Good afternoon, everyone, and welcome to the eHealth, Inc. conference call to discuss the company's Second Quarter 2022 Financial Results. At this time, all participants have been placed in listen mode. The floor will be open to your questions following the presentation. It is my pleasure to turn the floor over to Eli Newbrun-Mintz, Senior Investor Relations Manager. Please go ahead.

Thank you, operator. Good afternoon. And thank you all for joining us today, either by phone or by webcast for a discussion about eHealth, Inc's second quarter 2022 financial results. On the call this afternoon we have Fran Soistman, eHealth's Chief Executive Officer and Christine Janofsky, eHealth's 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 in webcast from the Investor Relations section of our website. A replay of the call will be available on our website following the call. We will be making forward-looking statements on this call that includes statements regarding future events, beliefs, and expectations, including statements relating to our expectations regarding trends in the healthcare insurance distribution industry, consumer demand, our competitive advantage, and market opportunities. Our expectations regarding our Medicare and individual and family businesses including our Medicare enrollment and other product offerings. Our expectations regarding and our ability to improve customer conversion, customer retention and other quality metrics. Our expectations regarding our marketing channels, our telephone and online enrollments, our e-commerce platform and our member acquisition strategy. Our expectations related to our short and long-term strategies, operating plan and financial goals, including our transformation initiatives. Our expectations regarding our financial performance, including the profitability of our business, cash flows, conversion rates, customer retention, lifetime values, member estimates, and fixed and operating expenses and our full-year 2022 financial guidance. Forward-looking statements on this call represent eHealth views as of today, you should not rely on these statements as representing our views in the future. We undertake no obligation or duty to update information contained in these forward-looking statements, whether as a result of new information, future events, or otherwise. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in our forward-looking statements. We describe some of these and other risks and uncertainties in our annual report on Form 10-K and quarterly reports on Form 10-Q, filed with the Securities and Exchange Commission, which you may access through the SEC website or from the Investor Relations section of our website. We will be presenting certain financial measures on this call that are 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 information included in our earnings release issued today and in our SEC filings, which can be found in the About Us section of our corporate website under the heading Investor Relations. At this point, I will turn the call over to Fran Soistman.

Thank you, Eli, and good afternoon to everyone joining us today for our second quarter '22 earnings call. During my prepared remarks, I will provide an update on our progress in implementing our strategic initiatives. Discuss second quarter financial and operating results and revisit our outlook for the remainder of the year. I'd like to begin though with some higher level thoughts on our industry. Do you align in telesales health insurance distribution industry has faced multiple challenges over the past two years that have required the key players, including eHealth to make conscious changes to our enrollment growth strategies, including a shift in approach to demand generation to achieve enrollment margins that support the economics of this business. Other top priorities for our industry include increasing manpower retention, continuously enhancing beneficiary experience, and maintaining a solid compliance track record as regulatory requirements evolve. The businesses that respond to these challenges effectively will be rewarded for deeper relationships with their customers and carrier partners. And as the industry continues to evolve, we believe growth will return along with more stable financial performance. We believe customers deserve a trusted and unbiased adviser and shopping platform offering a broad selection of quality carrier options to meet their personal health insurance needs and preferences. Further, consumer needs and expectations range from do it yourself for limited assistance or advice for full agents assistance to the customer or caregiver. Consumers also choose to interact with brokers in a variety of ways, including by telephone, or online on assistant using a computer or mobile device. But through a hybrid online agent assisted process. eHealth is listening to consumer preferences regarding the shopping experience for their health insurance needs, and has built a robust and convenient omnichannel platform that continues to evolve today. eHealth Medicare and…

