Good day, ladies and gentlemen, and welcome to the First Quarter 2012 eHealth Incorporated Earnings Conference Call. My name is Colby, and I will be your operator for today. [Operator Instructions] And as a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Kate Sidorovich, Vice President of Investor Relations. Please proceed, ma'am.

Good afternoon, and thank you, all, for joining us today, either by phone or webcast, for the discussion about eHealth, Inc.'s first quarter 2012 financial results. On the call this afternoon, we will have Gary Lauer, eHealth's Chief Executive Officer; and Stuart Huizinga, 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 and webcast from the Investor Relations section of our website. A replay of this 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 we will make on this call will include plans and projections for our Medicare business; projected lifetime Medicare member commissions; the size and growth of the Medicare market; submitted application growth; anticipated benefits of our new shopping cart feature; the impact of healthcare reform and related rules; our plans and expectations with respect to healthcare reform, our addressable market and growth opportunities, seasonality and timing of our financial results; our investment in Medicare and guidance for revenue, EBITDA, non-GAAP diluted earnings per share and stock-based compensation. 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 SEC, which you may access through the SEC website or from the Investor Relations section of our website. Forward-looking statements made on this call represent the company's views 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 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.

Thanks, Kate. Good afternoon, and thank you, all, for joining us today as we review our first quarter 2012 results. Our strategy for the past 1.5 years has been to maintain leadership in our individual and family plan business, which has undergone much change; to invest for high growth in our new Medicare business; and to maintain operational flexibility in this fluid market environment. During the first quarter of 2012, we continued to execute against our strategic objectives and build momentum in our business, reflected by our revenues, EBITDA and earnings per share results. Based on our first quarter results and the results we are seeing in our fastest growing Medicare business, we are raising our 2012 annual revenue guidance. Stuart will provide our updated guidance later on during this call. What I plan to do today is summarize our financial results for the first quarter, give you an update on our progress in building the Medicare business, discuss the performance in our individual and family planned business and make some comments about regulatory developments recently in the health insurance industry and marketplace. Revenue for the first quarter was $37.1 million, and earnings per share were $0.10. EBITDA was $6.6 million and cash flow from operations was $5.1 million. During the quarter, we completed our third $30 million share repurchase program and remained debt-free with over $116 million in cash and cash equivalents on the balance sheet. I'd like to note that we've reduced our outstanding share count by approximately 22% since late 2008 when the first repurchase program started. Following a successful Annual Enrollment Period last year, our Medicare business continued to perform strongly during the first quarter of 2012. First quarter Medicare revenue was $6.5 million, a more than 180% increase year-over-year. We are well on our way…

Thanks, Gary, and good afternoon, everyone. We're very pleased with our first quarter 2012 financial results, which demonstrate meaningful progress in our new Medicare business and continuing stabilization in our core individual and family plan business. Based on the first quarter performance, we are raising our revenue guidance for the year. We also continue to forecast revenue and earnings per share growth for the full year 2012 as implied by the mid-point of our guidance ranges. I'll provide more information on our annual guidance in just a few moments, but first, let me review our financial results for the quarter. Starting at the top line, our first quarter 2012 revenue was $37.1 million, a 1% decline as compared to the first quarter a year ago. Underneath that, commission revenue in our individual and family plan business declined by more than $3 million year-over-year, driven by the impact of commission rate reductions that we experienced beginning in January of 2011 and which has been phasing into our results since that point. As a reminder, this reduction was related to the Medical Loss Ratio requirement of the Affordable Care Act. At the same time, our Medicare commission revenue grew by $3.5 million compared to Q1 2011, allowing us to more than offset the impact of lower IFP commissions. Our total commission revenue for the quarter was $31.5 million, an increase of 2% compared to the first quarter of 2011. Please note that we expect to see a further decline in IFP commission revenue throughout 2012 and then expect to resume revenue growth in our individual business in 2013. So starting in 2013, we expect to -- that both our Medicare and IFP businesses will drive revenue growth for the company. Other revenue, which includes sponsorship, eCommerce On-Demand, Government Systems and Medicare lead…

[Operator Instructions] Your first question comes from line of George Sutton of Craig-Hallum.

So I wondered if you could walk through your thought process or what's taken place in the last quarter or so relative to your decision to increase the focus on Medicare and to an extent reduce some of the expense side on the IFP business?

Hey George, this is Gary. Yes, I'll make some comments on that. In the individual and family plan business, which is still an important cash generator for us and is still a really vibrant market, we have just been working hard to continue to reduce the per unit cost of acquisition to levels that -- where we were several years ago, and we've achieved that. And we've also -- we think very substantially, been able to reduce the reductions that we've had in growth there. And as we indicated, we expect to be flat to actually grow that application volume a bit this year. On the Medicare side, it is such a compelling opportunity to us. We're seeing so much demand that's coming our way. As we noted, we're able to -- we're fulfilling more of this demand in-house than we had planned at this point, which we're really pleased with. The lifetime revenue value of this Medicare members is essentially greater than the individual and family plan members and the marketplace itself is -- the growth rate is actually increasing. So when we look at all of that, it's really, for us, it's pretty simple, that for every cost of acquisition dollar we have, we want to both economize and maximize on the return. And what we're seeing in the Medicare business certainly allows us to do that. In fact, quite frankly, our objective is to be that largest source of these Medicare products, at least, the largest private source in the marketplace. And we're working hard toward that right now.

Okay, great. I don't know that you addressed it in your prepared comments, but the cash consideration paid to a partner in the book of business transferred, can you explain what that was?

Yes, this is Stuart, George. We make an upfront payment in transferring some Medicare members over to our books, and we earn the renewal commission revenue on that. We make the payment upfront and then we amortize that to expense as we recognize the revenue, as we collect that over a multi-year period.

