What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-09 compared with 2022-11-08 · 187 added, 385 removed, 249 unchanged (70% of the section changed)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In addition to historical information, this Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act").

The words “expect,” “anticipate,” “believe,” “estimate,” “target,” “goal,” “project,” “hope,” “intend,” “plan,” “seek,” “continue,” “may,” “could,” “should,” “might,” “forecast,” and variations of such words and similar expressions are intended to identify such forward-looking statements.

These statements include, among other things, statements regarding our expectations relating to approved members, new paying members and estimated membership;

our estimates regarding the constrained lifetime value of commissions;

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

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

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

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

our expectations regarding our strategic plans, including our growth strategy, cost savings and enrollment quality initiatives;

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

the expected impact of the COVID-19 pandemic and continued remote operations on our business;

the expected impact of inflation and general economic conditions on our business;

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

our expectations regarding health insurance agents licensing and productivity;

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

our expectations relating to the seasonality of our business;

expected competition from government-run health insurance exchanges and other sources;

our expectations relating to marketing and advertising expense and expected contributions from our marketing and strategic partnership channels;

the timing of our receipt of commission and other payments;

our critical accounting policies and related estimates;

liquidity and capital needs;

political, legislative, regulatory and legal challenges;

the merits or potential impact of any lawsuits filed against us;

as well as other statements regarding our future operations, financial condition, prospects and business strategies.

We have based these forward-looking statements on our current expectations about future events.

These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict.

Our actual results may differ materially from those suggested by these forward-looking statements for various reasons, including our ability to retain existing members and enroll new members during the annual health care open enrollment period, the Medicare annual enrollment period and other special enrollment periods;

changes in laws, regulations and guidelines, including in connection with health care reform or with respect to the marketing and sale of Medicare plans;

competition, including competition from government-run health insurance exchanges and other sources;

the seasonality of our business and the fluctuation of our operating results;

our ability to accurately estimate membership, lifetime value of commissions and commissions receivable;

changes in product offerings among carriers on our ecommerce platform and the resulting impact on our commission revenue;

our ability to execute on our growth strategy in the Medicare market;

the impact of the COVID-19 pandemic and other public health crises, illness, epidemics or pandemics on our operations, business, financial condition and growth prospects, as well as on the general economy;

changes in our management and key employees;

exposure to security risks and our ability to safeguard the security and privacy of confidential data;

our relationships with health insurance carriers;

the success of our carrier advertising and sponsorship program;

customer concentration and consolidation of the health insurance industry;

our success in marketing and selling health insurance plans and our unit cost of acquisition;

our ability to hire, train, retain and ensure the productivity of licensed health insurance agents and other employees;

our ability to effectively manage our operations as our business evolves and execute on our transformational plan and other strategic initiatives;

the need for health insurance carrier and regulatory approvals in connection with the marketing of Medicare-related insurance products;

changes in the market for private health insurance;

consumer satisfaction of our service and actions we take to improve the quality of enrollments;

changes in member conversion rates;

changes in commission rates;

our ability to sell qualified health insurance plans to subsidy-eligible individuals and to enroll subsidy-eligible individuals through government-run health insurance exchanges;

our ability to maintain and enhance our brand identity;

our ability to derive desired benefits from investments in our business, including membership growth and retention initiatives;

reliance on marketing partners;

the impact of our direct-to-consumer mail, email, social media, telephone and television marketing efforts;

timing of receipt and accuracy of commission reports;

payment practices of health insurance carriers;

dependence on our operations in China;

the restrictions in our debt obligations;

the restrictions in

our investment agreement with H.I.G.;

our ability to raise additional capital;

compliance with insurance, privacy and other laws and regulations;

the outcome of litigation in which we are and may from time to time become involved;

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

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

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

Given these risks and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements.

The forward-looking statements included in this report are made only as of the date hereof.

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

The following discussion should be read in conjunction with our Annual Report on Form 10-K as filed with the Securities and Exchange Commission in March 2022, and the audited consolidated financial statements and related notes contained therein.

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

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

You should read the following discussion and analysis together with our condensed consolidated financial statements and accompanying notes included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022 (the “Annual Report”).

This discussion and analysis contains forward-looking statements, which involve risks and uncertainties.

As a result of many factors, such as those described under “Cautionary Note Regarding Forward-Looking Statements,” “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report, our actual results may differ materially from those anticipated in these forward-looking statements.

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

Our mission is to expertly guide consumers through their health insurance enrollment and related options, when, where and how they prefer.

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 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.

Our omnichannel consumer engagement platform differentiates our offering from other brokers and enables consumers to use our services online, by telephone with a licensed insurance agent, or through a hybrid online assisted interaction that includes live agent chat and co-browsing capabilities.

We have created a consumer-centric marketplace that offers consumers a broad choice of insurance products that includes thousands of Medicare Advantage, Medicare Supplement, Medicare Part D prescription drug, individual, family, small business and other ancillary health insurance products from approximately 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.

Updates on 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 in preparation for the annual enrollment period ("AEP") in the fourth quarter.

We continue to build on these initiatives in 2022.

The introduction of enrollment quality assurance in the third quarter of 2021, in particular, resulted in an initial decline in conversion rates and longer talk times through the second quarter 2022.

However, we are seeing improvement in enrollment quality metrics including Complaint Tracking Module scores and retention characteristics for the new enrollments that we added during the 2022 AEP, relative to comparable enrollment cohorts from the 2021 and 2020 AEPs.

This suggests that the enrollments are of higher quality, resulting in higher customer satisfaction, increased plan longevity and potentially higher lifetime values.

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 addition, over the past twelve months, we introduced a number of significant enhancements to our sales and marketing processes.

This includes increased agent specialization by product and geography, improvement of agent training to further enhance their sales skills, and continued improvements in our omnichannel enrollment platform.

For example, we launched an online chat tool powered by licensed agents and a co-browsing feature that allows agents and customers to share screens for more effective navigation of the enrollment experience.

These initiatives enhance our technology differentiation and allow beneficiaries to progress through shopping and enrollment more easily.

As a result, we saw a significant year-over-year increase in conversion rates in the third quarter of 2022 on our Medicare calls and increased productivity from our tenured and newly hired agents.

We expect to continue to build on the positive momentum in our conversion rates as we move through the 2023 AEP season.

Transformational Plan — We are implementing a multi-year transformational plan to right-size our cost structure and drive future profitability.

This plan incorporates different operational and cost savings initiatives, including a reduction in vendor-related spend outside of mission critical areas, plans to reduce our real-estate footprint as we become a virtual-first workplace, and a targeted workforce reduction implemented during the second quarter of 2022.

In April 2022, we eliminated over 300 full-time positions, representing 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.

We are also making changes to variable cost management.

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

For example, we have de-emphasized underperforming demand generation channels in favor of channels that bring higher quality leads.

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

In 2022, we expect to achieve over $90 million in annualized cost savings compared to 2021.

The variable cost reduction is expected to lead to a temporary decline in our Medicare enrollments and revenue in 2022 before a return to enrollment growth in 2023 on a significantly improved operational and cost foundation.

Changes in Senior Management

In January 2022, we announced the termination of employment 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 served as an interim chief revenue officer until Michelle Barbeau was appointed as chief marketing officer effective September 6, 2022.

Hurley continues to serve as an executive advisor to senior management.

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

In May 2022, we announced the appointment of John Dolan as our chief accounting officer and principal accounting officer of the Company, effective May 31, 2022.

COVID-19 Impact Updates

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

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.

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 a result of the pandemic, we have had to adjust our business operations, including onboarding and training new health insurance agents remotely.

