Good day, ladies and gentlemen, and welcome to the eHealth, Inc., First Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I’d now like to turn the conference over to your host, Ms. Kate Sidorovich, Vice President of Investor Relations. Ma’am you may begin.

Thank you. Good morning and thank you all for joining us today, either by phone or by webcast, for a discussion about eHealth Inc.'s first quarter 2015 financial results. On the call this afternoon, we'll have Gary Lauer, eHealth's Chief Executive Officer; and Stuart Huizinga, eHealth's Chief Financial Officer. After management completes its remarks, we'll open the lines for questions. As a reminder, today's conference call is being recorded and webcast from the IR Section of our Web site. A replay of the call will be available on our Web site following the call. We will be making forward-looking statements on this call, that includes statements regarding future events, beliefs and expectations, including our expectations regarding Medicare commission revenue growth, continued expansion of our ancillary product business, expansion of our Medicare membership base, favorable retention rates for our Medicare members, growing contribution from high margin Medicare renewal commissions, the beneficial impact of the investments in our Medicare business, the importance of our Individual & Family Plan business or IFP, a source of significant annual revenue, cash flow and earnings, the profitability of our IFP business, the recent cost reduction program and the expected cost savings and impact on profitability on cash flow, member retention rates and IFP business projected commissions for member in our IFP business, our ability to take advantage of emerging opportunities in the IFP market, the timing of the recognition of Medicare revenue, our operating expense, cash flow and non-GAAP financial information, and our expectations regarding revenue during the second quarter. Forward-looking statements on this call represent eHealth's 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 these and other risks and uncertainties in our annual report on Form 10-K and quarterly report on Form 10-Q filed with the Securities and Exchange Commission, which you may access through the SEC Web site or from the Investor Relations section of our Web site. We will be presenting certain financial measures on 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 Web site, under the heading, Investor Relations. And at this point, I’ll turn the call over to Gary Lauer.

Thank you and thanks all for joining us today as we report our first quarter 2015 results. We completed a strong quarter driven by acceleration in Medicare commission revenue growth, better than expected Individual and Family Plan commission revenue, and a continued expansion of our ancillary product business. First quarter revenue was $61.3 million, representing a 20% growth rate compared to the first quarter a year-ago. First quarter EBITDA adjusted for restructuring charges was $5.8 million. During the first quarter we reported $4.5 million in restructuring charges related to our cost reduction program. Including these charges, EBITDA was $1.3 million and the GAAP net loss per share was $0.12. We ended the quarter with no debt and $39 million in cash. Our cash balance reflects seasonality inherent in our business model, as well as the restructuring charges that I just referenced. I’d like to start this morning by commenting on our performance of the Medicare business, one of the highlights of the quarter. Total first quarter Medicare revenue was $29.6 million or 108% annual growth, with a decline in Medicare advertising offsetting some of the growth in commission revenues. As we previously noted, Medicare advertising reflects discretionary spend by the carriers and tends to be more variable than commissions. First quarter Medicare commission revenue was $29.3 million, an increase of 135% compared to the first quarter a year-ago. This strong performance was driven by growth in renewal revenue on our existing book of business and increase in the number of new Medicare members added during the quarter as well as changes in timing of Medicare revenue recognition due to the impact of the new CMS regulations. So let me elaborate. During 2014, we grew our submitted applications for major Medicare products including Medicare Advantage and Medicare Supplement plans by 51%.…

