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Item 7. Management’s Discussion and Analysis

2021-02-26 compared with 2020-03-02 · 371 added, 328 removed, 275 unchanged (72% of the section changed)

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Please read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included under Part II, Item 8 of this Annual Report on Form 10-K.

We provide a leading health insurance marketplace for Medicare, individuals, families and small businesses through our ecommerce platforms and customer care centers where consumers can get quotes from leading health insurance carriers, compare plans, and apply for and purchase Medicare-related, individual and family, small business and ancillary health insurance plans.

Our ecommerce technology also enables us to deliver consumers’ health insurance applications electronically to health insurance carriers.

This simplifies and streamlines the traditionally paper-intensive and complex health insurance sales and purchasing process.

We have invested heavily in technology and resources for our ecommerce platforms and to obtain licenses and necessary regulatory approvals enabling us to sell health insurance in all 50 states and the District of Columbia and offer thousands of health insurance plans online.

We are a leading private health insurance marketplace with a technology and service platform that provides consumer engagement, education and health insurance enrollment solutions.

Our mission is to connect every person with the highest quality, most affordable health insurance and Medicare plans for their life circumstances.

Our platform integrates proprietary and third-party developed educational content regarding health insurance plans with decision support tools to aid consumers in what has traditionally been a confusing and opaque health insurance purchasing process, and to help them obtain the health insurance products that meet their individual health and economic needs.

Our omnichannel consumer engagement platform is designed to meet the consumer wherever they prefer to engage with us, and enables consumers to use our services online, through interactive chat, or by telephone with a licensed insurance agent.

We have created a marketplace that offers consumers a broad choice of insurance products that include thousands of Medicare Advantage, Medicare Supplement, Medicare Part D prescription drug, individual and family, small business and other ancillary health insurance products from over 200 health insurance carriers across all fifty states and the District of Columbia.

Impact from COVID-19

We experienced a number of changes in our business related to the impacts from the COVID-19 pandemic.

During the first quarter of 2020, we closed our offices in the United States and China and shifted our employees to a work-from-home model in response to the virus outbreak.

While some of our offices in the United States remain closed, we reopened our office in China in the second quarter of 2020 given the improvements in the situation in the region where our office is located.

During the third quarter of 2020, we also reopened some of our U.S.

office locations at a reduced capacity with additional safety and social distancing measures.

Based on our success in shifting existing agents to work from home, we launched a remote agent model in 2020, tapping into nationwide agent talent to hire full-time customer care agents.

We expect this model to provide us with geographic hiring flexibility as we grow our telesales capacity.

In addition, we believe the COVID-19 pandemic had an impact on consumer behavior when it comes to selecting and utilizing health insurance.

We believe that more seniors are now likely to shop for Medicare products online or over the phone versus a face-to-face meeting with a traditional broker.

This should have a positive impact on comparison Medicare platforms such as ours.

At the same time, we believe that reduced utilization of healthcare by seniors in 2020 also had a dampening effect on Medicare plan switching during the fourth quarter annual enrollment period, or AEP, of 2020.

See Risk Factors in Part I, Item 1A of this Annual Report on Form 10-K for a discussion of risks related to the COVID-19 pandemic.

On February 17, 2021, we entered into an investment agreement pursuant to which we have agreed to sell to the purchaser at closing, 2,250,000 shares of our newly designated Series A preferred stock at an aggregate purchase price of $225.0 million.

The Private Placement is subject to closing conditions, including, among others:

(i) the expiration or early termination of the waiting period (and any extension thereof) applicable to the consummation of the Private Placement under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended;

(ii) the confirmation by Nasdaq that it has no objection to the terms and conditions of the Private Placement;

and (iii) the determination that consummation of the Private Placement would not cause our outside auditor to no longer be

deemed independent under the rules and regulations of the Securities and Exchange Commission or the Public Company Accounting Oversight Board.

The parties have agreed to cooperate with each other and use reasonable best efforts to promptly take such actions to cause the closing conditions to be satisfied as promptly as reasonably practicable.

Summary of Selected Metrics

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Our commission revenue is influenced by a number of factors including but not limited to:

the number of individuals on applications for Medicare-related, individual and family, small business and ancillary health insurance plans we submit to and are approved by the relevant health insurance carriers, and

the constrained lifetime value of approved members for Medicare-related, individual and family and ancillary health insurance plans we sell as well as the estimated annual value of approved members for small business plans we sell.

Submitted Applications

Applications are counted as submitted when the applicant completes the application and either clicks the submit button on our website or provides verbal authorization to submit the application.

The applicant may have additional actions to take before the application will be reviewed by the insurance carrier, such as providing additional information.

In addition, an applicant may submit more than one application.

The following table shows submitted applications by product for the periods presented:

• the number of individuals on applications for Medicare-related, individual and family, small business and ancillary health insurance plans that are approved by the relevant health insurance carriers;

• the number of approved members for Medicare-related, individual and family, small business and ancillary health insurance plans from whom we have received an initial commission payment;

• the constrained lifetime value, or LTV, of approved members for Medicare-related, individual and family and ancillary health insurance plans we sell as well as the estimated annual value of approved members for small business plans we sell.

We have included the number of new paying members in our selected metrics to provide more detail and visibility into new paying member contribution to the changes in membership.

We count an approved member as a new paying member when we have received a commission payment from the carrier relating to the plan purchased by the member.

Not all approved members become paying members for various reasons.

In addition, for any given period, the rate at which approved members become new paying members is impacted by the time lag between carrier approval and our receipt of the commission payment from the carrier.

The difference in our metrics between the number of approved members and new paying members tends to vary, especially in the first and fourth quarters given this time lag and given that plans we sell in the fourth quarter do not begin generating commissions until the first quarter when they become effective.

We have removed submitted applications from our selected metrics given that we do not recognize revenue based on this metric, and it is not as indicative of our commission receivable collection as other metrics we do provide.

Approved Members

Approved members represent the number of individuals on submitted applications that were approved by the relevant insurance carrier for the identified product during the current period.

The applications may be submitted in either the current period or prior periods.

Not all approved members ultimately become paying members.

The following table shows approved members by product for the period presented:

Year Ended December 31,

2020 2019 2018

Medicare Advantage 387,652 279,561 148,478

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Total Individual and Family 33,328 32,186 42,650

Ancillary (3)

Total Ancillary

Short-term 41,640 58,687 107,846

Dental 40,455 43,640 47,343

Vision 18,581 21,391 24,638

Other 14,270 22,980 33,500

Total Ancillaries 114,946 146,698 213,327

Small Business 14,809 16,685 19,550

Medicare-related health insurance applications submitted on our website or through our customer care center during the period, including Medicare Advantage, Medicare Supplement and Medicare Part D prescription drug plans.

Major medical individual and family plan (“IFP”) health insurance applications submitted on our website during the period.

An applicant may submit more than one application.

We define our IFP offerings as major medical individual and family health insurance plans, which does not include Medicare-related, small business or ancillary plans.

Ancillaries consists primarily of short-term, dental and vision insurance plans submitted on our website during the period.

Applications for small business health insurance are counted as submitted when the applicant completes the application, the employees complete their applications, the applicant submits the application to us and we submit the application to the carrier.

2019 compared to 2018 – Submitted applications grew 24% in 2019 compared to 2018 , primarily driven by a 78% increase in Medicare submitted applications.

The increased number of submitted applications resulted from our strong execution and significant investment in Medicare-related sales and marketing initiatives.

The Medicare submitted applications were primarily driven by an 87% growth in Medicare Advantage submitted applications and an 82% growth in Medicare Part D submitted applications in 2019 as compared to 2018 .

Approximately 27% of all Medicare Advantage and Medicare Supplement applications were submitted online, which is a combination of agent unassisted and partially agent assisted online applications, in 2019 , compared to 16% in 2018 .

Individual and family plan submitted applications decreased by 7% in 2019 compared to 2018 , primarily due to a 16% decrease in submitted applications for qualified plans.

Ancillary plan submitted applications decreased by 37% in 2019 compared to 2018 , primarily due to a 46% decline in short-term plans submitted applications.

Small business submitted applications declined 7% in 2019 compared to 2018 .

The decline in submitted applications for individual, family, ancillary and small business products was due to the shift of our sales resources to our Medicare business.

2018 compared to 2017 – Medicare submitted applications grew 39% in 2018 compared to 2017.

The increase was primarily due to direct-to consumer marketing initiatives, our flexible call center capabilities, an improved online experience and our acquisition of GoMedigap.

Individual and family plan submitted applications declined 56% in 2018 compared to 2017, due to the state of the individual and family plan market as a result of the Affordable Care Act and our continued focus on the Medicare market in 2018.

Approximately 16% of all Medicare Advantage and Medicare Supplement applications were submitted online, which is a combination of agent unassisted and partially agent assisted online applications, in 2018, compared to 10% in 2017.

The decline in individual and family plan submitted applications has limited our ability to cross-sell ancillary plans, resulting in a decline of 6% in submitted applications for all ancillary products combined in 2018 compared to 2017.

Small business submitted applications grew 35% in 2018 compared to in 2017, due to the progress in implementing a focused marketing strategy for this market, technology enhancements and increased conversion rate.

Approved Members

Approved Members represents the number of individuals on submitted applications that were approved by the relevant insurance carrier for the identified product during the current period.

The applications may be submitted in either the current period or prior periods.

Approved members may not pay for their plan and become paying members.

The following table shows approved members by product for the period presented:

Total Approved Members 665,643 630,495 515,215

2020 compared to 2019 – Medicare approved members increased 16% in 2020 compared to 2019.

The increase in total Medicare approved members was primarily attributable to a 39% growth in Medicare Advantage plan members, partially offset by a 34% decline in Medicare Part D plan members.

The increase in approved Medicare Advantage members was primarily driven by strong online enrollment growth, increased marketing efforts, an increase in our internal agent productivity and the COVID-19 related special enrollment period in the second quarter of 2020.

During this special enrollment period, certain individuals were permitted to enroll, disenroll or switch their Medicare Advantage and Medicare Part D prescription drug plans.

However, our approved application growth was less than expected primarily due to the underperformance of our outsourced external agent force and, to a lesser extent, increased competition in our direct television marketing channel during the fourth quarter 2020 AEP.

We also believe that external factors, including the pandemic and the prolonged election cycle, impacted consumer demand on our platform during the 2020 AEP.

To address the underperformance of our external agents, we have determined to shift our agent salesforce to a predominantly internal full-time agent model as our internal agents have experienced stronger performance and productivity than our outsourced agents.

We began this shift towards the increased utilization of internal agents near the end of the 2020 AEP.

Individual and Family Plan approved members grew 4% in 2020 compared to 2019 primarily due to a 15% increase in approved members for qualified health plans.

Ancillary plan approved members declined 22% in 2020 compared to 2019 primarily due to a decrease in short-term health insurance approved members.

Small business group health insurance approved members declined 11% in 2020 compared to 2019 mainly due to the shift of our focus on our Medicare business.

2019 compared to 2018 – Medicare approved members grew 81% in 2019 compared to 2018.

The growth was primarily due to an 88% growth in Medicare Advantage submitted applications and an 84% growth in Medicare

Part D submitted applications.

Individual and Family Plan approved members declined 25% in 2019 compared to 2018, due primarily to market conditions in the individual and family plan market and our decision to shift our marketing investments towards our Medicare business.

Approved members for all ancillary products combined declined 31% in 2019 compared to 2018, due primarily to a 46% decline in short term plan submitted applications.

Small business approved members decreased 15% in 2019 compared to 2018, due primarily to a decrease in the number of members per application and in the percentage of approved applications.

New Paying Members

New Paying Members consist of approved members from the period presented and any periods prior to the period presented from whom we have received an initial commission payment during the period presented.

The following table shows our new paying member by product for the periods presented below:

Year Ended December 31,

2020 2019 2018

Medicare Advantage 324,916 235,978 134,565

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Total Individual and Family 30,657 30,997 50,304

Total Ancillary

Short-term 41,953 62,124 94,778

Dental 38,253 42,439 45,876

Vision 17,128 21,332 22,604

Other 13,918 21,601 34,029

Total Ancillaries 111,252 147,496 197,287

Small Business 14,362 17,606 18,874

2019 compared to 2018 – Medicare approved members grew 81% in 2019 compared to 2018 .

The growth was primarily due to our strong execution and significant investment in Medicare-related sales and marketing initiatives, which resulted in an 88% growth in Medicare Advantage submitted applications and an 84% growth in Medicare Part D submitted applications.

Individual and Family Plan approved members declined 25% in 2019 compared to 2018 , due primarily to market conditions in the individual and family plan market and our decision to shift our marketing investments towards our Medicare business.

Approved members for all ancillary products combined declined 31% in 2019 compared to 2018 , due primarily to a 46% decline in short-term plan submitted applications.

Small business approved members decreased 15% in 2019 compared to 2018 , due primarily to a decrease in the number of members per application and in the percentage of approved applications.

2018 compared to 2017 – Medicare approved members grew 36% in 2018 compared to 2017.

The increase was primarily due to 39% growth in Medicare submitted applications mainly driven by our investment in Medicare-related marketing initiatives, call center capabilities and an improved online experience and our acquisition of GoMedigap.

Individual and Family Plan approved members declined 46% in 2018 compared to 2017, due to the state of the individual and family health insurance plan market.

Approved members for all ancillary products combined 2018 increased 1% compared to 2017, despite a decrease in submitted applications of 6%, due to improved conversion rates year-over-year.

Small business approved members grew 28% in 2018 compared to 2017, due to improved focus on key partnerships, technology enhancements and increased conversion rates.

Constrained Lifetime Value of Commissions Per Approved Member

The following table shows our estimated constrained lifetime value, or LTV, of commissions per approved member by product for the years presented below:

Total New Paying Members 621,669 553,515 480,423

2020 compared to 2019 – Medicare total new paying members grew 30% in 2020 compared to 2019, primarily driven by a 38% increase in Medicare Advantage plan new paying members and a 24% increase in Medicare Part D prescription drug plan new paying members.

Individual and family plan new paying members declined 1% in 2020 compared to 2019 due to a decrease in new paying members for non-qualified plans, partially offset by an increase in new paying members for qualified plans.

Ancillary new paying members declined 25% in 2020 compared 2019 due primarily to a decline in approved members across all ancillary plans.

Small business new paying members declined 18% in 2020 compared to 2019 primarily due to a decrease in approved members.

2019 compared to 2018 – Medicare total new paying members grew 67% in 2019 compared to 2018, primarily driven by a 75% increase in Medicare Advantage plan new paying members and a 172% increase in Medicare Part D prescription drug plan new paying members.

The increases were primarily driven by an increase in enrollment volume.

Individual and family plan new paying members declined 38% in 2019 compared 2018 due to a decrease in new paying members for both non-qualified and qualified plans.

Ancillary new paying members declined 25% in 2019 compared to 2018 primarily due to a decline in approved members across all ancillary plans.

Small business new paying members declined by 7% in 2019 compared to 2018 primarily due to a decrease in approved members.

Estimated Constrained Lifetime Value of Commissions Per Approved Member

The following table shows our estimated constrained LTV, of commissions per approved member by product for the years presented below:

Year Ended December 31,

2020 2019 2018

Medicare Advantage (1)

$ 952 $ 1,013 $ 964

Medicare Supplement (1)

1,125 979 1,047

Medicare Part D (1)

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(1) Constrained LTV of commissions per approved member represents commissions estimated to be collected over the estimated life of an approved member’s policy after applying constraints in accordance with our revenue recognition policy.

The estimate is driven by multiple factors, including but not limited to, commission rates, carrier mix, estimated average plan duration, the regulatory environment, and cancellations of insurance plans offered by health insurance carriers with which we have a relationship.

The estimate is driven by multiple factors, including but not limited to, contracted commission rates, carrier mix, estimated average plan duration, the regulatory environment, and cancellations of insurance plans offered by health insurance carriers with which we have a relationship.

These factors may result in varying values from period to period.

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These factors may result in varying values from period to period.

2020 compared to 2019 – The constrained LTV of commissions per Medicare Supplement approved member increased by 15% in 2020 compared to 2019, primarily as a result of an increase in estimated average plan duration.

The constrained LTV of commissions per approved member for Medicare Advantage and Medicare Part D prescription drug plans declined by 6% and 10%, respectively, in 2020 compared to 2019, primarily due to a decrease in estimated average plan duration.

The decline in estimated average plan duration was driven by various factors, including our historical emphasis on optimizing member experience during the initial enrollment process and driving new enrollment growth with less emphasis and resources allocated to post-transaction communications and existing member retention.

In addition, the decline in estimated plan duration was also impacted by certain market related factors including the introduction of the open enrollment period in 2019 which provided an additional opportunity for Medicare Advantage and Medicare Part D prescription drugs plan members to change plans.

We also believe that a larger number of Medicare Advantage plan members terminated their plans due to an increased selection of plans with new features and benefits available to consumers for the 2020 plan year and the additional opportunities for consumers to shop and switch Medicare Advantage and Medicare Part D prescription drug plans

during the recent open enrollment periods.

The decline had a more pronounced impact on our newer member cohorts and on our telephonic enrollments, while our online enrollments continue to have higher average duration.

During the third quarter of 2020, we initiated a number of programs to improve our member retention.

For example, we have launched a customer retention team, adjusted the compensation structure of our agents to better align with our retention goals, and deployed new technologies aimed at improving member retention, including the launch of our Customer Center.

We believe these efforts will lead to improved plan duration trends during 2021.

2019 compared to 2018 – The constrained LTV of commissions per approved member for Medicare Advantage plans increased by 5% in 2019 compared to 2018, primarily due to improved member attrition and higher commission rates.

The constrained LTV for Medicare Supplement approved members declined by 6% primarily as a result of a decrease in the average plan duration, and the constrained LTV of commissions per Medicare Part D approved member declined by 2% primarily as a result of carrier mix.

Constrained LTV of commissions per qualified and non-qualified health plan for approved members increased by 54% and 41% , in 2019 compared to 2018 , respectively, mostly due to improved plan duration.

Constrained LTV of commissions per short-term approved member increased 80% in 2019 compared to 2018 , primarily driven by an increase in average plan duration.

2018 compared to 2017 – The constrained LTV improved 7% and 8% for Medicare Advantage and Medicare Supplement plans, respectively, in 2018 compared to 2017.

The improvement in constrained Medicare Advantage plan LTV was driven by increased commission rates and member retention, and the improvement in constrained Medicare Supplement plan LTV was driven by increased commission rates and our acquisition of GoMedigap in January 2018.

The constrained LTV of commissions for non-qualified health plans and Qualified Health Plans increased 11% and 8%, respectively, mostly driven by improved plan duration, in 2018 compared to 2017.

The constrained LTV for Medicare Part D prescription drug, short term and small business plans decreased 9%, 14% and 1%, respectively, in 2018 compared to 2017.

The decrease in Medicare Part D prescription drug plan LTV was due to higher plan turnover rate year-over-year.

The decrease in short term constrained LTV was mainly driven by a regulatory change in April 2017 that reduced the maximum length of a short-term policy from one year to 90 days.

The change year-over-year in small business plan LTV was relatively flat.

Individual and Family and Ancillaries

2020 compared to 2019 – The constrained LTV of commissions per approved qualified health plan member increased by 22% in 2020 compared to 2019 primarily due to increased estimates of average plan duration.

The constrained LTV of commissions per short-term health insurance approved member increased 60% in 2020 compared to 2019 primarily as a result of selling plans with higher premium and an increase in estimated average plan duration.

The constrained LTV of commission per approved member for dental plans increased by 13% in 2020 compared to 2019 primarily due to an increase in estimated average plan duration and lower constraints as a result of reduced volatility based on historical trends.

2019 compared to 2018 – The constrained LTV of commissions per qualified and non-qualified health plan for approved members increased by 54% and 41%, in 2019 compared to 2018, respectively, mostly due to improved plan duration.

The constrained LTV of commissions per short-term approved member increased 80% in 2019 compared to 2018, primarily driven by an increase in average plan duration.

Estimated Membership

Estimated membership represents the estimated number of members active as of the date indicated based on the number of members for whom we have received or applied a commission payment during the period of estimation.

The following table shows estimated membership by product as of the periods presented below:

As of December 31,

2020 2019 2018

Medicare Advantage 533,282 404,694 276,357

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Individual and Family (2)

Ancillary (3)

Total Ancillary

116,247 128,487 151,904

Ancillaries (3)

Short-term 23,088 27,862 24,192

Dental 118,647 127,083 138,916

Vision 68,587 71,277 73,987

Other 37,033 38,119 38,136

Total Ancillaries 247,355 264,341 275,231

Small Business (4)

45,771 42,638 39,101

Total Estimated Membership 1,285,346 1,146,115 952,926

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For instance, we reconcile information carriers provide to us and may determine that we were not historically paid commissions owed to us, which would cause us to have underestimated membership.

Conversely, carriers may require us

to return commission payments paid in a prior period due to policy cancellations for members we previously estimated as being active.

Conversely, carriers may require us to return commission payments paid in a prior period due to policy cancellations for members we previously estimated as being active.

We do not update our estimated membership numbers reported in previous periods.

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For example, a member who is active on both an individual and family health insurance plan and a standalone dental plan will be counted as two continuing members.

2020 compared to 2019 – Medicare estimated membership grew 23% as of December 31, 2020 compared to December 31, 2019 driven by a 32% increase in Medicare Advantage, as well as 12% and 11% increases in Medicare Part D prescription drug plan and Medicare Supplement plan estimated membership, respectively.

The overall growth in Medicare estimated membership was due to our investment in our Medicare business.

Individual and family plan estimated membership declined by 10% as of December 31, 2020 compared to December 31, 2019 due to market conditions in the individual and family plan market and our decision to shift our investment to our Medicare business.

Ancillary plan estimated membership as of December 31, 2020 declined 6% compared to estimated membership as of December 31, 2019 primarily as a result of the decline of estimated membership of dental, short-term health plans, and vision plans.

2019 compared to 2018 – Medicare estimated membership grew 46% as of December 31, 2019 compared to December 31, 2018 primarily driven by a 46% and 52% increase in Medicare Advantage and Medicare Part D prescription drug plan estimated membership, respectively.

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Small business estimated membership grew 9% as of December 31, 2019 compared to December 31, 2018, primarily driven by our focus on key partnerships and technology enhancements.

2018 compared to 2017 – Medicare estimated membership grew 26% as of December 31, 2018 compared to December 31, 2017 primarily due to our continued investment in Medicare-related marketing activities, call center capabilities and an improved online experience and our acquisition of GoMedigap.

Individual and family plan estimated membership declined 32% as of December 31, 2018 compared to December 31, 2017 due to the state of the individual and family plan market as a result of health care reform and our continued shift in focus on the Medicare market.

Ancillary plan estimated membership declined 7% as of December 31, 2018 compared to December 31, 2017 as a result of the decline in our ability to cross-sell dental and vision plans as a result of the decline in individual and family plan membership.

Small business plan estimated membership grew 23% as of December 31, 2018 compared to December 31, 2017 due to technology enhancements and an increased conversion rate.

Member Acquisition

Marketing initiatives are an important component of our strategy to increase revenue.

Our marketing initiatives are focused on three primary member acquisition channels:

direct, marketing partners and online advertising and are primarily designed to encourage consumers to complete an application for health insurance.

In addition, we incur customer care and enrollment expenses in assisting applicants during the enrollment process.

The following table shows the variable marketing cost per approved member and the customer care and enrollment expense per approved member metrics for the years presented below:

Marketing initiatives are an important component of our strategy to increase revenue and are primarily designed to encourage consumers to complete an application for health insurance.

Variable marketing cost represents direct costs incurred in member acquisition from our direct, marketing partners and online advertising channels.

In addition, we incur customer care and enrollment expenses (“CC&E”) in assisting applicants during the enrollment process.

Variable marketing costs exclude fixed overhead costs, such as personnel related costs, consulting expenses, facilities and other operating costs allocated to the marketing and advertising department.

The following table shows the estimated variable marketing cost per approved member and the estimated customer care and enrollment expense per approved member metrics for the years presented below.

The numerator used to calculate each metric is the portion of the respective operating expenses for marketing and advertising and customer care and enrollment that is directly related to member acquisition for our sale of Medicare Advantage, Medicare Supplement and Medicare Part D prescription drug plans (collectively, “Medicare Plans”) and for all individual and family major medical plans and short-term health insurance (collectively, “IFP Plans”), respectively.

The denominator used to calculate each metric is based on a derived metric that represents the relative value of the new members acquired.

For Medicare Plans, we call this derived metric Medicare Advantage (“MA”)-equivalent members, and for IFP Plans, we call this derived metric IFP-equivalent members.

The calculations for MA-equivalent members and for IFP-equivalent members are based on the weighted number of approved members for Medicare Plans and IFP Plans during the year, with the number of approved members adjusted based on the relative LTV of the product they are purchasing.

Since the LTV for any product fluctuates from year to year, the weight given to each product was determined based on their relative LTVs at the time of our adoption of ASC 606.

Year Ended December 31,

Medicare variable cost per approved member

Medicare variable marketing cost per approved Medicare Advantage (“MA”)-equivalent member (1)

Medicare CC&E expense per approved MA-equivalent member (2)

Total Medicare cost per approved member

Individual and Family Plan ( “ IFP ” ) variable cost per approved member

IFP variable marketing cost per approved IFP-equivalent member (3)

IFP CC&E expense per approved IFP-equivalent member (4)

Total IFP cost per approved member

Variable marketing cost per approved MA-equivalent member represents direct costs incurred in member acquisition for Medicare Advantage, Medicare Supplement and Medicare Part D plans from our direct, marketing partners and online advertising channels divided by MA-equivalent approved members in a given period.

MA-equivalent members is a derived metric and is equal to the sum of (i) the number of Medicare Part D approved members divided by 4, (ii) the number of Medicare Advantage approved members and (iii) the number of Medicare Supplement approved members in the given period.

Medicare CC&E expense per approved MA-equivalent member is equal to the CC&E expense of our Medicare business included in our operating costs and reported in our Consolidated Statements of Comprehensive Income divided by MA-equivalent approved members in a given period.

MA-equivalent approved members is a derived metric and is equal to the sum of (i) the number of Medicare Part D approved members divided by 4, (ii) the number of Medicare Advantage approved members and (iii) the number of Medicare Supplement approved members in the given period.

Variable marketing cost per approved IFP-equivalent member represents direct costs incurred in member acquisition for IFP plans from our direct, marketing partners and online advertising channels divided by IFP-equivalent approved members in a given period.

IFP-equivalent approved members is a derived metric and is equal to the sum of (i) the number of short-term approved members divided by 3 and (ii) the IFP approved members in the given period.

IFP CC&E expense per approved IFP-equivalent member is equal to the CC&E expense of our IFP business included in our operating costs and reported in our consolidated statement of comprehensive income divided by IFP-equivalent approved members in a given period.

IFP-equivalent approved members is a derived metric and is equal to the sum of (i) the number of short-term approved members divided by 3 and (ii) the IFP approved members in the given period.

2019 compared to 2018 – Variable marketing costs per approved MA-equivalent member increased by 11% in 2019 compared to 2018 , due to an increase in online advertising costs and higher variable marketing costs for select initiatives within the direct and partner channels.

2020 2019 2018

Estimated CC&E cost per approved MA-equivalent approved member (1)

$ 368 $ 355 $ 315

Estimated variable marketing cost per MA-equivalent approved member (1)

Total Medicare estimated cost per approved member $ 752 $ 685 $ 612

Individual and Family Plan:

Estimated CC&E cost per IFP-equivalent approved member (2)

$ 92 $ 102 $ 61

Estimated variable marketing cost per IFP-equivalent approved member (2)

Total IFP estimated cost per approved member $ 175 $ 169 $ 120

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(1) MA-equivalent approved members is a derived metric with a Medicare Part D approved member being weighted at 25% of a Medicare Advantage member and a Medicare Supplement member based on their relative LTVs at the time of our adoption of ASC 606.

We calculate the number of approved MA-equivalent members by adding the total number of approved Medicare Advantage and Medicare Supplement members and 25% of the total number of approved Medicare Part D members during the years presented.

(2) IFP-equivalent approved members is a derived metric with a short-term approved member being weighted at 33% of a major medical individual and family health insurance plan member based on their relative LTVs at the time of our adoption of ASC 606.

We calculate the number of approved IFP-equivalent members by adding the total number of approved qualified and non-qualified health plan members and 33% of the total number of short-term approved members during the years presented.

2020 compared to 2019 – Estimated CC&E costs per approved MA-equivalent member increased 4% in 2020 compared to 2019, due to underperformance of vendor agents which led to lower than expected approved members.

Estimated variable marketing costs per approved MA-equivalent member increased by 16% in 2020 compared to 2019, due to a larger portion of applications originating from our online marketing channels which tend to have higher average marketing costs, and it was also impacted by underperformance of vendor agents which resulted in lower than expected approved members.

Going forward, we expect a reduction in member acquisition costs per approved MA-equivalent member as a result of improved productivity of our agent force by

shifting to a predominantly internal employed agent model and, to a lesser extent, an increase in the percentage of unassisted online enrollment.

Estimated variable CC&E cost per approved IFP-equivalent member decreased 10% in 2020 compared to 2019 due primarily to a decrease in personnel-related costs and an increase in the number of approved members.

Estimated variable marketing cost per approved IFP-equivalent member increased by 24% in 2020 compared to 2019 primarily driven by an increase in variable marketing costs.

2019 compared to 2018 – Estimated CC&E costs per approved MA-equivalent member increased 13% in 2019 compared to 2018, due to our decision to have more customer care agents during the lower volume quarters, and a significant increase in overtime costs and average call length during the peak volume period in the fourth quarter.

Estimated variable marketing costs per approved MA-equivalent member increased by 11% in 2019 compared to 2018, due to an increase in online advertising costs and higher variable marketing costs for select initiatives within the direct and partner channels.

As we increased our spending on digital advertising channel for accelerated enrollment growth and market share expansion, the average costs were higher per member.

Variable CC&E costs per approved MA-equivalent member increased 13% in 2019 compared to 2018 , due to our decision to have more customer care agents during the lower volume quarters, and a significant increase in overtime costs and average call length during the peak volume period in the fourth quarter.

Variable marketing cost per approved IFP-equivalent member increased by 14% in 2019 compared to 2018 primarily driven by a decline in the number of approved members for non-qualified health plans, qualified health plans, and short-term products.

Variable CC&E cost per approved IFP-equivalent member increased 67% in 2019 compared to 2018 , also primarily driven by decline in the number of approved members for non-qualified health plans, qualified health plans, and short-term products as well as increase in investments of IFP-dedicated customer care agents.

2018 compared to 2017 – Medicare CC&E expense per approved MA-equivalent member decreased 5% in 2018 compared to 2017 due to the scalability of a flexible agent staffing model we adopted.

Variable marketing cost per approved MA-equivalent member decreased 12% in 2018 compared to 2017 due to an increase in demand generated from direct channels, including direct mail, television, search engine optimization, and paid search advertising and a reduction in the purchases of customer leads from third-party lead generation sources.

Variable marketing cost per approved IFP-equivalent member increased 18% in 2018 compared to 2017 due to a decline in the number of approved members for short-term products.

IFP CC&E expense per approved IFP-equivalent member decreased 18% in 2018 compared to 2017 due to our cost saving efforts.

The constraints applied to the total estimated lifetime commissions we expect to receive for selling the plan after the carrier approves an application in order to derive the constrained lifetime value of commissions for approved members recognized in the period are as follows:

Year Ended December 31,

Medicare Advantage

Medicare Supplement

Medicare Part D

Individual and Family

Non-Qualified Health Plans

Qualified Health Plans

Small Business

Estimated variable CC&E cost per approved IFP-equivalent member increased 67% in 2019 compared to 2018, also primarily driven by decline in the number of approved members for non-qualified health plans, qualified health plans, and short-term products as well as increase in investments of IFP-dedicated customer care agents.

Estimated variable marketing cost per approved IFP-equivalent member increased by 14% in 2019 compared to 2018 primarily driven by a decline in the number of approved members for non-qualified health plans, qualified health plans, and short-term products.

Results of Operations

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Year Ended December 31,

2020 2019 2018

Commission $ 508,189 87 % $ 466,676 92 % $ 227,211 90 %

Other 74,585 13 % 39,525 8 % 24,184 10 %

Total revenue 582,774 100 % 506,201 100 % 251,395 100 %

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Total operating costs and expenses 529,451 91 % 424,792 84 % 248,844 99 %

Income (loss) from operations

Income from operations 53,323 9 % 81,409 16 % 2,551 1 %

Other income, net 666 — % 2,090 — % 755 — %

Income (loss) before provision (benefit) for income taxes

Provision (benefit) for income taxes

Income before income taxes 53,989 9 % 83,499 16 % 3,306 1 %

Provision for income taxes 8,539 1 % 16,612 3 % 3,065 1 %

Net income $ 45,450 8 % $ 66,887 13 % $ 241 — %

(1) Operating costs and expenses include the following amounts of stock-based compensation expense (in thousands):

Year Ended December 31,

2020 2019 2018

Marketing and advertising $ 5,102 $ 4,230 $ 1,974

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Total stock-based compensation expense $ 25,172 $ 22,570 $ 12,540

Our commission revenue, other revenue and total revenue are summarized as follows for the years presented below (dollars in thousands):

Percentage of total revenue

Our commission revenue, other revenue and total revenue are summarized as follows (dollars in thousands):

Change Change

2020 $ % 2019 $ % 2018

Commission $ 508,189 $ 41,513 9% $ 466,676 $ 239,465 105% $ 227,211

% of total revenue 87 % 92 % 90 %

Other 74,585 35,060 89% 39,525 15,341 63% 24,184

% of total revenue 13 % 8 % 10 %

Total revenue $ 582,774 $ 76,573 15% $ 506,201 254,806 101% $ 251,395

2019 compared to 2018 – Total revenue increased by $254.8 million or 101% in 2019 compared to 2018 driven by the growth in both commission and other revenues.

Commission revenue increased by $239.5 million or 105% in 2019 compared to 2018 , primarily driven by a $217.8 million increase in Medicare commission revenue and a $12.2 million increase in commission revenue for individual and family plans.

The increase in Medicare commission revenue was attributable to an 81% increase in Medicare approved members, higher LTVs for Medicare Advantage plans, and an increase in adjustment revenue from Medicare Advantage plans approved in prior periods.

Of the adjustment revenue of $55.3 million for the year ended December 31, 2019, $42.3 million is related to a change in estimate of expected cash commission collections for Medicare Advantage plans since we began selling such products through the third quarter of 2019.

See Note 2 – Revenue in our Notes to the Consolidated Financial Statements for details.

2020 compared to 2019 – Commission revenue increased $41.5 million, or 9% in 2020 compared to 2019 due to a $35.2 million increase in commission revenue from the Medicare segment and a $6.3 million increase in commission revenue from Individual, Family and Small Business segment.

The increase in commission revenue from the Medicare segment was driven by a 16% increase in Medicare plan approved members, primarily attributable to a 39% growth in Medicare Advantage plan approved members, partially offset by a decrease in net adjustment revenue for the year ended December 31, 2020 compared to 2019 and a decline in the estimated constrained LTV for Medicare Advantage plans.

Excluding $42.3 million revenue recorded in the fourth quarter of 2019 related to a change in estimate of expected cash commission collections for Medicare Advantage plans since we began selling such products through the third quarter of 2019, commission revenue increased 20% in 2020 as compared to 2019.

The increase in commission revenue from Individual, Family and Small Business segment was primarily driven by a 21% increase in adjustment revenue and a 4% increase in individual and family plan approved members.

See Segment Information below for further discussion.

Net adjustment revenue consists of increases in revenue for certain prior period cohorts as well as reductions in revenue for certain prior period cohorts.

We recognize positive adjustments to revenue to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur.

Net adjustment revenue for our Medicare segment in 2020 and 2019 was $5.7 million and $55.3 million, respectively.

For our Individual, Family and Small Business segment net adjustment revenue in 2020 and 2019 was $39.8 million and $32.9 million, respectively.

See Note 2 – Revenue in our Notes to Consolidated Financial Statements for more information.

Other revenue increased $35.1 million, or 89% in 2020 compared to the same period in 2019 due to an increase in Medicare advertising revenue as a result of an increase in the size and number of advertising programs with certain carriers.

2019 compared to 2018 – Commission revenue increased $239.5 million, or 105% in 2019 compared to 2018 due to a $219.0 million increase in commission revenue from the Medicare segment and a $20.5 million increase in commission revenue from Individual, Family and Small Business segment.

The increase in commission revenue from the Medicare segment was attributable to an 81% increase in Medicare plan approved members, higher LTVs for Medicare Advantage plans, and an increase in adjustment revenue from Medicare Advantage plans approved in prior periods.

Of the adjustment revenue of $55.3 million for the year ended December 31, 2019, $42.3 million was related to a change in estimate of expected cash commission collections for Medicare Advantage plans since we began selling such products through the third quarter of 2019.

The increase in individual and family commission revenue was primarily driven by an increase in LTVs for IFP plans and an increase in adjustment revenue from IFP plans approved in prior periods as we continued to observe longer member duration than initially anticipated at the time of enrollment for these plans

Other revenue increased $15.3 million, or 63%, in 2019 compared to 2018, primarily driven by a $17.4 million growth in Medicare advertising revenue, partially offset by a $2.1 million decline in revenue from our individual and family health insurance sponsorship advertising program.

2018 compared to 2017 – Commission revenue increased $50.3 million, or 28%, in 2018, due to an increase of $57.2 million, or 42%, in Medicare commission revenue, partially offset by a $5.0 million decrease in Individual, Family and Small Business commission revenue.

The increase in Medicare commission revenue was due to an increase in approved members of 36%, as well as increases in the LTVs for Medicare Supplement and Medicare Advantage plans for the year ended December 31, 2018 compared to December 31, 2017.

The decrease in Individual, Family and Small Business commission revenue was primarily due to a 46% decline in individual and family health insurance approved members as of December 31, 2018 compared to December 31, 2017 due to the state of the individual and family health insurance plan market as a result of health care reform.

Other revenue increased $10.4 million, or 75% in 2018 compared to 2017 due primarily to increases of $7.7 million in sponsorship and advertising revenue and $4.6 million in lead generation revenue, offset partially by a decrease of $1.9 million in licensing revenue.

Cost of Revenue

Included in cost of revenue are payments related to health insurance plans sold to members who were referred to our website by marketing partners with whom we have revenue-sharing arrangements.

