eHealth, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS EHEALTH, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, unaudited) March 31, 2022 December 31, 2021 Assets Current assets: Cash and cash equivalents $ 220,563 $ 81,926 Short-term marketable securities 10,938 41,306 Accounts receivable 1,978 5,750 Contract assets – commissions receivable – current 204,237 254,821 Prepaid expenses and other current assets 11,825 23,784 Total current assets 449,541 407,587 Contract assets – commissions receivable – non-current 626,941 653,441 Property and equipment, net 11,106 12,105 Operating lease right-of-use assets 36,099 37,373 Restricted cash 3,239 3,239 Other assets 35,936 35,547 Total assets $ 1,162,862 $ 1,149,292 Liabilities, convertible preferred stock, and stockholders’ equity Current liabilities: Accounts payable $ 8,196 $ 13,750 Accrued compensation and benefits 18,501 16,458 Accrued marketing expenses 19,537 36,384 Lease liabilities – current 5,655 5,543 Other current liabilities 8,500 3,330 Total current liabilities 60,389 75,465 Long-term debt 64,989 — Deferred income taxes – non-current 42,763 50,796 Lease liabilities – non-current 34,410 35,826 Other non-current liabilities 4,574 5,094 Total liabilities 207,125 167,181 Commitments and contingencies Convertible preferred stock 239,810 232,592 Stockholders’ equity: Common stock 39 39 Additional paid-in capital 762,212 755,875 Treasury stock, at cost ( 199,998 ) ( 199,998 ) Retained earnings 153,253 193,213 Accumulated other comprehensive income 421 390 Total stockholders’ equity 715,927 749,519 Total liabilities, convertible preferred stock, and stockholders’ equity $ 1,162,862 $ 1,149,292 The accompanying notes are an integral part of these condensed consolidated financial statements. 3 EHEALTH, INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (in thousands, except per share amounts, unaudited) Three Months Ended March 31, 2022 2021 Revenue: Commission $ 93,850 $ 127,052 Other 11,400 7,162 Total revenue 105,250 134,214 Operating costs and expenses: Cost of revenue ( 127 ) 996 Marketing and advertising 58,454 50,874 Customer care and enrollment 42,164 34,162 Technology and content 19,663 23,163 General and administrative 19,987 23,054 Amortization of intangible assets — 176 Restructuring and reorganization charges 4,823 2,431 Total operating costs and expenses 144,964 134,856 Loss from operations ( 39,714 ) ( 642 ) Other income (expense), net ( 1,021 ) 150 Loss before income taxes ( 40,735 ) ( 492 ) Provision for (benefit from) income taxes ( 7,993 ) 308 Net loss ( 32,742 ) ( 800 ) Paid-in-kind dividends for preferred stock ( 4,717 ) — Change in preferred stock redemption value ( 2,501 ) — Net loss attributable to common stockholders: $ ( 39,960 ) $ ( 800 ) Net loss per share attributable to common stockholders: Basic and diluted $ ( 1.46 ) $ ( 0.03 ) Weighted-average number of shares used in per share amounts: Basic and diluted 27,278 26,620 Comprehensive income (loss): Net loss $ ( 32,742 ) $ ( 800 ) Unrealized holding gain (loss) for available for sales debt securities, net of tax 8 ( 16 ) Foreign currency translation adjustment 23 ( 17 ) Comprehensive loss $ ( 32,711 ) $ ( 833 ) The accompanying notes are an integral part of these condensed consolidated financial statements. 4 EHEALTH, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in thousands, unaudited) Three Months Ended March 31, 2022 Common Stock Additional Paid-in Capital Treasury Stock Retained Earnings Accumulated Other Comprehensive Income Total Stockholders’ Equity Shares Amount Shares Amount Balance as of December 31, 2021 38,704 $ 39 $ 755,875 12,016 $ ( 199,998 ) $ 193,213 $ 390 $ 749,519 Issuance of common stock in connection with equity incentive plans 176 — 1,054 — — — — 1,054 Repurchase of shares to satisfy employee tax withholding obligations — — ( 508 ) 37 — — — ( 508 ) Paid-in-kind dividend and accretion related to convertible preferred stock — — — — — ( 7,218 ) — ( 7,218 ) Stock-based compensation — — 5,791 — — — — 5,791 Other comprehensive income, net of tax — — — — — — 31 31 Net loss — — — — — ( 32,742 ) — ( 32,742 ) Balance as of March 31, 2022 38,880 $ 39 $ 762,212 12,053 $ ( 199,998 ) $ 153,253 $ 421 $ 715,927 Three Months Ended March 31, 2021 Common Stock Additional Paid-in Capital Treasury Stock Retained Earnings Accumulated Other Comprehensive Income Total Stockholders’ Equity Shares Amount Shares Amount Balance as of December 31, 2020 37,755 $ 38 $ 721,013 11,831 $ ( 199,998 ) $ 316,155 $ 350 $ 837,558 Issuance of common stock in connection with equity incentive plans 238 — 285 — — — — 285 Repurchase of shares to satisfy employee tax withholding obligations — — ( 5,037 ) 81 — — — ( 5,037 ) Stock-based compensation — — 11,952 — — — — 11,952 Other comprehensive income, net of tax — — — — — — ( 33 ) ( 33 ) Net loss — — — — — ( 800 ) — ( 800 ) Balance as of March 31, 2021 37,993 $ 38 $ 728,213 11,912 $ ( 199,998 ) $ 315,355 $ 317 $ 843,925 The accompanying notes are an integral part of these condensed consolidated financial statements. 5 EHEALTH, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands, unaudited) Three Months Ended March 31, 2022 2021 Operating activities: Net loss $ ( 32,742 ) $ ( 800 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 946 1,138 Amortization of internally developed software 3,832 2,806 Amortization of intangible assets — 176 Stock-based compensation expense 5,285 11,402 Deferred income taxes ( 8,032 ) ( 570 ) Other non-cash items 215 420 Changes in operating assets and liabilities: Accounts receivable 3,773 ( 48 ) Contract assets – commissions receivable 77,142 50,635 Prepaid expenses and other assets 12,418 4,225 Accounts payable ( 5,525 ) ( 25,826 ) Accrued compensation and benefits 2,042 4,088 Accrued marketing expenses ( 16,848 ) ( 6,712 ) Deferred revenue ( 223 ) 570 Accrued expenses and other liabilities 4,829 1,305 Net cash provided by operating activities 47,112 42,809 Investing activities: Capitalized internal-use software and website development costs ( 4,205 ) ( 3,242 ) Purchases of property and equipment and other assets ( 55 ) ( 1,899 ) Purchases of marketable securities ( 3,938 ) ( 7,771 ) Proceeds from redemption and maturities of marketable securities 34,319 23,409 Net cash provided by investing activities 26,121 10,497 Financing activities: Net proceeds from debt financing 64,862 — Net proceeds from exercise of common stock options and employee stock purchases 1,054 285 Repurchase of shares to satisfy employee tax withholding obligations ( 508 ) ( 5,037 ) Principal payments in connection with leases ( 35 ) ( 38 ) Net cash provided by (used in) financing activities 65,373 ( 4,790 ) Effect of exchange rate changes on cash, cash equivalents and restricted cash 31 ( 25 ) Net increase in cash, cash equivalents and restricted cash 138,637 48,491 Cash, cash equivalents and restricted cash at beginning of period 85,165 47,113 Cash, cash equivalents and restricted cash at end of period $ 223,802 $ 95,604 The accompanying notes are an integral part of these condensed consolidated financial statements. 