To the 2024 RBC Capital Markets Global Healthcare Conference, I'm Ben Hendrix, RBC's healthcare services and managed care analyst. We're pleased to host eHealth this afternoon, a direct-to-consumer health insurance broker, and with us from management are Fran Soistman, Chief Executive Officer, and in the audience we also have Eli Newbrun-Mintz, investor relations. Thank you for joining us today. Thanks for having me, Ben. Great. eHealth reported 1Q numbers ahead of consensus estimates. The company saw solid top-line growth and operating costs coming in lower than our expectations. Can you maybe kind of characterize the performance for us, and kind of what you saw in the first quarter versus your internal targets? Sure. It's a good way to start the year. Always best to be ahead of consensus, and I'd say that our performance relative to our internal goals was pretty much spot-on, maybe slightly ahead in some areas. But it demonstrates the momentum for the fourth quarter. We had a very big fourth quarter last year, which was sort of the proof of concept that the transformation initiatives that started in April 2022 are definitely making an impact and having the desired effect in terms of our top-line and bottom-line results. So I'm encouraged, leadership team's encouraged. I think there's a great sentiment of optimism across the entire organization. Great. And then with that optimism, as a backdrop, can you discuss kind of the long-term revenue growth and Adjusted EBITDA targets that you're looking for, and kind of the drivers there? Sure. In fact, last night we published, there on our Investor Relations website, a new investor presentation. I would invite everyone to go out there and take a look at it. You'll see the story told, I think, in a much more simplistic manner and further demonstration of our optimism about the future. So from a revenue perspective, we're anticipating CAGR somewhere between 8% and 10%. Measurement period begins the end of 2023 through 2026. Adjusted EBITDA, we'll continue to see improvements there as well. And we're targeting 8%-10% margins by 2026. And we feel good about our ability to deliver on that. And then, of course, the all-important cash flow performance. We delivered positive cash flow on a trailing 12-month basis this past first quarter. We're now anticipating positive cash flow from operations on a trailing 12-month basis by Q1 of 2027, free cash flow from operations. Great. How should we think about the LTV trajectory? Sure. Well, LTVs, I mean, we book up most of our revenue on the ASC 606 lifetime value basis. We saw a lift in the fourth quarter of our LTVs. That, I think, really reflects improved persistency. We've been putting a lot of attention, new strategies on retention of our enrolled business. And I'll be happy to expand on that as well. But also the good mix of carrier, those that generally have much more stable blocks of business. So I think we'll continue to see modest to medium improvements in LTVs, largely driven by improvements in retention. I mean, it's all-out effort on let's improve retention. We've shared in the past that the metrics are 1% improvement in persistency, yield 4% lift in LTVs. That's a really important metric and one that certainly motivates us to make the right strategic moves, the right investments in improving our ability to retain customers, those relationships, because not everyone shops every year. Can you talk about the incentives to retain, to enhance LTV, support that persistency while also kind of fostering an environment of growth? It seems like one of the issues we've seen with this sector is kind of a little bit of a conflict between growing your persistency and LTV while at the same time fostering good membership growth, because it could be churn that could pressure the LTV. How do you strike that balance theoretically? Well, churn is part of the business. Part of it is really outside of our control. Mortality occurs. And among the senior population, you're going to see higher mortality rates. So you have to replace that every year. That could be high single digits. And then we've been focusing over the past two years, re-engineering the sales process so that what we call rapid disenrollments, the disenrollments that occur within a first 90-day period, drive that number down as much as possible. You do that through enhancing the level of confidence of the beneficiary in that they made the right choice and helping them make that right choice by understanding what they value, what's most important to them, here are the most compatible plans based on those needs and expectations you have, and then even helping them onboard with a carrier, because things can really go awry in some situations if a carrier perhaps has more growth than they expected. They may not be staffed to deal with all the onboarding that occurs for January 1. So we can help that. And that's all towards retention of customers. We've also introduced a loyalty program we call ePerks. We have very high customer satisfaction levels in the 90-days measurement. But historically, we've not been