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Item 7. Management’s Discussion and Analysis

2022-03-01 compared with 2021-02-26 · 280 added, 237 removed, 409 unchanged (56% of the section changed)

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

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

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

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

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

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

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

Our platform leverages technology to solve a critical problem in a large and growing market by aiding consumers in what has traditionally been a complex, confusing, and opaque health insurance purchasing process.

Our omnichannel consumer engagement platform enables consumers to use our services online, by telephone with a licensed insurance agent, or through a hybrid online assisted interaction.

We have created a consumer-centric marketplace that offers a broad choice of insurance products including 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.

Our plan recommendation tool curates this broad plan selection by analyzing customer health-related information against plan data for insurance coverage fit.

This tool is supported by a unified data platform and is available to our ecommerce customers and our licensed agents.

2021 Business Initiatives

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

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 routing tools.

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

Enrollment quality has been our focus since the launch of our retention program in 2020, which helps ensure that we present 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.

Prior to the annual enrollment period, or AEP, which began in November 2021 for enrollment effective 2022, 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 facilitates 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 negatively impacted our financial results in the second half of the year ended December 31, 2021, 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 20, 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 Francis Soistman as a member of our board of directors and our chief executive officer, effective November 1, 2021.

Flanders provided 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 second half 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 Consolidated Statement of Comprehensive Income (Loss) for the year ended December 31, 2021.

In January 2022, we announced the termination of chief revenue officer, Timothy C.

Hannan, effective January 31, 2022, and the appointment of Robert S.

Hurley as interim chief revenue officer effective February 1, 2022.

Hurley previously served as an executive officer of the Company for over 20 years until his retirement in March 2020.

In February 2022, we announced the appointment of Roman Rariy as our chief operating officer and chief transformation officer, effective March 1, 2022.

Impact from COVID-19

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

We experienced a number of changes in our business related to the impacts from the COVID-19 pandemic during 2020 and 2021.

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

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

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

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

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

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

Our office in China has reopened since the second quarter of 2020 given the improvements in the situation in the region where our office is located.

As of December 31, 2021, all of our U.S.

offices are open at reduced capacity and with additional safety and social distancing measures.

We currently plan to operate with a combination of remote and in-office work in the United States at least through the first quarter of 2022.

We plan to increase the number of in-office employees in the future 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.

Due to the surge of COVID-19 cases caused by the COVID-19 Omicron 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 Omicron and other variants could cause us to alter our operations and plans for in-office and remote work.

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

We expect this model to provide us with geographic hiring flexibility.

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

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

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

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

We believe that more seniors have become more likely to shop for Medicare products online or over the phone versus a face-to-face meeting with a traditional broker, which could have a positive impact on comparison Medicare platforms such as ours.

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.

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

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

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

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

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

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

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

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

2022 Business Initiatives

Transformation Initiatives — We plan to implement a multi-year transformation initiative to right-size our cost structure and drive future profitability.

These initiatives include targeted reductions in fixed expenses and vendor-related spend outside of mission critical areas, as well as changes to variable cost management.

Through this program, we expect to achieve ongoing significant cost savings while preserving our competitive edge and focusing on initiatives with highest in-period returns on investment.

We expect to achieve over $60 million in annualized cost savings, excluding restructuring costs in 2022 of approximately $10 million to $20 million.

We expect the variable cost reduction to lead to a temporary decline in our Medicare enrollments and revenue in 2022 before a return to growth in 2023 on a significantly improved operational and cost foundation.

These initiatives are intended to improve our operations through re-engineering, reorganizing, and better deployment of marketing expenses.

Summary of Selected Metrics

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

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

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

Not all approved members become paying members for various reasons.

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

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

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

Approved Members

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Not all approved members ultimately become paying members.

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

The following table shows approved members for the years presented:

Year Ended December 31,

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Individual and Family 42,711 33,328 32,186

Non-Qualified Health Plans 19,578 20,187 23,075

Qualified Health Plans 13,750 11,999 19,575

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

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

Dental 40,455 43,640 47,343

Vision 18,581 21,391 24,638

Other 14,270 22,980 33,500

Total Ancillaries 114,946 146,698 213,327

Ancillary 97,694 114,946 146,698

Small Business 11,432 14,809 16,685

Total Approved Members 652,907 665,643 630,495

2021 compared to 2020 – Medicare approved members remained flat in 2021 compared to 2020 due to a 3% growth in Medicare Advantage plan approved members, offset by decreased Medicare Supplement and Medicare Part D plan approved members.

