What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-08 compared with 2021-08-09 · 226 added, 206 removed, 398 unchanged (52% of the section changed)

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our expectations relating to revenue, operating costs, cash flows and profitability;

our expectations regarding our strategy and investments, including investments in our e-commerce and call center capabilities, agent training and quality assurance efforts;

our expectations regarding our strategy and investments, including investments in our e-commerce and call center capabilities, technology, agent training and quality assurance efforts;

our expectations regarding our Medicare business, including market opportunity, consumer demand and our competitive advantage;

our expectations regarding our individual and family business, including anticipated trends and our ability to enroll individuals and families into qualified health plans;

the impact of future and existing healthcare laws and regulations on our business;

the expected impact of the COVID-19 on our business;

the impact of future and existing laws and regulations on our business;

the expected impact of the COVID-19 pandemic on our business;

our expectations regarding commission rates, payment rates, conversion rates, plan termination rates and duration, membership retention rates and membership acquisition costs;

our expectations regarding health insurance agents licensing and productivity;

our expectations regarding beneficiary complaints, customer experience and enrollment quality;

our expectations relating to the seasonality of our business;

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the outcome of litigation in which we are involved;

and the performance, reliability and availability of our information technology systems, ecommerce platform and underlying network infrastructure and those identified under the heading “Risk Factors” in Part II, Item 1A.

the performance, reliability and availability of our information technology systems, ecommerce platform and underlying network infrastructure;

and those identified under the heading “Risk Factors” in Part II, Item 1A.

of this report and those discussed in our other Securities and Exchange Commission filings.

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Except as required by applicable law, we do not undertake, and specifically decline, any obligation to update any of these statements or to publicly announce the results of any revisions to any forward-looking statements, whether as a result of new information, future events, changes in assumptions or otherwise.

The following discussion should be read in conjunction with our Annual Report on Form

10-K as filed with the Securities and Exchange Commission in February 2021 and amended in April 2021, and the audited consolidated financial statements and related notes contained therein.

The following discussion should be read in conjunction with our Annual Report on Form 10-K as filed with the

Securities and Exchange Commission in February 2021 and amended in April 2021, and the audited consolidated financial statements and related notes contained therein.

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

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Our omnichannel consumer engagement platform 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.

We have created a marketplace that offers consumers a broad choice of insurance products that includes 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.

Updates on Business Initiatives

During the third quarter of 2021, we made a number of changes to our telesales and online capabilities with a focus on driving performance and improving enrollment quality in preparation for the annual enrollment period in the fourth quarter.

In 2021, we shifted the mix of our telesales capacity towards full-time internal agents and away from third party vendor agents.

In October 2021, we entered the Medicare annual enrollment period with internal agents comprising over 95% of our total agents, the largest number of full-time employed agents in our history and compared to approximately 50% at the same time in 2020.

We also made other important changes across our call centers to improve the effectiveness of our agents and further enhance consumer experience.

These changes include the migration of our call center technology to a cloud-based contact center and upgraded lead scoring and routing tools.

We believe these improvements and new tools provide better support to our agents in their interactions with consumers as we enter into the most critical selling season of the year.

Enrollment quality has been our focus since the launch of our retention program over a year ago, which is ensuring that eHealth presents Medicare beneficiaries with choices that best align with their eligibility status, lifestyle, health conditions and economic means with the goal of minimal disruption in existing provider relationships.

We have been seeking additional ways to improve our customer experience, enhance accuracy of plan recommendations and reduce disenrollment.

In the third quarter of 2021, we introduced additional mandatory training for our agents, added a new customer care function to verify certain Medicare enrollments prior to submission to the carrier, and expanded other quality assurance efforts.

We restructured agent compensation incentives to place more focus on addressing the longer-term coverage needs of customers.

As part of the recent migration of our call center technology to a cloud-based contact center, we also implemented a new cloud-based agent monitoring system, which is expected to provide new robust capabilities to train agents and monitor their performance in real time.

While we expect these initiatives will enhance the quality of our enrollments generally, the introduction of these efforts to date has resulted in lower conversion rates and longer average talk times for telephonic enrollments.

We continuously look for ways to improve the user experience of our online tools.

Ahead of the annual enrollment period, we enhanced our online capabilities by launching an updated recommendation engine.

This engine is designed to improve the accuracy of personalized plan-matching.

It has machine-learning capabilities and leverages data from online customer interactions to provide recommendations, which we believe improves the online shopping experience and helps Medicare eligible consumers navigate increasingly broad and complex plan choices.

Our online Customer Center continues to strengthen and support our relationships with consumers and to help retain their business when it's time to review their plan coverage choices.

The Customer Center enables members to create a secure personal profile that stores their prescription drug regimen, preferred doctors and pharmacies, current coverage, and other relevant data, and makes this data available to the member and our licensed agents that they contact.

The accessibility of the information facilities plan selection for our agents and members with accounts and also incentivizes members to return to us when their needs change.

Although the investments in our telesales operations, technology and enrollment quality assurance have negatively impacted our third quarter financial results, we believe that they will create long-term competitive advantages for us as carriers place an increasing value on enrollment quality and reduction in beneficiary complaints.

Changes in Senior Management

In September 2021, we announced the appointment of Christine Janofsky as our senior vice president, chief financial officer, effective September 2021.

We also announced the resignation of Scott Flanders from his positions as a member of our board of directors and chief executive officer, effective October 31, 2021, and the appointment of Fran Soistman as a member of our board of directors and our chief executive officer, effective November 1, 2021.

Flanders has agreed to provide consulting services to us through December 31, 2021 to assist with the transition of his duties and responsibilities.

These executive changes resulted in lower general and administrative expenses in the third quarter of 2021, primarily due to the reversal of stock-based compensation expense related to Mr.

Flanders' forfeited equity awards.

Severance and other personnel costs related to Mr.

Flanders' separation are included in restructuring and reorganization charges on our Condensed Consolidated Statement of Comprehensive Loss in the third quarter of 2021.

Part of these severance and other personnel costs will be recognized during his remaining service period in the fourth quarter.

COVID-19 Impact Updates

As of June 30, 2021, all of our offices have reopened with additional safety and social distancing measures.

eHealth currently plans to operate with a combination of remote and in-office work in the United States until the end of 2021.

All of our U.S.

offices are currently open with reduced capacity as we continue to monitor the status of COVID-19.

We currently plan to increase the number of in-office employees later this year depending upon the COVID-19 vaccination status of our employees as we intend to have only vaccinated employees in the office to promote the health and safety of our employees.

As of September 30, 2021, all of our offices remained open at reduced capacity and with additional safety and social distancing measures as a result of the COVID-19 pandemic.

eHealth currently plans to operate with a combination of remote and in-office work in the United States at least through the end of 2021.

We plan to increase the number of in-office employees next year depending upon the COVID-19 vaccination status of our employees as we intend to have only vaccinated employees in the office to promote the health and safety of our employees.

The extent of the impact of the COVID-19 pandemic on our operational and financial performance will depend on future developments, including the duration, spread and severity of the pandemic, the availability, effectiveness and uptake of vaccines for COVID-19, the emergence of new variants of COVID-19 and whether existing vaccines are effective with respect to such variants, the actions to contain the disease or mitigate its impact, and the duration, timing and severity of the impact on consumer behavior, including any recession resulting from the pandemic, all of which are unpredictable.

The recent surge in the COVID-19 cases caused by the COVID-19 Delta variant is already having an impact as employees in our California offices are now required by county order to wear masks while in our offices regardless of vaccination status.

Due to the surge of COVID-19 cases caused by the COVID-19 Delta variant, employees in our California offices are still required by county order to wear masks while in our offices regardless of vaccination status.

The emergence of Delta and other variants could cause us to alter our operations and plans for in-office and remote work.

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

Current Business Initiatives

During the second quarter of 2021, we made progress expanding and enhancing our telesales organization and continued to scale our digital business.

With our experience in launching a remote agent model in 2020, we continued to grow our agent workforce to include remote workers, which provides us with better geographic hiring flexibility as we grow our telesales capacity.

Enrollment quality has been a focus in our organization since the launch of our retention program a year ago, and we are seeking additional ways to improve customer experience, enhance accuracy of plan recommendations and reduce rapid disenrollment.

Starting in the third quarter of 2021, we introduced mandatory additional training for our agents, added a new customer care function to verify certain Medicare enrollments prior to submission to the carrier, and are expanding other quality assurance efforts.

The recent migration of our call center technology to a cloud-based contact center is expected to provide new robust capabilities to train agents and monitor their performance in real time.

We also expect to incur additional expense as we expand our quality initiatives.

We believe that our ongoing investments in our telesales operations, technology and quality assurance will present a significant barrier to entry into the Medicare distribution market as carriers place an increasing value on enrollment quality and reduction in beneficiary complaints.

On April 30, 2021, upon the terms and subject to the conditions set forth in our investment agreement with Echelon Health SPV, LP, or H.I.G., we issued and sold 2,250,000 shares of newly designated Series A preferred stock to H.I.G.

in a private placement at an aggregate purchase price of $225 million, at a price of $100 per share.

See Note 6 – Convertible Preferred Stock in our Notes to Condensed Consolidated Financial Statements for details.

Summary of Selected Metrics

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• 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.

• the constrained lifetime value (“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.