Thanks, Gary, and good morning, everyone. During the first quarter we generated strong revenue growth and made an important step towards the Company's return to profitability by implementing an aggressive cost reduction program. Our first quarter 2015 revenue was $61.3 million, a 20% increase compared to the first quarter of 2014. Commission revenue for the first quarter was $57.8 million representing 27% year-over-year growth. Commissions from Individual and Family plan and ancillary products combined declined by 14% compared to the first quarter of 2014 due to a decline in the estimated number of revenue generating individual and family plan numbers over the same time period, partially offset by continuing growth in our ancillary product membership. First quarter Medicare commission revenue grew by 135% year-over-year, driven primarily by strong renewal revenue on our existing book of business, as well as growth in new member additions. Other revenue, which includes sponsorship, ecommerce on-demand, and non-commission Medicare revenue was $3.5 million in the first quarter, a decline of 35% compared to Q1 2014 driven primarily by a reduction of approximately $1.5 million in our Medicare advertising revenue. I now would like to address our commission revenue dynamics in greater detail, starting with the individual and family plan business. The annual decline in the first quarter individual and family plan commission revenue excluding ancillary and small business products was approximately 20%, which is less than the 27% year-over-year decline in our estimated individual and family plan membership. We believe that some of the difference is attributable to favorable commission mix. In addition, the commissions reported to us in Q1 imply that we may be benefiting from higher quarter end estimated membership than we reported, which can be driven by either more favorable retention rates or payment rates on approved numbers compared to our assumptions,…

[Operator Instructions] Our first question comes from the line of Steve Halper of FBR. Your line is open. Please go ahead.

So just to confirm the shift in the revenue recognition on the renewal to January 1 that accounted for $19 million and subsequently that $19 million won't be recognized in subsequent periods in the year, correct?

No, the $19 million is the total amount of renewal that we recognize in Q1. And Q1 is typically our largest renewable quarter anyway, because it does represent all of the accumulated sales we’ve made during the annual enrollment period over the history of the company that are still paying at this point in time, and also the Q1 renewals from Q1 sales. So it's always been our largest quarter. So the majority of that $19 million is in the first quarter as it always has been. So that's just the total amount that I'm stating there at $19 million. But you are correct as we move forward into Q2, Q3, and Q4 we won't have any renewals related to MA or PDP plans.

Right. Can you size that impact out of the $19 million?

I don't have that number for you here today. I'll say that the majority is Q1 as it always has been.

So it would have been in there anyway given the strong renewal trends that you saw?

That’s correct. And that’s why we gave the figure that the Q1 renewal amount compared to all of last year was up 56%. So we had strong renewal revenue growth and we are comparing basically year-to-year at this point.

Right.

And Steve -- hey Steve, the other point that we’d make is that over the past several years as we have been building this business, there has been a lot of discussion about Medicare, especially Medicare Advantage retention rates and what we’re seeing especially in this past quarter is that the Medicare retention is developing as we had always hoped.

Thanks. And then, the other comment -- the other question I have is as the visibility improves both on the IFP trends as well as Medicare and as you think about the restructuring effort, when are you -- when will the Company be in a position to provide more formal guidance for this year?

I don’t think we are in a position to answer that as to a specific time at this point. I think we are going to need to see how things develop at this point and make a decision as we go.

But clearly the -- the most important thing as we have said previously is, retention or attrition or churn in the individual book of business and because of the lag that both Stuart and I described, it takes several months so we can see what really occurred near the end of this open enrollment period. I think important to note again that we did -- we think we are seeing higher commission rates, we may be seeing earlier commission payments and we actually may have better retention than we had estimated, but we don't know that yet.

Right. And then, I'm sure its hard to answer the question is one of the different scenarios that you're looking at in case the Supreme Court strikes down subsidies at healthcare.gov? I know you can spend an hour talking about that.

Yes, yes. Obviously we think a lot about it and who the heck knows which way this is going to go. It's -- it may take -- if the Supreme Court rules in favor of king, the plaintiff, it may take some legislation to fix this. Obviously, we are talking to a number of legislators about that. So yes, we’re thinking a lot about it and we think about different scenarios here.

Thanks.

Thank you. Our next question comes from the line of Tobey Sommer of SunTrust. Your line is open. Please go ahead.

Thank you. I wanted to get into that kind of retention in the IFP, if you will. Over -- could you describe the process in the length of period, of time that it will take for you to have a firmer grip on whether that retention is a little bit better? Thanks.

Well, that would typically take us somewhere between three to five months probably from now to have a full view going back to Q1 of how that retention fully developed.

So we’re probably talking about a 2Q call in August and having a firm grip or even beyond that?

It could be at that point or little bit after that.

Okay.

Yes.

