eHealth, Inc. (EHTH) Q4 2024 Earnings Report, Transcript and Summary

Good morning, everyone, and welcome to eHealth Inc.'s conference call to discuss the company's fourth quarter and fiscal year 2024 financial results. [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 Dolan, Chief Financial Officer, will discuss our fourth quarter and fiscal year 2024 financial results. Following these prepared remarks, we will open 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 except as required by law. 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 to everyone joining us this morning. eHealth delivered outstanding AEP results, materially exceeding our expectations for enrollment volumes, revenue and earnings. This is a testament to the success of the transformed eHealth, including the exceptional performance of our licensed agents or benefit advisers, our innovative omnichannel platform and the growing prominence of our brand. In December, we increased our 2024 revenue and earnings guidance to reflect our early read into AEP execution. The results published earlier this morning significantly exceed the high end of our upwardly revised guidance for revenue, earnings and adjusted EBITDA. Fourth quarter revenue grew 27% compared to a year ago. Medicare submissions across Agency and Amplify fulfillment models grew 38%, with our Agency model growing submissions by 49%, well above the overall Medicare market. We delivered this growth while substantially improving our enrollment margins. Importantly, we were profitable on a GAAP net income basis for the fourth quarter and the full year 2024. Our fourth quarter adjusted EBITDA grew in excess of 70% compared to a year ago, representing a meaningful margin expansion. In addition to the remarkable execution of our operating teams, these results reflect unique Medicare market dynamics. We believe these dynamics made the value proposition of our carrier-agnostic choice platform much more relevant to beneficiaries. This AEP, we observed unprecedented disruption to MA plan offerings, as carriers faced higher medical cost trends as well as regulatory pressure, causing them to make material changes to their strategies. This included benefit and premium changes as well as outright plan cancellations and market exits. As a result, we saw elevated consumer demand as beneficiaries assess their coverage and, in many cases, opted to shop for a plan that better suited their needs. At the same time, competitive capacity across the industry was reduced due to exits and downsizing over the past 2 years. This set the stage for an annual enrollment period where our Medicare Matchmaker offerings was primed to stand out. Additionally, we observed an increase in commission suppression, a tactic carriers sometimes use to control enrollments across their plan offerings. This happens to some degree every year, but was particularly pronounced with certain carriers in 2024. eHealth was able to successfully navigate these suppressions given the broad selection of plans on our platform and our carrier-agnostic strategy within our Agency fulfillment model. It was a greater challenge for brokers supporting just a handful of carriers. And as a result, we may see more competitor exits over the next 12 months. During AEP, we made the strategic decision to lean in on the strong consumer demand environment and invest in scale and market share capture. The strength of our marketing and sales operations allowed us to generate an attractive return on this investment. 2024 adjusted EBITDA margins substantially exceeded margins implied by the high end of the guidance range we provided in August. Through our strong brand and standout service quality, we're building a membership base that we expect will continue generating commission streams for as long as members remain on our platform, even if their needs evolve and they return to select new coverage. While new members represented the vast majority of our enrollments in the fourth quarter, we also successfully engaged our existing members through a variety of touch points. For many of these beneficiaries, we aim to build confidence when they are still in a plan that best fits their needs. We also identified and reached out to members who are impacted by plan cancellations and carrier market exits, as well as those who experienced significant benefit or premium changes. Our goal with these beneficiaries was to help them find new plans while maintaining their eHealth membership, and we believe we were largely successful in these efforts. In addition to live benefit adviser support, we provided proprietary online tools