eHealth(EHTH) - 2025 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION eHealth, Inc.'s unaudited Q1 2025 and 2024 financial statements and management's discussion and analysis are presented ITEM 1. FINANCIAL STATEMENTS (Unaudited) eHealth, Inc.'s unaudited Q1 2025 and 2024 consolidated financial statements and related explanatory notes are presented Condensed Consolidated Balance Sheets The Condensed Consolidated Balance Sheets show a slight decrease in total assets from $1,155,425 thousand to $1,137,162 thousand | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | :------- | | Cash and cash equivalents | $121,092 | $39,197 | $81,895 | 209.0% | | Contract assets – commissions receivable – current | $197,493 | $242,467 | $(44,974) | (18.5)% | | Contract assets – commissions receivable – non-current | $725,764 | $757,523 | $(31,759) | (4.2)% | | Total current assets | $369,441 | $354,475 | $14,966 | 4.2% | | Total assets | $1,137,162 | $1,155,425 | $(18,263) | (1.6)% | | Total current liabilities | $143,354 | $96,011 | $47,343 | 49.3% | | Long-term debt | $— | $68,458 | $(68,458) | (100.0)% | | Total liabilities | $207,554 | $229,488 | $(21,934) | (9.6)% | | Total stockholders' equity | $581,623 | $588,428 | $(6,805) | (1.2)% | Condensed Consolidated Statements of Comprehensive Income (Loss) eHealth, Inc. reported net income of $1,950 thousand in Q1 2025, a significant turnaround from a $16,984 thousand net loss in Q1 2024 | Metric (in thousands, except per share) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change (in thousands) | % Change | | :-------------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | :------- | | Total revenue | $113,119 | $92,964 | $20,155 | 21.7% | | Total operating costs and expenses | $108,321 | $110,875 | $(2,554) | (2.3)% | | Income (loss) from operations | $4,798 | $(17,911) | $22,709 | 126.8% | | Net income (loss) | $1,950 | $(16,984) | $18,934 | 111.5% | | Net loss attributable to common stockholders | $(9,972) | $(27,711) | $17,739 | 64.0% | | Basic and diluted EPS | $(0.33) | $(0.96) | $0.63 | 65.6% | Condensed Consolidated Statements of Stockholders' Equity Total stockholders' equity slightly decreased from $588,428 thousand to $581,623 thousand, primarily due to preferred stock dividends | Metric (in thousands) | March 31, 2025 | December 31, 2024 | Change | | :-------------------- | :------------- | :---------------- | :----- | | Total Stockholders' Equity | $581,623 | $588,428 | $(6,805) | - Dividends and accretion related to convertible preferred stock resulted in a reduction of $11,922 thousand in retained earnings for the three months ended March 31, 2025, compared to $10,727 thousand for the same period in 2024[21][22] - Stock-based compensation contributed $3,897 thousand to additional paid-in capital in Q1 2025, a decrease from $5,718 thousand in Q1 2024[21][22] Condensed Consolidated Statements of Cash Flows eHealth, Inc. generated significantly more cash from operating activities in Q1 2025, driven by improved net income and reduced commissions receivable | Cash Flow Activity (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change (in thousands) | % Change | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | :------- | | Net cash provided by operating activities | $77,121 | $70,761 | $6,360 | 9.0% | | Net cash provided by (used in) investing activities | $5,472 | $(10,287) | $15,759 | 153.2% | | Net cash used in financing activities | $(699) | $(1,259) | $560 | 44.5% | | Net increase in cash, cash equivalents and restricted cash | $81,895 | $59,264 | $22,631 | 38.2% | | Cash, cash equivalents and restricted cash at end of period | $124,182 | $178,076 | $(53,894) | (30.3)% | Note 1 – Summary of Business and Significant Accounting Policies eHealth, Inc. operates as a leading private health insurance marketplace, with no material changes to significant accounting policies in Q1 2025 - eHealth, Inc. is a leading private health insurance marketplace providing omnichannel consumer engagement, education, and enrollment solutions for thousands of Medicare Advantage, Medicare Supplement, Medicare Part D, individual, family, small business, and other ancillary health insurance products from over 180 carriers nationwide[28] - The company's significant accounting policies, estimates, and judgments remain materially unchanged from its Annual Report on Form 10-K for the year ended December 31, 2024[34] - eHealth is currently evaluating the impact of ASU 2023-09 (Income Taxes) and ASU 2024-03 (Expense Disaggregation) on its consolidated financial statements and related disclosures, with effective dates for fiscal years beginning after December 15, 2024, and December 15, 2026, respectively[36][37] Note 2 – Revenue Total revenue increased by 21.7% in Q1 2025, primarily driven by a 22.2% increase in commission revenue from the Medicare segment | Revenue Type (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change (in thousands) | % Change | | :-------------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | :------- | | Commission | $98,946 | $80,927 | $18,019 | 22.2% | | Other | $14,173 | $12,037 | $2,136 | 17.7% | | Total Revenue | $113,119 | $92,964 | $20,155 | 21.7% | | Commission Revenue by Product (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change (in thousands) | % Change | | :------------------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | :------- | | Medicare Advantage | $74,986 | $61,996 | $12,990 | 21.0% | | Medicare Supplement | $8,604 | $5,478 | $3,126 | 57.1% | | Medicare Part D | $2,443 | $2,685 | $(242) | (9.0)% | | Total Medicare | $86,033 | $70,159 | $15,874 | 22.6% | | Total Individual and Family | $2,683 | $3,691 | $(1,008) | (27.3)% | | Total Ancillary | $5,832 | $2,688 | $3,144 | 117.0% | | Small Business | $3,434 | $3,616 | $(182) | (5.0)% | | Commission Revenue by Segment (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change (in thousands) | % Change | | :------------------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | :------- | | Total Medicare segment commission revenue | $89,719 | $70,754 | $18,965 | 26.8% | | Total Employer and Individual segment commission revenue | $9,227 | $10,173 | $(946) | (9.3)% | | Net commission revenue