Good afternoon, ladies and gentlemen, and welcome to Q1 FY16 eHealth Incorporated Conference Call. At this time, all participants are in a listen-only mode. Later, we will have a question-and-answer session, and the instructions will follow given at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the call over to your host Kate Sidorovich, Vice President of Investor Relations. Please go ahead.

Good afternoon, and thank you all for joining us today either by phone or by webcast for discussion about eHealth Inc.’s first quarter 2016 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 will open the lines for questions. As a reminder, today’s conference call is being recorded and webcast from the IR 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, plan and expectations, including those relating to our plans and objective with respect to our Medicare business, our expectations regarding, our strategy for the ISD business, our expectations regarding the financial performance of our ISD business this year, momentum in our Medicare business and our ability to generate and convert consumer demand. Our expectations regarding our previous year release guidance and financial results for the full year 2016 including revenue, EBITDA, stock-based compensation, and non-GAAP earnings per share. Trends in our business and operating results that we expect to see this year especially if they are related to the second quarter of this year. Forward-looking statements on this call represent eHealth’s views as of today. You should not rely on these statements as representing our views on 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 website or from the Investor Relations section of our website. 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 website, under the heading Investor Relations. And at this point, I will turn the call over to Gary Lauer.

Thanks, Kate, and thanks to all of you for joining us today. As we report our first quarter 2016 financial results. Our revenue of $73.8 million grew 20% and adjusted EBITDA of $26.8 million grew in excess of 300% compared to the first quarter a year ago. Our first quarter non-GAAP diluted earnings per share $1.10. During the quarter we generated $4.7 million cash flow from operations, resulting in a quarter cash end balance of $66.7 million and no debt. We are obviously very pleased with these financial results. Our Medicare business continues to gain momentum with strong double-digit growth across the key metrics we track, which are submitted applications, estimated membership and revenues. Our individual family business exceeded our expectations despite continuing turmoil in the market with first quarter submitted applications and revenues coming in higher and operating expenses lower than we anticipated. Last year we made a strategic decision to manage the individual business for profitability and this is proving to be the right decision. Now I would like to review the highlights of the quarter starting with Medicare. Submitted applications for Medicare Advantage products were up 53% in the quarter compared to the first quarter a year ago. Our Medicare Supplement business is also gaining some nice traction with first quarter application growth of 47%. Medicare Supplement is an attractive and growing market with over 11 million covered lives. Our focused to-date with Medicare has been primarily our Medicare Advantage products, but we are now serving to address to Medicare Supplement market in a more aggressive way. First quarter submitted application for all Medicare products which also include prescription drug plan were up 53% year-over-year. We are pleased with the level of Medicare consumer demand that we have generated and converted during the first quarter outside of…

Thanks, Gary, and good afternoon, everyone. During the first quarter of 2016 we grew our revenues 20% while at the same time reducing our operating expenses both in absolute terms and as a percentage of revenue, which allowed us to materially improve our profitability compared to the first quarter a year ago. These strong results reflect rapid expansion of our Medicare business combined with our prudent approach to expense management across the entire company and especially in our individual and family plan business, which we’re operating from profit. Our first quarter 2016 revenue was $73.8 million compared to $61.3 million in the first quarter of 2015. Commission revenue for the first quarter was $69.4 million, an increase of 20% compared to $57.8 million in the first quarter a year ago. First quarter Medicare commission revenue grew by $13.5 million, a 46% increase compared to the first quarter a year ago. This increase was primarily driven by significant growth in the number of Medicare members renewing in Q1 and also by an increase in the number of new members that we enrolled during the quarter compared to Q1 a year ago. As Gary mentioned during the first quarter we recognized the vast majority of renewal revenues on our existing Medicare Advantage and prescription drug plans making it the largest Medicare revenue quarter of the year. We had a very successful Medicare renewal season this year. Commissions for individual and family plan and ancillary products combined were down 7% or $1.9 million compared to the first quarter of 2015, due to a decline in the estimated number of revenue generating individual and family plan and the ancillary numbers over the same time period. Other revenue which includes sponsorship, e-commerce on-demand and non-commission Medicare revenue was $4.5 million in the first quarter, an…

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

Thank you. Guys I have a few questions. First, relative to your reaffirmation of the guidance, I just wanted to think about that up against what we were better than expected IFP results in Q1. Could you just give us a sense of what for the rest of the year might be different or is this just too early in the year to be too aggressive?

