EHTH earnings call transcript, November 4, 2026

comparable GAAP financial measures are included in today's press release. With that, I will turn the call over to Derek Duke.

the quality of our revenue and earnings is more pronounced under the lifetime advisory model. And while Q3 was seasonally low in terms of revenue, it is one of the most important operational quarters as we prepare for the annual enrollment period. This AEP beneficiaries are seeing another cycle of significant changes to Medicare Advantage plans, and we anticipate consumer shopping to remain strong. At the same time, we believe there are industry trends that point to sector state. We will continue to see the trend of capitalization starting next year, which bodes well for beneficiaries and Medicare brokers. Carriers are operating in a more predictable environment with a greater understanding of the levers available to balance growth and profitability. Medical loss ratios for certain key carriers have also begun to improve as reflected in their earnings reports year to date. We are seeing emerging growth mandates from carriers focused on specific plan types and Yeah. geographies. Importantly, sponsorship revenue is beginning to return gradually this AEP reflecting the value carriers continue to place on high quality distribution partners. We are all also seeing increased interest in our carrier dedicated Amplify business. During the quarter, we signed a new BPO agreement with a top three Medicare carrier to provide carrier branded enrollment support during AEP. We expect both sponsorship revenue and this BPO relationship to begin contributing revenue in the fourth quarter. Taken together, these developments suggest that in 27, the Medicare

Advantage market could be emerging from a period of disruption and starting to shift toward a disciplined growth environment. We believe eHealth is well positioned to benefit from that transition through our strong carrier relationships, emphasis on enrollment quality. And consumer engagement and broad geographic presence. In Q3, we completed our pre-AEP advisor hiring and conducted key training processes through our extensive Sales Mastery University program. During the quarter, Licensed Advisors reached out to existing members to review annual notices of change, identify potential gaps in coverage, and introduce relevant ancillary products. These activities reflect a broader role. Our advisors are playing under the lifetime advisory model, supporting members not only at the point of enrollment, but throughout the year as their health care and coverage needs evolve. We continue to see encouraging early proof points of our lifetime advisory model. Ancillary cross-sell rate exceeded 40% in the third quarter, nearly doubling year over year. We're also seeing a positive retention impact, including improved first 90-day retention for policies enrolled by our advisors since its launch. While these indicators are based on a small sample size, they reinforce our conviction that a deeper member-advisor relationship can improve consumer experience. while supporting retention, ancillary product revenue, and member lifetime value over time.

Our Medicare matchmaker brand continues to resonate with beneficiaries and represents an important competitive advantage in an industry where distribution has historically lacked meaningful consumer brand recognition. In the fourth quarter, we expect branded channels to drive the majority of our AEP applications similar to last year. These channels typically produce high quality enrollments and serve as an entry point to a lifetime advisory relationship. On the product side, we launched Content Genius, an AI powered platform that streamlines how we get gathered, validate, and publish information for thousands of Medicare Advantage plans from our broad network of insurers. This information is leveraged by our proprietary plan recommendation technology, which powers both the consumer-facing online experience as well as tools used in advisor-assisted applications. This new tool has already significantly improved content loading speed with comparable accuracy while reducing the cost of content processing. A major undertaking ahead of every AEP that used to be labor-intensive. Alongside our Medicare priorities, we continue to advance the diversification initiatives that we expect to contribute. More meaningfully to our growth over time. Individual coverage health reimbursement arrangements, or ICRA, remain an important part of that strategy. Based on a recent survey conducted by eHealth, 54%

of small and mid-sized businesses offering group coverage are facing premium increases of 10% or more for 2027. 73% of those businesses are considering discontinuing traditional health benefits in 2027 with cost being a key factor. 58% are pursuing alternatives such as level funded or self-funded plans or ICRA arrangements. the administration recently introduced choice as a new consumer and employer facing name for this benefit model and launch materials intended to make the model easier for employers to understand and evaluate. We believe great. Greater employer awareness can support broader adoption over time. eHealth is continuing to build the capabilities, partnerships and technology infrastructure needed to participate in the growth of this exciting opportunity. In a disciplined and capital efficient way. In Q3, we announced a partnership with Bernie Portal, a human resources and benefits administration platform. Through the partnership, more than 5,000 employers and 1,000 insurance brokers working with Bernie Portal are expected to have access to eHealth for a needs analysis and support in evaluating choice arrangement options. The integration of our platforms is intended to create a more seamless experience for employers, brokers and employees while making it easier for employees to compare their individual coverage options. The third quarter also marked my first full year as CEO of eHealth.

Over the past year, we've taken a number of important steps to strengthen the company and position it for the future. We launched a lifetime advisory model, began transitioning the organization toward deeper, more durable member relationships, and continued the to build our diversification capabilities. We implemented a cost reduction program that is on target to reduce 2026 variable and fixed operating costs and expenses by approximately $90 million compared with 2025. And we established three year financial targets centered on expanding profitability and cash flow generation with the goal of returning to sustainable revenue growth beginning in 27. With respect to our balance sheet. The management team and our advisors have recently renewed our discussions with our preferred equity partner, HIG, to evaluate specific options for improving eHealth's capital structure with the earliest redemption date for the. preferred coming up at the end of April of 2027. We believe both parties are highly motivated to arrive at a mutually acceptable agreement. It is important to note that the company's redemption obligations related to the preferred. equity are subject to certain limitations that safeguard the company's liquidity. This provides the parties with the opportunity to continue discussions towards a suitable outcome that supports the company's operational plans and long. value. We remain committed to continuing these discussions and will provide updates regarding these discussions as appropriate. In the first three weeks of this selling season, we've seen strong consumer demand at attractive league.

costs across our platform. Our agents are balancing volume targets with an emphasis on member engagement and retention, essential elements of our lifetime advisory model. The most critical part of AEP remains ahead of us and the entire organization. is focused on successful execution.

Thank you to our employees for their hard work and commitment and to our shareholders and business partners for their continued support. I'll now turn the call over to John.

care and enrollment expense was 24% lower, reflecting the flexible staffing model we have implemented to better align our sales organization with seasonal enrollment patterns. At the same time, customer care and enrollment expense did not decline at the same rate as application volume. This reflects our decision to retain our core career advisors throughout the year, while using seasonally lower volume periods, the second and third quarters, to engage existing members. It also reflects our investment in hiring and training new advisors ahead of AEP. Total Medicare applications submitted declined 55%. Medicare Advantage applications declined 58%, while Medicare Supplement applications declined 23%. Although application volume was lower, we continued to see encouraging early indicators from the lifetime advisory model. such as our ancillary cross-sell rate, which was more than 40%. The ratio of third quarter Medicare segment revenue to Medicare variable marketing and advertising costs was 3.9 times, up from 2.9 times. The ratio of Medicare segment revenue to total Medicare variable acquisition costs, including variable marketing and advertising, and segment CC&E expenses was 0.6 times, down from 1 times. In the third quarter of 2025, Medicare segment gross loss was 12.7 million compared to 1.2 million. The change primarily reflects lower tail revenue. Medicare tail revenue was 1.5 million, down from 12.1 million. Medicare Advantage Lifetime Value, or LTV, declined 2%. Despite declines in tail revenue and Medicare Advantage LTV,

we are seeing encouraging initial retention trends under the Lifetime Advisory Model. The second quarter was the first full quarter under the new model. Policies enrolled in the second quarter by our career advisors following the... ...launch of the new model have experienced lower churn during the first 90 days as compared to the same period last year, a critical period for a Medicare Advantage policy. We also continue to see strong year-to-date retention for the... ...January 2026 effective policies enrolled during the most recent AEP. This cohort is performing better than the comparable prior year cohort, despite significant plan changes across the Medicare Advantage market. Turning to our employer and individual segment. Revenue was $3.2 million, compared with $3.9 million last year, and segment gross profit was $0.1 million, compared with $1 million. As Derek discussed, we continue to... We need to invest selectively in the partnerships, technology, and infrastructure needed to participate in the growth of choice arrangements. We remain disciplined in the pace of that investment as we work toward our goal of building a scaled... capital-efficient offering. Turning to our overall cost structure, we continue to track toward our goal of total 2026 cost savings of more than $60 million and fixed cost savings of approximately $30 million. General and administrative and technology and content expenses declined 17%. Total marketing and advertising expense declined 55%, while customer care and enrollment expense declined 22%. Total operating costs and expense

has declined 29%. The work we are doing goes beyond reducing expenses in the current year. We are establishing a more efficient cost structure designed to produce operating leverage for our planned return to top line growth in 2027. One of the ways we are controlling our fixed costs is through investment in AI, including the third quarter introduction of our AI content loading initiative, Content Genius. At the same time, we continue to protect the capabilities that are critical to our law. our long-term strategy, including our technology platform, consumer brand, carrier relationships, and core advisor base. Turning to cash flow and the balance sheet, third quarter operating cash flow was negative 11.2 million, a 14.1 million improvement from negative 25.3 million. We ended the quarter with 88.1 million in cash, cash equivalents, and short-term marketables. Securities, compared with 101 million at the end of the second quarter. Our Commission's receivable balance as of September 30th was 970.6 million, compared to 907.7 million. We believe our liquidity significant Commission's receivable balance and improving cash flow profile provide a solid foundation for executing our operating and strategic priorities. Based on information available today, we are reaffirming our fiscal year 2026 guidance ranges. We are also updating our expectations for 2026 net adjustment revenue to be in the range of 17 million to 20 million up from 16 million to 20 million to reflect the 1.4 million

can entail revenue that we recognized in the third quarter. You can reference our guidance ranges in the third quarter earnings release in slides posted on the investor relations section of our website. Beyond 2026, we can see the next slide. We remain focused on the longer term financial objectives we established earlier this year, including our goal of returning to mid single digit revenue growth in 2027 accompanied by expanded adjusted EBITDA margins and positive operating cash flow. We look forward to updating you on our progress following the completion of AEP. With that, I'll turn the call back to the operator for questions.

Your first question comes from the line of Ben Hendricks with RBC Capital Markets. Your line is open. Please.