eHealth, Inc. Stock

Hello, everyone. Thank you for joining us, and welcome to the Q2 2026 eHealth, Inc. Earnings Conference Call.

[Operator Instructions]

I will now hand the conference over to Eli Newbrun-Mintz, Senior Manager of Investor Relations. Eli, please go ahead.

Good afternoon. 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 second quarter 2026 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. 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 reconciliation to the most directly comparable GAAP financial measures are included in today's press release.

With that, I will turn the call over to Derrick Duke.

Good afternoon. Thank you for joining us today. Our second quarter results reflect the deliberate choices we made going into 2026. We entered the year with a strategy-centered on 3 priorities: building our lifetime advisory model, materially improving our cash flow profile, and making targeted investments in long-term growth opportunities such as ICHRA. Second quarter revenue was $33.6 million. GAAP net loss was $23.6 million. Adjusted EBITDA was a negative $21.8 million. Operating cash flow for the first 6 months was $30.8 million. Overall, these results were in line to slightly above our expectations. More importantly, we remain on track to achieve our key financial objectives for the year, including our cost savings targets and significant operating cash flow improvement compared to 2025. For the first 6 months of the year, non-GAAP operating expenses declined by $42 million compared to the prior year.

We are creating a leaner operating model while preserving our key strategic capabilities and pursuing initiatives that we believe will drive long-term shareholder value. We continue to project annual variable cost savings of more than $60 million and fixed cost savings of approximately $30 million. Before discussing our operational progress, I'd like to spend a few minutes on the broader market environment. Despite recent disruption, the long-term opportunity in Medicare Advantage remains compelling. Medicare Advantage enrollment has now reached more than 35.5 million beneficiaries. While growth has moderated compared to prior years as carriers focus more heavily on profitability, the underlying demographic drivers supporting the market remain firmly intact. We continue to see strong demand from seniors with beneficiaries who are just turning 65, selecting Medicare Advantage at disproportionately high rates. Longer term, the Congressional Budget Office projects MA penetration to increase from approximately 55% today to 63% by 2034.

After more than 2 years of disruption, we believe the industry is now gradually moving towards greater stability. We have begun discussions with our carrier partners ahead of the upcoming annual enrollment period. Several of those conversations corroborate this view. In June, CMS finalized the maximum broker commission increase at 4.5% for plan year 2027. However, carrier approaches are likely to vary by geography, product type, and specific strategic priorities. We expect to gain greater visibility into carrier plans during the third quarter as AEP preparations accelerate. One thing has become increasingly clear throughout this period of industry change. The market is rewarding high quality, retention-oriented distribution models. That trend aligns exceptionally well with our strategy. Within the tele broker channel, we continue to see consolidation and rationalization as participants adjust to a new operating environment.

Against that backdrop, we believe the value eHealth provides to both consumers and carriers is as important as it has ever been. For beneficiaries, we serve as a trusted adviser with access to extensive plan inventory, which is especially critical during periods of elevated change. For carriers, we help deliver highly targeted member acquisition strategies and what we believe are among the highest quality enrollments within our distribution channel, supporting both member experience and carrier margin objectives. One of the most important milestones of the second quarter was the launch of our lifetime advisory model. The lifetime advisory approach shifts our relationship with members beyond a one-time enrollment interaction to a model of ongoing engagement throughout the year. Our advisers are equipped to help beneficiaries evaluate plan changes, address gaps in coverage, navigate healthcare decisions, and identify additional products that may improve financial security.

Beyond elevating consumer experience, we believe this creates significant opportunities to increase member value through ancillary product cross-selling. As expected, second quarter enrollments and revenue declined year-over-year. Under the new model, we are concentrating our marketing spend in the first and especially fourth quarters when we see the greatest return on our investment. In the second and third quarters, we are focusing our advisers on engaging with their existing members. We have made meaningful progress in the initial months following the lifetime advisory model launch. Operationally, we have deployed adviser training programs, coaching initiatives, and new adviser tools that provide a centralized view of a member, enable personalized communications, and generate data-driven recommendations for effective member engagement. On the product side, we launched final expense in Q2 and laid the foundation for additional ancillary product offerings.

Importantly, we have seen early validation of the core assumptions underpinning the strategy. First, consumers are responding positively to relationship-based engagement. Second, cross-selling opportunities appear significant. We are shifting the KPIs for measuring the success of this model in the same direction towards more holistic member-driven metrics. It starts with member retention. The core objective of the model is to deepen our relationship with members and remain engaged throughout the year. We believe improving retention over time will be one of our most important measures of success. We also plan to track ancillary product cross-sell rates and member-based lifetime value across multiple products. Early indicators have been encouraging, with second-quarter ancillary cross-sell rates doubling compared to a year ago.

This represents the number of advisor-assisted ancillary product applications submitted by customers aged 65 and older in relation to the number of advisor-assisted applications for major medical Medicare products, including Medicare Advantage and Medicare Supplement plans. While we will continue to measure and report policy-based lifetime value under ASC 606, our internal focus is increasingly shifting towards member-driven metrics that better reflect the broader value of long-term relationships. As the lifetime advisory model matures, we also expect unit margins to improve, driven in part by referrals becoming a larger contributor to total enrollments. Because advisers are central to the success of this strategy, adviser retention and productivity will be important indicators that we track closely. Another area where we continue to make progress is artificial intelligence. Our approach to AI is straightforward.

We believe technology can improve efficiency, scalability, and customer experience while still recognizing the critical role licensed insurance professionals play in providing personalized guidance and peace of mind for consumers. Today, AI is already supporting several of our customer-facing functions, including after-hours interactions, call screening, and certain customer service inquiries. For the upcoming AEP, we plan for AI-enabled call screening to replace the majority of manual screening processes. We are also exploring opportunities to expand our AI deployments into more complex customer service inquiries. Beyond consumer engagement, AI plays an important role across our back-office functions. We have expanded its use within product management, software development, and UX design. These capabilities helped us accelerate development of technology supporting the lifetime advisory model in about half the time we would have needed in the past.

Another important application involves carrier plan content ingestion, historically one of our most data and labor-intensive activities. Through AI-enabled automation, we believe we can reduce manual effort substantially while improving accuracy. Looking ahead, we see numerous opportunities across customer-facing workflows, adviser enablement, and internal operations. Collectively, we believe our AI initiatives have the potential to enhance scalability, improve service levels, and reduce costs over time. In addition to Medicare, the second pillar of our 3-year strategy is achieving measured, profitable growth within the under 65 consumer market. ICHRA is a key component of that effort. The long-term trend toward ICHRA adoption continues to strengthen as employers seek more flexible and cost-effective healthcare solutions. Industry forecasts suggest ICHRA could cover approximately 5 million lives by 2029. Our strategy is to build a scalable platform that connects employers, employees, brokers, and benefit administrators through a seamless experience.

While ICHRA is not expected to be a significant contributor to our 2026 financial results, with revenue forecasted to remain below $5 million this year, our focus today is on establishing the foundation for future growth. That means developing our pipeline, expanding strategic partnerships, strengthening broker relationships, and continuing to refine our operating model. We believe the market opportunity is attractive, and we are pursuing it with the same disciplined, capital-efficient approach that we are applying across the broader organization. To conclude, our priorities for 2026 remain unchanged. First, build and scale the lifetime advisory model to deepen member relationships, improve retention, and increase long-term member value. Second, continue improving our cash flow profile with a goal of achieving break even or better operating cash flow at the midpoint of our guidance. Third, advance diversification initiatives, including ancillary products and ICHRA.

Looking ahead, we continue to expect a return to sustainable revenue growth on a streamlined cost foundation beginning in 2027. We believe that growth will be driven by 3 primary factors. The transition from acquisition-based economics or recurring relationship economics, growth within ICHRA, and selective expansion of our carrier-dedicated business Amplify. We are encouraged by signs of improving stability across the Medicare Advantage ecosystem. While work remains, carrier sentiment and industry fundamentals appear increasingly constructive compared to where they stood a year ago. As we enter the second half of the year, preparations for AEP are underway. We plan to meet with carrier partners, scale our demand generation engine, and begin the operational work necessary to support another successful enrollment season. We believe we are well-positioned to execute against our goals. Thank you for your continued support.

I'll now turn the call over to our CFO, John Dolan.

Thank you, Derrick, good afternoon, everyone. Our second quarter results reflect the launch of our lifetime advisory operating model and the benefit of the cost reduction initiatives we implemented earlier this year. Consistent with our strategic priorities, we reduced lead generation spending outside of the key enrollment periods and focused our advisers on member engagement. We also continued making targeted investments in the under 65 opportunity, particularly within ICHRA. These actions result in lower Medicare enrollment volume during the second and third quarters. They are aligned with our longer-term objectives of improving return on marketing spend and increasing member lifetime value through stronger retention and ancillary product cross-selling. Importantly, we believe we are still on track to achieve our financial objectives for the year, including significant improvement in operating cash flow compared to 2025.

Turning now to our second quarter results, please note that unless otherwise specified, all comparisons are on a year-over-year basis. Second quarter revenue was $33.6 million, down 45%. Total commission revenue was $29.8 million, including $7.6 million of net adjustment or tail revenue, which represents the ongoing value generated from previously acquired members. This compares to $17.8 million in tail revenue a year ago. Non-commission revenue was $3.8 million, down 38% from the prior year period. The decline was primarily driven by lower sponsorship revenue as carriers continued to prioritize margin recovery over enrollment growth. This was consistent with our expectations and reflects a broader trend we see across the Medicare landscape. As industry growth normalizes over time, sponsorship revenue could become a meaningful source of upside. Medicare segment revenue was $31.8 million, down 45%, primarily reflecting lower Medicare Advantage approved member volume and lower tail revenue.

Medicare submissions declined 44% during the quarter, in line with our expectations. Moving to Medicare profitability and operating metrics. Within our Medicare segment, variable marketing and advertising expense declined 58%, reflecting our lower enrollment volume targets. The Medicare customer care and enrollment expense declined 21%. On a per approved member basis, total acquisition cost per MA equivalent approved member increased 16% during the quarter. Underneath that figure, customer care and enrollment cost per MA equivalent approved member increased 42%, while variable marketing cost per MA equivalent approved member declined 23%. We have significantly reduced marketing spend outside of the primary enrollment seasons while retaining our core adviser workforce. During the second and third quarters, those advisers are increasingly focused on member engagement activities and can rapidly pivot to inbound calls once AEP begins.