I think it’s too early in the year. We have reaffirmed our guidance for the year as you saw and we are very thoughtful about that when we look at it and our performance against that especially early in the year. I think there is clearly some timing impact this quarter and as we’ve mentioned throughout our comments this is a big quarter for renewals for Medicare, that’s a big driver from the timing standpoint and the seasonality of our business. We did see a better renewal year than we had anticipated when it comes to Medicare and as we commented the individual business came in a little bit better than we anticipated as well. So it’s a combination of those two things. So I would say we are optimistic about 2016 and feel good about what we did in Q1 and that’s kind of where we sit right now.

Okay. It was interesting that other revenues were up as large as they were and you mentioned that a bit of that was related to lead generation in the IFP area. Are you doing something different with leads in IFP than you would have otherwise in the past?

The answer is yes. Although we started doing this last year, the later part of last year and it’s generally in non-FFM states, states that are not covered by the FFM where we need more telephonic support and with those leads we will from time-to-time sell those leads to others to fulfill. After we have reduced our individual and family customer care staff and we started selling some of those leads off in some states. So that’s generally even if you see the bigger amounts for that during the open environment period. So fourth quarter and first quarter not so much outside of that.

Okay. And then two other quick things, the pathway for web based entities you were concerned about that last quarter, I’m curious if there is an update there? And then you also had talked about likely reengaging your stock buyback program I’m just curious if that was active during the quarter? Thanks.

Hey, George it’s Gary. On the pathway with CMS, no change. We are using the pathway that they had asked us to change to, we are enrolling subsidy-eligibles through it. I had made the comment last quarter we think it’s still going to require some work. We’ve been -- it’s been communicated to us by CMS. They are going to be doing that work to make that a better pathway. But it’s working for us today. It’s not ideal as I think I commented last quarter. But we hope that CMS will do the things that they’ve committed to do there. But it is working and it’s working for us today. Regarding stock repurchase I guess I’d just make a couple of comments. One is as you know we’ve repurchased in the past in fact we’ve spend $200 million of cash in the past several years. And have actually we are looking at this earlier through that a reduced what would have been our outstanding today by more than 35%. And I could just tell you that management and the Board are continually evaluating our options as they relate to cash and we are certainly pleased with the fact that we are generating cash the way that we are.

Perfect. Thanks guys.

Thanks, George.

Your next question comes from the line of Dave Styblo from Jefferies. Your line is open.

Hi, there, thanks for taking the questions. I do appreciate sort of being this early on in the year, but did the first quarter seasonality come in quite a bit better than you expected for the earnings it just seems we’ve got to have quite a bit of drag in the later half so is there some sort of additional expenses or again are you guys just bias to not moving things and so you get a little more line of sight of the full year here?

I will say that it came in somewhat better than we had anticipated and we are very pleased with that. I think as we think about expenses going forward throughout the year and the bottom-line one thing that we consider is having a little bit better performance in Q1 that does provide us some flexibility as we move forward in the year to spend that on our Medicare growth. So I think one thing to keep in mind is just we wouldn’t necessarily pocket an over performance in EBITDA for the year we would look to apply that back into Medicare potentially.

Yeah, I’d just add to that we made the decision a year ago to manage the individual business for profitability and be very disciplined about our acquisition spend and I think you have seen us do that. At the same time I think as Stuart indicated we are aggressively perusing the Medicare business and this is obviously working. So, the combination there and the strategies allowed us to grow our revenues 20% in the first quarter and at the same time we actually reduced our overall operating expenses across the company as Stuart described. So I think the only thing we would say right now is our strategy and our approach in the individual and Medicare markets is working well for us to-date.

Okay, very good. And so I think you guys -- I may have missed the exact context, but that you are going to become a little more aggressive I think on the Medicare stuff side is that right?

Yeah, we did make that comment, we have been quite effective with Medicare Advantage. The Medicare Supplement market as you may know it’s not part of the centers for Medicaid and Medicare services the way Medicare Advantage it’s a state-by-state business the United ARP [ph] products that you may see advertise are an example of the Medicare Supplement market. The lifetime revenue values are approximately equivalent to Medicare Advantage, our cost of acquisition is not dissimilar. So, it’s got a lot of attributes and it’s very attractive and we are now beginning to pursue that market and we are starting to see -- seeing some very attractive growth rates there we are enthused about that.

Gary, could you elaborate on that so what specifically are you doing is there some areas that you don’t have a product in certain geographies or what is that you are doing to become more aggressive on maybe it’s more so just the lead gen?