memorable, largely because before last year, we didn't emphasize our brand. We weren't featuring the eHealth brand. That changed. So not only do you have to emphasize branding, but then you have to have multiple interactions. So it's not just the one-dimensional relationship, selling, retaining. It's how can we support your onboarding? How can we give you further peace of mind by helping you make your first PCP visit, for example, or help you with mail maintenance prescriptions? So there's a lot of things that we can do in conjunction or in collaboration with the carriers to improve the retention. I'm sure we're going to talk about the outlook for AEP this year. But clearly, there's going to be, I think, the table's being set for a very heavy shopping season. Yeah. In fact, let's go right there, because it seems like that we've heard, I guess, just recently, CVS is kind of talking about a sizable chunk of membership lost as it focuses on margin retention. We've heard similar commentary from Humana. It seems like we're going to have to see some supplemental benefits pull back. We could see some plans come out of certain markets or have plans reintroduced. All of this seems like it is a very, very good shopping backdrop. And so what is your thought about positioning in this environment? Well, I think you teed it up right. I mean, it's likely to be one of the more, I'll call it, volatile AEP seasons that Medicare Advantage has seen in quite some time. It's the proverbial perfect storm. You've got rate pressures, utilization pressure, the Inflation Reduction Act, continued phase of Risk Adjustment. That puts a lot of pressure on carriers. And we're seeing that not just with the national, but also with some of the regional players. The way we think about it right now is there's going to be certain disruption that you can predict: market exits, geographic exits. There are going to be plans that may have TBC challenges, Total Beneficiary Cost limitations. They may have to pull product and introduce new product. When they introduce new product, they can't just roll members from product A to product B. They have to be resold. So that's where we see these are our customers as well. We'll know where that's occurring. And we can proactively reach out to customers and explain, "Here are your choices," which may be with that carrier or may be with an alternative carrier if an alternative carrier has a better value proposition. And we're going to see, I think, an opportunity for local plans, regional plans, given what we're hearing from the national plans, that it's a margin over membership. We work with over 50 Medicare Advantage carriers around the country. So we have, obviously, national relationships, which are very important to us. But we also have regional and local relationships. So we'll be equipped to really help customers objectively find the right fit for their 2025 needs. The efforts that you've made to support and bolster persistency, do you think those are adequate in this environment, or are we still going to probably see kind of an outsized persistency headwind through all this shopping behavior? Well, it remains to be well, I have confidence in what we've built and our ability to continue to scale it. That said, I think the entire industry is going to be pressure-tested this year: carriers and distribution organizations. Plus, you've got the election cycle that you introduce into November. Historically, for those of you who might be less familiar with the dynamics, it's difficult to get your message out prior to the election because the airwaves are consumed with campaign messaging. So that gives you about 3.5 weeks post-election to reach 30+ million Americans and that number who are at existing Medicare Advantage, plus those who may want to consider it now because they might be seeing large increases in their Med Supp premiums, for example, or those who are an original Medicare, they're likely to see some very large Medicare Part D premium increases this coming year. And when we go back to the introduction of Medicare Part D back in 2006, it was actually a catalyst for Medicare Advantage growth. So I think you could see that dynamic play out again. People on fixed income, in particular, they're really going to have to make some trade-offs here in terms of their ability to afford their Medicare premiums, their Part D premiums. It might be that there's a $0 monthly premium alternative with Medicare Advantage that includes Part D that could be a much better option for them. It's going to be a very interesting AEP and OEP in 2026. I want to go back to one of the points you made earlier about the TBC limitations, the potential for them to have to re-enroll patients or members instead of just rolling them in a new plan. It seems like that could be a really nice entry point for your carrier dedicated platform. And I'm wondering if you could talk about Amplify. Sure. Yeah. I'm really excited to talk about Amplify. Amplify is relatively new at eHealth. It represents what we call our BPO capabilities, dedicated carrier arrangements. We've had great success in a very short period of time and lots of opportunities to continue to scale that business. It supports our diversification strategy, among other things. Amplify, again, for those of you who are less familiar with what that business does, it's essentially what we do on the agency side. Usually, it's not in a broker of record arrangement. We become an extension of a carrier's distribution exclusively, but just for Amplify. We wanted to preserve the agnostic eHealth agency model and then have a firewall with Amplify so we can support carriers on a dedicated basis. We don't have the variable marketing cost associated with it. That's borne by the carrier. We are pricing this at margins that are comparable to our targeted agency models, 30%-35%. So it's good business. And it plays right to our core competence as a business. So I'm really, again, optimistic about what we can do with Amplify over the next couple of years. Great. Maybe shifting gears to the regulatory environment, could you discuss the CMS's recent marketing and commission rules? When these come out, it always kind of raises some questions about how is this going to fall on the DTC broker with their various platforms and strategies, agency and non-agency. I'm just wondering if you could talk a little bit about what you're seeing there and implications for both your traditional business and Amplify. Sure. Let me start with Amplify because that's easier. It's the cleaner of the two. It really has no direct implications to the Amplify business because we're not receiving commission revenue. And we're not in a lead gen situation. So it's very clean. As far as the agency side of the business, based on our interpretation of the final rule, in the preamble, it states that the rule applies to independent agents and brokers. We have employed agents, right? That's the model of a third-party marketing organization as we're labeled by CMS. So directly, we don't believe there's any implications. Indirectly, it remains to be seen. In other words, what will carriers do? How will they work with us? We pride ourselves on a healthy, productive, working relationship with all of our carrier partners, irrespective of their size. They're all important. But carriers, as we talked about earlier, they're going to have a lot of pressures that they have to navigate. My goal, of course, is to preserve what we have already in place. So again, at this time, we don't see any material implications to our business. You noted expectations for continued rationalization and market consolidation. This makes perfect sense if we're seeing a lot of carriers who can't adapt. What are the main aspects that are kind of driving consolidation and driving some of your competitors out of the market? Yeah. It's absolutely happening real time. We made an observation last year and stated that we thought the sector was in the midst of an inflection point. That played out throughout the balance of 2023 and into 2024. And as recent as two weeks ago, Prudential announcing that they're winding down Assurance IQ, which is a good-sized company. We've seen two bankruptcies. We've seen asset sales from smaller companies. Those that are backed by private equity, if they're incredibly well run, they're probably in good shape. But those that perhaps have had difficulties adopting to the various rule changes over the past two or three years, the compliance requirements and expectations, my prediction is you'll see continued exits and possibly some consolidations, but I think more likely exits. So from a capacity perspective, it's interesting. At a time when the number of Medicare eligibles is growing, right, we're expected to see a 25% increase in Medicare eligibles over the next four years. This is the acceleration of the aging baby boomers. 4.1 million people each year over the next four years, that's a lot of people coming in. That number is going to be bordering high 70 million in total. It is an opportunity for those of us who can stay financially sound to scale. And scale, there is a correlation between scale and margin opportunity. I think some of what's happened is good for the industry. I think some organizations that came into it, perhaps enamored by ASC 606 and the CAGRs that were occurring with revenues. But it's tough business. And you have to execute well. And in the case of eHealth, we're an omnichannel distribution company. We have online, assisted, unassisted, telephonic strategic partners. So we don't have reliance on one single channel. We have multiple channels. And the online, in particular, is one to really be excited about for the future because as more and more people age into Medicare eligibility, oftentimes, they're coming from employment where 10 years ago, the paternalism started to wean away, right? Employers were telling their employees, "You're going to do your own enrollment. You're going to go online. Here's the platform." So they're accustomed to navigating a shopping experience. What we introduced, though, is the shop and compare as opposed to an employer that might have just said, "Here's your