I’m curious what is left to develop on the Medicare side that you would require to actually give us a dollar figure for the impact of the accounting change? Thanks.

Can you say that again? What would happen …?

Yes, what you have to learn in order to understand just numerically in dollars what the change is to recording all the Medicare renewal revenue in 1Q versus spreading it out for the year? Because we’ve been given lots of numbers and percentages, but not just kind of the net effect of that equation. Thanks.

Yes, there is really not much more to develop on that number, because we have given a lot of percentages, as you stated, and I think the pertinent number is the 56% year-over-year growth in retention revenue. And so that's the focus there.

Okay. I guess, is it possible to express that in dollars?

It is possible to express, yes.

Could you do it on the call?

I'm not giving that number today. I don’t have it handy here.

Okay. I am curious -- its kind of shifting gears a little bit, outside of the Medicare enrollment period, what sort of opportunity do you think there is to enroll people in kind of this off cycle enrollment and how should we generally think about the spending required to do that? Thanks.

Well, we’re really enthused about the opportunity outside of the annual enrollment period. For example, in this first quarter that we just completed, we grew applications for Medicare Advantage Medicare Supplement. And primarily Medicare Advantage, I should add by 59%. That's very significant. We have got a lot of agents that are recurring. We have got more product inventory; we have got more visibility in the marketplace. So we’re enthused about that. And there is an important -- couple of important things here. It obviously increases our member base, but it'll also generate revenue in Q2 and Q3 and Q4 as we are paid for these new members as they come on. We do spend some money here. We spend money on marketing to acquire these. We have got a partner channel that works closely with us, we do work in search. So there is all of that and we’ve actually are upping our investment around that, because of the opportunity that we are seeing to go get it. But I’d just say it again; we are really pleased with what we are seeing so far outside of the annual enrollment period.

Okay. And my last question is, do you have an expectation or any kind of even broad expectation, it doesn’t have to be specific for cash flow or cash burn at this point of 1Q was pretty significant. And I know there were some puts and takes that you described amply in the call?

No specific numbers on it, but I do expect a positive cash flow from operations in total for the remainder of the year. From this point forward, to the end of the year I’d expect that to generate positive cash flow.

Okay. Thank you very much.

Thank you. Our next question comes from the line of Dave Francis of RBC Capital Markets. Your line is open. Please go ahead.

Hey, good morning guys. I guess, I want to try and ask the question a little differently on kind of how the revenue flows and waterfall from here going forward. It's -- as you can gather we're having a hard time getting our hands around the cadence of revenue flows relative to the accounting changes and just the changes in your business plan and business model related to the ACA. Can you give us a little bit better sense as to how you guys look at the business today given all of the changes that have come in and understanding the Q1 is clearly going to be a -- the big revenue quarter for you guys? How does that flow from here? I mean, can you give us a better sense as we try and get our hands around the business model as I imagine you guys are doing the same?

Sure. Yes. A couple of numbers I gave were intended to help with that. One is that the total renewal revenue for Q1 was $19 million and so that's the number for Q1 that you can reduce and get to more …

No, Stuart I -- I mean we got the numbers and we can play with the numbers in which way, but I guess again trying to get your sense as to how you guys are looking at the business, you got a better sense of it than we do, its clearly from where the revenues came in this quarter versus where not just us, but I think a lot of my peers were, it's pretty clear that the cadence of the -- of how the revenues come in is changing pretty considerably and what can you tell us to help us get a better handle around the mechanics around that, so that we can have a better handle on putting numbers together on our end.