Variable marketing costs and customer care and enrollment costs per member have moved in opposite directions, in line with expectations. Second quarter lifetime value, or LTV, for Medicare Advantage declined 1%. Medicare Supplement LTV increased 16%, and Medicare Part D LTV increased 52% compared to a year ago. It's important to remember that our unit economics remain largely policy-level metrics. They do not yet fully capture the value being created through higher ancillary product penetration, referrals, and broader member engagement. The increased ancillary product cross-sell rates are expected to become especially impactful as we return to growth and scale. In addition to increasing overall lifetime value, ancillary products generally produce a more favorable cash flow profile because a significant portion of the ancillary commission revenue is received earlier in the member life cycle relative to a Medicare Advantage sale.

Medicare segment gross profit was $6 million, compared to $19.1 million in the prior year period, reflecting primarily lower enrollment volume and tail revenue. The second quarter is also an important quarter from an actuarial perspective because it provides greater visibility into the retention performance of their Medicare cohort enrolled during the most recent AEP. Based on our latest review, retention trends are in line with the AEP cohort enrolled in the prior year and ahead of the cohort enrolled 2 years ago. We continue to monitor retention closely, given the significant benefit changes and product adjustments implemented by carriers across the industry over the last 2 years. Our prudent approach to booking initial revenue allowed us to continue recognizing positive adjustment revenue again this quarter for a cumulative tail revenue of $284 million since 2018. Turning to the employer and individual segment.

Revenue in this segment was $1.8 million, compared to $2.7 million. As we continue reducing investment in our traditional direct-to-consumer under 65 business, we expect that decline to eventually be offset and over time exceeded by growth in our emerging ICHRA platform. As Derrick highlighted earlier, our focus this year remains on building the employer relationships, partner ecosystem, and operational capabilities necessary to support scalable growth in the years ahead. Segment gross loss was $0.8 million, compared to a loss of approximately $0.3 million. Turning to overall profitability metrics. Second quarter GAAP net loss was $23.6 million, compared to $17.4 million, while adjusted EBITDA loss was $21.8 million compared to $14.1 million. Non-GAAP operating expenses declined 25% to $58.6 million, reflecting broad-based reductions across both fixed and variable cost categories. Non-GAAP marketing and advertising expense declined 45%, including a 56% reduction in variable marketing costs.

Non-GAAP customer care and enrollment expense declined 20%. On the fixed cost side, non-GAAP general and administrative expense declined 26%, while non-GAAP technology and content expense remained relatively stable as we continued to support key strategic initiatives. Second quarter operating cash flow was negative $5 million, compared to negative $41.2 million, representing a substantial year-over-year improvement. We currently expect year-over-year operating cash flow improvement in each of the remaining 2 quarters of the year. We ended the quarter with $101 million of cash equivalents, and short-term marketable securities and remain comfortable with our liquidity position to support both operating requirements and strategic investments. We ended the quarter with $1 billion of commission receivables, including both current and long-term balances. That compares to $917 million as of June 30, 2025, representing an increase of 10%.

As we look ahead, we are encouraged by the progress we have made under our new strategy. We have successfully launched the lifetime advisory model and are seeing encouraging early indicators around member engagement and ancillary product adoption. We remain on track to achieve our financial objectives for 2026, including meaningful cash flow improvement and our fixed and variable cost savings targets. Based on our execution year to date, and with the annual enrollment period still ahead of us, we are maintaining our 2026 guidance ranges for revenue, GAAP net income, adjusted EBITDA, and operating cash flow. We are updating our outlook for 2026 net adjustment revenue, which is now expected to be in the range of $16 million to $20 million to reflect the second quarter 2026 net adjustment revenue we recognized.

Perhaps most importantly, we believe we are building the operating and financial foundation necessary to return the business to sustainable growth beginning in 2027. In the third quarter, we plan to reduce our marketing spend to an even greater degree year-over-year compared to the 45% reduction in the second quarter. As a result, we also expect a greater year-over-year decline in third quarter enrollment volume and revenue. We plan to deploy the majority of our marketing budget for the year in the fourth quarter across our highest performing direct channels.

With that, operator, please open the line for Q&A.

[Operator Instructions] Your first question comes from the line of George Hill with Deutsche Bank.

Hi. This is Maxi on for George. Could you talk about your expectations for the MA broker commission environment for 2027? Are you anticipating any meaningful changes in carrier commission strategies and potentially a further increase in non-commissionable plans? Thank you.

Thanks, Maxi. It's good to hear from you. Thanks for joining the call. Let me make sure I heard the question appropriately. As it relates to agent commissions from carriers in the upcoming AEP, as you know, CMS printed the maximum rate, which was roughly 4.5%. Not unlike a year ago, our expectation is that each carrier will deploy a different strategy, and that likely commission rates will differ by plan type, geography type, as carriers finalize their plans for when, where, and how they want to grow their Medicare Advantage book. As it relates to non-commissionable revenue, that was the second part of your question. As we discussed, in Q1, we still don't see any material change in non-commissionable revenue opportunities as we prepare for AEP. Clearly our conversations with carriers are ongoing and we're evaluating those opportunities.

I think maybe another question that you asked was about non-commissionable plans. Again, we don't expect a material change year-over-year. We certainly still think carriers will potentially deploy that as a way to manage growth, again, specifically in plan type and geography type. As we've said in prior calls, size and scale matter as we navigate this market, both for our carrier partners as well as for our members. We're comfortable with our plan supply that we'll be able to navigate that well.

Got it. You just talked about deeper cuts in marketing spend in Q3. As you prepare for the upcoming AEP, could you talk about how you're thinking about the level and mix of marketing spend relative to last year?

Yes. Thanks. I'll start, and then I'll let John and or Michelle add. Again, we've been very deliberate in our marketing demand generation spend over the last few years as we have navigated away from affiliate spend in those channels, more into our branded marketing channels. There's an important reason why we've done that, and it's linked directly to the quality of Medicare Advantage enrollments, the retention of members that are acquired through those branded channels. We continue to see positive outcomes. As John mentioned, our most recent cohort, in the first quarter of this year, the retention looks very similar to last year where we had similar mixes of branded and affiliate marketing spend. Again, we're continuing to see improvement over years where there was a higher percentage of spend into the affiliate channels.

That's how we're continuing to think about the marketing mix heading into Q4. Again, we're deploying those dollars in the highest LTV to CAC ratio periods.

Hi, Maxi. This is John Dolan. I just want to add one thing. Obviously in the third quarter, we'll be in the second quarter of our new lifetime advisory model. In order to create space for our advisers, obviously we're going to bring down marketing spend, which will give them the capacity to work under that advisory model. With that lower spend, we'll see some lower commission revenue in third and fourth.

Your next question comes from the line of George Sutton with Craig-Hallum.

Logan on for George. Derrick, as you guys launched the lifetime advisory model here, I'm curious what you think is realistic in terms of attach rates over time, and when do you really start to measure your success on that front? I mean, how long do you think it should take for the motion to mature?

Yes. Logan, great to hear from you, and it's a really good question. Again, as we reported in the script, we're really pleased with sort of this first quarter and the cross-sell rate that we've experienced in Q2 of this year versus Q2 of a year ago. I do think it's realistic to expect that cross-sell rates will vary by quarter. As it relates to how we think about measuring it as it relates to maybe declaring victory, if that's the right way to think about it, I'd personally like to get through a full cycle, sort of through a full year, sort of through four full quarters, just to see and understand how members respond, how our advisers engage in those types of conversations.

Over time, I don't think it's unrealistic to expect a cross-sell rate in a mature model, and it's hard to, at least at this point, just one quarter in, to define how long that we think it takes to get to full maturity. I don't think it's unrealistic in the Medicare space to assume a cross-sell rate of 0.5 That's the way I personally think about sort of a mature model in the Medicare Advantage space. We're excited to continue deploying the model and learning both how our advisers and how our members respond.

Understood. One other for me. Last year, plan terminations were quite high, especially relative to previous years. I'm curious how you see plan terminations shaping up this year, and on top of that, with the smaller team, the focus on branded channels, how targeted are you able to be in terms of knowing those areas where you're going to have shoppers and conversion might be pretty good?

Again, really good questions. I'll take the first part, and then I'll let Michelle take the second part of that question. As it relates to plan terminations versus a year ago, I would say, again, it's really early in the cycle. I think we have more to learn as we continuing having conversations with our carrier partners. I am encouraged by some of the early conversations with carriers. Again, it's not the same across the board, so to speak. In some of our conversations, we're hearing our carrier partners seeing stability in their portfolios, and I think that's being reflected as we see our carrier partners that are public at least report their Q1 and Q2 earnings. We're seeing margin improvement inside of their Medicare Advantage space.

We're encouraged that there are places and pockets where it appears as though some stability is returning to the market. We also know that with some carriers, that there's some expectations that have been set that plan terminations will be similar year-over-year to slightly higher. I think that's really more of a reflection maybe of just market share gain in any one AEP, again, as the market sort of settles down and carriers navigate and manage their full portfolio. Michelle?

Sure. Hi, Logan, it's Michelle. Nice to chat with you. I'll answer a bit of the marketing piece, as well as just termed members in general. I might think about it in 2 different components. You know very well we've now had multiple years of success with our brand and our marketing channel performance, it does perform very well in these years of high plan disruption. We know that we have this very broad carrier mix, we can assist consumers, right, in a very unbiased way in helping them navigate through those changes. We know the strength of that branded messaging and the channels that we leverage to deploy that, always guided by our LTV to CAC and strong return. That will help in sort of the broad marketplace channel and broad consumers that are switching, shopping, and needing help.

Though, right, we even are very acutely aware and surgically keyed in on our own members that are impacted, especially by term plans, right? We really need to make sure that we are reaching them, we do that through our advisers will help through that, right? That email, calls, making sure that we are proactively reaching out, making sure that they are aware that they are on a plan that no longer, and how can we help them navigate through that change.

Your next question comes from the line of Jonathan Yong with UBS.

Just kind of building on the term plan commentary. I guess at least one of the larger public carriers has talked about retaining a fair amount of their term plan members. I guess how much of that retention that they're aiming for falls to you directly? Is there a way to kind of parse that in terms of how that would fall to you in terms of additional commission over and above what you would normally get within the bands of the CMS commissions, obviously? Do they give you additional advertising spend? Just any color around that.