such as Match Monitor, so that members could better understand changes to their coverage and assess their options. While these proactive member retention strategies are critical during any enrollment period, they were especially important this AEP. Moving now to some of the operational achievements that drove our fourth quarter outperformance. Over the past 2 years, eHealth's marketing organization has been focused on building our direct channels through key areas, including brand building, fine-tuned audience targeting, and compelling messaging that communicates our differentiated offering as a trusted, remarkably transparent adviser. Our brand recognition metrics outperformed our competitors and showed a marked improvement compared to a year ago with total aided awareness increasing 23%. Our branded direct marketing channels drove over 100% growth in fourth quarter enrollments compared to Q4 enrollments from direct channels the prior year. Enrollment growth in these channels outpaced the corresponding increase in marketing spend, resulting in highly attractive unit economics. On average, our direct channels over-index towards customers that are higher converting with greater persistency. This results in higher LTV enrollments. The standout performance of our direct digital channels also drove a significant increase in our online unassisted applications, our most scalable fulfillment method. We also saw strong demand from new to MA customers, another higher LTV audience, which grew as a percentage of total application volume in 2024 compared to '23. Our Medicare Advantage LTV to CAC ratio grew from 1.5x in Q4 2023 to 2x in Q4 2024, and unit margins grew from 34% to 50% for the same period. Moving to our telesales organization. Preparedness, licensed benefit advisers enablement and execution were key to our ability to take advantage of the large inbound call volume this AEP. In addition to having a greater number of tenured benefit advisers compared to a year ago, we also narrowed the gap between the effectiveness of brand new and seasoned advisers, resulting in substantial conversion rate gains of 39% year-over-year within our Agency fulfillment model. We continue to empower our advisers with innovative tools that enhance their productivity and differentiate their services. For example, during Q4, we extended LiveAdvise, our one-way video chat capability to a larger number of advisers, resulting in increased conversions for the enrollments that utilize this exciting new technology. Our digital capabilities were also essential to our AEP success. During the first 3 quarters of 2024, we invested in further streamlining and personalizing consumer experience on our platform. This included a more seamless flow from online ads into tailored landing pages within our shopping funnel with the goal of matching our platform's experience with the customer's shopping intent. Another focus area was returning visitors. Through a coordinated cross-channel effort, we targeted consumers who visited our platform in the past and took action to remove friction points for these return users by allowing them to pick up where they left off. During the fourth quarter, we drove 37% more visitors to our online platform and converted them at a greater rate, resulting in a 58% increase in Q4 submitted online unassisted applications compared to a year ago. We also have several exciting AI-driven projects in the works for 2025. These will be led by our newly established AI center of excellence, which will help guide and prioritize our AI initiatives going forward. We believe that generative AI can help add efficiency across our organization from automating manual processes, including plan data and content management on our digital platform, to increasing the productivity of our engineering teams, all the way to driving our call screening process and handing leads off to our licensed benefit advisers, which will help allow us to serve beneficiaries better, especially in the peak days of the enrollment season. Moving to Amplify, our carrier-dedicated fulfillment model. During Q4, Amplify volume came in below expectations. We believe the market environment favored a choice platform with broad carrier selection. Additionally, our Amplify carriers were more focused on margin protection than enrollment growth of AEP, which limited the success fees we were paid under our BPO arrangements. At the same time, we continue to deliver enrollments at high conversion rates and quality metrics for our BPO partners. Amplify leverages our platform and core competencies, allowing us to drive enrollment with lower upfront