Since the pandemic, we have offered several programs to provide additional support to our employees and contractors, including our comfort equipment reimbursement program and internet and mobile phone reimbursement programs, to assist all employees with purchasing equipment to better enable remote work;

access to digital health and mental wellness services for employees;

and rigorous remote training programs.

We currently operate with a combination of remote and in-office work in the United States.

All of our offices are open for employees who would prefer to work from one of our offices.

Except for those whose job responsibilities require in-office work, none of our employees are required to return to the office full time.

Most of our employees work remotely at this time, and we are taking steps to become a virtual-first workplace.

For example, in August 2022, we signed a sublease agreement for our office space located in Santa Clara, California, and we may consider entering into additional sublease arrangements in the future.

As we continue to assess challenges associated with enabling remote work, including the reconfiguration of work space and our facility footprint and fostering a cohesive workplace culture, we believe flexible workforce positions will make us a more attractive employer, increase productivity and enable us to recruit from a more diverse pool of applicants.

We strive to be the most trusted partner to the consumer in their life's journey through the health insurance market.

Business Update

Beginning in the fourth quarter of 2021, the Company began to execute significant strategic and management changes to transform our business and adapt to the evolving needs of our customers in order to position ourselves for long-term success.

In 2022, we purposefully slowed down our enrollment volume and revenue growth as we worked to implement a number of transformation initiatives aimed at increasing the effectiveness of our sales and marketing organizations and further enhancing consumer experience, as well as rationalizing our cost structure.

As a result, we entered the first quarter of 2023 on a significantly improved cost foundation compared to the same period prior year.

In the first quarter of 2023, we continued to execute our multi-year transformation plan with an emphasis on enrollment quality, member experience, and engagement built around audience segmentation and targeting, differentiated messaging based on our unique value proposition and gradual scaling of our direct and strategic partner marketing channels as we reduce our reliance on lead aggregators.

Over the last several months, we have achieved significant improvement in our conversion rates, member retention and Complaint Tracking Module scores.

We plan to continue improving customer experience and conversion rates across our entire omnichannel platform, driven by continued agent and technology enhancements.

We continue to leverage our technology leadership, carrier relationships and distribution capabilities to pursue the diversification of our business and revenue base, which will include investing for growth in existing product lines outside of the core Medicare Advantage broker-of-record business, as well as adding new products and services and accessing adjacent markets within the broader health insurance industry.

Summary of Selected Metrics

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Approved Members

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

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

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

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Three Months Ended

September 30, % Change Nine Months Ended

September 30, % Change

2022 2021 2022 2021

March 31, % Change

Medicare Advantage 60,451 82,431 (27) %

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Total Approved Members 97,576 127,095 (23) %

Three Months Ended September 30, 2022 and 2021 – Total Medicare approved members decreased 4% in the three months ended September 30, 2022 compared to the same period in 2021.

The decrease was attributable to a 39% and 20% decline in Medicare Supplement and Medicare Part D approved members, respectively, partially offset by an increase of 3% in Medicare Advantage approved members.

The decrease in Medicare Supplement and Medicare Part D plan approved members was driven primarily by a shift in consumer demand which now favors Medicare Advantage as well as our targeted deployment of marketing and advertising costs toward Medicare Advantage.

The increase in Medicare Advantage approved members was due to an increase in telephonic conversion rates and growth in online unassisted applications.

Individual and family plan approved members decreased 41% in the three months ended September 30, 2022 compared to the same period in 2021 due to an extension of the enrollment period in 2021 that did not occur in 2022.

Ancillary product approved members declined 26% in the three months ended September 30, 2022 compared to the same period in 2021 primarily due to declines in approved members across all ancillary insurance products that are typically cross sold with new individual and family plan enrollments.

Small business group health insurance approved members increased 5% in the three months ended September 30, 2022 compared to the same period in 2021.

Nine Months Ended September 30, 2022 and 2021 – Total Medicare approved members decreased 23% in the nine months ended September 30, 2022 compared to the same period in 2021.

This decrease was attributable to a decrease in approved members across all Medicare products that we market including Medicare Advantage, Medicare Supplement, and Medicare Part D prescription drug plans, driven primarily by a decrease in member acquisition spend including marketing and customer care and enrollment, as well as a decline in conversion rates in the first half of 2022 compared to the same period 2021.

Individual and family plan approved members declined 34% in the nine months ended September 30, 2022 compared to the same period in 2021 primarily due to an extension of the enrollment period in 2021 that did not occur in 2022.

Ancillary product approved members declined 26% in the nine months ended September 30, 2022 compared to the same period in 2021 primarily due to declines in approved members across all ancillary insurance products.

Small business group health insurance approved members declined 14% in the nine months ended September 30, 2022 compared to the same period in 2021.

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 members by product for the periods presented below:

Three Months Ended

September 30, % Change Nine Months Ended

September 30, % Change

2022 2021 2022 2021

Medicare Advantage 35,934 38,193 (6) % 203,053 256,900 (21) %

Medicare Supplement 1,972 3,832 (49) % 11,796 19,145 (38) %

Medicare Part D 4,146 5,601 (26) % 35,979 41,620 (14) %

Total Medicare 42,052 47,626 (12) % 250,828 317,665 (21) %

Individual and Family 5,034 8,143 (38) % 26,214 34,961 (25) %

Ancillary 17,751 24,662 (28) % 58,669 79,356 (26) %

Small Business 1,916 2,230 (14) % 6,921 8,746 (21) %

Total New Paying Members 66,753 82,661 (19) % 342,632 440,728 (22) %

Three Months Ended September 30, 2022 and 2021 – Total new paying members declined 19% in the three months ended September 30, 2022 compared to the same period in 2021 primarily due to a decline in Medicare Supplement and Medicare Part D plan approved members, as well the timing of the receipt of payments with respect to Medicare Advantage plan approved members.

Nine Months Ended September 30, 2022 and 2021 – Total new paying members declined 22% in the nine months ended September 30, 2022 compared to the same period in 2021, primarily due to an overall decline in approved members for all products.

Three Months Ended March 31, 2023 and 2022 – Total Medicare approved members decreased 28% in the three months ended March 31, 2023 compared to the same period in 2022.

This decrease was attributable to a decline in approved members across all Medicare products that we market including Medicare Advantage, Medicare Supplement, and Medicare Part D prescription drug plans.

This decline was driven primarily by a decrease in submitted applications as a result of reduced member acquisition spend including marketing and customer care and enrollment compared to the same period prior year as we focused on enrollments with the highest unit margins and de-emphasized unprofitable channels.

Individual and family plan approved members grew 3% in the three months ended March 31, 2023 compared to the same period in 2022 primarily due to a 20% increase in non-qualified health plans from individual coverage health reimbursement arrangement opportunities in 2023.

Ancillary product approved members declined 12% in the three months ended March 31, 2023 compared to the same period in 2022 primarily due to declines in approved members across most ancillary insurance products.

Small business group health insurance approved members declined 23% in the three months ended March 31, 2023 compared to the same period in 2022 reflecting the continued shift of our focus away from the sale of small business products.

Estimated Constrained Lifetime Value of Commissions Per Approved Member

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Three Months Ended

September 30, % Change

March 31, % Change

Medicare (1) (2)

Medicare Advantage $ 901 $ 948 (5) %

$ 953 $ 975 (2) %

Medicare Supplement 880 927 (5) %

Medicare Part D 202 213 (5) %

219 227 (4) %

Individual and Family (1)

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Qualified Health Plans 387 302 28 %

289 296 (2) %

Ancillary (1)

Short-term 187 182 3 %

149 157 (5) %

Dental 110 104 6 %

Vision 70 62 13 %

Small Business (1)

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

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

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

For additional information on constrained LTV, see Critical Accounting Policies and Estimates in our Annual Report on Form 10-K for the year ended December 31, 2021.