Jonathan, thanks for the question. I'm clearly not sure exactly which carrier or partner that you're referring to. Clearly in our own book, we have member retention data. We understand what our membership balance looks like walking into AEP, and we have a concerted effort to reach out specifically to members where we believe either we know the plans are going to terminate or where we believe they're at risk of terminating. We have an effort within our sales organization to retain as many of those members possible. I don't think we have, at least at this point, an indication of what that opportunity looks like yet for us. We'll learn more as we lean into carrier conversations in Q3 as it relates to AEP preparation.

Just given this is kind of a midterm election period, is there any consideration for how advertising spend may kind of spike up or what have you in the fourth quarter, and how you may be planning around that?

Jonathan, thanks. I'll let Michelle take that question.

Thanks, Jonathan. Appreciate the question. I could go back to even 2 years ago when we had the full election. I wouldn't say that you see a huge spike in rates, or at least the way that we buy media, we are able to mitigate that. What you see is maybe different performance on types of content in media. Think news stations may have higher levels of engagement, and we will make sure that we lean in as we're seeing the strong performance there.

Your next question comes from the line of Ben Hendrix with RBC Capital Markets.

This is Michael Murray on for Ben. Thanks for taking my question. I just wanted to discuss cash flow. I appreciate that you're expecting operating cash flow breakeven at the midpoint of your guidance in 2026. If you expect to return to growth next year, how should we be thinking about the puts and takes of cash flow in 2027?

Yes. Thanks, Michael. I'll let John take that.

Hi, Michael. How are you? Thanks for the question. Our midpoint of our guidance for 2026 does have our operating cash flow at basically slightly positive. Last quarter, we put out our long-range plan and some guidance there on where we think our cash flow will wind up, and we continue to look for opportunities to improve on our cash flow. We think after the successful launch of our Lifetime Advisory model and our expense reductions in 2026, as we enter into 2026, we'll be operating off a different operating base. With our plans for AEP, we're tracking to generate positive operating cash flow in 2027.

Michael, maybe I'll just add a little bit. If you think about the core tenets of the Lifetime Advisory model and what we believe it will help us achieve, it really starts with member engagement that leads to higher retention. Higher retention inside of a portfolio of MA business leads to higher cash flow. On top of that, increasing ancillary product offerings that meet needs of consumers. Again, what we're endeavoring to do here is to broaden the product portfolio so that we give our advisers the opportunity to meet whatever need potentially that a Medicare Advantage member may have based on the plans that they choose. Higher ancillary cross-sell rates lead to higher cash flow as well. On top of that, the timing of the cash flow related to ancillary products is much more favorable than MA plans.

We get more of the cash up front, that leads to a higher cash flow profile in future years. The last thing I would just say is we, again, endeavor on the ICHRA expansion. That product profile and that cash flow profile of that type of business is also favorable relative to Medicare Advantage business. It's really all of those things in the future as we continue to expand our capabilities and our product offerings that will allow us to continue to build on the meaningful progress that we're making this year in our operating cash flow profile.

Okay, that's helpful. Just a follow-up on AI. Wanted to see how these initiatives are helping you increase your efficiency, reduce costs, and how you're thinking about potential operating leverage driven by AI. Thanks.

Great question. I'll just point to 2 things. I think we mentioned it in the script. Number one, on the front end, our AI screener. Just as a reminder, I think about roughly this time a year ago, the company had piloted AI screeners, and the initial feedback that we got from our members and our consumers was really positive. It was deployed at scale during AEP a year ago, to where I think by the end of AEP, our AI screeners were answering roughly 80% to 85% of the incoming phone calls. Our plan this year is that those screeners will answer 100% of the calls. Where in prior periods we've employed human FTEs to be screeners of calls, we've been able to reduce that expense and use our AI screeners to achieve that outcome.

Again, I would say what we observed in our past AEP is that for calls that were answered by our AI screeners, that once they were transferred to an advisor, that the call times were lower than a human screener call that had been transferred, and our conversion rates were higher. Now, I feel compelled to say, almost like an investment manager, past performance doesn't indicate future performance. We are optimistic that what we've learned in that process, that we'll continue to see the benefits of the AI screener capabilities that we have. That's an example on the front end of engaging with consumers. In the back end, again, we mentioned this in the script, that one of the very time-consuming and high-cost initiatives we have on an annual basis is when we're receiving updates from our carrier partners on plans.

Plans, plan designs, benefit changes, networks, all the things that just go into maintaining that information across our ecosystem. It historically has been a very manual process, a very time-consuming process. The fact that it was manual by humans potentially led to the opportunity for there to be mistakes or errors. As we walk into this AEP, specifically around our Medicare Advantage book of business, we're transitioning that and using AI and an AI tool to ingest all of that material from our carrier partners. Again, reduced fixed cost savings from a headcount perspective. We'll be able to ingest the material much quicker, and we believe at a much higher rate of quality. That's reflected in our full year fixed cost reduction in our plan.

Your next question comes from the line of George Hill with Deutsche Bank.

I think you got the actual George this time. Me and Maxi didn't coordinate well on which of us was going to get on the call, so I apologize for that. My quick question, I kind of have 2.5 quick questions. Number one, is it too early to talk about or have thoughts on whether we should expect an elevated churn year in MA this year like we saw last year, or will we need to see Plan Finder come out to see that? Number 2, which I think is my more important question, is can you talk about thoughts and any progress or discussions that might be being had as it relates to the converts from the balance sheet and the ability to clean up the balance sheet? Thanks.

Great. George, thanks. It's great to hear from you and great to get your questions. As it relates to elevated churn, again, I would just remind you and others that the way we've described sort of the disruption in the marketplace is we've described it as one event that we thought and believed a year plus ago that would occur over multi years, and that's exactly what we've seen play out. Again, we know from some of our carrier partners that have publicly stated that they expect a similar to slightly elevated plan terms than they experienced in the prior year. We've heard from other carrier partners that they don't expect the same level of churn. I would just say, I think it's too early for us to sort of make a call on sort of the totality of the market.

Again, we're encouraged at least that we're hearing from some of our carrier partners that they believe that stability is returning. Again, as I mentioned earlier in a question, I think that's reflected in Q1, Q2 earnings announcements from our carrier partners and how they're reporting improved margin as it relates to their MA book of business. As it relates to HIG, again, we're continuing to have conversations with our preferred partner. As a reminder, the April of 2027 date that is getting closer is not a debt maturity date. Again, I would remind you and others that at the end of the year when we announced our Comvest financing, the board announced the formation of a strategy committee, which HIG is actively participating in.

We're continuing, again, to have those conversations, and the goal of the conversations is to get finally, optimally to a resolution that benefits all stakeholders. Nothing new material to report on that other than to just say that we're continuing in that effort with HIG.

There are no further questions at this time. I will now turn the call back to Derrick Duke for closing remarks.

Thank you all for joining us today, and thank you for your questions. Before we wrap up, I just want to reinforce how we're thinking about 2026. This is a bridge year for eHealth as we transition to our new lifetime advisory operating model. A model that starts with deepening member relationships and leads to improved retention and increased member lifetime value that we create across the full range of products and services that we deliver. As that model matures and as we continue expanding in the under 65 market, particularly through ICHRA, we believe that we're building a business with a stronger cash flow profile and a more durable earnings power over time. That's the foundation behind the 3-year targets we shared last quarter, including a return to revenue growth in 2027 and meaningful expansion in EBITDA margin.

I also want to thank our employees for their hard work and for continuing to bring our one team mindset to life every day. We appreciate your continued interest in eHealth, and we look forward to updating you on our progress next quarter. Thank you.

This concludes today's call. Thank you for attending. You may now disconnect.

Good afternoon, everyone, and welcome to eHealth, Inc.'s conference call to discuss the company's first quarter 2026 financial results. [Operator Instructions] I'll now turn the floor over to Eli Newbrun-Mintz, Senior Investor Relations Manager. Please go ahead.

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 first quarter 2026 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 website. 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, except where such reconciliation has been admitted in reliance on this unreasonable efforts exception provided under Item 10(e)(1)(i)(B) of Regulation S-K.

With that, I will turn the call over to Derrick Duke.

Thank you, Eli. Good afternoon, and thank you for joining us today. We're pleased with our first quarter results, which came in ahead of expectations. driven by stronger-than-anticipated Medicare enrollment volume at favorable unit economics. During the quarter, we made meaningful progress towards the strategic initiatives we outlined on our last earnings call, including implementing targeted cost reductions and completing critical build and readiness work for initiatives that launched in April. Most notably, we prepared for the rollout of our lifetime advisory model and the introduction of our new final expense insurance product. We are also encouraged by recent industry developments.

Last month, CMS finalized the 2027 Medicare Advantage rate, which came in above the initial proposal. While this is just one variable in the system, we believe it is an important signal that CMS leadership is responsive to industry feedback and focused on long-term program sustainability. That said, we are early in the planning cycle for the upcoming annual enrollment period.

Carriers are currently developing their 2027 bids, including benefit structures and geographic market strategies. We anticipate gaining a more comprehensive understanding of the upcoming AEP cycle and individual carrier approaches once bids are submitted. While some carriers may prioritize market share capture this AEP, we believe margin will remain the primary focus for most and the Medicare Advantage reset cycle will continue.

This means further adjustments to planned benefits and service areas as well as additional plan eliminations. As a result, we expect consumer demand to remain strong and carrier inventory dynamics to remain complex, similar to last year. We believe this environment underscores eHealth's value proposition as we help consumers navigate the evolving Medicare landscape.

Against this backdrop, we are intentionally evolving eHealth's operating model to foster deeper, longer-lasting relationships between members and advisers. Our goal is to ensure consumers see eHealth not as a onetime enrollment platform, but as a trusted ally throughout their health care journey. Central to this evolution is our lifetime advisory model, which I will discuss shortly.

From a financial standpoint, our priorities this year are achieving breakeven or better operating cash flow and positioning the company for sustainable, profitable growth once the Medicare Advantage reset cycle is complete. Our revised 3-year outlook, which we published today in our earnings slides, reflects a return to revenue growth in 2027 alongside adjusted EBITDA margin expansion, positive operating cash flow and breakeven or better free cash flow.