from members approved in prior periods | $10,484 | $2,470 | $8,014 | 324.5% | Note 3 – Supplemental Financial Statement Information Cash and cash equivalents significantly increased, while commissions receivable decreased, with credit risk concentrated among three major carriers | Metric (in thousands) | March 31, 2025 | December 31, 2024 | Change | | :-------------------- | :------------- | :---------------- | :----- | | Cash and cash equivalents | $121,092 | $39,197 | $81,895 | | Restricted cash | $3,090 | $3,090 | $0 | | Total cash, cash equivalents and restricted cash | $124,182 | $42,287 | $81,895 | | Contract Assets – Commissions Receivable (in thousands) | December 31, 2024 | March 31, 2025 | | :------------------------------------------------------ | :---------------- | :------------- | | Beginning balance | $999,990 | $999,990 | | Commission revenue from members approved during the period | $85,612 | $85,612 | | Net commission revenue from members approved in prior periods | $10,484 | $10,484 | | Cash receipts | $(175,994) | $(175,994) | | Ending balance | $923,257 | $923,257 | - Three carriers (Humana, UnitedHealthcare, Aetna) represented 75% of total contract assets – commissions receivable and accounts receivable balances as of March 31, 2025 (29%, 29%, and 17% respectively)[49] Note 4 – Fair Value Measurements Total assets measured at fair value were $127,605 thousand in Q1 2025, primarily commercial paper and government securities, with a net unrealized loss | Asset Type (in thousands) | March 31, 2025 (Carrying Value) | December 31, 2024 (Carrying Value) | | :------------------------ | :------------------------------ | :------------------------------- | | Money market funds | $13,055 | $15,090 | | Commercial paper | $104,274 | $28,361 | | Government securities | $10,276 | $27,862 | | Total assets measured at fair value | $127,605 | $71,313 | | Fair Value Hierarchy (in thousands) | Level 1 (March 31, 2025) | Level 2 (March 31, 2025) | Level 3 (March 31, 2025) | | :---------------------------------- | :----------------------- | :----------------------- | :----------------------- | | Cash equivalents | $13,055 | $80,055 | $— | | Short-term marketable securities | $— | $34,495 | $— | | Total assets measured at fair value | $13,055 | $114,550 | $— | - As of March 31, 2025, the company had a total of $127,626 thousand in amortized cost for cash equivalents and available for sale debt securities due in 1 year, with a fair value of $127,605 thousand, resulting in a net unrealized loss of $21 thousand[54][56] Note 5 – Equity No stock repurchases occurred in Q1 2025 or Q1 2024, except for employee tax withholding, and total stock-based compensation decreased by 31.6% - No stock repurchase activity occurred during the three months ended March 31, 2025 or 2024, other than repurchases to satisfy employee tax withholding obligations[57] | Stock-Based Compensation Expense (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change (in thousands) | % Change | | :---------------------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | :------- | | Restricted stock units | $3,137 | $4,636 | $(1,499) | (32.3)% | | Performance-based stock units | $446 | $407 | $39 | 9.6% | | Common stock options | $166 | $400 | $(234) | (58.5)% | | Employee stock purchase program | $40 | $97 | $(57) | (58.8)% | | Total stock-based compensation expense | $3,789 | $5,540 | $(1,751) | (31.6)% | | Stock-Based Compensation by Operating Function (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change (in thousands) | % Change | | :---------------------------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | :------- | | Marketing and advertising | $497 | $644 | $(147) | (22.8)% | | Customer care and enrollment | $264 | $524 | $(260) | (49.6)% | | Technology and content | $688 | $974 | $(286) | (29.4)% | | General and administrative | $2,340 | $3,398 | $(1,058) | (31.1)% | | Total stock-based compensation expense | $3,789 | $5,540 | $(1,751) | (31.6)% | Note 6 — Convertible Preferred Stock eHealth's Series A convertible preferred stock has senior dividend rights, and the company is not in compliance with certain covenants, granting H.I.G. additional rights - eHealth issued 2,250,000 shares of Series A convertible preferred stock to H.I.G. for $225.0 million in April 2021, receiving $214.0 million in net proceeds[61] - Dividends accrue at 8% per annum, with 6% payable in kind (PIK) and 2% payable in cash since June 30, 2023. As of March 31, 2025, $1.4 million in cash dividends have been accrued[63][65] - The company failed to maintain the Minimum Asset Coverage Ratio as of September 30, 2023, and the Minimum Liquidity Amount as of November 30, 2024, which entitles H.I.G. to additional rights, including nominating an additional board member and approving the annual budget and certain executive hires/terminations[70] | Series A Preferred Stock (in thousands) | Amount | | :-------------------------------------- | :----- | | Gross proceeds | $225,000 | | Less: issuance costs | $(10,975) | | Net proceeds | $214,025 | | Balance as of December 31, 2024 | $337,509 | | Accrued paid-in-kind dividends | $4,335 | | Change in preferred stock redemption value | $6,141 | | Balance as of March 31, 2025 | $347,985 | Note 7 – Net Loss Per Share Attributable to Common Stockholders eHealth, Inc. reported a net loss of $(9,972) thousand, or $(0.33) per share, in Q1 2025, a significant improvement from the prior year | Metric (in thousands, except per share) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------------- | :-------------------------------- | :-------------------------------- | | Net loss attributable to common stockholders | $(9,972) | $(27,711) | | Shares used in per share calculation – basic and diluted | 29,997 | 28,912 | | Net loss attributable to common stockholders per share – basic and diluted | $(0.33) | $(0.96) | | Anti-Dilutive Shares Excluded (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------------------------------- | :-------------------------------- | :-------------------------------- | | Convertible preferred stock | 3,680 | 3,469 | | Restricted stock units | 1,303 | 2,204 | | Performance-based stock units | 440 | 97 | | Common stock options | 213 | 218 | | Employee stock purchase program | 20 | 8 | | Total | 5,656 | 5,996 | Note 8 – Commitments and Contingencies eHealth has $10,515 thousand in contractual service and licensing obligations, and a qui tam action was unsealed on May 1, 2025 | Service and Licensing Obligations (in thousands) | Amount | | :----------------------------------------------- | :----- | | 2025 (remainder) | $5,456 | | 2026 | $4,453 | | 2027 | $606 | | Total | $10,515 | - As of March 31, 2025, eHealth had a self-insurance liability balance of $2.1 million for employee health benefits, with a maximum claim liability of $26.0 million[83] - On May 1, 2025, a qui tam action (United States ex rel. Andrew Shea v. eHealth, Inc. et al) alleging Federal False Claims Act violations related to enrollment and marketing activities was unsealed, with the U.S. Attorney's Office intervening in part. eHealth disputes the allegations and plans to vigorously defend itself[86][88] Note 9 – Segment and Geographic Information The Medicare segment's total revenue increased by 26% and gross profit by 62%, while the E&I segment's revenue decreased by 11% - eHealth's business is structured into two reportable operating segments: Medicare, and Employer and Individual (E&I)[89] | Segment Performance (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change (in thousands) | % Change | | :--------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | :------- | | Medicare Total revenue | $103,669 | $82,388 | $21,281 | 25.8% | | Medicare segment gross profit | $35,747 | $22,048 | $13,699 | 62.1% | | E&I Total revenue | $9,450 | $10,576 | $(1,126) | (10.7)% | | E&I segment gross profit | $5,988 | $7,405 | $(1,417) | (19.1)% | | Consolidated Total segment gross profit | $41,735 | $29,453 | $12,282 | 41.7% | | Long-Lived Assets by Geographical Area (in thousands) | March 31, 2025 | December 31, 2024 | | :---------------------------------------------------- | :------------- | :---------------- | | United States | $25,425 | $26,033 | | China | $255 | $299 | | Total | $25,680 | $26,332 | - Humana, UnitedHealthcare, and Aetna accounted for 24%, 24%, and 14% of total revenue, respectively, for the three months ended March 31, 2025, with the majority from the Medicare segment[100] Note 10 – Leases eHealth's operating lease costs decreased by 54.4% in Q1 2025, with no impairment charges, and expects $11.5 million in future sublease income - eHealth expects to generate $11.5 million in future sublease income through January 31, 2030, from subleasing office space after becoming a remote-first workplace[101] | Operating Lease Costs (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change (in thousands) | % Change | | :----------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | :------- | | Operating lease expense | $1,218 | $1,737 | $(519) | (29.9)% | | Operating sublease income | $(689) | $(576) | $(113) | (19.6)% | | Total operating lease cost | $529 | $1,161 | $(632) | (54.4)% | | Operating Lease Liabilities (in thousands) | Amount | | :----------------------------------------- | :----- | | 2025 (remainder) | $6,879 | | 2026 | $7,693 | | 2027 | $6,950 | | 2028 | $4,998 | | 2029 | $3,008 | | Thereafter | $196 | | Total lease payments | $29,724 | Note 11 — Impairment, Restructuring and Other Charges eHealth incurred no impairment or restructuring charges in Q1 2025, a 100% decrease from $6.3 million in charges in Q1 2024 | Charge Type (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------------- | :-------------------------------- | :-------------------------------- | | Asset impairment charges | $— | $5,492 | | Restructuring and reorganization charges | $— | $821 | | Total | $— | $6,313 | - The $5.5 million asset impairment charges in Q1 2024 included $5.1 million for operating lease right-of-use assets and $0.4 million for property and equipment[110] - The $0.8 million restructuring charges in Q1 2024 were primarily related to employee termination benefits from cost-reduction efforts[111] Note 12 – Debt eHealth's $70.0 million secured term loan was amended to extend maturity and reduce interest, with the company in compliance with all covenants - eHealth's $70.0 million secured term loan credit facility with Blue Torch Finance LLC was amended in November 2024, extending the maturity date from February 2025 to February 2026 and reducing interest margins[112] - As of March 31, 2025, the carrying value of the term loan was $68.8 million, and the interest rate was 11.57%. Interest expense for the three months ended March 31, 2025, was $2.0 million, a decrease from $2.3 million in the prior year[115][116] - The company was in compliance with its loan covenants as of March 31, 2025, which require maintaining liquidity at or above $25.0 million and outstanding debt less than 50% of total contract assets – commissions receivable[118] Note 13 – Income Taxes eHealth recorded a $1.8 million income tax provision in Q1 2025, with an effective tax rate of 47.7%, significantly higher than the prior year | Income Tax Metric (in thousands, except rate) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------------------- | :-------------------------------- | :-------------------------------- | | Income (loss) before income taxes | $3,726 | $(18,329) | | Provision for (benefit from) income taxes | $1,776 | $(1,345) | | Effective tax rate | 47.7% | 7.3% | - The higher effective tax rate in Q1 2025 (47.7%) compared to Q1 2024 (7.3%) was primarily due to state taxes, nondeductible stock-based compensation, lobbying expenses, and prior year discrete adjustments, partially offset by research and development credits[120][122] - eHealth continues to recognize its deferred tax assets, believing they are more likely than not to be realized, with the exception of certain net operating losses and credits for which a valuation allowance is applied[123] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management discusses eHealth's Q1 2025 financial condition and results, focusing on Medicare Advantage growth, cash flow, and strategic plans Overview eHealth, Inc. operates as a leading private health insurance marketplace, leveraging technology and agents to guide consumers through complex options - eHealth is a leading