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

(1) Constrained LTV of commissions per approved member for Medicare, individual and family and ancillary plans represents commissions estimated to be collected over the estimated life of an approved member’s plan after applying constraints in accordance with our revenue recognition policy.

Constrained LTV of commissions per approved member for small business represents the estimated commissions we expect to collect from the plan over the following twelve months.

The constraints are applied to help ensure that commissions estimated to be collected over the estimated life of an approved member’s plan are recognized as revenue only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with future commissions receivable from the plan is subsequently resolved.

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

The constrained LTV of commissions per approved member declined by 2% and 4% for Medicare Advantage and Medicare Part D prescription drug plans, respectively, during the three months ended September 30, 2022 compared to the same period in 2021.

The decrease in Medicare Advantage LTVs was primarily driven by less stable churn observations and a decrease in estimated average plan duration.

For additional information on constrained LTV, see " Critical Accounting Policies and Estimates " in our Annual Report on Form 10-K for the year ended December 31, 2022.

(2) The constraints for all Medicare products remained the same during the three months ended March 31, 2023, as compared to the same period in the prior year.

The constrained LTV of commissions per approved member declined by 5% for all Medicare product plans during the three months ended March 31, 2023 compared to the same period in 2022.

The decrease was driven primarily by lower retention in all products, partially offset by increased contracted rates and improved quality metrics.

Individual and Family, Ancillary and Small Business

The constrained LTV of commissions per non-qualified health plan approved member increased 20% and qualified health plan approved member decreased 2% during the three months ended September 30, 2022 compared to the same period in 2021.

The increase for non-qualified health plans was primarily due to more stable churn observations and an increase in estimated average plan duration.

The decrease for qualified health plans was due to pressures on churn performance.

The constrained LTV of commissions per approved member for dental, vision, and small business insurance plans increased by 2%, 2% and 17%, respectively, during the three months ended September 30, 2022 compared with the same period in 2021.

The increase for small business was due to higher commissions per group.

The constrained LTV of commissions per approved member for short-term health insurance decreased 5% during the three months ended September 30, 2022 compared with the same period in 2021 primarily due to lower expected commissions.

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

Three Months Ended

September 30,

Medicare Advantage 7 % 7 %

Medicare Supplement 9 % 9 %

Medicare Part D 7 % 7 %

Individual and Family

Non-Qualified Health Plans 4 % 7 %

Qualified Health Plans 4 % 4 %

Short-term 20 % 20 %

Dental 5 % 5 %

Vision 5 % 5 %

Other 10 % 10 %

Small Business 5 % 5 %

The constraints for all Medicare products remained the same during the three months ended September 30, 2022, as compared to the same period in the prior year.

The constraints for non-qualified health plans decreased during the three months ended September 30, 2022, as compared to the same period in the prior year, due to stabilization of market conditions and historical increases in LTV values.

The constraints for ancillary and small business insurance plans remained the same during the three months ended September 30, 2022, as compared to the same period in the prior year.

The constrained LTV of commissions per non-qualified health plan approved member increased 21% and qualified health plan approved member increased 28% during the three months ended March 31, 2023 compared to the same period in 2022.

The increase was primarily due to more stable retention observations and an increase in estimated average plan duration.

The constrained LTV of commissions per approved member for short-term, dental, vision, and small business insurance plans increased by 3%, 6%, 13% and 18%, respectively, during the three months ended March 31, 2023 compared with the same period in 2022 due to improved retention.

The increase for small business was also due to higher commissions per group.

Estimated Membership

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

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

As of September 30, % Change

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 as of the periods presented below:

As of March 31, % Change

Medicare Advantage 577,500 585,824 (1) %

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__________________

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

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

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

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

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

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

For ancillary health insurance plans, the one to three-month period varies by insurance product and is largely dependent upon the timeliness of commission payment and related reporting from the related carriers.

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The carriers do not report to us the number of members that we have as of a given date.

The majority of our members who terminate their plans do so by discontinuing their premium payments to the carrier or notifying the carrier directly and do not inform us of the cancellation.

The majority of our members who terminate their policies do so by discontinuing their premium payments to the carrier or notifying the carrier directly and do not inform us of the cancellation.

Also, some of our members pay their premiums less frequently than monthly.

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Instead, we reflect updated information regarding our historical membership in the membership estimate for the current period.

If we experience a significant variance in historical membership as compared to our initial estimates, we keep the prior period data consistent with previously reported amounts, while we may provide the updated information in other communications or disclosures.

If we experience a significant variance in historical membership as compared to our initial estimates, while we keep the prior period data consistent with previously reported amounts, we may provide the updated information in other communications or disclosures.

As a result of the delay in our receipt of information from insurance carriers, actual trends in our membership are most discernible over periods longer than from one quarter to the next.

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Various circumstances could cause the assumptions and estimates that we make in connection with estimating our membership to be inaccurate, which would cause our membership estimates to be inaccurate.

Medicare-related plan estimated membership as of September 30, 2022 increased 3% compared to estimated membership as of September 30, 2021 due to a 4% growth in both Medicare Advantage and Medicare Part D plan estimated memberships and a 2% decline in Medicare Supplement plan estimated membership.

The overall growth in Medicare estimated membership was due to new paying members we added over the last twelve months, net of churn.

Individual and family plan estimated membership as of September 30, 2022 declined 4% compared to estimated membership as of September 30, 2021 due to a decrease in applications.

Ancillary plan estimated membership as of September 30, 2022 declined 11% compared to estimated membership as of September 30, 2021 primarily as a result of the decline across all ancillary plans estimated membership.

Total Medicare estimated membership as of March 31, 2023 decreased 2% compared to estimated membership as of March 31, 2022 due to a decline across all Medicare products.

The overall decline in Medicare estimated membership was primarily due to a decrease in overall Medicare approved applications.

Individual and family plan estimated membership as of March 31, 2023 declined 6% compared to estimated membership as of March 31, 2022 due to a decrease in applications.

Ancillary plan estimated membership as of March 31, 2023 declined 10% compared to estimated membership as of March 31, 2022 primarily as a result of the decline in applications across all ancillary plans.

Member Acquisition

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The following table shows the variable marketing cost per approved member and the CC&E expense per approved member metrics for the periods presented below:

Three Months Ended

September 30, % Change

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

March 31, % Change

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

$ 375 $ 441 (15) %

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

Variable marketing cost per MA-equivalent approved member (1)

396 545 (27) %

Total Medicare estimated cost per approved member $ 1,213 $ 1,874 (35) %

Total acquisition cost per MA-equivalent approved member $ 771 $ 986 (22) %

Individual and Family Plan

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

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

$ 121 $ 88 38 %

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

Total IFP estimated cost per approved member $ 264 $ 184 43 %

Variable marketing cost per IFP-equivalent approved member (2)

Total acquisition cost per IFP-equivalent approved member $ 161 $ 137 18 %

__________________

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

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

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

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

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

Estimated CC&E cost per MA-equivalent approved member decreased 40% in the three months ended September 30, 2022 compared to the same period in 2021 due to better channel mix and higher telephonic conversion rates.

Estimated variable marketing cost per MA-equivalent approved member decreased 29% compared to the same period in 2021 primarily as a result of the improvements to our sales and marketing operations.

Estimated CC&E cost per IFP-equivalent approved member increased 45% in the three months ended September 30, 2022 compared to the same period in 2021 primarily due to an increase in the number of agents as we invest in individual coverage health reimbursement arrangement and state exchange opportunities.