First quarter revenue was $88 million, ahead of our expectations. GAAP net loss was $4.7 million and adjusted EBITDA was $9 million, exceeding our internal plan. Revenue performance was driven by Medicare enrollment volume as well as better-than-expected revenue outside of core MA agency sales, reflecting progress in our diversification efforts. This includes providing ancillary and post-enrollment services.

During the quarter, we implemented headcount reductions and vendor consolidation initiatives. These actions are expected to reduce our fixed operating cost base by approximately $30 million in 2026 compared to 2025, representing roughly a 20% reduction. While we realized some savings in the first quarter, the full impact is expected to become more apparent as we move through the year.

Quarter 1 results also reflect our strategic decision to reduce variable marketing and agent-related spend, focusing investment on our best-performing channels. First quarter MA LTV increased 3%, while total acquisition cost per MA equivalent approved member declined 10% compared to a year ago.

In the first quarter, we moved with urgency to execute on our strategic plan and make the necessary preparations for the launch of our lifetime advisory model. This key initiative is supported by a set of newly released agent-facing technology tools designed to enhance the beneficiary experience. These tools leverage the data and institutional knowledge that we have built up over decades of working with a wide array of beneficiaries.

Core components include a customer dashboard that provides a holistic view of the member relationship with eHealth, system-generated recommendations that prompt advisers to engage at the right moments and dynamic insight-driven scripts embedded directly into the sales and service workflow. Together, these tools are intended to ensure more personalized, proactive conversations while also driving consistency, scalability and quality across the adviser experience as the model matures.

As part of this strategy, we are expanding the scope of services we provide beyond core MA coverage. eHealth already offers ancillary plan options such as dental, vision, hearing and hospital indemnity plans. Last month, we launched final expense insurance offerings. These products enrich our health-based inventory by providing beneficiaries with additional financial protection and ultimately, peace of mind.

Final expense sales also offer attractive unit economics and a compelling cash flow profile. Over time, we plan to add more products and services that will benefit our members based on findings from consumer focus groups and industry research. The lifetime advisory model is expected to support consistent year-round engagement and enables more effective cross-selling. Through this strategy, we believe we will increase member lifetime value, improve retention, strengthen unit economics and build durable brand equity rooted in trust and loyalty.

As part of today's earnings release, we're updating our 3-year financial targets. I would first like to stress that our decision to pull back on growth in 2026 was intentional and strategic. In this environment, we have the ability to drive higher Medicare enrollment volume but chose instead to prioritize operating cash flow by focusing on our most profitable marketing channels, building our lifetime advisory model and taking a focused and disciplined approach to our diversification initiatives.

We believe this strategy positions us well to return to growth next year on a stronger foundation. Our 3-year forecast reflects mid-single-digit revenue growth on a percentage basis for 2027 as we selectively dial up member acquisition spend. We expect our revenue growth rate to increase to the mid-teens in 2028, supported by our core MA business and a greater contribution from ancillary sales driven by our new operating model.

Beginning in 2028, we also expect our E&I segment to contribute to growth with a focus on expanding employer coverage through partner-driven ICHRA offerings. Adjusted EBITDA margins are expected to increase each year starting in 2027 to reach 20% by 2028. This translates to double-digit percentage adjusted EBITDA growth in '27 and '28, reflecting the benefits of our fixed cost reductions and favorable Medicare unit economics. We forecast achieving breakeven or better free cash flow in 2027.

Our revenue growth goals could be accelerated should we observe a more rapid stabilization of the Medicare Advantage market relative to our current outlook. We're pleased with our first quarter results and the progress we've made executing against the initiatives outlined on our fourth quarter earnings call.

We believe eHealth is well positioned to continue delivering superior service and value for our customers and carrier partners, and we look forward to updating you on further milestones along our path towards sustainable, profitable growth. I will now turn the call over to our CFO, John Dolan, for his remarks. John?

Thank you, Derrick, and good afternoon, everyone. We delivered a strong start to the year, meeting our revenue, earnings and operating cash flow expectations and achieving a greater Medicare enrollment profitability compared to a year ago. Our results were driven by disciplined demand generation, strong sales execution and a favorable year-over-year trend in lifetime values of Medicare products. We also saw early benefits from the fixed cost reductions implemented earlier this year. As I walk through our first quarter financial results, you will see a consistent theme, higher quality enrollments, greater operating efficiency and a foundation that we believe will support enhanced cash flow generation over time.

Please note, all comparisons will be made on a year-over-year basis unless otherwise specified. First quarter 2026 total revenue was $88 million, representing a 22% decline. Medicare segment revenue also declined 22% to $81.3 million, driven primarily by lower enrollment volume as we reduced variable marketing spend to focus on our best-performing channels.

Medicare submissions declined 24%, with the revenue impact partially offset by growth in lifetime values for Medicare Advantage, Medicare Supplement and PDP products. In the first quarter, we recognized $8 million of positive net adjustment revenue or tail revenue compared to $10.5 million in the prior year. Tail revenue was driven by our Medicare and ancillary products and represents cash collections in excess of our original lifetime value estimates.

Importantly, we continue to hold significant unrecognized positive adjustments related to our existing book of business. First quarter non-commission revenue was $8.2 million, which was ahead of our internal expectations and reflects lower carrier sponsorship revenue compared to a year ago.

Turning to Medicare enrollment profitability. The first quarter Medicare LTV to CAC ratio was 1.4x, representing a 17% improvement from 1.2x. First quarter total acquisition cost per MA equivalent approved member declined 10%, driven by a 28% reduction in variable marketing cost per MA equivalent approved member, partially offset by a 9% increase in customer care and enrollment cost per MA equivalent approved member.

The reduction in variable marketing cost per MA equivalent approved member reflects our more disciplined marketing spend, improved channel mix and the continued impact of branding initiatives, which have a proven record of enhancing enrollment quality. The year-over-year increase in customer care and enrollment cost per MA equivalent approved member reflects lower application volume and our decision to retain sufficient agent capacity to support the launch of our lifetime advisory model. This model requires agents to dedicate a portion of their time to member engagement and cross-selling activities. We also plan to have a telesales organization with a higher mix of tenured advisers, which we expect to benefit conversions and enrollment quality.

First quarter lifetime values increased 3% for Medicare Advantage, 19% for Medicare Supplement and 78% for PDP products compared to a year ago. First quarter Medicare segment gross profit was $33 million, down 8%. At the same time, Medicare segment gross profit margin increased significantly from 34% to 41%, reflecting improvements in the first quarter Medicare LTV to CAC ratio. Turning to retention. Our most recent AEP cohorts, those enrolled in the fourth quarter of 2024 and the fourth quarter of 2025, continue to outperform each of their respective predecessor cohorts. This progress reflects targeted improvements across our sales and marketing organizations, along with continuing innovation in our customer online experience, resulting in stickier enrollments.

Our overall commission receivable value continued to grow on a year-over-year basis, ending just over $1 billion compared to $923 million as of March 31, 2025, or a 12% increase.

Looking ahead, the launch of our lifetime advisory model is expected to both improve retention at a client level and foster longer-term relationships with our members across multiple products. First quarter revenue in our Employer and Individual segment was $6.7 million, down 29% from $9.5 million a year ago. Segment gross profit was $3.7 million compared to $6 million last year. From a consolidated profitability perspective, first quarter GAAP net loss was $4.7 million compared to GAAP net income of $2 million. The decline was primarily driven by restructuring charges related to our headcount reduction this quarter.

First quarter adjusted EBITDA was $9 million, down from $12.5 million, and the adjusted EBITDA margin was 10% compared to 11% in the prior year. First quarter non-GAAP total operating expenses, which excludes stock-based compensation and restructuring charges, declined 21% to $82.3 million, reflecting organization-wide expense reductions. Non-GAAP marketing and advertising expense declined 38%, including a 44% reduction in variable marketing costs, consistent with our lower enrollment volume targets.

Non-GAAP customer care and enrollment expense declined 13%, reflecting lower adviser headcount. On the fixed cost side, non-GAAP technology and content expense declined 8% and non-GAAP general and administrative expense declined 6% compared to a year ago. We expect to see the full benefit of recent fixed cost initiatives as we progress through 2026. First quarter operating cash flow was $35.8 million compared to $77.1 million and ahead of internal expectations. We remain on track to achieve our full year operating cash flow goals as reflected in our 2026 guidance.

The year-over-year decline in first quarter operating cash flow primarily reflects the timing of several working capital items as well as severance and other onetime costs associated with our fixed cost reduction actions. In addition, carrier sponsorship revenue was lower year-over-year as the prior year quarter benefited from AEP-related sponsorship dollars that shifted into the first quarter. At the end of March 2026, eHealth had $110.8 million in cash, cash equivalents and short-term marketable securities. Based on our execution year-to-date and with the annual enrollment period still ahead of us, we are maintaining our 2026 guidance ranges for revenue, GAAP net income, adjusted EBITDA and operating cash flow.

We are updating our outlook for 2026 net adjustment revenue, which is now expected to be in the range of $8 million to $20 million. We believe we are well positioned to achieve our financial objectives for the year.

Consistent with the framework Derrick outlined, we view 2026 as an intentional bridge year, one focused on improving the quality of our revenue, enhancing the efficiency of our operating model and achieving cash flow generation rather than maximizing volume. Our actions this year, including disciplined demand generation, launching our lifetime advisory model and rationalizing our cost structure are designed to position eHealth to achieve the 3-year financial targets we published today.

You can reference these targets on Slide 10 of our earnings slides posted on eHealth's Investor Relations site. Our 3-year forecast assumes a modest increase in Medicare marketing spending in our best-performing channels starting in the fourth quarter of 2027. We expect to amplify the impact of this increased marketing investment through our lifetime advisory model as growth in our core Medicare commission revenue is complemented by higher cross-sell rates of ancillary products, including hospital indemnity plans and final expense insurance. In addition, we expect to start seeing positive contributions from our ICHRA business in 2028.

Given our planned revenue growth, we believe we will realize significant operating leverage from the recently implemented fixed cost reductions. Cash flow profitability remains the central objective of our long-term financial strategy, and we believe the progress we're making in 2026 establishes a strong foundation for a return to growth while delivering on our cash flow goals.

Macro assumptions behind our 3-year forecast are relatively conservative. There could be upside if the Medicare Advantage market recovers faster than we currently anticipate. And with that, we would like to open the call for questions.

[Operator Instructions] Your first question comes from the line of Ben Hendrix of RBC Capital Markets.