private health insurance marketplace with an omnichannel platform that provides consumer engagement, education, and health insurance enrollment solutions[126] - The platform offers thousands of Medicare Advantage, Medicare Supplement, Medicare Part D, individual, family, small business, and other ancillary health insurance products from over 180 health insurance carriers nationwide[126] Business Update eHealth's Q1 2025 update highlights 25% Medicare Advantage submission growth, focusing on revenue diversification, retention, and AI integration - eHealth's fiscal 2025 growth strategy focuses on deliberate revenue diversification, scaling the business, evolving brand awareness, improving member retention and conversions, advancing digital technology leadership, and strengthening carrier partnerships[127] - In Q1 2025, total Medicare Advantage submissions grew by 25% year-over-year, driven by increased consumer demand, variable marketing spend, and improved telesales conversion rates[128][134] - The company nearly doubled its retention and customer service team and began piloting artificial intelligence integration across its telephonic enrollment platform in Q2 2025[129][130] Summary of Selected Metrics eHealth's Q1 2025 metrics show a 14% increase in total approved members, mixed LTV trends, a slight membership decline, and varied acquisition costs Approved Members Total approved members increased by 14% in Q1 2025, driven by 26% Medicare Advantage growth, despite declines in Medicare Supplement and Part D | Approved Members by Product | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | % Change | | :-------------------------- | :-------------------------------- | :-------------------------------- | :------- | | Medicare Advantage | 82,671 | 65,750 | 26% | | Medicare Supplement | 2,565 | 6,182 | (59)% | | Medicare Part D | 2,642 | 3,575 | (26)% | | Total Medicare | 87,878 | 75,507 | 16% | | Individual and Family | 5,817 | 7,160 | (19)% | | Ancillary | 16,925 | 13,950 | 21% | | Small Business | 1,190 | 1,642 | (28)% | | Total Approved Members | 111,810 | 98,259 | 14% | - The 26% increase in Medicare Advantage approved members was driven by a 21% increase in broker of record submissions, attributed to increased consumer demand, variable marketing spend, and improved telesales conversion rates[134] - Declines in Medicare Supplement and Part D approved members were primarily due to a shift of some Medicare Supplement arrangements to fee-based models within the Amplify platform and a move away from standalone Medicare Part D plans[134][135] Estimated Constrained Lifetime Value of Commissions Per Approved Member Constrained LTV per approved member showed mixed trends, with Medicare Supplement up 31% and Medicare Advantage down 5% in Q1 2025 | Constrained LTV per Approved Member | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | % Change | | :---------------------------------- | :-------------------------------- | :-------------------------------- | :------- | | Medicare Advantage | $907 | $952 | (5)% | | Medicare Supplement | $1,256 | $957 | 31% | | Medicare Part D | $167 | $237 | (30)% | | Non-Qualified Health Plans | $386 | $385 | — % | | Qualified Health Plans | $415 | $402 | 3% | | Short-term | $118 | $184 | (36)% | | Dental | $134 | $124 | 8% | | Vision | $88 | $84 | 5% | | Small Business | $249 | $215 | 16% | - The 31% increase in Medicare Supplement LTV was primarily due to favorable carrier and contract mix and improved retention assumptions for Q1 2025 cohorts[138] - The 36% decrease in short-term plan LTV was mainly driven by less favorable retention assumptions year-over-year, resulting from regulatory changes that decreased term limits for short-term health plans[142] Estimated Membership Total estimated membership declined by 2% as of March 31, 2025, with Medicare remaining flat and other segments seeing decreases | Estimated Membership by Product | As of March 31, 2025 | As of March 31, 2024 | % Change | | :------------------------------ | :------------------- | :------------------- | :------- | | Medicare Advantage | 601,431 | 594,457 | 1% | | Medicare Supplement | 90,917 | 92,799 | (2)% | | Medicare Part D | 180,076 | 187,534 | (4)% | | Total Medicare | 872,424 | 874,790 | — % | | Individual and Family | 69,652 | 80,928 | (14)% | | Ancillary | 175,270 | 179,224 | (2)% | | Small Business | 41,317 | 45,084 | (8)% | | Total Estimated Membership | 1,158,663 | 1,180,026 | (2)% | - Medicare estimated membership remained flat year-over-year, with a 1% increase in Medicare Advantage offset by decreases in Medicare Supplement (2%) and Medicare Part D (4%) due to shifts to fee-based arrangements and a decline in standalone Part D plans[144] - Individual and Family, Ancillary, and Small Business estimated memberships declined by 14%, 2%, and 8% respectively, primarily due to a decrease in approved applications as the company focuses on operational enhancements in its E&I segment[144] Member Acquisition Total acquisition cost per MA-equivalent approved member decreased by 10%, while IFP-equivalent acquisition cost increased by 41% in Q1 2025 | Member Acquisition Cost | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | % Change | | :---------------------- | :-------------------------------- | :-------------------------------- | :------- | | CC&E cost per MA-equivalent approved member | $361 | $419 | (14)% | | Variable marketing cost per MA-equivalent approved member | $393 | $415 | (5)% | | Total acquisition cost per MA-equivalent approved member | $754 | $834 | (10)% | | CC&E cost per IFP-equivalent approved member | $189 | $161 | 17% | | Variable marketing cost per IFP-equivalent approved member | $119 | $58 | 105% | | Total acquisition cost per IFP-equivalent approved member | $308 | $219 | 41% | - The decrease in Medicare acquisition cost was due to a 14% decrease in CC&E cost per MA-equivalent approved member (efficiencies from more tenured benefit advisors and increased use of screeners) and a 5% decrease in variable marketing cost (marketing efficiencies and improved channel mix)[151] - The increase in Individual and Family Plan acquisition cost was driven by a 17% increase in CC&E cost and a 105% increase in variable marketing cost per