Well, we certainly have some more targeted marketing in that area for one; two, we have added more product inventory over the past year, which has helped us and what’s interesting about it is that both the Medicare Advantage and Medicare Supplement markets are somewhat geographically dependent. There are some geographies where Medicare Advantage is really strong and that’s the product that a consumer is more likely want to enroll in. There are other geographies many of them are rural where Medicare Advantage frankly doesn’t offer the kind of participation from providers and other that a consumer may want with the Medicare Supplement business it does or will. So there is that as well and we’re beginning to do some of the geographic targeting as we look at that also.

Okay. And then lastly just on the IFP side of things can you may be parse out a little more where the growth came from was this exchange related was that not exchange related?

Hard to point specifically to one area there, I can say we did have higher mix of exchange related subsidy eligible business this last OEP so that is part of it and that does help our inflation of our premiums and also our commissions a little bit with the QHP. And also you will note in our metrics that we had a 47% decline in individual and family applications in Q1, but if you will recall we actually had an increase year-over-year in the fourth quarter the early part of OEP. And so we are starting to see possibly a better environment for us in Q4 versus Q1 portion of OEP. So when you look back at this last OEP we saw a decline in the applications for individual and family of 22% across OEP despite the fact that you saw the tail end down about 47% that’s pretty consistent with what some of the data points that are out there published by the exchanges as well. So we are looking at the whole OEP as a driver towards the revenue for this year it’s not just kind of a tail end here.

Sure. And have you guys noticed on that as you’re getting this higher mix of exchange subsidy, certainly as we follow the other managed care stocks. The churn is one of the issues that they’re talking about. And it’s upwards of 50% if not more perhaps. I’m curious given how you guys are paid on the business I think it’s breakeven after about a year. Are you making money on that business from what you’ve been able to see or do you sort of get it and it just turn out and so it’s sort of breakeven? What sort of economics are you seeing on that part of the business right now?

We haven’t seen anything abnormal with that. We’ve just gone through our first meaningful renewal cycles with those this time of year, this with last OEP with the first full meaningful cycle of renewal. So I don’t have a full view of that yet, but I can say that it does appear just kind of initial review of the data would suggest that our -- there is nothing unusual in terms of the churn relative to the non-QHPs at this point that I can see and the revenue itself came out better than we had in our planning. And our planning was based on churn from a year ago. So I’m not seeing anything unusual going on there.

Just on that and as Stuart noted this in the script our individual family plan and ancillary revenues down about $2 million year-over-year. And at the same time our Medicare revenues up $13.5 million year-over-year. So I think that reflects somewhat on the individual business to what we’re experiencing there in our strategy and also what we’re doing in Medicare what the growth engine looks like.

Sure, thanks for the questions.

Thank you.

Your next question comes from the line of Stephen Lynch from Wells Fargo. Your line is open.

Hey, guys. Thanks for taking the question. I guess to start out I wanted to talk to you about the marketing advertising spending. It came in a lot of lower than expected. I was hoping maybe you could just walk us through some of the dynamics that you’re seeing there. I know you talked last quarter about average acquisition cost for Medicare is I believe you said it was down 14% in 2015. So maybe can you give us some color on what’s driving the lower spending there this year? Is this sort of a permanent, is this a fundamental difference in the businesses so we're going to -- we should expect to see lower customer acquisition cost from Medicare going forward or is some of the benefit in the quarter driven by IFP as well?

Yeah some of the benefit is driven by IFP as well. We did spend more in Medicare this quarter than we did this time a year ago. But that was more than offset by the reduced spend in IFP. So those are like high level the big drivers. In Medicare from a cost acquisition standpoint, we did spend a little bit higher on a unit basis than we had this time last year. But great unit economics on that at the same time. Just we thought comfortable doing that. We’ve been seeing good improvements in our cost per agent in our customer care side of the business and given us a little room to push a little bit harder on the unit cost from a marketing standpoint for Medicare to keep generating significant growth.

Got it. And then Gary maybe this question is for you. Given the Medicare business is set to become the largest source of revenue this year and is definitely the primary focus going forward. Can you just give us your big picture overview of what the competitive landscape looks like selling Medicare plans? How many other firms are out there in the market you’re competing with how fragmented the market is and who are some of the other larger competitors that you come up against?