cash investments compared to the Agency model. We believe that an improving MA rate regulatory environment will benefit this model, and we plan to continue scaling it with both new and existing customers. Our Med Supp business had a strong quarter with submissions up 9% year-over-year and a considerable increase in the estimated lifetime values, reflecting favorable carrier mix and retention. We also grew our ancillary product enrollments driven by dental and vision products. As you can see from our financial and operating results, eHealth successfully navigated the Medicare sector disruption, taking market share and scaling our business at attractive economics. Consumer demand represented a strong tailwind for us, and we are ready to lean into this trend given our nimble, scalable platform that can be leveraged for growth when the opportunity arises. We remain confident that we are in a strong, competitive and financial position to continue building on this momentum. Looking ahead, we expect the Medicare market to remain fluid with more changes underway and are ready to be opportunistic in this environment. It is our belief that the regulatory environment in the Medicare Advantage sector will improve over the next 4 years relative to the prior administration. Importantly, early indicators will be the final MA rates as well as final MA and PDP marketing rules expected in the second quarter. Additionally, carriers continue to communicate margin pressure within their MA businesses. While many of them took action to improve profitability of their Medicare Advantage plans last year, it remains to be seen what dynamics will dominate as carriers decide on their plan offerings and geographic strategies ahead of Q4. Their decisions will have a direct impact on consumer behavior next enrollment season. The bottom line is that it's hard to predict the consumer demand environment for this AEP this early in the year, especially given the uniqueness of 2024. As a result, we're taking a balanced approach to our outlook. As a starting point, we are guiding to relatively flat revenues compared to a year ago. John will provide detailed guidance and the corresponding operational assumptions in his remarks, but I would like to point out that we are tracking nicely against the 3-year revenue and adjusted EBITDA targets that we provided last year. These targets included our goal to grow at an 8% to 10% revenue CAGR between 2023 and 2026 and to reach 8% to 10% adjusted EBITDA margins by 2026. In 2024, we pulled forward some of the growth leading into the attractive demand environment. Based on the midpoints of the 2025 guidance ranges, our '23 to '25 revenue CAGR is expected to be 8% with an implied 2025 adjusted EBITDA margin of 9%. It also implies an impressive adjusted EBITDA CAGR of 84%. Our 2025 strategic priorities align with our 3-year strategy to build a sustainably profitable cash flow generative business through scale differentiation in Medicare Advantage Agency services and targeted diversification. These priorities are as follows and can be found in our earnings presentation. First, we aim to expand our brand recognition across all direct marketing channels and extend our brand beyond our core Medicare Advantage products. Second, we plan to enhance our retention and customer loyalty strategies, recognizing that lasting relationships transcend individual interactions and specific products. Third, we'll focus on optimizing our telesales organization by providing our advisers with industry-leading brand support, training programs, career development opportunities and technological tools. Fourth, we plan to advance our AI and digital technology leadership to better serve all key eHealth stakeholders, including consumers, employees and carriers. Fifth, we aim to strengthen and expand our carrier relationships, which are critical to our Agency choice model. Sixth and finally, we plan to diversify our revenue base through targeted investments in Medicare Supplement under 65 individual and family, employer, ancillary products, and carrier dedicated services. It is truly an exciting time to be part of this organization, and I'm confident in this team's ability to continue delivering on our goals while improving the health care journey for millions of Americans. I also want to acknowledge our exceptional company culture and extend my gratitude to our employees and management teams for their invaluable contributions to our success in 2024. I'll now turn the call over to John Dolan, who will cover our financial performance in greater detail and discuss our guidance for fiscal 2025. John?

