eHealth, Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index to the Consolidated Financial Statements Report of Independent Registered Public Accounting Firm (PCAOB ID: 42 ) 79 Consolidated Balance Sheets 81 Consolidated Statements of Comprehensive Loss 82 Consolidated Statements of Stockholders’ Equity 83 Consolidated Statements of Cash Flows 84 Notes to Consolidated Financial Statements 85 78 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of eHealth, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of eHealth, Inc. (the Company) as of December 31, 2023 and 2022, the related consolidated statements of comprehensive loss, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 29, 2024 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. 79 Table of Contents Revenue recognition: Estimated constrained lifetime value of commission revenue Description of the Matter The Company recognized commission revenue of approximately $403.9 million in 2023 and related commissions receivable were approximately $918.2 million at December 31, 2023. As described in Notes 1 and 2 to its consolidated financial statements, the Company’s commission revenue is recognized as the amount of the total estimated lifetime value (“LTV”) of the commissions expected to be received when a member obtains a plan through the Company and is approved by a carrier. Auditing management’s determination of the LTV of commission revenue was especially complex and highly judgmental due to the complexity of the models used and the subjectivity required by the Company to estimate the amount and timing of future cash flows, calculate the amount of commission revenue that is probable of not being reversed, and determine the timing and amount of any adjustment revenue that results from changes in the estimates of previously recorded LTV. The Company utilizes statistical tools and methodologies to estimate member attrition, which is a key driver when estimating the amount and timing of future cash flows and can be particularly volatile during the first several years. To determine the initial constraint to be applied to LTV, the Company evaluates the difference between prior estimates of LTV and actual cash received and applies judgment to determine the constraint to apply. For the ongoing evaluation of the constraint, the Company also analyzes whether circumstances have changed and considers any known or potential modifications to the inputs into LTV and the factors that can impact the amount of cash expected to be collected in future periods such as commission rates, carrier mix, estimated average plan duration, changes in laws and regulations, and cancellations of insurance plans offered by health insurance carriers with which the Company has a relationship. The Company also compares actual versus expected cash collections of previously recorded LTV and assesses qualitative and quantitative factors to determine whether adjustment revenue should be recognized and, if so, the amount and timing of such. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s process to estimate the amount and timing of future cash flows and LTV. These processes and controls include those covering the models and methods used to calculate LTV, the use of management judgment to determine the constraint applied to LTV, management’s evaluation of any required adjustments to previously recorded LTV estimates, and the completeness and accuracy of the data used in such estimates and calculations. Our audit procedures also included, among others, evaluating the methodology used and significant assumptions discussed above, and testing the completeness and accuracy of the underlying data used by the Company. We involved our valuation specialists to assist in our testing of the estimated average plan duration, which includes member attrition assumptions, including performing certain corroborative calculations. We inspected and compared the results of the Company’s retrospective review analysis of historical estimates for certain plan effective years to historical cash collection experience, including reperforming the calculations and validating the completeness and accuracy of the underlying data used. In addition, we performed inquiries of key personnel regarding their evaluation of changes to LTV, the adjustments made to the constraint for current and expected future economic conditions, and any decisions on the timing and amount of adjustment revenue recognized. We also reviewed analyst reports, press releases, and other relevant third-party and/or industry trends data for contrary evidence including competitor data. /s/ Ernst & Young LLP We have served as the Company's auditor since 2000. San Francisco, California February 29, 2024 80 Table of Contents EHEALTH, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except per share amounts) December 31, 2023 December 31, 2022 Assets Current assets: Cash and cash equivalents $ 115,722 $ 144,401 Short-term marketable securities 5,930 — Accounts receivable 3,993 2,633 Contract assets – commissions receivable – current 244,663 242,749 Prepaid expenses and other current assets 12,044 11,301 Total current assets 382,352 401,084 Contract assets – commissions receivable – non-current 673,514 641,555 Property and equipment, net 4,864 5,501 Operating lease right-of-use assets 22,767 26,516 Restricted cash 3,090 3,239 Other assets 26,758 34,716 Total assets $ 1,113,345 $ 1,112,611 Liabilities, convertible preferred stock and stockholders’ equity Current liabilities: Accounts payable $ 7,197 $ 6,732 Accrued compensation and benefits 40,800 20,690 Accrued marketing expenses 20,340 23,770 Lease liabilities – current 7,070 6,486 Other current liabilities 3,131 2,887 Total current liabilities 78,538 60,565 Long-term debt 67,754 66,129 Deferred income taxes – non-current 29,687 32,359 Lease liabilities – non-current 28,333 34,187 Other non-current liabilities 4,949 5,132 Total liabilities 209,261 198,372 Commitments and contingencies (Note 8) Convertible preferred stock, par value $ 0.001 per share; 2,250 issued and outstanding as of December 31, 2023 and 2022 298,053 263,284 Stockholders’ equity: Preferred stock, par value $ 0.001 per share, other than convertible preferred stock; 7,750 authorized; none issued and outstanding as of December 31, 2023 and 2022 — — Common stock, par value $ 0.001 per share; 100,000 authorized; 41,457 and 39,977 issued as of December 31, 2023 and 2022, respectively; 28,629 and 27,562 outstanding as of December 31, 2023 and 2022, respectively 41 40 Additional paid-in capital 798,786 777,187 Treasury stock, at cost: 12,828 and 12,415 shares as of December 31, 2023 and 2022, respectively ( 199,998 ) ( 199,998 ) Retained earnings 7,284 73,799 Accumulated other comprehensive loss ( 82 ) ( 73 ) Total stockholders’ equity 606,031 650,955 Total liabilities, convertible preferred stock and stockholders’ equity $ 1,113,345 $ 1,112,611 The accompanying notes are an integral part of these consolidated financial statements. 81 Table of Contents EHEALTH, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (In thousands, except per share amounts) Year Ended December 31, 2023 2022 2021 Revenue Commission $ 403,924 $ 361,246 $ 493,119 Other 48,947 44,110 45,080 Total revenue 452,871 405,356 538,199 Operating costs and expenses Cost of revenue 1,771 1,647 1,992 Marketing and advertising 173,326 195,088 271,300 Customer care and enrollment 159,060 141,099 179,295 Technology and content 61,027 78,809 83,800 General and administrative 86,761 71,810 75,699 Amortization of intangible assets — — 536 Impairment, restructuring and other charges — 19,616 51,222 Total operating costs and expenses 481,945 508,069 663,844 Loss from operations ( 29,074 ) ( 102,713 ) ( 125,645 ) Interest expense ( 10,974 ) ( 7,627 ) ( 845 ) Other income, net 9,453 3,951 1,600 Loss before income taxes ( 30,595 ) ( 106,389 ) ( 124,890 ) Benefit from income taxes ( 2,381 ) ( 17,667 ) ( 20,515 ) Net loss ( 28,214 ) ( 88,722 ) ( 104,375 ) Preferred stock dividends ( 20,965 ) ( 19,357 ) ( 12,206 ) Change in preferred stock redemption value ( 17,336 ) ( 11,335 ) ( 6,361 ) Loss attributable to common stockholders $ ( 66,515 ) $ ( 119,414 ) $ ( 122,942 ) Loss per share attributable to common stockholders: Basic and diluted $ ( 2.37 ) $ ( 4.36 ) $ ( 4.59 ) Weighted-average number of shares used in per share amounts: Basic and diluted 28,016 27,359 26,781 Comprehensive loss: Net loss $ ( 28,214 ) $ ( 88,722 ) $ ( 104,375 ) Unrealized holding gain (loss) on available-for-sale debt securities, net of tax 10 ( 29 ) ( 49 ) Foreign currency translation adjustments ( 19 ) ( 434 ) 89 Comprehensive loss $ ( 28,223 ) $ ( 89,185 ) $ ( 104,335 ) The accompanying notes are an integral part of these consolidated financial statements. 82 Table of Contents EHEALTH, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (In thousands) Common Stock Additional Paid-in Capital Treasury Stock Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Equity Shares Amount Shares Amount Balance as of December 31, 2020 37,755 $ 38 $ 721,013 11,831 $ ( 199,998 ) $ 316,155 $ 350 $ 837,558 Issuance of common stock in connection with equity incentive plans 849 1 4,904 — — — — 4,905 Repurchase of shares to satisfy employee tax withholding obligations — — ( 9,333 ) 185 — — — ( 9,333 ) Dividends and accretion related to convertible preferred stock — — — — — ( 18,567 ) — ( 18,567 ) Issuance of common stock for employee stock purchase program 100 — 3,813 — — — — 3,813 Stock-based compensation — — 35,478 — — — — 35,478 Other comprehensive income, net of tax — — — — — — 40 40 Net loss — — — — — ( 104,375 ) — ( 104,375 ) Balance as of December 31, 2021 38,704 39 755,875 12,016 ( 199,998 ) 193,213 390 749,519 Issuance of common stock in connection with equity incentive plans 1,095 1 1,054 — — — — 1,055 Repurchase of shares to satisfy employee tax withholding obligations — — ( 3,102 ) 399 — — — ( 3,102 ) Dividends and accretion related to convertible preferred stock — — — — — ( 30,692 ) — ( 30,692 ) Issuance of common stock for employee stock purchase program 178 — 1,159 — — — — 1,159 Stock-based compensation — — 22,201 — — — — 22,201 Other comprehensive loss, net of tax — — — — — — ( 463 ) ( 463 ) Net loss — — — — — ( 88,722 ) — ( 88,722 ) Balance as of December 31, 2022 39,977 40 777,187 12,415 ( 199,998 ) 73,799 ( 73 ) 650,955 Issuance of common stock in connection with equity incentive plans 1,338 1 — — — — — 1 Repurchase of shares to satisfy employee tax withholding obligations — — ( 3,331 ) 413 — — — ( 3,331 ) Dividends and accretion related to convertible preferred stock — — — — — ( 38,301 ) — ( 38,301 ) Issuance of common stock for employee stock purchase program 142 — 677 — — — — 677 Stock-based compensation — — 24,253 — — — — 24,253 Other comprehensive loss, net of tax — — — — — — ( 9 ) ( 9 ) Net loss — — — — — ( 28,214 ) — ( 28,214 ) Balance as of December 31, 2023 41,457 $ 41 $ 798,786 12,828 $ ( 199,998 ) $ 7,284 $ ( 82 ) $ 606,031 The accompanying notes are an integral part of these consolidated financial statements. 83 Table of Contents EHEALTH, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Year Ended December 31, 2023 2022 2021 Operating activities: Net loss $ ( 28,214 ) $ ( 88,722 ) $ ( 104,375 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 2,540 3,845 5,430 Amortization of internally developed software 17,376 17,263 12,901 Amortization of intangible assets — — 536 Stock-based compensation expense 23,213 20,316 32,857 Deferred income taxes ( 2,672 ) ( 18,436 ) ( 21,522 ) Impairment charges — 12,102 46,344 Other non-cash items 701 2,084 1,466 Changes in operating assets and liabilities: Accounts receivable ( 1,361 ) 3,118 ( 3,952 ) Contract assets – commissions receivable ( 33,594 ) 23,760 ( 116,030 ) Prepaid expenses and other assets ( 1,948 ) 13,473 ( 7,945 ) Accounts payable 487 ( 7,029 ) ( 23,052 ) Accrued compensation and benefits 20,110 4,232 ( 4,083 ) Accrued marketing expenses ( 3,430 ) ( 12,614 ) 18,596 Deferred revenue 1,278 175 20 Accrued expenses and other liabilities ( 1,178 ) ( 436 ) 187 Net cash used in operating activities ( 6,692 ) ( 26,869 ) ( 162,622 ) Investing activities: Capitalized internal-use software and website development costs ( 8,693 ) ( 15,292 ) ( 16,992 ) Purchases of property and equipment and other assets ( 2,086 ) ( 214 ) ( 3,865 ) Purchases of marketable securities ( 54,514 ) ( 8,402 ) ( 103,058 ) Proceeds from redemption and maturities of marketable securities 49,400 49,769 111,284 Net cash provided by (used in) investing activities ( 15,893 ) 25,861 ( 12,631 ) Financing activities: Proceeds from issuance of preferred stock, net of issuance costs — — 214,025 Net proceeds from debt financing — 64,862 — Net proceeds from exercise of common stock options and employee stock purchases 677 2,214 8,699 Repurchase of shares to satisfy employee tax withholding obligations ( 3,330 ) ( 3,102 ) ( 9,333 ) Principal payments in connection with leases ( 38 ) ( 136 ) ( 150 ) Payments of preferred stock dividends ( 3,533 ) — — Net cash provided by (used in) financing activities ( 6,224 ) 63,838 213,241 Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 19 ) ( 355 ) 64 Net increase (decrease) in cash, cash equivalents and restricted cash ( 28,828 ) 62,475 38,052 Cash, cash equivalents and restricted cash at beginning of period 147,640 85,165 47,113 Cash, cash equivalents and restricted cash at end of period $ 118,812 $ 147,640 $ 85,165 Supplemental disclosure of cash flows Cash paid for interest $ 9,054 $ 5,031 $ — Cash refunds from (payments for) income taxes, net $ ( 327 ) $ ( 529 ) $ 103 The accompanying notes are an integral part of these consolidated financial statements. 84 Table of Contents EHEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 – Summary of Business and Significant Accounting Policies Description of Business – eHealth, Inc., a Delaware corporation, and its consolidated subsidiaries (collectively, “eHealth”) is 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 differentiates our offering from other brokers and enables consumers to use our services online, by telephone with a licensed insurance agent, or benefit advisor, 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 over 180 health insurance carriers nationwide. 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 benefit advisors. We strive to be the most trusted partner to the consumer in their life's journey through the health insurance market. Unless otherwise specified or required by the context, references in this Annual Report on Form 10-K to “eHealth,” “the Company,” “we,” “us” or “our” mean eHealth, Inc. and its consolidated direct and indirect wholly-owned subsidiaries. Basis of Presentation – Our consolidated financial statements include the accounts of eHealth, Inc. and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). Certain prior period amounts have been reclassified to conform with our current period presentation. Subsequent to the issuance of our consolidated financial statements for the year ended December 31, 2020, we identified certain errors, including a $ 3.0 million under-recognition of stock-based compensation expense and a $ 1.5 million over-recognition of licensing costs for the year ended December 31, 2020. We adjusted for these items in the first quarter of 2021 and the adjustments increased our net loss by approximately $ 1.5 million, or $ 0.06 per basic and diluted share, in our Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2021. These items also increased our net loss by approximately $ 1.5 million, or $ 0.05 per basic and diluted share, on our Consolidated Statements of Comprehensive Loss for the year ended December 31, 2021. We evaluated the effects of these out-of-period adjustments, both qualitatively and quantitatively, and concluded that the errors and the correction thereof were immaterial both individually and in the aggregate to the current reporting period and the periods in which they originated, including quarterly reporting. Operating Segments – We report segment information based on how our chief executive officer, who is our chief operating decision maker (“CODM”), regularly reviews our operating results, allocates resources and makes decisions regarding our business operations. The performance measures of our segments include total revenue and profit (loss). Our business structure is comprised of two operating segments: • Medicare; and • Employer and Individual In the fourth quarter of 2023, the Individual, Family and Small Business segment was renamed “Employer and Individual” (“E&I”). The Employer and Individual segment name change was to the name only and had no impact on our historical financial position, results of operations, cash flow or segment level results previously reported. 