Yeah so really great question. We haven’t seen a lot of change in terms of the landscape. The large in fact the 50 state online exchange you can go to is medcare.gov it’s estimated that about 5% of Medicare Advantage transacts there and about 20% of prescription drug plans with the rest outside. We definitely compete directly with the suppliers the carriers. They’ve got very large marketing budgets you’ll see them advertise on TV, print media and other places as well, selling their products directly the same products that we sell. There are large regional brokerages that more often than not are dedicated to one brand name. So it may be Humana, it maybe Aetna and as I said they are regional. So it maybe a state or a part of a state or a couple of states depending upon where they are. Where one of the issues that we’re aware of that it’s got the national footprint that we have is doing it online the way that we’re doing it. I think the way that we’re acquiring consumers or reaching them is rather unusual, we’re doing it online, we’re doing it offline with television advertising obviously online we’re using search, we’re doing a little bit of print media believe it or not we even do a little bit of direct mail we found that that’s sometimes is effective. So we’ve got a really interesting mix here that has serviced well so far, but from a competitive standpoint we haven’t seen anything in the marketplace that indicates any real change and frankly what we’re seeing I think this is even more traffic and more interest online and you know the demographics like we do over 70 million Baby Boomers aging in over the next 15 years and we’re seeing more and more of that as well. But nothing to report from a competitive standpoint that’s unusual or has changed much.

Thanks, Gary that’s great color. And if I could just two really quick housekeeping questions, the first is on the $29 million of revenue that you got from renewals this quarter, can you give us what the comparable number was from Q1 last year? And then the second thing is whether or not we should expect a meaningful tax provision for the rest of this year?

Yeah I don’t have or I do, $19 million was the comparable number to that $29 million so it’s a 52% increase in our renewal revenue. And I’m sorry the second question was on the tax rate?

Yeah that’s right, whether or not we should expect meaningful taxes for the rest of the year?

Yeah, so the rate that we use roughly 24% for Q1 represents what we would estimate our rate to be for the full year. So I would use that rate for the full year.

Okay, thanks.

Thank you.

Your next question comes from the line of Steve Halper from FBR. Your line is open.

Yeah hi. If you could just do me a favor and talk about the cash on the balance sheet and plan is for deployment until share repurchases, I don’t think the company has been too active in that in the share repurchase area of late?

Yeah Steve it’s Gary as I am sure you hear me say earlier we have repurchased $200 million we’re pleased with our cash position, we’ve been generating cash at a really nice pace and we are continue looking at options relating to the disposition of cash, we don’t have any more to comment or report on that at the moment.

Okay, thanks.

Your next question comes from the line of Tobey Sommer from SunTrust. Your line is open.

Hi it’s very long going in for Tobey. You talked about the attractive unit cost economics for Medicare, can you just -- when you decided to turn around and operate it for profit what is the potential scale that you can achieve in this business?

Well the unit economics today are really good and I think we would continue to try to go for growth and keep pushing at those levels. As we move forward we are looking to bring the unit cost down just through ongoing efficiencies and marketing programs improving efficiencies in our customer care enrollments. I don’t have specific target margin to throw out in front of me today because I really think we’re in a multi-year growth mode here. And so I think it’s kind of early for me to talk about the kind of a normalized kind of when we stop going for strong growth and try to settle into kind of a normalized position, I think it’s kind of too early to do that.

And as you see we’re definitely investing for growth right now, I mean our objective is to grow the revenue base as large as we can reasonably. When I say reasonable I mean profitably and with a unit economic as Stuart described that is very, very favorable. And because of the way we’ve been managing our individual business and our overall expense profile we’re able to do that we’re seeing these what we think are really attractive growth rates on Medicare and profitability as a company in a whole.

Okay, thanks for the color. And not to beat a dead horse, but just I mean given the recent weakness in the share price and could you just talk about what the options are that you are weighing against share repurchases?

I can’t talk about anything specifically. But we’ve -- as I said earlier we have repurchased in the past. In fact many times in the past we have been quite aggressive about it. And we are just thinking about a number of different options that would optimize the use of our cash both from a company standpoint and a shareholder return the point of view as well.

Alright. And just one last one, on the marketing strategy you previously mentioned new customer generation sources that you are exploring. Are there just anything you could point to that particularly exciting or I think that you see catalyzing increased conversion.