choice. Here's your health insurance choice. Here's your dental choice. But you got to click whether you want it or not." It's a little more comprehensive. But nevertheless, we continue to evolve our online capabilities, both unassisted and assisted, with chat capabilities. And we're piloting right now, we call it eHealth Live Advice. It's one-way video chatting. So our agent is on video. The beneficiary isn't for privacy reasons. But we started testing that last month. And there's certainly cause for cautious optimism. It changes the whole dynamic of the interplay between the customer and the agent. I mean, you can see people's reactions. In fact, they think they're on camera. And then they realize they're really not on camera. But the fact that they can see the agent and match that agent with the voice changes the whole dynamic. So I'm really encouraged by that as well. Great. Now, you have reported much more stable receivables balances than some of your peers in the market and in our coverage and have actually guided towards positive tail revenue this year. How do you think about the balance between kind of guiding towards positive tail revenue? And And is it a 7% constraint? You have an LTV right now? That's correct. In our Medicare. Yeah. In Medicare. So how do we think about striking that balance going forward? I know there's two different dynamics, but they kind of feed each other. So do we think the 7% is still the right number going forward? Well, let me start with the stability of the model. For a five-year period, we have produced $200 million of tail revenue, which is extraordinary. Despite that, we've not gotten credit for that contract asset receivable. Relative to our market cap, it's discounted dramatically, as you know. So for the first time this year, we worked with our independent auditors about developing, a, including in our guidance, a range. And that range is $0-$15 million of tail revenue. The constraint is something that we look at quarterly. And it's a complex process. And that's an understatement in terms of how you develop your LTVs and your contract asset receivable. So I don't anticipate, to the extent there is any change, it'll be marginal change. You won't see. I don't think we're going to see a 100 basis points change, in part because you want to have confidence that everything you're doing on the retention side is sticking. So it's not just one-time. You're really getting consistent, improved retention. Secondly, knowing that we're going into what will likely be a very volatile AEP and a lot of shopping, I'm not sure now would be the time to make changes, even if you could justify making the change. But we'll see. Our goal, of course, is, it's sort of for those golfers in the room, you want to get closer to the pin. You don't want to go over the hole, right, particularly if it's a downhill putt. So we have a similar philosophy in terms of an appropriate degree of conservatism in the constraint. But because we don't get credit for it, obviously, you don't want to have too much conservatism because you're understating revenue. That's what ultimately it means. Tail Revenue is a byproduct of collecting more cash than you had forecasted. And that's what's happening right now. And that's a good outcome. But we'll continue to look at the c onstraint. Great. Makes perfect sense. In the last couple of minutes, I want to give you an opportunity to talk about the Blue Torch debt maturity next year and your plans for meeting the obligation and broader thoughts on the capital. Sure. With respect to Blue Torch, they've been a great partner, number one. Number two, we're confident if we do feel the need to renew either with Blue Torch or with an alternative, we can do so at comparable to better economics. That would be the goal. As far as our capital structure, we are working on strategies right now. I shared last week during our earnings call, we're looking at multiple vehicles. But one that may have particular benefits would be some form of securitization of that contract asset receivable, some part of it, not the entire amount, but some part of it, which would allow us to perhaps shore up some things on the balance sheet and address some overhangs that we've been navigating over the past couple of years. So again, it's complex. But I have reasonable confidence that we can get something done in the not-too-distant future. One of your competitors shared a similar securitization structure, which could actually pull cash flow forward. Is that something that you would contemplate? That certainly could be one of multiple alternatives. It may be that maybe similar to who you're referring to, they're likely to go in two directions, right? I mean, they're obviously looking to pull more cash forward immediately. But also, they too have a large contract asset. And I'm sure that they would like to securitize some of that as well. So we're thinking about it in a very similar fashion. Imagine. Well, I think that brings us pretty close to time. Thank you very much for joining us today. Ben, thanks for having me. Great. me. Great.