6 EHEALTH, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Note 1 – Summary of Business and Significant Accounting Policies Description of Business – eHealth, Inc. (the “Company,” “eHealth,” “we” or “us”) is a leading health insurance marketplace with a technology and service platform that provides consumer engagement, education and health insurance enrollment solutions. Our mission is to connect every person with the highest quality, most affordable health insurance and Medicare plans for their life circumstances. Our platform integrates proprietary and third-party developed educational content regarding health insurance plans with decision support tools to aid consumers in what has traditionally been a confusing and opaque health insurance purchasing process, and to help them obtain the health insurance products that meet their individual health and economic needs. Our omnichannel consumer engagement platform 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 includes thousands of Medicare Advantage, Medicare Supplement, Medicare Part D prescription drug, individual and family, small business and other ancillary health insurance products from approximately 200 health insurance carriers across all fifty states and the District of Columbia. Basis of Presentation – The accompanying condensed consolidated balance sheet as of March 31, 2022, the condensed consolidated statements of comprehensive loss and stockholders’ equity for the three months ended March 31, 2022 and 2021, and the condensed consolidated statements of cash flows for the three months ended March 31, 2022 and 2021 are unaudited. The condensed consolidated balance sheet data as of December 31, 2021 was derived from the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the Securities and Exchange Commission on March 1, 2022. The accompanying financial statements and related notes should be read in conjunction with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K. The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") for interim financial information and reflect all normal recurring adjustments that are necessary to present fairly the results for the interim periods presented. The condensed consolidated financial statements include the accounts of eHealth, Inc. and its direct and indirect wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Certain information and disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted in accordance with those rules and regulations. Certain prior period amounts have been reclassified to conform with our current period presentation. The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2021 and include all adjustments necessary for the fair presentation of our financial position as of March 31, 2022 and December 31, 2021, and our results of operations for the periods presented. The results for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for any subsequent period or for the year ending December 31, 2022 and therefore should not be relied upon as an indicator of future results. Subsequent to the issuance of our consolidated financial statements for the year ended December 31, 2020, we identified certain errors, including a $ 3.0 million under-recognition of stock-based compensation expense and a $ 1.5 million over-recognition of licensing costs for the year ended December 31, 2020. We adjusted for these items in the first quarter of 2021 and the adjustments reduced our net loss by approximately $ 1.5 million, or $ 0.06 per basic and diluted share in our Condensed Consolidated Statement of Comprehensive Loss for the three months ended March 31, 2021. These items also reduced our net loss by approximately $ 1.5 million, or $ 0.06 per basic and diluted share, on our Condensed Consolidated Statement of Comprehensive Loss for the three months ended March 31, 2021. We evaluated the effects of these out-of-period adjustments, both qualitatively and quantitatively, and concluded that the errors and the correction thereof were immaterial both individually and in the aggregate to the current reporting period and the periods in which they originated, including quarterly reporting. 7 EHEALTH, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Significant Accounting Policies, Estimates and Judgments – The preparation of condensed consolidated financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported and disclosed in the condensed consolidated financial statements and accompanying notes. On an ongoing basis, we evaluate our estimates, including those related to, but not limited to, the useful lives of intangible assets, fair value of investments, recoverability of intangible assets, the commissions we expect to collect for each approved member cohort, valuation allowance for deferred income taxes, provision (benefit) for income taxes and the assumptions used in determining stock-based compensation. We base our estimates of the carrying value of certain assets and liabilities on historical experience and on various other assumptions that we believe to be reasonable. Actual results may differ from these estimates. There have been no material changes to our significant accounting policies discussed in our Annual Report on Form 10-K for the year ended December 31, 2021. Seasonality – Open enrollment periods drive the seasonality of our business. A greater number of our Medicare-related health insurance plans are sold in our fourth quarter during the Medicare annual enrollment period when Medicare-eligible individuals are permitted to change their Medicare Advantage and Medicare Part D prescription drug coverage for the following year. As a result, our Medicare plan-related commission revenue is highest in our fourth quarter. Our Medicare plan-related commission revenue is also elevated in the first quarter compared to the second and third quarters as a result of the reintroduction of the Medicare Advantage open enrollment period in the first quarter of 2019. Any changes to or additional enrollment periods may change the seasonality of our business. The majority of our individual and family health insurance plans are sold in the fourth quarter during the annual open enrollment period as defined under the federal Patient Protection and Affordable Care Act and related amendments in the Health Care and Education Reconciliation Act. In the states where the Federally Facilitated marketplace operates as the state health insurance exchange, individuals and families generally are not able to purchase individual and family health insurance outside of the annual enrollment period, unless they qualify for a special enrollment period as a result of certain qualifying events, such as losing employer-sponsored health insurance or moving to another state. Extended open enrollment or special enrollment periods may change the seasonality of our individual and family health insurance business. For example, the COVID-related special enrollment period which ended on August 15, 2021 caused increased commission revenue from the sale of individual and family health insurance plans outside of the open enrollment period. Recently Adopted Accounting Pronouncements We did not adopt any new accounting pronouncements during the three months ended March 31, 2022. 8 EHEALTH, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Note 2 – Revenue Disaggregation of Revenue – The table below depicts the disaggregation of revenue by product and is consistent with how we evaluate our financial performance (in thousands): Three Months Ended March 31, 2022 2021 Medicare Medicare Advantage $ 78,130 $ 103,525 Medicare Supplement 6,120 8,222 Medicare Part D 1,460 1,736 Total Medicare 85,710 113,483 Individual and Family (1) Non-Qualified Health Plans 1,610 3,367 Qualified Health Plans 1,516 2,100 Total Individual and Family 3,126 5,467 Ancillary Short-term 1,343 1,756 Dental 831 1,728 Vision 243 205 Other 414 35 Total Ancillary 2,831 3,724 Small Business 3,483 3,223 Commission Bonus and Other ( 1,300 ) 1,155 Total Commission Revenue 93,850 127,052 Other Revenue Sponsorship and Advertising Revenue 10,645 5,814 Other 755 1,348 Total Other Revenue 11,400 7,162 Total Revenue $ 105,250 $ 134,214 _____________ (1) We define our Individual and Family plan offerings as major medical individual and family health insurance plans, which does not include Medicare-related, small business or ancillary plans. Individual and family health insurance plans include both qualified and non-qualified plans. Qualified health plans are individual and family health insurance plans that meet the requirements of the Affordable Care Act and are offered through the government-run health insurance exchange in the relevant jurisdiction. Non-qualified health plans are Individual and Family plans that meet the requirements of the Affordable Care Act and are not offered through the exchange in the relevant jurisdiction. Individuals that purchase non-qualified health plans cannot receive a subsidy in connection with the purchase of non-qualified plans. 