Interestingly in the Medicare business we’ve had some really good experience with television. And one wouldn’t think that when you think about a technology in e-commerce company. See a lot of TV advertising, you don’t see Amazon, Google, eBay and others doing a lot of TV. We have actually found that direct response TV has been quite effective for us in this marketplace. We’ve found that the cost of acquisition is good. We’ve found that it’s -- that we can scale a lot of consumers who actually convert for us. So that’s one area that we’ve been creatively developing over the last year or a year and half and it’s worked well for us. We do it both through our partners as well as our own direct advertising. We continue to do work in and around search. I mentioned earlier that we’ve been doing some direct mail, that’s believe or not been effective for us as well. The response on that has been good and the economics work for us. So we continue to look at a number of different things to do then and the other thing I would tell you is that we found this in our individual business that as we build the Medicare business because of the consumer experience we like to think we provide, word of mouth becomes an important driver for consumers coming to us as well and at least anecdotally we are finding there is more and more of that as well and we are pleased about that.

Okay, thanks.

Your next question comes from the line of Ned Davis from William Smith & Co. Your line is open.

Thank you. Real quickly there was a rather large disparity between the trend in net cash flow and the EBITDA and I noticed that your receivables went up by about $10 million and your payables didn’t go up proportionally. Should we expect Stuart that you will kind of revert back to more traditional ratios, which would mean that whatever EBITDA you have in the final nine months will have a proportionally larger net cash flow generation the free cash in the balance sheet?

Yeah, so the receivable tends to increase fairly significantly in the first quarter when we recognize our renewals for Medicare Advantage and then we collect those monthly throughout the year and that receivable comes down across the year. So we will definitely benefit from that in future quarters across the year and help our cash flow for the year. I would expect our operating cash flow this year to be fairly similar to what you would see for EBITDA. So if you look at our EBITDA range that just put you in the zip code of where our operating cash flow should be for the year.

That would be a big relative shift in free cash flow versus EBITDA for the rest of the year, huge right?

Yeah, as I said we will be collecting that cash across the year and Q1 is also a quarter in which we pay off our marketing cost coming off of the open enrollment period and then you can also see just crude incentive pay and other payroll related pay is fairly high in Q1. And then that does recur in future quarters.

Secondly, back in March you came out with an announcement of a revision of your compensation program for key executives. And look to me like it’s mostly tied to hitting revenue targets and EBITDA targets for all the top executives. You don’t disclose those targets are they -- I'll ask the rhetorical question, which probably want to -- are they like the mid-point of these guidance ranges or are they high end or low end?

Ned I can’t comment on what they are specifically, but they are certainly within the guidance range or where those targets would be.

Okay. And then one final thing, just a little refinement you mentioned that basically, also [indiscernible] you didn’t raise your guidance as you want the flexibility to spend more particularly on Medicare market development and coming off a very low share of the total market I can see why you would do that and you have talked about TV, direct mail, et cetera I take it what you’re implying that the rates of return on this type of spending, if you opt to spend more to grow even faster that these are very high rates of return. And I take it that’s the way you are kind of looking at it, am I on track there with that kind of thinking?

Yeah, you’re totally on track. I mean we are very focused in both individual family and Medicare on return on investment on every unit that we bring in. We are every day like hawks are watching that. So I would definitely agree with that comment.

And you don’t see any gates to the growth rate, you already talked about competition you see meeting radically different there and the carrier still love you, right? I guess…

Well I don’t know about love, but I think they like us we generate some good volume for them we think we do it in a quality way, the cost of acquisition they tell us through us is good for them we help them to gain market share. So I think all of that’s good we have always approached our carrier partners with the idea that we want the relationship with each and every carrier as good as the best relationship we have with the best member. And so we take a lot of care in that area. Medicare is a very exciting market and I think you can -- that really start with it taking about it for several years, but I think when you see the kind of results and the growth rates we have had over the past several quarters it begins to illustrate why we are so excited about this.

And so what you were suggesting earlier on the supplement side is the inventory available to you on a state-by-state basis is increasing in a meaningful way is that did I interpret that correctly?

Yeah, we actually have increased it over the last year that’s correct and now we begin to pay more attention to this market as well we are building a very nice business with Medicare Advantage and now we are beginning to look at doing the same thing in parallel with the Medicare Supplement business.

Great, thank you very much. Appreciate it.

Thanks, Ned.

I’m not showing any further questions at this time. I would now like to turn the conference back to Gary Lauer for closing remarks.

Well, we just appreciate your time this afternoon and look forward to speaking to many of you over the next several months. Thank you.

Ladies and gentlemen this does conclude today’s conference. Thank you for your participant and have a wonderful day. You may now disconnect.