Michael Murray, on for Ben. I appreciate your commentary on your revenue growth expectations for the next few years. I'm curious if you have any tail revenue embedded in these targets? And if you do realize tail revenue this year, would that alter your targeted growth rate?

John, do you want to take that?

Yes, sure. Let me take that question. I appreciate the question. Yes, in our long-range plan, we have assumed effectively flat tail revenue growth. So similar to what we've put in the 2026 guidance, similar assumptions into the outer years.

Okay. So if you did realize tail revenue this year, that would lower your growth rate targets for 2027, for instance?

Not necessarily. If you're looking at -- the growth will be flat on the tail, but it would obviously be offset by other growth.

Okay.

Yes. So let's try again. The assumed tail revenue in our 2026 plan is consistent in the 3-year LRP. So the revenue growth in the out years is not coming from increased tail, if that's what you're asking.

Yes. So we're already expecting this year, correct? So it's -- we are expecting to recognize tail this year. You can look at our guidance of $8 million to $20 million. So if you can think about somewhere at the midpoint of that guidance, you can assume that a tail for '25, and we are assuming flattish tail revenue for the forecast periods in the outer years as well. So are you saying if we were to recognize tail above and beyond current guidance in '26?

Yes. Say, if you recognized it at the high end of your guidance range, would that lower your expected EBITDA growth in 2027?

I think if we were within the guidance range, no. If we were -- if we saw a significant positive development above and beyond our current guidance, yes, obviously, because you would look at '27 off a higher base in '26. But if we are somewhere within our guidance range, no, that would that would imply a similar growth rate and similar EBITDA growth rate.

Yes. So if you look at our 3-year financial targets -- the 3-year financial targets that we provided, we're assuming zero growth on tail, but other revenue streams will be generating that growth. As we said in '27, it's single-digit percentage growth rate and '28 is mid-teens. So tail is not contributing to that.

Okay. I got you. That's helpful. Just shifting gears to cash flow. First quarter is typically pretty strong cash collection quarter for you guys. It came in a little bit below last year's number. Obviously, you maintained your cash flow guidance. I wanted to see if there's any timing-related items in there and why you have conviction just hitting that full year guidance?

Yes, sure. So the -- I'd say about 80% of the decline year-over-year is really driven by a couple of things, lower carrier sponsorship timing. We had some timing and onetime items in the quarter, such as we had severance related to our fixed cost reductions. And then there was some lower commission collections because of our lower volume. So those are the main drivers in the decline. It's -- I'd say it's the cash flow did exceed our expectations, and we are definitely on track for achieving our 2026 guidance ranges.

Just to reiterate, the bulk of it is timing and the onetime costs related to severance. That accounts for about 80% of that.

Your next question comes from the line of George Sutton from Craig-Hallum.

You mentioned 2026 would be a bridge year and you were not going to necessarily chase growth. It sounded very similar to how 2025 came out for you. So I just want to make sure I understood the deltas year-over-year in terms of how you're going to market?

The deltas in revenue expectations and marketing spend, like just maybe give me a little bit more, George.

Actually, both. You sort of characterized it as we didn't chase growth in '25, try to be responsible about going after the right customers and using the right channels. It sounds like you're doing the same thing in 2026. I'm just trying to understand what's different.

Yes. Well, the difference is the commitment that we've made and the focus that we have on generating positive operating cash flow. And so that we did not achieve that in 2025, and we believe it was important for us to focus on that in 2026 as we strengthen, again, as we've characterized, strengthening the foundation of the company. There's multiple ways that we've gone about that, George, including the Q4 refinancing that we were able to secure to help strengthen the balance sheet.

And so the next evolution of that is to be disciplined again in our approach in '26 and again, not chase growth at all costs. We think that's the responsible thing to do in light of the continued market disruption. Again, I think we've been pretty clear in our communicating our view that what's happening in the market is sort of one event that's occurring over multiple years as carriers make the important decisions that they're making to improve their own financial statements and their margin. And we're respective of that.

And we want to position eHealth to be ready to take advantage of a return to growth in the future once the market stabilizes.

And just very quickly, George, I think that it is correct that a lot of what you are seeing in '26 is continuation of what we started doing in '25. So for example, the marketing channels and the focus on brand and direct channels, you will see it being even more pronounced in the fourth quarter AEP as we're pulling back from the less profitable channels. And that will continue for the 3-year outlook as well. And that's why you see that pretty significant EBITDA growth that we're projecting. But what is also different this year is the lifetime advisory model that we're implementing, and that will mean that in Q2 and Q3, we're really pulling back on what we're spending into the market. Those enrollments are not very high profit enrollments in the first place.

So we're going to use the time of agents to engage with our existing members, and that will have downstream implications for retention and for ancillary sales. The ancillary sales this year will start contributing, but you will really start seeing much bigger impact in '27 and '28 in terms of the cross-sell rate impact. So that's layering on what you started seeing in '25 layering on top of that in '26.

Could you just help me understand what the Lifetime Advisory model will look like from an engagement perspective? Obviously, we've had ancillary offerings before, and those were available to customers. Is it just simply more proactively marketing those to them? Or how does the engagement change?

That's a great question, [ Greg ]. I'm going to start, and then I'll ask Michelle to contribute as well. So it's important to understand that historically, inside of the eHealth operating model that as new products were put into the platform, the expectation from an operating model perspective was that, that would need its own set of advisers. It would need its own demand generation of budget effectively in order to drive growth.

The lifetime advisory model doesn't rely on additional marketing spend, doesn't rely on additional agents to sell the product. It's really encouraging and supporting our current advisers to develop a holistic relationship with the member once they engage with a member. So it's not about more product versus what we've had in the past, although our future expectation is that we'll continue to add products and services as we see needs that beneficiaries have. But the real change here is that we're supporting the adviser to engage with their member and to effectively be a one-stop shop that, that adviser is equipped to engage and meet the holistic needs of the member.

Michelle?

Sure. I'll add on. I mean we really think about this -- it is about putting the consumer first. And so it's not just about, yes, we've done a lot to improve our brand, our marketing, that will continue, but it's really focused on that over 65 segment. And so as we bring that member in, how do we continue to cultivate that relationship, not just to drive sort of the immediate enrollment, which is absolutely also really needed in this environment and what's going on in Medicare, but it's also just doing right by the consumer, ensuring that we can use the time and the capacity that we have. So we really link that beneficiary to that adviser.

And through that relationship, we cultivate what you asked about, right, what are those activities, the engagement, it follow-up on planned check-in is going on right now. Do they have their PCP? Can we help with an annual wellness visit? Cross-sell, right, will come in as well. Are there referrals? Are there other people that are really satisfied with our service that we can also sell. So it's not just relying on marketing, but really kind of setting this up for a long-term relationship.

[Operator Instructions] Your next question comes from the line of George Hill of Deutsche Bank.

This is [ Maxi ] on for George. I want to ask about the shift toward higher-margin branded marketing channels. Could you give us an update on how much of your Medicare enrollment mix in Q1 came from these branded channels? And how does it compare to last year?

Yes. Michelle, do you want to take that? So I think the question is what percentage of our enrollment volume is coming from our branded channels? And how does that compare to a year ago?

Yes, yes. I will tell you that we continue -- so first off, when we look at sort of how do we maximize marketing spend, it is really guided on quality, on the return, like LTV to CAC, right, as you saw in sort of the slide is really the North Star. So you then focus on what are the best performing channels. Also even within the channels, you're looking at what are the top-performing campaigns and how do you continue to optimize. So we continue to lean into our branded channels with the right mix throughout Q1, Q2, Q3.

And kind of similar to what we said earlier, you're going to see that even continue to improve into Q4.

Got it. Just a quick follow-up. Could you give us some color on the unit economics of cross-selling ancillary products through the lifetime advisory model and ICHRA versus MA? How should we think about the company's overall margin profile as these products scale? And how much of the mid-teens revenue growth in 2028 is expected to be driven by ICHRA and ancillary products through this model?

Yes. So the way -- again, I'll start and then John and/or Michelle or others can chime in. So the way we think about the ancillary opportunity, again, it's really important to understand that in the lifetime advisory model, there's no additional marketing demand dollars that the company is spending in order to generate the revenue that we are expecting in the ancillary business.

The ancillary bucket is a wide array of products. So each product has its own sort of LTV profile based on the unit economics of each. But the way I would just generally encourage you to think about this is that for each cross-sell opportunity that we have the opportunity to add somewhere between maybe 15% to 20% of LTV to the MA sale when we sell an ancillary plan. So that's how we think about the economics on ancillary.

On ICHRA, we would just say it's -- certainly, we have it modeled, but it's a little -- probably a little early for us to share how we think about each of the unit economics of that. And it's a small amount of the revenue growth that's in our 3-year LRP at the moment. So it's certainly not material in the plan at this point as it relates to the 28 revenue growth that's in the plan.

One of the other things I'd probably add to it is some of the ancillary products have a much more favorable cash flow profile, which is something that we've built into our plan.

There are no further questions at this time. We have reached the end of the Q&A session. This also concludes today's call. Thank you for attending. You may now disconnect.

Good afternoon, everyone, and welcome to eHealth, Inc.'s conference call to discuss the company's fourth quarter and fiscal year 2025 financial results. [Operator Instructions] I will now turn the floor over to Eli Newbrun-Mintz, Senior Investor Relations Manager. Please go ahead.

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 fourth quarter and fiscal year 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 will turn the call over to Derrick Duke.

Good afternoon, everyone. In 2025, eHealth delivered strong results, achieving meaningful earnings growth in a complex and rapidly evolving environment. We consistently exceeded expectations, raising annual guidance 3x. We closed the year with another highly successful annual enrollment period, helping hundreds of thousands of seniors navigate one of the most disruptive Medicare Advantage cycles in recent memory, an outcome that speaks to the differentiated value of our platform, brand and the trust that we've built with consumers and carrier partners. We've also strengthened our balance sheet entering 2026 with enhanced financial flexibility and a longer-term commitment of capital to execute our strategic priorities.