Thank you, Fran, and good morning, everyone. I'm pleased to report exceptional fourth quarter results that demonstrate our strong execution in a dynamic market. Building on the internal and macro catalysts that Fran described, we achieved significant Medicare volume growth while improving enrollment profitability. In fact, we generated record high revenue and record high net income of any quarter in the company's history. During the annual enrollment period, we capitalized on stronger-than-expected consumer demand by making the strategic decision to pursue enrollment growth beyond our initial targets. While this decision enhanced our 2024 revenue and earnings and necessitated a larger upfront cash investment than initially forecasted due to the timing between the payment of acquisition costs and our receipt of commission payments, which typically begin in Q1. We are confident that this strategic choice will generate substantial value as we have acquired what we believe to be a high-quality member cohort that will deliver recurring commission payments for years to come. Specifically, this new cohort helped drive year-over-year commission receivables growth in excess of $80 million to a record level $1 billion as of December 31, 2024. I'll now share highlighted fourth quarter 2024 metrics with all comparisons year-over-year unless otherwise noted. Fourth quarter revenue increased 27% to a record high $315.2 million. Excluding net adjustment revenue or tail in both periods, revenue grew 33%. GAAP net income increased 87% to a record level of $97.5 million, up from $52.2 million. Fourth quarter adjusted EBITDA grew 74% to $121.3 million, and the adjusted EBITDA margin was 38% for the quarter. Our Medicare business delivered its best fourth quarter performance in years. Medicare segment revenue of $305.8 million grew 31%. Total Medicare submissions increased 38% across Agency and Amplify enrollments. Submissions in our Agency fulfillment model rose 49%, reflecting current consumer market preference for platforms with broad plan offerings. Acquisition cost per approved Medicare member improved 23%, driven by enhanced lead quality and significantly higher conversions, both telephonically and through our online platform. Underneath that, customer care and enrollment cost per approved member improved 28% and variable marketing cost per approved member improved 19%. Medicare Advantage lifetime value increased 2% to $1,174. LTV to CAC ratio was 2x, exceeding our target of 1.7x and improved meaningfully from 1.5x in the fourth quarter last year. Medicare segment gross profit increased 56% to $159.9 million. Our E&I segment revenue was down 33% to $9.4 million in the fourth quarter with segment gross profit of $4 million. Excluding tail revenue, fourth quarter E&I segment revenue declined 16%. While we maintain strong conviction in our opportunities in the Under 65 and Employer markets, we made the strategic decision during AEP to allocate resources toward Medicare Advantage growth. On a consolidated basis, fourth quarter tail revenue was $7.6 million, of which $5.9 million came from our Medicare segment. This brings total 2024 tail to $22.7 million compared to $48.1 million a year ago. The tail we recognized reflects continued cash collections in excess of our original LTV estimates. There continues to be significant unrecognized positive adjustments related to our Medicare book of business, including, but not limited to, our initial constraint. Fourth quarter non-GAAP operating expenses, which excludes stock-based compensation and impairment and restructuring charges, were $197.7 million, an 8% increase. Despite the considerable growth we achieved in Q4, we reduced our non-GAAP fixed costs, which include a combination of our technology and content and general and administrative by 1%. Q4 non-GAAP marketing and advertising increased 9%, notably much smaller than our revenue and enrollment growth rates for the same period, indicative of much greater return on our marketing spend compared to last year. Q4 non-GAAP customer care enrollment increased 12%, driven by our larger adviser force and a larger number of screeners and retention agents compared to last year. Turning to our consolidated full year financial highlights. 2024 marked our return to profitability on a GAAP net income basis, a substantial achievement and indicator of the progress this organization has made over the past 3 years. Annual revenue of $532.4 million increased 18%. Excluding net adjustment revenue or tail, full year 2024 revenue grew 26% and net income of $10.1 million increased $38.3 million. 