And this is from a partner who we exclusively provide the leads and the demand, to.

I understand, okay. All right, that's very helpful. Lastly, obviously, the MLR rate was changed with the new legislation. Is there any discussion, or would you have any anticipation that, that might change as a result of anything that might come down from the Supreme Court, or is that just way too early to?

I think it's too early to know. There's so much a speculation and so much written and discussed about the Supreme Court. Will they invalidate any of this? Will they invalidate only the mandate? Will they invalidate the mandates and more than that? If they invalidate the mandate, is it such a lynchpin that the rest of the legislation collapses? There really is so many unknowns at this point. But again, we're just -- we're managing our business presuming that the -- it's the law of the land, and it's going to continue to be, and any changes -- we're certainly thinking through different scenarios on how to react to them.

Your next question comes from the line of Robert Coolbrith with ThinkEquity.

Just wondering, you delved a little bit into the HHS regulations which were recently introduced, clarifying some of the issues around the state healthcare exchanges. Could you maybe provide some more detail on what still needs to be clarified, specifically -- I mean, reading through the regulation that was issued, I didn't get a sense for whether or not there was a clear-cut, sort of bright line ruling on the commissionability of a subsidy. And I think you -- yes, that's probably at top-of-mind for people who are thinking about this opportunity. just any more detail on that in particular?

Yes. Well there's some details still to be determined. For example, being a web-based entity, which is how we are regarded, we and others would have display all the plans that are on the state exchange. We believe that, that's going to be public use data file that we'll be able to simply get access to. So things -- small things like that, that we're finding at Health and Human Services. They're very cooperative, and seem to be quite eager to participate and to support. On the commissionability, that's all been left silent purposely because that continues to be a state-by-state regulated part of the business and will be. We fully expect that these subsidy-eligible plans, which are called qualified health plans, QHPs, will be commissionable and will be commissionable at least out of methodologies somewhere to the products that we sell today. What those commission rates are and so on, that certainly is still to be determined. But I would think that they wouldn't be markedly different than the other products that are in the marketplace as well.

Great. And I'll just ask a follow-up as well. I just wanted to ask for a little more detail on the very strong growth in the Medicare Advantage products, just anything in particular that you're doing to drive that, or is it just a stronger entry in some markets, showing your presence in the market, and how does that play also into marketing expense? Is that a shift where you're now spending more to go after these potentially more valuable members, or is it -- any other additional detail or color you can offer on that?

Well, I'm glad you asked about that because we're certainly pleased with the portion of the business that is Medicare Advantage, especially in this past quarter, 60%, as we noted. I think it's a number of things. Our presence in the marketplace, the way that we're marketing, I think the offerings that we have online, the way that people are able to interact with them, clearly, people in our call centers and so on. It's been noted by several other payers that over 25% of seniors now are actually enrolling in Medicare Advantage products, and we're obviously seeing a larger percentage than that. But we just think it's a number of things that may have something to do with the younger senior that's being attracted to us as well. So it's a combination of those things. From a cost of acquisition standpoint, it's exactly what we want because the Medicare Advantage lifetime revenue is the highest of all these Medicare products. So, on just a per dollar basis, obviously, what we're investing from a cost of acquisition standpoint has got a much more attractive return when it converts to being a Medicare Advantage product.

Great. And one last follow up...

I was just going to -- I was going to add a comment to that, that we are shifting funds to that direction, and I'm very pleased to see that our unit cost of acquisition is declining in Medicare at the same time. So while we're moving the funds there, they're even more effective, especially as our conversions get better.

That's great. One last question. As Medicare advantage becomes more impactful for the company, what's your view on -- going back to ACA, some of the issues that were raised around Medicare Advantage, I guess they refer to them as overpayments. And just generally the federal government's sort of -- or, yes, the current administration's view or orientation towards Medicare Advantage and where you think that might go in the future?

Well, we think that there's so many seniors on Medicare Advantage today and more coming on all the time that we think these continue to be really viable products and alternatives for seniors, and they're popular. From a commission standpoint, can only -- the only comment we can make is what we see and what we hear from our suppliers, the payers, which is that they're very eager for this Medicare Advantage business. It's really good business for them, and they're willing to certainly fund through a commission standpoint, a distribution vehicle like us, which is rather unique. So we feel really good about the future with Medicare Advantage.

Your next question comes from the line of Corbin Woodhull with Janney.

Sorry if I missed this earlier, but I was just wondering the number of Medicare members? I think the last we heard was about 45,000. And just an update on the forecast for growth in the Medicare business? I think you said in the call, it's going to be EBITDA profitable by the fourth quarter of 2012 -- or EBITDA positive by the fourth quarter 2012 and a profitable business by 2013?

That's correct. Those are the statements I made about EBITDA. As far as members are concerned, we're a little bit higher now than that number that you just mentioned, the 45,000 enrolled members. Those are members, which we've either had revenue recognized in the past or will have future revenues recognized related to some of these members transferred that I mentioned earlier in the call. We're fairly close to that number at March 31, in that -- the last time we put out a number, it was as of February 15. So it's that number plus what we've sold in the last month and a half of the quarter.

And you said Medicare Advantage is up 450%?

Correct, yes. Our sales, approved members in the quarter year-over-year are up 450%.

Yes, we're still -- again, we're seeing very attractive growth rates here, and again, that's why we're investing in this business.

[Operator Instructions] At this time, there are no further questions appearing in the queue, so I will now turn over the call to Mr. Gary Lauer, CEO, for closing remarks. Please proceed, sir.

Well, thank you. I'd just like to thank everybody for your time today, and we look forward to speaking with many of you individually as well. Thanks.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.