Good afternoon, everyone and welcome to eHealth, Inc.'s Conference Call to discuss the Company's Third Quarter 2023 Financial Results. At this time, all participants have been placed in a listen-only mode. The floor will be open for your questions following the prepared remarks. I will now turn the floor over to Eli Newbrun-Mintz, Senior Investor Relations Manager. Please go ahead.

Good morning and thank you all for joining us today. On the call today, Fran Soistman, eHealth's Chief Executive Officer; and John Stelben, Chief Financial Officer will discuss our third quarter 2023 financial results. Following these prepared remarks, we will open up the line for a Q&A session with industry analysts. As a reminder, this 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 later today. Today's press release, our historical financial news releases, and our filings with the SEC are also available on our Investor Relations site. We will be making forward-looking statements on this call about certain matters that are based upon management's current beliefs and expectations relating to future events impacting the company and our future financial operating performance. Forward-looking statements on this call represent eHealth's views as of today and actual results could differ materially. We undertake no obligation to publicly address or update any forward-looking statements in future filings or communications regarding our business or results. The forward-looking statements, we will be making during this call are subject to a number of uncertainties and risks, including, but not limited to those described in today's press release, and in our most recent Annual Report on Form 10-K and our subsequent filings with the SEC. We will also be discussing certain non-GAAP financial measures on this call. Management’s definitions of these non-GAAP measures and reconciliations to the most directly comparable GAAP financial measures are included in today’s press release. With that, I’ll turn the call over to Fran Soistman.

Thank you, Eli, and thank you all for joining us this morning for eHealth’s third quarter 2023 earnings call. eHealth delivered strong Q3 results reflecting favorable member retention trends, an increase in Medicare Advantage lifetime value, and better than expected cash collections on our existing book of business. Third quarter Medicare enrollments came in slightly below expectations as we focused on AEP preparedness and reserved our marketing budget for the fourth quarter. Our Q3 results also reflect important investments in support of our Medicare annual enrollment period objectives, including the successful scaling of our telesales organization. This included the expansion of our national and local market teams of licensed agents or benefit advisors, as well as the addition of customer care specialists as part of our ongoing commitment to enrollment quality and superior member experience that leads to improved customer persistency. We also ramped our advisor force supporting our dedicated carrier arrangements. During the quarter, we finalized our preparations for the AEP across all key areas of our organization entering Q4 in a strong position to deliver on our financial and operational goals. Importantly, the organization is now significantly more agile than we have been in prior enrollment seasons, allowing us to course correct as we go, leaning into channels and markets that are outperforming expectations, while shifting spend out of underperforming areas. Agility is a critical factor for a successful AEP, as this concentrated stretch is both intense and fluid. Before discussing operational developments during the third quarter, I'll first offer some comments on dynamics we are observing within the Medicare market. First and foremost, the Medicare Advantage market remains as attractive as ever, aided by demographic trends, bipartisan support for the program, a significant value proposition relative to traditional Medicare, and robust plan selection offered by carriers. The…

Thank you, Fran, and good afternoon, everyone. Our third quarter results reflect our AEP readiness efforts, including investments in scaling telesales capacity. As our organization prepared for AEP, we continue to exercise cost discipline and work towards achieving adjusted EBITDA profitability. Our third quarter results also include positive tail or adjustment revenue indicative of strong performance of our book of business in both our operating segments Medicare and IFP SMB. Total revenue for the third quarter was $64.7 million, representing a 21% increase from the third quarter of 2022. Year-over-year revenue upside was driven primarily by the $12.2 million in net tail revenue that we recognized in the quarter and that compares to $3.5 million in net tail in Q3 of last year. Underneath that, $9.3 million of the tail came from our Medicare book of business and $2.9 million came from our IFP, SMB and ancillary products. We have now reached $186 million in cumulative net tail since we adopted ASC 606, including more than $30 million in net tail this year alone. The main driver of third quarter positive tail was favorable cash collections from some of our Medicare Advantage cohorts relative to our original expectations. The LTV revenue we recognize for each member cohort consists of a combination of initial revenue booked at the time of enrollment and the revisions to that estimated lifetime value, which we recognize over the life of that cohort. Recall that we booked initial revenue with a constraint. For our Medicare Advantage product, we constrained LTVs by 7%. If cohort performance based on cash collection exceeds expectations estimated by the initial constrained LTV, that constraint is released over time in the form of positive adjustment revenue. Our cumulative net tail revenue of 186 million since our implementation of ASC 606 in 2018…

Thank you, John. Before we open the call for questions, I'd like to take a moment to highlight the significant progress this organization has made in the past 2 years. Today, we are much stronger operationally in every major aspect of our business, including our telesales processes, demand generation programs, consumer and agent facing technology tools, carrier relations, customer satisfaction, and so much more. Our book of business is performing well with an improving retention trends and strong commission flow relative to our LTV models. The cost reduction program we implemented last year has led to significant improvement in our earnings and operating cash flow. As a result, we are in a strong liquidity position and on target to reach cash flow generation. Most importantly, our employees are motivated, engaged, and looking forward to taking our company to the next stage as we complete the transformation formation process. And now, we will open the call for questions and answers. Operator?

