Good afternoon, everyone, and welcome to the eHealth Inc. conference call to discuss the company's Third Quarter 2025 Financial Results. [Operator Instructions] I will now turn the floor over to Mr. Eli Newbrun-Mintz, Senior Investor Relations Manager.

Good afternoon and thank you all for joining us. On the call today, Derrick Duke, eHealth's Chief Executive Officer; and John Dolan, Chief Financial Officer, will discuss our third quarter 2025 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 Derrick Duke.

Thank you, Eli, and welcome, everyone. It's been 6 weeks since I stepped into the CEO role, and I couldn't be more excited to be part of this organization. With years of experience in health insurance distribution, I've long admired eHealth, especially the technological innovation it has brought and continues to bring to the industry. I joined because I see a massive opportunity in our core Medicare Advantage and adjacent markets. eHealth is uniquely positioned to capture this opportunity through our strong carrier relationships, trusted brand, high-performing sales organization and differentiated omnichannel enrollment platform. Before diving into our performance, I want to take a moment to thank Fran Soistman for his leadership through eHealth's business transformation and for assembling a strong mission-driven team. Over the past 6 weeks, I've spent time meeting employees across all levels and functions. What I found is a deeply customer-centric culture and a team that's passionate about helping beneficiaries navigate their healthcare choices. Right now, my top priority is executing on AEP. This is a critical period for our business, and I believe we've entered well prepared and better positioned than other distribution organizations to succeed in this dynamic environment. After AEP, I'll turn my attention to reviewing our longer-term strategy and refreshing our 3-year financial targets. I also remain committed to enhancing our capital structure. Last month, we extended the maturity of our term loan with Blue Torch to January of 2027 with other key items of the agreement remaining unchanged. This provides us with additional financial flexibility as we continue to work towards achieving greater liquidity by leveraging our receivable asset and addressing the convertible preferred instrument. Let me now pivot to where my focus is today, AEP execution. This year's AEP is once again marked by disruption. Carriers have made broad plan…

Thank you, Derrick, and good afternoon, everyone. Third quarter results reflect a typical seasonal dip in Medicare enrollment volume, further intensified by this year's dual-eligible regulatory changes accompanied by a corresponding reduction in our Q3 marketing spend. At the same time, we made a deliberate investment in scaling and training our licensed adviser force, an annual initiative that prepares our organization to meet consumer demand during AEP. Through the early weeks of the annual enrollment period, consumer demand on the eHealth platform has been strong and the effectiveness of our marketing spend is up not only sequentially, but also year-over-year. These early indicators reinforce our confidence in the strategic decisions we made this year to prepare us for the elevated consumer activity. As I review our results, please note that all comparisons are year-over-year unless otherwise specified. Total revenue for the third quarter was $53.9 million, down 8%. GAAP net loss improved to $31.7 million from $42.5 million and adjusted EBITDA was a loss of $34 million, also an improvement from a loss of $34.8 million last year. Third quarter Medicare segment revenue was $49.9 million compared to $53.2 million, reflecting lower enrollment volume, which was partially offset by $12.1 million in positive net adjustment revenue or tail revenue. This compares to $1.1 million in Medicare segment tail revenue last year. Q3 segment loss narrowed significantly to $1.2 million compared to segment loss of $5.6 million. Total Medicare applications across our fulfillment models declined 26%. As Derrick mentioned earlier, enrollment volume was below expectations with the removal of the quarterly dual-eligible enrollment period having a larger impact on our results in Q3 versus Q2. We believe that many dual-eligible consumers who could transact outside of the main enrollment periods likely did so earlier in the year. MA-related marketing spend declined…

Operator, you can open the line for Q&A now, please.

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

I wondered if you could talk about the disruption that you speak of relative to AEP. What that means to us is more shoppers. You've got more folks turning 65 than ever and you've got all the plan changes and terminations that are creating the need for movement or shopping. Are we reading that disruption as being favorable for you correctly?

Yes. George, it's great to hear from you and speak to you again. I think I would start by just saying that from a disruption perspective, we're seeing similar levels of demand year-over-year that's tied to that carrier disruption. And the way I would encourage you to think about that is that similar levels, different reasons and different carriers from the prior year. So sometimes we talk about that internally that it's sort of one event that is occurring over a multiyear period as carriers address their own issues related to margin and portfolio productivity. Early stage, again, in AEP. So we want to make sure we emphasize that the last few weeks are the important time period of the AEP enrollment period. But so far, our results are in line with our expectations and we're happy with the results that we're seeing. So again, similar levels of demand that we saw year-over-year and a high number of shoppers on our platform.

You mentioned a plan to prepare to be opportunistic as you see the evolution of the AEP period. Can you talk about what that might look like?

Yes. I'll start and maybe I'll ask Michelle to add. George, we're trying to be really thoughtful about which marketing channels that we invest into based on the economics of those channels. As you recall, I think we mentioned in our last quarterly call that we're investing more in our branded channels that have better economics, higher LTV to CAC ratios for us. In the prepared remarks, we talked about the fact that we reduced spend in Q3 in order to be ready to increase spend in Q4 when and where we saw those opportunities. Michelle, what would you add?

Sure. Thank you. I think you captured it really well. But it is exactly that it is regularly looking at performance across all channels and how to continuously optimize to improve. As you well know, our North Star, right, is always LTV to CAC. And we look at that continuously across our mix, what is performing best? What do you need to dial back? What do you need to lean into? As we've talked about, we are continuing to grow branded channels as part of our mix and are really pleased with how they are continuing to perform. And as part of that, we actually look at the branded channels across several channels because they work cohesively together. For example, when TV is on, we also see a great lift in search and our search traffic is up substantially year-over-year as a result. So there's also sort of that holistic view that we give in addition.