IFP-equivalent approved member, primarily due to an overall decline in approved members and increased marketing spend in the E&I segment[151] Critical Accounting Policies and Estimates eHealth's critical accounting policies and estimates, including revenue recognition, stock-based compensation, and income taxes, remain unchanged - There have been no changes to eHealth's critical accounting policies and estimates, which include revenue recognition and contract assets - commissions receivable, stock-based compensation, and accounting for income taxes[150][152] Results of Operations eHealth's total revenue increased by 22% in Q1 2025, with decreased operating costs due to the absence of impairment charges, resulting in net income Revenue Total revenue increased by $20.2 million, or 22%, in Q1 2025, driven by $18.0 million (22%) commission revenue growth, primarily from Medicare | Revenue (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change (in thousands) | % Change | | :--------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | :------- | | Commission | $98,946 | $80,927 | $18,019 | 22% | | Other | $14,173 | $12,037 | $2,136 | 18% | | Total revenue | $113,119 | $92,964 | $20,155 | 22% | - Commission revenue from the Medicare segment increased by $19.0 million (27%), driven by a 16% increase in overall Medicare plan approved members and $8.0 million in net adjustment revenue from prior periods[160] - Other revenue increased due to a $4.2 million increase in fee-based revenue from BPO arrangements, partially offset by a $2.0 million decline in sponsorship and advertising revenue[157] Marketing and Advertising Marketing and advertising expenses increased by $2.5 million, or 6%, in Q1 2025, primarily due to a $3.9 million rise in variable advertising costs | Marketing and Advertising (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change (in thousands) | % Change | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | :------- | | Marketing and advertising expenses | $41,189 | $38,737 | $2,452 | 6% | - The increase was primarily driven by a $3.9 million increase in variable advertising costs due to increased investment in direct marketing channels and affiliate partner channels[162] - This increase was partly offset by a $1.0 million decrease in fixed marketing costs[162] Customer Care and Enrollment Customer care and enrollment expenses increased by $4.3 million, or 13%, in Q1 2025, mainly due to higher personnel and compensation costs | Customer Care and Enrollment (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change (in thousands) | % Change | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | :-------------------- | :------- | | Customer care and enrollment expenses | $37,221 | $32,901 | $4,320 | 13% | - The increase was primarily due to a $5.8 million increase in personnel and compensation costs associated with a higher number of screeners, licensed benefit advisors, and retention advisors[164] - This was partially offset by a $1.3 million decrease in other operating expenses, including lower consulting and licensing costs[164] Technology and Content Technology and content expenses decreased by $0.7 million, or 5%, in Q1 2025, driven by lower amortization and personnel costs | Technology and Content (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change (in thousands) | % Change | | :------------------------------------ | :-------------------------------- | :-------------------------------- | :-------------------- | :------- | | Technology and content expenses | $12,601 | $13,305 | $(704) | (5)% | - The decrease was primarily driven by a $0.4 million decrease in amortization of internally developed software, a $0.3 million decrease in personnel and compensation costs, and a $0.3 million decrease in stock-based compensation expense[167] - This was partly offset by an increase of $0.4 million in other operating costs, particularly consulting expenses[167] General and Administrative General and administrative expenses decreased by $2.3 million, or 12%, in Q1 2025, primarily due to lower professional fees and stock-based compensation | General and Administrative (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change (in thousands) | % Change | | :---------------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | :------- | | General and administrative expenses | $17,310 | $19,619 | $(2,309) | (12)% | - The decrease was primarily driven by a $1.1 million decrease in professional fees and a $1.1 million decrease in stock-based compensation expense[169] Impairment, Restructuring and Other Charges eHealth incurred no impairment or restructuring charges in Q1 2025, a 100% decrease from $6.3 million in Q1 2024 | Impairment, Restructuring and Other Charges (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change (in thousands) | % Change | | :--------------------------------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | :------- | | Impairment, restructuring and other charges | $— | $6,313 | $(6,313) | (100)% | - The $6.3 million charges in Q1 2024 consisted of $5.5 million in asset impairments related to leased office spaces ($5.1 million operating lease ROU assets, $0.4 million property and equipment) and $0.8 million in restructuring charges for employee termination benefits[170] Interest Expense Interest expense decreased by $0.2 million, or 6%, in Q1 2025, primarily due to lower interest rates on the company's term loan | Interest Expense (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change (in thousands) | % Change | | :------------------------------ | :-------------------------------- | :-------------------------------- | :-------------------- | :------- | | Interest expense | $(2,648) | $(2,809) | $161 | 6% | - The decrease in interest expense was primarily driven by lower interest rates on the Credit Agreement[171] Other Income, Net Other income, net, decreased by $0.8 million, or 34%, in Q1 2025, primarily due to less favorable short-term investment returns | Other Income, Net (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change (in thousands) | % Change | | :------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | :------- | | Other income, net | $1,576 | $2,391 | $(815) | (34)% | - The