The Medicare Advantage market is in the midst of a structural reset. Carriers continue to experience elevated medical cost trends and regulatory pressure, which has resulted in meaningful benefit changes, plan eliminations, carrier market exits and a more targeted approach to growth. Millions of Medicare customers were impacted by these changes in '24 and again last year.

eHealth has provided crucial help to these populations as they've been forced to reassess their coverage options. On the distribution side, these trends have introduced pockets of commission suppression and reshaped carriers marketing sponsorship programs, among other changes. At the same time, carriers have been narrowing their distribution relationships, placing greater emphasis on quality, retention and other key measures of consumer experience. They are severing ties with brokers not performing to their standards and deepening relationships with distributors that provide the most value.

eHealth has consistently ranked high on key quality metrics that are important to our carrier partners. These shifts have challenged the industry, but they also affirmed an important theme. When consumers face complexity, they seek trusted guidance. And when carriers need targeted high-quality growth, they value partners that can support their objectives. eHealth operates uniquely at that intersection.

Now let me turn to our 2025 operational review. In 2025, annual revenue grew 4%. GAAP net income was almost 4x 2024 net income and adjusted EBITDA increased by 40%. These strong results were driven by focused execution throughout the year, but especially during AEP. We were exceptionally well positioned to enter the 2025 annual enrollment period. This included a more tenured adviser force, stronger branded channels and an expanded member retention program.

Our AI screener piloted earlier in the year was scaled during AEP, bringing additional efficiency to our model and helping to reduce customer wait times. This technology was well received by our consumers and performed on par or better than human screeners in terms of transfer rates and conversions. We believe this technology further differentiates eHealth in the marketplace and opens the door for further consumer-facing AI applications in health insurance distribution. As anticipated, this AEP generated substantial consumer activity on par with the prior year.

Demand on our platform was strong as our Medicare Matchmaker value proposition resonated with consumers. eHealth also successfully navigated changes in carrier inventory that resulted from plan eliminations, commission suppression and other key factors impacting product selection. We continue to offer quality, affordable plans in our key markets. During AEP, our direct branded channels exceeded enrollment expectations. In response, we strategically reduced spend on third-party affiliate leads.

Direct channels typically deliver higher enrollment margins and stronger retention. Their increased share of our marketing mix positively impacted in-period earnings, and we expect that they will continue to strengthen financial performance beyond '25 by increasing book persistency and supporting LTV growth. We delivered on our 2025 annual plan for enrollment volume and revenue while significantly exceeding earnings expectations, driven by favorable LTV to CAC dynamics in our Medicare business and disciplined fixed cost management.

We also demonstrated continued strength in our commissions receivable, which ended the year at a record high. Beyond Medicare Advantage, we made progress towards diversifying our revenue base. Our hospital indemnity plan, or HIP sales achieved exceptional growth with approved application volume surging over 400% year-over-year in the fourth quarter of 2025.

Medicare Supplement also performed well during AEP, delivering 39% approved application growth in the fourth quarter. While carrier dedicated revenue and sponsorships declined year-over-year in the fourth quarter, reflecting broader market pressures, our core agency platform more than absorbed this impact through strong operational execution. As planned, after AEP completion, I initiated a comprehensive strategic review of the organization.

Our macro outlook suggests that many of the conditions that shaped the past 2 years will persist into 2026. While we anticipate growth mandates reemerging in 2027, we believe that this year, carriers will continue pursuing targeted strategies and emphasizing margin protection. We expect to see further exits on the distribution side, consolidating sector leadership with platforms that have scale and strong carrier relationships that are able to deliver high-quality book of business.

Additionally, it is our belief that brokers who are able to deliver consumer value beyond onetime enrollment support will be at a material advantage. We continue to hold conviction in the longer-term growth potential of the Medicare Advantage market. The number of Americans turning 65 will be peaking at over 4 million per year with the Medicare eligible population reaching over 80 million by 2034. MA penetration is also expected to increase, reaching over 60% by 2030 compared to approximately 54% in 2025.

We believe eHealth is well positioned to lead this growth on the distribution side by leveraging the strength of our brand, deep carrier partnerships and our differentiated omnichannel platform. Seniors are becoming increasingly tech savvy, and this administration is placing a particular emphasis on the role of technology in modernizing and improving Medicare. We believe eHealth already has a lead as an industry technology innovator, which will provide us with a competitive advantage in this environment for years to come.

With that, we view 2026 as a bridge year, a year to become more focused in our execution, maximize the return on our platform and improving operating cash flow generation to ensure that when the market shifts back to growth, we are in a strong position to accelerate. More specifically, our 2026 focus will include developing our lifetime advisory engagement model, concentrating Medicare enrollment efforts on our highest margin and persistency marketing channels, broadening our non-MA portfolio, including ancillaries and ICHRA and continued cost discipline, including the optimization initiatives we implemented last month. Let me expand on the lifetime advisory model, which is a major element of our strategy going forward. We are providing our licensed advisers with additional opportunities to solve consumer needs through an ongoing trusted relationship. This model blends the relationship-driven approach of local field agents with the scale, breadth and technology advantage of an omnichannel model.

Based on consumer focus groups we conducted, beneficiaries place high value on engagement-based models that combine choice with access to a trusted adviser, someone who understands their personal situation and coverage needs. This model leverages eHealth's brand proposition and valuable beneficiary base and aligns with exactly where carriers are placing value, high-quality enrollments that persist. The seasonal nature of our business provides meaningful opportunities for advisers to deepen member engagement throughout the year, conducting need assessments, identifying gaps in coverage, managing plan changes proactively and offering relevant ancillary products.

As part of this strategy, eHealth will be expanding the portfolio of ancillary products and services we offer to our beneficiaries, building on meaningful growth we achieved with hospital indemnity plans last year. In '26, we expect to add critical illness, final expense and similar products while driving greater attach rates with our existing ancillaries such as dental, vision and hearing. We plan to build on this effort in 2027 and '28 by adding additional adjacent services that leverage eHealth's core competencies and help Medicare beneficiaries maximize the value of their coverage.

This strategy is expected to drive increased member lifetime value, improved retention and most importantly, build on eHealth's brand equity and member loyalty. Furthermore, the favorable cash flow dynamics of these ancillary products make them an important element of our diversification and overall financial goals. What does this mean for this year's financial outlook? Because we're prioritizing operating cash flow and quality, we expect Medicare enrollment volumes and noncommission revenue to decline relative to 2025.

Despite lower revenue and enrollment volume, earnings, excluding net adjustment or tail revenue are expected to remain roughly flat and EBITDA margin ex tail is expected to improve year-over-year. This reflects the positive impact of our cost reduction efforts as well as focusing member acquisition spend in the highest margin marketing channels.

On cost savings, we enacted headcount and vendor consolidation in January of this year. We expect these actions to lower our 2026 fixed operating cost by approximately $30 million compared to 2025, a decrease of roughly 20%. We also plan to reduce our variable spend by over $60 million for an overall year-over-year spend reduction greater than $90 million. As a result of strategic changes and significant cost measures we have implemented, we believe we can drive meaningful improvement in operating cash flow in 2026.

Cash flow is our North Star, and we are committed to reaching breakeven operating cash flow this year, a $25 million year-over-year improvement with positive operating cash flow targeted for 2027. John will share our guidance ranges and key drivers in his prepared remarks. In diversification, our approach will be similarly focused and disciplined. We are prioritizing ICHRA, including a partner-driven SaaS model, which allows us to extend our platform to brokers with strong employer relationships. This strategy is capital efficient, leverages our core capabilities and positions us in a growing market where employers are increasingly looking for greater control over benefit expense and a personalized approach to coverage selection.

During 2026, we are taking important steps to position us for success once the reset cycle has been completed in Medicare Advantage and as ICHRA continues to gain adoption with employers. We expect to continue to invest strategically and in a focused way in key capabilities required to grow profitably in these areas. Our technology remains an important differentiator and growth enabler. We see significant potential to improve our operational and financial performance by further scaling of AI screening and introducing additional AI applications in both our back and front office.

The goal is to prioritize revenue growth in 2027 on a profitable and operating cash flow positive basis. It's important to note that while we are taking a more measured approach to demand generation this year, we expect our commissions receivable to remain around current levels in the beginning of 2027, driven by favorable retention trends and our relationship-driven approach to managing our book of business. We have also taken a measured approach to our capital structure by first augmenting our liquidity, extending maturities and lowering our cost of capital with the revolving credit facility that we entered into at the end of 2025.

Our next priority is to unlock value for all of our stakeholders by addressing our convertible preferred equity. Further, as we have discussed in the past, our industry is dynamic, and there have been significant developments over the past several quarters. We regularly evaluate these developments and the strategic opportunities that may present themselves to us.

To that end, we have had discussions with others in our industry, and we expect to continue to have discussions. Those discussions may not result in any meaningful developments, but we think it is important for us to be active in this regard. To summarize, our 2026 strategy will be focused on 3 priorities: reset Medicare into a cash flow generative relationship-driven business, deliver a broader set of products to customers and the advisers who serve them and pursue measured partner-driven ICHRA growth, including a SaaS-based model. And now I'll turn the call over to John, who will discuss our '25 results in greater detail and provide our 2026 annual guidance.

Thank you, Derrick, and good afternoon, everyone. In fiscal 2025, we significantly improved profitability, driven by greater enrollment margins in our Medicare business, the continued strength of our commissions receivable and cost savings across all expense categories. We leaned into elevated consumer demand during the first and fourth quarter enrollment periods and pulled back in the seasonally low middle quarters, deploying a more flexible operating structure in our telesales organization.

I will now walk through our 2025 financials, followed by a discussion of our 2026 guidance and underlying assumptions. Please note that all comparisons I make will be on a year-over-year basis unless otherwise specified. Fourth quarter revenue was a company record $326.2 million, up 4%, driven by Medicare and ancillary product commissions, partially offset by lower noncommission revenue and individual and family product commissions.

For the full year, total revenue of $554 million also increased 4%. Within our Medicare segment, we achieved fourth quarter revenue of $319.6 million or an increase of 5%. Underneath that, fourth quarter Medicare Advantage submissions in our agency model declined slightly at 3%, but were more than offset by a meaningful increase in the LTVs for all Medicare products. An 11% increase in our Medicare Advantage LTV was especially impactful, reflecting favorable retention, particularly the performance of the prior year's fourth quarter cohort, an indicator of the quality of our book. The 3% decline in fourth quarter Medicare Advantage agency submissions is reflective of our strategic decision to concentrate demand generation in our direct branded channels and decreasing marketing spend in channels with lower underlying margins.

