Good afternoon, everyone, and welcome to the eHealth, Inc. conference call to discuss the company's Third 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.

Good afternoon. And thank you all for joining eHealth, Inc's third quarter 2022 financial results. Joining me today are Fran Soistman, Chief Executive Officer and Christine Janofsky, Chief Financial Officer. After managements prepared 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 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 the Medicare market and individual and family plan market, including current market and enrollment trends, consumer demand, our competitive advantage and market opportunities, our investments in enrollment quality initiatives, our omnichannel capabilities and call center operations and expected impact of these investments on customer conversion, customer retention and other quality metrics, our expectations regarding our marketing and member acquisition strategies and sales channels, our expectations regarding our business strategy, operating plan and financial performance, including the profitability of our business, cost savings, cash flows, conversion rates, customer retention, lifetime values, acquisition costs, member estimates and fixed and operating expenses and our full year 2022 financial guidance. 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 earnings release, 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. We will also be presenting certain non-GAAP financial measures on this call. For a 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 you may access from the Investor Relations section of our website. I will now turn the call over to Fran Soistman.

Thanks, Eli. Good afternoon, and thank you to everyone joining us for our third quarter '22 earnings call. Today, I will review our third quarter results and provide an update on our execution, as we prepare for the important enrollment season, which started on October 15 in the Medicare market and November 1 in the individual and family plan market. I began my tenure at eHealth just about one year ago this month. Since then, we've assembled a new leadership team and developed a comprehensive long-range strategic plan for returning the company to sustainable profitable growth, while delivering a differentiated value proposition to carrier partners and customers. Significant operational changes were implemented across all critical areas of the organization this year as we started to execute against the plan with additional initiatives roadmap for 2023 and beyond. Our initial achievements will be tested and leveraged for success during this important time when millions of customers shop for individual and Medicare plans. During this enrollment period, our company will assist tens of thousands of Americans to shop and enroll in plans that represent an optimal match for their personal preferences, health needs, and budgets. Our sales agents and product teams have performed the critical work of assisting customers and navigating a complex landscape of health plan options, guiding beneficiaries through planned features and key selection criteria, as well as providing the enrollment method that are most convenient for the beneficiary or their caregivers. This important service provided in a multi-carrier choice environment that meets beneficiaries when, where, and how they want to be served. We give consumers the ability to shop and enroll through a host of different methods, including telephonically, online using their personal computers, laptops, tablets or mobile devices through live chat, or fully unassisted using our digital tools.…

Thank you, Fran and good afternoon, everyone. Our third quarter results reflect a reduction in member acquisition costs pursuant to our cost transformation plan combined with a significant improvement in Medicare agent productivity. During the quarter, we generated similar Medicare enrollment volume compared to third quarter a year ago, while reducing variable acquisition spend in that segment by 37%. Third quarter Medicare revenue was $45.1 million, down 3% from Q3, 2021. Medicare commission revenue was $41.3 million, down 3% year-over-year. During the quarter, we recognized $1.7 million of positive adjustments or tail revenue in our Medicare business, reflective of positive cash collection trends on some of our older member cohorts. Third quarter Medicare non-commission revenue of $3.8 million was flat year-over-year and is comprised predominantly of carrier advertising revenue. Medicare segment loss was $23 million in the third quarter, compared to a loss of $52.9 million a year ago, reflecting the impact of our cost transformation program and increased conversion rates in our telesales organization. Medicare Advantage approved enrollment were approximately 37,800, a year-over-year increase of 3%. Total Medicare enrollment, including Medicare Supplement and Medicare Part D approved members were approximately 44,900, or a 4% decline relative to Q3 of 2021. The year-over-year decline in Med Sup and Part D enrollment are driven by secular shifts in consumer demand, favoring MA and MAPD product, as well as our more targeted deployment of marketing spend on MA leads. We ended the third order with an estimated total Medicare Advantage paying membership of $582,000, which represents year-over-year growth of 4%. Total estimated Medicare membership was $905,000 or an increase of 3% compared to a year ago. MA LTV for third quarter was $953, down 2% on a year-over-year basis, reflecting stable turn observations on our historic third quarter cohort and a product…

Thank you. [Operator Instructions] And our first question will come from Tobey Sommer of Truist Securities. Your line is open.

Thank you. I was wondering if you could give us a perspective that you have both from your own business and appetite for marketing spend and sort of pricing out in the – as well as the market perspective. We've heard from some other players that everything seems to be a bit more rational with competition down somewhat – would love – ? Thank you.

Hi, Tobey. Nice to hear from you. Thanks for the question, of course. I would describe the environment as continue to be competitive. It's at least through the first three-plus weeks of the AEP. It's hard to predict what will happen in the remaining four and half weeks. That said, I would say that looking at things from the eHealth perspective, the team has done a really good job in managing attack. And again, every day is a new adventure. But I attribute that to the good leadership that we brought on board here in managing our channels as effectively as possible. So rational is all relative. So let's start there. And I think it all depends on how each marketing organization is performing relative to their, own goals and objectives. And if they're performing consistent with their goals and objectives, it probably does remain rational, if they're not they may do irrational things. So let's see how it all plays out through December 7th.

Sure. So maybe to kind of dig into that from a pricing perspective, for out in the market for selling leads have those prices change? And I know that's not the preponderance of the business, nor the focal point of growth, but that our excellent plan [Technical Difficulty] and expectations were out in the market.

You broke up at the end. Can you say the last part of your question again, please?

Yeah. If we talk about pricing specifically, then it may distill and kind of get around that need for understanding any particular competitor's expectations in plans, and whether or not they're living up to them or not.

It's -- let's just say this. We obviously keep a very close eye on what our competitors are doing, to the extent that we have that visibility. Our channels are a little different. We have a very robust online capability. Our competitors don't necessarily have that same capability. So our online channel, we do more search engine optimization, searching and marketing. We do more of our paid search activity. So ours is a little different strategy on the direct mail, it's hard to really get visibility as to what they may be spending there, than what we're spending. But I would say that we're satisfied where we are to-date. We're satisfied with what we're spending, relative to where we were this time last year. But again, it's a point in time. And so we can't -- we don't get to up, we don't get through down. We're just -- it's November 7th, and we got another 30 days less in the AEP. So could be a different answer tomorrow. So I think that's where we are today.

Okay. You referenced scheduling an Investor Day in early 2023. Could you talk -- and you also have the cited the sort of harvestable receivables over the next 12 months or so, to speak to the cash flow position of the company as we get into next year. And I know AEP is a big variable in that equation. So the extent to which you can comment on that would be helpful.

Sure. I'll let Christine talk a little bit more about the cash flow. I would say, at a very general level, we're pleased with where we are from a cash flow perspective. From Investor Day, the goal there, of course, is really multi-dimensional and that we want to present this leadership team to our investors and to analysts, share much more about the longer range strategic objectives for the organization and provide more insight as to how we continue to see this business unfold and where we're going to take the company and it's a very different company today than it was a year ago, and that will continue to evolve between now and even the time when we schedule our Investor Day in late first quarter, early second quarter. Cash flow, I'll ask Christine, if she wants to share a little bit more.

Sure. Thank you, Fran, and nice to talk to you again Tobey. As we've talked about, certainly being cash flow positive is critical to this management team, and that's been one of our goals as we revised our operating plan for 2022 is to really reduce our cash burn. And as part of our revised 2022 guidance that we talked about on the Q2 earnings call, we increased our cash flow ranges by $30 million. And then also, as you think about our results for Q3, we're seeing that initial impact from our efforts through those operating cash flows and the outflows improving by $52 million on a year-to-date basis as compared to the first three quarters of 2021. And then we think about heading into 2023 in Q1, we will be at a significantly lower cost basis on both the fixed and variable cost side.

Okay. Thank you very much.

Thank you. One moment please file for our next question. Our next question will come from George Hill of Deutsche Bank. Your line is open.

Hey good evening guys, and thanks for taking the questions. I kind of just have two topics I wanted to touch on. So, the first is you have CMS implementing the advanced marketing rules, I'm sorry, the advanced market recording rules for this year's AEP. I guess, can you talk about what changes that creates for you guys, if any? I mean, I know from the call center business, you guys have always been recording calls, but I don't know if the changes CMS has implemented has created any changes in your workflow?

Hi, George, thanks for the question. It really hasn't changed anything for us. I mean, we've always recorded, call quality is critically important to us. It's really for beneficiary protection. And it's actually certainly grateful for us to continue to advance proficiency of our sales agents. The one nuance I would say this year is that there was a requirement of disclaimer requirement that we -- third-party marketing organizations were required to within the first 60 seconds of a call, share with beneficiaries that we don't offer all plans within their geographic area. And -- but it hasn't resulted in any issues for us as far as directing calls to CMS. So we -- our conversion rates are higher than they were last year. Our telesales is robust. So we're doing just fine and our call qualities are very high as well. So nothing -- no concerns on the CMS side.

Okay. And then I guess my follow-up would be is, there's been a bunch of -- a little bit of concern at the margin, I guess, that that combined with the changes in the TV marketing ads is likely to drive down churn for this selling season, which I would assume is good for you guys, but could also slow market growth at the margin. So I guess I would just ask. I know we're only a couple of weeks in with it, maybe kind of do you see anything that could impact the market from a macro level as opposed to anything we see help specific?

Well, I think the -- what you're referring to is the 45-day approval process for TV advertising at CMS and post the new [Audio Gap] filing use, but they have 45 days to review TV commercial that carriers or any marketing organization wants to utilize. And we're not utilizing DIRECTV this year, so it doesn't impact us as much as it might impact others. Look, churn is one of our top priorities, meaning reducing churn, increasing persistency. And I think what CMS has been concerned about are some of the commercials that have featured some celebrities that really is aimed debt beneficiaries who might be eligible for Part B rebate. They promote that. And they broader those down quite a bit, because they're only available on a very limited number of geographic areas in the country, and I think they were probably over-promoted in the past, CMS to credit really got after the organization to change the way they were promoted. And I think that's been a good thing. It's not good for the industry to create any kind of messaging that can be easily misinterpreted. So we're very supportive of CMS efforts there to make sure that all communications are done in a way that is a good reflection on the industry.

Okay. I appreciate the color. Thank you.

Thank you. One moment for our next question. Our next question will come from Ben Hendrix of RBC Capital Markets. Your line is open.

Thank you very much. I just wanted a quick question -- a quick question on the $90 million of cost savings this year. It makes sense the variable costs were mostly accrue to 4Q. But I was wondering if you could give us some more color on how that's manifesting here in the early weeks of AEP. We're seeing that, for example, an increased to online penetration both in unassisted and assisted mix there in terms of enrollment, kind of just a little bit more color on how that's accruing? Thanks.

Hi, Ben. Thanks for the question. The cost savings, the cost transformation activities have been across a wide area of activity. I'm going to ask Christine to join me in this part of our conversation. But we've been at it since April, that's when we first launched our cost transformation initiatives. And there's still more opportunities that we've already identified for the balance of this year and certainly into 2023. So, these are efficiencies and cost fixed and variable opportunities. They're intended to be executed in ways that are really aimed at efficiencies and minimally disruptive in terms of what they mean for the organization and what they mean for certainly our customers as well as our carrier partners. So as far as assisted and unassisted online, we look at all our channels as equal opportunities to support our growth objectives. We don't favor one over the other. It’s -- the objective here is to meet customers where they want to be met. And in fact, we've even taken it to new levels by introducing live agent chat perhaps was in the past, the bias towards unassisted, we can actually improve the throughput on our top of the funnel by having the live agent chat capability. We're here before those were in completed sales. And now by having a live chat capability, they're now converted to an assist it, and that was unproductive before, right, because people weren't completing the transaction, because they didn't have the ability to click on for help and now that changes. So it's just a different philosophy now. We -- if it increases the acquisition costs incrementally, so be it. It results in a customer and a customer that we intend to keep for the lifetime. That's the goal. So it's a different philosophy in eHealth today. The platform, there's other ways to create efficiency. We want that top of the funnel to be a source for lifetime value as for as much of the throughput as possible by introducing live chat, we think that there's greater opportunity for throughput. Christine, anything you want to add on the cost efficiency cycle.

I think you covered a lot of it, Fran. I think there's a couple of things that I'll mention. As we think about the cost transformation we're looking at all costs, both variable and fix. On the variable side, certainly, that will be the largest portion of our cost reduction for this year. mainly certainly from lower marketing spend and really focusing on the right channels that are going to provide us that right ROI and then having that corresponding reduction in the agent headcount to match that on a year-over-year basis. And then on the fixed side, really looking at all of our fixed expenses and making sure that we have that right cost structure in play. And starting 2023 at a better cost basis than we did entering into 2022. And we're continuing to look at additional opportunities both on the variable, as we continue to hone in on what are the right areas of focus. And then on the fixed side as well, one of the things that we mentioned was the Santa Clara lease. So we did a sublease on one of our office spaces. And that is something, as we have that remote first strategy from a people side that is an area that we'll continue to look at opportunities as well as other fixed costs expenses.

Thanks for the color, guys.

Thank you. And one moment for our next question. Our next question will come from Daniel Grosslight of Citi. Your line is open.

Hi. Thanks for taking the question. One of your competitors noted that there's more MA planned differential, this AEP, which is leading to more shopping. I'm curious, if you're seeing the same thing off of your platform and what that may mean for one, you approved policies of AEP. And then two, churn in older cohorts in your ability to recapture those seniors?

Hi Daniel, thanks for the question. I don't know if I would refer to it as more planned differential or just greater value proposition, whether it's in the core or in the supplemental plans, but I'd also say there's greater economic pressure in general, just because inflation in America is being felt by those with fixed income, so -- and I wouldn't focus entirely on those who have an MA plan today, right, because there's -- think about the 60% of Americans who are in original Medicare or who have an original Medicare and have supplemental -- Medicare supplemental that are shopping for Medicare Advantage because, it does provide a much greater value proposition and can reduce the financial exposure that they're subjected to an original Medicare with coinsurance, deductibles, where they have that protection on a Medicare Advantage plan in large part with a $0 monthly premium. So, I know there's concern about people switching and there could be people switching, but they could also be switching and staying with the same carrier, right, because carriers offer multiple plan options in the same geography, that doesn't necessarily result in beneficiaries having to switch the relationship with the carrier as well. So, I just want to provide some perspective there that first and foremost, those in original Medicare gain a lot of protection by considering a Medicare Advantage alternative, even those with Medicare supplemental oftentimes because they're paying frequently a pretty high month with premium, and from a fixed income that can be challenging, particularly now with higher inflation. So -- but back to your original point about differential, I think, it's just a value proposition is really very, very attractive for American beneficiaries today.

Yes. Makes sense. Okay. And then on the ISP segment, the inflation Reduction Act extended subsidies, ACA subsidies to provide 2024. I'm just curious, I know you're not over the index to the qualified brands, but I'm curious, if you think that will translate into faster ISP growth this year and next.

I don't necessarily think it's going to be accelerated growth. I would call it more moderate growth. That's our thinking right now.

Got it. Thank you.

Thank you. And this will end the Q&A portion of the conference. I would now like to turn the conference back to Fran Soistman for closing remarks.

Well, thank you, operator, and thank you all very much for joining us this afternoon. Thanks for your -- thank you.

This will conclude today's conference call. Thank you all for participating. You may now disconnect and have a pleasant day.