decrease was primarily due to an $0.8 million decrease in interest income, resulting from less favorable short-term investment returns and a decline in average short-term investment balances[173] Provision for (Benefit from) Income Taxes eHealth recorded a $1.8 million income tax provision in Q1 2025, with an effective tax rate of 47.7%, significantly higher than prior year | Income Tax Metric (in thousands, except rate) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change (in thousands) | % Change | | :-------------------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------- | :------- | | Provision for (benefit from) income taxes | $1,776 | $(1,345) | $3,121 | (232)% | | Effective tax rate | 47.7% | 7.3% | 40.4 pp | 553.4% | - The effective tax rate of 47.7% in Q1 2025 was higher than the statutory federal tax rate primarily due to state taxes, nondeductible stock-based compensation, lobbying expenses, and prior year discrete adjustments, partially offset by research and development credits[174] Segment Information eHealth's Medicare segment showed strong revenue and gross profit growth, while the E&I segment experienced declines in Q1 2025 Medicare Segment The Medicare segment's total revenue increased by 26% and gross profit by 62% in Q1 2025, driven by commission revenue growth - Medicare segment total revenue increased by $21.3 million, or 26%, in Q1 2025 compared to Q1 2024[184] - This growth was primarily driven by a $19.0 million increase in Medicare segment commission revenue, including a $13.0 million increase in Medicare Advantage plan commission revenue (26% growth in approved members) and $8.0 million in net adjustment revenue from prior periods[184] - Medicare segment gross profit increased by $13.7 million, or 62%, to $35.7 million, despite increases in variable marketing and advertising expenses and segment CC&E expenses[184] Employer and Individual Segment The E&I segment's total revenue decreased by 11% and gross profit by 19% in Q1 2025, due to declines in approved members and higher marketing - E&I segment total revenue decreased by $1.1 million, or 11%, in Q1 2025 compared to Q1 2024[185] - This was primarily driven by a $0.9 million decrease in commission revenue, resulting from a 19% decline in individual and family plan approved members and a 28% decline in small business plan approved members[185][189] - E&I segment gross profit decreased by $1.4 million, or 19%, to $6.0 million, also impacted by an increase of $0.4 million in variable marketing and advertising expenses[185][189] Liquidity and Capital Resources eHealth's liquidity significantly improved in Q1 2025, with $155.6 million in cash and marketable securities, and strong operating cash flow Cash and Cash Equivalents eHealth's total cash, cash equivalents, and short-term marketable securities significantly increased to $155.6 million in Q1 2025 | Metric (in thousands) | March 31, 2025 | December 31, 2024 | | :-------------------- | :------------- | :---------------- | | Cash and cash equivalents | $121,092 | $39,197 | | Short-term marketable securities | $34,495 | $43,043 | | Total cash, cash equivalents and short-term marketable securities | $155,587 | $82,240 | - eHealth maintained $3.1 million in restricted cash as of both March 31, 2025, and December 31, 2024[187] Material Cash Requirements eHealth's material cash requirements include short-term and long-term lease and service obligations, funded by existing cash and operations - Short-term obligations as of March 31, 2025, were $8.4 million for leases and $7.6 million for service and licensing[190] - Long-term obligations as of March 31, 2025, were $21.3 million for leases and $2.9 million for service and licensing[190] - These obligations are expected to be funded through existing cash and cash generated from operations[190] Convertible Preferred Stock eHealth's Series A convertible preferred stock includes redemption rights, and non-compliance with covenants grants H.I.G. additional rights - eHealth issued 2,250,000 shares of Series A convertible preferred stock to H.I.G. for $225.0 million in April 2021[191] - The company failed to maintain the Minimum Asset Coverage Ratio as of September 30, 2023, and the Minimum Liquidity Amount as of November 30, 2024, granting H.I.G. additional rights, including board nomination and approval over certain corporate actions[191][192] - Non-compliance with these covenants does not entitle H.I.G. to accelerate the redemption of the Series A Preferred Stock[192] Term Loan Credit Agreement eHealth's $70.0 million secured term loan was amended to extend maturity and reduce interest, with the company in compliance with all covenants - eHealth's $70.0 million secured term loan credit facility was amended in November 2024, extending its maturity to February 2026 and reducing the overall interest rate[193] - As of March 31, 2025, the interest rate on the loan was 11.57%, and the carrying value was $68.8 million[193] - The company was in compliance with its loan covenants as of March 31, 2025, which require maintaining liquidity at or above $25.0 million and outstanding debt less than 50% of total contract assets – commissions receivable[193] Availability and Use of Cash eHealth believes existing cash and expected collections are sufficient for at least 12 months, with potential for future capital needs - eHealth believes its current cash, cash equivalents, short-term marketable securities, and expected cash collections will be sufficient to fund operations for at least 12 months[194] - Future capital requirements depend on factors like enrollment volume, membership, retention rates, telesales conversion rates, and investments in technology, marketing, and customer care[195] - The company may raise additional capital through bank debt or public/private capital financing if available funds are insufficient[195] Cash Activities eHealth's cash activities in Q1 2025 showed an $81.9 million net increase, driven by strong operating cash flows and investing activities | Cash Flow Activity (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by operating activities | $77,121 | $70,761 | | Net cash provided by (used in) investing activities | $5,472 | $(10,287) | | Net cash used