We're seeing encouraging early signs on retention. Based on current data, our January 2026 Medicare Advantage cohort is performing significantly better in year-to-date retention compared to last year's cohort. This continues the strong pattern of year-over-year improvement we've seen in early-stage retention. Over the past 2 years, retention in the key early weeks of January Medicare Advantage cohort has improved by a cumulative 700 basis points. On the ancillary product side, hospital indemnity plans, which are typically cross-sold as part of the Medicare sales process, grew significantly in the fourth quarter and full year.

2025 annual approved members exceeded 30,000 and was up more than 5x compared to 2024. For the full year, Medicare segment revenue of $531.2 million grew 6%. Fourth quarter positive net adjustment revenue or tail revenue was $3.9 million, almost all of which came from our Medicare segment. This compares to $7.6 million in total fourth quarter tail revenue last year, $5.9 million of which came from the Medicare segment. For the full year 2025, total tail revenue was $44.4 million compared to $22.7 million a year ago. The tail revenue we recognize reflects cash collections in excess of our original LTV estimates. There continues to be a significant unrecognized positive adjustments related to our Medicare book of business beyond our initial constraint.

Turning to Medicare profitability. Fourth quarter LTV to CAC ratio was 2.2x, improving meaningfully from 2x in the fourth quarter of last year. We believe this is a clear indication that the marketplace is rewarding quality and that our multiyear investments in brand building, consumer experience and retention are delivering tangible returns. Fourth quarter Medicare gross profit of $178.3 million grew 12%, while for the full year, Medicare gross profit grew 21%.

Our Employer and Individual segment revenue and profit decreased for both the fourth quarter and full year 2025. This segment is undergoing a transition from being primarily driven by individual and family plan sales to being focused on the employer market and specifically the ICHRA solution. On a consolidated basis, total fourth quarter operating expenses were $200 million, a decrease of 1%. Fourth quarter marketing and advertising and customer care and enrollment costs decreased 3%, while general and administrative and technology and content combined increased 6%.

As I mentioned before, for the full year, our total operating expenses were down 4% with every category of fixed and variable spend declining compared to 2024. Fourth quarter GAAP net income was $87.2 million, a decrease from $97.5 million in the fourth quarter of 2024. This year-over-year reduction was primarily due to a higher effective tax rate during Q4 2025, partially offset by higher total revenue in the quarter.

Full year 2025 GAAP net income was $40 million, an increase of almost 300% compared to $10.1 million a year ago. Fourth quarter adjusted EBITDA was $132.9 million, an increase of 10% and full year adjusted EBITDA was $97.3 million, an increase of 40%. We ended the year with $77.2 million in cash, cash equivalents and marketable securities compared to $82.2 million at the same point last year. This includes the net impact of the $125 million credit facility we announced in January after transaction costs and $70.7 million used to repay our existing term loan.

As a reminder, the first quarter is our seasonally highest cash collection quarter as commission payments related to AEP enrollment cohorts mostly begin in January. Total commissions receivable as of December 31, 2025, were $1.1 billion, up 12% compared to December 31, 2024.

Moving to our 2026 guidance. As Derrick outlined, this year, we are intentionally prioritizing operating and cash flow and margin over enrollment volume in line with our carrier partner strategies. We plan to continue concentrating our marketing spend on our highest quality channels, those with the strongest expected persistency and LTV to CAC profiles. Our demand generation strategy will also focus on the periods with the highest returns, the first quarter and most significantly, the fourth quarter. In the middle quarters, we plan for our licensed advisers to combine new enrollment activity with work towards deepening relationships with our existing members and ensuring member needs are fully met by offering ancillary products and services.

On the cost side, in January, we implemented fixed cost reductions expected to generate approximately $30 million of fixed cost savings, combined with over $60 million of planned reductions in variable spend in 2026 versus 2025. As a result, the midpoint of our guidance reflects a year-over-year improvement in earnings margins, excluding tail revenue in both periods, even as revenue moderates. Importantly, our guidance also reflects our objective to achieve breakeven operating cash flow in 2026, representing roughly a $25 million year-over-year improvement at the midpoint. We expect to achieve this despite anticipated declines in BPO and sponsorship revenue in the current environment, which are fully baked into our 2026 guidance.

As a reminder, the cash inflows of our business are largely driven by incoming commission payments from carrier partners, the timing of which can be difficult to control, which is reflected in the guidance range. We believe achieving operating cash flow breakeven this year will establish a critical foundation for positive operating cash flow in 2027 and positive free cash flow over the next 2 years.

With that, we expect total revenue to be in the range of $405 million to $445 million. We expect GAAP net income to be in the range of $8 million to $25 million. We expect adjusted EBITDA to be in the range of $55 million to $75 million, and operating cash flow is expected to be in the range of negative $10 million to positive $12 million. These ranges include the assumption of positive net adjustment revenue in the range of $0 to $20 million.

Taking a long-term view, the underlying goal of our financial strategy this year is to become increasingly targeted with our capital deployment. We plan to lean into the most profitable business opportunities and quarters, maximizing the return on our industry-leading omnichannel platform. We appreciate your continued support, and I'll now turn over the call for your questions. Operator, please open the line for Q&A.

[Operator Instructions] Your first question comes from Ben Hendrix from RBC Capital Markets.

This is Michael Murray on for Ben. There's obviously a major MA payer that's trying to limit membership growth this year, and that's impacted some of your peers. Is this what is causing your softer top line outlook? Or is it also related to your reduced investment in lower-margin third-party marketing channels? Any color would be helpful.

Yes. Thanks for the question. This is Derrick. I would say that our -- I think you have it right as it relates to your second point on our reduced revenue outlook for 2026. We're prioritizing our higher-margin branded marketing channels, which higher quality, higher retention as evidenced by the performance of our book. It also is in -- recognizes the difficult macro environment we're in and the difficult choices that carriers are making as it relates to improving their own margins. And so we're choosing to also focus on our margins in 2026 as we -- as I said in my remarks, as we consider this a bridge year.

Okay. That's helpful. And then your MA LTV saw a nice increase in 4Q on improved quality and retention. Were there any changes to your constraints or persistency assumptions there? And should we expect similar rates in 2026?

Michael, it's John Dolan. Thanks for the question. Yes, Yes. Sorry, just -- would you ask the question one more time?

Yes. Were there any changes to your constraints or persistency assumptions in your MA LTV? And should we expect similar rates in 2026?

Thanks for repeating the question. No, there's no change in our constraints for MA product or any products this quarter. We did make a change earlier in the year on product, but that was the only change that was made during the year. And as we look forward into 2026, we're expecting slightly improved LTVs.

Your next question comes from Jonathan Yong from UBS.

Just thinking about kind of what's embedded in your outlook, are you assuming that payers will continue to suppress commissions for the bulk of the year as you kind of move forward and as we get into the next AEP cycle? Or is this really just kind of the pullback that you are proactively taking because you're assuming that the payers will be focused more on margin and try not to grow their book?

Yes, it's a great question. Thank you. I don't -- the way we think about year-over-year commission suppression is that we believe again, as we said in our prepared remarks, that this year will be disruptive similar to the prior years. We don't have any indication at this point that it will be any more disruptive than what we've seen. So it's certainly not an indication that we think that it's worsening from that perspective.

And again, our pullback really is more about what we're doing to address our own margins. And as we think about where to invest capital and focus again on those branded channels that we've proven now, right, over a period of time that are higher quality, higher persistency and will lead to a more meaningful relationship with our members.

Okay. And kind of on this pullback that you're doing, I guess it is a little surprising given over the last couple of years, you have successfully navigated kind of this dynamic environment. and now we seem to be downshifting in terms of the growth profile. I guess what's the reasoning for that, just given that you have successfully navigated the environment for why make this change now? And then is there any disruption that will occur from this in terms of members perhaps not utilizing eHealth kind of moving forward or some of your payer partners thinking that the pullback is a negative aspect from that perspective?

Yes. Thank you. So I'm going to answer the second part of the question first. We don't believe there's any potential adverse outcomes for members or our carrier partners. The way we view the pullback is it's a chance -- again, our carrier partners for 2 years running now, and again, we expect for a third year are making difficult choices to address their margins, and it's time for us to do a similar thing. And while -- by the way, thank you for your comment about successfully navigating prior periods. But I will say it hasn't been easy. Like it's been a difficult road for us to navigate. I've said on prior calls that size and scale matter.

And I think our results prove that our size and scale has been one of the reasons that we have been able to successfully navigate those changes. But again, as we move forward with headwinds that we've talked about historically because of the disruption that we believe this was the right time to continue the move into the investment in our branded channels. Again, that's not new. We're just expanding the percentage of our spend into those branded channels versus prior years for -- again, for good reason.

So it's calculated. We're doing this on purpose as we -- again, in my prepared remarks, as I said, as we focus on moving to a lifetime advisory model with our members that ultimately will allow us to achieve what we've laid out as it relates to higher attachment rates on ancillary products and services that meet the needs. I also think it's important to know and understand that at least at this point, we believe carriers in addressing their margin channels likely will reduce benefits. that will also give us an opportunity to add additional products and services to fill those voids or those gaps, if you will, as those MA product benefits change.

Your next question comes from George Hill from Deutsche Bank.

It's [ Maxi ] on for George. The CMS enrollment data in February showed continued slowdown in the growth of MA market, but SNP enrollment growth remained very strong and even accelerated significantly this year. Could you talk about the degree to which you serve SNP versus regular plan population? And are you guys over or underinvest here to capture the growth in the segment? And also please remind us if there is any different commission structure for the SNP population.

Yes. We don't break out and we haven't provided information publicly about those cohorts around how many SNP members versus non-SNP members we have. I think generally, again, we would say that we -- our broad platform, our broad carrier relationship and the number of MA plans on our platform. Again, as a reminder, we have, I think, roughly 50 different payers on our platform with thousands of individual plans across hundreds of geographic locations. So certainly, within there, we have those SNP plans available, and we'll continue to have them available, and we'll meet the need of the consumer. Whoever the consumer is and what their need is, our focus is on making sure that we align them with the right plan to meet those needs.

Your next question comes from George Sutton from Craig-Hallum.

I wondered if you could give us a little bit more granularity on the $30 million of fixed cost savings. What areas are being affected by that move? And then also any additional details on the $60 million reduction in variable spend? Is that purely the lower margin channel spend? Or is there more to it?