2024 adjusted EBITDA was $69.3 million, an increase of $55.2 million. The adjusted EBITDA margin was 13% for the year, a material improvement over 3% a year ago. Excluding tail revenue, adjusted EBITDA improved by $80.6 million for the full year. Full year 2024 non-GAAP operating expenses were $479.5 million, up 5%. This included an 8% decline in non-GAAP fixed costs and 11% and 10% increases in non-GAAP marketing and advertising and non-GAAP CC&E costs, respectively. We ended the year with $82.2 million in cash, cash equivalents and marketable securities. As a reminder, the end of the year is the seasonally low point of our cash balance cycle, reflecting AEP expenses. Q1 is our seasonally highest cash collection quarter as commission payments related to AEP enrollment cohorts begin in January. We expect this will yield a meaningful increase in balance sheet cash as of the end of the first quarter of 2025 relative to December. As such, we believe we have sufficient liquidity to execute on our strategic plan while we continue to work towards improving our capital structure. As discussed on last quarter's call, we reached an agreement with our term lender, Blue Torch, to extend the maturity of our $70 million loan by 1 year under slightly more favorable terms. This change took effect during the fourth quarter. Thinking about our approach to available capital solutions more broadly, our guiding philosophy is the pursuit of a clean, best-in-class capital structure that will provide maximum strategic and financial flexibility going forward. I will now review the financial guidance for 2025. We expect total revenue to be in the range of $510 million to $550 million. We expect GAAP net income to be in the range of a net loss of $10 million to a net income of $15 million. We expect adjusted EBITDA to be in the range of $35 million to $60 million, and operating cash flow is expected to be in the range of negative $25 million to positive $10 million. These ranges contemplate positive net adjustment revenue in the range of $0 to $20 million. I would also like to provide additional color regarding quarterly cadence as it is expected to be different than in the past. This year, Q1 is expected to be our primary enrollment growth quarter, supported by the strong consumer demand trends described earlier in the call and our decision to retain a larger number of seasonal advisers post annual enrollment period. At the same time, we currently expect that while consumer propensity to shop will remain elevated in the coming AEP, we do not expect to see nearly the same level of activity as seen in 2024. This is reflected in our enrollment volume expectations. Further, due to recent regulatory changes, most beneficiaries on dual eligible special needs plans, or D-SNPs, will no longer be permitted to change their plans on a quarterly basis. D-SNPs have historically represented a considerable portion of our Q2 and Q3 volumes. As a result, we plan to reduce our MA-focused marketing spend during these quarters relative to past years. In summary, after an exceptional AEP last year, when we scaled our member base at a highly attractive ROI, we are taking a more measured approach in 2025. Specifically, we will continue to focus on unit economics in our MA Agency business, further increasing the contribution from our branded marketing channels, while reducing our investment in third-party leads. We will also make incremental investments in our diversification initiatives. Our dedicated carrier business, in particular, is expected to grow as a percentage of total revenue in 2025. The margin in this channel is currently below what we generate on the Agency side as it is a new business model, which we expect will continue to improve as it matures and scales. Additionally, we plan to increase our retention team headcount in 2025, which we expect to increase CC&E costs, but have a long-term positive impact on cash collections through member retention. To reiterate, we currently forecast enrollment and revenue to grow in Q1, followed by declines in Q2 and Q3 and a flattish fourth quarter compared to the same quarters in 2024. In terms of profitability, given our investment in diversification initiatives and our lower Agency volume expectations in Q2 through Q4, adjusted EBITDA is currently forecasted to decline in each quarter and for the full year relative to the same periods a year ago. In Q1 specifically, we expect adjusted EBITDA loss to be in the high single digits in millions of dollars. It is important to note that while 2024 was somewhat of an outlier in terms of market environment and resulting performance, our underlying trajectory remains strong, reflecting the monumental operational improvements this organization has made. We summarized some of these historic metric improvements in the earnings deck. As you can see, we are showing significant progress, which we expect to continue into 2025. And as Fran mentioned, we are tracking ahead of the 3-year financial targets that we provided in May of last year. I wanted to especially call out our adjusted EBITDA margin guidance of 9% at the midpoint, which compares to 3% in 2023 and to our goal of reaching 8% to 10% adjusted EBITDA margin by 2026. Operator, please open the line for Q&A.