in financing activities | $(699) | $(1,259) | Operating Activities Net cash provided by operating activities increased to $77.1 million in Q1 2025, driven by net income and reduced commissions receivable - Net cash provided by operating activities was $77.1 million in Q1 2025, up from $70.8 million in Q1 2024[200][202] - Cash provided by changes in net operating assets and liabilities in Q1 2025 primarily consisted of decreases of $77.0 million in contract assets – commissions receivable and $13.4 million in accounts receivable[201] - Fee-based BPO arrangements generate fee-based revenue with cash collected in advance or in close proximity to revenue recognition[200] Investing Activities Net cash provided by investing activities was $5.5 million in Q1 2025, a significant shift from a net use of $10.3 million in Q1 2024 - Net cash provided by investing activities was $5.5 million in Q1 2025, compared to net cash used of $10.3 million in Q1 2024[204][205] - Q1 2025 investing activities included $36.3 million in proceeds from marketable securities and $27.4 million in purchases of marketable securities[204] Financing Activities Net cash used in financing activities decreased to $0.7 million in Q1 2025, primarily for employee tax withholding obligations - Net cash used in financing activities was $0.7 million in Q1 2025, compared to $1.3 million in Q1 2024[206] - Both periods' cash usage was primarily due to repurchases of shares to satisfy employee tax withholding obligations[206] Seasonality eHealth's business is highly seasonal, driven by annual and open enrollment periods for Medicare and Individual and Family Plans - The Medicare annual enrollment period (October 15 - December 7) and Individual and Family Plan open enrollment (November 1 - December/January 15) drive significant seasonality, with most commission revenue recognized in the fourth quarter[207][209] - Medicare Advantage open enrollment (January 1 - March 31) also contributes to elevated commission revenue in the first quarter[207] - Marketing and advertising expenses are typically highest in the fourth quarter, while customer care and enrollment expenses are highest in the fourth quarter and lowest in the second quarter[210][211] Recent Accounting Pronouncements Refer to Note 1 for information on recently issued accounting standards that could affect eHealth, Inc. - Refer to Note 1 – Summary of Business and Significant Accounting Policies for information on recently issued accounting standards[212] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a smaller reporting company, eHealth, Inc. is exempt from providing market risk disclosures - eHealth, Inc. is a "smaller reporting company" and is not required to provide quantitative and qualitative disclosures about market risk[213] ITEM 4. CONTROLS AND PROCEDURES eHealth's management concluded disclosure controls and procedures were effective as of March 31, 2025, with no material changes reported - Management, with CEO and CFO participation, concluded that eHealth's disclosure controls and procedures were effective as of March 31, 2025, providing reasonable assurance for timely and accurate reporting[214][215] - There were no changes in internal control over financial reporting during the three months ended March 31, 2025, that materially affected or are reasonably likely to materially affect internal control over financial reporting[216] - Management acknowledges that control systems, no matter how well designed, can only provide reasonable, not absolute, assurance and are subject to inherent limitations such as human error, collusion, or management override[217] PART II. OTHER INFORMATION This section covers eHealth, Inc.'s legal proceedings, risk factors, and other required disclosures ITEM 1. LEGAL PROCEEDINGS eHealth faces various legal proceedings, including a qui tam action unsealed May 1, 2025, with potential for fines and business harm - eHealth is subject to various legal proceedings and governmental inquiries, with potential risks including fines, license revocations, and reputational damage[218] - A qui tam action alleging Federal False Claims Act violations related to marketing activities was unsealed on May 1, 2025, with the U.S. Attorney's Office intervening in part[219] ITEM 1A. RISK FACTORS This section outlines significant risks to eHealth's business, covering market, regulatory, financial, technology, and stock ownership Risks Related to Our Business eHealth faces intense competition, reliance on carriers, member acquisition challenges, operational risks in China, seasonality, and management changes - The health insurance market is intensely competitive, with rivals including government-run exchanges, local agents, and national telesales brokers, potentially leading to increased marketing costs and adverse impacts on business[222][225] - eHealth's business depends on relationships with health insurance carriers, which are typically non-exclusive and terminable on short notice, with a significant portion of revenue concentrated in a small number of carriers (Humana, Aetna, UnitedHealthcare)[226][229][230] - Operations in China involve risks such as differing laws, trade tensions, and potential requirements to move operations back to the U.S., which could increase expenses and harm business[249][250][252] - The business is seasonal due to Medicare and individual/family enrollment periods, leading to fluctuating financial results and increased expenses in certain quarters[253] - Changes in senior management, including the ongoing search for a new CEO, and the ability to recruit, train, and retain licensed insurance agents are critical for business success[256][258] Risks Related to Laws and Regulations eHealth operates in a highly regulated U.S. healthcare industry, facing risks from changing laws, non-compliance, legal proceedings, and data privacy issues - The U.S. healthcare industry is highly regulated, and changes in laws, regulations, or guidelines, including proposals for government-sponsored coverage, could reduce demand for eHealth's services[268] - The marketing and sale of health insurance plans, especially Medicare plans, are subject to numerous, complex, and frequently changing laws and regulations, with non-compliance