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, 85 Table of Contents EHEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS and to a lesser extent, ancillary products sold to our Medicare-eligible customers, including but not limited to, dental and vision insurance, as well as our advertising program that allows Medicare-related carriers to purchase advertising on a separate website developed, hosted and maintained by us or pursuant to which we perform other services as marketing and our delivery and sale to third parties of Medicare-related health insurance leads generated by our ecommerce platforms and our marketing activities. The E&I segment consists primarily of commissions earned from our sale of individual and family and small business health insurance plans and ancillary products sold to our non-Medicare-eligible customers, including but not limited to, dental, vision, short term disability and long-term disability insurance. To a lesser extent, the E&I segment includes amounts earned from our online sponsorship program that allows carriers to purchase advertising space in specific markets in a sponsorship area on our website, our licensing to third parties the use of our health insurance ecommerce technology and our delivery and sale to third parties of individual and family health insurance leads generated by our ecommerce platforms and our marketing activities. 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 two operating segments and are presented as a reconciling item to our consolidated financial results. Segment profit (loss) is calculated as total revenue for the applicable segment less direct and allocated marketing and advertising, customer care and enrollment, technology and content and general and administrative operating expenses, excluding stock-based compensation expense, depreciation and amortization expense, amortization of intangible assets and impairment, restructuring and other charges. Estimates and Judgments – The preparation of consolidated financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported and disclosed in the consolidated financial statements and accompanying notes. On an ongoing basis, we evaluate our estimates, including those related to, but not limited to, the fair value of investments, recoverability of intangible assets, the commissions we expect to collect for each approved member cohort, valuation allowance for deferred income taxes, provision for (benefit from) income taxes and the assumptions used in determining stock-based compensation. We base our estimates of the carrying value of certain assets and liabilities on historical experience and on various other assumptions that we believe to be reasonable. Actual results may differ from these estimates. Cash and Cash Equivalents – Our cash and cash equivalents were held in cash depository accounts with major financial institutions or invested in high quality, short-term liquid investments having original maturities of 90 days or less from the date of purchase. Cash and cash equivalents are stated at fair value. Our restricted cash balances are not material and are primarily used to collateralize letters of credit related to certain lease commitments. 86 Table of Contents EHEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Property and Equipment – Property and equipment are stated at cost, less accumulated depreciation and amortization. Finance lease amortization expenses are included in depreciation expense in our Consolidated Statements of Comprehensive Loss. Maintenance and minor replacements are expensed as incurred. Depreciation and amortization expenses are computed using the straight-line method based on estimated useful lives as follows: Computer equipment and software 3 to 5 years Office equipment and furniture 5 years Leasehold improvements* 5 to 10 years _______ * Lesser of useful life or related lease term See Note 3 – Supplemental Financial Statement Information of the Notes to Consolidated Financial Statements for additional information regarding our property and equipment. Leases – We account for leases in accordance with Accounting Standards Codification Topic 842, Leases. We determine if an arrangement is a lease at inception. Our lease portfolio is primarily composed of operating leases for corporate offices and are included in operating lease right-of-use (“ROU”) assets and lease liabilities on our Consolidated Balance Sheets. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the Company's leases generally do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date. In determining the present value of lease payments, we utilized the assistance of third-party specialists to assist us in determining our yield curve based upon our credit rating, lease term and adjustment for security. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Goodwill and Intangible Assets – Goodwill represents the excess of the consideration paid over the estimated fair value of assets acquired and liabilities assumed in a business combination. Our goodwill is allocated among our two segments, (1) Medicare and (2) E&I. All of our goodwill resulting from our prior business combinations was allocated to the Medicare segment. Goodwill and intangible assets are considered non-financial assets and therefore, subsequent to their initial recognition are not revalued at fair value each reporting period unless an impairment charge is recognized. We test our goodwill for impairment on an annual basis in the fourth quarter of each year or whenever events or changes in circumstances indicate that the asset may be impaired. Factors that we consider in deciding when to perform an impairment test include significant negative industry or economic trends or significant changes or planned changes in our use of the intangible assets. As of December 31, 2021, we performed a goodwill impairment assessment, which included both qualitative and quantitative assessments. Our assessment included a comparison of carrying value to an estimated fair value using a market approach based on our market capitalization. Based on this assessment, we concluded the fair value of our Medicare segment was below the carrying value primarily due to the change in our market valuation and financial performance at the time and recorded a $ 40.2 million impairment of our goodwill, which was recognized in the “Impairment, restructuring and other charges” line in our Consolidated Statements of Comprehensive Loss. As a result of this impairment, we had no goodwill balance on our Consolidated Balance Sheets as of December 31, 2023 and 2022. We must make subjective judgments in determining the independent cash flows that can be related to specific asset groupings. In addition, we must make subjective judgments regarding the remaining useful lives of assets with finite useful lives. When we determine that the useful life of an asset is shorter than we had originally estimated, we accelerate the rate of amortization over the assets’ new, remaining useful life. 87 Table of Contents EHEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate a potential reduction in their fair values below their respective carrying amounts. Intangible assets with finite useful lives, which include purchased technology, pharmacy and customer relationships, trade names, and certain trademarks, are amortized over their estimated useful lives. See Note 3 – Supplemental Financial Statement Information of the Notes to Consolidated Financial Statements for additional information regarding our intangible assets and related impairment. Other Long-Lived Assets – We evaluate other long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. Revenue Recognition – We account for revenue under ASC 606 – Revenue from Contracts with Customers . Our revenue consists of commission revenue and other revenue. The core principle of ASC 606 is to recognize revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration the entity expects to be entitled to in exchange for those goods or services. Accordingly, we recognize revenue for our services through the application of the following steps: • Identification of the contract, or contracts, with a customer. • Identification of the performance obligations in the contract. • Determination of the transaction price. • Allocation of the transaction price to the performance obligations in the contract. • Recognition of revenue when, or as, we satisfy a performance obligation. Commission Revenue. Our commission revenue results from approval of an application from health insurance carriers, which we define as our customers under ASC 606. Our commission revenue is primarily comprised of commissions from health insurance carriers which is computed using the estimated constrained lifetime value of commission payments that we expect to receive. We estimate commission revenue for each insurance product by using a portfolio approach to a group of approved members by plan type and the effective month of the relevant plan, which we refer to as “cohorts.” We recognize revenue for plans approved during the period by applying the latest estimated constrained lifetime value (“LTV”) for that product. We recognize adjustment revenue for plans approved in prior periods when changes in assumptions for constrained LTV calculations are made and when there is sufficient evidence demonstrating a trend that is different from the estimated constrained LTV at the time of approval resulting in a change in estimate to expected cash collections. Net adjustment revenue consists of increases in revenue for certain prior period cohorts as well as reductions in revenue for certain prior period cohorts. We recognize positive adjustments to revenue to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. We assess the risk of significant revenue reversal based on statistical and qualitative analysis given historical information and current market conditions. Our commission revenue for each product line is based on a number of assumptions, which include, but are not limited to, estimating conversion of an approved member to a paying member, forecasting average plan duration and forecasting the commission amounts likely to be received per member. These assumptions are based on our analysis of historical trends for the different cohorts and incorporate management’s judgment in interpreting those trends and applying the constraints discussed below. For our Medicare commission revenue, which represented 89 %, 88 % and 86 % of our total commission revenue for the years ended December 31, 2023, 2022 and 2021, respectively, the estimated average plan duration, which is the average length of time paying members are active on their plans, used to calculate Medicare health insurance plan LTVs has been approximately 2 to 3 years for Medicare Advantage plans, and approximately 4 to 5 years for both Medicare Supplement and Medicare Part D prescription drug plans. While the average plan duration has been approximately 2 to 3 years for Medicare Advantage plans, certain members can have a duration of up to approximately 14 years. The estimated average plan duration used to calculate the LTV for major medical individual and family health insurance plans has been approximately 1.5 to 2 years. For short term health insurance plan LTVs, the estimated average plan duration has 88 Table of Contents EHEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS been approximately six months . For all other ancillary health insurance plan LTVs, the estimated average plan duration has historically varied from 1 to 6 years. Constraints are applied to LTV for revenue recognition purposes to help ensure that the total estimated lifetime commissions expected to be collected for 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 is subsequently resolved. Significant judgment can be involved in determining the constraint. To determine the constraints to be applied to LTV, we compare cash collection patterns to our assumptions and analyze the drivers for variations. We then apply judgment in assessing whether the variation between historical cash collections and LTV is representative of variations that can be expected in future periods. We also analyze whether circumstances have changed and consider any known or potential modifications to the inputs into LTV in light of the factors that can impact the amount of cash expected to be collected in future periods, including but not limited to commission rates, carrier mix, plan duration, cancellations of insurance plans offered by health insurance carriers with which we have a relationship, changes in laws and regulations, and changes in the economic environment. We evaluate the appropriateness of our constraints on an annual basis, at least, and update our assumptions when we observe a sufficient amount of evidence that would suggest that the long-term expectation underlying the assumptions has changed. We re-compute LTVs for all outstanding cohorts on a quarterly basis. We continually review and monitor changes in the data used to estimate LTV and compare the cash received for each cohort to our original estimates at the time of approval. The fluctuations of cash received for each cohort as compared to our estimates and the fluctuations in LTV can be significant and may or may not be indicative of the need to adjust revenue for prior period cohorts. Changes in LTV may result in an increase or a decrease to revenue and a corresponding increase or decrease to contract assets – commissions receivable. We analyze these fluctuations and, to the extent we see changes in our estimates of the cash commission collections that we believe are indicative of an increase or decrease to prior period LTVs, we adjust revenue for the affected cohorts at the time such determination is made and when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. As we accumulate more historical data, we continue to enhance our LTV estimation models using statistical tools to increase the accuracy of LTV estimates with an emphasis on improving member attrition forecasting. The enhancements to the LTV estimation model provide greater statistical certainty on expected cash collections, particularly for earlier period cohorts where there is more historical data available. In the first effective plan year of a Medicare Advantage and Medicare Part D prescription drug plan, for which we are the broker of record, we receive a fixed, annual commission payment from insurance carriers generally after the plan is approved by the carrier and becomes effective. If applicable, after the health insurance carrier approves the application but during the effective year of the plan, we are paid a fixed commission that is prorated for the number of months remaining in the calendar year. Additionally, if the plan is the first Medicare Advantage or Medicare Part D prescription drug plan issued to the member, we may receive a higher commission rate that covers a full 12-month period, regardless of the month the plan was effective. Beginning with the second plan year and for as long as the member remains on that plan, we typically receive fixed, monthly commissions for Medicare Advantage and Medicare Part D prescription drug plans and generally continue to receive commissions until either the plan is cancelled or we otherwise do not remain the agent on the plan. Our commissions also include regular administrative payments related to administrative services we perform. For individual and family, Medicare Supplement, small business and ancillary plans, our commissions generally represent a flat amount per member per month or a percentage of the premium amount collected by the carrier during the period that a member maintains coverage under a plan. Premium-based commissions are reported to us after the premiums are collected by the carrier, generally on a monthly basis. We generally continue to receive the commission payment from the relevant insurance carrier until the health insurance plan is cancelled or we otherwise do not remain the agent on the plan. For Medicare-related, individual and family and ancillary health insurance plans, our services are complete once a submitted application is approved by the relevant health insurance carrier. Accordingly, we recognize commission revenue based upon the total estimated lifetime commissions we expect to receive for selling the plan after the carrier approves an application, net of an estimated constraint. We refer to these as estimated and 89 Table of Contents EHEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS constrained LTVs for the plan. We provide annual services in selling and renewing small business health insurance plans; therefore, we recognize small business health insurance plan commission revenue at the time the plan is approved by the carrier, and when it renews each year thereafter, equal to the estimated commissions we expect to collect from the plan over the following 12 months. For our Medicare segment, our commissions may also include certain bonus payments, which are generally based on attaining predetermined target sales levels or other objectives, as determined by the health insurance carriers. See Note 2 – Revenue of the Notes to Consolidated Financial Statements for additional information regarding our commission revenue. Other Revenue. Our non-Medicare plan related sponsorship and advertising program allows carriers to purchase advertising space in specific markets in a sponsorship area on our website. In return, we are typically paid a fee, which is recognized over the period that advertising is displayed, and often a performance fee based on metrics such as submitted health insurance applications, which is recognized when the service has been performed. We also offer Medicare advertising and other services, which include, among other things, marketing and website development, hosting and maintenance. In these instances, we are typically paid a fixed, up-front fee, which we recognize as revenue ratably over the service period as service is performed. In certain arrangements, we facilitate beneficiary enrollment in Medicare-related health insurance plans with health insurance carriers without remaining the agent of record. Under these arrangements, we receive one-time fees determined by contract terms and our services are complete once a submitted application is approved by the relevant health insurance carrier. Accordingly, we recognize fee income based upon the fee we expect to receive for selling the plan after the carrier approves an application. We also generate revenue from agreements with carriers to perform post enrollment services for members in Medicare-related health insurance plans. We typically are paid a fixed fee upon completion of the specific service and the revenue is recognized in the period the service was completed. Our commercial technology licensing business allows carriers the use of our ecommerce platform to offer their own health insurance policies on their websites and agents to utilize our technology to power their online quoting, content and application submission processes. Typically, we are paid a one-time implementation fee, which we recognize on a straight-line basis over the estimated term of the customer relationship, and a performance fee based on metrics such as submitted health insurance applications. The performance fees are based on performance criteria. In instances where the performance criteria data is tracked by us, we recognize revenue in the period of performance and when all other revenue recognition criteria has been met. In instances where the performance criteria data is tracked by the third party, we recognize revenue when reversal of such amounts is probable to not occur. Incremental Costs to Obtain a Contract. Our sales compensation plans, which are directed at converting leads into approved members, represent fulfillment costs and not costs to obtain a contract with a customer. Additionally, we reviewed compensation plans related to personnel responsible for identifying new health insurance carriers and entering into contracts with new health insurance carriers and concluded that no incremental costs are incurred to obtain such contracts. Therefore, costs related these compensation plans are expensed as incurred. Deferred Revenue – Deferred revenue includes deferred fees and amounts billed to or collected from advertising, sponsorship or technology licensing customers in advance of our performing our service for such customers. It also includes the amount by which both unbilled and billed services provided under our technology licensing arrangements exceed the revenue recognized to date. Cost of Revenue – Included in cost of revenue are payments related to health insurance plans sold to members who were referred to our website by marketing partners with whom we have revenue-sharing arrangements. In order to enter into a revenue-sharing arrangement, marketing partners must be licensed to sell 90 Table of Contents EHEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS health insurance in the state where the policy is sold. Costs related to revenue-sharing arrangements are expensed as the related revenue is recognized. Marketing and Advertising Expenses – Marketing and advertising expenses consist primarily of member acquisition expenses associated with our direct marketing and marketing partner 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 direct marketing expenses in our direct member acquisition channel in the period in which they are incurred, including in the period in which the consumer clicks on the advertisement for direct online channels. Advertising costs incurred in the years ended December 31, 2023, 2022 and 2021 totaled $ 148.7 million, $ 169.1 million, and $ 240.4 million, respectively. Our direct channel expenses primarily consist of costs for direct mail, email marketing, paid keyword search advertising on search engines and paid social platforms, search engine optimization and television and radio advertising. Advertising costs for our direct channel are expensed the first time the related advertising takes place and in the period in which the consumer clicks on the advertisement for direct online channels. Our marketing partner channel expenses primarily consist of fees paid to marketing partners with which we have a relationship. Advertising costs for our marketing partner channel are expensed as incurred. Research and Development Expenses – Research and development expenses consist primarily of compensation and related expenses incurred for employees on our engineering and technical teams, which are expensed as incurred. Research and development costs, which totaled $ 13.7 million, $ 12.1 million and $ 10.4 million for the years ended December 31, 2023, 2022 and 2021, respectively, are primarily included in the “Technology and content expense” line in the accompanying Consolidated Statements of Comprehensive Loss. Internal-Use Software and Website Development Costs – We capitalize costs of materials, consultants and compensation and benefits costs of employees who devote time to the development of internal-use software and websites during the application development stage. The amortization expenses of these assets are recorded in technology and content. Our judgment is required in determining the point at which various projects enter the phases at which costs may be capitalized, in assessing the ongoing value of the capitalized costs and in determining the estimated useful lives over which the costs are amortized, which is generally 3 years. For the years ended December 31, 2023, 2022 and 2021, we capitalized internal-use software and website development costs of $ 9.7 million, $ 17.2 million and $ 19.6 million respectively, and recorded amortization expense of $ 17.4 million, $ 17.3 million, and $ 12.9 million, respectively. Capitalized internal-use software and website development costs are included in other assets on our Consolidated Balance Sheets and were $ 23.6 million and $ 31.3 million as of December 31, 2023 and 2022, respectively. See Note 5 - Equity of the Notes to Consolidated Financial Statements for the amount of stock-based compensation capitalized for internal-use software. Stock-Based Compensation – We grant stock-based awards to officers, certain other employees of the Company and non-employee directors of the Company. The stock-based awards have consisted of stock options, restricted stock units and performance-based stock units. We recognize stock-based compensation expense in the accompanying Consolidated Statements of Comprehensive Loss based on the fair value of our stock-based awards over their respective requisite service periods, typically the vesting period, which is generally four years for service-based awards for employees and one year for non-employee directors or the one-year anniversary of achieving performance criteria for performance-based awards. Stock Options . Our stock options have consisted of service, performance and market-based awards and have exercise prices equal to the market price of the underlying common shares on the date of grant and a term of seven years . The estimated grant date fair value of our stock options is estimated using the Black-Scholes option-pricing model and a single option award approach. The weighted-average expected term for stock options granted is calculated using historical option exercise behavior. The dividend yield is determined by dividing the expected per share dividend during the coming year by the grant date stock price. Through December 31, 2023, we had not declared or paid any cash dividends to common stockholders. We base the risk-free interest rate on the implied yield currently available on U.S. Treasury zero-coupon issues with a remaining term equal to the expected term of our stock options. Expected volatility is determined using a combination of the implied volatility of publicly traded options in our stock and historical volatility of our stock price. 91 Table of Contents EHEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Restricted and Performance-Based Stock Units. Our restricted stock units consist of service-based awards. Our performance-based stock units are subject to certain performance metrics, which may be market-based or non-market-based financial metrics. Our market-based performance stock units are contingent upon the attainment of certain stock prices generally over a four-year performance period while non-market-based performance metrics are contingent upon attainment of certain financial performance metrics generally over a one -year performance period. Performance-based stock units vest on the one-year anniversary of the date of achievement, subject to the employee’s continued service through the vesting date. Each restricted and performance-based stock unit represents a contingent right to receive a share of our common stock upon predetermined criteria. The fair value for restricted and non-market-based performance stock units is estimated on the date of grant based on the current market price of our common shares. The grant date fair value of market-based performance stock awards is determined using the Monte-Carlo simulation model and requires the input of subjective assumptions. The weighted-average expected term is based on the likelihood of achievement using historical behavior. The dividend yield is based on our dividend payment history and expectation of future dividend payments. Through December 31, 2023, we had not declared or paid any cash dividends to common stockholders. We base the risk-free interest rate on the implied yield currently available on U.S. Treasury zero-coupon issues with a remaining term equal to the length of the remaining performance period. Expected volatility is determined using a combination of the implied volatility of publicly traded options in our stock and historical volatility of our stock price. The estimated attainment of performance-based awards and related expense are based on the achievement of certain financial targets over a predetermined performance period, subject to continued service through the vesting date and ultimately are subject to the discretion of the Company’s compensation committee. The assumptions used in calculating the fair value of stock-based payment awards and expected attainment of performance-based awards represent our best estimates, but these estimates involve inherent uncertainties and the application of management judgment. We will continue to use judgment in evaluating the expected term and volatility related to our own stock-based awards on a prospective basis and incorporating these factors into the model. Changes in key assumptions could significantly impact the valuation of such instruments. Forfeiture Rate . We estimate a forfeiture rate to calculate the stock-based compensation for all of our awards. We evaluate the appropriateness of the forfeiture rate based on historical forfeiture, analysis of employee turnover, and other factors. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Earnings (Loss) Per Share – Our Series A Preferred Stock is considered a participating security which requires the use of the two-class method for the computation of basic and diluted per share amounts. Under the two-class method, earnings available to common stockholders for the period are allocated between common stockholders and participating securities according to dividends accumulated and participation rights in undistributed earnings. Net loss attributable to common stockholders is not allocated to the convertible preferred stock as the holder of the Series A Preferred Stock does not have a contractual obligation to share in losses. Basic net loss attributable to common stockholders per share is computed by dividing net loss available to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Diluted net loss attributable to common stockholders per share is computed by dividing the net loss available to common stockholders for the period by the weighted average number of common and common equivalent shares outstanding during the period. Diluted net loss attributable to common stockholders per share reflects all potential dilutive common stock equivalent shares, including conversion of preferred stock, stock options, restricted stock units and shares to be issued under our employee stock purchase program. 