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

Nice results. So I wanted to talk through '25 expectations from the following angle. When we look at the overall scenario, we should have a better regulatory environment. Fran had mentioned potential competitive exits, which I'm curious about, but we would expect the competitive scenario to remain as good or better. And we certainly have a good macro in the number of 65-year-olds aging in. So I'm curious why there's a little bit more of a somber thought process in terms of growing the business this year.

George, thanks for the question. I wouldn't characterize it as somber. I think it's pragmatic given that there's a change in the administration. And the President is 37 days into his new term. So we've seen a rapid pace of change aimed at taking out cost to the government, improving efficiency and so forth. So while we know, in the first term, the Trump administration was very supportive of MA, we know that Secretary Kennedy is through the confirmation here, we learned that he is a member of Medicare Advantage plan and is a very satisfied member. We also know that Dr. Oz has been rather supportive of MA. That said, it's a question of priority and timing. So until we see greater evidence, because bear in mind that the rate increase in the advanced notice occurred prior to the inauguration. So that happened during the Biden administration. And it remains to be seen whether the Trump administration will improve that, maintain or potentially reduce it. So we look at that April time line as a very important check-in to see just how bullish the Trump administration is on Medicare Advantage.

George, I also wanted to say that if you look at the switching activity last annual enrollment period, it was all-time high. If you look at different industry reports, the switching rate was about 23%. A year ago, it was 16%. And even at that point, a year ago, it was already at historically high, but we just set another record. It helps with volume, certainly. It also helps with conversion rates, because we have this high propensity to switch. And our platform was in amazing condition operationally that we were able to convert all of that demand at attractive enrollment margins that you've seen in our Q4 results. Now looking into the next Q4, it is really hard to say. It's probably not going to be as high. Where is it going to be? Is it going to be closer to 23%? Is it going to be somewhere in between? We don't know yet. And so our guidance range does reflect that range of outcomes.

The last thing I would say on your question, George, is that our guidance is in line with the 3-year CAGRs that we provided. So while the road map looks different today than it did when we first prepared our outlook, it's tracking consistently.

Great. And Fran, in your prepared comments, you talked about extending the brand beyond core Medicare offerings. I just want to make sure I'm clear -- that's obviously been a strategy for quite some time. I'm curious if there have been iterations to that strategy.

Yes, the most significant part of our brand evolution has been aimed at Medicare Advantage. Over the past year, Michelle and her team have focused on creating same kind of look on our E&I program, for example, landing pages start looking very similar to our MA landing pages. How we emphasize and feature the brand with our Med Supp is still work in progress; E&I, work in progress. We made important progress last year, but we're going to take it to the next level. We want consumers, whether they're under 65 or over 65, to know that eHealth can help them navigate their health insurance choices. So tremendous progress on the Medicare Advantage side. I mean I couldn't be more pleased. The 23% increase in awareness year-over-year is monumental. We want to replicate that for all of our product lines.

Your next question is from Ben Hendrix from RBC Capital Markets.

Congratulations on the quarter. I wanted to follow up on some of your cadence commentary. I appreciate the change in marketing outlook through the year based on changes in D-SNP rules. But just wondering how you're thinking about 4Q in the context of maybe some of that D-SNP volume moving into the fourth quarter and kind of how you're thinking about that versus your kind of normal cadence that we would see kind of prior to these changes?

Ben, thanks for the question. We did bake that into our assumptions for fourth quarter that there would be likely more D-SNP opportunities in Q4 given that we don't have those opportunities in Q2 and Q3. The other component of this is CMS' change in the industry's ability to assist beneficiaries through an SEP associated with a natural disaster. I'm hopeful that they're going to revisit that in light of things that are going on with respect to headcounts, including HHS. We think the industry is better equipped to help beneficiaries in a time of great need in a natural disaster. So a combination of those have put a little bit of pressure on Q2 and Q3, but we baked in D-SNPs specifically in Q4.

And just a follow-up question, too, on the Amplify platform. I appreciate the commentary of the drivers of the weakness that you saw relative to your agent platform. But I just wanted to get your reasons to believe that we're kind of maybe at a trough that it improves from here. I mean many of the carriers that are focused on profitability are pointing to a multiyear path to target margins. And I'm just wondering kind of what gives you confidence in kind of that a change of tide there in Amplify for this year and next?

Sure. Well, let me start with reminding everyone that Amplify is a little over a year old. So it's a new business for eHealth, and its evolution is moving very, very nicely. And we're putting more emphasis on building the pipeline. And a lot of that is coming through sort of word of mouth. We're delivering on our carrier partners' expectations with respect to conversion and the quality and compliance and the experience that their customers are getting with us. So we're confident that because we're already very early in its evolution that we can continue to build on that, scale it, and with the scaling, we will improve our margin performance.