potentially leading to fines, license revocations, and business harm[272] - eHealth is involved in legal proceedings, including a qui tam action alleging Federal False Claims Act violations, which could result in significant liability, jeopardize licenses, and harm reputation[277] - Maintaining health insurance licenses in all 50 states and D.C. is critical, and failure to comply with state-specific laws and regulations could lead to license limitations, suspensions, or revocations[278][279] - Increasing regulatory focus on privacy and data security, along with evolving laws like the California Consumer Privacy Act, could increase compliance costs and expose eHealth to increased liability and reputational harm[280] Risks Related to Finance, Accounting and Tax Matters eHealth's financial risks include commission revenue estimates, inaccurate carrier reports, debt covenants, capital requirements, and internal control effectiveness - Commission revenue is computed using estimated constrained LTVs, which are sensitive to changes in conversion rates of approved members to paying members, forecasted average plan duration, and forecasted commission amounts[290][293] - Inaccurate or untimely commission reports from health insurance carriers can harm business and operating results, making it difficult to determine the impact of current conditions on membership retention[300][301] - Agreements with lenders (term loan) and convertible preferred stock investors (H.I.G.) contain restrictions and financial covenants (e.g., Minimum Liquidity Amount, Asset Coverage Ratio), with non-compliance potentially leading to acceleration of obligations or additional rights for investors[304][305][308] - Operating and growing the business is likely to require additional capital, and if funds are unavailable or only on unacceptable terms, it could lead to significant dilution or higher leverage[310] - Failure to maintain proper and effective internal controls could impair the ability to produce accurate financial statements, and changes in income tax provisions or limitations on net operating losses (NOLs) could adversely affect results[313][314][315] Risks Related to Our Technology eHealth's technology risks include platform reliability, AI use, cybersecurity threats, and intellectual property protection, all critical for business operations - The performance, reliability, and availability of eHealth's ecommerce platform, cloud contact center, and underlying network infrastructures are critical, with system failures or interruptions potentially harming business, especially during enrollment periods[318] - Issues related to the use of new and evolving technologies, such as AI, in business operations could result in liability, reputational harm, and adverse impacts on operating results due to ineffective implementation, security risks, or new regulations[321] - eHealth's business is subject to security risks, including cyberattacks and breaches, which could damage reputation, terminate relationships, reduce demand, and lead to significant liability and regulatory action[322][323] - Inadequate protection of intellectual property, particularly in China where laws are less developed, could harm business, operating results, and financial condition[324][325] Risks Related to Ownership of Our Common Stock Common stock ownership risks include price volatility, dilution from preferred stock conversion, preferential rights of investors, and anti-takeover provisions - eHealth's future operating results are likely to fluctuate, and failure to meet guidance or expectations could negatively affect the value of its common stock[327] - The price of eHealth's common stock has been and may continue to be volatile due to various factors, including market fluctuations, competitor performance, and company-specific announcements[328] - The issuance of common stock underlying convertible preferred stock would dilute the ownership and relative voting power of existing common stockholders and may adversely affect the market price of common stock[331][334] - The convertible preferred stock investor (H.I.G.) has preferential rights (liquidation, dividends, redemption, conversion price adjustments) and may exercise influence over the company, potentially affecting liquidity and making acquisitions more difficult[335][338] - Anti-takeover provisions in the company's certificate of incorporation and bylaws, as well as Delaware law, could delay or prevent takeover attempts, potentially limiting stockholders' opportunity to receive a premium for their shares[339][340][341] Macroeconomic and Industry Risks eHealth's business is susceptible to macroeconomic and industry risks, including political events, adverse economic conditions, and large-scale health issues - Political events, instability, trade disputes, geopolitical tensions, and natural disasters can have a material adverse effect on eHealth and its customers, consumers, and channel partners[349] - Adverse economic conditions, including slow growth, recession, high unemployment, inflation, and financial/credit market disruptions, could materially adversely affect consumer demand for health insurance and eHealth's business[351][352] - Large-scale health issues, such as pandemics, have had and could continue to have a material adverse effect on eHealth's business, operating results, and financial condition, requiring costly and disruptive operational adjustments[353][354] ITEM 5. OTHER INFORMATION No director or executive officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement in Q1 - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the last fiscal quarter[355] ITEM 6. EXHIBITS This section lists exhibits filed with the Q1 2025 Form 10-Q, including CEO/CFO certifications and XBRL financial documents - Exhibits include certifications from the Chief Executive Officer and Chief Financial Officer (31.1, 31.2, 32.1, 32.2) and various XBRL documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[358] SIGNATURES The Q1 2025 Form 10-Q was signed by eHealth's CEO and CFO on May 7, 2025, fulfilling regulatory requirements - The report was signed on May 7, 2025, by Francis Soistman, Chief Executive Officer, and John Dolan, Chief Financial Officer[362]