Estimated variable marketing cost per IFP-equivalent approved member increased 40% in the three months ended September 30, 2022 compared to the same period in 2021 primarily due to the decline in approved members compared to the same period in 2021.

We calculate the number of IFP-equivalent approved 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 periods presented.

CC&E cost per MA-equivalent approved member decreased 15% in the three months ended March 31, 2023 compared to the same period in 2022.

Variable marketing cost per MA-equivalent approved member decreased 27% compared to the same period in 2022.

These decreases were primarily attributable to improvements to our sales and marketing operations and our cost reduction initiatives, which began subsequent to the first quarter of 2022.

These optimizations have enabled improved agent performance at a lower cost resulting in higher lead conversion rates.

CC&E cost per IFP-equivalent approved member increased 38% in the three months ended March 31, 2023 compared to the same period in 2022 primarily due to our increased investment in individual coverage health reimbursement arrangements and state exchange opportunities.

Variable marketing cost per IFP-equivalent approved member decreased 18% in the three months ended March 31, 2023 compared to the same period in 2022 primarily due to lower marketing spend as part of our cost reduction initiatives.

Critical Accounting Policies and Estimates

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

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

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

• Revenue Recognition and contract assets - commission receivable;

• Revenue Recognition and contract assets - commissions receivable;

• Stock-Based Compensation;

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Results of Operations

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

The following table sets forth our operating results and related percentage of total revenue for the periods presented (dollars in thousands):

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Commission $ 68,003 92 % $ 93,850 89 %

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General and administrative 21,002 28 % 19,987 19 %

Amortization of intangible assets — — % 121 — % — — % 416 — %

Impairment, restructuring and other charges — — % 4,823 5 %

1 unchanged sentence

Loss from operations (22,894) (31) % (39,714) (38) %

Other income (expense), net (647) (1) % 189 — % (2,835) (1) % 511 — %

Other expense, net (592) (1) % (1,021) (1) %

Loss before income taxes (23,486) (32) % (40,735) (39) %

3 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Marketing and advertising $ 455 $ 313

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Three Months Ended

September 30, Change Nine Months Ended

September 30, Change

March 31, Change

2023 2022 $ %

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Total revenue $ 73,723 $ 105,250 $ (31,527) (30) %

Three Months Ended September 30, 2022 and 2021 – Commission revenue decreased $10.2 million, or 17% during the three months ended September 30, 2022 compared to the same period in 2021 due to a $1.2 million decrease in commission revenue from the Medicare segment and a $9.0 million decrease in commission revenue from the Individual, Family and Small Business segment.

The decrease in commission revenue from the Medicare segment was driven by a 4% decline in Medicare plan approved members.

This was primarily due to a 39% and 20% decline in Medicare Supplement and Medicare Part D plan approved members, respectively, partially offset by a 3% increase in Medicare Advantage plan approved members compared to the same period in 2021.

The decrease in commission revenue from the Individual, Family and Small Business segment was primarily due to $1.8 million in net adjustment revenue from prior period enrollments for the three months ended September 30, 2022 compared to $10.0 million for the same period in 2021, a 41% decrease in individual and family plan approved members and a 26% decline in ancillary product approved members, partially offset by an increase in constrained lifetime value of commissions per approved IFP member compared to the same period in 2021.

See Approved Members above and Segment Information below for further discussion.

Other revenue decreased $0.3 million, or 7%, during the three months ended September 30, 2022 compared to the same period in 2021 due to a decrease in advertising revenue.

Nine Months Ended September 30, 2022 and 2021 – Commission revenue decreased $85.4 million, or 31%, during the nine months ended September 30, 2022 compared to the same period in 2021 due to a $59.5 million decrease in commission revenue from the Medicare segment and a $25.9 million decrease in Individual, Family and Small Business segment commission revenue.

Three Months Ended March 31, 2023 and 2022 – Commission revenue decreased $25.8 million, or 28%, during the three months ended March 31, 2023 compared to the same period in 2022 due to a $27.7 million, or 33%, decrease in commission revenue from the Medicare segment, partially offset by a $1.8 million, or 19%, increase in Individual, Family and Small Business segment commission revenue.

The decrease in commission revenue from the Medicare segment was driven by a 28% decline in overall Medicare plan approved members, specifically a 27% decline in Medicare Advantage plan approved members compared to the same period in 2022.

The decrease in commission revenue from the Individual, Family and Small Business segment was primarily due to a 34% decline in individual and family plan approved members, a 26% decline in ancillary product approved members, and $4.4 million in net adjustment revenue from prior period enrollments for the nine months ended September 30, 2022 compared to $29.1 million for the same period in 2021.

See Approved Members above and Segment Information below for further discussion.

Other revenue decreased $0.2 million, or 1%, during the nine months ended September 30, 2022 compared to the same period in 2021 due to a decrease in advertising revenue.

The increase in commission revenue from the Individual, Family and Small Business segment was primarily driven by an increase in lifetime values, a 3% increase in individual and family plan approved members and $1.5 million in net adjustment revenue from prior period enrollments for the three months ended March 31, 2023 compared to $0.4 million for the same period in 2022, partially offset by a 12% decline in ancillary product approved members.

See Summary of Selected Metrics above and Segment Information below for further discussion.

Other revenue decreased $5.7 million, or 50%, during the three months ended March 31, 2023 compared to the same period in 2022 due to a decrease in advertising revenue.

Cost of Revenue

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Costs related to revenue-sharing arrangements are expensed as the related revenue is recognized.

Additionally, cost of revenue includes the amortization of consideration we paid to certain broker partners in connection with the transfer of their health insurance members to us as the new broker of record on the underlying plans.

These transfers include primarily Medicare plan members.

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

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

Three Months Ended

September 30, Change Nine Months Ended

September 30, Change

March 31, Change

2023 2022 $ %

1 unchanged sentence

% of total revenue — % — %

Three Months Ended September 30, 2022 and 2021 – Cost of revenue increased by $0.5 million during the three months ended September 30, 2022, compared to the same period in 2021, primarily due to increased activity from our revenue sharing arrangements.

Nine Months Ended September 30, 2022 and 2021 – Cost of revenue decreased by $0.4 million during the nine months ended September 30, 2022, compared to the same period in 2021, primarily due to decreased activity from our revenue sharing arrangements.

Three Months Ended March 31, 2023 and 2022 – Cost of revenue increased by $0.3 million during the three months ended March 31, 2023, compared to the same period in 2022, primarily due to increased activity from our revenue sharing arrangements.

Marketing and Advertising

Marketing and advertising expenses consist primarily of member acquisition expenses associated with our direct, marketing partner and online advertising member acquisition channels, in addition to compensation and other expenses related to marketing, business development, partner management, public relations and carrier relations personnel who support our offerings.

We recognize expenses in our direct member acquisition channel in the period

in which they are incurred.

We generally compensate our marketing partners for referrals based on the consumer submitting a health insurance application on our platform, regardless of whether the consumer's application is approved by the health insurance carrier, or for the referral of a Medicare-related lead to us by the marketing partner.

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.

We recognize these expenditures in the period when a marketing partner's referral results in the submission of a health insurance application.

We recognize expenses associated with our online advertising member acquisition channels in the period in which the consumer clicks on the advertisement.

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

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

Three Months Ended

September 30, Change Nine Months Ended

September 30, Change

March 31, Change

2023 2022 $ %

1 unchanged sentence

% of total revenue 45 % 56 %

Three Months Ended September 30, 2022 and 2021 – Marketing and advertising expenses decreased $12.8 million, or 29%, during the three months ended September 30, 2022 compared to the same period in 2021, primarily driven by decreases of $10.0 million in Medicare plan related variable advertising, $1.7 million in stock-based compensation expense, and $1.4 million in personnel and compensation costs, partially offset by an increase of $0.4 million in consulting expenses.