Approved Members

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

Three Months Ended June 30, % Change Six Months Ended June 30, % Change

Three Months Ended September 30, % Change Nine Months Ended September 30, % Change

2021 2020 2021 2020

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Other 2,396 2,991 (20) % 7,413 11,262 (34) %

Total Ancillaries 24,048 24,878 (3) % 50,559 55,552 (9) %

Total Ancillary 23,084 26,717 (14) % 73,643 82,269 (10) %

Small Business 2,320 3,473 (33) % 7,856 10,194 (23) %

Total Approved Members 80,420 94,502 (15) % 371,654 333,026 12 %

Three Months Ended June 30, 2021 and 2020 – Medicare approved members increased 19% in the three months ended June 30, 2021 compared to the same period in 2020.

The increase in total Medicare approved members was primarily attributable to a 30% growth in Medicare Advantage plan members, partially offset by a 30% decline in Medicare Supplement plan members and an 8% decline in Medicare Part D prescription drug plan members in the three months ended June 30, 2021 compared to the same period in 2020.

Medicare Advantage enrollment growth in the three months ended June 30, 2021 slowed down compared to the same period in 2020 due to the COVID-related special enrollment period which drove higher growth last year.

Individual and family plan approved members grew 78% in the three months ended June 30, 2021 compared to the same period in 2020 due to favorable market environment, which drove a 113% increase in approved members for qualified health plans and a 47% increase in approved members in non-qualified health plans.

Three Months Ended September 30, 2021 and 2020 – Medicare approved members decreased 22% in the three months ended September 30, 2021 compared to the same period in 2020.

The decrease in total Medicare approved members was primarily attributable to a decline in telesales conversion rate which was primarily driven by additional quality initiatives we introduced during the third quarter of 2021, partially offset by the growth of our online applications.

Individual and family plan approved members grew 88% in the three months ended September 30, 2021 compared to the same period in 2020 due to the favorable market environment.

The individual and family health insurance market is benefiting from the passage of the American Rescue Plan Act in March 2021.

This legislation expanded access to premium credits making individual and family major medical plans more affordable, which allows a larger population to get the coverage that our major medical plans offer.

Ancillary plan approved members decreased 3% in the three months ended June 30, 2021 compared to the same period in 2020 primarily due to a 32% decline in approved members for short-term health plans and a 34% decline in approved members for other ancillary plans, partially offset by an increase in approved members for dental and vision insurance.

Small business group health insurance approved members declined 17% in the three months ended June 30, 2021 compared to the same period in 2020 mainly due to the shift of our focus away from the sale of small business products.

Six Months Ended June 30, 2021 and 2020 – Medicare approved members increased 33% in the six months ended June 30, 2021 compared to the same period in 2020.

The increase in total Medicare approved members was primarily attributable to a 48% growth in Medicare Advantage plan members, partially offset by a 29% decline in Medicare Supplement plan members and a 10% decline in Medicare Part D prescription drug plan members in the six months ended June 30, 2021 compared to the same period in 2020.

Individual and Family Plan approved members grew 42% in the six months ended June 30, 2021 compared to the same period in 2020 partially due to favorable market environment resulting from the recent legislation mentioned above, driven by a 57% increase in approved members for qualified health plans and a 28% increase in approved members in non-qualified health plans.

Ancillary plan approved members declined 9% in the six months ended June 30, 2021 compared to the same period in 2020 primarily due to a 34% decline in approved members for short-term health plans and a 39% decrease in approved members for other ancillary plans, partially offset by an increase in approved members for dental and vision insurance.

Small business group health insurance approved members declined 18% in the six months ended June 30, 2021 compared to the same period in 2020 mainly due to the shift of our focus away from the sale of small business products.

Ancillary plan approved members decreased 14% in the three months ended September 30, 2021 compared to the same period in 2020 primarily due to decreases in approved members for short-term health insurance plans, dental and other ancillary insurance, partially offset by an increase in approved members for vision insurance.

Small business group health insurance approved members declined 33% in the three months ended September 30, 2021 compared to the same period in 2020 mainly due to the shift of our focus away from the sale of small business products.

Nine Months Ended September 30, 2021 and 2020 – Medicare approved members increased 18% in the nine months ended September 30, 2021 compared to the same period in 2020.

The increase in total Medicare approved members was primarily attributable to an increase in Medicare Advantage plan members, partially offset by decreases in Medicare Supplement plan members and Medicare Part D prescription drug plan members during the nine months ended September 30, 2021 compared to the same period in 2020.

The increase in approved Medicare Advantage members was primarily driven by strong consumer demand, online enrollment growth, and an increase in our internal agent productivity during the Medicare Advantage open enrollment period in the first quarter of 2021, partially offset by a decline in telesales conversion rate during the third quarter of 2021, as described above.

Individual and family plan approved members grew 52% in the nine months ended September 30, 2021 compared to the same period in 2020 partially due to the favorable market environment resulting from the passage of the American Rescue Plan Act mentioned above.

Ancillary plan approved members declined 10% in the nine months ended September 30, 2021 compared to the same period in 2020 primarily due to declines in approved members for short-term health insurance plans and other ancillary plans, partially offset by an increase in approved members for dental and vision insurance.

Small business group health insurance approved members declined 23% in the nine months ended September 30, 2021 compared to the same period in 2020 mainly due to the shift of our focus away from the sale of small business products.

New Paying Members

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

Three Months Ended June 30, % Change Six Months Ended June 30, % Change

Three Months Ended September 30, % Change Nine Months Ended September 30, % Change

2021 2020 2021 2020

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Other 2,534 3,502 (28) % 7,710 11,289 (32) %

Total Ancillaries 23,103 23,627 (2) % 54,694 56,184 (3) %

Total Ancillary 24,662 27,416 (10) % 79,356 83,600 (5) %

Small Business 2,230 3,518 (37) % 8,746 11,812 (26) %

Total New Paying Members 82,661 93,850 (12) % 440,728 414,965 6 %

Three Months Ended June 30, 2021 and 2020 – Medicare total new paying members grew 24% in the three months ended June 30, 2021 compared to the same period in 2020, primarily driven by a 36% increase in Medicare Advantage plan new paying members, partially offset by a 33% decline in Medicare Supplement plan new paying members and an 8% decline in Medicare Part D prescription drug plan new paying members .

Individual and family plan new paying members grew 33% in the three months ended June 30, 2021 compared to the same period in 2020 due to increases in new paying members for both non-qualified plans and qualified health plans.

Ancillary new paying members declined 2% in the three months ended June 30, 2021 compared to the same period in 2020 primarily due to a decline in approved members for short-term and other health plans.

Small business new paying members declined 24% in the three months ended June 30, 2021 compared to the same period in 2020 primarily due to a decrease in approved members .

Six Months Ended June 30, 2021 and 2020 – Medicare total new paying members grew 15% in the six months ended June 30, 2021 compared to the same period in 2020, primarily driven by a 52% increase Medicare Advantage plan new paying members, partially offset by a 49% decrease in Medicare Part D prescription drug plan and a 21% decrease in Medicare Supplement plan new paying members .

Individual and family plan new paying members grew 20% in the six months ended June 30, 2021 compared to the same period in 2020 due to increases in new paying members for non-qualified plans and new paying members for qualified plans.

Ancillary new paying members declined 3% in the six months ended June 30, 2021 compared to the same period in 2020 primarily due to a decline in approved members for short-term and other health plans.

Small business new paying members declined 21% in the six months ended June 30, 2021 compared to the same period in 2020 primarily due to a decrease in approved members .

Three Months Ended September 30, 2021 and 2020 – Medicare total new paying members declined 19% in the three months ended September 30, 2021 compared to the same period in 2020, attributable to a decline in telesales conversion rate, partially offset by the growth of our online applications .

Individual and family plan new paying members grew 99% in the three months ended September 30, 2021 compared to the same period in 2020 primarily driven by an increase in approved members for qualified health plans.

Ancillary new paying members declined 10% in the three months ended September 30, 2021 compared to the same period in 2020 primarily due to a decline in approved members for short-term, dental and other ancillary insurance plans, partially offset by an increase in approved members for vision insurance plans.

Small business new paying members declined 37% in the three months ended September 30, 2021 compared to the same period in 2020 primarily due to a decrease in approved members for small business plans .

Nine Months Ended September 30, 2021 and 2020 – Medicare total new paying members grew 8% in the nine months ended September 30, 2021 compared to the same period in 2020, primarily driven by an increase in Medicare Advantage plan approved members, partially offset by decreases in Medicare Part D prescription drug plan and Medicare Supplement plan approved members .

Individual and family plan new paying members grew 32% in the nine months ended September 30, 2021 compared to the same period in 2020 primarily driven by increases in approved members for non-qualified and qualified plans.

Ancillary new paying members declined 5% in the nine months ended September 30, 2021 compared to the same period in 2020 primarily due to a decrease in approved members for short-term and other ancillary plans.

Small business new paying members declined 26% in the nine months ended September 30, 2021 compared to the same period in 2020 primarily due to a decrease in approved members for small business plans .

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 periods presented below:

Three Months Ended June 30, % Change

Three Months Ended September 30, % Change

Medicare Advantage (1)

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

The constrained LTV of commissions per approved member for Medicare Supplement, Medicare Part D prescription drug, and Medicare Advantage plans declined by 17%, 11%, and 4%, respectively, during the three months ended June 30, 2021 compared to the same period in 2020.

The decline in constrained LTV of commissions per approved member for Medicare Advantage and Medicare Supplement plans was partially driven by a shorter average plan duration for telephonic enrollments.

The shorter estimated average plan duration was partially attributable to additional opportunities for Medicare Advantage plan members to switch plans during the Medicare Advantage open enrollment period and the COVID-19 related special enrollment period in 2020.

The negative impact of these factors was partially offset by an increase in broker commission rates and higher commission rates for new Medicare Advantage enrollments compared to the commissions for enrollments of existing members changing their plans.

The decline in constrained LTV for Medicare Part D prescription drug plans was due in part to a shift in consumer demand away from these plans and towards Medicare Advantage plans with prescription drug coverage.

Individual and Family and Ancillaries

The constrained LTV of commissions per non-qualified health plan approved member and qualified health plan approved member increased 32% and 11%, respectively, during the three months ended June 30, 2021 compared with the same period in 2020 mostly due to increased estimates of average plan duration.

The constrained LTV of commissions per short-term health insurance approved member remained relatively flat during the three months ended June 30, 2021 compared to the same period in 2020.

The constrained LTV of commissions per approved member for dental and vision plans increased by 47% and 27%, respectively, during the three months ended June 30, 2021 compared with the same period in 2020 primarily due to an increase in estimated average plan duration and lower constraints as a result of reduced volatility based on historical trends.

The constrained LTV of commissions per approved member for Medicare Advantage plans grew by 9%, and declined by 11% and 7%, respectively, for Medicare Supplement and Medicare Part D prescription drug plans during the three months ended September 30, 2021 compared to the same period in 2020.

The increase in constrained LTV of Medicare Advantage plans was due to higher commission rates.

The decline in constrained LTV of commissions per approved member for Medicare Supplement and Medicare Part D prescription drug plans was due to shorter average plan durations for both products.

Individual and Family and Ancillary

The constrained LTV of commissions per non-qualified health plan approved member and qualified health plan approved member increased 35% and 21%, respectively, during the three months ended September 30, 2021 compared with the same period in 2020 mostly due to increased estimates of average plan duration and a lower constraint for non-qualified health insurance plans.

The constrained LTV of commissions per approved member for short-term health insurance, dental, vision, and small business insurance plans increased by 5%, 17%, 11%, and 31%, respectively, during the three months ended September 30, 2021 compared with the same period in 2020 primarily due to an increase in estimated average plan duration.

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 LTV of commissions for approved members recognized for the periods presented below are summarized as follows:

Three Months Ended June 30,

Three Months Ended September 30,

Medicare Advantage 7 % 7 %

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Small Business 5 % — %

The constraints for Medicare Supplement and Medicare Part D prescription drug plans increased during the three months ended June 30, 2021, as compared to the same period in the prior year, due to an increase in volatility and the observed declining LTV trends.

The constraints for non-qualified health plans decreased during the three months ended June 30, 2021, as compared to the same period in the prior year, due to stabilization of market conditions and reduced volatility.

The constraints for dental and vision plans decreased during the three months ended June 30, 2021, as compared to the same period in the prior year, due to reduced volatility and improved LTV trends.

The constraints for small business plans increased during the three months ended June 30, 2021, as compared to the same period in the prior year, due to an increase in volatility.

The constraints for Medicare Supplement and Medicare Part D prescription drug plans increased during the three months ended September 30, 2021, as compared to the same period in the prior year, due to declining LTV trends for these products.

The constraints for non-qualified health plans decreased during the three months ended September 30, 2021, as compared to the same period in the prior year, due to stabilization of market conditions and increases in LTV values.

The constraints for dental plans decreased during the three months ended September 30, 2021, as compared to the same period in the prior year, due to improved LTV trends.

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.

Estimated membership represents the estimated number of members active as of the date indicated based on the estimation methodology below.

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

As of June 30, % Change

As of September 30, % Change

Medicare Advantage 559,235 421,237 33 %

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Individual and Family (2)

107,466 115,832 (7) %

Ancillaries (3)

Non-Qualified Health Plans 84,260 92,054 (8) %

Qualified Health Plans 23,866 20,780 15 %

Total Individual and Family 108,126 112,834 (4) %

Ancillary (3)

Short-term 17,073 24,105 (29) %

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Other 32,957 36,158 (9) %

Total Ancillaries 236,099 245,471 (4) %

Total Ancillary 241,366 245,053 (2) %

Small Business (4)

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__________________

(1) To estimate the number of members on Medicare-related health insurance plans, we take the sum of (i) the number of members for whom we have applied or expected to receive a commission payment for a month that may be up to three months prior to the date of estimation (after reducing that number using historical experience for assumed member cancellations over the period being estimated);

(1) To estimate the number of members on Medicare-related health insurance plans, we take the sum of (i) the number of members for whom we have received or applied a commission payment for a month that may be up to three months prior to the date of estimation (after reducing that number using historical experience for assumed member cancellations over the period being estimated);

and (ii) the number of approved members over that period (after reducing that number using historical experience for an assumed number of members who do not accept their approved policy and for estimated member cancellations through the date of the estimate).

To the extent we determine we have received substantially all of the commission payments related to a given month during the period being estimated, we will take the number of members for whom we have received or applied a commission payment during the month of estimation.

To the extent we determine through confirmations from a health insurance carrier that a commission payment is delayed or is inaccurate as of the date of estimation, we adjust the estimated membership to also reflect the number of members for whom we expect to receive or to refund a commission payment.

Further, to the extent we have received substantially all of the commission payments related to a given month during the period being estimated, we will take the number of members for whom we have received or applied a commission payment during the month of estimation.

(2) To estimate the number of members on Individual and Family health insurance plans (“IFP”), we take the sum of (i) the number of IFP members for whom we have received or applied a commission payment for a month that may be up to three months prior to the date of estimation (after reducing that number using historical experience for assumed member cancellations over the period being estimated);

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However, we experienced a larger deviation in the actual Medicare Advantage membership, which was lower than our initial estimate, for the first quarter of 2020.

This deviation was primarily due to the time delay in receiving information from our carriers and a higher level of plan cancellations than expected.

Medicare-related plan estimated membership as of June 30, 2021 grew 22% compared to estimated membership as of June 30, 2020 due to a 38% growth in Medicare Advantage estimated membership and a 5% growth in Medicare Supplement plan estimated membership.

This deviation was primarily due to the time delay in our receiving information from carriers and a higher level of plan cancellations than expected.

The difference between our estimates and carrier data have returned to our historical ranges since that time.

Medicare-related plan estimated membership as of September 30, 2021 grew 19% compared to estimated membership as of September 30, 2020 due to a 33% growth in Medicare Advantage estimated membership and a 3% growth in Medicare Supplement plan estimated membership.

The overall growth in Medicare estimated membership was due to increased sales of Medicare Advantage plans.

Individual and family plan estimated membership as of June 30, 2021 declined 7% compared to estimated membership as of June 30, 2020 due to overall market conditions in the individual and family plan market, despite the recent stabilization and improvement, and the shift of our investment towards Medicare.

Ancillary plan estimated membership as of June 30, 2021 declined 4% compared to estimated membership as of June 30, 2020 primarily as a result of the decline in dental and short-term health plans estimated membership.

Individual and family plan estimated membership as of September 30, 2021 declined 4% compared to estimated membership as of September 30, 2020 due to overall market conditions in the individual and family plan market, despite the recent stabilization and improvement, and the shift of our investment towards Medicare.

Ancillary plan estimated membership as of September 30, 2021 declined 2% compared to estimated membership as of September 30, 2020 primarily as a result of the decline in short-term health plans estimated membership.

Member Acquisition

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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 periods 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.

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Since the LTV for any product fluctuates from period to period, the weight given to each product was determined based on their relative LTVs at the time of our adoption of Accounting Standards Codification 606 – Revenue from Contracts with Customers ("ASC 606").

Three Months Ended June 30, % Change

Three Months Ended September 30, % Change

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

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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 period presented.

Estimated CC&E cost per approved MA-equivalent member increased 18% in the three months ended June 30, 2021 compared to the same period in 2020 due to an earlier start in our increase in internal agent headcount with the goal of staffing our telesales capacity with at least 90% of internal agents for the Medicare annual enrollment period this year.

We believe this investment in internal telesales capacity will better position us for enrollment growth in the fourth quarter annual enrollment period and to improve enrollment quality.

Estimated variable marketing cost per MA-equivalent member increased 23% partially due to the COVID-related special enrollment period that occurred primarily in 2020 benefiting our conversion rates both online and in our call centers, as a significantly higher proportion of inbound website visitors and callers were eligible to switch plans.

The increase in marketing cost per MA-equivalent member was also driven by an ongoing shift away from the traditional channels and focus more on our online advertising channel which carries higher per enrollment marketing costs but lower customer care and enrollment costs.

Estimated CC&E cost per approved IFP-equivalent member decreased 2% in the three months ended June 30, 2021 compared to the same period in 2020 due primarily to an increase in agent productivity.

Estimated variable marketing cost per IFP-equivalent member increased 8% in the three months ended June 30, 2021 compared to the same period in 2020 due to an increase in marketing costs to drive enrollment growth.

Estimated CC&E cost per approved MA-equivalent member increased 45% in the three months ended September 30, 2021 compared to the same period in 2020 due to lower enrollment volume resulting from enrollment quality initiatives, a decline in our telesales conversion rate and an earlier start to our staffing increase for the Medicare annual enrollment period this year.