Thank you, Fran and good afternoon, everyone. Our core operational results for the second quarter before the impact of a revenue adjustment exceeded our expectations driven primarily by telephonic conversion rates that were favorable to our internal financial plan. At the same time, our year-over-year comparisons for conversion rates, revenue and profitability continue to be impacted by the changes in the enrollment process that we introduced in July of last year. The net impact of the negative revenue adjustment from prior period enrollments was $8.7 million across all products, with the largest impact coming from our Medicare book of business. Based on our implementation of ASC 606, we have guardrails in place that trigger a negative adjustment if cumulative churn when a cohort exceeds a certain threshold. This adjustment applies even if a cohort is early in its life, and can over time track to the original LTVs as it matures. The goal with our guardrails is to adjust our receivables in real time, and prevent any sizable revisions down the road. Notably, we do not use the same review policy with respect to positive tail revenue, as we are far more conservative and applying positive tail to our financial performance. Instead, positive tail is typically recognized only after we have three years of persistency observations on a cohort. As a result, we have a sizable amount of unrecognized positive tail on our Medicare book of business. Within our Medicare segment, second quarter Medicare Advantage approved enrollments were approximately 51,500, or a year-over-a year decrease of 34%. This made up the majority of our approximately 59,400 in total Medicare enrollments, which were down 35%, relative to Q2 2021. The year-over-year decline in enrollments reflected a reduction in variable marketing spend, and lower call conversion rates. Q2 is the last full…

Thank you. [Operator Instructions]. Your first question will come from Elizabeth Anderson with Evercore.

Hey, guys, thanks so much for the question. So a couple of questions maybe. I appreciate you're giving us the updated churn numbers on the newest cohort. I'm just trying to think of for people who are just trying to sort of, we've been sort of so accustomed to like fixating on that over the years. When do you think that like the -- as we sort of think through the newer cohorts and the impact that they have on that total churn number? Is that like a 2023 event before we start to see those churn numbers on a year-over-year basis move lower. Just help us think about that. Because I know that that's something that sort of incrementally always makes people nervous when it -- when they see it moving up?

Hi, Elizabeth. This is Fran. Thanks for joining us. I think, you follow the -- follow sort of each year's life, if you will, or call it a tranche, the January 1 AEP cycle. Think of it as a measurement over a 12 month period, and then we can do a quarterly, but I think looking at it over 12 months is probably more credible. The next real credible measurement will be January of 23. When it goes -- when that cohort goes through the next annual election period. And then they're again through the OEP. And then the next measurement period beyond that would be January of 24. So I think they're the kind of a key milestones.

Okay, that's really helpful. And then as we think about CC&E, I appreciate you're talking through the quality initiatives that you've been mentioning. One, can you comment on the overall hiring environment now mentioned of how your it is? I know, it's sort of early days for the full AEP ramp, but how that's trending sort of to plan? And then when do you sort of lap the implementation of the quality initiatives you put in place last year? Because I would think that that would then sort of the comparison, at least on the Medicare Advantage and things conversion would become easier, right? Is that the right way to think about that?

Let me take the second question first. This quality initiatives went into effect on the third quarter of '21. So the measurement year-over-year would begin this third quarter. So we'll be able to do an apples-to-apples comparison and going forward. As far as the dynamics in terms of agent recruiting, recognizing that we are now a remote first organization, and we're not sort of beholden to any one geography when we're looking to recruit agents. That gives us greater flexibility. And I would say that, largely our needs have been met provided our assumptions regarding agents, attrition hold up, of course. So I would say that they're tracking pretty much the plan. And that's Roman is here, and I'll let him to comment as well. Our Chief Operating Officer oversees our telesales operations. But I think that the training is going really well. He expects the graduation rate to be higher than it has been historically. And it's because we changed the way that we are onboarding the agents with a more personal hiring with the supervisors are ultimately going to be responsible for that that particular agent being the one who is doing the hiring, as opposed to the recruiter. So there's just the whole process has been re-engineered. So Roman do you want to add anything to that.

Thank you. So we acknowledge that this year, and that the year refereeing, and they will test environment. So we were preparing for AEP and the new agent class. We acknowledge that and tried our best to actually substitute the in-person interactions that you would have in the office with the -- within the training and within the recruitment. So we increase the number of touch points with a new agent, we increase the interaction of new agents and the seasoned agents to with the management team all the way from supervisor to VP of sales that seemed to be giving us early indicators of increased hire stark AEP. And on balance the strong group focus on agent training, especially early on. It's given us good vibes regarding the expected performance during the AEP at least the numbers of agents for sure.