9 EHEALTH, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Commission revenue by segment is presented in the table below (in thousands): Three Months Ended March 31, 2022 2021 Medicare Commission Revenue from Members Approved During the Period $ 84,283 $ 114,678 Net Commission Revenue from Members Approved in Prior Periods (1) 51 14 Total Medicare Segment Commission Revenue $ 84,334 $ 114,692 Individual, Family and Small Business Commission Revenue from Members Approved During the Period $ 6,042 $ 6,395 Commission Revenue from Renewals of Small Business Members During the Period (2) 3,037 2,687 Net Commission Revenue from Members Approved in Prior Periods (1) 437 3,278 Total IFP/SMB Segment Commission Revenue $ 9,516 $ 12,360 Total Commission Revenue from Members Approved During the Period (1) $ 90,325 $ 121,073 Commission Revenue from Renewals of Small Business Members During the Period 3,037 2,687 Total Net Commission Revenue from Members Approved in Prior Periods (1)(2) 488 3,292 Total Commission Revenue $ 93,850 $ 127,052 _____________ (1) These amounts reflect our revised estimates of cash collections for certain members approved prior to the relevant reporting period that are recognized as adjustments to revenue within the relevant reporting period. The net adjustment revenue includes both increases in revenue for certain prior period cohorts as well as reductions in revenue for certain prior period cohorts. (2) The impacts of total net commission revenue from members approved in prior periods were $ 0.02 and $ 0.12 per basic and diluted share, for the three months ended March 31, 2022 and 2021, respectively. There were no reductions to revenue from members approved in prior periods for the three months ended March 31, 2022 and $ 0.9 million for the three months ended March 31, 2021. These reductions to revenue primarily related to the Individual, Family and Small Business segment. Note 3 – Supplemental Financial Statement Information Cash, Cash Equivalents and Restricted Cash We consider all investments with an original maturity of 90 days or less from the date of purchase to be cash equivalents. Cash and cash equivalents are stated at fair value. We also invest in marketable securities that are measured and recorded at fair value. See Note 4 – Fair Value Measurements for further discussion about our marketable securities. Our cash, cash equivalent and restricted cash balances are summarized as follows (in thousands): March 31, 2022 December 31, 2021 Cash $ 91,414 $ 33,253 Cash equivalents 129,149 48,673 Cash and cash equivalents 220,563 81,926 Restricted cash 3,239 3,239 Total cash, cash equivalents and restricted cash $ 223,802 $ 85,165 10 EHEALTH, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) As of March 31, 2022 and December 31, 2021, we had $ 3.2 million of restricted cash which was classified as a non-current asset on our Condensed Consolidated Balance Sheets. This amount collateralizes letters of credit related to certain lease commitments. Contract Assets and Accounts Receivable We do not require collateral or other security for our contract assets and accounts receivable. We believe the potential for collection issues with any of our customers was minimal as of March 31, 2022. We estimate an allowance for credit losses using relevant available information from internal and external sources, related to past events, current conditions, and reasonable and supportable forecasts. Specifically, for the purpose of measuring the probability of default parameters, we utilize Capital IQ’s, Standard & Poor’s and Moody’s analytics. Our estimates of loss given default are determined by using our historical collections data as well as historical information obtained through our research and review of other insurance related companies. Our estimated exposure at default is determined by applying these internal and external data sources to our commission receivable balances. As such, we apply an immediate reversion method and revert to historical loss information when computing our credit loss exposure. Credit loss expenses are assessed quarterly and included in general and administrative expense on our Condensed Consolidated Statement of Comprehensive Loss. There were no write-offs during the three month periods ended March 31, 2022 and 2021. We considered the impact of recent events and global economic conditions when evaluating the appropriate adjustments to our allowance for credit losses as of March 31, 2022. We also considered the current and expected future economic and market conditions surrounding the COVID-19 pandemic. The change in the allowance for credit losses for the three months ended March 31, 2022 is summarized as follows (in thousands): Beginning balance $ 2,198 Change in allowance ( 59 ) Ending balance $ 2,139 11 EHEALTH, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Our contract assets – commission receivable activities, net of credit loss allowances are summarized as follows (in thousands): Three Months Ended March 31, 2022 Medicare Segment IFP/SMB Segment Total Beginning balance $ 837,474 $ 70,788 $ 908,262 Commission revenue from members approved during the period 84,283 6,042 90,325 Commission revenue from renewals of small business members during the period — 3,037 3,037 Net commission revenue from members approved in prior periods 51 437 488 Cash receipts ( 159,443 ) ( 11,550 ) ( 170,993 ) Net change in credit loss allowance 54 5 59 Ending balance $ 762,419 $ 68,759 $ 831,178 Three Months Ended March 31, 2021 Medicare Segment IFP/SMB Segment Total Beginning balance $ 739,637 $ 52,768 $ 792,405 Commission revenue from members approved during the period 114,678 6,395 121,073 Commission revenue from renewals of small business members during the period — 2,687 2,687 Net commission revenue from members approved in prior periods 14 3,278 3,292 Cash receipts ( 165,520 ) ( 12,012 ) ( 177,532 ) Net change in credit loss allowance ( 72 ) ( 6 ) ( 78 ) Ending balance $ 688,737 $ 53,110 $ 741,847 Credit Risk Our financial instruments that are exposed to concentrations of credit risk principally consist of cash, cash equivalents, marketable securities, contract assets – commissions receivable, and accounts receivable. We invest our cash and cash equivalents with major banks and financial institutions and such investments are in excess of federally insured limits. We also have deposits with major banks in China that are denominated in both U.S. dollars and Chinese Yuan Renminbi and are not insured by the U.S. federal government. The deposits in China were $ 4.2 million as of March 31, 2022. See Note 4 – Fair Value Measurements for more information regarding our marketable securities. We do not require collateral or other security for either our contract assets or accounts receivable. Carriers that represented 10% or more of our total contract assets, commission receivable, and accounts receivable balances are summarized as of the dates presented below: March 31, 2022 December 31, 2021 Humana 26 % 25 % UnitedHealthCare (1) 24 % 23 % Aetna (1) 17 % 17 % Centene (1) 9 % 10 % _____________ (1) Percentages include the carriers' subsidiaries. 12 EHEALTH, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Prepaid Expenses and Other Current Assets – Our prepaid expenses and other current assets are summarized as of the periods presented as follows (in thousands): March 31, 2022 December 31, 2021 Prepaid maintenance contracts $ 6,052 $ 6,246 Prepaid licenses 2,149 3,076 Prepaid expenses 1,837 11,379 Prepaid insurance 1,431 2,161 Others 356 922 Prepaid expenses and other current assets $ 11,825 $ 23,784 Note 4 – Fair Value Measurements We define fair value as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques we use to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. We classify the inputs used to measure fair value into the following hierarchy: Level 1 Unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 Unadjusted quoted prices in active markets for similar assets or liabilities; unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability. Level 3 Unobservable inputs for the asset or liability. Our financial assets measured at fair value on a recurring basis are summarized below by their classification within the fair value hierarchy as of the dates presented below (in thousands): March 31, 2022 Carrying Value Level 1 Level 2 Level 3 Total Assets Cash equivalents Money market funds $ 17,186 $ 17,186 $ — $ — $ 17,186 Commercial paper 111,964 — 111,964 — 111,964 Short-term marketable securities Commercial paper 10,938 — 10,938 — 10,938 Total assets measured at fair value $ 140,088 $ 17,186 $ 122,902 $ — $ 140,088 13 EHEALTH, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) December 31, 2021 Carrying Value Level 1 Level 2 Level 3 Total Assets Cash equivalents Money market funds $ 9,217 $ 9,217 $ — $ — $ 9,217 Commercial paper 39,456 — 39,456 — 39,456 Short-term marketable securities Commercial paper 38,801 — 38,801 — 38,801 Corporate bond 2,505 — 2,505 — 2,505 Total assets measured at fair value $ 89,979 $ 9,217 $ 80,762 $ — $ 89,979 As of March 31, 2022, our cash equivalents consisted of money market funds and commercial paper with original maturity of 90 days or less were classified as Level 1 and 2, respectively. We endeavor to utilize the best available information in measuring fair value. We used observable prices in active markets in determining the classification of our money market funds as Level 1. Our Level 2 assets consisted of available for sale marketable securities, which included commercial paper, agency bonds, and a corporate bond with maturities of less than one year. We classify our marketable debt securities within Level 2 in the fair value hierarchy, because we use quoted market prices to the extent available or alternative pricing sources and models utilizing market observable inputs to determine fair value. Our portfolio primarily consisted of financial instruments with a credit rating of AA or equivalent by S&P Rating and Moody's Investor Services. There were no transfers between the hierarchy levels during either the three months ended March 31, 2022 or the year ended December 31, 2021. The following table summarizes our cash equivalents and available-for-sale debt securities by contractual maturity (in thousands): As of March 31, 2022 Amortized Cost Fair Value Due in 1 year $ 140,089 $ 140,088 Unrealized gains and losses on available-for-sale debt securities that are not credit related are included in accumulated other comprehensive income and summarized as follows as of March 31, 2022 (in thousands): Amortized Cost Unrealized Gain Unrealized Loss Fair Value Cash equivalents Money market funds $ 17,186 $ — $ — $ 17,186 Commercial paper 111,964 5 ( 5 ) 111,964 Short-term marketable securities Commercial paper 10,939 1 ( 2 ) 10,938 Total $ 140,089 $ 6 $ ( 7 ) $ 140,088 As of March 31, 2022, we had 31 securities in net loss positions and their unrealized losses were immaterial individually and in aggregate. We did not record any credit losses regarding our available-for-sale debt securities during the three months ended March 31, 2022. We do not intend to sell these securities and it is more likely than not that we will not be required to sell these securities before the recovery of their amortized cost basis. 14 EHEALTH, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Note 5 – Equity 2021 Inducement Plan – On September 22, 2021, the Company adopted an inducement plan (the “2021 Inducement Plan”), pursuant to which the Company reserved 410,000 shares of its common stock (subject to customary adjustments in the event of a change in capital structure of the Company) to be used exclusively for grants of awards to individuals who were not previously employees or directors of the Company, other than following a bona fide period of non-employment, as an inducement material to the individual's entry into employment with the Company within the meaning of Rule 5635(c)(4) of the Nasdaq Listing Rules (“Nasdaq Rules”). In March 2022, the Company amended and restated the 2021 Inducement Plan to reserve an additional 500,000 shares of its common stock. The 2021 Inducement Plan and its amendment were approved by the Company's board of directors (the “Board”) without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Rules, and the terms and conditions of the 2021 Inducement Plan and awards to be granted thereunder are substantially similar to the Company's stockholder-approved Amended and Restated 2014 Equity Incentive Plan. As of March 31, 2022, 390,584 shares were issued under the 2021 Inducement Plan. Stock Repurchase Programs – We had no stock repurchase activity during the three months ended March 31, 2022. In addition to 10.7 million shares repurchased under our previous repurchase programs, we have in treasury 1.4 million shares as of March 31, 2022 that were previously surrendered by employees to satisfy tax withholding due in connection with the vesting of certain restricted stock units. As of March 31, 2022 and December 31, 2021, we had a total of 12.1 million shares and 12.0 million shares, respectively, held in treasury. For accounting purposes, common stock repurchased under our stock repurchase programs is recorded based upon the settlement date of the applicable trade. Such repurchased shares are held in treasury and are presented using the cost method. Stock-Based Compensation Expense – Our stock-based compensation expense is summarized as follows by award types (in thousands): Three Months Ended March 31, 2022 2021 Restricted stock units* $ 4,706 $ 10,719 Common stock options 257 180 Employee stock purchase plan 322 503 Total stock-based compensation expense $ 5,285 $ 11,402 _________ * Amounts include market-based and performance-based restricted stock units. 15 EHEALTH, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) The following table summarizes stock-based compensation expense by operating function for the periods presented below (in thousands): Three Months Ended March 31, 2022 2021 Marketing and advertising $ 313 $ 2,485 Customer care and enrollment 454 469 Technology and content 1,850 2,743 General and administrative 2,668 5,705 Total stock-based compensation expense $ 5,285 $ 11,402 Amount capitalized for internal-use software 506 550 Total stock-based compensation $ 5,791 $ 11,952 Note 6 — Convertible Preferred Stock On April 30, 2021 (the “Closing Date”), we issued and sold to Echelon Health SPV, LP (“H.I.G.”), an investment vehicle of H.I.G. Capital, in a private placement, 2,250,000 shares of our newly designated Series A convertible preferred stock (the “Series A preferred stock”), par value $ 0.001 per share, at an aggregate purchase price of $ 225.0 million. We received $ 214.0 million in net proceeds from the private placement with H.I.G., net of sales commissions and certain transaction fees totaling $ 11.0 million. The Series A preferred stock ranks senior to all other equity securities of the Company with respect to dividend rights and rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company. Dividends – Dividends initially accrue on the Series A preferred stock daily at 8 % per annum on the stated value of $ 100 per share (“Stated Value”) and compound semiannually, payable in kind (“PIK”) until the second anniversary of the Closing Date on June 30 and December 31 of each year (each, a “Dividend Payment Date”), beginning on June 30, 2021, and thereafter 6 % PIK and 2 % payable in cash in arrears on June 30 and December 31 of each year, beginning on June 30, 2023. PIK dividends are cumulative and are added to the Accrued Value (as defined below). “Accrued Value” means, as of any date, with respect to any share of Series A preferred stock, the sum of the Stated Value per share plus, on each Dividend Payment Date, on a cumulative basis, all accrued PIK dividends on such share that have not previously compounded and been added to the Accrued Value. The Series A preferred stock participates, on an as-converted basis in all dividends paid to the holders of our common stock. Conversion Rights – The Series A preferred stock is convertible at any time into common stock at a conversion rate equal to (i) the Accrued Value plus accrued PIK dividends that have not yet been added to the Accrued Value, (ii) divided by the conversion price as of the applicable conversion date (the “Conversion Price”). As of the date of this report, the Conversion Price is equal to $ 79.5861 per share. This Conversion Price is subject to further adjustment and the number of shares of common stock issuable upon conversion of the Series A preferred stock is subject to certain limitations, each as set forth in the Certificate of Designations of Series A preferred stock, as filed with the Secretary of State of the State of Delaware on April 30, 2021 (the “Certificate of Designations”). Redemption Put Right – At any time on or after the sixth anniversary of the Closing Date, holders of the Series A preferred stock will have the right to cause the Company to redeem all or any portion of the Series A preferred stock in cash at an amount equal to the greater of (i) 135 % of the Accrued Value per share as of the redemption date, plus accrued PIK dividends that have not yet been added to the Accrued Value and (ii) the amount per share that would be payable on an as-converted basis on such Series A preferred stock at the then-current Accrued Value, plus accrued PIK dividends that have not yet been added to the Accrued Value, and in either case of (i) or (ii) plus any unpaid cash dividends that would have otherwise been settled in cash in connection with such conversion (the greater of (i) and (ii), the “Redemption Price”). 16 EHEALTH, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Redemption Call Right – At any time on or after the sixth anniversary of the Closing Date, the Company will have the right (but not the obligation) to redeem out of legally available funds and for cash consideration all (but not less than all) of the Series A preferred stock upon at least 30 days prior written notice at an amount equal to the Redemption Price. Board Nomination Rights – H.I.G. is entitled to nominate one individual for election to the Board so long as it continues to own at least 30 % of the common stock issuable or issued upon conversion of the Series A preferred stock originally issued to it in the private placement. H.I.G. also has the right to nominate an additional individual to the Board if the Company fails to maintain certain levels of commissions receivable and liquidity. Voting Rights – The Series A preferred stock will vote together with the common stock as a single class on all matters submitted to a vote of the holders of the common stock (subject to certain voting limitations set forth in, and the terms and conditions of, the Certificate of Designations). Each holder of Series A preferred stock shall be entitled to the number of votes, rounded down to the nearest whole number, equal to the product of (i) the aggregate Accrued Value of the issued and outstanding shares of Series A preferred stock divided by the Minimum Price (as defined below), multiplied by (ii) a fraction, the numerator of which is the number of shares of Series A preferred stock held by such holder and the denominator of which is the aggregate number of issued and outstanding shares of Series A preferred stock. “Minimum Price” means the lower of: (i) the Nasdaq Official Closing Price per share of common stock on the Closing Date; or (ii) the average Nasdaq Official Closing Price per share of common stock for the five trading days immediately prior to the Closing Date. Holders of Series A preferred stock will have one vote per share on any matter on which the holders of the Series A preferred stock are entitled to vote separately as a class (subject to certain voting limitations set forth in, and the terms and conditions of, the Certificate of Designations). Mandatory Conversion of the Series A Preferred Stock – At any time on or after the third anniversary of the Closing Date, if the volume-weighted average price per share of our common stock is greater than 167.5 % of the then-current Conversion Price for 20 consecutive trading days in a 30 -day trading day period, the Company will have the right to convert all, but not less than all, of the Series A preferred stock into common stock at a conversion rate with respect to each share of Series A preferred stock of (i) the Accrued Value plus accrued PIK dividends that have not yet been added to the Accrued Value, (ii) divided by the then applicable Conversion Price. Covenants and Liquidity Requirements – As long as H.I.G. continues to own at least 30 % of the Series A preferred stock originally issued to it in the private placement, the consent of H.I.G. will be required for the Company to incur certain indebtedness and to take certain other corporate actions as set forth in the Company's investment agreement with H.I.G. entered into on February 17, 2021 (the “Investment Agreement”). In addition, the Company is required to maintain an asset coverage ratio (as defined in the Investment Agreement) of at least 2 x, which increases to 2.5 x 30 months after the date of the Investment Agreement. Additionally, the Investment Agreement requires the Company to maintain a minimum liquidity amount (as defined in the Investment Agreement) for certain periods that ranges from $ 65 million to $ 125 million. If the Company fails to maintain the minimum asset coverage ratio or minimum liquidity amount as of a certain date or for a certain time period required by the Investment Agreement and H.I.G continues to own at least 30 % of the Series A preferred stock originally issued to it in the private placement, H.I.G will have the right to nominate an additional director to the Board, and the consent of H.I.G. will be required to approve the Company's annual budget, hire or terminate certain key executives, and incur certain indebtedness as outlined in the Investment Agreement. H.I.G. will no longer have these additional board nomination and consent rights if the Company is able to satisfy the minimum liquidity amount requirements in the Investment Agreement for any subsequent 12 consecutive months. Our Series A preferred stock is considered temporary equity in our condensed consolidated financial statements. We have determined there are no material embedded features that require recognition as a derivative asset or liability. We recognized the Series A preferred stock at its stated amount less issuance costs of $ 11.0 million, or $ 214.0 million. As of March 31, 2022, the estimated Series A preferred stock redemption value equals 135 % of the Accrued Value per share as of the redemption date, plus any accrued and unpaid dividends, which is significantly in excess of the fair value of the common stock into which the Series A preferred stock is convertible as of March 31, 2022. 