In October 2021, we entered this annual enrollment period with over 95% of our sales force consisting of internal agents.

We believe that this investment in internal telesales capacity will strengthen our telesales organization and improve enrollment quality going forward.

Estimated variable marketing cost per MA-equivalent member increased 84% primarily due to lower enrollment volume as a result of lower conversion rates from our telephonic leads.

In addition, a greater focus on our online advertising channel also contributed to the increase as it carries higher per enrollment marketing costs but lower customer care and enrollment costs.

Estimated CC&E cost per approved IFP-equivalent member decreased 13% in the three months ended September 30, 2021 compared to the same period in 2020 due primarily to an increase in agent productivity.

Estimated variable marketing cost per IFP-equivalent member decreased 18% in the three months ended September 30, 2021 compared to the same period in 2020 due to an extended special open enrollment period.

Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with U.S.

generally accepted accounting principles, or U.S.

GAAP, requires us to make judgments, assumptions, and estimates that affect the amounts reported in the consolidated financial statements and the accompanying notes.

generally accepted accounting principles requires us to make judgments, assumptions, and estimates that affect the amounts reported in the consolidated financial statements and the accompanying notes.

These estimates and assumptions are based on current facts, historical experience, and various other factors that we believe are reasonable under the circumstances to determine reported amounts of assets, liabilities, revenue and expenses that are not readily apparent from other sources.

9 unchanged sentences

Our operating results and related percentage of total revenue are summarized below for the periods presented (dollars in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

9 unchanged sentences

Amortization of intangible assets 121 — % 287 — % 416 — % 1,207 — %

Restructuring charges — — % — — % 2,431 1 % — — %

Restructuring and reorganization charges 573 1 % — — % 3,004 1 % — — %

Total operating costs and expenses 129,951 203 % 115,131 122 % 386,697 131 % 315,528 109 %

Loss from operations (66,037) (103) % (20,847) (22) % (92,012) (31) % (26,070) (9) %

Other income, net 172 — % 452 1 % 322 — % 825 — %

Other income (expense), net 189 — % (101) — % 511 — % 724 — %

Loss before benefit from income taxes (65,848) (103) % (20,948) (22) % (91,501) (31) % (25,346) (9) %

Benefit from income taxes (12,834) (20) % (6,443) (7) % (19,278) (7) % (10,923) (4) %

Net income (loss) $ (18,409) (19) % $ (3,370) (4) % $ (19,209) (8) % $ 82 — %

Net loss $ (53,014) (83) % $ (14,505) (15) % $ (72,223) (24) % $ (14,423) (5) %

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

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

5 unchanged sentences

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

Three Months Ended June 30, Change Six Months Ended June 30, Change

Three Months Ended September 30, Change Nine Months Ended September 30, Change

2021 2020 $ % 2021 2020 $ %

4 unchanged sentences

Total revenue $ 63,914 $ 94,284 $ (30,370) (32) % $ 294,685 $ 289,458 $ 5,227 2 %

Three Months Ended June 30, 2021 and 2020 – Commission revenue increased $9.1 million, or 11%, during the three months ended June 30, 2021 compared to the same period in 2020 due to a $14.9 million increase in commission revenue from the Individual, Family and Small Business segment, partially offset by a $5.8 million decrease in commission revenue from the Medicare segment.

The decrease in commission revenue from the Medicare segment was primarily due to lower LTVs and a decrease in net commission revenue from Medicare members approved in prior periods, or negative adjustment revenue, which was primarily attributable due to Medicare Part D prescription drug plans.

The increase in commission revenue from the Individual, Family and Small Business segment was primarily driven by a $13.8 million increase in net adjustment revenue, 78% increase in individual and family major medical plan approved members, 35% increase in dental plan approved members and 21% increase in vision plan approved members.

The increase in net adjustment revenue from the Individual, Family and Small Business segment was attributable to increase in LTV and higher demand of individual and family plans, dental and vision products.

See Segment Information below for further discussion.

Other revenue declined $1.3 million, or 16%, during the three months ended June 30, 2021 compared to the same period in 2020 due to a decrease in sponsorship and advertising revenue.

Six Months Ended June 30, 2021 and 2020 – Commission revenue increased $36.4 million, or 20%, during the six months ended June 30, 2021 compared to the same period in 2020 due to a $18.8 million increase in commission revenue from the Medicare segment and a $17.6 million increase in commission revenue from the Individual, Family and Small Business segment.

The increase in commission revenue from the Medicare segment was driven by a 33% increase in Medicare plan approved members, primarily attributable to a 48% growth in Medicare Advantage plan approved members compared to 2020, partially offset by lower LTVs and a decrease in net commission revenue from Medicare members approved in prior periods which was primarily attributable to Medicare Part D prescription drug plans.

Three Months Ended September 30, 2021 and 2020 – Commission revenue decreased $14.4 million, or 20%, during the three months ended September 30, 2021 compared to the same period in 2020 due to an $8.8 million decrease in commission revenue from the Medicare segment and a $5.5 million decrease in commission revenue from the Individual, Family and Small Business segment.

The decrease in commission revenue from the Medicare segment during the three months ended September 30, 2021 compared to the same period in 2020 was due to a 22% decline in approved members primarily attributable to an 18% decline of approved members for Medicare Advantage plans, partially offset by a 9% increase in Medicare Advantage LTVs.

The decrease in commission revenue from the Individual, Family and Small Business segment was due primarily to a $7.0 million decrease in net adjustment revenue from members enrolled in prior periods, partially offset by an 88% increase in approved individual and family plan members due to a favorable market environment, and higher lifetime values for individual and family plan and certain ancillary products.

Other revenue declined $16.0 million, or 77%, during the three months ended September 30, 2021 compared to the same period in 2020 due primarily to a decrease in Medicare sponsorship and advertising revenue driven by reduced sponsorship activity, a decline in Medicare enrollment volumes year-over-year, and timing, with certain advertising arrangements commencing in the fourth quarter as compared to the third quarter in 2020.

Nine Months Ended September 30, 2021 and 2020 – Commission revenue increased $22.1 million, or 9%, during the nine months ended September 30, 2021 compared to the same period in 2020 due to a $12.1 million increase in commission revenue from the Individual, Family and Small Business segment and a $10.0 million increase in commission revenue from the Medicare segment.

The increase in commission revenue from the Medicare segment was driven by an 18% increase in Medicare plan approved members, driven primarily by a 30% growth in Medicare Advantage plan approved members compared to 2020, partially offset by a decrease in net commission revenue from Medicare members approved in prior periods which was primarily attributable to Medicare Supplement and Medicare Part D prescription drug plans.

The increase in commission revenue from the Individual, Family and Small Business segment was primarily driven by a $8.6 million increase in net adjustment revenue, 52% increase in individual and family major medical plan approved members, 11% increase in dental plan approved members, and 16% increase in vision plan approved members.

See Segment Information below for further discussion.

Other revenue decreased $0.8 million, or 6%, during the six months ended June 30, 2021 compared to the same period in 2020 due to a decrease in sponsorship and advertising revenue.

Other revenue decreased $16.9 million, or 48%, during the nine months ended September 30, 2021 compared to the same period in 2020 due to a decrease in Medicare sponsorship and advertising revenue also related to timing as mentioned above.

We believe that the nature of our sponsorship arrangements with carriers will evolve and be driven by the quality of broker enrollments to a greater extent compared to the prior arrangements which were more focused on volume.

Cost of Revenue

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

Three Months Ended June 30, Change Six Months Ended June 30, Change

Three Months Ended September 30, Change Nine Months Ended September 30, Change

2021 2020 $ % 2021 2020 $ %

1 unchanged sentence

% of total revenue — % 1 % — % 1 %

Three Months Ended June 30, 2021 and 2020 – Cost of revenue decreased by $0.3 million during the three months ended June 30, 2021, compared to the same period in 2020, primarily due to decreased activity from our revenue sharing arrangements.

Six Months Ended June 30, 2021 and 2020 – Cost of revenue decreased by $0.4 million during the three months ended June 30, 2021, compared to the same period in 2020, primarily due to decreased activity from our revenue sharing arrangements.

Three Months Ended September 30, 2021 and 2020 – Cost of revenue decreased by $0.5 million during the three months ended September 30, 2021, compared to the same period in 2020, primarily due to decreased activity from our revenue sharing arrangements.

Nine Months Ended September 30, 2021 and 2020 – Cost of revenue decreased by $0.9 million during the three months ended September 30, 2021, compared to the same period in 2020, primarily due to decreased activity from our revenue sharing arrangements.

Marketing and Advertising

1 unchanged sentence

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

Three Months Ended June 30, Change Six Months Ended June 30, Change

Three Months Ended September 30, Change Nine Months Ended September 30, Change

2021 2020 $ % 2021 2020 $ %

1 unchanged sentence

% of total revenue 68 % 35 % 47 % 36 %

Three Months Ended June 30, 2021 and 2020 – Marketing and advertising expenses increased $11.7 million, or 36%, during the three months ended June 30, 2021 compared to the same period in 2020, primarily driven by an $11.9 million increase in Medicare plan related variable advertising and $0.6 million in stock-based compensation expenses, partially offset by decreases of $0.5 million in consulting expenses and $0.5 million in personnel and compensation costs.

The increase in variable advertising expenses was due to an increase in our advertising expense through our partner and online channels.