401(k) Plan – Our Board of Directors adopted a defined contribution retirement plan (“401(k) Plan”) in 1998, which qualifies under Section 401(k) of the Internal Revenue Code of 1986. Participation in the 401(k) Plan is available to substantially all employees in the United States. Employees may contribute up to 85 % of their salary, subject to applicable annual Internal Revenue Code limits and are permitted to make both pre-tax and after-tax contributions. Employee contributions are fully vested when contributed. We contribute a maximum of 100 % of the first 3 % of compensation a participant contributes to the 401(k) Plan, which vests immediately. Our matching contributions to the 401(k) Plan are discretionary and are expensed as incurred. We recognized expense of $ 3.6 92 Table of Contents EHEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS million, $ 3.8 million and $ 4.2 million for the years ended December 31, 2023, 2022 and 2021, respectively, related to 401(k) matching contributions. Income Taxes – We account for income taxes using the liability method. Deferred income taxes are determined based on the differences between the financial reporting and tax bases of assets and liabilities, using enacted statutory tax rates in effect for the year in which the differences are expected to reverse. We utilize a two-step approach for evaluating uncertain tax positions. Step one, Recognition , requires a company to determine if the weight of available evidence indicates that a tax position is more likely than not to be sustained upon audit, including resolution of related appeals or litigation processes, if any. Step two, Measurement , is based on the largest amount of benefit, which is more likely than not to be realized on ultimate settlement. We record interest and penalties related to uncertain tax positions as income tax expense in the consolidated financial statements. Recently Adopted Accounting Pronouncements We did not adopt any new accounting pronouncements during the year ended December 31, 2023. Recently Issued Accounting Pronouncements Not Yet Adopted Segment Reporting (Topic 280) — In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU updates reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the CODM and included within each reported measure of a segment’s profit or loss. The ASU is effective for fiscal years beginning after December 15, 2023 and interim periods beginning after December 15, 2024. Adoption of the ASU should be applied retrospectively to all prior periods presented in the financial statements and early adoption is permitted. We are currently evaluating the impact of adopting this ASU on our consolidated financial statements and related disclosures. Income Taxes (Topic 740) — In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) Improvements to Income Tax Disclosures, which requires public entities, on an annual basis, to provide disclosure of specific categories in the rate reconciliation, as well as additional disclosure on income taxes paid. The ASU is effective on a prospective basis for fiscal years beginning after December 15, 2024 for public entities and early adoption is permitted. We are currently evaluating the impact of adopting of this ASU on our consolidated financial statements and related disclosures. 93 Table of Contents EHEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 2 – Revenue Disaggregation of Revenue – The table below depicts the disaggregation of revenue by product and is consistent with how we evaluate our financial performance (in thousands): Year Ended December 31, 2023 2022 2021 Medicare Medicare Advantage $ 335,849 $ 293,562 $ 393,868 Medicare Supplement 13,825 17,419 24,272 Medicare Part D 11,180 7,171 7,361 Total Medicare 360,854 318,152 425,501 Individual and Family (1) Non-Qualified Health Plans 10,640 12,430 23,579 Qualified Health Plans 6,020 5,435 9,295 Total Individual and Family 16,660 17,865 32,874 Ancillary Short-term 3,319 4,419 6,112 Dental 3,151 3,489 10,216 Vision 1,627 1,050 2,250 Other 2,657 2,508 2,776 Total Ancillary 10,754 11,466 21,354 Small Business 17,669 11,842 10,720 Commission Bonus and Other ( 2,013 ) 1,921 2,670 Total Commission Revenue 403,924 361,246 493,119 Other Revenue Sponsorship and Advertising Revenue 42,530 40,960 40,560 Other 6,417 3,150 4,520 Total Other Revenue 48,947 44,110 45,080 Total Revenue $ 452,871 $ 405,356 $ 538,199 _______ (1) We define our individual and family plan offerings as major medical individual and family health insurance plans, which do not include Medicare-related, small business or ancillary plans. Individual and family health insurance plans include both qualified and non-qualified plans. Qualified health plans meet the requirements of the Affordable Care Act and are offered through the government-run health insurance exchange in the relevant jurisdiction. Non-qualified health plans do not meet the requirements of the Affordable Care Act and are not offered through the government-run health insurance exchange in the relevant jurisdiction. Individuals that purchase non-qualified health plans cannot receive a subsidy in connection with the purchase of non-qualified plans. Commission Revenue Since the adoption of ASC 606, we have evaluated changes in estimated cash collections and compare these to the initial estimates of LTV at the time of approval. We record adjustment revenue in the period when the risk of significant reversal is not probable and continue to enhance our LTV estimation models to improve the accuracy and to reduce the fluctuations of our LTV estimates. 94 Table of Contents EHEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Commission revenue by segment is presented in the table below (in thousands): Year Ended December 31, 2023 2022 2021 Medicare Commission revenue from members approved during the period $ 326,087 $ 322,506 $ 437,738 Net commission revenue from members approved in prior periods (1) 33,544 ( 2,326 ) ( 8,414 ) Total Medicare segment commission revenue $ 359,631 $ 320,180 $ 429,324 Employer and Individual Commission revenue from members approved during the period $ 19,789 $ 22,358 $ 25,078 Commission revenue from renewals of small business members during the period 9,973 9,981 8,564 Net commission revenue from members approved in prior periods (1) 14,531 8,727 30,153 Total Employer and Individual segment commission revenue $ 44,293 $ 41,066 $ 63,795 Total commission revenue from members approved during the period $ 345,876 $ 344,864 $ 462,816 Commission revenue from renewals of small business members during the period 9,973 9,981 8,564 Total net commission revenue from members approved in prior periods (1)(2) 48,075 6,401 21,739 Total commission revenue $ 403,924 $ 361,246 $ 493,119 _______ (1) These amounts reflect our revised estimates of cash collections for certain members approved prior to the relevant reporting period that are recognized as adjustments to revenue within the relevant reporting period. The net adjustment revenue includes both increases as well as reductions in revenue for certain prior period cohorts. (2) The impact of total net commission revenue from members approved in prior periods for the years ended December 31, 2023, 2022 and 2021 was $ 1.72 , $ 0.23 and $ 0.81 per basic and per diluted share, respectively. The total reductions to revenue from members approved in prior periods were $ 4.3 million, $ 16.5 million and $ 28.8 million for the years ended December 31, 2023, 2022 and 2021, respectively. These reductions to revenue primarily relate to the Medicare segment. Enhancement to LTV Estimation Model During 2023, we observed stronger member retention rates and commission rate increases for our Medicare segment. Based on our evaluation of the updated LTV models and retention and commission rate trends, we recorded $ 33.5 million of net adjustment revenue for the year ended December 31, 2023. In addition, we continued to observe stronger member retention rates in our LTV assessments for the majority of the earlier period cohorts of certain products in our E&I segment and as a result, we recognized $ 14.5 million of net adjustment revenue for the year ended December 31, 2023. We will continue to monitor our member retention rates as compared to our forecasts and other market factors and evaluate whether any addition or reduction of adjustment revenue shall be recorded as we continue to assess our LTV models in future periods. During 2022, we continued to observe stronger member retention rates in our LTV assessments for the majority of the earlier period cohorts of certain products in our E&I segment. Based on our evaluation of the updated LTV models and retention trends, we recognized $ 8.7 million of net adjustment revenue for the E&I segment for the year ended December 31, 2022. In addition, we evaluated various market factors related to our Medicare segment and recorded a net adjustment of $( 2.3 ) million for the year ended December 31, 2022, primarily due to declines in LTV in all Medicare products. 95 Table of Contents EHEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS During 2021, despite the extension of the COVID-19 related special enrollment period through August 15, 2021 and an increase in subsidies to certain individuals who purchase qualified health plans, we continued to observe stronger member retention rates in our LTV assessments for the majority of the earlier period cohorts of certain products in our E&I segment. We recognized $ 30.2 million of net adjustment revenue for the E&I segment for the year ended December 31, 2021. In addition, we evaluated various market factors related to our Medicare segment and recorded a net adjustment of $( 8.4 ) million for the year ended December 31, 2021, primarily due to decline in LTV of Medicare Supplement and Medicare Part D prescription drug plans. Note 3 – Supplemental Financial Statement Information Cash, Cash Equivalents and Restricted Cash Our cash, cash equivalents and restricted cash balances are summarized as follows (in thousands): December 31, 2023 December 31, 2022 Cash $ 7,114 $ 17,776 Cash equivalents 108,608 126,625 Cash and cash equivalents 115,722 144,401 Restricted cash 3,090 3,239 Total cash, cash equivalents and restricted cash $ 118,812 $ 147,640 As of December 31, 2023 and 2022, we had $ 3.1 million and $ 3.2 million of restricted cash which was classified as a non-current asset on our Consolidated Balance Sheets. This amount collateralizes letters of credit related to certain lease commitments. Contract Assets and Accounts Receivable We do not require collateral or other security for our contract assets and accounts receivable. We believe the potential for collection issues with any of our customers was minimal as of December 31, 2023. We estimate an allowance for credit losses using relevant available information from internal and external sources, related to past events, current conditions, and reasonable and supportable forecasts. Specifically, for the purpose of measuring the probability of default parameters, we utilize Capital IQ’s, Standard & Poor’s and Moody’s analytics. Our estimates of loss given default are determined by using our historical collections data as well as historical information obtained through our research and review of other insurance related companies. Our estimated exposure at default is determined by applying these internal and external data sources to our commissions receivable balances. As such, we apply an immediate reversion method and revert to historical loss information when computing our credit loss exposure. Credit loss expenses are assessed quarterly and included in the “General and administrative” line in our Consolidated Statements of Comprehensive Loss. There were no write-offs during the years ended December 31, 2023, 2022 and 2021. The change in the allowance for credit losses is summarized as follows (in thousands): December 31, 2023 December 31, 2022 Beginning balance $ 2,398 $ 2,198 Change in allowance ( 280 ) 200 Ending balance $ 2,118 $ 2,398 96 Table of Contents EHEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Our contract assets – commissions receivable activities, net of credit loss allowances, are summarized as follows (in thousands): Year Ended December 31, 2023 Medicare Segment E&I Segment Total Beginning balance $ 817,043 $ 67,261 $ 884,304 Commission revenue from members approved during the period 326,087 19,789 345,876 Commission revenue from renewals of small business members during the period — 9,973 9,973 Net commission revenue from members approved in prior periods 33,544 14,531 48,075 Cash receipts ( 329,600 ) ( 40,731 ) ( 370,331 ) Net change in credit loss allowance 258 22 280 Ending balance $ 847,332 $ 70,845 $ 918,177 Year Ended December 31, 2022 Medicare Segment E&I Segment Total Beginning balance $ 837,474 $ 70,788 $ 908,262 Commission revenue from members approved during the period 322,506 22,358 344,864 Commission revenue from renewals of small business members during the period — 9,981 9,981 Net commission revenue from members approved in prior periods ( 2,326 ) 8,727 6,401 Cash receipts ( 340,426 ) ( 44,578 ) ( 385,004 ) Net change in credit loss allowance ( 185 ) ( 15 ) ( 200 ) Ending balance $ 817,043 $ 67,261 $ 884,304 Credit Risk Our financial instruments that are exposed to concentrations of credit risk principally consist of cash, cash equivalents, marketable securities, contract assets – commissions receivable and accounts receivable. We invest our cash and cash equivalents with major banks and financial institutions and, at times, such investments are in excess of federally insured limits. We also have deposits with major banks in China that are denominated in both U.S. dollars and Chinese Yuan Renminbi and are not insured by the U.S. federal government. The deposits in China were $ 3.2 million as of December 31, 2023. See Note 4 – Fair Value Measurements for more information regarding our marketable securities. We do not require collateral or other security for either our contract assets or accounts receivable. Carriers that represented 10% or more of our total contract assets – commissions receivable and accounts receivable balances are summarized as follows: December 31, 2023 December 31, 2022 Humana 27 % 26 % UnitedHealthcare (1) 26 % 24 % Aetna (1) 16 % 16 % _______ (1) Percentages include the carriers' subsidiaries. 97 Table of Contents EHEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Prepaid Expenses and Other Current Assets – Our prepaid expenses and other current assets are summarized as follows (in thousands): December 31, 2023 December 31, 2022 Prepaid software and maintenance contracts $ 5,328 $ 5,211 Prepaid licenses 2,739 1,116 Prepaid expenses 1,808 2,858 Prepaid insurance 1,436 1,893 Other current assets 733 223 Prepaid expenses and other current assets $ 12,044 $ 11,301 Property and Equipment – Our property and equipment are summarized as follows (in thousands): December 31, 2023 December 31, 2022 Computer equipment and software $ 9,008 $ 8,727 Office equipment and furniture 2,875 3,556 Leasehold improvements 4,124 5,992 Property and equipment, gross 16,007 18,275 Less: accumulated depreciation and amortization ( 11,143 ) ( 12,774 ) Property and equipment, net $ 4,864 $ 5,501 Depreciation and amortization expense related to property and equipment for the years ended December 31, 2023, 2022 and 2021 was $ 2.5 million, $ 3.8 million and $ 5.4 million, respectively. During 2022, we recognized impairment charges of $ 2.2 million related to computer equipment, office equipment and furniture and leasehold improvements as a result of our sublease and vacating of certain leased office spaces in the “Impairment, restructuring and other charges” line in our Consolidated Statements of Comprehensive Loss. Intangible Assets – As of December 31, 2023 and 2022, our intangible assets subject to amortization had a gross carrying value of $ 17.2 million and life-to-date accumulated amortization and impairment charges of $ 17.2 million. As of December 31, 2023 and 2022, our indefinite-lived intangible assets had a gross carrying value of $ 5.1 million and life-to-date impairment charges of $ 3.2 million. We had no amortization expense related to intangible assets for the years ended December 31, 2023 and 2022. Amortization expense related to intangible assets for the year ended December 31, 2021 was $ 0.5 million. We recorded $ 6.1 million of impairment charges related to our intangible assets in the “ Impairment, restructuring and other charges ” line in our Consolidated Statements of Comprehensive Loss for the year ended December 31, 2021. See Note 11 - Impairment, Restructuring and Other Charges for further discussion on our impairment charge in 2021. 