Sure. George, it's John Dolan. Thanks for the question. The $30 million of the cost savings is really coming from all areas of our fixed cost the fixed marketing and advertising technology and content and G&A functions. Nothing -- I wouldn't highlight any one area specifically. With respect to the variable spend, our focus was taking a look at the lower margin areas first and reducing those. So as I think Derrick covered in his prepared remarks, our goal is to spend into the areas that have the best persistency in LTV to CAC.

So Derrick, there was a suggestion that you had that you would look for 2027 to become another growth period. I'm just kind of curious, obviously, it sounds somewhat hopeful sitting here today. I'm curious what drives that thought process?

Yes. I think it's, George, based on demographics as agents continue to hit sort of their annual peak over the next couple of years in the 4 million to 4.1 million. We know from McKinsey data that roughly 70% of those new agents are choosing Medicare Advantage plans. CMS themselves believe the penetration rate for MA products will get to 60% by 2030. So we believe that, right? We believe that the value proposition is strong for consumers. And we believe that carriers will get their margins corrected, if you will, if that's the right way to think about it. And once they stabilize that, they'll be in a position to return to sort of a growth mode. And when they do, we'll be prepared to return to that growth mode with them.

Got you. You mentioned having active discussions with others in the space. I'm curious and many of whom are in a similar boat, what are you looking for? Are you looking for more capabilities through M&A/combinations? Are you looking to buy books of business? Just curious what the general plan would be there in terms of how you would benefit?

Yes. Thanks for the question. I would just say at a high level, sort of in the proverbial 30,000-foot view. It's my belief and our belief that when we're -- when any kind of market is in a period of volatility and disruption the way our market is today that it makes sense for us to be thoughtful about what those opportunities could be and how they present themselves. And so it could be yes to all of the types of things that you mentioned. And we're trying to be thoughtful and mindful to be able to take advantage of opportunities as they present themselves.

There are no further questions at this time. I will now turn the call over to management for closing remarks. Please go ahead.

Thank you for joining us. We appreciate the time that you spent with us today and that you invest in the coverage of eHealth. We're proud of the results for the fourth quarter of 2025 and the full year of 2025, and we're excited about the future. We're excited about where we're going to increase our capabilities to meet the needs of our members and to also meet the needs of our carrier partners. Look forward to speaking to you in the future. Have a great evening.

Ladies and gentlemen, this concludes today's conference call. Thank you all for your participation. You may now disconnect.

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 changes, focusing growth on their best-performing products and geographies while pulling back elsewhere. Healthcare is local and the impact of these changes vary significantly by region, carrier and plan type.

In this environment, eHealth is playing a critical role. Our Medicare matchmaker brand and carrier-agnostic model continue to resonate strongly with consumers. As we enter the second year of plan disruption, seniors note that they can come to eHealth for unbiased advice and continuity.

Carriers continue to view eHealth as a valuable partner in executing their targeted growth strategies. We maintain broad inventory across large national carriers, blue plans and regional insurers, allowing us to offer consumers an attractive variety of coverage options.

Just as carriers have taken varied approaches to plan design this year, we've seen similar diversity in how they've adjusted compensation structures across distribution channels. Overall, we're seeing a solid year-over-year increase in our commission rates, underscoring the strength of our relationships and the confidence carriers place in our model.

Through the first 3 weeks of AEP, our Medicare performance is tracking in line with internal expectations, supported by strong consumer demand on our platform. We are seeing early signs of a more favorable competitive environment as well as increased efficiency within our branded marketing channels. The most critical weeks of the enrollment period are still ahead of us.

As we progress through AEP, we're prepared to be opportunistic, leaning in where we see the potential to drive incremental growth at attractive LTV to CAC ratios with flexibility afforded to us by online and hybrid fulfillment that can be more easily flexed compared to traditional call centers and feet on the street models.

Now let's take a step back and look at our performance in Q3. In the third quarter, total revenue was roughly in line with internal expectations. Medicare Advantage volume came in below our expectations due to a more pronounced impact from new dual-eligible enrollment rules compared to what we saw in Q2.

We responded by pulling back marketing spend, preserving budget for AEP where it can be deployed at significantly higher ROI. At the same time, we continue to recognize positive net adjustment or tail revenue from our existing book, driven primarily by our Medicare Advantage cohorts.

Third quarter GAAP net loss and adjusted EBITDA exceeded internal expectations, driven by tail revenue, which has a positive impact on profitability. Disciplined cost management was also a key contributor to our Q3 profitability performance.

During the quarter, we finalized our preparations for AEP, and I'm encouraged by the momentum we've built heading into this critical period. We entered the season with a more tenured and experienced adviser force than last year, a direct result of our continued investment in long-term career paths for top performers.

Our consumer brand continues to gain strength. Direct branded channels are expected to drive the majority of application volume this AEP with a higher contribution than last year. These channels are not only generating better lead quality, but also driving stronger retention, evidence that our message is resonating.

Technology remains a cornerstone of our strategy. Our digital team is focused on delivering a seamless omnichannel journey, whether a consumer starts online or with a licensed adviser. New features like click-to-call from adviser chat are helping bridge these environments, allowing for fluid transitions and more personalized support.

Our AI screener, originally piloted in Q2, is now deployed at scale. We expect this powerful tool to enable us to unlock meaningful operational efficiencies and improve consumer experience. And while acquisition is essential, retention is equally critical, especially in a disruptive AEP.

Our goal is to preserve the continuity of the member relationship, whether that means advising someone to stay on their current plan or guiding them to new coverage within our ecosystem. We've proactively reached out to members most impacted by plan changes, initiating adviser conversations early in the season. We are also equipping members with a robust suite of self-service tools to help them evaluate their options and make informed decisions with confidence.

Our tool, MatchMonitor, delivers a personalized automated shopping experience for our members at the start of the AEP with a side-by-side comparison of their current plan to the top plan recommended for them by our proprietary multifactor algorithm.

While AEP is our primary focus, I want to briefly touch on our diversification efforts. We continue to see solid performance in products that can be sold year-round and have favorable cash flow profile, including hospital indemnity plans or HIP, and MedSupp. Third quarter HIP enrollments more than doubled and MedSupp agency enrollments grew 10% year-over-year.

Six weeks into my tenure, I've gained a deep appreciation for the strength of this organization, its people, its platform and its purpose. We are executing in a highly dynamic environment, and I believe eHealth is uniquely positioned to lead through this disruption. Our value proposition remains clear and differentiated. We offer among the broadest selection of plans in the private sector, enabling consumers to find the right coverage even as the market shifts.

Our growing brand identity is driving higher engagement, more efficient member acquisition and better retention. Our online and AI capabilities allow us to flex capacity and scale intelligently, supporting both consumer experience and enrollment margins. And finally, our carrier value proposition is differentiated through our ability to tailor distribution strategies in support of carrier geographic and product focus.

We are raising our 2025 GAAP net income and adjusted EBITDA guidance ranges, reflecting our performance through the end of Q3. John will provide updated guidance in his prepared remarks. I look forward to engaging with many of you after the call. Thank you for your continued support.

And now I will turn the call over to our CFO, John Dolan.

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 25%, roughly in line with volume. Customer care and enrollment expense was down 6%. While we use flexible staffing arrangements like voluntary time off to accommodate lower inbound call volume, we also ramped new adviser cohorts. This process includes onboarding, licensing and training in preparation for AEP. These dynamics are reflected in our Q3 Medicare unit economics.

Member retention remains a cornerstone of our strategy. Last year, we introduced initiatives aimed at further strengthening member engagement and protecting our book of business impacted by Medicare plan changes. These initiatives delivered strong results as evidenced by the improved retention data we are seeing from the MA cohort we enrolled last AEP compared to the same cohort from 2023.

This year, we're building on that success. During the third quarter, we expanded our dedicated customer service and retention team. We're applying key learnings from last year to optimize our retention initiatives, focusing on what delivered the highest ROI and resonated most with our members.

We recognized another quarter of positive tail revenue, bringing our year-to-date cumulative positive tail revenue across all segments to $40.5 million. Medicare Advantage LTV declined slightly by 1.5%. Third quarter Employer and Individual segment revenue was $3.9 million, with segment gross profit of $1 million. This compares to $5.2 million in revenue and $1.8 million in gross profit last year. The year-over-year decline was due to shifts in market dynamics and our marketing budget allocations.

We limited marketing and sales spend in the Individual ACA market amid declining eligibility and rising premiums that were impacted by the one big beautiful bill. In this segment, we are focused on building ICRA capabilities that advance eHealth's market-leading technology platform to support diversification.

Combined, technology and content and general and administrative costs grew 3.6%. Beneath that, technology and content expense decreased 4%, while general and administrative expenses increased 8%, primarily due to compensation and benefits tied to leadership transitions.

Total operating expenses declined 6%, driven by reductions in variable marketing spend. Cost management remains a key focus. We're proactively adjusting variable spend to drive growth at attractive unit acquisition costs while pulling back from areas with lower return on investment. We'll continue evaluating fixed costs as a source of leverage.

Operating cash flow was negative $25.3 million, an improvement from negative $29.3 million last year. We ended the quarter with $75.3 million in cash, cash equivalents and short-term marketable securities compared to $105.2 million last year. Our commission receivable balance as of September 30 was $907.7 million.

We continue to work towards leveraging our sizable receivable asset to increase access to capital in support of our strategic initiatives, including developing and integrating AI through our distribution platform, business diversification and other high ROI opportunities.

The final tenet of our capital structure enhancement is addressing the convertible preferred instrument. As we stand today, we believe we have sufficient liquidity to execute on our operational plan and continue to enhance and scale our Medicare business and in-flight diversification areas.

We are raising our net income and adjusted EBITDA guidance ranges to reflect execution through the end of Q3. AEP has started strongly, but it's important to remember that the final weeks have a significant impact on our fourth quarter performance.

Our new guidance ranges are as follows: We continue to expect total revenue for 2025 to be in the range of $525 million to $565 million. GAAP net income for 2025 is now expected to be in the range of $9 million to $30 million compared to our prior guidance range of $5 million to $26 million.

Adjusted EBITDA for 2025 is now expected to be in the range of $60 million to $80 million compared to our prior guidance range of $55 million to $75 million. And we continue to expect operating cash flow to be in the range of negative $25 million to positive $10 million. These ranges include estimated positive net adjustment revenue in the range of $40 million to $43 million compared to the prior range of $29 million to $32 million. Operationally and strategically, we believe we are well positioned to take share and continue building lasting brand and consumer relationships this AEP and beyond.

With that, I'll turn the call over for questions.

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.