The increase in approved Medicare Advantage members was primarily due to our investments in customer care and enrollment and marketing, and an increase in online enrollment, partially offset by a decline in telesales conversion rate during the second half of 2021.

Although the investment in our telesales operations, technology and enrollment quality assurance have negatively impacted our second half 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.

Individual and Family Plan approved members grew 28% in 2021 compared to 2020 primarily due to a 57% increase in approved members for qualified health plans and an 8% increase in non-qualified health plan approved members.

The individual and family health insurance market benefited from the passage of the American Rescue Plan Act adopted 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.

The credits cover the 2021 and 2022 plan years, after which the credit subsidies expire.

Ancillary plan approved members declined 15% in 2021 compared to 2020 primarily due to a decrease in short-term health insurance plans and other ancillary plans approved members.

Small business group health insurance approved members declined 23% in 2021 compared to 2020 mainly due to the shift of our focus away from the sale of small business products.

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

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

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

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

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

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

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

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

Part D submitted applications.

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

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

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

New Paying Members

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

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

Not all approved members become paying members for various reasons.

The following table shows our new paying members for the years presented:

Year Ended December 31,

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Individual and Family 40,658 30,657 30,997

Non-Qualified Health Plans 18,279 20,687 27,105

Qualified Health Plans 12,378 10,310 23,199

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

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

Dental 38,253 42,439 45,876

Vision 17,128 21,332 22,604

Other 13,918 21,601 34,029

Total Ancillaries 111,252 147,496 197,287

Ancillary 100,068 111,252 147,496

Small Business 11,008 14,362 17,606

Total New Paying Members 609,183 621,669 553,515

2021 compared to 2020 – Medicare total new paying members declined 2% in 2021 compared to 2020, due primarily to a 38% decrease in Medicare Part D prescription drug plan new paying members and a 29% decrease in Medicare Supplement plan new paying members, partially offset by a 13% increase in Medicare Advantage plan new paying members.

Overall, the total Medicare new paying members were negatively impacted primarily by a reduced telephonic enrollment conversion rate in the second half of 2021.

Individual and family plan new paying members grew 33% in 2021 compared to 2020 due to a 55% increase in new paying members for qualified plans and an 18% increase in new paying members for non-qualified plans.

Ancillary new paying members declined 10% in 2021 compared 2020 due primarily to a decline in approved members for short-term health plans and other ancillary plans.

Small business new paying members declined 23% in 2021 compared to 2020 primarily due to a decrease in approved members for small business plans.

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

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

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

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

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

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

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

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

Small business new paying members declined 18% in 2020 compared to 2019 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 years presented below:

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

Year Ended December 31,

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For additional information on constrained LTV, see Critical Accounting Policies and Estimates.

(2) For small business, the amount represents the estimated commissions we expect to collect from the plan over the following twelve months.

(2) For small business, the amount represents the estimated commissions we expect to collect from the plan over the following 12 months.

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

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

2021 compared to 2020 – The constrained LTV of commissions per approved member for Medicare Advantage plans increased by 3% and decreased by 12% and 6%, respectively, for Medicare Supplement and Medicare Part D prescription drug plans in 2021 compared to 2020.

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

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

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

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

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

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

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

during the recent open enrollment periods.

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

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

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

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

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

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

Individual and Family and Ancillaries

2021 compared to 2020 – The constrained LTV of commissions per approved qualified health plan member increased by 17% in 2021 compared to 2020 primarily 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 4%, 22%, 11%, and 16%, respectively, in 2021 compared to 2020 primarily as a result of an increase in estimated average plan duration.

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

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

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

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

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:

Year Ended December 31,

Medicare Advantage 7 % 7 %

Medicare Supplement 9 % 5 %

Medicare Part D 7 % 5 %

Individual and Family

Non-Qualified Health Plans 7 % 15 %

Qualified Health Plans 4 % 4 %

Certain Ancillary Products

Short-term 20 % 20 %

Dental 5 % 10 %

Vision 5 % 5 %

Small Business 5 % — %

The constraints for Medicare Supplement and Medicare Part D prescription drug plans increased during the year ended December 31, 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 year ended December 31, 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 and vision plans decreased during the year ended December 31, 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.