Your next question is from Jonathan Yong from UBS.

Just to go back to Amplify here. I understand that this is a bit more of a unique situation with this year's AEP. But do you think that there are other changes that need to be done to the business? Because I think last year, you had a similar situation where it kind of fell behind a little bit. So I guess, are you contemplating any other changes? Or is it really just about scale? And if so, how is the progress going in terms of adding additional carriers to Amplify?

Good morning, Jonathan. Yes, I'm very bullish on Amplify. I mean going back to why did we do this in the first place? It was to create optionality. It gives us an opportunity to diversify, to lessen the risk on the Agency side, specifically the marketing investment. We don't deploy capital to generate leads. That's the responsibility of our carrier partner. We're there to answer the calls and close sales and provide a great customer experience for their customer. So the thesis of the business hasn't changed. Last year, given that carriers were focusing primarily on margin improvement and containing their growth, we're not really surprised by these results. We don't think they're going to change overnight on a carrier-by-carrier basis, but we do think by adding to our carrier supply, we will continue to grow the revenues and grow the margins. Let me see if anyone wants to...

No, I think -- Jonathan, it's John Dolan. The only thing I'd add is as we continue to scale and continue to build on our infrastructure, the Amplify platform will continue to see improvement in margins.

Okay. Great. And then I guess in terms of...

It all needs sort of context. I mean, it's below 10% of the company's revenue. So it's a very, very small component of eHealth's revenues.

Okay. Great. And I guess just in terms of OEP thus far, I mean, at least as best as you can tell, have people largely realized that their benefits have changed? Or are people still on the sidelines in terms of just realizing it now and actually doing switching this period versus during AEP? And kind of how is that factored into your outlook of possible churn?

Yes, great question. We were anticipating a more active OEP given what occurred in fourth quarter of '24, and we are seeing that play out. So there is much greater activity through today, and we'll see whether that continues for the remainder of the quarter. But those who had SEPs associated with market exits and plan withdrawals, those SEPs expired February 15. So we may see that begin to slow down. But nevertheless, we think that there were many people that didn't read their annual notice of change and unfortunately found out they didn't have coverage or specifically Part D coverage until they went to the pharmacy for the first time in 2025, and that was a catalyst for them to take action. We haven't been able to measure that precisely, but we believe it's contributing to the stronger performance in the quarter.

Okay. And just if I could...

Yes. So this is Kate. I think it's important to point out that we are putting in place diversified retention initiatives that target specifically these individuals. First of all, the individuals who were impacted last year. And we had a very wide reach into that beneficiary base. Our recapture rate has tripled or more year-over-year. And certainly, this has not stopped into the first quarter of this year. In fact, we called out Amplify as one of the reasons why the EBITDA margin is slightly down year-over-year at the midpoint of the guidance. But it is also driven by the fact that we have a larger team of retention advisers. And it's too early to see the full view into retention from this [indiscernible] cycle. But what we've seen so far has actually been very favorable.

Okay. Great. Just if I could squeeze in one more. I think you mentioned during the quarter, you reallocated resources towards Medicare away from E&I. I guess given what will happen on the exchanges, et cetera, and some of the dynamics there, does this change your viewpoint on how you will allocate resources towards it in the future or at least in terms of pacing?