Got you. Lastly, you have really focused the discussion around stronger retention. That was not necessarily historically an eHealth strength. Can you talk about sort of what you're seeing there? Is this really driven by more of the brand message, meaning someone leaves or has a plan change and comes back to you to solve their needs?

It's a great question, George. Let me start maybe with a bit of a philosophical statement on my part as I've started reacquainting myself and reestablishing long relationships I've had in this industry with carriers as well as building new ones. Part of the conversation I'm having with our carrier partners is around my expectation of what type of distribution company eHealth is going to be going forward. Sometimes I hear from carriers that we are best-in-class for telebrokers, whether it's retention, quality, which I appreciate the compliment. But my response to them so far has been, I don't want to just be the best telebroker, I want to be the best broker. And I believe that eHealth has all of the capabilities and competencies to allow us to do that regardless of who we compete with on the other side, whether that's another telebroker or whether that's a feet on the street brokerage or an FMO. And so often, we hear in this industry that FMOs have better retention because of relationships. And again, my perspective is we have the ability, especially because of the decision the company made a few years ago to begin investing in our brand to replicate those types of relationships. And so it's on the strength of the brand investment that the company has made that we believe we're seeing incremental growth in retention. Again, in John's prepared remarks, he talked about the improved retention on our most recent cohort during AEP last year and our continued investment in our retention and loyalty team. One metric to give you related to that is that we increased our outbound calls this year by approximately 20% into our membership base to ensure that they were prepared for the disruption that we believe they were going to experience during this open enrollment period. So based on all of those things, we believe we've yet to see the full benefit of increased retention because of the investments that we've made. And personally, I'm excited to see what we can do around not having a transactional relationship with our membership, but having a relationship that leads to transactions, if that makes sense. Michelle or John, would you guys add anything?

I think you covered it.

And your next question comes from Jonathan Yong from UBS.

I guess you mentioned that you're seeing similar levels of demand. I assume that's similar to last year. But the carriers in CMS have pointed to a flat to down type of growth expectations for next year and some carriers have removed some brokers from their network. So I guess within the context of that similar levels of demand, would you characterize this as share gains from competitors or underlying enrollment growth, if you could provide additional color there, understanding it's early in AEP?

Yes. Jonathan, this is Kate. So if you look at how we performed in last AEP when we exceeded our expectations, we actually took market share, both as a percentage of new enrollment and the ending member base. Now as you progress through this year, it's a highly disruptive period. It remains to be seen where we end up as a percentage of total membership for the industry. But to your point, CMS does expect that the overall membership in Medicare Advantage will decline a little bit by about 3%. It is a temporary bump because by 2030, we still expect for Medicare Advantage to represent a much larger percentage of total Medicare enrollees, around 60%.

Okay. And then the enrollment, I think you said is tracking to internal expectations so far. And it sounds like you're seeing an increase in commission rate. I just want to make sure, is it those enrolled lives of the higher commission rates or just generally speaking, because of the commission increase you're seeing that? And then of those lots you are enrolling, are they actually commissionable or are they 0 commission lives and you just happen to be getting them?

Yes. Jonathan, great question. I'll start, and then maybe I'll ask John to add on. So around the rate portion of your question, as you know, CMS rate decision led to carriers having the opportunity for a rate increase of a little north of 10%. What we've seen as we prepared for this AEP is that carriers took sort of a different strategy, if you will, on how they would deploy that increased rate. Some carriers gave us that increased rate across all products that we're selling. Others distinguished it between their product portfolio where they wanted to see growth. I would say, in general, what we're seeing and now expecting is that we'll sort of be in the mid-single-digit percentage rate increase year-over-year in -- during the AEP period. So that's number one. The second thing is the demand that we're seeing and the enrollments that we're seeing are in plans that are commissionable, and we fully expect to receive commissions on the production that we're producing. John?

Yes. The one thing I'd just make sure you understand is when we think about our LTV, it's comprised of both the commission rates, which Derrick focused on in those increases. It also includes a component of administrative fees. So the -- some of the increase may not flow all the way through to the LTV. So I just want to make sure people hear that.

[Operator Instructions] And your next question comes from Ben Hendrix from RBC Capital Markets.

This is Michael Murray on for Ben. Just a quick follow-up on the commission rates. So how should we think about LTV growth for 2026 given the higher commissions? Should we think about it in the low-single-digit range?

John?

Yes. I think as Derrick pointed out, we're expecting to see the commission in our forecast to be in the mid-single digits. A little bit of that will be muted by the administrative fees. So it's probably expected to be low-to-middle single-digits increase.

Okay. And then I just had a question on your tail revenue expectations for the year. So you increased your tail revenue guidance by $11 million at the midpoint while you raised adjusted EBITDA guidance by $5 million. Is there anything to call out in the delta between the 2?

No, I think the -- if you're looking at the Q3 results, our revenue was kind of in line with expectations. We had -- as Derrick explained in his prepared remarks, I think our volume was lower, so our commissions were lower, but we had net adjustment revenue that offset it. So as we flow through that into our guidance for the full year, you got to take that into consideration. So the tail guidance, we think there's between the $40 million that is the low end of our range on a full year basis, which is what we booked year-to-date, we think there might may be potentially some upside in Q4.

And there are no further questions at this time. Mr. Derrick Duke, you can proceed.

Thank you. Thank you all for joining us today and for your continued interest in eHealth. We look forward to updating you on our AEP results in our next quarterly call. Have a great evening.

Ladies and gentlemen, this does conclude your conference call for today. We thank you very much for your participation. You may now disconnect. Have a great day. Good bye.