been traditionally for years and years, which is through agents, brokers and through the carriers themselves. It's very much like the individual business distribution that was in place when we started eHealthInsurance years ago.

Ladies and gentlemen, we have no further questions. I'd like to turn the call over to Mr. Gary Lauer for closing remarks. Please proceed.

I just like to thank everyone for taking the time this afternoon, and we look forward to talking with many of you one-on-one as well. Thanks.

Ladies and gentlemen, thank you for your participation in today's conference. That does conclude the presentation. You may disconnect. Have a wonderful day.