The decrease in variable advertising expenses was due to a decrease in our advertising expense through select lead generation partners and direct TV channels as we shift to a more targeted deployment of our marketing budget to emphasize highest performing channels.

Nine Months Ended September 30, 2022 and 2021 – Marketing and advertising expenses decreased $19.8 million, or 14%, during the nine months ended September 30, 2022 compared to the same period in 2021, primarily driven by decreases of $14.6 million in Medicare plan related variable advertising, $5.6 million in stock-based compensation expense, and $1.7 million in personnel and compensation costs, partially offset by an increase of $1.7 million in consulting expenses.

The decrease in variable advertising expenses was due to a decrease in our advertising expense through select lead generation partners and direct TV channels.

Three Months Ended March 31, 2023 and 2022 – Marketing and advertising expenses decreased $25.6 million, or 44%, during the three months ended March 31, 2023 compared to the same period in 2022, primarily driven by a $23.5 million decrease in variable advertising costs, a $1.1 million decrease in personnel and compensation costs and a $0.7 million decrease in consulting expenses.

The decrease in variable advertising costs was due to a decrease in our advertising expense amongst all of our channels primarily as a result of more targeted deployment of our marketing budget.

Customer Care and Enrollment

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Three Months Ended

September 30, Change Nine Months Ended

September 30, Change

March 31, Change

2023 2022 $ %

1 unchanged sentence

% of total revenue 37 % 40 %

Three Months Ended September 30, 2022 and 2021 – Customer care and enrollment expenses decreased $19.6 million, or 40%, during the three months ended September 30, 2022 compared to the same period in 2021, primarily due to decreases of $17.2 million in personnel cost from decreased headcount, $1.2 million in facilities and other expenses, and $0.7 million in consulting expenses.

Nine Months Ended September 30, 2022 and 2021 – Customer care and enrollment expenses decreased $20.8 million, or 17%, during the nine months ended September 30, 2022 compared to the same period in 2021, primarily due to decreases of $15.4 million in personnel costs and $6.5 million in consulting expenses, partly offset by an increase of $0.8 million in facilities and other expenses.

Three Months Ended March 31, 2023 and 2022 – Customer care and enrollment expenses decreased $15.2 million, or 36%, during the three months ended March 31, 2023 compared to the same period in 2022, primarily due to a $13.6 million decrease in personnel costs from lower headcount, a $0.7 million decrease in facilities and other expenses, a $0.5 million decrease in licensing costs and a $0.2 million decrease in consulting expenses.

Technology and Content

3 unchanged sentences

Three Months Ended

September 30, Change Nine Months Ended

September 30, Change

March 31, Change

2023 2022 $ %

1 unchanged sentence

% of total revenue 21 % 19 %

Three Months Ended September 30, 2022 and 2021 – Technology and content expenses decreased $1.0 million, or 5%, during the three months ended September 30, 2022 compared to the same period in 2021 primarily driven by decreases of $1.0 million in stock-based compensation expense, $0.7 million in consulting costs, and $0.6 million in personnel and compensation costs due to lower headcount, partially offset by increases of $1.2 million in amortization of internally developed software and $0.7 million in facilities and other operating costs.

Nine Months Ended September 30, 2022 and 2021 – Technology and content expenses decreased $7.2 million, or 11%, during the nine months ended September 30, 2022 compared to the same period in 2021 primarily driven by decreases of $3.3 million in personnel and compensation costs due to lower headcount, $2.5 million in stock-based compensation expense, $2.1 million in consulting costs, and $2.0 million in facilities and other operating costs, partially offset by an increase of $3.6 million in amortization of internally developed software.

Three Months Ended March 31, 2023 and 2022 – Technology and content expenses decreased $4.1 million, or 21%, during the three months ended March 31, 2023 compared to the same period in 2022 primarily driven by a $3.7 million decrease in personnel and compensation costs due to lower headcount, a $0.9 million decrease in stock-based compensation expense and a $0.5 million decrease in consulting costs, partially offset by increases of $0.8 million in amortization of internally developed software and $0.4 million in facilities and other expenses.

General and Administrative

General and administrative expenses include compensation and benefits costs for personnel working in our executive, finance, investor relations, government affairs, legal, human resources, internal audit, facilities and

internal information technology departments.

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

1 unchanged sentence

Three Months Ended

September 30, Change Nine Months Ended

September 30, Change

March 31, Change

2023 2022 $ %

1 unchanged sentence

% of total revenue 28 % 19 %

Three Months Ended September 30, 2022 and 2021 – General and administrative expenses increased $0.7 million, or 4%, during the three months ended September 30, 2022 compared to the same period in 2021, primarily driven by increases of $2.8 million in stock-based compensation expense, $0.4 million in other professional fees, and $0.4 million in personnel costs, partially offset by a decrease of $3.1 million in facilities and other operating costs.

The increase in stock-based compensation expense during the third quarter of 2022 was primarily due to a $4.1 million credit related to equity awards forfeited in the third quarter of 2021 in connection with the termination of employment of our former chief executive officer.

Nine Months Ended September 30, 2022 and 2021 – General and administrative expenses decreased $3.3 million, or 6%, during the nine months ended September 30, 2022 compared to the same period in 2021, primarily driven by a decrease of $4.3 million in in facilities and other operating cost, partially offset by an increase of $1.0 million in consulting expenses.

Amortization of Intangible Assets

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

Three Months Ended

September 30, Change Nine Months Ended

September 30, Change

2022 2021 $ % 2022 2021 $ %

Amortization of intangible assets $ — $ 121 $ (121) (100) % $ — $ 416 $ (416) (100) %

% of total revenue — % — % — % — %

Amortization expense decreased during the three and nine months ended September 30, 2022 compared to the same periods in 2021 due to the impairment of our finite-lived intangible assets at December 31, 2021.

Three Months Ended March 31, 2023 and 2022 – General and administrative expenses increased $1.0 million, or 5%, during the three months ended March 31, 2023 compared to the same period in 2022, primarily driven by increases of $1.5 million in personnel costs and $0.4 million in stock-based compensation expense, partially offset by decreases of $0.4 million in professional fees and $0.2 million in facilities and other expenses.

Impairment, Restructuring and Other Charges

2 unchanged sentences

Three Months Ended

September 30, Change Nine Months Ended

September 30, Change

March 31, Change

2023 2022 $ %

1 unchanged sentence

% of total revenue — % 5 %

Three Months Ended September 30, 2022 and 2021 – Impairment, restructuring and other charges for the three months ended September 30, 2022 primarily consisted of $3.7 million of impairment charges, which were related to $2.5 million of operating lease right-of-use assets impairment and $0.9 million of property, plant and equipment impairment related to our Santa Clara, California office sublease and $0.3 million of impairment charges related to abandoned in-process internally developed software during the quarter.

Additionally, we incurred

$0.8 million of restructuring charges primarily related to employee termination benefits during the three months ended September 30, 2022.

Nine Months Ended September 30, 2022 and 2021 – Impairment, restructuring and other charges for the nine months ended September 30, 2022 primarily consisted of $7.0 million of severance and other personnel related cost related to the restructuring that took place throughout 2022 as well as $3.7 million of impairment charges, which were related to $2.5 million of operating lease right-of-use assets impairment and $0.9 million of property, plant and equipment impairment related to our Santa Clara, California office sublease and $0.3 million of impairment charges related to abandoned in-process internally developed software during the quarter.