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

Our next question comes from Daniel Grosslight with Citigroup.

Hi guys, thanks for taking the question. I just want to go to the unassisted online enrollees in Medicare Advantage. So in 2Q, it was up around 12% year-over-year. If I look back at 1Q, it was up around 50%. And then back in 2Q '21, it was up around 80%. I'm just curious if you're seeing any headwinds in this channel, specifically, obviously, it's growing nice for you, but at a slower rate versus historical. And how should we think about that unassisted online for this upcoming AEP, should we assume that's going to be a significant step down to last year's AEP growth, which was around 53%?

Hi, Daniel, it's Fran. We've been very careful about our marketing spend in terms of even on the online unassisted. There's multiple ways that that money can be directed to generate traffic to our online platform. And the spend was redirected to those areas that we felt were going to get the greatest lift and the highest conversion. So it is more targeted. We do expect healthy growth on our online channel for the AEP. We're not prepared to provide the guidance quite yet on what we think that will ultimately look like in terms of compared to last year's AEP, but it is an important contributor to the overall story here at eHealth. So we'll provide a little more guidance in the near future.

Okay, great. Some of your competitors have spoken about growing revenue outside of core Medicare commissions. I'm curious, it's not something you've talked about much. But I'm curious what levers you can pull to grow outside of commissions, if you plan, maybe not this year, but next year, year after if you plan on investing in new, more predictable revenue streams?

Well, I want to make sure I understand the question because there's other, I would say somewhat related to the Medicare Advantage business that we're also compensated for. So if it's not particular to that there, there's other things that we already provide in the way of services that we are in discussions with several carriers about that, I would say they value in terms of improving the persistency of their membership. We can generate revenue as a result of that. So the short answer is, yes, we are definitely looking at that, we see that as revenue opportunities that would be, it wouldn't be 606 related revenue, it would be 605 related revenue. And perhaps it would be more predictable.

Yes, all right. Appreciate the color, Fran.

Your next question comes from Tobey Sommer with Truist Securities.

Thank you. Under the new lower growth plan, do you expect eHealth to remain in the top tier for the major carriers, given the lower volume levels of sales production that you expect?

Hi, Tobey, Fran again. Thanks for joining. I think when we look at our partnership with the top carriers, we evaluate those relationships based on the net, meaning that it's the volume and the retention combined. We're putting a lot of attention on reducing the churn and improving the quality continuing to drive the style which we've had great progress on. And that's been noted by several of our carrier partners. So we will remain quite relevant with our carrier partners perhaps we will be less relevant with some of the smaller ones, as we put more focus on some of the larger ones. So I would say that's the tradeoff that will make.

Okay, and you mentioned I think in the prepared remarks comment about how others in the market are also being more sort of scrutinizing their marketing spend, how can you tell that competitors are also pulling back on their expectations for growth?

Well we're relying on what they're saying publicly, we're going to take them at their word.

Okay, so but there's nothing in the marketplace, as you see it, are there other signs that you can see in your day-to-day business activity, that's occurring?

Not quite yet, but we would potentially see some reduction in traffic on our website, a lot of our competitors, agents use our website to look up providers and they can do that using article, they had no other.

Okay. And then on CMS front was a little under a year-ago, right before AP where there was a letter sent to remind everybody the rules of the road for marketing and sort of good behavior. Do you expect anything this year, how's the dialog and interaction been with regulators?

Well, I don't want to go too far out on the limb here and make some precedent. But may or may not do, I think they realized when that came out last October was quite late in the process, and I would like to think that they would not repeat something like that again. So I have a call later this week with the Deputy Administrator that I organized, so we know each other, we have a chat allows for this is to kind of catch him up on what's going on in eHealth and see what's going on in his world and let him know what's on my mind and how we can keep the dialog open. So hopefully we can avoid those kinds of situations.

Thank you.

Your next question comes from Ben Hendrix with RBC Capital Markets.