The short answer, Jonathan, is, we're still very bullish on E&I. We think it's going to play an important role in the future of our company, tied in some part to the ICRA opportunities that we think will continue to evolve over the next several years. Medical cost, health care cost inflation continues to be a major challenge for our nation. And we think that there will likely be a growing number of employers who decide, you know what, we're throwing in the towel. We're going to go the route of an ICRA. We're going to provide a stipend and allow our employees to shop in the individual markets for plan that best meets their personal needs. So that's going to require some regulatory influence to make that even more viable, but we believe it's very important to have a healthy E&I capability, and we've made changes to our shop compare and enroll experience last year. There's still a gap between the experience for an individual under 65 versus an over 65, but we're continuing to narrow that gap. So our technology and the customer journey are one and the same, whether it's under 65 or over 65. So we will continue to make those investments and continue to develop our business development capabilities on the employer side, which is a very different strategy than how we approach the individual. Anything you want to add?

I think you said it very well. Really, the core areas of focus are continuing to build out, which we talked about earlier in terms of brand and diversification of marketing channels. Those go hand-in-hand, right? And they have to be tailored for each of those different audiences. And then driving improvements in conversion, right, which we potentially experience both online and even the sales telephonic and really capitalizing, as Fran said, on what we have done so well on the Medicare side and ensuring that we're bringing that same sort of experience efficiencies into that to drive higher conversion with improvement. And then, yes, building out this new business development capability, which is across sales and marketing side, to really tailor to that B2B broker and employer audiences.

[Operator Instructions] Your next question is from George Hill from Deutsche Bank.

Fran, I just kind of have 2 big picture ones for you, which is, number one, a trend that we saw at the end of '24 going into 2025 with carriers looking to not pay commissions on specific products. I'd be interested if you'd be willing to talk about how that impacts eHealth? And kind of how does that impact how your clients impact with eHealth? And then if you wouldn't mind kind of open-micing for a second, I'd love to hear how you talk about how you think the rate environment -- you had favorable comments about the advance notice for '26. Just generally, how you see the rate environment for MA impacting the business. I assume it has to do with a better rate makes the products more attractive, which kind of flows through the background, but kind of would love to hear you talk about the puts and takes for that a little bit.

Thanks, George. Good to hear you. Well, let me start with the second question first. The rate environment can affect the shopping experience when it's bad and when it's very good. So that may be counterintuitive, but that's what we've observed. So last year was a tough rate environment. It required carriers to do some pretty drastic things, including market exits and plan withdrawals. That's very disruptive to beneficiaries. That increased the shopping. Similarly, when the rate environment is good, as we saw 6 years ago, 5 years ago, the value proposition continued to improve. So there were more shoppers and more people moving from original Medicare into Medicare Advantage. The in between is where perhaps it's more of an uneventful AEP, but the eventful AEPs come from both ends of that -- extreme end of the continuum. With respect to carriers' behavior last year to either suppress plans or suppress commission, as I said in my remarks, it was more pronounced, but our expanded carrier portfolio, we have an agnostic choice model, well over 40-plus Medicare Advantage relationships on our Agency side. And that creates much greater choice than perhaps many of our competitors can offer. So I think that we navigated that incredibly well under the circumstances. In terms of how it's utilized going forward, well, as I've shared before, we see it in many AEPs, but it's just less pronounced. I don't think carriers like to play that card ,because it can create friction between distribution. And memories are long. And in fact, I would say that field distribution organizations, agents on the street probably suffered greater consequences to this than the telebroker industry, because we do generally work with far more than an agent on the street, who may only work with 2 or 3 of the organizations. So if 2 or all 3 took action to suppress commission, it was very detrimental to them. We navigated it quite well given the circumstances. I just want to emphasize, having spent a big part of my career on the carrier side, I understand the mindset and they don't do this lightly, and they don't want to do it on a recurring basis, or it does threaten their distribution and their growth opportunities for the future. So I think there's some checks and balances in place.

There are no further questions at this time. Please proceed.

Well, let me again thank everyone for joining us this morning. We appreciate your interest in following and support of eHealth. We look forward to our one-on-one conversations and certainly look forward to reporting out Q1 performance sometime later in the early second quarter. So thank you all very much.

Thank you. Ladies and gentlemen, the conference has now ended. Thank you all for joining. You may all disconnect your lines. Good bye.