17 EHEALTH, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) We have elected to apply the accretion method to adjust the carrying value of the Series A preferred stock to its redemption value at the earliest date of redemption, April 30, 2027. Amounts recognized to accrete the Series A preferred stock to its estimated redemption value are treated as a deemed dividend and are recorded as a reduction to retained earnings. The estimated redemption value will vary in subsequent periods due to the redemption put right described above and we have elected to recognize such changes prospectively. No shares of Series A preferred stock have been converted and the Series A preferred stock was convertible into approximately 3.0 million shares of common stock as of March 31, 2022. The following table summarizes the proceeds and changes to our Series A preferred stock (in thousands): Gross proceeds $ 225,000 Less: issuance costs ( 10,975 ) Net proceeds $ 214,025 Balance as of Closing Date $ 214,025 Accrued paid-in-kind dividends 12,206 Change in preferred stock redemption value 6,361 Balance as of December 31, 2021 $ 232,592 Accrued paid-in-kind dividends 4,717 Change in preferred stock redemption value 2,501 Balance as of March 31, 2022 $ 239,810 Note 7 – Net Loss Per Share Attributable to Common Stockholders Our Series A preferred stock is considered a participating security which requires the use of two-class method for the computation of basic and diluted per share amounts. Under the two-class method, earnings available to common stockholders for the period are allocated between common stockholders and participating securities according to dividends accumulated and participation rights in undistributed earnings. Net loss attributable to common stockholders is not allocated to the convertible preferred stock as the holder of the Series A preferred stock does not have a contractual obligation to share in losses. Basic net loss attributable to common stockholders per share is computed by dividing net loss available to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Diluted net loss attributable to common stockholders per share is computed by dividing the net loss available to common stockholders for the period by the weighted average number of common and common equivalent shares outstanding during the period. Diluted net loss attributable to common stockholders per share reflects all potential dilutive common stock equivalent shares, including conversion of preferred stock, stock options, restricted stock units and shares to be issued under our employee stock purchase program (“ESPP”). 18 EHEALTH, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) The following table sets forth the computation of basic and diluted net loss attributable to common stockholders per share (in thousands, except per share amounts): Three Months Ended March 31, 2022 2021 Numerator: Net loss attributable to common stockholders: $ ( 39,960 ) $ ( 800 ) Denominator: Shares used in per share calculation – basic 27,278 26,620 Dilutive effect of common stock — — Shares used in diluted share calculation 27,278 26,620 Net loss attributable to common stockholders per share – basic and diluted $ ( 1.46 ) $ ( 0.03 ) For each of the three months ended March 31, 2022 and 2021, we had securities outstanding that could potentially dilute per share amounts, but the shares from the assumed conversion or exercise of these securities were excluded in the computation of diluted net loss per share as their effect would have been anti-dilutive. The number of outstanding anti-dilutive shares that were excluded from the computation of diluted net loss per share consisted of the following (in thousands): Three Months Ended March 31, 2022 2021 Convertible preferred stock 2,981 — Restricted stock units 1,548 1,090 Common stock options 279 363 ESPP 53 7 Total 4,861 1,460 Note 8 – Commitments and Contingencies 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. As the benefits of these agreements are experienced uniformly over the applicable contractual periods, 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. 19 EHEALTH, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Our future minimum payments under non-cancellable contractual service and licensing obligations as of March 31, 2022 (in thousands): For the Years Ending December 31, Remainder of 2022 $ 8,258 2023 8,370 2024 2,470 2025 229 2026 — Thereafter — Total $ 19,327 Operating Leases Refer to Note 10 – Leases for commitments related to our operating leases. Contingencies From time to time, we receive inquiries from governmental bodies and also may be subject to various legal proceedings and claims arising in the ordinary course of business. We assess contingencies to determine the degree of probability and range of possible loss for potential accrual in our condensed consolidated financial statements. An estimated loss contingency is accrued in the condensed consolidated financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. There was no material litigation-related accrual during the three months ended March 31, 2022. Legal proceedings or other contingencies could result in material costs, even if we ultimately prevail. Legal Proceedings Securities Class Action – On April 8, 2020 and April 30, 2020, two purported class action lawsuits were filed against the Company, its then-chief executive officer, Scott N. Flanders, its then-chief financial officer, Derek N. Yung, and its then-chief operating officer, David K. Francis in the United States District Court for the Northern District of California. The cases are captioned Patel v. eHealth, Inc., et al ., Case No. 5:20-cv-02395 (N.D. Cal.) and Bertrand v. eHealth, Inc. et al. , Case No. 4:20-cv-02967 (N.D. Cal.). The complaints allege, among other things, that the Company and Messrs. Flanders, Yung and Francis made materially false and misleading statements and/or failed to disclose material information regarding the Company's accounting and modeling assumptions, rate of member churn and the Company's profitability during the alleged class period of March 19, 2018 to April 7, 2020. The complaints allege that we and Messrs. Flanders, Yung and Francis violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The complaints seek compensatory and (in the Patel lawsuit) punitive damages, attorneys’ fees and costs, and such other relief as the court deems proper. On June 24, 2020, the Court consolidated the above-referenced matters under the caption In re eHealth Securities Litig. , Master File No. 4:20-cv-02395-JST (N.D. Cal.). The Court also appointed a lead plaintiff and lead counsel for the consolidated matter. An Amended Complaint was filed on August 25, 2020, which Defendants moved to dismiss on October 23, 2020. Defendants’ motion, which Plaintiff opposed, was granted in part and denied in part on August 12, 2021. The Court dismissed Plaintiff's claims to the extent premised upon alleged misrepresentations or omissions relating to churn, but denied Defendants' motion with respect to alleged misstatements regarding purported operating costs. On October 1, 2021, the Company filed an Answer denying in part and admitting in part the remaining allegations, and denying any wrongdoing. On November 11, 2021, Plaintiff’s counsel filed a suggestion of death with respect to the lead plaintiff Billy White. The parties stipulated to a schedule for the lead plaintiff process to be re-opened, which was so-ordered by the Court on January 10, 2022. Plaintiff’s counsel published notice regarding the appointment of a new lead plaintiff on January 17, 2022. On March 18, 2022, several motions were filed by class members seeking appointment as lead plaintiff. The lead plaintiff motions are presently set to be heard on May 12, 2022. 20 EHEALTH, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Derivative Actions – On July 7, 2020 and October 13, 2020, two derivative lawsuits were filed against the Company's then-chief executive officer, Mr. Flanders, its then-chief financial officer, Mr. Yung, its then-chief operating officer, Mr. Francis, and the then-current members of the Board (collectively, the “Individual Defendants”), in the United States District Court for the Northern District of California and the Superior Court of California, County of Santa Clara. The cases are captioned Chernet v. Flanders et al ., Case No. 3:20-cv-04477-SK (N.D. Cal.), and Lincolnshire Police Pension Fund v. Flanders et al. , Case No. 20CV371555 (Cal. Super. Ct.), and also name the Company as a nominal defendant. A third derivative lawsuit was filed against the same defendants on October 5, 2021 in the United States District Court for the Northern District of California, captioned Badwal v. Flanders et al ., Case No. 4:21-cv-07795 (N.D. Cal.). The complaints allege, among other things, that the Individual Defendants made or caused the Company to make materially false and misleading statements and/or failed to disclose material information regarding our accounting and modeling assumptions, rate of member churn, profitability, and internal controls for the period of March 2018 through the present. The Chernet and Lincolnshire complaints purport to assert claims for breach of fiduciary duty, unjust enrichment and waste of corporate assets. The Chernet lawsuit also alleges that the Individual Defendants violated Sections 14(a), 10(b), and 20(a) of the Securities Exchange Act of 1934, and asserts claims for abuse of control and gross mismanagement. The Badwal complaint purports to assert a claim for breach of fiduciary duty, an insider trading claim, and violations of Section 14(a), 10(b) and 21D of the Securities Exchange Act of 1934. The Chernet and Lincolnshire complaints seek damages, restitution, attorneys’ fees and costs, and certain measures with respect to the Company's corporate governance and internal procedures, and (in the Lincolnshire lawsuit) equitable and/or injunctive relief. The Badwal complaint seeks damages, declaratory relief, corporate governance measures, equitable and injunctive relief, restitution and disgorgement, and attorneys' fees and costs. On August 10, 2020, the parties filed a Stipulation and Proposed Order in the Chernet matter to stay the action until and through the resolution of the Defendants' anticipated motion to dismiss the consolidated securities class action, and filed a similar stipulation in the Lincolnshire matter on December 11, 2020. The Chernet stipulation was granted by the Court on August 12, 2020 and the Lincolnshire stipulation on December 11, 2020. In December 2021, the parties entered into a stipulation to further stay the Badwal and Chernet actions pending the appointment of a lead plaintiff in the consolidated action, which was so ordered by the Court on December 14, 2021. Note 9 – Segment and Geographic Information Operating Segments We report segment information based on how our chief executive officer, who is our chief operating decision maker ("CODM"), regularly reviews our operating results, allocates resources and makes decisions regarding our business operations. The performance measures of our segments include total revenue and profit. Our business structure is comprised of two operating segments: Medicare and Individual, Family and Small Business. Please refer to Note 1 – Summary of Business and Significant Accounting Policies of the Notes to Consolidated Financial Statements in Part II, Item 8 of the Annual Report on Form 10-K for the year ended December 31, 2021 for our accounting policies relating to operating segments. 21 EHEALTH, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) The results of our operating segments are summarized for the periods presented below (in thousands): Three Months Ended March 31, 2022 2021 Revenue: Medicare $ 95,067 $ 121,021 Individual, Family and Small Business 10,183 13,193 Total revenue $ 105,250 $ 134,214 Segment profit (loss) Medicare segment profit (loss) $ ( 14,817 ) $ 24,545 Individual, Family and Small Business segment profit 5,254 8,052 Segment profit (loss) ( 9,563 ) 32,597 Corporate ( 15,265 ) ( 15,286 ) Stock-based compensation expense ( 5,285 ) ( 11,402 ) Depreciation and amortization ( 4,778 ) ( 3,944 ) Amortization of intangible assets — ( 176 ) Restructuring and reorganization charges ( 4,823 ) ( 2,431 ) Other income (expense), net ( 1,021 ) 150 Loss before income taxes $ ( 40,735 ) $ ( 492 ) There were no inter-segment revenue transactions for the periods presented. With the exception of contract assets – commissions receivable, which is presented by segment in Note 3 – Supplemental Financial Statement Information , our CODM does not separately evaluate assets by segment, and therefore, assets by segment are not presented. Geographic Information Our long-lived assets primarily consist of property and equipment and internally-developed software. Our long-lived assets are attributed to the geographic location in which they are located. Long-lived assets by geographical area are summarized as follows (in thousands): March 31, 2022 December 31, 2021 United States $ 44,573 $ 45,134 China 547 595 Total $ 45,120 $ 45,729 22 EHEALTH, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Significant Customers Substantially all revenue for the three months ended March 31, 2022 and 2021 was generated from customers located in the United States. Carriers representing 10% or more of our total revenue are summarized as follows: Three Months Ended March 31, 2022 2021 Humana 27 % 17 % UnitedHealthCare (1) 15 % 22 % Centene (1) 14 % 12 % Aetna (1) 11 % 21 % __________ (1) Percentages include the carriers' subsidiaries. Note 10 – Leases Our leases have remaining lease terms of 1 to 8 years. Certain of these leases have free or escalating rent payment provisions. We recognize lease expense on a straight-line basis over the terms of the leases, although actual cash payment obligations under certain of these agreements fluctuate over the terms of the agreements. Most leases include options to renew, and the exercise of these options is at our discretion. Total operating lease expenses were $ 1.9 million and $ 2.0 million for the three months ended March 31, 2022 and 2021, respectively and sublease income was immaterial for both periods. Supplemental information related to leases are as follows (dollars in thousands): March 31, 2022 December 31, 2021 Weighted-average remaining lease term of operating leases 6.1 years 6.3 years Weighted-average discount rate used to recognize operating lease right-of-use-assets 5.4 % 5.4 % Three Months Ended March 31, 2022 2021 Operating lease expense $ 1,912 $ 1,986 Cash outflows related to operating leases 1,953 1,900 23 EHEALTH, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) As of March 31, 2022, maturities of operating lease liabilities are as follows (in thousands): Year ending December 31, Remainder of 2022 $ 5,744 2023 8,029 2024 7,828 2025 8,004 2026 6,734 Thereafter 12,827 Total lease payments (1) 49,166 Less imputed interest ( 9,101 ) Total $ 40,065 ____________ (1) Noncancellable sublease income for the remainder of 2022 and year ending December 31, 2023 of $ 0.3 million and $ 0.4 million, respectively, is not included in the table above. Note 11 — Restructuring and Reorganization Our restructuring and reorganization costs and liabilities consist primarily of severance, transition and other related costs. The following table summarizes the cash-based restructuring and reorganization related liabilities (in thousands): Three Months Ended March 31, 2022 Beginning balance $ 146 Restructuring and reorganization charges 4,823 Payments ( 1,565 ) Ending balance $ 3,404 In the first quarter of 2022, we recorded pre-tax restructuring charges of $ 4.8 million related to the elimination of 339 full-time positions that was completed in April 2022. The reduction represented approximately 14 % of our workforce, primarily within our customer care and enrollment group, and to a lesser extent, in our marketing and advertising, technology and content, and general and administrative groups. The expense was primarily related to employee termination benefits. Substantially all of the restructuring charges will be settled in cash. No equity awards were modified. As of March 31, 2022, we recorded a restructuring accrual of $ 3.4 million in other current liabilities on our Condensed Consolidated Balance Sheet. In September 2021, we announced the transition of our chief executive officer. Mr. Scott Flanders resigned as a member of our Board and chief executive officer, effective October 31, 2021. We recognized $ 2.4 million in severance costs related to his separation for the year ended December 31, 2021. Stock-based compensation expense for the year ended December 31, 2021 was impacted by a $ 4.1 million credit related to forfeited equity awards due to Mr. Flanders' separation, which was included in general and administrative expenses on our Condensed Consolidated Statement of Comprehensive Loss. In February 2021, we eliminated approximately 89 full-time positions, primarily in the United States, representing approximately 5 % of our workforce, primarily within our customer care and enrollment group, and to a lesser extent, in our marketing and advertising, technology and content, and general and administrative groups. Total pre-tax restructuring charges were $ 2.4 million for the year ended December 31, 2021, which primarily related 24 EHEALTH, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) to employee termination benefits. Substantially all of the restructuring charges resulted in cash expenditures. The restructuring activities were completed by March 31, 2021. Note 12 – Debt We entered into a term loan credit agreement (the "Term Loan Credit Agreement") with Blue Torch Finance LLC, as administrative agent and collateral agent, and other lenders party thereto on February 28, 2022. The Term Loan Credit Agreement provides for a $ 70.0 million secured term loan credit facility. 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 entering into the Term Loan Credit Agreement. As of December 31, 2021, there was $ 0.4 million of unamortized issuance costs related to the RBC credit agreement recorded in other assets in our Condensed Consolidated Balance Sheet. As a result of the termination of our credit agreement with RBC, we wrote-off our remaining related debt issuance cost of $ 0.4 million in the first quarter of 2022. We had no outstanding borrowings under our agreement with RBC at the time of termination. 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 RBC and to pay fees and expenses in connection with the entry into the Term Loan Credit Agreement. The term loan bears interest, upon 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 rates 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. Furthermore, as part of the agreement, we will incur a $ 0.3 million fee per annum, payable annually. 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 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 exclusion. We are obligated to pay administration fees with the Term Loan Credit Agreement. Financial covenants in the Term Loan Credit Agreement require that we maintain Liquidity (as defined in the Term Loan Credit Agreement) at or above $ 25.0 million as of the last calendar day of any month. The Term Loan Credit Agreement also requires that the outstanding amount as of any day be less than 50 % of our total contract assets - commissions receivables (i.e., both current and non-current commissions receivables). As of March 31, 2022, we were in compliance with our loan covenants. In the first quarter of 2022, we obtained a $ 70.0 million secured term loan under our Term Loan Credit Agreement. We incurred closing costs totaling $ 5.1 million, which were recorded as a direct deduction from the face of the loan on our Condensed Consolidated Balance Sheet. There was $ 5.0 million of unamortized issuance costs as of March 31, 2022. The carrying value of the loan was $ 65.0 million as of March 31, 2022. 25 EHEALTH, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Note 13 – Income Taxes The following table summarizes our benefit from income taxes and our effective tax rates for the periods presented below (in thousands, except effective tax rate): Three Months Ended March 31, 2022 2021 Loss before income taxes $ ( 40,735 ) $ ( 492 ) Provision for (benefit from) income taxes ( 7,993 ) 308 Effective tax rate 19.6 % ( 62.6 ) % For the three months ended March 31, 2022, we recognized a benefit from income taxes of $ 8.0 million, representing an effective tax rate of 19.6 % which was lower than the statutory federal tax rate due primarily to stock-based compensation adjustments and non-deductible lobbying expenses, partially offset by research and development credits and state taxes. For the three months ended March 31, 2021, we recognized provision for income taxes of $ 0.3 million, representing an effective tax rate of ( 62.6 )%, respectively, which was lower than the statutory federal tax rate due primarily to one-time state tax adjustments. Assessing the realizability of our deferred tax assets is dependent upon several factors, including the likelihood and amount, if any, of future taxable income in relevant jurisdictions during the periods in which those temporary differences become deductible. We forecast taxable income by considering all available positive and negative evidence, including our history of operating income and losses and our financial plans and estimates that we use to manage the business. These assumptions require significant judgment about future taxable income. 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. We continue to recognize our deferred tax assets as of March 31, 2022, as we believe it is more likely than not that the net deferred tax assets will be realized, with the exception of certain net operating losses and credits that are expected to expire unutilized which have a valuation allowance. 26