Hey, thanks, guys. I was wondering if you could give us any more information as you increasingly seem to be targeting your variable marketing spend towards those higher ROI areas. If there are any characteristics as we kind of start applying that spending that you are doing in the third quarter, if you're any kind of characteristics, specific characteristics you can offer to differentiate these higher ROI channels versus those that you're de-emphasizing?

Hi, Ben. I would probably limit my comments right now. I mean, I think it's fair to say that, we have utilized direct mail, it's no too proprietary. It's probably less about the channel and more about how you convey the message because there's a lot of -- there's a lot of traffic. As you know, during the APC and it's the message you convey and how do you make sure your message stands out above the rest of that, if beneficiary is going to pick up the phone and dial, they're going to ring eHealth. And that's really what we're focused on. How do we reach our audience? And what message is going to resonate with that. So there are certain channels that are just, say for a fact that more than others, so that's really our focus.

Got you. Thank you. And just one more last quarter, you mentioned that you had a strong online completion rate around 90% for IFP, and you've called out the ICHRA opportunity. And now given that we've seen the extended reconciliation -- the reconciliation bill passed that extended subsidies for ACA plans. I was wondering if you could have any early thoughts on where you think your IFP mix might go over the next couple of years? Thanks.

Yes, I think the IFP business will continue to be an important part of our portfolio. I think the [indiscernible] I still remain bullish on it. I'm very eager to see what we can achieve in the fourth quarter, and first quarter of '23. I think it's an intriguing product that could be incredibly helpful to small businesses. So I'm very bullish on that. And I still think that there's great opportunities with state exchanges that we remain encouraged to play a part on.

Thank you.

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

Hey, thank you. This is Adam on for George. Fran, in your remarks you mentioned the goal is to get to a profitable growth on an accelerated timeline. I'm curious if there's any specific items that you could focus on that would either speed up or slowdown that timeline in your mind?

Hi, Adam, thanks for joining. I think we're really pulling all those levers right now, we've worked very diligently to take out cost. We've made great progress there. We've continued to work to improve the conversion rates, for example, on our telesales as well as our online. And the marketing optimization will remain a focus. So, we're pulling all of the right levers, we have to continue to make important progress there. And I think it basically comes down to the time it takes to get to that optimal level and continue to take out more costs. And I think it's kind of cliche, but it's about turning the corner. And I think we're getting closer and closer to turning that corner.

Great. And just one more for me, with respect to the opportunity, any potential way to size, what you think that may be relative to other opportunities for this year and what you think it could potentially grow into it, I know it's rather early for it. But any type of thoughts would be helpful.

Well, I'd love to stick my neck out. But my General Counsel is sitting here and shooting looks at me. So I'm going to have to dodge that question a bit. I'd like to say this, that it's been sized on a national scale, and there's inside by a couple of different experts. And the numbers range by pretty substantial level. So I think that when we talk about later this year, when we talk about the revenue growth opportunity, perhaps I can be a little more specific. But let me say that, I'm very bullish on it, I think that it's going to gain traction and momentum over the next two to three years as small employers realize what it can do, how it can be utilized in terms of doesn't necessarily have to solve all of their needs, it can solve part of their needs. And if they have a strategy and strategy that an eHealth can certainly help them work through. It's a great tool, it's a great tool. So I'll just leave it is I'm very bullish.

There are no further questions at this time. Mr. Soistman, I would like to turn the call over to you.

Well, thank you operator. First, I'd like to leave you with a few closing thoughts. The eHealth team continues to make important changes in nearly every aspect of our business towards a goal returning the company to profitable growth and positive cash flow as quickly as possible. Every day we're making important progress on our strategic plan and our operational priorities. Now that we're at the end of the day here on August the 8th or T minus 68 days from the beginning of AEP and our readiness is tracking the plan. We look forward to our follow-up conversations and continuing to share updates on our progress this year. So thank you again for joining us this afternoon, operator?

Good bye.

This concludes the eHealth 2022 second quarter conference results. You may now disconnect.