98 Table of Contents EHEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 4 – Fair Value Measurements We define fair value as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques we use to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. We classify the inputs used to measure fair value into the following hierarchy: Level 1 Unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 Unadjusted quoted prices in active markets for similar assets or liabilities; unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability. Level 3 Unobservable inputs for the asset or liability. Our financial assets measured at fair value on a recurring basis are summarized below by their classification within the fair value hierarchy as follows (in thousands): December 31, 2023 Carrying Value Level 1 Level 2 Level 3 Total Assets Cash equivalents Money market funds $ 11,576 $ 11,576 $ — $ — $ 11,576 Commercial paper 86,090 — 86,090 — 86,090 Agency bonds 10,942 — 10,942 — 10,942 Short-term marketable securities Agency bonds 5,930 — 5,930 — 5,930 Total assets measured at fair value $ 114,538 $ 11,576 $ 102,962 $ — $ 114,538 December 31, 2022 Carrying Value Level 1 Level 2 Level 3 Total Assets Cash equivalents Money market funds $ 13,015 $ 13,015 $ — $ — $ 13,015 Commercial paper 112,268 — 112,268 — 112,268 Agency bonds 1,342 — 1,342 — 1,342 Total assets measured at fair value $ 126,625 $ 13,015 $ 113,610 $ — $ 126,625 We endeavor to utilize the best available information in measuring fair value. Our money market funds are measured at fair value based on quoted prices in active markets and are classified as Level 1 within the fair value hierarchy. Our available for sale marketable securities, which include commercial paper and agency bonds with maturities of less than one year, are measured at fair value using quoted market prices to the extent available or alternative pricing sources and models utilizing market observable inputs and are classified as Level 2 within the fair value hierarchy. There were no transfers between the hierarchy levels during either of the years ended December 31, 2023 or 2022. 99 Table of Contents EHEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table summarizes our cash equivalents and available-for-sale debt securities by contractual maturity (in thousands): As of December 31, 2023 As of December 31, 2022 Amortized Cost Fair Value Amortized Cost Fair Value Due in 1 year $ 114,577 $ 114,538 $ 126,664 $ 126,625 Unrealized gains and losses on available-for-sale debt securities that are not credit related are included in accumulated other comprehensive loss and summarized as follows (in thousands): December 31, 2023 Amortized Cost Unrealized Gains Unrealized Losses Fair Value Cash equivalents Money market funds $ 11,576 $ — $ — $ 11,576 Commercial paper 86,132 — ( 42 ) 86,090 Agency bonds 10,940 2 — 10,942 Short-term marketable securities Agency bonds 5,929 1 — 5,930 Total $ 114,577 $ 3 $ ( 42 ) $ 114,538 December 31, 2022 Amortized Cost Unrealized Gains Unrealized Losses Fair Value Cash equivalents Money market funds $ 13,015 $ — $ — $ 13,015 Commercial paper 112,307 — ( 39 ) 112,268 Agency bonds 1,342 — — 1,342 Total $ 126,664 $ — $ ( 39 ) $ 126,625 As of December 31, 2023 and 2022, we had 20 and 26 securities in net loss positions, respectively, and their unrealized losses were immaterial individually and in aggregate. We did not record any credit losses regarding our available-for-sale debt securities during the year ended December 31, 2023 or 2022. We do not intend to sell these securities and it is more likely than not that we will not be required to sell these securities before the recovery of their amortized cost basis. We incurred interest income of $ 8.4 million, $ 2.8 million and $ 0.2 million for the years ended December 31, 2023, 2022 and 2021, respectively. Note 5 – Equity Common Stock – On all matters submitted to our stockholders for vote, our common stockholders are entitled to one vote per share, voting together as a single class, and do not have cumulative voting rights. Accordingly, the holders of a majority of the shares of common stock entitled to vote in any election of directors can elect all of the directors standing for election, if they so choose. Subject to preferences that may apply to any shares of preferred stock outstanding, the holders of common stock are entitled to share equally in any dividends, when and if declared by our Board of Directors. Upon the occurrence of a liquidation, dissolution or winding-up, the holders of common stock are entitled to share equally in all assets remaining after the payment of any liabilities and the liquidation preferences on any outstanding preferred stock. Holders of common stock have no preemptive or conversion rights or other subscription rights and there are no redemption or sinking funds provisions applicable to the common stock. 100 Table of Contents EHEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Stock Repurchase Programs – We had no stock repurchase activity during the years ending December 31, 2023, 2022 or 2021. As of December 31, 2023 and 2022, we had a total of 12.8 million and 12.4 million shares, respectively, held in treasury. As of December 31, 2023 and 2022, we had 2.1 million and 1.7 million shares, respectively, in treasury that were previously surrendered by employees to satisfy tax withholding due in connection with the vesting of certain restricted stock units as well as 10.7 million shares previously repurchased under our past repurchase programs. For accounting purposes, common stock repurchased under our stock repurchase programs is recorded based upon the settlement date of the applicable trade. Such repurchased shares are held in treasury and are presented using the cost method. 2020 Employee Share Purchase Plan – Our Board of Directors adopted in March 2020 and our stockholders approved in June 2020 the 2020 Employee Stock Purchase Plan (“ESPP”). A total of 0.5 million shares of our common stock are available for sale under the ESPP. Eligible employees can purchase shares of our common stock based on a percentage of their compensation subject to certain limits. The purchase price per share is equal to the lower of 85 % of the fair market value of our common stock on the offering date or the purchase date. Employees purchased 0.1 million, 0.2 million and 0.1 million shares of common stock under our ESPP during the years ended December 31, 2023, 2022 and 2021, respectively. There were 0.1 million shares remaining for purchase under our ESPP as of December 31, 2023. As of December 31, 2023, there was $ 0.2 million of unrecognized compensation cost related to our employee stock purchase program, expected to be recognized over a weighted average period of 0.4 years. Equity Plans – On June 12, 2014, upon approval at the Annual Meeting of Stockholders, we adopted the 2014 Equity Incentive Plan (the “2014 Plan”) with 4.5 million shares authorized for issuance. The 2014 Plan does not include an evergreen provision to automatically increase the number of shares available under it, and any increase in the number of shares authorized for issuance under the 2014 Plan requires stockholder approval. Also, under the 2014 Plan the following shares are not recycled for future grant under the 2014 Plan: (i) shares used in connection with the exercise of an option and/or stock appreciation right to pay the exercise price or purchase price of such award or satisfy applicable tax withholding obligations; and (ii) the gross number of shares subject to stock appreciation rights that are exercised. Furthermore, the 2014 Plan included a provision that prohibits repricing of outstanding stock options or stock appreciation rights and formalized and updated procedures to qualify awards as “performance-based” compensation under Section 162(m) of the Internal Revenue Code in order to preserve full tax deductibility of such awards. Our stockholders approved an amendment to the 2014 Plan to increase the maximum number of shares that may be issued by 2.5 million shares in 2019 and by 3.0 million in 2022. The 2014 Plan was further amended on September 29, 2022 to remove certain provisions permitting the Company to provide a reload option (as amended and restated, the “A&R 2014 Plan”). On September 22, 2021, the Company adopted an inducement plan (the “2021 Inducement Plan”), pursuant to which the Company reserved 0.4 million shares of its common stock (subject to customary adjustments in the event of a change in capital structure of the Company) to be used exclusively for grants of awards to individuals who were not previously employees or directors of the Company, other than following a bona fide period of non-employment, as an inducement material to the individual's entry into employment with the Company within the meaning of Rule 5635(c)(4) of the Nasdaq Listing Rules (“Nasdaq Rules”). In March 2022 and September 2022, the Company amended and restated its 2021 Inducement Plan to reserve an additional 0.5 million and 1.5 million shares of its common stock, respectively (as amended and restated, the “A&R 2021 Inducement Plan”). The 2021 Inducement Plan and its amendments were approved by our Board of Directors without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Rules, and the terms and conditions of the A&R 2021 Inducement Plan and awards to be granted thereunder are substantially similar to our stockholder-approved A&R 2014 Plan. As of December 31, 2023, 2.0 million shares were issued under the A&R 2021 Inducement Plan. Shares Reserved – We generally issue previously unissued common stock upon the exercise of stock options, the vesting of restricted and performance-based stock units and upon granting of restricted common stock awards; however, we may reissue previously acquired treasury shares to satisfy these future issuances. 101 Table of Contents EHEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Shares of authorized but unissued common stock reserved for future issuance were as follows (in thousands): December 31, 2023 December 31, 2022 Stock options issued and outstanding 218 226 Restricted stock units issued and outstanding 3,105 2,238 Performance-based stock units issued and outstanding 400 242 Shares available for grant 2,810 5,165 Total shares reserved 6,533 7,871 The following table summarizes activity under our A&R 2014 Plan and A&R 2021 Inducement Plan for the year ended December 31, 2023 (in thousands): Balance at December 31, 2022 (1) 5,165 Restricted stock units granted ( 2,413 ) Performance-based stock units granted ( 337 ) Restricted stock units cancelled 283 Performance-based stock units cancelled 104 Options cancelled 8 Balance at December 31, 2023 2,810 _______ (1) Shares available for grant do not include treasury stock shares that could be granted if we determined to do so. Stock-Based Compensation Expense – The following table summarizes stock-based compensation expense recognized for the years presented below (in thousands): Year Ended December 31, 2023 2022 2021 Restricted stock units $ 19,151 $ 17,837 $ 23,645 Performance-based stock units 2,422 876 6,867 Common stock options 1,254 1,154 707 Employee stock purchase program 386 449 1,638 Total stock-based compensation expense $ 23,213 $ 20,316 $ 32,857 Related tax benefit recognized $ 5,488 $ 4,747 $ 7,746 102 Table of Contents EHEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table summarizes stock-based compensation expense by operating function for the years presented below (in thousands): Year Ended December 31, 2023 2022 2021 Marketing and advertising $ 2,201 $ 1,901 $ 8,660 Customer care and enrollment 2,287 2,096 2,836 Technology and content 4,498 6,015 10,013 General and administrative 14,227 10,304 11,348 Total stock-based compensation expense 23,213 20,316 32,857 Amount capitalized for internal-use software 1,040 1,885 2,621 Total stock-based compensation $ 24,253 $ 22,201 $ 35,478 For the years ended December 31, 2023, 2022 or 2021, there was a total of $ 1.0 million, $ 1.9 million and $ 2.6 million, respectively, of stock-based compensation expense capitalized in the internal-use software and website development costs classified under Other assets, which represents a noncash investing activity. Stock Options – The following table summarizes stock option activity (in thousands, except weighted-average exercise price and weighted-average remaining contractual life data): Number of Stock Options (1) Weighted Average Exercise Price Weighted-Average Remaining Contractual Life (years) Aggregate Intrinsic Value (2) Outstanding as of December 31, 2022 226 $ 39.07 5.3 $ — Granted — $ — Exercised — Forfeited ( 8 ) $ 23.34 Outstanding balance as of December 31, 2023 218 $ 39.65 4.5 $ — Vested and expected to vest as of December 31, 2023 194 $ 39.48 4.5 $ — Exercisable as of December 31, 2023 74 $ 36.98 4.0 $ — _______ (1) Includes certain stock options with service, performance-based or market-based vesting criteria. (2) The aggregate intrinsic value is calculated as the product between eHealth’s closing stock price as of December 31, 2023 and 2022 and the exercise price of in-the-money options as of those dates. The following table provides information pertaining to our stock options for the years presented below (in thousands, except weighted-average fair values): Year Ended December 31, 2023 2022 2021 Weighted average fair value of options granted n/a n/a $ 41.03 Total fair value of options vested $ 534 $ 835 $ 797 Intrinsic value of options exercised n/a $ 694 $ 5,182 103 Table of Contents EHEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS There were no options granted during the years ended December 31, 2023 and 2022. For the options granted during the year ended December 31, 2021, the fair value of stock options granted to employees was estimated using the Black-Scholes option-pricing model and with the following weighted average assumptions for the year presented below: Year Ended December 31, 2021 Expected term (years) 7.0 Expected volatility 69.1 % Expected dividend yield —% Risk-free interest rate 1.3 % As of December 31, 2023, there was $ 1.2 million of total unamortized compensation cost, net of estimated forfeitures, related to stock options, expected to be recognized over a weighted average period of 1.1 years. Restricted Stock Units – The following table summarizes restricted stock unit activity (in thousands, except weighted-average grant date fair value and weighted-average remaining service period data): Number of Restricted Stock Units Weighted-Average Grant Date Fair Value Weighted-Average Remaining Service Period (years) Aggregate Intrinsic Value (1) Outstanding as of December 31, 2022 2,238 $ 19.13 1.4 $ 10,832 Granted 2,413 $ 8.33 Vested ( 1,263 ) $ 16.88 Forfeited ( 283 ) $ 22.80 Outstanding as of December 31, 2023 3,105 $ 11.31 1.3 $ 27,083 _______ (1) The aggregate intrinsic value is calculated as the difference of the grant date price and our closing stock price as of December 31, 2023 and 2022 multiplied by the number of restricted stock units outstanding as of December 31, 2023 and 2022, respectively. As of December 31, 2023, there was $ 22.8 million of total unamortized compensation cost, net of estimated forfeitures, related to restricted stock units, expected to be recognized over a weighted average period of 2.6 years. Performance-based Stock Units – The following table summarizes performance-based stock unit activity (in thousands, except weighted-average grant date fair value and weighted-average remaining service period data): Number of Performance-based Stock Units Weighted-Average Grant Date Fair Value Weighted-Average Remaining Service Period (years) Aggregate Intrinsic Value (1) Outstanding as of December 31, 2022 242 $ 20.55 1.1 $ 1,172 Granted 337 $ 7.56 Vested ( 75 ) $ 4.42 Forfeited ( 104 ) $ 14.08 Outstanding as of December 31, 2023 400 $ 14.32 0.6 $ 3,486 _______ (1) The aggregate intrinsic value is calculated as the difference of the grant date price and our closing stock price as of December 31, 2023 and 2022 multiplied by the number of performance stock units outstanding as of December 31, 2023 and 2022, respectively. 104 Table of Contents EHEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The weighted-average fair value of the market-based restricted stock units was determined using the Monte Carlo simulation model using the following weighted average assumptions: Year Ended December 31, 2023 2022 2021 Expected term (years) 1.1 2.1 2.0 Expected volatility 76.3 % 68.7 % 66.0 % Expected dividend yield — % — % — % Risk-free interest rate 4.0 % 2.5 % 0.9 % Weighted-average grant date fair value $ 4.79 $ 9.66 $ 46.36 As of December 31, 2023, there was $ 0.9 million of total unamortized compensation cost, net of estimated forfeitures, related to performance-based stock units, expected to be recognized over a weighted average period of 0.6 years. Note 6 – Convertible Preferred Stock Pursuant to an investment agreement dated February 17, 2021 with Echelon Health SPV, LP (“H.I.G.”), an investment vehicle of H.I.G. Capital (the “H.I.G. Investment Agreement”), we issued and sold to H.I.G., in a private placement, 2,250,000 shares of our newly designated Series A convertible preferred stock (the “Series A Preferred Stock”), par value $ 0.001 per share, at an aggregate purchase price of $ 225.0 million on April 30, 2021 (the “Closing Date”). We received $ 214.0 million in net proceeds from the private placement with H.I.G., net of sales commissions and certain transaction fees totaling $ 11.0 million. Our Series A Preferred Stock is considered temporary equity in our Consolidated Balance Sheets and we have determined there are no material embedded features that require recognition as a derivative asset or liability. The Series A Preferred Stock ranks senior to all other equity securities of the Company with respect to dividend rights and rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company. Dividends – Dividends initially accrued on the Series A Preferred Stock daily at 8 % per annum on the stated value of $ 100 per share (the “Stated Value”), and were payable in kind (“PIK”) beginning on June 30, 2021 through the second anniversary of the Closing Date. Subsequent to the second anniversary of the Closing Date, dividends continue to accrue at 8 % per annum, with 6 % PIK and 2 % payable in cash in arrears beginning on June 30, 2023. Dividends compound semiannually and are PIK and payable in cash in arrears, as applicable, on June 30 and December 31 of each year (each a “Dividend Payment Date”). PIK dividends are cumulative and are added to the Accrued Value. “Accrued Value” means, as of any date, with respect to any share of Series A Preferred Stock, the sum of the Stated Value per share plus, on each Dividend Payment Date, on a cumulative basis, all accrued PIK dividends that have accrued on such share but that have not previously been added to the Accrued Value. During the year ended December 31, 2023, we made cash dividend payments in the aggregate amount of $ 3.5 million. The Series A Preferred Stock participates, on an as-converted basis in all dividends paid to the holders of our common stock. Conversion Rights – The Series A Preferred Stock is convertible at any time into common stock at a conversion rate equal to (i) the Accrued Value plus accrued PIK dividends that have not yet been added to the Accrued Value, (ii) divided by the conversion price as of the applicable conversion date (the “Conversion Price”). As of December 31, 2023, the Conversion Price is equal to $ 79.5861 per share. This Conversion Price is subject to further adjustment and the number of shares of common stock issuable upon conversion of the Series A Preferred Stock is subject to certain limitations, each as set forth in the Certificate of Designations of Series A Preferred Stock, as filed with the Secretary of State of the State of Delaware on April 30, 2021 (the “Certificate of Designations”). Redemption Put Right – At any time on or after the sixth anniversary of the Closing Date, holders of the Series A Preferred Stock will have the right to cause the Company to redeem all or any portion of the Series A Preferred Stock in cash at an amount equal to the greater of (i) 135 % of the Accrued Value per share as of the redemption date, plus accrued PIK dividends that have not yet been added to the Accrued Value and (ii) the amount per share that would be payable on an as-converted basis on such Series A Preferred Stock at the then-current 105 Table of Contents EHEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Accrued Value, plus accrued PIK dividends that have not yet been added to the Accrued Value, and in either case of (i) or (ii) plus any unpaid cash dividends that would have otherwise been settled in cash in connection with such conversion (the greater of (i) and (ii), the “Redemption Price”). Redemption Call Right – At any time on or after the sixth anniversary of the Closing Date, the Company will have the right (but not the obligation) to redeem out of legally available funds and for cash consideration all (but not less than all) of the Series A Preferred Stock upon at least 30 days prior written notice at an amount equal to the Redemption Price. Board Nomination Rights – H.I.G. is entitled to nominate one individual for election to our Board of Directors so long as it continues to own at least 30 % of the common stock issuable or issued upon conversion of the Series A Preferred Stock originally issued to it in the private placement. Under certain circumstances, H.I.G. also has the right to nominate an additional individual to our Board of Directors if we fail to maintain certain levels of commissions receivable or liquidity as further discussed below. Voting Rights – The Series A Preferred Stock will vote together with the common stock as a single class on all matters submitted to a vote of the holders of the common stock (subject to certain voting limitations set forth in, and the terms and conditions of, the Certificate of Designations). Each holder of Series A Preferred Stock shall be entitled to the number of votes, rounded down to the nearest whole number, equal to the product of (i) the aggregate Accrued Value of the issued and outstanding shares of Series A Preferred Stock divided by $ 69.684 , which is the “Minimum Price” computed in accordance with the Certificate of Designations (as further described below), multiplied by (ii) a fraction, the numerator of which is the number of shares of Series A Preferred Stock held by such holder and the denominator of which is the aggregate number of issued and outstanding shares of Series A Preferred Stock. “Minimum Price” means the lower of: (i) the Nasdaq Official Closing Price per share of common stock on the Closing Date; or (ii) the average Nasdaq Official Closing Price per share of common stock for the five trading days immediately prior to the Closing Date. Holders of Series A Preferred Stock will have one vote per share on any matter on which the holders of the Series A Preferred Stock are entitled to vote separately as a class (subject to certain voting limitations set forth in the Certificate of Designations). Mandatory Conversion of the Series A Preferred Stock – At any time on or after the third anniversary of the Closing Date, if the volume-weighted average price per share of our common stock is greater than 167.5 % of the then-current Conversion Price for 20 consecutive trading days in a 30 -day trading day period, the Company will have the right to convert all, but not less than all, of the Series A Preferred Stock into common stock at a conversion rate with respect to each share of Series A Preferred Stock of (i) the Accrued Value plus accrued PIK dividends that have not yet been added to the Accrued Value, (ii) divided by the then applicable Conversion Price. Covenants and Liquidity Requirements – As long as H.I.G. continues to own at least 30 % of the Series A Preferred Stock originally issued to it in the private placement, the consent of H.I.G. will be required for the Company to incur certain indebtedness and to take certain other corporate actions as set forth in the H.I.G. Investment Agreement. In addition, the Company is required to maintain an Asset Coverage Ratio (as defined in the H.I.G. Investment Agreement) of at least 2.0 x, (the “Minimum Asset Coverage Ratio”), which increased to 2.5 x in August of 2023. The first measurement date of the 2.5 x Minimum Asset Coverage Ratio was September 30, 2023. Additionally, the H.I.G. Investment Agreement requires the Company to maintain a Minimum Liquidity Amount (as defined in the H.I.G. Investment Agreement) for certain periods that ranges from $ 65.0 million to $ 125.0 million. Failure to maintain the Minimum Asset Coverage Ratio or the Minimum Liquidity Amount as of the date or for the time period required by the H.I.G. Investment Agreement for as long as H.I.G. continues to own at least 30 % of the Series A Preferred Stock originally issued to it in the private placement, entitles H.I.G., subject to conditions and restrictions specified therein, to additional rights, including the right to nominate one additional member to the Company’s Board of Directors, the right to approve the Company's annual budget, the right to approve hiring or termination of certain key executives, and the right to approve the incurrence of certain indebtedness. As of December 31, 2023, we complied with the Minimum Liquidity Amount. As of September 30, 2023, we failed to maintain the Minimum Asset Coverage Ratio, which entitles H.I.G. to the additional rights set forth above. As of December 31, 2023, the estimated Series A Preferred Stock redemption value equals 135 % of the Accrued Value per share as of the redemption date, plus accrued PIK dividends, that have not yet been added to the Accrued Value, which is significantly in excess of the fair value of the common stock into which the Series A Preferred Stock is convertible as of December 31, 2023. We have elected to apply the accretion method to adjust the carrying value of the Series A Preferred Stock to its redemption value at the earliest date of redemption, April 30, 106 Table of Contents EHEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2027. Amounts recognized to accrete the Series A Preferred Stock to its estimated redemption value are treated as a deemed dividend and are recorded as a reduction to retained earnings. The estimated redemption value will vary in subsequent periods due to the redemption put right described above and we have elected to recognize such changes prospectively. No shares of Series A Preferred Stock have been converted and the Series A Preferred Stock was convertible into 3.4 million shares of common stock as of December 31, 2023. The following table summarizes the proceeds and changes to our Series A Preferred Stock (in thousands): Gross proceeds $ 225,000 Less: issuance costs ( 10,975 ) Net proceeds $ 214,025 Balance as of December 31, 2021 $ 232,592 Accrued paid-in-kind dividends 19,357 Change in preferred stock redemption value 11,335 Balance as of December 31, 2022 263,284 Accrued paid-in-kind dividends 17,433 Change in preferred stock redemption value 17,336 Balance as of December 31, 2023 $ 298,053 Note 7 – Net Loss Per Share Attributable to Common Stockholders The following table sets forth the computation of basic and diluted net loss attributable to common stockholders per share (in thousands, except per share amounts): Year Ended December 31, 2023 2022 2021 Basic Net loss attributable to common stockholders $ ( 66,515 ) $ ( 119,414 ) $ ( 122,942 ) Shares used in per share calculation – basic 28,016 27,359 26,781 Net loss attributable to common stockholders per share – basic $ ( 2.37 ) $ ( 4.36 ) $ ( 4.59 ) Diluted: Net loss attributable to common stockholders $ ( 66,515 ) $ ( 119,414 ) $ ( 122,942 ) Shares used in per share calculation – basic 28,016 27,359 26,781 Dilutive effect of common stock — — — Shares used in per share calculation – diluted 28,016 27,359 26,781 Net loss attributable to common stockholders per share – diluted $ ( 2.37 ) $ ( 4.36 ) $ ( 4.59 ) 107 Table of Contents EHEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For each of the years ended December 31, 2023, 2022 and 2021, we had securities outstanding that could potentially dilute net loss per share, but the shares from the assumed conversion or exercise of these securities were excluded in the computation of diluted net loss per share as their effect would have been anti-dilutive. The number of weighted-average outstanding anti-dilutive shares that were excluded from the computation of diluted net loss per share consisted of the following (in thousands): Year Ended December 31, 2023 2022 2021 Convertible preferred stock 3,340 3,102 1,905 Restricted stock units 2,255 1,551 1,075 Performance-based stock units 154 — 3 Common stock options 221 271 333 Employee stock purchase program 51 65 29 Total 6,021 4,989 3,345 Note 8 – Commitments and Contingencies Service and Licensing Obligations We have entered into service and licensing agreements with third party vendors to provide various services, including network access, equipment maintenance, and software licensing. As the benefits of these agreements are experienced uniformly over the applicable contractual periods, we record the related service and licensing expenses on a straight-line basis, although actual cash payment obligations under certain of these agreements fluctuate over the terms of the agreements. Our future minimum payments under non-cancellable contractual service and licensing obligations as of December 31, 2023 were as follows (in thousands): For the Years Ending December 31, 2024 $ 6,180 2025 1,141 2026 — 2027 — 2028 — Thereafter — Total $ 7,321 Operating Leases Refer to Note 10 – Leases for commitments related to our operating leases. Self-Insurance We provide comprehensive major medical benefits to our employees. Effective January 1, 2023, we began maintaining a substantial portion of our U.S. employee health insurance benefits on a self-insured basis with up to $ 0.3 million per individual per year and a maximum claim liability of $ 13.6 million. As a result, we record a self-insurance liability based on claims filed and an estimate of claims incurred but not yet reported. As of December 31, 2023, we had a self-insurance liability balance of $ 2.5 million in the “Accrued compensation and benefits” line on our Consolidated Balance Sheet. We had no liability on our Consolidated Balance Sheet as of December 31, 2022 as our employee health insurance coverage was not self-insured at the time. 108 Table of Contents EHEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Contingencies From time to time, we receive inquiries from governmental bodies and also may be subject to various legal proceedings and claims arising in the ordinary course of business. We assess contingencies to determine the degree of probability and