In the first half of 2022, we completed a reduction in force in April 2022 in which we eliminated 339 full-time positions, representing approximately 14% of our workforce, primarily within the customer care and enrollment groups, and to a lesser extent, in our marketing and advertising and general and administrative groups, and, as a result, incurred $6.2 million of restructuring charges.

In the three months ended September 30, 2022, we incurred restructuring charges of $0.8 million for additional eliminated positions.

Other Income (Expense), Net

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

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

Three Months Ended March 31, 2023 and 2022 – We incurred no impairment, restructuring and other charges for the three months ended March 31, 2023 compared to $4.8 million of restructuring and reorganization charges for the three months ended March 31, 2022.

These charges primarily consisted of severance and other personnel related costs related to a reduction in force.

Other Expense, Net

Other expense, net, primarily consisted of interest expense and fees related to our Credit Agreement, partially offset by interest income and margin earned on commissions received from Medicare plan members transferred to us in 2010 through 2012 by a broker partner.

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

Three Months Ended

September 30, Change Nine Months Ended

September 30, Change

March 31, Change

2023 2022 $ %

Other income (expense), net $ (647) $ 189 $ (836) (442) % $ (2,835) $ 511 $ (3,346) (655) %

Other expense, net $ (592) $ (1,021) $ 429 42 %

% of total revenue (1) % (1) %

Three Months Ended September 30, 2022 and 2021 – Other income (expense), net was $(0.6) million and $0.2 million during the three months ended September 30, 2022 and September 30, 2021, respectively.

The change for the three months ended September 30, 2022 was primarily due to $2.1 million of interest expense for the Credit Agreement entered into during the first quarter of 2022, partially offset by an increase of approximately $0.8 million in interest income.

Nine Months Ended September 30, 2022 and 2021 – Other income (expense), net was $(2.8) million and $0.5 million during the nine months ended September 30, 2022 and September 30, 2021, respectively.

The change for the nine months ended September 30, 2022 was primarily due to $4.7 million of interest expense for the Credit Agreement entered into during the first quarter of 2022 and $0.4 million of expenses related to the termination of the RBC revolving credit facility at the same time, partially offset by an increase of $1.2 million in interest income.

Three Months Ended March 31, 2023 and 2022 – Other expense, net was $0.6 million during the three months ended March 31, 2023, compared to $1.0 million during the three months ended March 31, 2022.

The change was primarily due to an increase of $1.8 million in interest income, partially offset by an increase of $1.5 million of interest expense related to the Credit Agreement entered into during the first quarter of 2022.

Benefit from Income Taxes

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

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

Three Months Ended

September 30, Change Nine Months Ended

September 30, Change

March 31, Change

2023 2022 $ %

1 unchanged sentence

Effective tax rate 15.4 % 19.6 %

Three Months Ended September 30, 2022 and 2021 – Our effective tax rate of 20.0% for the three months ended September 30, 2022 was higher than our 19.5% effective tax rate for the three months ended September 30, 2021 primarily due to fluctuations in stock-based compensation adjustments.

Our effective tax rate for the three months ended September 30, 2022 was lower than the statutory federal tax rate primarily due to stock-based compensation adjustments, non-deductible lobbying expenses, partially offset by research and development credits and state taxes.

Nine Months Ended September 30, 2022 and 2021 – Our effective tax rate of 19.7% for the nine months ended September 30, 2022 was lower than our 21.1% effective tax rate for the nine months ended September 30, 2021 primarily due to fluctuations in stock-based compensation adjustments.

Our effective tax rate for the nine months ended September 30, 2022 was lower than the statutory federal tax rate due primarily to stock-based compensation adjustments, non-deductible lobbying expenses, partially offset by research and development credits and state taxes.

Three Months Ended March 31, 2023 and 2022 – Our effective tax rate of 15.4% for the three months ended March 31, 2023 was lower than our 19.6% effective tax rate for the three months ended March 31, 2022 primarily due to fluctuations in stock-based compensation adjustments.

Our effective tax rate for the three months ended March 31, 2023 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.

Segment Information

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

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

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 revenue and segment profit (loss).

Our business structure is comprised of two operating segments:

1 unchanged sentence

Our CODM does not separately evaluate assets by segment, with the exception of commissions receivable, 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 to purchase other marketing and advertising services, as well as our delivery and sale to third parties of Medicare-related health insurance leads generated by our ecommerce platforms and our marketing activities.

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

To a lesser extent, the Individual, Family and Small Business segment consists of amounts earned from our online sponsorship program that allows carriers to purchase advertising space in specific markets in a sponsorship area on our website, our licensing to third parties for 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.

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, and to a lesser extent, amounts earned from our sale of ancillary products sold 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 advertising program that allows Medicare-related carriers to purchase advertising on a separate website developed, hosted and maintained by us and to purchase other services such as marketing and advertising services, as well as 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, including both qualified and non-qualified plans, and

ancillary products sold to our non-Medicare-eligible customers, including but not limited to, dental, vision, and short-term 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 for the use of our health insurance ecommerce technology, and our delivery and sale to third parties of individual and family health insurance plan leads generated by our ecommerce platforms and our marketing activities.

Marketing and advertising, customer care and enrollment, technology and content and general and administrative operating expenses that are directly attributable to a segment are reported within the applicable segment.

Indirect marketing and advertising, customer care and enrollment, and technology and content operating expenses are allocated to each segment based on usage.

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 (loss) is calculated as total revenue for the applicable segment less direct and indirect allocated marketing and advertising, customer care and enrollment, technology and content, and general and administrative operating expenses, excluding stock-based compensation expense, depreciation and amortization expense, amortization of intangible assets, and impairment, restructuring and other charges.

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

Corporate consists of other indirect general and administrative operating expenses, excluding stock-based compensation expense, depreciation and amortization, which are managed in a corporate shared services environment and, since they are not the responsibility of segment operating management, are not allocated to the reportable segments and instead are reported within Corporate.

Segment profit (loss) is calculated as total revenue for the applicable segment less direct and indirect allocated marketing and advertising, customer care and enrollment, technology and content and general and administrative operating expenses, excluding stock-based compensation expense, depreciation and amortization, and impairment, restructuring and other charges.

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

Three Months Ended

September 30, Change Nine Months Ended

September 30, Change

March 31, Change

2023 2022 $ %

9 unchanged sentences

Depreciation and amortization (5,245) (4,778) (467) (10) %

(5,558) (4,899) (659) (13) % (15,685) (12,840) (2,845) (22) %

Amortization of intangible assets — (121) 121 100 % — (416) 416 100 %

Impairment, restructuring and other charges — (4,823) 4,823 100 %

Other income (expense), net (647) 189 (836) (442) % (2,835) 511 (3,346) (655) %

Other expense, net (592) (1,021) 429 42 %

Loss before income taxes $ (23,486) $ (40,735) $ 17,249 42 %

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

Three Months Ended September 30, 2022 and 2021 – Revenue from our Medicare segment declined $1.2 million, or 3%, during the three months ended September 30, 2022 compared to the same period in 2021, primarily attributable to a $1.2 million decrease in commission revenue, driven by an overall decline of 4% in Medicare plan approved members and a 2% decline in Medicare Advantage LTVs.

Revenue from our Individual, Family and Small Business segment declined $9.3 million, or 53%, during the three months ended September 30, 2022 compared to the same period in 2021, primarily attributable to a $9.0 million decrease in commission revenue driven by a 41% decrease in individual and family plan approved members and a 26% decline in ancillary product approved members.