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

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

As of December 31,

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Ancillaries (3)

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

Dental 118,647 127,083 138,916

Vision 68,587 71,277 73,987

Other 37,033 38,119 38,136

Total Ancillaries 247,355 264,341 275,231

235,017 247,355 264,341

Small Business (4)

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

2021 compared to 2020 – Medicare estimated membership grew 10% as of December 31, 2021 compared to December 31, 2020 driven by a 19% increase in Medicare Advantage, offset by 6% and 2% decreases in Medicare Part D prescription drug plan and Medicare Supplement plan estimated membership, respectively.

The overall growth in Medicare estimated membership reflected new enrollments we generated during the year, net of estimated attrition.

Individual and family plan estimated membership declined by 9% as of December 31, 2021 compared to December 31, 2020 due to our previous decision to shift our investment to our Medicare business.

Ancillary plan estimated membership as of December 31, 2021 declined 5% compared to estimated membership as of December 31, 2020 primarily as a result of the decline of estimated membership of dental, short-term health plans, and other ancillary plans.

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

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

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

Individual and family plan estimated membership declined by 15% as of December 31, 2019 compared to December 31, 2018 primarily due to market conditions in the individual and family plan market and our decision to shift our marketing investments towards our Medicare business.

Ancillary plan estimated membership declined 4% as of December 31, 2019 compared to December 31, 2018, primarily due to a 9% decline in dental plan estimated membership.

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

Member Acquisition

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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 years presented.

2021 compared to 2020 – Estimated CC&E costs per approved MA-equivalent member increased 4% in 2021 compared to 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 in 2021.

Estimated variable marketing costs per approved MA-

equivalent member increased by 36% in 2021 compared to 2020, primarily due to a decline in telesales conversion rates leading to a reduced return on our marketing spend and an increase in cost of leads in certain marketing channels, such as direct television and direct mail.

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.

Based on what we learned from this recent AEP, we will continue to improve the marketing strategy and the structure of our telesales organization to address the changing market environment.

Estimated variable CC&E cost per approved IFP-equivalent member decreased 1% in 2021 compared to 2020 due primarily to a decrease in costs and an increase in the number of approved members.

Estimated variable marketing cost per approved IFP-equivalent member decreased by 19% in 2021 compared to 2020 due primarily to a decrease in online marketing spend and an increase in the number of approved members.

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

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

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

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

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

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

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

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

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

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

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

Results of Operations

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Amortization of intangible assets 536 — % 1,493 — % 2,187 — %

Restructuring charges — — % — — % 1,865 1 %

Acquisition costs — — % — — % 76 — %

Restructuring and reorganization charges 4,878 1 % — — % — — %

Impairment charges 46,344 9 % — — % — — %

Total operating costs and expenses 663,844 114 % 529,451 91 % 424,792 84 %

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

Income (loss) from operations (125,645) (14) % 53,323 9 % 81,409 16 %

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

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

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

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

Income (loss) before income taxes (124,890) (14) % 53,989 9 % 83,499 16 %

Provision for (benefit from) income taxes (20,515) (4) % 8,539 1 % 16,612 3 %

Net income (loss) $ (104,375) (10) % $ 45,450 8 % $ 66,887 13 %

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

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General and administrative 11,348 11,887 13,278

Restructuring charges — — 251

Total stock-based compensation expense $ 32,857 $ 25,172 $ 22,570

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Total revenue $ 538,199 $ (44,575) (8)% $ 582,774 76,573 15% $ 506,201

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

2021 compared to 2020 – Commission revenue decreased $15.1 million, or 3% in 2021 compared to 2020 due to a $17.1 million decrease in commission revenue from the Medicare segment, offset by a $2.0 million increase in commission revenue from the Individual, Family and Small Business segment.

The decrease in commission revenue from the Medicare segment for the year ended December 31, 2021 compared to 2020 was primarily due to a decrease in net adjustment revenue and a decline in the estimated constrained LTV and lower enrollment volume for Medicare Supplement and Medicare Part D prescription drug plans, partially offset by an increase in constrained LTV and enrollment volume for Medicare Advantage plans.

The increase in commission revenue from the Individual, Family and Small Business segment was primarily driven by a 28% increase in individual and family plan approved members.

See Segment Information below for further discussion.

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

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

Net adjustment revenue for our Medicare segment in 2021 and 2020 was $(8.4) million and $5.7 million, respectively.

For our Individual, Family and Small Business segment net adjustment revenue in 2021 and 2020 was $30.2 million and $33.1 million, respectively.

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

Other revenue decreased $29.5 million, or 40% in 2021 compared to the same period in 2020 due to a decrease in Medicare advertising revenue as a result of a decrease in the size and number of advertising programs with certain carriers.

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

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

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

We recognize positive adjustments to revenue to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized

will not occur.

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

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

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

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

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

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

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

We anticipate a reduction in revenue in 2022 as we reset our strategy, improve the structure of our telesales organization, and focus on driving volume from marketing channels that offer more favorable return on our investments.

Cost of Revenue

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% of total revenue — % 1 % 1 %

2021 compared to 2020 – Cost of revenue decreased $2.1 million in 2021, compared to $4.1 million in 2020, primarily due to decreased activity from our revenue sharing arrangements.

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

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

Marketing and Advertising

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Some of our partners such as pharmacies and hospital networks are not compensated for referrals to us as a result of legal requirements.

These organizations have relationships with us to provide their customers and patients with our consumer experience and to help them find the plan that best meets their needs.

These organizations have relationships with us to provide their customers and patients with

our consumer experience and to help them find the plan that best meets their needs.

Some of our marketing partners have tiered arrangements where the amount we pay the marketing partner per submitted application increases as the volume of submitted applications we receive from the marketing partner increases.

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

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

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

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

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% of total revenue 50 % 36 % 30 %

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

2021 compared to 2020 – Marketing and advertising expenses increased by $62.0 million or 30% in 2021, compared to 2020, primarily due to a $60.4 million increase in variable advertising costs, $3.6 million increase in stock-based compensation, and $0.7 million increase in facilities and operating costs, partially offset by decreases in consulting and personnel related costs.

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

The increase in expense as a percentage of revenue reflects lower than expected volume driven by underperformance of certain marketing channels.

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

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

Customer Care and Enrollment

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

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

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

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2021 compared to 2020 – Customer care and enrollment expenses increased by $6.4 million, or 4%, in 2021 compared to 2020.

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

This increase was primarily driven by a $36.4 million increase in personnel costs associated with an increase in customer care and enrollment headcount and a $3.3 million increase in facilities and other operating expenses, partially offset by a $27.5 million decrease in spending on external call center and agents, and a $6.6 million decrease 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.

In 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.

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

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 second half of 2021, including the addition of a new customer care role to verify Medicare enrollments prior to submission and expanding our quality assurance efforts.

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

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

The increase in personnel costs resulted from higher headcount in the lower application volume quarters compared to the prior year as we started to hire and train agents earlier in 2019 in preparation for the AEP in the fourth quarter, a significant increase in

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

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

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

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

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

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

Technology and Content

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% of total revenue 16 % 11 % 9 %

2021 compared to 2020 – Technology and content expenses increased $18.6 million, or 29%, in 2021 compared to 2020, primarily driven by increases of $6.9 million in personnel and compensation costs, $5.1 million in amortization of internally developed software, $4.6 million in stock-based compensation expense, $0.9 million in depreciation and amortization, and $0.9 million in facilities and other operating costs.

The increase reflects an implementation of a cloud-based call center technology platform and further enhancements to our online user experience in 2021.

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

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

General and Administrative

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% of total revenue 14 % 13 % 13 %

2021 compared to 2020 – General and administrative expenses decreased by $0.8 million, or 1%, in 2021 compared to 2020, primarily due to decreases of $2.8 million in compensation and personnel costs and $1.1 million in consulting expense, partly offset by a $2.7 million increase in professional fees.

The decrease in stock-based compensation expenses in 2021 compared to 2020 was primarily attributable to a one-time reversal related to forfeited equity awards due to our former chief executive officer's separation.

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

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

Change in Fair Value of Earnout Liability

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

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

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

Amortization of Intangible Assets

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Amortization expense decreased in 2021 compared to 2020 due to certain intangible assets being fully amortized in 2021.

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

Amortization expense in 2019 remained flat compared to 2018.

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

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

Restructuring and Reorganization Charges

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

We incurred $4.9 million in restructuring and reorganization charges in 2021, which primarily consisted of the severance and other personnel related costs related to the restructuring that took place in the first quarter of 2021 and the severance and other personnel related cost related to the separation arrangement with our former chief executive officer in September 2021.

We did not incur any restructuring and reorganization costs in 2020 and 2019.

We expect to incur higher restructuring and reorganization charges in 2022 in connection with our transformation initiatives.

Impairment Charges

Our impairment charges consist of goodwill and intangible asset impairment.

We reviewed for impairment because events or changes in circumstances indicated a potential reduction in the fair values of goodwill and intangible assets below their respective carrying amounts as of December 31, 2021 and recorded an impairment charge of $40.2 million and $6.1 million regarding our goodwill and intangible assets, respectively, primarily due to the recent change in our market valuation and financial performance.

There were no impairment charges record during the years ended December 31, 2020 and 2019.

Other Income, Net

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% of total revenue — % — % — %

2021 compared to 2020 – Other income, net, increased by $0.1 million or 13% in 2021 compared to 2020 due primarily to decreases in various individually immaterial items.

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

2019 compared to 2018 – Other income, net, increased by $1.3 million or 177% in 2019 compared to 2018 primarily driven by an increase in interest income and an increase in margin earned on from members previously

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

Provision for Income Taxes

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

Provision for (Benefit from) Income Taxes

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

Change Change

2021 $ % 2020 $ % 2019

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

Provision for (benefit from) income taxes $ (20,515) $ (29,054) (340) % $ 8,539 $ (8,073) (49) % $ 16,612

Effective tax rate 16.4 % 15.8 % 19.9 %

2021 compared to 2020 – For the year ended December 31, 2021, we recorded a benefit from income taxes of $20.5 million representing an effective tax rate of 16.4%.

A benefit was recorded in 2021 due to the pretax loss.

In 2021, the effective tax rate was lower than the statutory tax rate due to stock-based compensation adjustments, a valuation allowance of $3.2 million recorded on net California state deferred tax assets, offset by research and development tax credits.

The 2020 effective tax rate was lower than the statutory tax rate primarily due to stock-based compensation adjustments and research and development credits, offset by state tax and lobbying expenses.

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

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

Segment Information

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

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

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

The Medicare segment consists primarily of amounts earned from our sale of Medicare-related health insurance plans, including Medicare Advantage, Medicare Supplement and Medicare Part D prescription drug plans, fees for the performance of administrative services and to a lesser extent, amounts from our sale of ancillary products to our Medicare-eligible customers, including but not limited to, dental and vision plans, as well as amounts we are paid in connection with our Medicare plan advertising program that allows Medicare-related carriers to purchase advertising on a separate website developed, hosted and maintained by us or pursuant to which we perform other services such as marketing and our delivery and sale to third parties of Medicare-related health insurance leads generated by our ecommerce platforms and our marketing activities.

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

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

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

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

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

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Segment profit

Medicare segment profit $ 101,963 (53,271) (34) % $ 155,234 94,390 155 % $ 60,844

Medicare segment profit (loss) (1)

$ (12,079) (120,866) (111) % $ 108,787 (49,274) (31) % $ 158,061

Individual, Family and Small Business segment profit (1)

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

45,705 5,390 13 % 40,315 15,954 65 % 24,361

Total segment profit (loss) 33,626 (115,476) (77) % 149,102 (33,320) (18) % 182,422

Corporate (56,325) 1,339 (2) % (57,664) (12,290) 27 % (45,374)

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Depreciation and amortization (2)

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

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

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

(18,331) (6,881) 60 % (11,450) (4,647) 68 % (6,803)

Restructuring and reorganization charges (4,878) (4,878) * — — — % —

Amortization of intangible assets (536) 957 (64) % (1,493) 694 (32) % (2,187)

Other income, net 755 89 13 % 666 (1,424) (68) % 2,090

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

Income (loss) before income taxes $ (124,890) $ (178,879) (331) % $ 53,989 $ (29,510) (35) % $ 83,499

* Percentage calculated is not meaningful.

2020 compared to 2019

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

(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 was $12.9 million, $7.8 million and $3.8 million for the years ended December 31, 2021, 2020 and 2019, respectively.

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

Segment Revenue

2021 compared to 2020 – Medicare segment revenue declined $45.5 million or 9% in 2021 compared to 2020, primarily attributable to a $28.5 million decrease in sponsorship and advertising revenue and a $17.1 million decrease in Medicare segment commission revenue.

The decrease in Medicare segment commission revenue was primarily due to a decrease in commission revenue for Medicare Supplement plans of $24.3 million and Medicare Part D prescription drug plans of $5.5 million, partially offset by an increase of $18.9 million in Medicare Advantage plan commission revenue.

The increase in Medicare Advantage plan commission revenue was driven by 3% growth in Medicare Advantage approved members and higher constrained LTVs.

The decrease in commission revenue for Medicare Supplement and Medicare Part D prescription drug plans was attributable to a decline in enrollment volume and a negative net adjustment of $8.4 million for the year ended December 31, 2021, primarily due to lower LTVs.

Revenue from the Individual, Family and Small Business segment grew $1.0 million, or 1% in 2021 compared to 2020, primarily attributable to a $2.0 million increase in commission revenue.

The increase in commission revenue from Individual, Family and Small Business segment was primarily due to an increase in commission revenue from members approved during the period of $3.1 million, partially

offset by adjustment revenue of $3.0 million in 2021 compared to 2020.

We recognized $30.2 million adjustment revenue in 2021 due to stronger retention rates for earlier period cohorts of certain products based on our latest LTV assessment.

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

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

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

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

The overall growth of our Medicare business was a result of our investment and marketing efforts in this segment and the increases in approved application volume due to the open enrollment period in the first quarter and the COVID-19 related special enrollment period introduced in the second quarter.

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

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

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

Segment Profit (Loss)

2021 compared to 2020 – Our Medicare segment loss was $12.1 million in 2021, a decrease of $120.9 million or 111%, compared to 2020.

This was primarily due to a $75.3 million increase in operating expenses, excluding stock-based compensation expense, depreciation and amortization expenses, restructuring and reorganization charges, and amortization of intangible assets and by a $45.5 million decrease in revenue.

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

Our Medicare segment profit (loss) was negatively impacted by the underperformance of our internal agent force and certain of our marketing channels during the fourth quarter 2021 AEP.

Our Individual, Family and Small Business segment profit was $45.7 million in 2021, an increase of $5.4 million or 13% compared to 2020.

The increase was primarily driven by a $4.4 million decrease in operating expenses, excluding stock-based compensation expense, change in earnout liability, depreciation and amortization expenses, restructuring and reorganization charges, and amortization of intangible assets, and a $1.0 million increase in revenue.

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

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

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

Our Medicare segment profit was negatively impacted by the underperformance of our outsourced external agent force and certain of our marketing

channels during the fourth quarter 2020 AEP.

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

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

2019 compared to 2018

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

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

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

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

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

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

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

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

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

Liquidity and Capital Resources

Material Cash Requirements

Our material cash requirements include our operating leases and service and licensing obligations.

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

We have entered into service and licensing agreements with third party vendors to provide various services, including network access, equipment maintenance and software licensing.

The terms of these services and licensing agreements are generally up to three years.

We record the related service and licensing expenses on a straight-line basis, although actual cash payment obligations under certain of these agreements fluctuate over the terms of the agreements.

Short-term obligations were $7.7 million for leases and $10.5 million for service and licensing as of December 31, 2021.

Long-term obligations were $43.3 million for leases and $11.0 million for service and licensing.

We expect to fund these obligations through our existing cash and cash equivalents and cash generated from operations.

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 and content, marketing and advertising, customer care and enrollment, and other initiatives.

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

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.

Alternatively, we may decide to reduce expenses in order to manage liquidity.

These reductions could adversely impact the growth of membership and revenue.

We believe our current cash and cash equivalents, along with the proceeds from the term loan we obtained on February 28, 2022, and expected cash collections will be sufficient to fund our operations for at least twelve months after the filing date of this Annual Report on Form 10-K.

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

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Total cash, cash equivalents, and short-term marketable securities $ 123,232 $ 93,379

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

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

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

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

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

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

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

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

As of December 31, 2020 and 2019, our cash and cash equivalents totaled $43.8 and $23.5 million, respectively.

As of December 31, 2021 and 2020, our cash and cash equivalents totaled $81.9 million and $43.8 million, respectively.

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.

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

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

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

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

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

increase in cash and cash equivalents reflects $213.2 million of net cash provided by financing activities, partially offset by $12.6 million of net cash used in investing activities and $162.6 million of net cash used in operating activities.

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

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

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

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

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

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

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

Year Ended December 31, 2021 – Net cash used in operating activities was $162.6 million during the year ended December 31, 2021, primarily driven by cash used from changes in net operating assets and liabilities of $136.3 million and by a net loss of $104.4 million, partly offset by adjustments for non-cash items of $78.0 million.

Cash used from changes in net operating assets and liabilities during the year ended December 31, 2021 primarily consisted of an increase of $116.0 million in contract assets – commissions receivable, a decrease of $23.1 million in accounts payables, an increase of $7.9 million in

prepaid expenses, and a decrease of $4.1 million in accrued compensation and benefits, partially offset by increases of $18.6 million in accrued marketing expenses.

Adjustments for non-cash items primarily consisted of $32.9 million of stock-based compensation expense, $12.9 million of amortization of internally-developed software, and $0.5 million of amortization of intangible assets, partially offset by a $21.5 million decline in deferred income taxes.

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

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

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

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

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

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

Investing Activities

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Year Ended December 31, 2021 – Net cash used in investing activities of $12.6 million during 2021 mainly consisted of $103.1 million used to purchase marketable securities, $17.0 million of capitalized internal-use software and website development costs, and $3.9 million used to purchase property and equipment and other assets, partially offset by $111.3 million of proceeds from redemption and maturities of marketable securities.

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

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

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

Financing Activities

Year Ended December 31, 2021 – Net cash provided by financing activities of $213.2 million during 2021 was primarily attributable to $214.0 million proceeds from issuance of preferred stock, net of issuance costs and $8.7 million of net proceeds from exercise of common stock options, partially offset by $9.3 million cash used for share repurchases to satisfy employee tax withholding obligations.

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

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

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

See Note 5 – Equity and Note 6 – Convertible Preferred Stock in our Notes to Consolidated Financial Statements for information regarding our equity offering in 2020 and our preferred stock transaction in 2021, respectively .

We also had $3.2 million and $3.4 million in restricted cash as of December 31, 2021 and December 31, 2020, respectively.

As of December 31, 2021 and 2020, we had 1.3 million and 1.2 million shares held in treasury stock, respectively, that were shares repurchased to satisfy tax withholding obligations.

As of December 31, 2021 and 2020, we had a total of 12.0 million and 11.8 million shares held in treasury stock, respectively, including 10.7 million shares previously repurchased.

Common Stock Issuance

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

In January 2019, we entered into an underwriting agreement to issue and sell a total of 2,760,000 shares of our common stock in a public offering, which total included the exercise in full of the underwriters’ option to purchase 360,000 additional shares of common stock, at a price to the public of $48.50 per share, for total net proceeds of $126.2 million, after deducting underwriting discounts, commissions and offering expenses.

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

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

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

Preferred Stock

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

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

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

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

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

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

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

Convertible Preferred Stock

On April 30, 2021 (the "Closing Date"), we issued and sold 2,250,000 shares of our newly designated Series A preferred stock at an aggregate purchase price of $225.0 million to H.I.G., at a price of $100 (the “Stated Value” per share of Series A preferred stock) per share (the "Private Placement").

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 on June 30 and December 31 of each year, beginning on June 30, 2021, and will thereafter 6% payable in kind and 2% payable in cash in arrears on June 30 and December 31 of each year, beginning on June 30, 2023 (each, a “Cash Dividend Payment Date”).

Dividends payable in kind will be cumulative.

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

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

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

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

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

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.

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.

The Credit Agreement provides for a $40.0 million secured asset-backed revolving credit facility with a $5 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.

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

We have the right to prepay the loans under the Credit Agreement in whole or in part at any time without penalty.

Subject to availability under the Borrowing Base, amounts repaid may be reborrowed.

Amounts not borrowed under the Credit Agreement are subject to a commitment fee of 0.5% per annum on the daily unused portion of the credit facility, to be paid in arrears on the first business day of each calendar quarter.