range of possible loss for potential accrual in our consolidated financial statements. An estimated loss contingency is accrued in the consolidated financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Legal proceedings or other contingencies could result in material costs, even if we ultimately prevail, and we may from time to time enter into settlements to resolve such litigation. Legal costs incurred in connection with the resolution of claims, lawsuits and other contingencies generally are expensed as incurred. There were no material litigation-related accruals recorded during the years ended or as of December 31, 2023, 2022 and 2021. The following discussion is limited to the Company's material on-going legal proceedings: Legal Proceedings Securities Class Action – On April 8, 2020 and April 30, 2020, two purported class action lawsuits were filed against the Company, its then-chief executive officer, Scott N. Flanders, its then-chief financial officer, Derek N. Yu ng, and its then-chief operating officer, David K. Francis in the United States District Court for the Northern District of California. The cases are captioned Patel v. eHealth, Inc., et al., Case No. 5:20-cv-02395 (N.D. Cal.) and Bertrand v. eHealth, Inc. et al., Case No. 4:20-cv-02967 (N.D. Cal.). The complaints allege, among other things, that the Company and Messrs. Flanders, Yung and Francis made materially false and misleading statements and/or failed to disclose material information regarding the Company’s accounting and modeling assumptions, rate of member churn and the Company’s profitability during the alleged class period of March 19, 2018 to April 7, 2020. The complaints allege that the specified defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (as amended, the “Exchange Act”) and Rule 10b-5 promulgated thereunder. The complaints seek compensatory and (in the Patel lawsuit) punitive damages, attorneys’ fees and costs, and such other relief as the court deems proper. On June 24, 2020, the Court consolidated the above-referenced matters under the caption In re eHealth Securities Litig., Master File No. 4:20-cv-02395-JST (N.D. Cal.). The Court also appointed a lead plaintiff and lead counsel for the consolidated matter. An Amended Complaint was filed on August 25, 2020, which Defendants moved to dismiss on October 23, 2020. Defendants’ motion, which Plaintiff opposed, was granted in part and denied in part on August 12, 2021. The Court dismissed Plaintiff’s claims to the extent premised upon alleged misrepresentations or omissions relating to churn, but denied Defendants’ motion with respect to alleged misstatements regarding purported operating costs. On October 1, 2021, the Company filed an Answer denying in part and admitting in part the remaining allegations and denying any wrongdoing. On November 11, 2021, Plaintiff’s counsel filed a suggestion of death with respect to the lead plaintiff Billy White. Plaintiff’s counsel published notice regarding the appointment of a new lead plaintiff on January 17, 2022. On November 9, 2022, the Court appointed Chicago & Vicinity Laborers’ District Council Pension Fund as the new lead plaintiff and approved plaintiff’s selection of counsel. On November 29, 2022, the new lead plaintiff and lead plaintiff’s counsel filed a supplement to the amended complaint, replacing the names of the prior lead plaintiff and counsel and incorporating new lead plaintiff’s previously filed certification. On December 22, 2022, the Company, Mr. Flanders, and Mr. Yung moved for judgment on the pleadings as to the remaining claims. Mr. Francis also moved for judgment on the pleadings the same day, and joined the motion by the Company, Mr. Flanders, and Mr. Yung. The motions for judgment on the pleadings were fully briefed by February 9, 2023, and were scheduled for a hearing on April 13, 2023. On April 5, 2023, the Court vacated the hearing on the motions and stated its intent to issue a decision based on the parties’ written briefing. On April 25, 2023, a consortium of putative class members (the “Alger Funds”) filed a motion to intervene in the case, prior to the expiration of the applicable statute of repose, to preserve their individual rights. On May 5, 2023, a defendants’ statement of non-opposition to Alger Funds’ limited motion to intervene and a stipulation with Alger Funds regarding same were filed. On September 28, 2023, the Court granted, with leave to amend, the Company’s motion for judgment on the pleadings as to all remaining claims, along with the similar motions of Mr. Flanders and Mr. Yung. The Court simultaneously dismissed, with prejudice and without leave to amend, all claims against Mr. Francis. On October 23, 2023, plaintiff filed a stipulation of dismissal order and notice, indicating that lead plaintiff would not file an amended complaint or appeal (a) the order granting in part and denying in part the motion to dismiss or (b) the order granting the motion for judgment on the pleadings. On October 25, 2023, the court 109 Table of Contents EHEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS entered the stipulated order, dismissing the case without leave to amend, and on November 29, 2023, the Court entered judgment in the Company’s favor. Derivative Actions – On July 7, 2020, a derivative lawsuit captioned Chernet v. Flanders et al., Case No. 3:20-cv-04477-SK (N.D. Cal.) (the “Chernet” matter) was filed in the United States District Court for the Northern District of California. On October 13, 2020, a derivative lawsuit captioned Lincolnshire Police Pension Fund v. Flanders et al., Case No. 20CV371555 (Cal. Super. Ct.) (the “Lincolnshire” matter) was filed in the Superior Court of California, County of Santa Clara. The complaints were brought against the Company's then-chief executive officer, Mr. Flanders, its then-chief financial officer, Mr. Yung, its then-chief operating officer, Mr. Francis, and the then-current members of the Board of Directors (collectively, the “Individual Defendants”), and name the Company as a nominal defendant. The complaints allege, among other things, that the Individual Defendants made or caused the Company to make materially false and misleading statements and/or failed to disclose material information regarding the Company’s accounting and modeling assumptions, rate of member churn, profitability and internal controls for the period of March 2018 through the present. The Chernet and Lincolnshire complaints purport to assert claims for breach of fiduciary duty, unjust enrichment and waste of corporate assets. The Chernet lawsuit also alleges that the Individual Defendants violated Sections 14(a), 10(b) and 20(a) of the Exchange Act and asserts claims for abuse of control and gross mismanagement. The Chernet and Lincolnshire complaints seek damages, restitution, attorneys’ fees and costs, and certain measures with respect to the Company's corporate governance and internal procedures, and (in the Lincolnshire lawsuit) equitable and/or injunctive relief. On August 12, 2020, the court stayed the Chernet matter pending the resolution of the then-anticipated motion to dismiss the consolidated securities class action. On December 11, 2020, the court stayed the Lincolnshire matter, also pending the resolution of the motion to dismiss in the consolidated securities class action. On October 5, 2021, a third derivative lawsuit, captioned Badwal v. Flanders et al., Case No. 4:21-cv-07795 (N.D. Cal.) (the “Badwal” matter) was filed in the United States District Court for the Northern District of California. The Badwal complaint purports to assert a claim for breach of fiduciary duty, an insider trading claim, and violations of Section 14(a), 10(b) and 21D of the Exchange Act. The Badwal complaint seeks damages, declaratory relief, corporate governance measures, equitable and injunctive relief, restitution and disgorgement, and attorneys' fees and costs. On November 29, 2021, the federal court consolidated the Chernet and Badwal matters under the caption In re eHealth, Inc. Stockholder Derivative Litigation (the “Federal Derivative Action”). On August 12, 2021, the court granted-in-part and denied-in-part defendants’ motion to dismiss the securities class action. In December 2021, the parties entered into a stipulation to further stay the Federal Derivative Action pending the appointment of a new lead plaintiff in the securities class action, which was so ordered by the court on December 14, 2021. As discussed above, on November 9, 2022, the court appointed a new lead plaintiff in the securities class action. On December 9, 2022, plaintiffs in the Federal Derivative Action filed a verified consolidated stockholder derivative complaint on behalf of the Company against certain current and former members of its Board of Directors and certain of its officers. The complaint alleges breaches of fiduciary duties, insider trading, and violations of Sections 14(a), 10(b) and 21D of the Exchange Act. The complaint seeks damages, declaratory relief, corporate governance measures, equitable and injunctive relief, restitution and disgorgement, and attorneys’ fees and costs. On January 3, 2023, pursuant to a joint stipulation, the court ordered all proceedings in the Federal Derivative Action stayed pending the resolution of the securities class action. On July 28, 2023, the Lincolnshire matter was stayed pending the resolution of the securities class action, pursuant to the parties’ stipulation. On January 10, 2024, the Court entered the parties’ stipulated order voluntarily dismissing the Federal Derivative Action. 110 Table of Contents EHEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 9 – Segment and Geographic Information Operating Segments The results of our operating segments are summarized for the periods presented below (in thousands): Year Ended December 31, 2023 2022 2021 Revenue: Medicare $ 406,467 $ 361,687 $ 471,217 Employer and Individual 46,404 43,669 66,982 Total revenue $ 452,871 $ 405,356 $ 538,199 Segment profit (loss): Medicare $ 54,748 $ ( 9,873 ) $ ( 12,079 ) Employer and Individual 25,841 21,438 45,705 Segment profit 80,589 11,565 33,626 Corporate ( 66,534 ) ( 53,238 ) ( 56,325 ) Stock-based compensation expense ( 23,213 ) ( 20,316 ) ( 32,857 ) Depreciation and amortization ( 19,916 ) ( 21,108 ) ( 18,331 ) Impairment, restructuring and other charges — ( 19,616 ) ( 51,222 ) Amortization of intangible assets — — ( 536 ) Interest expense ( 10,974 ) ( 7,627 ) ( 845 ) Other income, net 9,453 3,951 1,600 Loss before income taxes $ ( 30,595 ) $ ( 106,389 ) $ ( 124,890 ) There were no inter-segment revenue transactions for the periods presented. With the exception of contract assets – commissions receivable, which is presented by segment in Note 3 – Supplemental Financial Statement Information, our CODM does not separately evaluate assets by segment, and therefore assets by segment are not presented. Geographic Information Our long-lived assets primarily consist of property and equipment, net and internally developed software. Our long-lived assets are attributed to the geographic location in which they are located. Long-lived assets by geographical area are summarized as follows (in thousands): December 31, 2023 December 31, 2022 United States $ 29,419 $ 37,915 China 281 381 Total $ 29,700 $ 38,296 111 Table of Contents EHEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Significant Customers Substantially all revenue for the years ended December 31, 2023, 2022 and 2021 was generated from customers located in the United States. Carriers representing 10% or more of our total revenue are summarized as follows: Year Ended December 31, 2023 2022 2021 Humana 27 % 23 % 19 % UnitedHealthcare (1) 23 % 22 % 20 % Aetna (1) 15 % 12 % 18 % Centene (1) 4 % 8 % 12 % _______ (1) Percentages include the carriers' subsidiaries. Note 10 – Leases Our lease portfolio primarily consists of operating leases for office space and our leases have remaining lease terms of less than 1 to 6 years. Certain of these leases have free or escalating rent payment provisions. We recognize lease expense on a straight-line basis over the terms of the leases, although actual cash payment obligations under certain of these agreements fluctuate over the terms of the agreements. Most leases include options to renew, and the exercise of these options is at our discretion. Subsequent to becoming a remote first workplace in the third quarter of 2022, we executed several subleases of our office space in the United States. The subleases run through the remaining term of the primary leases. As of December 31, 2023, we expect to generate a total of $ 14.2 million in future sublease income through January 31, 2030. Sublease income is recorded on a straight-line basis as a reduction of lease expense in our Consolidated Statements of Comprehensive Loss. We test right-of-use assets when impairment indicators are present in accordance with the asset impairment provisions of Accounting Standards Codification 360, Property, Plant and Equipment (“ASC 360”). Our decision to sublease or to vacate a number of our leased office space triggered impairment testing for the underlying right-of-use assets. We evaluated these right-of-use assets, including leasehold improvements, furniture and fixtures and computer equipment for impairment under ASC 360. For our impairment tests, we utilized an income approach to value the asset group by performing a discounted cash flow analysis and determined that the net carrying value exceeded the estimated discounted future cash flows based on current market conditions. As a result, we recorded an $ 11.8 million impairment charge related to operating lease right-of-use assets and property, plant and equipment, which was reflected in the “Impairment, restructuring and other charges” line in our Consolidated Statements of Comprehensive Loss for the year ended December 31, 2022. See Note 11 — Impairment, Restructuring and Other Charges for further discussion about our asset impairment charges. We recorded no impairment charge related to operating lease right-of-use assets and property, plant and equipment during the years ended December 31, 2023 and 2021. The components of operating lease costs were as follows (in thousands): Year Ended December 31, 2023 2022 2021 Operating lease expense $ 7,912 $ 7,782 $ 7,650 Operating sublease income ( 2,210 ) ( 1,048 ) ( 1,222 ) Total operating lease cost $ 5,702 $ 6,734 $ 6,428 112 Table of Contents EHEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Supplemental information related to our leases are as follows (in thousands): Year Ended December 31, 2023 2022 Cash paid for amounts included in the measurement of operating lease liabilities $ 9,489 $ 7,697 Non-cash investing activities relating to operating lease right-of-use assets $ 1,285 $ 3,493 December 31, 2023 December 31, 2022 Weighted-average remaining lease term of operating leases 4.8 years 5.7 years Weighted-average discount rate used to recognize operating lease right-of-use-assets 5.7 % 5.6 % As of December 31, 2023, maturities of our operating lease liabilities are as follows (in thousands): Year ending December 31, 2024 $ 8,904 2025 9,110 2026 7,771 2027 6,773 2028 4,998 Thereafter 3,204 Total lease payments (1) 40,760 Less imputed interest ( 5,357 ) Total $ 35,403 _______ (1) Non-cancellable sublease rent payments for the years ending December 31, 2024, 2025, 2026, 2027, 2028 and thereafter of $ 2.4 million, $ 2.6 million, $ 2.7 million, $ 2.8 million, $ 2.8 million, and $ 1.0 million, respectively, are not included in the table above. Note 11 – Impairment, Restructuring and Other Charges The following table details impairment, restructuring and other charges for each of the periods presented (in thousands): Year Ended December 31, 2023 2022 2021 Asset impairment charges $ — $ 