Based on our evaluation of the updated LTV models and retention trends, we recognized $1.8 million in net adjustment revenue from prior period enrollments during the three months ended September 30, 2022 compared to $10.0 million for the same period in 2021.

Nine Months Ended September 30, 2022 and 2021 – Revenue from our Medicare segment declined $59.4 million, or 25%, during the nine months ended September 30, 2022 compared to the same period in 2021, primarily attributable to a $59.5 million decrease in commission revenue.

The decrease in Medicare segment commission revenue is primarily due to a $57.2 million decrease in Medicare Advantage plan related commission revenue, driven by a 23% decline in Medicare Advantage plan approved members.

Revenue from our Individual, Family and Small Business segment declined $26.3 million, or 49%, during the nine months ended September 30, 2022 compared to the same period in 2021, primarily attributable to a $25.9 million decrease in commission revenue driven by a 34% decline in individual and family plan approved members and a decline of 26% in ancillary product approved members.

Based on our evaluation of the updated LTV models and retention trends, we recognized $4.4 million in net adjustment revenue from prior period enrollments during the nine months ended September 30, 2022 compared to $29.1 million for the same period in 2021.

Three Months Ended March 31, 2023 and 2022 – Revenue from our Medicare segment declined $33.2 million, or 35%, during the three months ended March 31, 2023 compared to the same period in 2022, primarily attributable to a $27.7 million decrease in commission revenue.

The decrease in Medicare segment commission revenue is primarily due to a $24.0 million decrease in Medicare Advantage plan related commission revenue, as a result of a 27% decline in Medicare Advantage plan approved members compared to the same period prior year as we execute on our transformation initiatives to optimize customer acquisition spend and ultimately grow profitability.

Revenue from our Individual, Family and Small Business segment grew $1.7 million, or 17%, during the three months ended March 31, 2023 compared to the same period in 2022, primarily attributable to a $1.8 million increase in commission revenue driven by a 3% increase in individual and family plan approved members and $1.5 million in net adjustment revenue from prior period enrollments for the three months ended March 31, 2023 compared to $0.4 million for the same period in 2022, partially offset by a 12% decline in ancillary product approved members.

Segment Profit (Loss)

Three Months Ended September 30, 2022 and 2021 – Our Medicare segment loss was $23.0 million during the three months ended September 30, 2022, a decrease of $29.9 million, or 57%, compared to segment loss of $52.9 million for the same period in 2021.

The improvement in net segment loss was primarily due to a decrease of $31.2 million in operating expenses, excluding stock-based compensation expense, depreciation and amortization expense, impairment, restructuring and other charges, and other income (expense), partially offset by a $1.2 million decrease in revenue.

The decrease in operating expenses was due to impacts from our transformation initiatives.

Our Individual, Family and Small Business segment profit was $2.7 million during the three months ended September 30, 2022, a decrease of $9.8 million, or 78%, compared to segment profit of $12.5 million for the same period in 2021.

The decrease was primarily driven by a $9.3 million decrease in revenue.

Nine Months Ended September 30, 2022 and 2021 – Our Medicare segment loss was $63.1 million during the nine months ended September 30, 2022, an increase of $16.9 million, or 37%, compared to segment loss of $46.1 million for the same period in 2021.

This was primarily due to a $59.4 million decrease in revenue, partially offset by a $42.5 million decrease in operating expenses, excluding stock-based compensation expense, depreciation and amortization expense, impairment, restructuring and other charges, and other income (expense).

The decrease in operating expenses was mostly attributable to impacts from our transformation initiatives.

Our Individual, Family and Small Business segment profit was $12.3 million during the nine months ended September 30, 2022, a decrease of $26.2 million, or 68% compared to segment profit of $38.5 million for the same period in 2021.

The decrease was primarily driven by a $26.3 million decrease in revenue.

Three Months Ended March 31, 2023 and 2022 – Our Medicare segment loss was $3.4 million during the three months ended March 31, 2023, an improvement of $11.4 million, or 77%, compared to segment loss of $14.8 million for the same period in 2022.

This was primarily due to a $44.7 million decrease in operating expenses, excluding stock-based compensation expense, depreciation and amortization, impairment, restructuring and other charges, and other expense, net, partially offset by a $33.2 million decrease in revenue.

The decrease in operating expenses was mostly attributable to impacts from our transformation initiatives which began in the second quarter of 2022.

Our Individual, Family and Small Business segment profit was $7.4 million during the three months ended March 31, 2023, an increase of $2.2 million, or 41%, compared to segment profit of $5.3 million for the same period in 2022.

The increase was primarily driven by a $1.7 million increase in revenue.

Liquidity and Capital Resources

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

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

See Note 10 – Leases in our Notes to Condensed Consolidated Financial Statements for 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.

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See Note 8 – Commitments and Contingencies in ou r Notes to Condensed Consolidated Financial Statements.

Short-term obligations were $8.3 million for leases and $9.1 million for service and licensing as of September 30, 2022.

Long-term obligations were $36.9 million for leases and $4.3 million for service and licensing as of September 30, 2022.

Short-term obligations were $8.4 million for leases and $8.2 million for service and licensing as of March 31, 2023.

Long-term obligations were $37.3 million for leases and $1.4 million for service and licensing as of March 31, 2023.

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

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

We are implementing a multi-

year transformational plan to right-size our cost structure and drive future profitability.

In April 2022, we eliminated 339 full-time positions, representing 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.

We have implemented a multi-year transformation plan to right-size our cost structure and drive future profitability.

This plan has incorporated different operational and cost savings initiatives, including a reduction in vendor-related spend outside of mission critical areas, a reduction of our real-estate footprint as we decided to become a remote first workplace in 2022, and a targeted workforce reduction implemented during 2022.

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

We believe our current cash and cash equivalents, including the proceeds from the term loan we obtained on February 28, 2022 under our Credit Agreement and expected cash collections will be sufficient to fund our operations for at least 12 months after the filing date of this Quarterly Report on Form 10-Q.

We believe our current cash and cash equivalents, including the proceeds from the term loan we obtained on February 28, 2022 under our credit agreement with Blue Torch Finance, LLC and expected cash collections will be sufficient to fund our operations for at least 12 months after the filing date of this Quarterly Report on Form 10-Q.

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

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Cash and cash equivalents $ 180,633 $ 144,401

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Total cash, cash equivalents, and short-term marketable securities $ 202,692 $ 144,401

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.

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

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

As of September 30, 2022, our cash and cash equivalents totaled $160.3 million.

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

The increase in cash and cash equivalents reflects $8.3 million of net cash used in operating activities, $24.1 million of net cash provided by investing activities, and $62.9 million of net cash provided by financing activities.

We also maintained $3.2 million in restricted cash as of September 30, 2022 and December 31, 2021.

The following table presents a summary of our cash flows for the nine months ended September 30, 2022 (in thousands):

Nine Months Ended

September 30,

Net cash used in operating activities $ (8,290) $ (60,321)

We also maintained $3.2 million in restricted cash as of March 31, 2023 and December 31, 2022.

Our cash flows for the three months ended March 31, 2023 are summarized as follows (in thousands):

Three Months Ended

Net cash provided by operating activities $ 60,803 $ 47,112

Net cash provided by (used in) investing activities (24,240) 26,121

Net cash provided by financing activities 62,925 210,914

Net cash provided by (used in) financing activities (439) 65,373

Operating Activities

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

Net cash provided by operating activities primarily consists of net loss, adjusted for certain non-cash items, including, deferred income taxes, stock-based compensation expense, depreciation and amortization, amortization of internally developed software, other non-cash items, and the effect of changes in working capital and other activities.

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

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

If we were to experience a delay in receiving a commission payment from a significant 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 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 expense is directly correlated with the number of health insurance applications submitted on our ecommerce platforms.

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

During the Medicare annual enrollment period that takes place during the last quarter of each year and the reintroduced Medicare Advantage open enrollment period in the first quarter of the year, we experience an increase in the number of submitted Medicare-related health insurance applications and marketing and advertising expenses compared to outside of these enrollment periods.

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

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

Nine Months Ended September 30, 2022 – Net cash used in operating activities was $8.3 million during the nine months ended September 30, 2022, primarily driven by a net loss of $109.4 million, offset by changes in net operating assets and liabilities of $91.6 million and adjustments for non-cash items of $9.5 million.

The timing of open enrollment periods for individual and family

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

Three Months Ended March 31, 2023 – Net cash provided by operating activities was $60.8 million during the three months ended March 31, 2023, primarily driven by changes in net operating assets and liabilities of $74.0 million and adjustments for non-cash items of $6.7 million, partially offset by a net loss of $19.9 million.

Adjustments for non-cash items primarily consisted of $5.0 million of stock-based compensation expense and $4.6 million of amortization of internally developed software, partially offset by a $3.6 million decrease due to the change in deferred income taxes.

Cash provided by changes in net operating assets and liabilities during the nine months ended September 30, 2022 primarily consisted of decreases of $122.4 million in contract assets – commissions receivable, $2.7 million in prepaid expenses and other assets, and $3.9 million in accounts receivable, partly offset by decreases of $28.2 million in accrued marketing expenses and $7.1 million in accounts payable.

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

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

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

Cash provided by changes in net operating assets and liabilities during the three months ended March 31, 2023 primarily consisted of decreases of $82.5 million in contract assets – commissions receivable and $1.6 million in accounts receivable and increases of $7.2 million in accrued compensation and related expenses, partly offset by decreases of $15.0 million in accrued marketing expenses and $1.5 million in accounts payable.

Three Months Ended March 31, 2022 – Net cash provided by operating activities was $47.1 million during the three months ended March 31, 2022, primarily driven by changes in net operating assets and liabilities of $77.6 million and adjustments for non-cash items of $2.2 million, partially offset by a net loss of $32.7 million.

Adjustments for non-cash items primarily consisted of $5.3 million of stock-based compensation expense and $3.8 million of amortization of internally developed software, partially offset by an $8.0 million decrease due to the change in deferred income taxes.

Cash provided by changes in net operating assets and liabilities during the three months ended March 31, 2022 primarily consisted of decreases of $77.1 million in contract assets – commissions receivable and $12.4 million in prepaid expenses and other current assets, and increases of $4.8 million in accrued expenses and other liabilities, partly offset by decreases of $16.8 million in accrued marketing expenses and $5.5 million in accounts payable.

Investing Activities

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

Nine Months Ended September 30, 2022 – Net cash provided by investing activities of $24.1 million for the nine months ended September 30, 2022 mainly consisted of $45.3 million of proceeds from the maturities and redemptions of marketable securities, partially offset by $12.5 million in capitalized internal-use software and website development costs and $8.4 million used to purchase marketable securities.

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

Our investing activities primarily consist of purchases and redemption of marketable securities, purchases of computer hardware and software to enhance our website and customer care operations, and capitalized internal-use software.

Three Months Ended March 31, 2023 – Net cash used in investing activities of $24.2 million for the three months ended March 31, 2023 mainly consisted of $22.0 million used to purchase marketable securities and $2.2 million in capitalized internal-use software and website development costs.

Three Months Ended March 31, 2022 – Net cash provided by investing activities of $26.1 million for the three months ended March 31, 2022 mainly consisted of $34.3 million of proceeds from the maturities and redemptions of marketable securities, partially offset by $4.2 million in capitalized internal-use software and website development costs and $3.9 million used to purchase marketable securities.

Financing Activities

Nine Months Ended September 30, 2022 – Net cash provided by financing activities of $62.9 million for the nine months ended September 30, 2022 was primarily due to $64.9 million of net proceeds from debt financing and $1.1 million of net proceeds from the exercise of common stock options, partially offset by $2.9 million in repurchases of shares to satisfy employee tax withholding obligations.

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

Three Months Ended March 31, 2023 – Net cash used in financing activities of $0.4 million for the three months ended March 31, 2023 was primarily due to $0.4 million in repurchases of shares to satisfy employee tax withholding obligations.

Three Months Ended March 31, 2022 – Net cash provided by financing activities of $65.4 million for the three months ended March 31, 2022 was primarily due to $64.9 million of net proceeds from debt financing and $1.1 million of net proceeds from the exercise of common stock options, partially offset by $0.5 million in repurchases of shares to satisfy employee tax withholding obligations.

Convertible Preferred Stock

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

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

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

Echelon Health SPV, LP ("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., which are 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 be 6% payable in kind and 2% payable in cash in arrears on June 30 and December 31 of each year, beginning on June 30, 2023 (each, a “Cash Dividend Payment Date”).

Dividends payable in kind will be cumulative.

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Beginning on April 30, 2027, which is the sixth anniversary of the Closing Date, each holder of Series A preferred stock will have the right to require us to redeem all or any portion of the Series A preferred stock for cash at a price calculated as set forth in the certificate of designations.

In addition, upon certain change of control events,

holders of Series A preferred stock can require us, subject to certain exceptions, to repurchase any or all of their Series A preferred stock.

As of September 30, 2022, no shares of the Series A preferred stock have been converted and the balance of our Series A preferred stock was $255.2 million, including a change in the redemption value of $8.2 million and the accrued paid-in-kind dividends of $14.4 million, which was equivalent to 3.2 million shares of common stock on an as-converted basis.

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.

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

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We terminated our credit agreement with Royal Bank of Canada ("RBC"), pursuant to which we had an up to $75.0 million revolving credit facility in connection with our receiving the loan under the Term Loan Credit Agreement.

The Amendment replaced the LIBOR-based Adjusted Eurocurrency Rate (as defined in the original Term Loan Credit Agreement) with Adjusted Term SOFR (as defined in the Amendment) as a reference rate for loans under the Credit Agreement

The Amendment replaced the LIBOR-based Adjusted Eurocurrency Rate (as defined in the Original Credit Agreement) with Adjusted Term SOFR (as defined in the Amendment) as a reference rate for loans under the Credit Agreement

The proceeds of the loans under the 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 Credit Agreement.

The Original Credit Agreement bore interest, at our option, at either a rate based on the LIBOR for the applicable interest period or a base rate, in each case plus a margin.

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

The Original Credit Agreement bore 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 was the highest of the prime rate, the federal funds rate plus 0.50% and one month adjusted LIBOR plus 1.00%.

The margin was 7.50% for LIBOR loans and 6.50% for base rate loans.

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The margin is 7.50% for Adjusted Term SOFR loans and 6.50% for base rate loans.

Furthermore, as part of the Credit Agreement, we will incur a $0.3 million fee per annum, payable annually.

Furthermore, as part of the Credit Agreement, we incur a $0.3 million fee per annum, payable annually.

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

The Credit Agreement matures in February of 2025.

We have the right to prepay the loans under the 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 Credit Agreement after February 28, 2023, to an exit fee.

Our obligations under the 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 under the Credit Agreement.

As of September 30, 2022, we had $65.7 million outstanding principal amount under our Credit Agreement, net of closing costs.

Our obligations under the 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 Credit Agreement.

As of March 31, 2023, we had $66.5 million outstanding principal amount under our Credit Agreement, net of closing costs.

See Note 12 – Debt of Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional information regarding the Credit Agreement.

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.

Recent Accounting Pronouncements

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis