Good morning, everyone, and welcome to eHealth, Inc.’s conference call to discuss the company’s Fourth Quarter and Fiscal 2023 Financial Results. At this time all participants have been placed on a listen-only mode. [Operator Instructions]. 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 fourth quarter and fiscal year 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 or 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 and 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 those 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 good morning, everyone. Today, we will discuss our fourth quarter and fiscal year 2023 results and 2024 outlook. Our fourth quarter results demonstrate the success of our transformation program and our company-wide AEP preparedness efforts. One of our primary goals this year was to return to fourth quarter Medicare enrollment growth on a profitable basis and a substantially enhanced operational foundation. I am pleased to announce that we have successfully accomplished this objective, delivering strong growth in Medicare enrollment and revenue as well as a significant improvement in our profitability metrics compared to Q4 of 2022. Our execution in 2023 has positioned us well for this year with an expanded and more productive telesales organization supported by technology enhancements and continuous reinforcement of training, positive momentum in our brand-building initiatives, a wider and more diversified portfolio of marketing channels and a promising start for Amplify, our new dedicated carrier business. We are excited to continue building on this foundation in 2024 as we plan to drive growth, further enhance our profitability metrics and pursue business diversification. Before diving into our operational performance, I want to share some thoughts on the current industry landscape. Medicare Advantage has proven to be highly valued by seniors with over 30 million Americans enrolled and continuous share gains relative to the traditional Medicare program. During this AEP, carriers continue to offer robust plan selection, strong provider networks and attractive benefits. In fact, the average beneficiary had access to 43 Medicare Advantage plans, the largest number of options ever. As of January 2024, the individual MA market grew 2.3% sequentially and 9.4% year-over-year, representing a slight acceleration from last January when it grew 1.1% and 9.2%, respectively. The agnostic nature of our platform allows eHealth to succeed by providing great selection and…

Thank you, Fran, and good morning. Fourth quarter results reflect significant year-over-year improvements across our critical financial and operating metrics. Medicare segment profit, consolidated GAAP net income and adjusted EBITDA all improved significantly compared to Q4 a year ago. Importantly, fourth quarter and full year 2023 operating cash flow exceeded our expectations, reflecting favorable retention trends in our Medicare book of business, among other factors. Fourth quarter 2023 revenue was $247.7 million, representing 26% year-over-year growth, driven by strong performance within our Medicare segment. Fourth quarter Medicare segment revenue was $233.7 million, up 30% year-over-year, reflecting approved [ph] member growth, increase in our MA LTVs and positive net adjustment or tail revenue. Excluding tail revenue in both periods, Q4 2023 total revenue grew 25% and Medicare segment revenue grew 28% compared to Q4 of 2022. Fourth quarter Medicare Advantage approved members were approximately 160,000, an increase of 22% year-over-year. Total Medicare approved members grew 16% year-over-year to approximately 187,000, reflecting growth in Medicare Advantage and Medicare Supplement enrollments and a decline in Part D applications, which we view as part of a continued market-wide shift away from standalone drug plans. Fourth quarter Medicare Advantage lifetime value increased 11% year-over-year to 1,151. The increase in our MA LTV is primarily reflective of improved retention on the AEP cohort we enrolled in Q4 of 2022 as well as favorable carrier mix and contract mix. Positive persistency dynamics on our existing book of business, along with strong cash collections also drove positive tail revenue during the quarter. I’d now like to spend a moment explaining the interdependencies between several important metrics of our business. Member retention, lifetime values, net adjustment or tail revenue and cash flow. In accordance with U.S. GAAP, specifically Accounting Standards 606, we record our initial revenue in a manner…

Thank you. [Operator Instructions] And our first question will come from George Sutton with Craig-Hallum. Please go ahead.

Thank you. And I appreciate all the details on the call. Fran, you wrote a very interesting open letter to CMS. And I’m just curious what sort of a response you got from both carriers and if any, from CMS relative to the thought that let’s give some of these changes a chance to actually be able to evaluate if they work before we make a lot of other changes. And you had some other interesting ideas. Just curious the response you got.

Good morning, George. Good to hear you. Thanks for the question. That letter was really – think of that as sort of an op-ed and we use it social media and it got a lot of attention and overwhelming support for being a very – well, number one, addressing the concerns about the AEP process. And then secondly, the regulatory environment were more regulatory changes follow before, for the New Year before those that were put in place in the previous year have time to really affect outcome. I haven’t received anything from CMS. I didn’t expect to. Carriers largely supported because they face the same challenges in terms of year-after-year their surgery. It’s a question of is it major surgery or less invasive surgery, but nevertheless, it’s disruptive, it’s expensive. And in the end, there tends to be unintended consequences to beneficiary usually through more confusion. So it doesn’t clear things up, but actually oftentimes muddies the water, some more. They don’t like beneficiaries don’t like three minutes of disclaimers, right out of the gate. I mean think about it. But that’s the world we live in right now, and it’s not very customer-friendly. I am a senior. I think you know that, and I have a lot of friends who of my same age band. And I talked with them frequently about their experiences. And so it’s not just one person’s opinion, it’s fairly widespread. But my goal was to start a dialogue. I didn’t expect a seismic shift initially, but I do think it has been received well by carriers. I will let you know that our Public Policy Advisory Council, we have two former governors at that serve on that Advisory Council, and they have pended an op-ed that will follow mine. So that would be coming out likely this week. And these are two highly respected former governors, one representing democratic policy, one representing Republican policy, but they’re absolutely in lockstep on this regulatory environment. And giving regulations a chance to affect before new ones follow. So let me see if that answers your question.