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

I've got a few questions. First on the customer care and enrollment side, obviously, much more expense per approved member in Q3. You mentioned that that was an enhanced training protocol in part. Can you just give us a sense of what that means for Q4? How much better are you set up? Will we see actual reductions In that line item, on a per approved member basis in Q4?

Good afternoon, George. Thanks for your question. Yes, I think the short answer is you will see improvements in the fourth quarter. We're very, of metrics oriented here, we know what drives top line, bottom line performance. We're mindful of not just having the capacity to respond to inbound calls, but also, making sure that when where we invest the marketing dollars, we're getting, the respectful and appropriate, LTV to CAC outcome. Let me see if John would like to add anything to that.

No, Fran, I think that's right. We expect to see expansion in the LVADICAC margin in Q4. Got it, year-over-year.

So, others have also reported Kind of early indications of what they're seeing. Sounds somewhat consistent with what you're saying. I believe given you mentioned you were below plan a little bit in Q3. Others have said they saw a slow start to the season, but it has picked up relatively nicely since. Is that generally what you were saying in this messaging?

I think largely that's right, George. I mean, the 1st day, we absolutely killed it. And, and then things started to settle down a little bit. And that 1st day's performance is largely reflecting the pipeline that we had built up, that the agents had built up, and we're able to move on it very quickly. And that was a Sunday, by the way, this huge Sunday. So it has largely moved to what I would say is pretty predictable. At this stage, we're 24 days into AEP. As you know, there's generally or at least historically a surge in those last 10 days, we have no reason to believe that's going to be different this year. But I would say just to elaborate further, we are an omnichannel distribution organization and we have channels that are performing strongly, channels that have performed a little less than expected, but we see some signs over the last couple days of that improving. We see with our diversification of now having a dedicated carrier capability, we see different trends there as well. The agency side of the business and the dedicated carrier side of the business, there are some similarities, but there are also some interesting differences, which we'll certainly elaborate further if they continue when we report our fourth quarter.

And then finally, just a comment and then a final question. The comment is on the TV ad, I think it's really well done, concept of reducing stress, so I certainly am eager to see kind of how that plays through this season. But on the question side, the 2025 CMS technical changes include a $6.42 fixed cost or fixed compensation arrangement, can you explain what you see that meaning for you and is that meant to target certain players in the industry specifically?

Well, before I answer the question, let me acknowledge what you've already shared in terms of the TV spot. We're really pleased with it. It's helping our branding recognition and that's important. As you know, there's a lot of noise at this time of the year, the messaging needs to find its way through all that noise and we are seeing some encouraging signs that indeed it's doing what we had opted to do. And the stress limiting stress messaging is really resonating. As far as your question, as you know, the, CMS did issue its proposed new rules for 2025 on Monday evening. And it's luminous, it's just under 500 pages. I would say that there's areas where we are still trying to decipher what the intent is, that's not uncommon. I'll remind you of what happened with the 48 hour rule, the scope of appointment. We experienced some similar ambiguity that's pretty typical. So, clearly, this will be a process, including an opportunity to talk to CMS to comment to CMS before these proposed regulations become finalized. So, we may have more to share with you later in the quarter.

Your next question comes from George Hill from Deutsche Bank.

What is just a thing I want to revisit on the tail revenue, which is if I remember, like, the margin on that comes through at a pretty high level. And I guess I just want to confirm that. And I guess I wanted to ask if you guys have any visibility into any more tail revenue coming through in Q4? And then I've got a couple more as well, please.

Sure. So, I'm going to let John take that, and I may supplement it to see what John has to say.

Sure. The tail revenue relates to a prior period. So therefore, it is very high margin. To tell you, we do not, guide or forecast tail forward. It's there are a lot of factors that go into how that tail, to get developed. So our guidance for Q4 implied in the annual guidance does not include any tail.

That's super helpful. Fran, that was pretty clear. I didn't know if you had anything else you want to add or I can just move on?

I think it's an encouraging sign. It's an early indicator of the important work we're doing with retention. So we're very encouraged. The work is far from completed, but it's an important sort of preliminary milestone.

Okay. And I guess how are you guys thinking about how you resource the ISP market given kind of what we're seeing in Medicaid redeterminations to excuse me, and a lot of members, a lot of these people transitioning to ACA style plans with some degree of subsidy. And we're seeing a lot of the MCO companies who you guys work with kind of put up pretty good results around what would look like ISP business for you guys, would just want some macro thoughts on that?

Thanks for that question, George. The individual market is an interesting, I would say phenomenal right now. If you've seen one state, you've seen one state. There's been states that have suspended the redetermination efforts. We've seen states with their state exchanges where it's more difficult to work with them, or there's limitations as to what we can do. That said, we're still very committed to the individual market. And we're looking at to Enhancements to our operating model, to our marketing strategies. So while it hasn't been as much of a factor to in '23, we aim to change that for '24 and beyond.

I'd say, I have twp quick ones, Fran, to pick up on one of them, which is, I don't know if you I know you guys aren't in a position to put '24 guidance out there yet, put a lot of companies on the third quarter calls kind of talk about big moving pieces in puts and takes. I was wondering if you guys would address that. And my last follow-up would just be, it looks like the Med D program is going to see a significant amount of disruption over the next 2 years. I know it's not important, very important for you guys, but we just love how you're thinking about to, would there be either the opportunity or to like the elimination of the opportunity to book that for you guys? And I'll hop back in the queue. Let me address your first question, guidance. We don't provide '24 guidance out q4, full year '23 results, which will be early Q1 next year. So more to come on that. We obviously have a governance process. We have to, get forward buy in terms of our operating plan. As far as Part D, I think you're right. There will likely be a fair amount of disruption on Medicare Part D. It's potentially going to be a catalyst for more movement into Medicare Advantage, because of ADD most Medicare Advantage programs have an integrated Part D, program. So -- but to the extent that it's still necessary to complement, those who are in original Medicare with or without Med Supe, people are going to need it. In fact, you know, there's penalties if you don't sign up for it when you first become eligible. So right now, our thinking is that it could be a catalyst for more Medicare Advantage business.

Yes. I phrased the question poorly. That's generally the direction I was going in is, I would expect that you guys should see a little bit of PDP to MA conversion in 24 in 25, I'm sorry. I appreciate the comment?

Thank you. Your next question comes from Ben Hendrix from RBC Capital Markets.

This is Michael Murray on for Ben. Could you discuss the scaling of your telesales organization ahead of ahead of AEP. how does this compare to prior years? And how are you thinking about the efficiency of these agents given potentially limited experience?

The scaling has, I would say is comparable to what we did a couple years ago. As you know, we needed to reset, our sales organization and is part of the transformation, and we did that successfully in April of 2022. The advancements that have been made on our sales effectiveness, and our marketing optimization gave us confidence that we could scale it again. Plus, through our diversification efforts and having the dedicated carrier BTO capabilities, we needed to ramp up for that opportunity. So, that didn't exist when we were last at a comparable level a few years back. So, the scaling really accomplishes are strategic needs on the agency side as well as on the dedicated carrier BPO side of our businesses. As far as the tenure. What I can tell you, Meds, and it's really a testament to the effectiveness of our training. Our sales organization has just an incredibly, well-tuned training capability that is continuous. It's not one and done. I mean, it is continuous. Every day, we send out what we call a slew bite, and it's a pretty 4 minute video that provides training tips to both new and tenured agents. And I watch them every day because, it's important to understand, what we're focusing on and its message resonating. So, Training is not one and done, it's continuous, and it's been effective at narrowing the gap between tenured agents conversion performance and new hires. So, I'm really pleased with the progress. And the learning curve is fast. And I think we accelerated because of all of our training techniques.

And then just a quick one on, your local teams. Could you remind us, how many markets you're in for this AEP? And how does performance in these markets compare with other markets?

Sure. Well, Mike, we started with really, 2 teams last year. We needed proof of concept that it does produce better performance than focusing only on a national operating model. And it absolutely did proof that local healthcare is local. And we've found that when you have agents that our focus more on what's available in a defined, a very defined geographic region, not just from a carrier perspective, but from a provider perspective, particularly with value-based arrangements, and plans that offer social determinative health solutions, they can be even more effective in being responsive to beneficiaries' needs. We expanded that to 6 markets this year, and early signs are confirming that it continues to be the right model. How far we go with this remains to be seen, but I think we made an important investments for ‘23 and it's looking good.

Thank you. There are no further questions at this time. I'll turn the call over to Fran Soistman for closing remarks. Please go ahead.

Well, thank you, operator. And thank you, everyone, again, for listening in on our call today. And we look forward to having one on one conversations over the coming days. Thank you.