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

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

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

See Note 6 – Convertible Preferred Stock of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Form 10-K for more information.

Term Loan Credit Agreement

We entered into the Term Loan Credit Agreement with Blue Torch Finance LLC, as administrative agent and collateral agent, and the other lenders party thereto in February 2022.

The Term Loan Credit Agreement provides for a $70.0 million secured term loan credit facility, which term loans were made available to us on February 28, 2022.

We terminated our credit agreement with Royal Bank of Canada ("RBC"), pursuant to which we had an up to $75 million revolving credit facility in connection with our receiving the loan under the Term Loan Credit Agreement.

See Note 12 – Debt in our Notes to Consolidated Financial Statements regarding our credit agreement with RBC.

The proceeds of the loans under the Term Loan Credit Agreement may be used for working capital and general corporate purposes, to refinance our credit agreement with Royal Bank of Canada and to pay fees and expenses in connection with the entry into the Term Loan Credit Agreement.

The term loan bears interest, at our option, at either a rate based on the London Interbank Offered Rate ("LIBOR") for the applicable interest period or a base rate, in each case plus a margin.

The base rate is the highest of the prime rate, the federal funds rate plus 0.50% and one month adjusted LIBOR plus 1.0%.

The margin is 7.50% for LIBOR loans and 6.50% for base rate loans and the Term Loan Credit Agreement includes customary "fallback" provisions with respect to potential transition from the LIBOR.

The outstanding obligations under the Term Loan Credit Agreement are payable in full on the maturity date.

The Term Loan Credit Agreement matures in February of 2025.

We have the right to prepay the loans under the Term Loan Credit Agreement in whole or in part at any time, subject, in the case of certain mandatory prepayments or any voluntary prepayment of the loans under the Term Loan Credit Agreement after February 28, 2023, to an exit fee.

Our obligations under the Term Loan Credit Agreement are guaranteed by certain of our material domestic subsidiaries and substantially all of our assets and the assets of such guarantors, in each case, subject to customary exclusions.

We are obligated to pay administration fees in connection with the Term Loan Credit Agreement.

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

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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.

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

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

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

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

Our commission revenue is primarily

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

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

Our commissions include regular payments with respect to administrative services we perform.

Our Medicare Supplement plan commissions include certain bonus payments, which are generally based on our attaining predetermined target sales levels or other objectives, as determined by the health insurance carriers.

We estimate commission revenue for each insurance product by using a portfolio approach to a group of approved members by plan type and the effective month of the relevant plan, which we refer to as “cohorts”.

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We provide annual services in selling and renewing small business health insurance plans;

therefore, we recognize small business health insurance plan commission revenue at the time the plan is approved by the carrier, and when it renews each year thereafter, equal to the estimated commissions we expect to collect from the plan over the following twelve months.

Our estimate of commission revenue for each product line is based on a number of assumptions, which include, but are not limited to, estimating conversion of an approved member to a paying member, forecasting average plan duration and forecasting the commission amounts likely to be received per member.

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

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

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

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

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

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

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

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

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

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

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

Stock-Based Compensation

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

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

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

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

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

The assumptions used in calculating the fair value of stock-based payment awards and expected attainment of performance-based awards represent our best estimates,

but these estimates involve inherent uncertainties and the application of management judgment.

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

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

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

Through December 31, 2021, we had not declared or paid any cash dividends to common stockholders, and we do not expect to pay any in the foreseeable future.

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

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

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

Contractual Obligations and Commitments

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

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

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

2022 7,701 3,408 11,109

2023 8,033 2,745 10,778

2024 7,832 2,056 9,888

2025 8,009 1,353 9,362

Thereafter 19,408 1,353 20,761

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

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

Service and Licensing Obligations

We have entered into service and licensing agreements with third party vendors to provide various services, including network access, equipment maintenance and software licensing.

The terms of these services and licensing agreements are generally up to three years.

We record the related service and licensing expenses on a straight-line basis, although actual cash payment obligations under certain of these agreements fluctuate over the terms of the agreements.

Off-Balance Sheet Arrangements

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

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

Recent Accounting Pronouncements

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

What changed 10-K

Item 7. Management’s Discussion and Analysis