That’s good. And I’ll just – I’m here to tell you that I think you would be relatively young for a U.S. Presidential candidate for what that’s worth. I did want to talk about your comment about profitability over enrollment from the carriers, which is obviously something they’ve been clear about. You can read that as carriers are planning to spend less money to try to go after a larger audience, which I wouldn’t see as positive for you. I believe you were suggesting that it could increase the amount of shopping because the quality of the options for the beneficiaries would not necessarily be as exciting and therefore, more moving around. Is that effectively what you’re saying?

I think you’ve captured it largely, George. I spent most of my career on the carrier side, and I sort of know the playbook when these situations occur. And I think it will likely play itself out again, and that is that they’re very disciplined about where they grow and how they grow. So I think that when rates get tough, margins get pressured. You will see in markets where star scores are closer to 3.5%, let’s say, than versus 4%, 4.5%, you’re going to see more benefit changes there. That’s going to create some volatility with beneficiaries and an opportunity to see if there’s a 4.5, 5 star plan alternative that they should consider that still preserves the rich supplemental benefits that they’ve grown accustomed to over the last few years. I think that the national carriers will be very strategic and where they focus the growth. And where they concede share because there – it could be the provider dynamics have changed. They don’t have the unit cost favorability that they may have had previously. So I think we’ll see some market exits. I do think that preservation of the $0 premium product will continue to be paramount. It eliminates the barrier to sales and introducing a premium to someone that here to [indiscernible] had $0 monthly premium would be very disruptive. And I think carriers will avoid that at all costs.

Perfect. Thanks for the thoughts.

Thanks for the question.

Our next question will come from Ben Hendrix with RBC Capital. Please go ahead.

Hi. This is Michael Murray on for Ben. So you guys saw declines in MA approved members if you’re just giving lower agent headcount. And I’m sorry if I missed this, but do you anticipate increasing head count this year?

Michael, we actually grew year-over-year in the fourth quarter. So – and that’s when the full effect of our marketing, reengineering went in place. We were – marketing was the last area of transformation by design because it started with bringing on a new leader in November of 2022, Michelle Barbeau. So rebuilding her team, implementing new strategies, we saw that play out very, very nicely in the fourth quarter. So, I’m thrilled with that demonstration of great progress. The agent counts, it’s going to be a little different in 2024 than 2023 because of our Amplify business. So we will be growing our agent resources for Amplify, because we’re bringing on more business, a nice new customer. But we’ll be on the agency side will be relatively flat. And – let me also point out, Michael, that while we will be relatively flat to a modest increase, the tenured relationship to new agents will be much better, in other words, we’ll have a larger proportion of our agent base with more experience than what we had in 2023 and where we had a large influx of new agents. So let’s deliver it, and we believe that’s going to help with conversion performance at the upcoming AEP.

Yes, Michael. So expect enrollments to grow again this year and probably very similar to the midpoint of the revenue growth that we provided in the guidance. We don’t break out how this will be spread between Amplify, which is the dedicated carrier unit and our agency choice, but the overall growth will be sort of in that roll bar.

Okay. That’s really helpful. And then just a quick one on the cost side. Regarding customer care and enrollment, that increased – those costs increased throughout the year. I wanted to see how we should be thinking about that for 2024?

John?

Yes. In the 2024 guidance, again, as Fran mentioned earlier, on the agency side, while the agent counts will be up a little bit year-over-year. The growth is predominantly in the Amplify business due to the new customer contract and some other dynamics in there. I would say that year-over-year, the absolute increase in CC&E will be less than what you saw in absolute terms in 2023 over 2022.

Okay. That’s helpful. Thank you.

I was just going to say, you should expect – we do expect to see continued expansion in our LTV to CAC on MA in fourth quarter of 2024 versus fourth quarter of 2023.

Okay. Thank you.

[Operator Instructions] And with no further questions, I’d like to turn the call back to Fran Soistman for any additional or closing remarks.

Well, thank you, operator. Well, I want to thank everyone again for joining our earnings call. As we continue to build momentum in 2024, I am confident in this organization’s ability to navigate our dynamic industry and seize new opportunities throughout the year. This is a battle-tested team that brings discipline to everything we do with the courage to make changes when necessary. As eHealth builds on our foundation of steady profitable growth, we will continue to innovate to reflect the needs of beneficiaries and our carrier partners. We look forward to updating you on our progress in the coming quarters. Thank you very much.

Good bye.

And that will conclude today’s conference. Thank you for your participation and you may now disconnect.