Well, clearly this is a more seasonal business. The majority of the applications flow in the individual business happens on a short period of time. The same in the Medicare business, but and so you're going to see a -- you saw a larger Q1; you are probably going to see the same thing next year in the first quarter. But let me add to that, this isn't just all about timing, this is about momentum and it's about a lot of volume that we generated. The growth rates that we got in this Medicare business, we think are quite substantial. We continue to be disappointed in the entire marketplace in the individual business as we look out at it, but as we indicated we don't yet have a good hand on -- we don’t feel confident that we know enough about churn, but we like what we’ve seen with the commission rates. We made -- it maybe a better retention and we thought so. You put all that into the mix and at some point we’d like to be able to provide guidance, but we don’t want to do it and so we’re confident that we got a good handle on all of this. But sure the first quarter is a bigger quarter as Stuart said; sequentially the second quarter is going to be less. But he also said we’re going to be -- expect to be positive cash flow from operations for the year. So we are looking all of this right now. All I can tell you at this point absent giving guidance is that we’re really pleased not just with what we have seen in the quarter, but more importantly the momentum behind that supports all of this.

So let me ask you an operational question along those lines. And again, trying to get a handle on -- I understand you guys are trying to get a hand on the churn rates and what have you. Is there something that you guys can be doing differently from an engagement perspective? Either engagement with your customers or an engagement level with your insurance company partners to be getting better data such that you’re not necessarily managing the numbers from a rear view mirror perspective, but more in real time to understand what's going on in real time with the business rather than waiting for data to come in from your partners, which sounds like six to nine months down the road.

Well, we’ve worked with them over time to improve that, but it’s really a function of the fact that they collect the cash and pass it on to us and we are always going to be rear view mirror somewhat to the extent that we are not collecting the cash. So that's one. I’d say another piece of this those that have not all of the consumers paid monthly. Some paid quarterly, some pay every six months and so even if we had a tighter flow from the carriers, we're still not going to fully be able to understand who is churning every three months, that they’re paying every three months or who is churning every six months or they are paying every six months. That piece of it is that a little bit of a hurdle for us.

It's a hard one. And we try to get more insight and visibility and get the data sooner. One of the large carriers recently commented that that they have the same issue. In fact the comment and I’m paraphrasing went something along the lines that we just wish that these members would call us up and thank us for the health insurance and tell us that they are going to terminate, but they don't. We don't find out for a few months when they stop paying and that’s how the carriers do with it, then we get in those arrears as well. So it’s a difficult one. Its one we’ve not been able to solve and it's a carrier issue as well as it is for us. So we're somewhat down the tail on all of this. And it is frustrating for us.

Thank you.

But it’s the characteristic of this part of the business.

Thank you. Our next question comes from the line of George Sutton of Craig Hallum. Your line is open. Please go ahead.

Thank you. I wonder if you could talk about the IFP revenues per member which were much better than expected. And in your prepared comments you suggested part of that was mix and then part of that was your estimation of the numbers, which may have been conservative. I’m just trying to see if we can get a break down of how much might have been in each of those buckets. In particular, can you talk more about the mix which you saw?

Yes. So that was what I commented on that. It’s still going to take us a few months of getting the commissions off of Q1 before we can parse out how much of this is related to churn versus how much of it’s related to the rate of payment on members. We’re still collecting cash off of Q4 even now. Q4, not Q1, but back to Q4, we’re still collecting cash from that. And so I’d say that in a couple of months we will be able to break out those different buckets.

No, I understand you’re still collecting off Q4 but you therefore are getting a sense of what that mix looks like and I think the suggestion you're making is that that mix has improved and I am trying to understand how significant that mix change has been? Or commission rates or however you want to define the -- what you are learning.

Yes. Well, we’re seeing improved commission rates. I think it's a little bit -- it's still little bit early on this, but we could be seeing in excess of 5% possibly even 10% improvement in commission rates and we will have to see how that further develops. But that may give you at least a general sense of what we maybe seeing there. We also might be seeing earlier payments of commissions from a timing standpoint, that they maybe coming faster. There are some indications that that’s happening, but we will see if that continues. And then finally just it may be better retention and that's the one that takes a lot longer for us to understand. And that’s what makes me reluctant to really break out a pie chart basically at how much is coming from what place because it maybe that churn is better than we estimated.

Understand. Okay. And Gary on the ancillary product side, can you just give us a general sense of where you’re seeing success there and where your marketing focus has been?

Yes, George. We just had -- we continue to have really good attach rates to the major medical products that we sell, dental, vision, accident as well. And of course we’ve always done well with short-term, but these dental and vision, in particular, are just attaching in a new way. We’ve done some work over the past year or so to improve the consumer flow. So it’s easier to do that and to see those. And as we commented previously, we’ve already spent the acquisition costs on getting the major medical product here and sold. So in many ways these ancillary products almost flow as pure margin on top of that, because there is no direct acquisition costs associated, so just a combination of things. The products are better; we’ve got a better line up of those products. I think we are probably doing a better job, presenting them. They’re not expensive. And as a result of all that we continue to see really good attach rates.

I appreciate it. Thanks, guys.

Thanks, George.

Thank you. Our next question comes from the line of Stephen Lynch of Wells Fargo. Your line is open. Please go ahead.

Hey, guys. Thanks for taking my questions. Most of mine has been addressed at this point, but maybe if you could give us a little bit of an update on what you're seeing in terms of the competition for key words in the paid search advertising space for the IFP business? And then, maybe also how your client acquisition costs are trending in the Medicare business, that would be great.

Yes, I’d say on the individual family side, we continue to see strong competition in Q1. We mentioned it in Q4 that we saw strong competition there and I would say that the heaviest competition is from the carriers at this point and they continue to drive that in Q1. From a Medicare standpoint, we are seeing good improvement in our cost of acquisition year-over-year. We saw improvement in Q4 and we saw improvement again in Q1. And that's one of the reasons we’re able to generate the growth in Medicare that these rates that we are talking about with new application we are seeing good cost of acquisition that allows us to spend into that.

Is that improvement in the client acquisition costs there in the Medicare business is that being driven primarily by a shift towards direct leads or is it marketing partners or can give us a sense for what’s driving that?

Yes, it’s a combination of things. Our paid search has been going well. We have been expanding our partners and I’d say more of a shift probably from the paid search channel to the marketing partner channel as we grow that out.

We are also seeing an interesting dynamic there as well which we absorbed our individual business several years ago. And this is more anecdotal, but there is more and more word of mouth. And that impacts the acquisition costs, because it's essentially nominal or free. So it's a combination of all of those things. And we have also got more product supply. And with more product supply, there is more choices and the consumer is more likely to choose something. And so, what's really key -- the fact what’s most important element in cost of acquisition is conversion.

Got you. And then, I guess, just finally may be more of a housekeeping question. I may have missed it, but are you guys expecting to incur any amount of material restructuring costs in Q2 or is pretty much all that behind us?

I’d say pretty much all that’s behind us. There may be a little bit trickling in from what we have already done in Q1, but its normal at this point.

Okay. Thanks, guys.

Thank you. Our next question comes from the line of Steve Rubis of Stifel. Your line is open. Please go ahead.

Hey, guys. I actually try to take myself out of the queue. I don’t have any questions at this time. Thanks.

Thank you. Our next question comes from the line of Jason Mitchell of Bank of America. Your line is open. Please go ahead.

Hi, guys. This is Jason here for Nat Schindler. I just wonder if you could maybe talk about churn on the IFP plans during the quarter. Did you have any sense of some of that churn was people switching from subsidy plans to non- subsidy plans or vice versa that were maybe already members? And then, I guess, overall churn was kind of a new high this quarter. How do you kind of see the IFP business moving forward? It sounds like you’re emphasizing more of the Medicare and refocusing your spending there. So just could you talk about how you think about the IFP plan business maybe some of the takeaways you got from this enrollment season? Thank you.

Well, I will let Stuart handle part of that, but just on the individual business, I want to emphasize this is a key business for us, its core to the Company. We are invested in it. We certainly rebalanced our -- the expense structure around that business as we needed to do. But we continue to push on that business when new opportunities represent themselves, we will evaluate them and go after them, and I give you an example of that. Right now as we speak, we're marketing and selling qualified health plans to subsidy eligible individuals. We were hardly able to do that at all during the open enrollment period a year-ago and outside the open enrollment period a year-ago we didn't do any of it, now we are. And that's a really unique opportunity that we are very, very enthused about. The Medicare business, I think the number speak for themselves. We’ve invested in that, its worth. We are going to invest more, because we think we’ve the opportunity to grow, that these rates are even higher rates. It’s a huge marketplace. It’s incredibly exciting to us.

And I just say on the churn, I will point out that again it is an estimate. We -- our process is to use the historical numbers from year-ago to make those estimates. And so we're looking back to last Q1 and OEP and -- when you look back at Q1 a year-ago, we actually thought higher churn than we originally estimated and reported for Q1. As we went into Q2 and Q3, we found that there was higher churn that related back to Q1. And so we’re using that updated number to inform this year’s calculation. So and lets get back to my comment that that the commissions that are being reported back in Q1 would indicate that we may be understating our membership number which would increase the churn that you're seeing.

But we will know that for several months.

Okay, great. Thanks guys.

Thank you. Our next question comes from the line of Scott Fidel of Deutsche Bank. Your line is open. Please go ahead.

Thanks. So just going back to the higher commissions and the IFP business and then just thinking about the potential impact of mix on that, how do your average commission rates or on a dollar basis compare and the QHPs, in the qualified health plans as compared to non-QHP products?

The QHPs appear to be giving as higher commissions than the off exchange plans. The premiums appear to be higher that that consumers are selecting with those QHPs. I will likely give more data on this when we fully develop the -- more numbers across OEP, probably next quarter. But directionally that is overseeing.

And do you think that the variance between the two is significant enough that that could explain the higher commission rates? I’m just interested if you’re actually seeing when you think about 5% to 10% higher commissions, the base rates actually going up or could it just be that -- now you have almost half of the IFP business and QHP’s that really just drove that -- those increased revenue yields?

That could be a factor. There is a differential there that could be a good part of that.

Okay. And then just I had a follow-up question, just on the Medicare side. With the application growth that you saw in the first quarter, did you see that pretty well balanced across for the numerous carrier partners or did it seem like there were one or two carriers out there that keeps driving in order the amount of the growth in the first quarter of this year?

We saw good growth across the spectrum of our carrier partners.

Yes, okay. Thanks.

Thank you. [Operator Instructions] Our next question comes from the line of Tobey Sommer of SunTrust. Your line is open. Please go ahead.

Thank you. Just had a question to see if you have any plans and opportunity you think to sign up any new partnerships that could drive more traffic and help out the profitability side? We haven’t really talked about that kind of thing a while on one of these calls and I’d just wanted to get an update. Thank you.

Yes, we got a very active business development and partnering group. That's one of the things, one of the areas that is contributing to our Medicare momentum. We think about that in the individual business. We got a number of partners there that are been good ones, we expect them to continue to be. We’re always looking for new ones. So yes, very, very active and maybe -- and probably in this next quarter we will provide an update on a few of those new partners that we brought on.

Thank you.

Our next question comes from the line of Steve Halper of FBR. Your line is open. Please go ahead.

So we understand the -- you have the cost coming out based on the cost reduction program and a certain percentage of that is going to go to building Medicare business as you stated previously. But as we think about the rest of the year, do you -- what sort of magnitude of decline in marketing and advertising expense do you expect? Last year you had a very -- steep drop off, but then the enrollment periods change for individuals. So just give us some flavor of that and we assume a big -- and should we assume another big pick up around fourth quarter?

Yes, we’d expect a fairly significant drop off in that, particularly, in off season for individual and family. Last year you saw much lower volumes for individual and family and we could use the range around numbers from a year-ago to estimate the spending in that. It’s very closely linked to those volumes, but I guess I’d just look at those kind of volumes. And then, on Medicare, I’d likely see that dial up from a year-ago, but with our cost acquisition coming down that will mitigate at some.

Right. And then that -- and then the spike up again in fourth quarter, given Medicare and IFP open enrollment?

Right. Definitely, that spike up in the fourth quarter.

Right. Got it. Thank you.

Yes.

Thank you. And that does conclude our Q&A session. I’d like to turn the conference back over to Mr. Gary Lauer for any closing remarks. End of Q&A

Well, thanks everyone for taking the time this morning, and we look forward to speaking with many of you individually as well. Thank you.