12,102 $ — Restructuring and reorganization charges — 7,514 4,878 Goodwill and intangible assets impairment — — 46,344 Impairment, restructuring and other charges $ — $ 19,616 $ 51,222 113 Table of Contents EHEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Our restructuring and reorganization costs and liabilities consist primarily of severance, transition and other related costs. The following table summarizes the cash-based restructuring and reorganization related liabilities (in thousands): Balance at December 31, 2022 $ 366 Restructuring and reorganization charges — Payments ( 366 ) Balance at December 31, 2023 $ — Asset Impairments For the year ended December 31, 2022, we recognized a non-cash, pre-tax asset impairment charge of $ 12.1 million related to the subleasing and vacating of several of our office spaces in the “Impairment, restructuring and other charges” line in our Consolidated Statements of Comprehensive Loss. The charge primarily consisted of $ 9.6 million of operating lease right-of-use assets impairment and $ 2.2 million of property, plant and equipment impairment. Restructuring In the first half of 2022, we eliminated 339 full-time positions, which represented approximately 14 % of our workforce, primarily within our customer care and enrollment group, and to a lesser extent, in our marketing and advertising, technology and content, and general and administrative groups, and, as a result, recorded pre-tax restructuring charges of $ 6.2 million in the “Impairment, restructuring and other charges” line in our Consolidated Statements of Comprehensive Loss. In the second half of 2022, we incurred pre-tax restructuring charges of $ 1.3 million for additional eliminated positions. Substantially all of the restructuring charges have been settled in cash and no equity awards were modified. As of December 31, 2022, the restructuring accrual of $ 0.4 million was recorded in the “Other current liabilities” line in our Consolidated Balance Sheets. During the year ended December 31, 2023, we incurred no pre-tax restructuring charges. As of December 31, 2023, we had no restructuring accrual on our Consolidated Balance Sheets. In September 2021, we announced the transition of our chief executive officer. Mr. Scott Flanders resigned as a member of our board of directors and chief executive officer, effective October 31, 2021. We recognized $ 2.4 million in severance costs related to his separation in 2021. Stock-based compensation expense for the year ended December 31, 2021 was impacted by a $ 4.1 million credit related to forfeited equity awards due to Mr. Flanders' separation, which was included in the “General and administrative” line in our Consolidated Statements of Comprehensive Loss. In February 2021, we eliminated 89 full-time positions, primarily in the United States, representing approximately 5 % of our workforce, primarily within our customer care and enrollment group, and to a lesser extent, in our marketing and advertising, technology and content, and general and administrative groups. Total pre-tax restructuring charges were $ 2.4 million for the year ended December 31, 2021, which primarily related to employee termination benefits. Substantially all of the restructuring charges resulted in cash expenditures. The restructuring activities were completed by March 31, 2021. Goodwill and Intangible Asset Impairments For the year ended December 31, 2021, we performed an impairment analysis over our goodwill, which included both qualitative and quantitative assessments. Our goodwill assessment included a comparison of carrying value to an estimated fair value using a market approach based on our market capitalization. Based on this assessment, we concluded the fair value of our Medicare segment was below the carrying value primarily due to the change in our market valuation at the time and financial performance and recorded a $ 40.2 million impairment of goodwill to write-off our entire goodwill balance. 114 Table of Contents EHEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31, 2021, we performed an impairment analysis over our intangible assets. Our analysis included a recoverability test for definite-lived intangible assets and a comparison of carrying value to the estimated fair value. The fair value of our intangible assets as of December 31, 2021 was estimated using a market approach for certain indefinite-lived intangible assets as well as using the expected future cash flow approach for our definite-lived intangible assets. Based our assessment, we determined that the fair value of our Medicare segment was below the carrying value as of December 31, 2021 primarily due to the recent change in our market valuation and financial performance. Therefore, we recorded a $ 6.1 million impairment charge on our Consolidated Statements of Comprehensive Loss related to our intangible assets. No intangible asset impairment was identified during the years ended December 31, 2023 or 2022. Note 12 – Debt On February 28, 2022, we entered into a term loan credit agreement with Blue Torch Finance LLC, as administrative agent and collateral agent, and other lenders party thereto (the “Original Credit Agreement”). On August 16, 2022, we entered into an Amendment (the “Amendment”) to the Original Credit Agreement (as amended by the Amendment, the “Credit Agreement”). The Amendment replaced the LIBOR-based Adjusted Euro currency 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 Royal Bank of Canada (“RBC”) and to pay fees and expenses in connection with the entry into the Credit Agreement. The Credit Agreement provides for a $ 70.0 million secured term loan credit facility. We incurred closing costs totaling $ 5.1 million , which were recorded as a direct deduction from the face amount of the loan on our Consolidated Balance Sheets. Total amortization of closing costs, or debt issuance costs, was $ 1.6 million and $ 1.3 million for the years ended December 31, 2023 and 2022, respectively, and is recorded in the “Interest expense” line in our Consolidated Statements of Comprehensive Loss. There were $ 2.2 million of unamortized issuance costs as of December 31, 2023. The carrying value of the term loan approximates the fair value, based on Level 2 inputs (observable market prices in less than active markets), as the interest rate is variable over the selected interest period and is similar to current rates at which we can borrow funds. The carrying value of the loan was $ 67.8 million as of December 31, 2023. 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 1.00 %. The margin was 7.50 % for LIBOR loans and 6.50 % for base rate loans. After the Amendment, the loans under the Credit Agreement bear interest, at our option, at either a rate based on the Adjusted Term SOFR or a base rate, in each case plus a margin. The base rate is the highest of the prime rate, the federal funds rate plus 0.50 % and three-month Adjusted Term SOFR plus 1.00 %. The margin is 7.50 % for Adjusted Term SOFR loans and 6.50 % for base rate loans. As of December 31, 2023, the interest rate was 13.15 %. For the years ended December 31, 2023 and 2022, we incurred interest expense of $ 9.1 million and $ 5.9 million, respectively. We incurred no interest expense in relation to the Credit Agreement for the year ended December 31, 2021. 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 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, which right we did not exercise. 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. Financial covenants in the Credit Agreement require that we maintain Liquidity (as defined in the Credit Agreement) at or above $ 25.0 million as of the last calendar day of any month. The Credit Agreement also requires that the outstanding amount as of the last calendar day of any month be less than 50 % of our total contract assets - 115 Table of Contents EHEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS commissions receivable (i.e., both current and non-current commissions receivable). As of December 31, 2023, we were in compliance with our loan covenants. On September 17, 2018, we entered into a $ 40.0 million credit agreement with RBC as administrative agent and collateral agent and incurred $ 1.2 million of issuance costs which were capitalized as part of other assets on our Consolidated Balance Sheets. On December 20, 2019, we amended our revolving credit facility agreement with RBC which increased the borrowing amount from $ 40.0 million to $ 75.0 million and incurred $ 0.5 million of issuance costs which were capitalized in “Other assets” on our Consolidated Balance Sheets. The maturity date was extended to December 20, 2022. Total amortization of debt issuance costs for the year ended December 31, 2021 was $ 0.4 million, which was recorded in the “Interest expense” line in our Consolidated Statements of Comprehensive Loss. As of December 31, 2021, the remaining balance of unamortized issuance costs was $ 0.4 million and we had no outstanding borrowings under our agreement with RBC. In the first quarter of 2022, in connection with entering into the Credit Agreement, we terminated our credit agreement with RBC and wrote off our remaining related debt issuance cost of $ 0.4 million. We had no outstanding borrowings under our agreement with RBC at the time of termination. Note 13 – Income Taxes The components of our loss before income taxes were as follows (in thousands): Year Ended December 31, 2023 2022 2021 United States $ ( 31,972 ) $ ( 108,006 ) $ ( 125,876 ) Foreign 1,377 1,617 986 Loss before income taxes $ ( 30,595 ) $ ( 106,389 ) $ ( 124,890 ) The federal, state and foreign income tax benefit is summarized as follows (in thousands): Year Ended December 31, 2023 2022 2021 Current: Federal $ — $ — $ — State 68 514 858 Foreign 221 256 148 Total current 289 770 1,006 Deferred: Federal ( 2,164 ) ( 16,382 ) ( 20,696 ) State ( 506 ) ( 2,055 ) ( 825 ) Foreign — — — Total deferred ( 2,670 ) ( 18,437 ) ( 21,521 ) Benefit from income taxes $ ( 2,381 ) $ ( 17,667 ) $ ( 20,515 ) 116 Table of Contents EHEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The effective tax rate of our benefit from income taxes differs from the federal statutory rate as follows: Year Ended December 31, 2023 2022 2021 Statutory rate 21.0 % 21.0 % 21.0 % State income taxes, net of federal benefit 2.8 2.1 0.4 Stock-based compensation shortfalls, net ( 6.8 ) ( 4.5 ) ( 1.5 ) Non-deductible stock-based compensation ( 4.7 ) ( 0.7 ) ( 0.8 ) Non-deductible lobbying expenses ( 0.9 ) ( 0.3 ) ( 0.3 ) Research and development credits 1.7 0.8 1.0 Changes in valuation allowance ( 2.0 ) ( 1.0 ) ( 0.6 ) Foreign income tax and income inclusion ( 1.5 ) ( 0.2 ) ( 0.1 ) Goodwill impairment — — ( 2.4 ) Other permanent differences ( 1.8 ) ( 0.6 ) ( 0.3 ) Effective tax rate 7.8 % 16.6 % 16.4 % Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, together with operating losses and tax credit carryforwards. The tax effects of significant items comprising our deferred taxes as of December 31, 2023 and 2022 were as follows (in thousands): December 31, 2023 December 31, 2022 Deferred tax assets: Net operating losses $ 154,607 $ 154,832 Intangible assets 21,232 13,618 Research and development credits carryovers 12,493 11,384 Operating lease liabilities 8,458 10,015 Accruals and reserves 6,352 3,411 Stock-based compensation 1,283 1,387 Fixed assets 1,069 636 Other 2,279 1,093 Total deferred tax assets 207,773 196,376 Valuation allowance ( 4,888 ) ( 4,287 ) Total deferred tax assets net of valuation allowance 202,885 192,089 Deferred tax liabilities: Commissions receivable ( 227,242 ) ( 217,919 ) Right-of-use assets ( 5,330 ) ( 6,529 ) Total deferred tax liabilities ( 232,572 ) ( 224,448 ) Net deferred tax liabilities $ ( 29,687 ) $ ( 32,359 ) 117 Table of Contents EHEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Assessing the realizability of our deferred tax assets is dependent upon several factors, including the likelihood and amount, if any, of future taxable income in relevant jurisdictions during the periods in which those temporary differences become deductible. We forecast taxable income by considering all available positive and negative evidence, including our history of operating income and losses and our financial plans and estimates that we use to manage the business. These assumptions require significant judgment about future taxable income. As a result, the amount of deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income change. As of December 31, 2023, a valuation allowance of $ 4.9 million was recorded against California net deferred tax assets. The valuation allowance was recorded as a result of increased uncertainty regarding our future taxable income and a lack of sources of other taxable income to realize our net deferred tax assets in California. The remaining deferred tax assets are supported by the reversal of deferred tax liabilities. The change in our valuation allowance is summarized as follows for the years ended (in thousands): Deferred Tax Assets - Valuation Allowance Balance at beginning of year Provision for income taxes Write-offs and Deductions Balance at end of year December 31, 2023 $ 4,287 $ 643 $ ( 42 ) $ 4,888 December 31, 2022 3,214 1,103 ( 30 ) 4,287 December 31, 2021 2,479 3,150 ( 2,415 ) 3,214 The net operating loss and tax credit carryforwards as of December 31, 2023 are summarized as follows (in thousands): Amount Expires Net operating losses, federal (with expiration) $ 39,166 2034-2037 Net operating losses, federal (without expiration) 587,020 Indefinite Net operating losses, state (with expiration) 408,112 2024-2043 Tax credits, federal 11,582 2024-2043 Tax credits, state 11,859 n/a Utilization of the net operating loss carryforwards and credits may be subject to a substantial annual limitation due to ownership changes that may have occurred or that could occur in the future, as required by Section 382 of the Internal Revenue Code and similar state provisions. These ownership change limitations may limit the amount of net operating loss carryforwards and other tax attributes that can be utilized annually to offset future taxable income and tax, respectively. A reconciliation of the beginning and ending amount of our unrecognized tax benefits is as follows (in thousands): Year Ended December 31, 2023 2022 2021 Beginning balance $ 9,875 $ 8,551 $ 6,330 Additions for tax positions of prior years — 162 646 Lapse of statute of limitations ( 36 ) ( 86 ) ( 64 ) Additions based on tax positions related to the current year 800 1,248 1,639 Ending balance $ 10,639 $ 9,875 $ 8,551 118 Table of Contents EHEALTH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of December 31, 2023, the total amount of gross unrecognized tax benefits was $ 10.6 million, of which $ 9.4 million, if recognized, would affect our effective tax rate. As of December 31, 2022, the total amount of gross unrecognized tax benefits was $ 9.9 million, of which $ 8.7 million, if recognized, would affect our effective tax rate. We record interest and penalties related to unrecognized tax benefits in benefit from income taxes. As of December 31, 2023, the amount accrued for estimated interest related to uncertain tax positions was immaterial. We did not record an accrual for penalties. As of December 31, 2023, we had an immaterial amount related to tax positions for which it is reasonably possible that the statute of limitations will expire in various jurisdictions and income tax exams will close within the next 12 months. We are subject to taxation in various jurisdictions, including federal, state and foreign. Our federal and state income tax returns are generally not subject to examination by taxing authorities for fiscal years before 2003 due to our credit carryforwards. 119 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.