Six Months Ended June 30, 2021 and 2020 – Marketing and advertising expenses increased $24.8 million, or 35%, during the six months ended June 30, 2021 compared to the same period in 2020, primarily driven by a $25.9 million increase in Medicare plan related variable advertising and $1.3 million in stock-based compensation expenses, partially offset by decreases of $1.6 million in consulting expenses and $1.2 million in personnel and compensation costs.

Three Months Ended September 30, 2021 and 2020 – Marketing and advertising expenses increased $9.9 million, or 30%, during the three months ended September 30, 2021 compared to the same period in 2020, primarily driven by a $10.2 million increase in Medicare plan related variable advertising, $0.4 million in stock-based compensation expenses and $0.4 million in facilities and other costs, partially offset by decreases of $0.6 million in consulting expenses and $0.6 million in personnel and compensation costs.

The increase in variable advertising expense was due to an increase in our advertising expense per approved Medicare member, partially offset by a decline in the number of approved members during the quarter.

Nine Months Ended September 30, 2021 and 2020 – Marketing and advertising expenses increased $34.7 million, or 33%, during the nine months ended September 30, 2021 compared to the same period in 2020, primarily driven by a $36.1 million increase in Medicare plan related variable advertising and $1.8 million in stock-based compensation expenses, partially offset by decreases of $2.2 million in consulting expenses and $1.8 million in personnel and compensation costs.

The increase in variable advertising expenses was due to an increase in our advertising expense through our partner and online channels.

3 unchanged sentences

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

Three Months Ended June 30, Change Six Months Ended June 30, Change

Three Months Ended September 30, Change Nine Months Ended September 30, Change

2021 2020 $ % 2021 2020 $ %

1 unchanged sentence

% of total revenue 77 % 46 % 41 % 35 %

Three Months Ended June 30, 2021 and 2020 – Customer care and enrollment expenses increased $11.2 million, or 41%, during the three months ended June 30, 2021 compared to the same period in 2020, primarily due to increases of $7.5 million in personnel costs associated with an increase in customer care and enrollment headcount as we focus on the expansion of our internal telesales team to strengthen our resources in advance of the AEP as noted below, $2.4 million in consulting expenses, and $0.6 million in licensing costs.

Six Months Ended June 30, 2021 and 2020 – Customer care and enrollment expenses increased $14.8 million, or 26%, during the six months ended June 30, 2021 compared to the same period in 2020, primarily due to an increase of $13.6 million in personnel costs associated with an increase in customer care and enrollment headcount as noted below, $1.4 million in consulting expenses, and $0.6 in facilities and other costs, partially offset by decreases of $1.1 million in licensing costs.

Three Months Ended September 30, 2021 and 2020 – Customer care and enrollment expenses increased $5.6 million, or 13%, during the three months ended September 30, 2021 compared to the same period in 2020, primarily due to increases of $15.1 million in personnel costs reflecting our investment in earlier onboarding of our internal telesales team and strengthening our resources in advance of the Medicare annual enrollment period as noted below and $1.9 million in facilities and other costs as well as a decline in telephonic conversion rates, partially offset by decreases of $8.4 million in external agents and consulting expenses, and $3.2 million in licensing costs.

Nine Months Ended September 30, 2021 and 2020 – Customer care and enrollment expenses increased $20.5 million, or 20%, during the nine months ended September 30, 2021 compared to the same period in 2020, primarily due to increases of $28.7 million in personnel costs reflecting our investment in earlier onboarding of our internal telesales team and strengthening our resources in advance of the Medicare annual enrollment period as noted below and $2.4 million in facilities and other costs, partially offset by decreases of $7.0 million in consulting expenses and $4.4 million in licensing costs.

The decrease in licensing costs was primarily due to previously over-recognized licensing costs that were adjusted during the first quarter of 2021.

We have shifted to a predominantly internal agent model and intend to employ and maintain the majority of our health insurance agent force year-round.

In 2021, we started internal agent hiring and training earlier in the year compared to 2020, with the largest headcount increase planned for the second and third quarters.

During the three months ended June 30, 2021, we made progress expanding and enhancing our telesales organization and continued to scale our digital business.

We anticipate additional spend on agent training and the expansion of our customer service team in the third and fourth quarters, including the addition of a new customer care role to verify Medicare enrollments prior to submission and expanding our quality assurance efforts.

Over time, we expect for these initiatives to result in improved agent efficiency, higher LTVs, as well as stronger consumer awareness of our choice platform.

In 2021, we started internal agent hiring and training earlier in the year compared to 2020, with the largest headcount increase in the second and third quarters.

During the three months ended September 30, 2021, we made progress expanding and enhancing our telesales organization and continued to scale our digital business.

In October 2021, we entered the annual enrollment period with over 95% of our sales force consisting of internal agents, the largest number of full-time agents in our company's history.

We also incurred more spending on agent training and the expansion of our customer service team in the third and fourth quarters, including the addition of a new customer care role to verify Medicare enrollments prior to submission and expanding our quality assurance efforts.

Over time, we expect for these initiatives to result in improved enrollment quality, higher LTVs, as well as stronger consumer awareness of our choice platform.

Technology and Content

2 unchanged sentences

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

Three Months Ended June 30, Change Six Months Ended June 30, Change

Three Months Ended September 30, Change Nine Months Ended September 30, Change

2021 2020 $ % 2021 2020 $ %

1 unchanged sentence

% of total revenue 31 % 19 % 22 % 16 %

Three Months Ended June 30, 2021 and 2020 – Technology and content expenses increased $7.1 million, or 53%, during the three months ended June 30, 2021 compared to the same period in 2020 primarily driven by increases of $2.6 million in personnel and compensation costs due to higher headcount, $2.4 million in stock-based compensation expense, and $1.2 million in amortization of internal software development costs.

Six Months Ended June 30, 2021 and 2020 – Technology and content expenses increased $14.5 million, or 50%, during the six months ended June 30, 2021 compared to the same period in 2020 primarily driven by increases of $5.8 million in personnel and compensation costs due to higher headcount, $3.6 million in stock-based compensation expense, $2.5 million in amortization of internal software development costs, $1.8 million in facilities and other operating costs.

Three Months Ended September 30, 2021 and 2020 – Technology and content expenses increased $2.7 million, or 15%, during the three months ended September 30, 2021 compared to the same period in 2020 primarily driven by increases of $1.7 million in depreciation and amortization expenses, $1.0 million in stock-based compensation expense and $0.9 million in personnel and compensation costs due to higher headcount, partially offset by $0.6 million decrease in facilities and other operating costs and $0.3 million in consulting expenses.

Nine Months Ended September 30, 2021 and 2020 – Technology and content expenses increased $17.2 million, or 37%, during the nine months ended September 30, 2021 compared to the same period in 2020 primarily driven by increases of $6.8 million in personnel and compensation costs due to higher headcount, $4.5 million in stock-based compensation expense, $4.3 million in depreciation and amortization expenses, and $1.2 million in facilities and other operating costs.

General and Administrative

2 unchanged sentences

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

Three Months Ended June 30, Change Six Months Ended June 30, Change

Three Months Ended September 30, Change Nine Months Ended September 30, Change

2021 2020 $ % 2021 2020 $ %

1 unchanged sentence

% of total revenue 26 % 21 % 20 % 21 %

Three Months Ended June 30, 2021 and 2020 – General and administrative expenses decreased $2.6 million, or 13%, during the three months ended June 30, 2021 compared to the same period in 2020, primarily driven by decreases of $1.6 million stock-based compensation expenses, $1.5 million in personnel and compensation costs, and $1.1 million in consulting expenses, partially offset by an increase of $1.0 million in shareholder engagement costs.

Six Months Ended June 30, 2021 and 2020 – General and administrative expenses increased $0.8 million, or 2%, during the six months ended June 30, 2021 compared to the same period in 2020, primarily driven by increases of $0.7 million in consulting expenses, $0.6 million stock-based compensation expenses, and $0.6 million in personnel and compensation costs, partially offset by an increase of $1.0 million in shareholder engagement costs.

Three Months Ended September 30, 2021 and 2020 – General and administrative expenses decreased $3.3 million, or 17%, during the three months ended September 30, 2021 compared to the same period in 2020, primarily driven by decreases of $2.7 million in stock-based compensation expenses, $1.8 million in personnel and compensation costs, and $0.5 million in consulting expenses, partially offset by an increase of $1.3 million in other professional fees.

Nine Months Ended September 30, 2021 and 2020 – General and administrative expenses decreased $2.5 million, or 4%, during the nine months ended September 30, 2021 compared to the same period in 2020, primarily driven by decreases of $3.3 million in stock-based compensation expenses, $2.4 million in personnel and compensation costs and $1.1 million in consulting expenses, partially offset by an increase of $2.7 million in other professional fees, $0.8 million in facilities and other operating costs and $0.5 million in depreciation and amortization expenses.

The decrease in stock-based compensation expenses for both three and nine months ended September 30, 2021 compared to the same periods in the prior year was primarily attributable to a $4.1 million credit related to forfeited equity awards due to our chief executive officer's separation.

Amortization of Intangible Assets

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

Three Months Ended June 30, Change Six Months Ended June 30, Change

Three Months Ended September 30, Change Nine Months Ended September 30, Change

2021 2020 $ % 2021 2020 $ %

2 unchanged sentences

Amortization expense was primarily related to intangible assets purchased through our acquisitions.

Amortization expense decreased during the three and six months ended June 30, 2021 compared to the same periods in 2020 due to certain intangible assets being fully amortized during the three and six months ended June 30, 2021.

Restructuring Charges

In February 2021, our board of directors approved a plan to terminate the employment of certain employees in certain locations.

As part of this plan, we eliminated approximately 89 full-time positions, primarily in the United States, representing approximately 5% of our workforce primarily within customer care and enrollment groups, and to a lesser extent, in our marketing and advertising and general and administrative groups.

Our restructuring charges is summarized as follows (dollars in thousands):

Three Months Ended June 30, Change Six Months Ended June 30, Change

Amortization expense decreased during the three and nine months ended September 30, 2021 compared to the same periods in 2020 due to certain intangible assets being fully amortized during the three and nine months ended September 30, 2021.

Restructuring and Reorganization Charges

Our restructuring and reorganization charges consist primarily of severance, transition and other related costs.

Our restructuring and reorganization charges are summarized as follows (dollars in thousands):

Three Months Ended September 30, Change Nine Months Ended September 30, Change

2021 2020 $ % 2021 2020 $ %

Restructuring charges $ — $ — $ — * $ 2,431 $ — $ 2,431 *

Restructuring and reorganization charges $ 573 $ — $ 573 * $ 3,004 $ — $ 3,004 *

% of total revenue 1 % — % 1 % — %

Our restructuring charges primarily consist of severance and other termination benefits provided to employees as part of the restructuring plan.

* Percentage calculated is not meaningful.

Other Income, Net

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):

Three Months Ended June 30, Change Six Months Ended June 30, Change

Three Months Ended September 30, 2021 and 2020 – Restructuring and reorganization charges for the three months ended September 30, 2021 consisted of the severance and other personnel related cost related to the separation arrangement with our chief executive officer in September 2021.

Nine Months Ended September 30, 2021 and 2020 – Restructuring and reorganization costs for the nine months ended September 30, 2021 primarily consisted of the severance and other personnel related cost related to the restructuring that took place in the first quarter of 2021.

In February 2021, our board of directors approved a plan to terminate the employment of certain employees in certain locations.

As part of this plan, we eliminated approximately 89 full-time positions, representing approximately 5% of our workforce, primarily in the United States within the customer care and enrollment groups, and to a lesser extent, in our marketing and advertising and general and administrative groups.

In addition, we recognized severance and other personnel related costs related to our chief executive officer's separation as described above.

Other Income (Expense), Net

Other income (expense), 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 (expense), net is summarized as follows (dollars in thousands):

Three Months Ended September 30, Change Nine Months Ended September 30, Change

2021 2020 $ % 2021 2020 $ %

Other income, net $ 172 $ 452 $ (280) (62) % $ 322 $ 825 $ (503) (61) %

Other income (expense), net $ 189 $ (101) $ 290 (287) % $ 511 $ 724 $ (213) (29) %

% of total revenue — % — % — % — %

Three Months Ended June 30, 2021 and 2020 – Other income, net decreased $0.3 million during the three months ended June 30, 2021 compared to the same period in 2020 due primarily to a decrease in interest income.

Six Months Ended June 30, 2021 and 2020 – Other income, net decreased $0.5 million during the six months ended June 30, 2021 compared to the same period in 2020 due primarily to a decrease in interest income.

Three Months Ended September 30, 2021 and 2020 – Other income (expense), net increased $0.3 million during the three months ended September 30, 2021 compared to the same period in 2020 due to multiple individually immaterial items.

Nine Months Ended September 30, 2021 and 2020 – Other income (expense), net decreased $0.2 million during the nine months ended September 30, 2021 compared to the same period in 2020 due primarily to a decrease in interest income.

Benefit from Income Taxes

Our benefit from income taxes are summarized as follows (dollars in thousands):

Three Months Ended June 30, Change Six Months Ended June 30, Change

Three Months Ended September 30, Change Nine Months Ended September 30, Change

2021 2020 $ % 2021 2020 $ %

1 unchanged sentence

Effective tax rate 19.5 % 30.8 % 21.1 % 43.1 %

Three Months Ended June 30, 2021 and 2020 – Our effective tax rate of 26.8% for the three months ended June 30, 2021 was lower compared to 41.9% for the three months ended June 30, 2020 primarily due to a decrease in excess tax benefits associated with stock-based compensation.

Our effective tax rate for the three months ended June 30, 2021 and 2020 were higher than the statutory federal tax rate due primarily to stock-based compensation adjustments, and non-deductible lobbying expenses and state taxes, partially offset by research and development credits.

Six Months Ended June 30, 2021 and 2020 – Our effective tax rate of 25.1% for the six months ended June 30, 2021 was lower compared to 101.9% for the six months ended June 30, 2020 primarily due to a decrease in excess tax benefits associated with stock-based compensation.

Our effective tax rate for the six months ended June 30, 2021 and 2020 were higher than the statutory federal tax rate due primarily to stock-based compensation adjustments, and non-deductible lobbying expenses and state taxes, partially offset by research and development credits.

Three Months Ended September 30, 2021 and 2020 – Our effective tax rate of 19.5% for the three months ended September 30, 2021 was lower compared to 30.8% for the three months ended September 30, 2020 primarily due to a decrease in excess tax benefits associated with stock-based compensation.

Our effective tax rate for the three months ended September 30, 2021 and 2020 were higher than the statutory federal tax rate due primarily to stock-based compensation adjustments, and non-deductible lobbying expenses and state taxes, partially offset by research and development credits.

Nine Months Ended September 30, 2021 and 2020 – Our effective tax rate of 21.1% for the nine months ended September 30, 2021 was lower compared to 43.1% for the nine months ended September 30, 2020 primarily due to a decrease in excess tax benefits associated with stock-based compensation.

Our effective tax rate for the nine months ended September 30, 2021 and 2020 were higher than the statutory federal tax rate due primarily to stock-based compensation adjustments, and non-deductible lobbying expenses and state taxes, partially offset by research and development credits.

Segment Information

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

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

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

Our business structure is comprised of two operating segments:

7 unchanged sentences

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 expense, change in fair value of earnout liability, depreciation and amortization expense, and amortization of intangible assets.

Segment profit (loss) 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, depreciation and amortization expense, amortization of intangible assets, and restructuring and reorganization charges.

During the first quarter of 2021, we modified the calculation of segment profit to exclude the amortization of capitalized software development cost to enhance comparability of our financial metrics with peer companies.

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

Three Months Ended June 30, Change Six Months Ended June 30, Change

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

Three Months Ended September 30, Change Nine Months Ended September 30, Change

2021 2020 $ % 2021 2020 $ %

2 unchanged sentences

Total revenue $ 63,914 $ 94,284 $ (30,370) (32) % $ 294,685 $ 289,458 $ 5,227 2 %

Segment profit:

Segment profit (loss):

Medicare segment profit (loss) (1)

2 unchanged sentences

12,499 18,487 (5,988) (32) % 38,476 24,153 14,323 59 %

Total segment profit 121 17,734 (17,613) (99) % 32,718 43,798 (11,080) (25) %

Total segment profit (loss) (40,383) 4,348 (44,731) (1,029) % (7,665) 48,146 (55,811) (116) %

Corporate (14,827) (15,581) 754 (5) % (43,206) (43,376) 170 — %

3 unchanged sentences

Amortization of intangible assets (121) (287) 166 (58) % (416) (1,207) 791 (66) %

Restructuring charges — — — * (2,431) — (2,431) *

Other income, net 172 452 (280) (62) % 322 825 (503) (61) %

Restructuring and reorganization charges (573) — (573) * (3,004) — (3,004) *

Other income (expense), net 189 (101) 290 (287) % 511 724 (213) (29) %

Loss before benefit from income taxes $ (65,848) $ (20,948) $ (44,900) 214 % $ (91,501) $ (25,346) $ (66,155) 261 %

1 unchanged sentence

(1) During the first quarter of 2021, we revised the calculation of segment profit by excluding amortization of capitalized software development costs to enhance comparability of our financial metrics with peer companies.

The amortization of capitalized software development costs were $2.9 million and $1.7 million for the three months ended June 30, 2021 and 2020, respectively, and were $5.7 million and $3.2 million for the six months ended June 30, 2021 and 2020.

The amortization of capitalized software development costs were $3.4 million and $2.1 million for the three months ended September 30, 2021 and 2020, respectively, and were $9.1 million and $5.3 million for the nine months ended September 30, 2021 and 2020, respectively.

(2) Depreciation and amortization has been adjusted to include amortization of software development costs.

Three Months Ended June 30, 2021 and 2020 – Revenue from our Medicare segment declined $7.1 million, or 9%, during the three months ended June 30, 2021 compared to the same period in 2020, primary attributable to a decrease in net adjustment revenue, partially offset by an increase in commission revenue from members approved during the period.

The decrease in net adjustment revenue was largely attributable to our Medicare Part D prescription drug plans.

Revenue from our Individual, Family and Small Business segment grew $14.9 million, or 178%, during the three months ended June 30, 2021 compared to the same period in 2020, primarily attributable to a $13.8 million increase in net adjustment revenue.

Despite the extension of the special enrollment period through August 15, 2021 combined with greater government incentives, we continued to observe stronger member retention rates in our LTV assessments for the majority of the earlier period cohorts of certain products in our Individual, Family and Small Business segment.

Based on our evaluation of the updated LTV models and retention trends, we recognized $15.8 million in net adjustment revenue during the three months ended June 30, 2021.

Six Months Ended June 30, 2021 and 2020 – Revenue from our Medicare segment grew $17.7 million, or 10%, during the six months ended June 30, 2021 compared to the same period in 2020, primary attributable to an increase in Medicare Advantage plan related commission revenue of $45.7 million, partially offset by lower LTVs and a $21.2 million decrease in net adjustment revenue which was largely attributable to our Medicare Part D prescription drug plans.

Three Months Ended September 30, 2021 and 2020 – Revenue from our Medicare segment declined $24.0 million, or 34%, during the three months ended September 30, 2021 compared to the same period in 2020, primary attributable to a $15.2 million decrease in sponsorship and advertising revenue and an $8.8 million decrease in commission revenue.

Revenue from our Individual, Family and Small Business segment declined $6.4 million, or 27%, during the three months ended September 30, 2021 compared to the same period in 2020, primarily attributable to a $7.0 million decrease in net adjustment revenue.

Despite the extension of the COVID-related special enrollment period through August 15, 2021 and an increase in subsidies to certain individuals who purchase qualified health plans, we continued to observe stronger member retention rates in our LTV assessments for the majority of the earlier period cohorts of certain products in our Individual, Family and Small Business segment.

Based on our evaluation of the updated LTV models and retention trends, we recognized $10.0 million in net adjustment revenue during the three months ended September 30, 2021, compared to $17.1 million recognized in the same period in 2020.

Nine Months Ended September 30, 2021 and 2020 – Revenue from our Medicare segment declined $6.3 million, or 3%, during the nine months ended September 30, 2021 compared to the same period in 2020, primary attributable to a $16.2 million decrease in sponsorship and advertising revenue, partially offset by a $10.0 million increase in commission revenue.

The increase in Medicare segment commission revenue is primarily driven by an increase in Medicare Advantage plan related commission revenue of $40.4 million, partially offset by a $20.7 million decrease in net adjustment revenue which was largely attributable to our Medicare Part D prescription drug plans and a decline in the LTV of Medicare Supplement and Medicare Part D prescription drug plans.

The increase in Medicare Advantage commission revenue was driven by 30% growth in Medicare Advantage plan approved members.

Revenue from our Individual, Family and Small Business segment grew $17.9 million, or 96%, during the six months ended June 30, 2021 compared to the same period in 2020, primarily attributable to a $17.6 million increase in commission revenue.

Based on our evaluation of the updated LTV models and retention trends, we recognized $19.1 million in net adjustment revenue, an increase of $15.7 million during the six months ended June 30, 2021 compared to the same period in 2020.

Revenue from our Individual, Family and Small Business segment grew $11.5 million, or 27%, during the nine months ended September 30, 2021 compared to the same period in 2020, primarily attributable to a $12.1 million increase in commission revenue.

Based on our evaluation of the updated LTV models and retention trends, we recognized $29.1 million in net adjustment revenue, an increase of $8.6 million during the nine months ended September 30, 2021 compared to the same period in 2020.

Our Individual, Family and Small Business segment is benefiting from the passage of the American Rescue Plan Act in March 2021.

This legislation expanded access to premium credits making individual and family health plans more affordable, which allows a larger population to get quality coverage that our major medical plans offer.

Segment Profit

Three Months Ended June 30, 2021 and 2020 – Our Medicare segment loss was $17.8 million during the three months ended June 30, 2021, a decrease of $32.8 million, or 219%, compared to segment profit of $15.0 million for the same period in 2020.

This was primarily due to a $7.1 million decrease in revenue and a $25.7 million increase in operating expenses, excluding stock-based compensation expense, depreciation and amortization expenses, and amortization of intangible assets.

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 Individual, Family and Small Business segment profit was $17.9 million during the three months ended June 30, 2021, an increase of $15.2 million, or 555% compared to the same period in 2020.

The increase was primarily driven by a $14.9 million increase in revenue and a $0.2 million decrease in operating expenses, excluding stock-based compensation expense, depreciation and amortization expenses, and amortization of intangible assets.

Six Months Ended June 30, 2021 and 2020 – Our Medicare segment profit was $6.7 million during the six months ended June 30, 2021, a decrease of $31.4 million, or 82%, compared to the same period in 2020.

This was primarily due to a $49.1 million increase in operating expenses, excluding stock-based compensation expense, depreciation and amortization expenses, and amortization of intangible assets, partially offset by a $17.7 million increase in revenue.

Our Individual, Family and Small Business segment profit was $26.0 million during the six months ended June 30, 2021, an increase of $20.3 million, or 358% compared to the same period in 2020.

The increase was primarily driven by a $17.9 million increase in revenue and a $2.4 million decrease in operating expenses, excluding stock-based compensation expense, depreciation and amortization expenses, and amortization of intangible assets.

Segment Profit (Loss)

Three Months Ended September 30, 2021 and 2020 – Our Medicare segment loss was $52.9 million during the three months ended September 30, 2021, an increase of $38.7 million, or 274%, compared to segment loss of $14.1 million for the same period in 2020.

This was primarily due to a $24.0 million decrease in revenue and a $14.8 million increase in operating expenses, excluding stock-based compensation expense, depreciation and amortization expenses, amortization of intangible assets, and restructuring and reorganization charges.

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, enrollment quality initiatives, and enhancements to our technology platform.

These investments were made in preparation for the annual enrollment period in the fourth quarter.

Our Individual, Family and Small Business segment profit was $12.5 million during the three months ended September 30, 2021, a decrease of $6.0 million, or 32% compared to the same period in 2020.

The decrease was primarily driven by a $6.4 million decrease in revenue and a $0.4 million decrease in operating expenses, excluding stock-based compensation expense, depreciation and amortization expenses, amortization of intangible assets, and restructuring and reorganization charges.

Nine Months Ended September 30, 2021 and 2020 – Our Medicare segment loss was $46.1 million during the nine months ended September 30, 2021, a decrease of $70.1 million, or 292%, compared to segment profit of $24.0 million for the same period in 2020.

This was primarily due to a $63.9 million increase in operating expenses, excluding stock-based compensation expense, depreciation and amortization expenses, amortization of intangible assets, and restructuring and reorganization charges, as well as a $6.3 million decrease in revenue.

The increase in operating expenses was mostly attributable to our enrollment quality initiatives and our investments in preparation for the annual enrollment period in the fourth quarter.

Our Individual, Family and Small Business segment profit was $38.5 million during the nine months ended September 30, 2021, an increase of $14.3 million, or 59% compared to the same period in 2020.

The increase was primarily driven by a $11.5 million increase in revenue and a $2.8 million decrease in operating expenses, excluding stock-based compensation expense, depreciation and amortization expenses, amortization of intangible assets, and restructuring and reorganization charges.

Liquidity and Capital Resources

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

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Cash and cash equivalents $ 157,530 $ 43,759

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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 Quarterly Report on Form 10-Q.

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.

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

In addition, our cash position could be impacted by further acquisitions and the level of investments we make to pursue our 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.

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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.

As of June 30, 2021, our cash and cash equivalents totaled $229.3 million.

Alternatively, we may decide to reduce marketing and advertising, customer care and enrollment, technology and content, or other expenses in order to manage liquidity.

These reductions could adversely impact our rate of membership and revenue growth.

As of September 30, 2021, our cash and cash equivalents totaled $157.5 million.

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 and commercial paper.

The increase in cash and cash equivalents reflects $10.7 million of net cash provided by operating activities and $211.1 million of net cash provided by financing activities, partially offset by $36.3 million of net cash used in investing activities.

We also maintained $3.4 million in restricted cash as of June 30, 2021 and December 31, 2020.

The following table presents a summary of our cash flows for the six months ended June 30, 2021 (in thousands):

Six Months Ended June 30,

Net cash provided by (used in) operating activities $ 10,726 $ (12,398)

The increase in cash and cash equivalents reflects $210.9 million of net cash provided by financing activities, partially offset by $60.3 million of net cash used in operating activities and $36.8 million of net cash used in investing activities.

We also maintained $3.4 million in restricted cash as of September 30, 2021 and December 31, 2020.

The following table presents a summary of our cash flows for the nine months ended September 30, 2021 (in thousands):

Nine Months Ended September 30,

Net cash used in operating activities $ (60,321) $ (10,959)

Net cash used in investing activities (36,822) (128,291)

Net cash provided by financing activities 210,914 203,555

211,093 212,344

Operating Activities

Net cash provided by (used in) operating activities primarily consists of net income (loss), adjusted for certain non-cash items, including, 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.

Net cash used in operating activities primarily consists of net loss, adjusted for certain non-cash items, including, 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.

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Similarly, during the open enrollment period for individual and family health insurance plans which typically takes place during the fourth 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 enrollment periods for individual and family health insurance plans, the Medicare annual enrollment

period and the open enrollment period for Medicare-related health insurance can positively or negatively affect our cash flows during each quarter.

Six Months Ended June 30, 2021 – Net cash provided by operating activities was $10.7 million during the six months ended June 30, 2021, primarily driven by changes in net operating assets and liabilities of $8.7 million and adjustments for non-cash items of $21.3 million, partially offset by a net loss of $19.2 million.

Adjustments for non-cash items primarily consisted of $19.6 million of stock-based compensation expense, $6.0 million of amortization of intangible assets and internally-developed software, and $2.2 million of depreciation and amortization, partially offset by a $7.4 million decrease due to the change in deferred income taxes.

Cash used from changes in net operating assets and liabilities during the six months ended June 30, 2021 primarily consisted of decreases of $37.0 million in contract assets – commissions receivable and $4.3 million in prepaid expenses and other current asset, partially offset by decreases of $21.4 million in accounts payable, $7.6 million in accrued marketing expense, and $3.7 million in accrued compensation and benefits.

Six Months Ended June 30, 2020 – Net cash provided by operating activities was $12.4 million during the six months ended June 30, 2020, primarily driven by changes in net operating assets and liabilities of $29.4 million, partially offset by adjustments for non-cash items totaling $17.0 million.

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

Nine Months Ended September 30, 2021 – Net cash used in operating activities was $60.3 million during the nine months ended September 30, 2021, primarily driven by net loss of $72.2 million and changes in net operating assets and liabilities of $7.0 million, partially offset by adjustments for non-cash items of $18.9 million.

Adjustments for non-cash items primarily consisted of $24.9 million of stock-based compensation expense, $9.6 million of amortization of intangible assets and internally-developed software, and $3.7 million of depreciation and amortization, partially offset by a $20.1 million decrease due to the change in deferred income taxes.

Cash used from changes in net operating assets and liabilities during the six months ended June 30, 2020 primarily consisted of decreases of $17.5 million in accounts payable, $7.8 million in accrued compensation and benefits, $7.3 million in accrued marketing expenses, $2.5 million in deferred revenue, and a $1.0 million increase in prepaid expenses and other assets, partially offset by a decrease of $4.8 million in contract assets – commissions receivable and an increase of $2.2 million in accrued expenses and other liabilities.

Cash used from changes in net operating assets and liabilities during the nine months ended September 30, 2021 primarily consisted of decreases of $26.9 million in accounts payable, $6.5 million in accrued marketing expense, increases of $20.8 million in prepaid expenses and other current asset, and decreases in $0.1 million in accrued compensation and benefits, partially offset by decreases of $35.2 million in contract assets – commissions receivable, increases of $10.2 million in deferred revenue and $1.4 million in accrued expenses and other liabilities.

Nine Months Ended September 30, 2020 – Net cash used in operating activities was $11.0 million during the nine months ended September 30, 2020, primarily driven by changes in net operating assets and liabilities of $16.8 million and a net loss of $14.4 million, partially offset by adjustments for non-cash items totaling $20.3 million.

Adjustments for non-cash items primarily consisted of $21.7 million of stock-based compensation expense, $6.5 million of amortization of intangible assets and internally developed software, and $2.6 million of depreciation and amortization, partially offset by an $11.0 million change in deferred income taxes.

Cash used from changes in net operating assets and liabilities during the nine months ended September 30, 2020 primarily consisted of increases of $16.8 million in contract assets – commissions receivable, $9.4 million in prepaid expenses and other current assets and $1.5 million in accounts receivable, decreases of $7.4 million in accrued compensation and benefits, $5.4 million in accrued marketing expenses, and $3.2 million in accounts payable, partially offset by increases of $23.9 million in deferred revenue and $3.1 million in accrued expenses and other liabilities.

Investing Activities

Our investing activities primarily consist of purchases, maturities, and redemptions of marketable securities as well as purchases of computer hardware and software to enhance our website and customer care operations, leasehold improvements related to facilities expansion, capitalized internal-use software and website development costs and security deposit payments.

Six Months Ended June 30, 2021 – Net cash used in investing activities of $36.3 million for the six months ended June 30, 2021 mainly consisted $67.8 million used to purchase marketable securities, $7.3 million in capitalized internal-use software and website development costs and $2.7 million used to purchase property and equipment and other assets, partially offset by $41.5 million proceeds from the maturities and redemptions of marketable securities.

Six Months Ended June 30, 2020 – Net cash used in investing activities of $146.6 million for the six months ended June 30, 2020 was due to $147.5 million in purchases of marketable securities, $7.6 million in capitalized internal-use software and website development costs and $4.7 million used to purchase property and equipment and other assets, partially offset by $13.3 million proceeds from the maturities and redemptions of marketable securities.

Nine Months Ended September 30, 2021 – Net cash used in investing activities of $36.8 million for the nine months ended September 30, 2021 mainly consisted of $89.0 million used to purchase marketable securities, $12.6 million in capitalized internal-use software and website development costs and $3.6 million used to purchase property and equipment and other assets, partially offset by $68.3 million proceeds from the maturities and redemptions of marketable securities.

Nine Months Ended September 30, 2020 – Net cash used in investing activities of $128.3 million for the nine months ended September 30, 2020 was due to $180.5 million in purchases of marketable securities, $12.1 million in capitalized internal-use software and website development costs and $6.5 million used to purchase property and equipment and other assets, partially offset by $70.8 million proceeds from the maturities and redemptions of marketable securities.

Financing Activities

Six Months Ended June 30, 2021 – Net cash provided by financing activities of $211.1 million for the six months ended June 30, 2021 was primarily due to $214.0 million net proceeds from issuance of convertible preferred stock and $3.1 million net proceeds from exercise of common stock options, partially offset by $5.9 million repurchase of shares to satisfy employee tax withholding obligation.

Six Months Ended June 30, 2020 – Net cash provided by financing activities of $212.3 million for the six months ended June 30, 2020 was primarily due to $228.0 million net proceeds from the issuance of common stock in a public equity offering and $1.3 million of net proceeds from the exercise of common stock options, partially offset by $8.8 million of

acquisition-related contingent payments and $8.2 million repurchase of shares to satisfying employee tax withholding obligations.

Nine Months Ended September 30, 2021 – Net cash provided by financing activities of $210.9 million for the nine months ended September 30, 2021 was primarily due to $214.0 million net proceeds from issuance of convertible preferred stock and $5.0 million net proceeds from exercise of common stock options, partially offset by $8.0 million in repurchases of shares to satisfy employee tax withholding obligations.

Nine Months Ended September 30, 2020 – Net cash provided by financing activities of $203.6 million for the nine months ended September 30, 2020 was primarily due to $228.0 million net proceeds from the issuance of common stock in a public equity offering and $1.6 million of net proceeds from the exercise of common stock options, partially offset by $17.2 million in repurchases of shares to satisfy employee tax withholding obligations and $8.8 million of acquisition-related contingent payments.

Convertible Preferred Stock

On April 30, 2021 (the “Closing Date”), we issued and sold 2,250,000 shares of our newly designated Series A convertible 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.

We received $214.0 million net proceeds from the private placement with H.I.G., net of sales commissions and certain transaction fees.

Dividends on our outstanding shares of Series A preferred stock accrue daily at 8% per annum on the Stated Value per share and compound semiannually, payable in kind until April 30, 2023, which is 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 will thereafter become 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”).

On April 30, 2021 (the “Closing Date”), we issued and sold 2,250,000 shares of our newly designated Series A convertible preferred stock (“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.

We received $214.0 million net proceeds from the private placement with Echelon Health SPV, LP ("H.I.G."), net of sales commissions and certain transaction fees.

Dividends on our outstanding shares of Series A preferred stock accrue daily at 8% per annum on the Stated Value per share and compound semiannually, payable in kind until April 30, 2023, which is the second anniversary of the Closing Date, on June 30 and December 31 of each year, beginning on June 30, 2021, and will thereafter become 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.

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

Beginning on April 30, 2027, which is 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.

Beginning on April 30, 2027, which is the sixth anniversary of the Closing Date, 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.

As of June 30, 2021, no shares of the Series A preferred stock have been converted and the balance of our Series A preferred stock was $218.5 million, including a change in the redemption value of $1.4 million and the accrued paid-in-kind dividends of $3.1 million, which was equivalent to 2.9 million shares of common stock on an as-converted basis.

As of September 30, 2021, no shares of the Series A preferred stock have been converted and the balance of our Series A preferred stock was $225.4 million, including a change in the redemption value of $3.8 million and the accrued paid-in-kind dividends of $7.6 million, which was equivalent to 2.9 million shares of common stock on an as-converted basis.

See Note 6 – Convertible Preferred Stock in our Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional information.

Credit Agreement

We entered into a credit agreement with Royal Bank of Canada, or RBC, as administrative agent and collateral agent, (the “Credit Agreement”) in September 2018.

We entered into a credit agreement with Royal Bank of Canada (“RBC”) as administrative agent and collateral agent, (the “Credit Agreement”) in September 2018.

The Credit Agreement provides for a $40.0 million secured asset-backed revolving credit facility with a $5.0 million letter of credit sub-facility.

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.

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 (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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At closing of the Credit Agreement, we paid a one-time facility fee of 1.75% of the total commitments of $40 million.

We also paid a one-time closing

fee of 0.5% of the new commitment of $75.0 million in connection with the Amendment.

We also paid a one-time closing fee of 0.5% of the new commitment of $75.0 million in connection with the Amendment.

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

As of June 30, 2021, we had no outstanding principal amount under our revolving credit facility.

As of September 30, 2021, we had no outstanding principal amount under our revolving credit facility.

See Note 12 – Debt of Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional information regarding this credit agreement and subsequent amendment.

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Off-Balance Sheet Arrangements

As of June 30, 2021, 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, revenues, or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors.

As of September 30, 2021, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues, 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-Q

Item 2. Management’s Discussion and Analysis