Cost of revenue consists of payments related to health insurance plans sold to members who were referred to our website by marketing partners with whom we have revenue-sharing arrangements.

In order to enter into a revenue-sharing arrangement, marketing partners must be licensed to sell health insurance in the state where the policy is sold.

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Consideration for all book-of-business transfers is being amortized to cost of revenue as we recognize commission revenue related to the transferred members.

The following table presents our cost of revenue for the years presented below (dollars in thousands):

Our cost of revenue is summarized as follows (dollars in thousands):

Change Change

2020 $ % 2019 $ % 2018

Cost of revenue $ 4,083 $ 1,345 49 % $ 2,738 $ 1,510 123 % 1,228

% of total revenue 1 % 1 % — %

2020 compared to 2019 – Cost of revenue increased $1.3 million in 2020, compared to $2.7 million in 2019, primarily due to increased activity from our revenue sharing arrangements.

2019 compared to 2018 – Cost of revenue increased $1.5 million in 2019, compared to $1.2 million in 2018, primarily due to an increased amount of payments to marketing partners with whom we have revenue sharing arrangements.

2018 compared to 2017 – Cost of revenue increased $0.6 million in 2018 compared to 2017, due primarily to an increased amount of payments to our marketing partners.

Marketing and Advertising

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In our Medicare business, our current emphasis is on reducing the contribution from the lead aggregator marketing channel that is characterized by high acquisition costs and emphasizing strategic partnerships including relationships with health care industry participants, such as pharmacies and hospital networks, and with affiliate organizations where our acquisition costs may be significantly lower.

Because the total volume of submitted applications that we receive from our marketing partners is largely outside of our control, particularly during any short-term period, and because of our tiered marketing partner arrangements, we could incur expenses in excess of, or below, the amounts we had planned in periods of rapid change in the volume of submitted applications from marketing partner referrals.

Since the total volume of submitted applications that we receive from our marketing partners is largely outside of our control, particularly during any short-term period, and because of our tiered marketing partner

arrangements, we could incur expenses in excess of, or below, the amounts we had planned in periods of rapid change in the volume of submitted applications from marketing partner referrals.

Similar to our marketing partner channel, expenses in our online advertising channel will increase or decrease in relation to any increase or decrease in consumers referred to our website as a result of search engine advertising or retargeting campaigns.

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Increases in submitted applications resulting from marketing partner referrals or visitors to our website from our online advertising channel has in the past, and could in the future, result in marketing and advertising expenses significantly higher than our expectations.

The following table presents our marketing and advertising expenses for the years presented below (dollars in thousands):

Our marketing and advertising expenses are summarized as follows (dollars in thousands):

Change Change

2020 $ % 2019 $ % 2018

Marketing and advertising $ 209,340 $ 59,091 39 % $ 150,249 $ 67,310 81 % $ 82,939

% of total revenue 36 % 30 % 33 %

2019 compared to 2018 – Marketing and advertising expenses increased by $67.3 million or 81% in 2019 , compared to 2018 , primarily driven by a $59.3 million increase in Medicare plan related variable advertising costs and a $4.4 million increase in personnel costs due to higher headcount as we continued to invest in our marketing initiatives in Medicare-related products.

2018 compared 2017 – Marketing and advertising expenses increased $17.1 million, or 26%, in 2018, primarily due to our investment in Medicare-related marketing initiatives partially offset by a decline in IFP-related marketing costs.

The higher expenses were due to $9.5 million increase in variable advertising costs, $5.7 million increase in personnel costs due to additional headcount, and $1.2 million higher in stock-based compensation expenses.

2020 compared to 2019 – Marketing and advertising expenses increased by $59.1 million or 39% in 2020, compared to 2019, primarily driven by a $56.3 million increase in Medicare plan related variable advertising costs, and $2.4 million increase in consulting.

The increase in variable advertising expenses was due to an increase in our investment for Medicare enrollment growth and the increase in expense as a percentage of revenue reflects lower than expected volumes driven by underperformance of certain marketing channels.

2019 compared 2018 – Marketing and advertising expenses increased by $67.3 million or 81% in 2019, compared to 2018, primarily driven by a $59.3 million increase in Medicare plan related variable advertising costs and a $4.4 million increase in personnel costs due to higher headcount as we continued to invest in our marketing initiatives in Medicare-related products.

Customer Care and Enrollment

Customer care and enrollment expenses primarily consist of compensation and benefits costs for personnel engaged in assistance to applicants who call our customer care center and for enrollment personnel who assist applicants during the enrollment process.

The following table presents our customer care and enrollment expenses for the years presented below (dollars in thousands):

Our customer care and enrollment expenses are summarized as follows (dollars in thousands):

Change Change

2020 $ % 2019 $ % 2018

Customer care and enrollment $ 172,895 $ 38,591 29 % $ 134,304 $ 63,757 90 % $ 70,547

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2020 compared to 2019 – Customer care and enrollment expenses increased by $38.6 million, or 29%, in 2020 compared to 2019.

This increase was primarily due to a $28.4 million increase in personnel costs and a $24.3 million increase f or the external agents hired for the annual enrollment period in the fourth quarter.

The increase in personnel costs resulted from higher headcount in the lower application volume quarters compared to the prior year as we started to hire and train agents earlier in 2019 in preparation for the annual enrollment period in the fourth quarter, a significant increase in overtime costs and average call length during the peak volume period in the fourth quarter, as well as the expenses incurred related to the opening of the new customer care center in Indianapolis.

2018 compared to 2017 – Customer care and enrollment expenses increased $11.4 million, or 19%, in 2018 compared to 2017, primarily due to growth in our Medicare and small group businesses, which resulted in increases of $6.3 million in personnel costs, $4.3 million in consulting costs, and $0.4 million in stock-based compensation expense, partially offset by a decrease of $0.4 million in facilities and other operating costs.

This increase was primarily driven by $27.5 million increase in personnel costs associated with an increase in customer care and enrollment headcount, $5.1 million increase in consulting expenses, $2.8 million increase in facilities and other operating expenses, $1.3 million increase in stock-based compensation and $1.0 million increase in licensing costs.

2019 compared to 2018 – Customer care and enrollment expenses increased by $63.8 million, or 90%, in 2019 compared to 2018.

This increase was primarily due to a $28.4 million increase in personnel costs and a $24.3 million increase for the external agents hired for the AEP in the fourth quarter.

overtime costs and average call length during the peak volume period in the fourth quarter, as well as the expenses incurred related to the opening of the new customer care center in Indianapolis.

Historically, we experienced a seasonal increase in customer care and enrollment costs during the third and fourth quarters primarily due to increased customer care center staffing to handle the anticipated increased volume of health insurance transactions during the AEP in the fourth quarter.

A significant portion of these costs were due to increased outsourced vendor agent costs.

Going forward, we plan to shift to a predominantly internal agent model and will employ and maintain the majority of our health insurance agent force year-round.

We expect to increase our internal agents' utilization outside of the enrollment periods by expanding our offerings of ancillary products and increasing our outbound calling efforts.

As a result, we expect to incur increased customer care and enrollment costs beginning earlier in 2021 and a reduced level of outsourced vendor agent costs during the fourth quarter AEP season.

Technology and Content

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A portion of our technology and content group is located at our wholly-owned subsidiary in China, where technology development costs are generally lower than in the United States.

The following table presents our technology and content expenses for the years presented below (dollars in thousands):

Our technology and content expenses are summarized as follows (dollars in thousands):

Change Change

2020 $ % 2019 $ % 2018

Technology and content $ 65,188 $ 18,103 38 % $ 47,085 $ 15,115 47 % $ 31,970

% of total revenue 11 % 9 % 13 %

2019 compared to 2018 – Technology and content expenses increased $15.1 million , or 47% , in 2019 compared to 2018 , primarily driven by increases of $5.3 million in personnel and compensation costs, $3.3 million in consulting expenses, and $2.6 million in facilities and other operating costs.

2018 compared 2017 – Technology and content expenses decreased $0.9 million, or 3% in 2018 compared to 2017 as a result of a $2.8 million decrease in personnel costs, $0.4 million in depreciation and amortization expense, and $0.1 million in other professional fees, partially offset by increases of $1.0 million in consulting expenses, $0.4 million in facilities and other operating costs, and $0.3 million in stock-based compensation expense.

2020 compared to 2019 – Technology and content expenses increased $18.1 million, or 38%, in 2020 compared to 2019, primarily driven by increases of $8.4 million in personnel and compensation costs, $5.8 million in facilities and other operating costs, $3.9 million in amortization of internally developed software and $1.8 in stock-based compensation expense, partially offset by $2.1 million decrease in consulting expense.

2019 compared 2018 – Technology and content expenses increased $15.1 million, or 47%, in 2019 compared to 2018, primarily driven by increases of $5.3 million in personnel and compensation costs, $3.3 million in consulting expenses, and $2.6 million in facilities and other operating costs.

General and Administrative

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These expenses also include fees paid for outside professional services, including audit, tax, legal, government affairs and information technology fees.

The following table presents our general and administrative expenses for the years presented below (dollars in thousands):

Our general and administrative expenses are summarized as follows (dollars in thousands):

Change Change

2020 $ % 2019 $ % 2018

General and administrative $ 76,452 $ 12,302 19 % $ 64,150 $ 18,322 40 % $ 45,828

% of total revenue 13 % 13 % 18 %

2020 compared to 2019 – General and administrative expenses increased by $12.3 million, or 19%, in 2020 compared to 2019, primarily driven by increases of $5.2 million in compensation and personnel costs, $3.0 million in consulting expense, and $2.8 million in facilities and other operating costs.

2019 compared to 2018 – General and administrative expenses increased by $18.3 million, or 40%, in 2019 compared to 2018, primarily driven by increases of $7.5 million in compensation and personnel costs, $5.4 million in stock-based compensation expense, and $2.5 million in legal and professional fees.

2018 compared to 2017 – General and administrative expenses increased $5.9 million, or 15%, in 2018 compared to 2017, primarily due to increases of $3.2 million in personnel costs, $1.0 million in stock-based compensation expense, $1.1 million in legal and other professional fees, and $0.5 million in facilities and other operating costs.

Acquisition Costs

During 2017, we incurred $0.6 million of costs associated with our acquisition of Wealth, Health and Life Advisors, LLC, which was completed on January 22, 2018.

Acquisition costs incurred in the year ended December 31, 2018 were immaterial.

We did not incur any acquisition costs in the year ended December 31, 2019.

Change in Fair Value of Earnout Liability

During the year ended December 31, 2019 , we recorded a $24.1 million increase in the fair value of earnout liability.

During the year ended December 31, 2020, there were no changes in fair value of earnout liability as the earnout consideration was settled in January 2020.

During the year ended December 31, 2019, we recorded a $24.1 million increase in the fair value of earnout liability.

The adjustments to fair value of earnout liability in both periods were due to an increase in the value of our common stock since our acquisition of GoMedigap in January 2018.

Restructuring Charges

In February 2018, our Board of Directors approved a plan to close our sales call center in Massachusetts and to terminate the employment of certain employees in certain other locations.

As part of the plan, we eliminated approximately 110 full-time positions in the United States, representing approximately 10% of our workforce primarily in our customer care and enrollment groups, and to a lesser extent, in our marketing and advertising and general and administrative groups.

We incurred $1.9 million for employee termination benefits and related costs in the year ended December 31, 2018.

The restructuring activities comprising the plan were completed during the year ended December 31, 2018.

During the year ended December 31, 2019 , we did not incur any restructuring costs.

The following table presents our restructuring charge for the years presented below (dollars in thousands):

Restructuring charge

% of total revenue

The adjustment to fair value of earnout liability in 2019 was due to an increase in the value of our common stock since our acquisition of GoMedigap in January 2018.

Amortization of Intangible Assets

The following table presents our intangible asset amortization expense for the years presented below (dollars in thousands):

Our intangible asset amortization expense is summarized as follows (dollars in thousands):

Change Change

2020 $ % 2019 $ % 2018

Amortization of intangible assets $ 1,493 $ (694) (32) % $ 2,187 $ 96 5 % $ 2,091

% of total revenue — % — % 1 %

2020 compared to 2019 – Amortization expense was primarily related to intangible assets purchased through our acquisitions.

Amortization expense decreased in 2020 compared to 2019 due to certain intangible assets being fully amortized in 2020.

2019 compared to 2018 – Amortization expense was primarily related to intangible assets purchased through our acquisitions of PlanPrescriber and GoMedigap.

Amortization expense in 2019 remained flat compared to 2018.

2018 compared to 2017 – Amortization expense for the year ended December 31, 2018 increased year over year due to the amortization of intangible assets from our acquisition of GoMedigap acquisition completed on January 2018.

Other Income, Net

The following table presents our other income, net for the years presented below (dollars in thousands):

Other income, net, primarily consisted of interest income, sublease income, and margin earned on commissions received from Medicare plan members transferred to us in 2010 through 2012 by a broker partner, partially offset by interest expense on finance leases and debt and other bank fees.

Our other income, net is summarized as follows (dollars in thousands):

Change Change

2020 $ % 2019 $ % 2018

Other income, net $ 666 $ (1,424) (68) % $ 2,090 $ 1,335 177 % $ 755

% of total revenue — % — % — %

Other income, net, primarily consisted of margin earned on commissions received from Medicare plan members transferred to us in 2010 through 2012 by a broker partner, whereby we became the broker of record on the underlying policies.

In addition, other income, net included interest income earned on our invested cash, cash equivalents and marketable securities balances, offset by administrative bank fees, investment management fees and interest expense on capital lease obligations and our debt facility.

2019 compared to 2018 – Other income, net, increased by $1.3 million or 177% in 2019 compared to 2018 primarily driven by an increase in interest income and an increase in margin earned on from members previously transferred from a broker partner, partially offset by the accretion of debt related costs incurred from the debt facility that we entered into in 2018 and amended in 2019.

2018 compared to 2017 – Other income, net, decreased by $0.4 million in 2018, primarily due to an increase in interest expense as a result of the debt facility the we entered into in 2018 and realized losses.

Provision (Benefit) for Income Taxes

The following table presents our provision (benefit) for income taxes for the years presented below (dollars in thousands):

Provision (benefit) for income taxes

2020 compared to 2019 – Other income, net, decreased by $1.4 million or 68% in 2020 compared to 2019 due primarily to a decrease in interest income.

transferred from a broker partner, partially offset by the accretion of debt related costs incurred from the debt facility that we entered into in 2018 and amended in 2019.

Provision for Income Taxes

The following table presents our provision for income taxes for the years presented below (dollars in thousands):

Change Change

2020 $ % 2019 $ % 2018

Provision for income taxes $ 8,539 $ (8,073) (49) % $ 16,612 $ 13,547 442 % $ 3,065

Effective tax rate 15.8 % 19.9 % 92.7 %

2019 compared to 2018 – For the year ended December 31, 2019 , we recorded a provision for income taxes of $16.6 million representing an effective tax rate of 19.9% , which is lower than the statutory federal rate primarily due to stock-based compensation windfalls and research and development tax credits, offset by state taxes and lobbying and other non-deductible expenses.

2018 compared to 2017 – For the year ended December 31, 2018, we recorded a provision for income taxes of $3.1 million, representing an effective tax rate of 92.7%, which was higher than the statutory federal rate due primarily to a one-time increase of $2.4 million in the valuation allowance on deferred tax assets related to certain state net operating loss carryforwards that are expected to expire unutilized.

The remaining $0.7 million of provision for income taxes was impacted by lobbying and other non-deductible expenses, partially offset by research and development tax credits and stock-based compensation windfalls.

2020 compared to 2019 – For the year ended December 31, 2020, we recorded a provision for income taxes of $8.5 million representing an effective tax rate of 15.8%, which is lower than the effective tax rate of 19.9% in 2019 primarily due to increased impact from stock-based compensation tax benefits and higher research and development tax credits as compared to 2019.

2019 compared to 2018 – For the year ended December 31, 2019, we recorded a provision for income taxes of $16.6 million representing an effective tax rate of 19.9%, which is lower than the effective federal tax rate of 92.7% for 2018 primarily due to a $2.4 million valuation allowance which was recorded in 2018 against certain state net operating losses.

Segment Information

We report segment information based on how our chief executive officer, who is our chief operating decision maker, or CODM, regularly reviews our operating results, allocates resources, and makes decisions regarding our business operations.

The performance measures of our operating segments include revenues and profit and loss.

The performance measures of our segments include total revenue and profit.

Our business structure is comprised of two operating segments:

• Individual, Family and Small Business.

Our CODM does not separately evaluate assets by segment, and therefore assets by segment are not presented.

The revenue in our Medicare segment consists primarily of commissions earned from our sale of Medicare-related health insurance plans, including Medicare Advantage, Medicare Supplement and Medicare Part D prescription drug plans, and to a lesser extent, ancillary products sold to our Medicare-eligible customers, including but not limited to, dental and vision insurance, as well as our advertising program that allows Medicare-related carriers to purchase advertising on a separate website developed, hosted and maintained by us and our delivery and sale to third parties of Medicare-related health insurance leads generated by our ecommerce platforms and our marketing activities.

In addition, in connection with our Medicare plan advertising program, we may use direct marketing channels including direct television and direct mail to generate leads for carriers participating in the program.

In return for our services, we typically are paid either a flat amount, a monthly amount, or, in our individual and family health insurance sponsorship advertising program, a performance-based fee based on metrics such as submitted health insurance applications.

The revenue in our Individual, Family and Small Business segment consists primarily of commissions earned from our sale of individual and family and small business health insurance plans and ancillary products sold to our non-Medicare-eligible customers, including but not limited to, short-term, dental, vision, life, short-term disability and long-term disability insurance.

Our CODM does not separately evaluate assets by segment, with the exception of commissions receivable, by segment, and therefore assets by segment are not presented.

The Medicare segment consists primarily of commissions earned from our sale of Medicare-related health insurance plans, including Medicare Advantage, Medicare Supplement and Medicare Part D prescription drug plans, and to a lesser extent, ancillary products sold to our Medicare-eligible applicants, including but not limited to, dental and vision plans, as well as our advertising program that allows Medicare-related carriers to purchase advertising on a separate website developed, hosted and maintained by us and our delivery and sale to third parties of Medicare-related health insurance leads generated by our ecommerce platforms and our marketing activities.

The Individual, Family and Small Business segment consists primarily of commissions earned from our sale of individual, family and small business health insurance plans and ancillary products sold to our non-Medicare-eligible applicants, including but not limited to, dental, vision, and short-term health insurance.

To a lesser extent, the Individual, Family and Small Business segment consists of amounts earned from our online sponsorship program that allows carriers to purchase advertising space in specific markets in a sponsorship area on our website, our licensing to third parties the use of our health insurance ecommerce technology, and our delivery and sale to third parties of individual and family health insurance leads generated by our ecommerce platforms and our marketing activities.

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Other indirect general and administrative operating expenses are managed in a corporate shared services environment and, since they are not the responsibility of segment operating management, are not allocated to the operating segments and instead reported within Corporate.

Segment profit is calculated as total revenue for the applicable segment less direct and allocated marketing and advertising, customer care and enrollment, technology and content and general and administrative operating expenses, excluding stock-based compensation, depreciation and amortization expense and amortization of intangible assets.

The following table presents summary results of our operating segments for the years presented below (in thousands):

Segment profit is calculated as total revenue for the applicable segment less direct and allocated marketing and advertising, customer care and enrollment, technology and content and general and administrative operating expenses, excluding stock-based compensation expense, change in fair value of earnout liability, depreciation and amortization expense, and amortization of intangible assets.

Our operating segment revenue and profit are summarized as follows (in thousands):

Change Change

2020 $ % 2019 $ % 2018

Medicare $ 516,762 $ 69,801 16 % $ 446,961 $ 236,391 112 % $ 210,570

Individual, Family and Small Business 66,012 6,772 11 % 59,240 18,415 45 % 40,825

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Total segment profit 141,346 (37,256) (21) % 178,602 111,955 168 % 66,647

Corporate (57,664) (12,290) 27 % (45,374) (12,378) 38 % (32,996)

Stock-based compensation expense (25,172) (2,602) 12 % (22,570) (10,281) 84 % (12,289)

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Change in fair value of earnout liability — 24,079 (100) % (24,079) (11,779) 96 % (12,300)

Restructuring charge

Restructuring charges — — * — 1,865 (100) % (1,865)

Acquisition costs — — * — 76 (100) % (76)

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Other income, net 666 (1,424) (68) % 2,090 1,335 177 % 755

Income (loss) before income taxes

Income before income taxes $ 53,989 $ (29,510) (35) % $ 83,499 $ 80,193 2,426 % $ 3,306

* Percentage calculated is not meaningful.

2020 compared to 2019

Revenue – Revenue from Medicare segment revenue grew $69.8 million or 16% in 2020 compared to 2019, primarily attributable to an increase in Medicare Advantage plan related commission revenue of $35.2 million and an increase in other revenue of $34.6 million.

Excluding $42.3 million revenue resulting from a change in estimate recorded in the fourth quarter of 2019 regarding expected cash commission collections for Medicare Advantage plans since we began selling such products through the third quarter of 2019, Medicare segment revenue increased 28% in 2020 compared to 2019.The increase in Medicare Advantage commission revenue was driven by 39% growth in Medicare Advantage approved members.

The overall growth of our Medicare business was a result of our investment and marketing efforts in this segment and the increases in approved application volume due to the

open enrollment period in the first quarter and the COVID-19 related special enrollment period introduced in the second quarter.

The increase in other revenue was driven by an increase in advertising revenue due to increases in size and number of advertising arrangements.

Revenue from Individual, Family and Small Business segment grew $6.8 million, or 11% in 2020 compared to 2019, primarily attributable to $6.3 million increase in commission revenue.

The increase in commission revenue from Individual, Family and Small Business segment was primarily due to an increase in adjustment revenue of $7.0 million in 2020 compared to 2019, partially offset by $0.6 million decrease in commission revenue from members approved during the period.

We recognized $39.8 million adjustment revenue in 2020 due to stronger retention rates for earlier period cohorts of certain products based on our latest LTV assessment.

Segment Profit – Our Medicare segment profit was $102.0 million in 2020, a decrease of $53.3 million or 34%, compared to 2019.

This was primarily due to a $123.1 million increase in operating expenses, excluding stock-based compensation expense, change in earnout liability, depreciation and amortization expenses, and amortization of intangible assets, partially offset by a $69.8 million increase in revenue.

The increase in operating expenses was mostly attributable to increases in marketing costs and customer care and enrollment costs as we continued to invest in telesales capacity, internal agent counts, agent productivity tools and incentives, customer engagement and retention initiatives, and enhancements to our technology platform.

Our Medicare segment profit was negatively impacted by the underperformance of our outsourced external agent force and certain of our marketing channels during the fourth quarter 2020 AEP.

We also believe that some external factors, including the COVID-19 pandemic and, to a lesser extent, the prolonged election cycle, might have influenced consumer demand.

Our Individual, Family and Small Business segment profit was $39.4 million in 2020, an increase of $16.0 million or 69% compared to 2019.

The increase was primarily driven by a $6.8 million increase in revenue and a $9.2 million decrease in operating expenses, excluding stock-based compensation expense, change in earnout liability, depreciation and amortization expenses, and amortization of intangible assets.

2019 compared to 2018

Revenue – Medicare segment revenue grew $236.4 million or 112% in 2019 compared to 2018, primarily attributable to an increase in Medicare Advantage plan related commission revenue of $196.4 million.

This was driven by 88% increase in approved Medicare Advantage applications in 2019 compared to 2018 and an increase in adjustment revenue for Medicare Advantage plans approved in prior periods.

See Note 2 – Revenue in our Notes to the Consolidated Financial Statements for details.

Individual, Family and Small Business segment revenue grew $18.4 million or 45% in 2019 compared to 2018 , primarily attributable to $11.1 million increase in non-qualified health plans commission revenue and $7.0 million increase in ancillary commission revenue.

Most of these increases were contributed by the adjustment revenue.

Revenue from Individual, Family and Small Business segment grew $18.4 million or 45% in 2019 compared to 2018, primarily attributable to $11.1 million increase in non-qualified health plans commission revenue and $7.0 million increase in ancillary commission revenue.

The increases were primarily attributable to an increase in net adjustment revenue.

Segment Profit – Our Medicare segment profit was $155.2 million in 2019, an increase of $94.4 million or 155%, compared to 2018.

This was primarily driven by a $236.4 million increase in revenue, partially offset by a $142.0 million increase in operating expenses.

This was primarily driven by a $236.4 million increase in revenue, partially offset by a $142.0 million increase in operating expenses, excluding stock-based compensation expense, change in earnout liability, depreciation and amortization expenses, and amortization of intangible assets.

The increase in operating expenses was mostly attributable to increased variable marketing costs and customer care and enrollment costs.

Individual, Family and Small Business segment profit was $23.4 million in 2019 , an increase of $17.6 million or 303% compared to 2018 .

The increase was primarily driven by an $18.4 million increase in revenue and a $0.9 million increase in operating expenses.

2018 compared to 2017

Revenue – Medicare segment revenue increased $68.1 million, or 48%, in 2018 compared to 2017 primarily due to a $57.3 million increase in Medicare plan-related commission revenue and a $10.9 million increase in other revenue.

The increase in Medicare commission revenue was primarily attributable to a 36% increase in Medicare approved applications in 2018 compared to 2017 and an increase in lifetime value of commissions per Medicare Supplement and Medicare Advantage approved applications.

The increase in other Medicare revenue was driven primarily by carrier advertising programs and our sale of Medicare leads.

Our Individual, Family and Small Business segment revenue decreased $7.4 million, or 15%, in 2018 compared to 2017, primarily attributable to a $6.9 million decrease in commission revenue and a $0.5 million decrease in other revenue.

The decrease in Individual, Family and Small Business segment commission revenue was primarily due to a 46% decline in individual and family health insurance approved applications in 2018 compared to 2017.

The decrease in other revenue resulted from a decrease in individual and family health insurance applications submission during 2018 compared to 2017.

Segment Profit – Our Medicare segment profit was $60.8 million in 2018, a $38.7 million, or 175%, improvement compared to profit of $22.1 million in 2017.

The improvement in profit from the Medicare segment in 2018 was primarily due to a $68.1 million increase in revenue, of which $57.3 million related to Medicare commission revenue and $10.9 million related to other revenue, partially offset by a $29.4 million increase in operating expenses.

The increase in revenue from 2017 to 2018 was mostly due to an increase in approved applications.

The increase in operating expenses was primarily attributable to an increase in personnel costs associated with higher headcount, an increase in variable advertising and customer care and enrollment expenses associated with the increase in applications and an increase in the number of licensed sales agents.

Individual, Family and Small Business segment profit was $5.8 million in 2018, a $3.8 million, or 39%, decrease compared to profit of $9.6 million from the Individual, Family and Small Business segment in 2017.

The decrease in profit from the Individual, Family and Small Business segment in 2018 was primarily due to a $7.4 million decrease in revenue, of which $5.0 million related to a decrease in individual and family health plan revenue and $3.5 million related to ancillary plan revenue, partially offset by a $1.1 million increase in Small Business revenue.

The decrease in Individual, Family and Small Business segment revenue from 2017 to 2018 was mainly due to a decline in individual and family health insurance approved members.

Our Individual, Family and Small Business segment profit was $23.4 million in 2019, an increase of $17.6 million or 303% compared to 2018.

The increase was primarily driven by an $18.4 million increase in revenue and a $0.9 million increase in operating expenses, excluding stock-based compensation expense, change in earnout liability, depreciation and amortization expenses, and amortization of intangible assets.

Liquidity and Capital Resources

Our cash, cash equivalents, and short-term marketable securities are summarized as follows (in thousands):

December 31, 2020 December 31, 2019

Cash and cash equivalents $ 43,759 $ 23,466

Short-term marketable securities 49,620 —

Total cash, cash equivalents, and short-term marketable securities $ 93,379 $ 23,466

We believe our current cash and cash equivalents, credit facility, and expected cash collections will be sufficient to fund our operations for at least twelve months after the filing date of this Annual Report on Form 10-K.

Our future capital requirements will depend on many factors, including our expected membership and retention rates, our level of investment in technology, marketing and advertising and our customer care initiatives.

Our future capital requirements will depend on many factors, including our expected membership, retention rates, and our level of investment in technology, marketing and advertising and our customer care initiatives.

In addition, our cash position could be impacted by further acquisitions and investments we make to pursue our growth strategy.

While we recognize constrained LTV as revenue at the time applications are approved, our collection of the cash commissions resulting from approved applications generally occurs over a number of years.

The expense associated with approved applications, however, is generally incurred at the time of enrollment.

As a result, the net cash flow resulting from approved applications is generally negative in the period of revenue recognition and generally becomes positive over the lifetime of the member.

In periods of membership growth, cash receipts associated with new and continuing members may be less than the cash outlays to acquire new members.

We expect a reduction in cash and cash equivalents in the future resulting from our continued investments to grow our business.

To the extent that available funds are insufficient to fund our future activities or to execute our financial strategy, we may raise additional capital through bank debt, or public or private equity or debt financing to the extent such funding sources are available.

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Cash equivalents, which are comprised of financial instruments with an original maturity of 90 days or less from the date of purchase, primarily consist of money market funds.

As of December 31, 2019 and 2018 , we had 1.0 million and 0.8 million treasury shares, respectively, that were previously surrendered by employees to satisfy tax withholdings in connection with the vesting of certain restricted stock units.

As of December 31, 2019 and 2018 , we had a total of 11.6 million and 11.4 million shares, respectively, held in treasury.

The following table presents a summary of our cash flows for the years presented below (in thousands):

The increase in cash and cash equivalents reflects $201.2 million of net cash provided by financing activities, partially offset by $73.3 million of net cash used in investing activities and $107.9 million of net cash used in operating activities.

See Note 6 — Equity in our Notes to Consolidated Financial Statements for information regarding our equity offering in March 2020 .

We also had $3.4 million in restricted cash as of December 31, 2020 and December 31, 2019.

As of December 31, 2020 and 2019, we had 1.1 million and 1.0 million shares held in treasury stock, respectively, that were shares repurchased to satisfy tax withholding obligations.

As of December 31, 2020 and 2019, we had a total of 11.8 million and 11.6 million shares held in treasury stock, respectively, including 10.7 million shares previously repurchased.

Our cash flows are summarized as follows (in thousands):

Year Ended December 31,

2020 2019 2018

Net cash used in operating activities $ (107,860) $ (71,492) $ (3,230)

Net cash used in investing activities (73,283) (16,944) (25,757)

Net cash provided by (used in) financing activities

The increase in cash and cash equivalents reflects $102.1 million cash provided by financing activities, partially offset by $71.5 million cash used in operating activities and $16.9 million cash used investing activities.

As of December 31, 2019 , we had a restricted cash balance of $3.4 million .

Net cash provided by financing activities 201,249 102,141 1,860

Operating Activities

Cash provided by operating activities primarily consists of net income, adjusted for certain non-cash items including depreciation and amortization;

amortization of intangible assets and internally developed software;

stock-based compensation expense and the effect of changes in working capital and other activities.

Net cash used in operating activities primarily consists of net loss, adjusted for certain non-cash items, including change in fair value of earnout liability, deferred income taxes, stock-based compensation expense, depreciation and amortization, amortization of intangible assets and internally developed software, other non-cash items, and the effect of changes in working capital and other activities.

Collection of commissions receivable depends upon the timing of our receipt of commission payments and associated commission reports from health insurance carriers.

If we were to experience a delay in receiving a commission payment from a health insurance carrier within a quarter, our operating cash flows for that quarter could be adversely impacted.

A significant portion of our marketing and advertising expenses is driven by the number of health insurance applications submitted on our ecommerce platform.

Since our marketing and advertising costs are expensed and generally paid as incurred and since commission revenue is recognized upon approval of a member but commission payments are paid to us over time, our operating cash flows could be adversely impacted by a substantial decrease in the volume of applications submitted during a quarter or negatively impacted by a substantial increase in attrition during a quarter.

During the Medicare annual enrollment period, we experience an increase in the number of submitted Medicare-related health insurance applications and marketing and advertising expenses compared to outside of Medicare annual enrollment periods.

Similarly, during the open enrollment periods for individual and family health insurance plans, we experience an increase in the number of submitted individual and family plan health insurance applications and marketing and advertising expenses compared to outside of open enrollment periods.

The timing of enrollment periods impacts our cash flows typically during the third quarter as we increase the number of enrollment agents to get ready for the open enrollment in the fourth quarter.

Year Ended December 31, 2019 – Cash used in operating activities was $71.5 million in 2019 , consisted of net income of $66.9 million and adjustments for non-cash items totaling $71.1 million , offset by cash used for working capital needs and other activities of $209.5 million .

A significant portion of our marketing and advertising expenses is driven by the number of health insurance applications submitted on our ecommerce platforms.

Since our marketing and advertising costs are expensed and generally paid as incurred, and since commission revenue is recognized upon approval of a member but commission payments are paid to us over time, our operating cash flows could be adversely impacted by a substantial increase in the volume of applications submitted during a quarter or positively impacted by a substantial decline in the volume of applications submitted during a quarter.

During the Medicare AEP which takes place during the last quarter of each year, we experience an increase in the number of submitted Medicare-related health insurance applications and marketing and advertising expenses compared to outside of Medicare annual enrollment periods.

Similarly, during open enrollment periods for individual and family health insurance plans which takes place during the first quarter of each year, we experience an increase in the number of submitted individual and family plan health insurance applications and marketing and advertising expenses compared to outside of open enrollment periods.

The timing of open enrollment periods for individual and family health insurance and the Medicare AEP and open enrollment period for Medicare-related health insurance can positively or negatively affect our cash flows during each quarter.

Year Ended December 31, 2020 – Net cash used in operating activities was $107.9 million during the year ended December 31, 2020, primarily driven by cash used from changes in net operating assets and liabilities of $201.3 million, partially offset by net income of $45.5 million and adjustments for non-cash items of $48.0 million.

Cash used from changes in net operating assets and liabilities during the year ended December 31, 2020 primarily consisted of an increase of $205.2 million in contract assets – commissions receivable, a decrease of $9.0 million in accrued compensation and benefits, an increase of $6.2 million in prepaid expenses and other assets and a decrease of $2.3 million in deferred revenue, partially offset by increases of $12.3 million in accounts payable, $5.7 million in accrued marketing expenses, and $2.8 million in accrued expenses and other liabilities.

Adjustments for non-cash items primarily consisted of $25.2 million of stock-based compensation expense, $8.8 million change in deferred income taxes, $7.8 million of amortization of internally-developed software, and $1.5 million of amortization of intangible assets.

Year Ended December 31, 2019 – Net cash used in operating activities was $71.5 million in 2019, consisted of cash used for working capital needs and other activities of $209.5 million, partially offset by net income of $66.9 million and adjustments for non-cash items totaling $71.1 million.

Adjustments for non-cash items primarily consisted of $24.1 million change in fair value of earnout liabilities, $22.6 million of stock-based compensation expense, $16.2 million increase in deferred income taxes, $3.8 million of amortization of internally-developed software, $3.0 million of depreciation and amortization, and $2.2 million of amortization of intangible assets.

The cash decrease resulting from changes in working capital in 2019 primarily consisted of $243.4 million increase in commissions receivable, partially offset by increases of $19.7 million in accounts payable, $8.8 million in accrued compensation and benefits, $1.9 million in accrued expenses and other liabilities, $1.7 million in deferred revenue, and $1.0 million in accrued marketing expenses.

Year Ended December 31, 2018 – Cash used in operating activities was $3.2 million during 2018, consisted of net income of $0.2 million, offset by cash used for working capital needs and other activities of $38.6 million and adjustments for non-cash items of $35.1 million.

Adjustments for non-cash items primarily consisted of $12.5 million of stock-based compensation expense, $12.3 million change in fair value of earnout liability, $2.8 million decrease in deferred income taxes, $2.5 million of depreciation and amortization, $2.2 million of amortization of internally-developed software and $2.1 million of amortization of intangible assets.

The cash decrease resulting from changes in working capital during the year ended December 31, 2018 primarily consisted of an increase of $51.0 million in commissions receivable and a $2.1 million increase in trade receivables, partially offset by increases of $6.3 million in accrued marketing expenses, $5.1 million in accrued compensation and benefits, $1.4 million in accounts payable, $0.9 million in other current liabilities, $0.5 million in deferred revenue, and $0.2 million in prepaid expenses.

Year Ended December 31, 2017 – Cash used in operating activities was $15.5 million during 2017, consisted of a net income of $25.4 million, offset by cash used for working capital needs and other activities of $25.6 million and adjustments for non-cash items of $15.4 million.

Adjustments for non-cash items primarily consisted of $9.7 million of stock-based compensation expense, $2.5 million of amortization of intangible assets and internally-developed software and $2.8 million of depreciation and amortization and $30.3 million decrease in deferred income taxes.

The cash decrease resulting from changes in working capital during the year ended December 31, 2017 primarily consisted of decreases of $1.3 million in other liabilities, $3.4 million in accrued marketing expenses, $1.9 million in accounts payable and $0.5 million in deferred revenue and increases of $21.6 million in commissions receivable and $1.9 million in prepaid expenses and other current assets, partially offset by a $4.6 million increase in accrued compensation and benefits and a $0.5 million decrease in accounts receivable.

Year Ended December 31, 2018 – Net cash used in operating activities was $3.2 million during the year ended December 31, 2018, primarily driven by changes in net operating assets and liabilities of $38.6 million and, partially offset by adjustments for non-cash items of $35.1 million.

Adjustments for non-cash items primarily consisted of $12.5 million of stock-based compensation expense, $12.3 million change in fair value of earnout liability, $2.8 million change in deferred income taxes, $2.5 million of depreciation and amortization, $2.2 million of

amortization of internally-developed software, and $2.1 million of amortization of intangible assets.

Cash used from changes in net operating assets and liabilities during the year ended December 31, 2018 primarily consisted of increases of $51.0 million in contract assets – commissions receivable and $2.1 million in accounts receivable, partially offset by increases of $6.3 million in accrued marketing expenses, $5.1 million in accrued compensation and benefits, and $1.4 million in accounts payable.

Investing Activities

Our investing activities primarily consist of purchases of computer hardware and software to enhance our website and customer care operations, leasehold improvements related to facilities expansion, internal-use software and the purchase of certain intangible assets.

Year Ended December 31, 2019 – Net cash used in investing activities of $16.9 million during 2019 mainly consisted of $10.2 million of in capitalized internal-use software and website development costs and $6.6 million used to purchase property and equipment and other assets.

Our investing activities primarily consist of purchases and redemption of marketable securities, purchases of computer hardware and software to enhance our website and customer care operations, leasehold improvements related to facilities expansion, internal-use software and the purchase of certain intangible assets.

Year Ended December 31, 2020 – Net cash used in investing activities of $73.3 million during 2020 mainly consisted of $180.5 million used to purchase marketable securities, $16.0 million of capitalized internal-use software and website development costs, and $7.8 million used to purchase property and equipment and other assets, partially offset by $131.0 million of proceeds from redemption and maturities of marketable securities.

Year Ended December 31, 2019 – Net cash used in investing activities of $16.9 million during 2019 mainly consisted of $10.2 million of capitalized internal-use software and website development costs and $6.6 million used to purchase property and equipment and other assets.

Year Ended December 31, 2018 – Net cash used in investing activities of $25.8 million during 2018 was due to $14.9 million of net cash used to acquire GoMedigap, $6.3 million of capitalized internal-use software and website development costs, and $4.5 million used to purchase property and equipment and other assets.

Year Ended December 31, 2017 – Net cash used in investing activities of $5.1 million during 2017 was due to $3.2 million in capitalized internal-use software and website development costs and $1.9 million used to purchase property and equipment and other assets.

Financing Activities

Year Ended December 31, 2019 – Net cash provided by financing activities of $102.1 million during 2019 was primarily attributable to $126.1 million proceeds from issuance of common stock, net of issuance costs and $5.5 million net proceeds from exercise of common stock options, partially offset by $14.3 million cash used to net-share settle the tax obligation related to vesting equity awards, $9.5 million acquisition-related contingent payments, and $5.0 million repayment of debt.

Year Ended December 31, 2018 – Net cash provided by financing activities of $1.9 million during 2018 was primarily due to $5.0 million proceeds from drawing on our line of credit, $2.7 million net proceeds from exercises of common stock options, partially offset by $4.5 million used to net-share settle the tax obligation related to vesting equity awards, $1.2 million of debt issuance costs, and $0.1 million for principal payments in connection with capital leases.

Year Ended December 31, 2017 – Net cash used in financing activities of $0.9 million during 2017 was primarily due to $1.0 million proceeds from the exercise of stock options and $1.8 million used to net-share settle the tax obligation related to vesting equity awards.

On January 22, 2018, we completed our acquisition of Wealth, Health and Life Advisors, LLC, more commonly known as GoMedigap, a technology-enabled provider of Medicare Supplement enrollment services.

The acquisition price paid at closing of the transaction consisted of cash of $15.0 million, less $0.1 million cash acquired, and approximately 294,637 shares of our common stock.

In addition, we are obligated to pay an additional $20.0 million in cash and 589,275 shares of our common stock, subject to the terms of the acquisition agreement and upon final determination of the achievement of certain milestones in 2018 and 2019.

See Note 5 – Fair Value Measurements of our Notes to Consolidated Financial Statements for the discussion on the milestone payments.

Year Ended December 31, 2020 – Net cash provided by financing activities of $201.2 million during 2020 was primarily attributable to $228.0 million proceeds from issuance of common stock, net of issuance costs and $1.9 million of net proceeds from exercise of common stock options, partially offset by $19.8 million cash used for share repurchases to satisfy employee tax withholding obligations and $8.8 million of acquisition-related contingent consideration payments.

Year Ended December 31, 2019 – Net cash provided by financing activities of $102.1 million during 2019 was primarily attributable to $126.1 million proceeds from issuance of common stock, net of issuance costs and $5.5 million of net proceeds from exercise of common stock options, partially offset by $14.3 million cash used for share repurchases to satisfy employee tax withholding obligations, $9.5 million of acquisition-related contingent payments, and $5.0 million repayment of debt.

Year Ended December 31, 2018 – Net cash provided by financing activities of $1.9 million during 2018 was primarily due to $5.0 million of proceeds from drawing on our line of credit, $2.7 million of net proceeds from exercises of common stock options, partially offset by $4.5 million used for share repurchases to satisfy employee tax withholding obligations, and $1.2 million of debt issuance costs.

Common Stock Issuance

In January 2019, we entered into an underwriting agreement with RBC Capital Markets, LLC and Credit Suisse Securities (USA) LLC as representatives of the several underwriters to issue and sell a total of 2,760,000 shares of our common stock in a public offering, which total included the exercise in full of the underwriters’ option to purchase 360,000 additional shares of common stock, at a price to the public of $48.50 per share, for total net proceeds of $126.2 million, after deducting underwriting discounts, commissions and offering expenses.

In March 2020, we entered into an underwriting agreement to issue and sell a total of 2,070,000 shares of common stock, which total included the exercise in full of the underwriters’ option to purchase 270,000 additional shares of common stock, at a price to the public of $115.00 per share.

Net proceeds from the offering were approximately $228.0 million after deducting underwriting discounts, commissions and expenses of the offering.

We intend to use the net proceeds of the offering for general corporate purposes, including working capital.

Preferred Stock

On February 17, 2021, we entered into an investment agreement with H.I.G.

pursuant to which we have agreed to sell to H.I.G.

at closing, 2,250,000 shares of our newly designated Series A preferred stock at an aggregate purchase price of $225.0 million, at a price of $100 (the “Stated Value” per share of Series A preferred stock) per share.

The Private Placement is subject to closing conditions, including, among others:

(ii) the confirmation by Nasdaq that it has no objection to the terms and conditions of the Private Placement;

and (iii) the determination that consummation of the Private Placement would not cause our outside auditor to no longer be deemed independent under the rules and regulations of the Securities and Exchange Commission or the Public Company Accounting Oversight Board.

Dividends will initially accrue on the Series A preferred stock daily at 8% per annum on the Stated Value per share and compound semiannually, payable in kind until the second anniversary of the closing date of the Private Placement on June 30 and December 31 of each year, beginning on June 30, 2021, and thereafter 6% payable in kind and 2% payable in cash in arrears on June 30 and December 31 of each year, beginning on June 30, 2023 (each, a “Cash Dividend Payment Date”).

Dividends payable in kind will be cumulative.

The Series A preferred stock will also participate, on an as-converted basis (without regard to conversion limitations) in all dividends paid to the holders of our common stock.

If we fail to declare and pay full cash dividend payments as required by the certificate of designations for the Series A preferred stock for two consecutive Cash Dividend Payment Dates, the cash dividend rate then in effect shall increase one time by 2%, retroactive to the first day of the semiannual period immediately preceding the first Cash Dividend Payment Date at which we failed to pay such accrued cash dividends, until such failure to pay full cash dividends is cured (at which time the dividend rate shall return to the rate prior to such increase).

The dividend rights of the Series A preferred stock are senior to all of our other equity securities.

At any time on or after the sixth anniversary of the closing date of the Private Placement, each holder of Series A preferred stock will have the right to require us to redeem all or any portion of the Series A preferred stock for cash at a price calculated as set forth in the certificate of designations.

In addition, upon certain change of control events, holders of Series A preferred stock can require us, subject to certain exceptions, to repurchase any or all of their Series A preferred stock.

Credit Agreement

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On December 20, 2019, we amended our revolving credit facility agreement with RBC (the “Amendment”) and increased the maximum borrowing amount to $75.0 million and extended the expiration to December 20, 2022.

The borrowing base under the Credit Agreement is comprised of an amount equal to (a) the lesser of (i) eighty percent (80%) of Eligible Commissions Receivables (as defined in the Credit Agreement) we actually collected during the immediately preceding period of three months or (ii) eighty percent (80%) of our Eligible Commission Receivables for the immediately

succeeding period of three months, plus (b) fifty percent (50%) of our Eligible Commission Receivables for the immediately succeeding period of six months (excluding the immediately succeeding period of three months), in each case subject to reserves established by RBC, or the Borrowing Base.

Eligible Commission Receivables for the immediately succeeding period of six months (excluding the immediately succeeding period of three months), in each case subject to reserves established by RBC, or the Borrowing Base.

The proceeds of the loans under the Credit Agreement may be used for working capital and general corporate purposes.

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We are also obligated to pay other customary administration fees for a credit facility of this size and type.

As of December 31, 2018, we had $5.0 million outstanding principal amount under our revolving credit facility, which was repaid in full in January 2019.

As of December 31, 2019, we had no outstanding principal amount under this revolving credit facility.

As of December 31, 2020 and 2019, we had no outstanding principal amount under our revolving credit facility.

See Note 11 – Debt of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information regarding this credit agreement and subsequent amendment.

Common Stock Issuance

In January 2019, we entered into an underwriting agreement relating to a public offering in which we issued 2,760,000 shares of common stock, including 360,000 shares of common stock issued pursuant to the exercise in full of the underwriters' option to purchase additional shares, at a price to the public of $48.50 per share.

Net proceeds from the offering were approximately $126.2 million after deducting underwriting discounts and commissions and the expenses of the offering.

We intend to use the net proceeds of the offering for general corporate purposes, including working capital.

On January 22, 2018, we completed our acquisition of Wealth, Health and Life Advisors, LLC, more commonly known as GoMedigap, a technology-enabled provider of Medicare Supplement enrollment services.

The acquisition price paid at closing of the transaction consisted of cash of $15.0 million, less $0.1 million cash acquired, and approximately 294,637 shares of our common stock.

In addition, we were obligated to pay an additional $20.0 million in cash and 589,275 shares of our common stock, subject to the terms of the acquisition agreement and upon final determination of the achievement of certain milestones in 2018 and 2019.

The first and second earnout liability payments were made in February 2019 and January 2020, respectively.

See Note 5 – Fair Value Measurements of our Notes to Consolidated Financial Statements for the discussion on the milestone payments.

Critical Accounting Policies and Estimates

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To the extent there are material differences between our estimates and the actual results, our future consolidated results of comprehensive income may be affected.

An accounting policy is considered to be critical if the nature of the estimates or assumptions is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change, and the effect of the estimates and assumptions on financial condition or operating performance.

The accounting policies we believe to reflect our more significant estimates, judgments and assumptions and are most critical to understanding and evaluating our reported financial results are as follows:

Revenue recognition;

Among our significant accounting policies, which are described in Note 1 – Summary of Business and Significant Accounting Policies in our Notes to Consolidated Financial Statements , the following accounting policies and specific estimates involve a greater degree of judgments and complexity:

• Revenue recognition and contract assets - commission receivable;

• Stock-based compensation;

Business combinations;

Realizability of long-lived assets;

• Accounting for income taxes.

During the year ended December 31, 2020, there were no significant changes to our critical accounting policies and estimates.

Revenue Recognition

We are compensated by the receipt of commission payments from health insurance carriers whose health insurance policies are purchased through our ecommerce platforms or our customer care centers.

We may also receive commission bonuses based on our attaining predetermined target sales levels for Medicare, individual and family, small business and ancillary health insurance products, or other objectives, as determined by the health insurance carrier, which we recognize as

commission revenue when we achieve the predetermined target sales levels or other objectives.

In addition, we also generate revenue from non-commission revenue sources, which include sponsorship and advertising, technology licensing and lead referrals.

The core principle of ASC 606 is to recognize revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration the entity expects to be entitled to in exchange for those goods or services.

Accordingly, we recognize revenue for our services in accordance with the following five steps outlined in ASC 606:

Identification of the contract, or contracts, with a customer.

A contract with a customer exists when (i) we enter into an enforceable contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies the payment terms related to these goods or services, (ii) the contract has commercial substance, and (iii) we determine that collection of substantially all consideration for goods or services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration.

Identification of the performance obligations in the contract.

Performance obligations promised in a contract are identified based on the goods or services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the goods or service either on its own or together with other resources that are readily available from third parties or from us, and are distinct in the context of the contract, whereby the transfer of the goods or services is separately identifiable from other promises in the contract.

Determination of the transaction price.

The transaction price is determined based on the consideration to which we will be entitled in exchange for transferring goods or services to the customer.

Allocation of the transaction price to the performance obligations in the contract.

If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation.

Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price basis.

Recognition of revenue when, or as, we satisfy a performance obligation.

We satisfy performance obligations either over time or at a point in time, as discussed in further detail below.

Revenue is recognized at the time the related performance obligation is satisfied by transferring the promised good or service to the customer.

Commission Revenue – Our commission revenue results from approval of an application from health insurance carriers, which we define as our customers.

Our commission revenue is primarily comprised of commissions from health insurance carriers which is computed using the estimated constrained lifetime values as the “constrained LTVs” of commission payments that we expect to receive.

We typically enter into contractual agency relationships with health insurance carriers that are non-exclusive and terminable on short notice by either party for any reason.

In addition, health insurance carriers often have the ability to terminate or amend our agreements unilaterally on short notice, including provisions in our agreements relating to the commission rates paid to us by the health insurance carriers.

The amendment or termination of an agreement we have with a health insurance carrier may adversely impact the commissions we are paid on health insurance plans purchased from the carrier by means of our health insurance exchange services.

For both Medicare Advantage and Medicare Part D prescription drug plans, we receive a fixed, annual commission payment from insurance carriers once the plan is approved by the carrier and either a fixed, monthly, or annual commission payment beginning with and subsequent to the second plan year.

In the first plan year of a Medicare Advantage and Medicare Part D prescription drug plan, after the health insurance carrier approves the application but during the effective year of the plan, we are paid a fixed commission that is prorated for the number of months remaining in the calendar year.

Additionally, if the plan is the first Medicare Advantage or Medicare Part D prescription drug plan issued to the member, we may receive a higher commission rate that covers a full twelve-month period, regardless of the month the plan was effective.

We earn commission revenue for Medicare Advantage and Medicare Part D prescription drug plans for which we are the broker of record, typically until either the policy is cancelled or we otherwise do not remain the agent on the policy.

For individual and family, Medicare Supplement, small business and ancillary plans, our commissions generally represent a flat amount per member per month or a percentage of the premium amount collected by the carrier during the period that a member maintains coverage under a plan.

Premium-based commissions are reported to us after the premiums are

collected by the carrier, generally on a monthly basis.

We generally continue to receive the commission payment from the relevant insurance carrier until the health insurance plan is cancelled or we otherwise do not remain the agent on the policy.

We estimate commission revenue for each insurance product by using a portfolio approach to a group of approved members by plan type and the effective month of the relevant plan, which we refer to as “cohorts.” We estimate the commissions we expect to collect for each approved member cohort by evaluating various factors, including but not limited to, commission rates, carrier mix, estimated average plan duration, the regulatory environment, and cancellations of insurance plans offered by health insurance carriers with which we have a relationship.

Revenue Recognition and Contract Assets - Commission Receivable

Commission Revenue – Our commission revenue results from approval of an application from health insurance carriers, which we define as our customers under ASC 606.

Our commission revenue is primarily

comprised of commissions from health insurance carriers which is computed using the estimated constrained lifetime values as the “constrained LTVs” of commission payments that we expect to receive.

We estimate the commissions we expect to collect for each approved member cohort by evaluating various factors, including but not limited to, commission rates, carrier mix, estimated average plan duration, the regulatory environment, and cancellations of insurance plans offered by health insurance carriers with which we have a relationship.

Contract assets - commissions receivable represent the variable consideration for policies that have not renewed yet and therefore are subject to the same assumptions, judgements and estimates used when recognizing revenue as noted above.

For Medicare-related, individual and family and ancillary health insurance plans, our services are complete once a submitted application is approved by the relevant health insurance carrier.

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These assumptions are based on our analysis of historical trends for the different cohorts and incorporate management’s judgment in interpreting those trends to apply the constraints discussed below.

For our Medicare commission revenue, which represented 87% , 83% and 76% of our total commission revenue for the years ended December 31, 2019 , 2018 and 2017 , respectively, the estimated average plan duration used to calculate Medicare health insurance plan LTVs historically has been approximately 3 years for Medicare Advantage plans, approximately 5 years for Medicare Part D prescription drug plans, and approximately 5 years for Medicare Supplement plans.

While the average plan duration has been approximately 3 years for Medicare Advantage plans, certain members may have a duration of up to 12 years.

The estimated average plan duration used to calculate the LTV for major medical individual and family health insurance plans historically has been approximately 1.5 to 2 years .

For short term health insurance plan LTVs, the estimated average plan duration historically has been less than six months.

For all other ancillary health insurance plan LTVs, the estimated average plan duration has historically varied from 1 to 3 years .

The estimated average plan duration used to calculate Medicare health insurance plan LTVs historically has been approximately 3-5 years, while the estimated average plan duration used to calculate the LTV for major medical individual and family health insurance plans historically has been approximately six months to 3 years.

To the extent we make changes to the assumptions we use to calculate constrained LTVs, we recognize any material impact of the changes to commission revenue in the reporting period in which the change is made, including revisions of estimated lifetime commissions either below or in excess of previously estimated constrained LTV recognized as revenue.

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Adjustment revenue is a result of a change in estimate of expected cash collections when actual cash collections have indicated a trend that is different from the estimated constrained LTV for the revenue recognized at the time of approval.

We recognize adjustment revenue when we do not believe there is a probable reversal.

Adjustment revenue can be positive or negative and we recognize adjustment revenue when we do not believe there is a probable reversal.

We assess the risk of reversal based on statistical analysis given historical information and consideration of the constraints used at the time of approval.

Adjustment revenue can have a significant favorable or unfavorable impact on our revenue and we seek to enhance our LTV estimation models to improve the accuracy and to reduce the fluctuations of our LTV estimates.

As we continue to evaluate our LTV estimation models, we may in the future make further changes based on a number of factors and such changes could result in significant increases or decreases in our revenue.

Other Revenue

Our sponsorship and advertising program allows carriers to purchase advertising space in specific markets in a sponsorship area on our website.

In return, we are typically paid a monthly fee, which is recognized over the period that advertising is displayed, and often a performance fee based on metrics such as submitted health insurance applications, which is recognized when control has been transferred.

Other Revenue – Sponsorship and Advertising – Our sponsorship and advertising program allows carriers to purchase advertising space in specific markets in a sponsorship area on our website.

In return, we are typically paid a fee, which is recognized over the period that advertising is displayed, and often a performance fee based on metrics such as submitted health insurance applications, which is recognized when control has been transferred.

We also offer Medicare advertising services, which include website development, hosting and maintenance.

In these instances, we are typically paid a fixed, up-front fee, which we recognize as revenue as control is transferred ratably over the service period.

Our commercial technology licensing business allows carriers the use of our ecommerce platform to offer their own health insurance policies on their websites and agents to utilize our technology to power their online quoting, content and application submission processes.

Typically, we are paid a one-time implementation fee, which we recognize as control is transferred on a straight-line basis over the estimated term of the customer relationship (generally the initial term of the agreement), commencing once the technology is available for use by the third party, and a performance fee based on metrics such as submitted health insurance applications.

The metrics used to calculate performance fees for both sponsorship and advertising and technology licensing are based on performance criteria that are either measured based on data tracked by us, or based on data tracked by the third party.

In instances where the performance criteria data is tracked by us, we recognize revenue in the period of performance and when all other revenue recognition criteria has been met.

In instances where the performance criteria data is tracked by the third party, we recognize revenue when reversal of such amount is not likely to occur.

Typically, this occurs through our receipt of a cash payment from the third party along with a detailed statement containing the data that is tracked by the third party.

Deferred Revenue

Deferred revenue includes deferred technology licensing implementation fees and amounts billed for performance obligations, including professional services, undelivered performance obligations, as well as amounts billed or collected from sponsorship or technology licensing customers in advance of our performing our service for such customers.

It also includes the amount by which both unbilled and billed services provided under our technology licensing arrangements exceed the revenue recognized to date.

Stock-Based Compensation

We recognize stock-based compensation expense in the accompanying Consolidated Statements of Comprehensive Income based on the fair value of our stock-based awards over their respective vesting periods, which is generally four years.

The estimated attainment of performance-based awards and related expense is based on the expectations of revenue and earnings target achievement.

The estimated fair value of performance awards with market conditions is determined using the Monte-Carlo simulation model.

The assumptions used in calculating the fair value of stock-based payment awards and expected attainment of performance-based awards represent our best estimates, but these estimates involve inherent uncertainties and the application of management judgment.

We will continue to use judgment in evaluating the expected term and volatility related to our own stock-based awards on a prospective basis, and incorporating these factors into the model.

Changes in key assumptions could significantly impact the valuation of such instruments.

The estimated grant date fair value of our stock options is determined using the Black-Scholes-Merton pricing model and a single option award approach.

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The dividend yield is determined by dividing the expected per share dividend during the coming year by the grant date stock price.

Through December 31, 2019 , we had not declared or paid any cash dividends, and we do not expect to pay any in the foreseeable future.

Through December 31, 2020, we had not declared or paid any cash dividends to common stock holders, and we do not expect to pay any in the foreseeable future.

We base the risk-free interest rate on the implied yield currently available on U.S.

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Expected volatility is determined using a combination of the implied volatility of publicly traded options in our stock and historical volatility of our stock price.

The estimated attainment of performance-based awards and related expense is based on the expectations of revenue and earnings target achievement.

The estimated fair value of performance awards with market conditions is determined using the Monte-Carlo simulation model.

We will continue to use judgment in evaluating the expected term and volatility related to our own stock-based awards on a prospective basis, and incorporating these factors into the model.

Changes in key assumptions could significantly impact the valuation of such instruments.

Business Combinations

We include the results of operations of acquired businesses prospectively from the acquisition date.

We allocate the fair value of the purchase consideration of our acquired businesses to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date.

The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill.

When determining the fair values of assets acquired and liabilities assumed, we make significant estimates and assumptions.

When provisional amounts are recorded in the reporting period in which a business combination occurs, adjustments to the provisional amounts may be subsequently recognized to reflect new information obtained about facts and circumstances that existed as of the acquisition date that would have affected the measurement of the amounts recognized at the acquisition date.

Adjustments to the provisional amounts identified during the measurement period, which is a period not to exceed one year from the acquisition date, are reported in the period the adjustment is identified by means of an adjustment to goodwill, with the effect on earnings measured as if the provisional amounts had been completed at the acquisition date.

Adjustments to amounts recognized in a business combination that occur after the end of the measurement period are recognized in current period operations.

Realizability of Long-Lived Assets

We assess the realizability of our long-lived assets, including intangible assets and goodwill, whenever events or changes in circumstances indicate the carrying value of such assets may not be recoverable.

Factors that we consider in deciding when to perform an impairment review include significant negative industry or economic trends or significant changes or planned changes in our use of the assets.

Additionally, we test goodwill and our other indefinite-lived intangible assets for impairment on an annual basis on or about November 30 of each year.

When performing the annual goodwill impairment test we first assess qualitative factors to determine whether it is “more likely than not” that the fair value of our reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test.

When performing the annual impairment test for indefinite-lived intangible assets other than goodwill we first assess qualitative factors to determine whether it is “more likely than not” that the indefinite-lived intangible is impaired.

If events or changes in circumstances indicate the carrying value of such assets may not be recoverable, for long lived assets other than goodwill, including intangible assets with finite useful lives, which include purchased technology, pharmacy relationships, trade names, and trademarks, we measure the recoverability of assets that will continue to be used in our operations by comparing the carrying value of the asset grouping to our estimate of the related total future undiscounted net cash flows.

If an asset grouping’s carrying value is not recoverable through the related undiscounted cash flows, the asset grouping is considered to be impaired.

The impairment charge is calculated as the amount by which the asset grouping’s carrying value exceeds its fair value, which is defined as the price that would be received from selling an asset in an orderly transaction between market participants at the measurement date.

We must make subjective judgments in determining the independent cash flows that can be related to specific asset groupings.

In addition, we must make subjective judgments regarding the remaining useful lives of assets with finite useful lives.

When we determine that the useful life of an asset is shorter than we had originally estimated, we accelerate the rate of amortization over the new remaining useful life of the asset.

Accounting for Income Taxes

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As a result, the amount of deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income change.

Future changes in various factors, such as the amount of stock-based compensation we record during the period and the related tax benefit we realize upon the exercise of employee stock options, potential limitations on the use of our federal and

state net operating loss credit carry forwards, pending or future tax law changes including rate changes and the tax benefit from or limitations on our ability to utilize research and development credits, the amount of non-deductible lobbying and acquisition-related costs, changes in our valuation allowance and state and foreign taxes, would impact our estimates, and as a result, could affect our effective tax rate and the amount of income tax expense we record, and pay, in future periods.

use of our federal and state net operating loss credit carry forwards, pending or future tax law changes including rate changes and the tax benefit from or limitations on our ability to utilize research and development credits, the amount of non-deductible lobbying and acquisition-related costs, changes in our valuation allowance and state and foreign taxes, would impact our estimates, and as a result, could affect our effective tax rate and the amount of income tax expense we record, and pay, in future periods.

Contractual Obligations and Commitments

The following table presents a summary of our future minimum payments under non-cancellable operating lease agreements and contractual service and licensing obligations as of December 31, 2020 (in thousands):

Years Ending December 31,

Operating Lease Obligations*

Service and Licensing Obligations

Total Obligations

Years Ending December 31, Operating Lease Obligations* Service and Licensing Obligations Total Obligations

2021 $ 7,644 $ 5,775 $ 13,419

2022 7,701 3,408 11,109

2023 8,033 2,745 10,778

2024 7,832 2,056 9,888

2025 8,009 1,353 9,362

Thereafter 19,408 1,353 20,761

Total $ 58,627 $ 16,690 $ 75,317

* See Note 10 – Leases of our Notes to Consolidated Financial Statements for details of our operating lease obligations.

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Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements, investments in special purpose entities or undisclosed borrowings or debt.

We are also not engaged in any derivative contracts or synthetic leases.

As of December 31, 2020, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K, that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenue, or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors.

Recent Accounting Pronouncements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis