What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-06 compared with 2024-08-07 · 180 added, 179 removed, 366 unchanged (50% of the section changed)

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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.

We strive to be the most trusted partner to consumers in their journeys through the health insurance market.

Business Update

Our fiscal 2024 growth strategy focuses on pursuing deliberate enrollment and revenue growth, while diversifying our revenue streams, continuing to build out our unified omnichannel marketing engine, driving higher conversion rates on our platform and enhancing enrollment quality and member retention.

During the first half of 2024, we maintained momentum in our Medicare business delivering strong enrollment growth across our core agency (“Agency”) and carrier-dedicated (“Amplify”) models.

Our Agency model consists of arrangements where we are the broker of record while our Amplify model consists of both broker of record arrangements as well as non-broker of record arrangements where we provide business process outsourcing services (“BPO”) Broker of record arrangements generate commission revenue, and fee-based BPO arrangements generate fee-based revenue which is recorded in other revenue.

Agency performance during the second quarter was driven by our enhanced marketing strategies, greater lead conversion rates and the retention of our tenured benefit advisors.

During the first nine months of 2024, we maintained momentum in our Medicare business, delivering strong enrollment growth across our core agency (“Agency”) and carrier-dedicated (“Amplify”) models.

Agency performance was driven by our enhanced marketing strategies, greater lead conversion rates and the retention of our tenured benefit advisors.

We also observed significant traction in our Amplify initiatives, which is an important element of our business diversification strategy.

This year, we added new carriers to the Amplify platform and are expanding relationships with our existing customers.

During the second quarter of 2024, a portion of our Amplify broker of record arrangements converted to fee-based BPO arrangements, resulting in a reduction of our Medicare approved members and a decrease in the corresponding commission revenue, while our fee-based BPO arrangements have increased, contributing to substantial growth in our other revenue.

While we have observed declines in Medicare plan approved members, which only reflect our broker-of-record arrangements, our total Medicare submissions, inclusive of our broker of record and fee-based BPO arrangements, increased 16% during the second quarter of 2024 compared to the same

period in 2023.

Broker of record arrangements generate commission revenue and while we recognize constrained lifetime value (“LTV”) of commissions for approved members as revenue at the time applications are approved, our collection of the cash commissions resulting from approved applications generally occurs over a number of years.

Our fee-based BPO arrangements generate fee-based revenue, which is recorded in other revenue, and cash is collected in advance or in close proximity to when revenue is recognized.

During the second quarter of 2024, a portion of our Amplify broker of record arrangements converted to fee-based BPO arrangements, which resulted in a reduction of our Medicare approved members and a decrease in the corresponding commission revenue, while our fee-based BPO arrangements increased, contributing to substantial

growth in our other revenue.

Even with this shift, during the three and nine months ended September 30, 2024, we observed a 6% increase in Medicare plan approved members, which only reflect our broker-of-record arrangements.

Our total Medicare submissions, inclusive of our broker of record and fee-based BPO arrangements, increased 22% and 17% during the three and nine months ended September 30, 2024, respectively, compared to the same period in 2023.

Submissions describe applications that are submitted by individuals online through our eHealth platform or completed with the assistance of our benefit advisors where the individual provides authorization to the benefit advisor to submit the application to the insurance carrier partner.

The individual may have additional actions to take before the application will be reviewed by the insurance carrier and not all submissions ultimately become approved members.

Additionally, during the second quarter of 2024, our existing book of business continued to generate positive adjustment revenue driven by favorable retention and cash collection trends and we continued to execute on our fixed cost reduction initiative while improving our member acquisition costs for our Medicare Agency model.

In our Employer and Individual segment (“E&I”) we have been focused on implementing operational enhancements with a plan to resume enrollment growth in the fourth quarter.

We also began preparations for the 2025 Annual Enrollment Period (“AEP”).

During the third quarter of 2024, we largely completed our preparations for the 2025 Annual Enrollment Period (“AEP”).

We expect to see significant consumer demand this upcoming AEP, presenting a growth opportunity for us that is driven by anticipated changes in many Medicare Advantage plans as well as a reduction in tele-broker capacity as several of our competitors have exited the market over the past twelve months.

Our AEP preparedness efforts include development of and continued enhancements of our marketing materials, enhancements to our omni-channel consumer platform and hiring and training of the new benefit advisor classes.

We have also launched the next phase of our retention strategy including Match Monitor, a tool that allows members to easily understand the implications of annual notice changes, check if any of their critical benefits are impacted and compare their current plan to other options.

We also expanded our loyalty program, ePerks, by adding new partners to the platform and we have developed a plan tracker tool called eHealth Application Tracker, which is designed to allow beneficiaries to monitor the status of their Medicare plan application in real-time.

Our AEP preparedness efforts include the advancement of our brand-driven marketing strategy, development of AEP marketing materials, including new television ads, enhancements to consumer experience on our omni-channel platform with its differentiated tech-enabled features and the achievement of our benefit advisor hiring and training goals with a benefit advisor mix that is more tenured relative to last year.

We have also launched the next phase of our retention strategy including the introduction of Match Monitor, a tool that allows members to easily understand the implications of annual notice changes, check if any of their critical benefits are impacted and compare their current plan to other options.

Member retention is especially important in the upcoming annual enrollment cycle given the anticipated increase in consumer shopping.

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Approved Members

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

Approved members represent the number of individuals on submitted applications, or submissions, that were approved by the relevant insurance carrier for the identified product during the current period for which we are the broker of record.

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

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Three Months Ended

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September 30, % Change Nine Months Ended

September 30, % Change

2024 2023 2024 2023

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Total Approved Members 58,266 58,467 — % 213,093 216,811 (2) %

Three Months Ended June 30, 2024 and 2023 – Total approved members declined 7% during the three months ended June 30, 2024 compared to the same period in 2023, driven by:

• a 1% decline in Medicare approved members, primarily resulting from:

◦ a 50% decline in Medicare Part D approved members due to carrier mix as well as the shift from some broker of record arrangements to fee-based arrangements within our Amplify platform,

◦ a 33% decline in Medicare Supplement approved members due to the shift from some broker of record arrangements to fee-based arrangements within our Amplify platform, and

◦ a 6% increase in Medicare Advantage approved members due to an increased number of benefit advisors and increased variable marketing spend year-over-year, partially offset by the shift from some broker of record arrangements to fee-based arrangements within our Amplify platform.

Three Months Ended September 30, 2024 and 2023 – Total approved members was flat during the three months ended September 30, 2024 compared to the same period in 2023, driven by:

• a 6% increase in Medicare approved members, primarily resulting from:

◦ a 14% increase in Medicare Advantage approved members due to a 21% increase in Medicare Advantage broker of record submissions as a result of increased variable marketing spend year-over-year and an increased number of benefit advisors year-over-year along with improved telesales conversion rates, partially offset by the shift of some broker of record arrangements to fee-based arrangements within our Amplify platform which are not included in the approved member metrics, and

◦ a 52% and 48% decline in Medicare Supplement and Medicare Part D approved members, respectively, due to the shift of some Medicare Supplement broker of record arrangements to fee-based arrangements within our Amplify platform and a shift away from standalone Medicare Part D plans.

• a 12% decline in ancillary approved members due to declines in approved members across all ancillary insurance products that are typically cross-sold with new individual and family plan enrollments;

• a 53% and 18% decline in small business health insurance and individual and family plan approved members, respectively, primarily due to a decrease in volume as we focus on implementing operational enhancements with a plan to resume enrollment growth in our E&I segment in the fourth quarter of 2024.

Six Months Ended June 30, 2024 and 2023 – Total approved members declined 2% during the six months ended June 30, 2024 compared to the same period in 2023, driven by:

• a 23% and 13% decline in individual and family plan and small business health insurance plan approved members, respectively, primarily due to a decrease in volume as we focus on implementing operational enhancements within our Employer and Individual (“E&I”) segment.

Nine Months Ended September 30, 2024 and 2023 – Total approved members declined 2% during the nine months ended September 30, 2024 compared to the same period in 2023, driven by:

• a 14% decline in ancillary approved members due to declines in approved members across most ancillary insurance products that are typically cross-sold with new individual and family plan enrollments;

• a 26% and 34% decline in individual and family plan and small business health insurance approved members, respectively, primarily due to a decrease in volume as we focus on implementing operational enhancements with a plan to resume enrollment growth in our E&I segment in the fourth quarter of 2024;

• a 25% and 29% decline in individual and family plan and small business health insurance plan approved members, respectively, primarily due to a decrease in volume as we focused on implementing operational enhancements in our E&I segment;

• partially offset by a 6% increase in Medicare approved members, primarily resulting from:

◦ an increased number of benefit advisors and increased variable marketing spend year-over-year, specifically contributing to an 8% increase in both Medicare Advantage and Medicare Supplement approved members,

◦ slightly offset by the shift from some broker of record arrangements to fee-based arrangements within our Amplify platform, which impacted all Medicare products, along with an additional decline in Medicare Part D approved members due to carrier mix.

◦ increased variable marketing spend and an increased number of benefit advisors year-over-year along with improved telesales conversion rates, driving a 14% increase in Medicare Advantage broker of record submissions, which contributed to a 9% growth in Medicare Advantage approvals,

◦ partially offset by a 32% and 9% decline in Medicare Part D and Medicare Supplement approved members, respectively, primarily caused by the shift of some broker of record arrangements to fee-based arrangements within our Amplify platform.

Estimated Constrained Lifetime Value of Commissions Per Approved Member

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Medicare (1) (2)

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For additional information on constrained LTV, see “ Critical Accounting Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2023.

(2) The constraints applied to the total estimated lifetime commissions we expect to receive for selling the plan after the carrier approves an application in order to derive the constrained LTV of commissions for approved members recognized for Medicare Advantage, Medicare Supplement and Medicare Part D were 5.5%, 9% and 7%, respectively, for the three months ended June 30, 2024 and 7%, 9% and 7%, respectively, for the three months ended June 30, 2023.

Three Months Ended June 30, 2024 and 2023 - The changes in constrained LTV of commissions per approved member primarily consisted of:

• a 4% increase in Medicare Advantage plans, reflecting positive trends in commissions collected as a result of more favorable carrier and contract mix and a decrease in constraint due to a decline in

volatility and the observed increases in LTV trends, partially offset by less favorable retention for Q2 2024 cohorts compared to Q2 2023 cohorts;

(2) The constraints applied to the total estimated lifetime commissions we expect to receive for selling the plan after the carrier approves an application in order to derive the constrained LTV of commissions for approved members recognized for Medicare Advantage, Medicare Supplement and Medicare Part D were 5.5%, 9% and 7%, respectively, for the three months ended September 30, 2024 and 7%, 9% and 7%, respectively, for the three months ended September 30, 2023.

Three Months Ended September 30, 2024 and 2023 – The changes in constrained LTV of commissions per approved member primarily consisted of:

• a 1% decrease in Medicare Advantage plans, reflecting less favorable retention trends for Q3 2024 cohorts compared to Q3 2023 cohorts, partly offset by favorable carrier and contract mix and a decrease in constraint due to a decline in volatility and the observed increases in LTV trends;

• a 33% increase in Medicare Supplement plans, primarily due to favorable carrier and contract mix and favorable retention;

• a 6% decrease in Medicare Part D plans, primarily driven by unfavorable carrier and contract mix, partially offset by improved retention;

• a 7% increase in non-qualified health plans, primarily driven by favorable carrier and contract mix, partially offset by unfavorable retention;

• a 24%, 15% and 7% increase in dental, vision and short-term plans, respectively, primarily driven by favorable carrier and contract mix;

• a 3% decrease in non-qualified and qualified health plans and a 5% decrease in short-term plans, primarily driven by unfavorable retention;

• a 9% and 8% increase in dental and vision and plans, respectively, primarily driven by favorable carrier and contract mix;

• a 10% increase in small business plans, primarily due to favorable contract rates.

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Estimated membership represents the estimated number of members active as of the date indicated based on the number of members for whom we have received or applied a commission payment during the period of estimation.

Estimated membership only includes estimated active members for arrangements where we are the broker of record.

There is generally up to a few months lag between newly approved plans and the receipt of commission payments from the health insurance carrier.

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As a result of the delay in our receipt of information from insurance carriers, actual trends in our membership are most discernible over periods longer than from one quarter to the next, making it difficult for us to determine with any certainty the impact of current conditions on our membership retention.

Various circumstances could cause the

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

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

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

As of June 30, % Change

As of September 30, % Change

Medicare Advantage 583,970 565,126 3 %

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We often are made aware of policy cancellations and group size changes at the time of annual renewal and update our membership statistics accordingly in the period they are reported.

June 30, 2024 compared to June 30, 2023 - Total estimated membership declined 3% as of June 30, 2024 compared to June 30, 2023 due to:

• an 11%, 11% and 3% decline year-over-year in individual and family plan, ancillary plan and small business plan estimated membership, respectively, primarily due to a decrease in approved applications as we focus on implementing operational enhancements with a plan to resume enrollment growth in our E&I segment in the fourth quarter of 2024;

• overall flat Medicare estimated membership year over year, due to a 2% and 3% increase in Medicare Advantage and Medicare Supplement plans, respectively, as a result of increased approved applications, partially offset by the shift from some broker of record arrangements to fee-based arrangements within our Amplify platform, which impacted all Medicare products.

September 30, 2024 compared to September 30, 2023 – Total estimated membership declined 2% as of September 30, 2024 compared to September 30, 2023 due to:

• an 11%, 8% and 11% decline year-over-year in individual and family plan, ancillary plan and small business plan estimated membership, respectively, primarily due to a decrease in approved applications as we focus on implementing operational enhancements in our E&I segment;

• a 1% increase in Medicare estimated membership year over year, due to:

◦ a 3% and 2% increase in Medicare Advantage and Medicare Supplement plans, respectively, as a result of increased approved applications,

◦ partially offset by the shift of some broker of record arrangements to fee-based arrangements within our Amplify platform, which are not included in estimated membership, as well as a decline in Medicare Part D plan approved applications due to the shift away from standalone Medicare Part D plans.

Member Acquisition

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

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

537 557 (4) %

Total acquisition cost per MA-equivalent approved member $ 1,256 $ 1,503 (16) %

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

Three Months Ended June 30, 2024 and 2023 - Total acquisition cost per MA-equivalent approved member decreased $46, or 4%, during the three months ended June 30, 2024 compared to the same period in 2023, driven by:

Three Months Ended September 30, 2024 and 2023 – Total acquisition cost per MA-equivalent approved member decreased $247, or 16%, during the three months ended September 30, 2024 compared to the same period in 2023, driven by:

• a $227, or 24%, decrease in CC&E cost per MA-equivalent approved member driven by:

◦ a reduced new benefit advisor ramp during the three months ended June 30, 2024 compared to the same period in 2023 as we retained a larger number of tenured benefit advisors subsequent to our 2024 AEP,

◦ continued optimization of our sales force operations, and

◦ reductions in third party agent costs which were utilized to support volume during the three months ended June 30th 2023.

• a $61, or 15%, increase in variable marketing cost per MA-equivalent approved member, primarily reflecting acquisition costs to drive Medicare enrollment growth on our Agency platform.

◦ efficiencies resulting from a benefit advisor mix that is more tenured when compared to the same period in 2023, and

◦ continued optimization of our sales force operations driven by enhanced training protocols and new agent-facing sales tools.

• a $20, or 4%, decrease in variable marketing cost per MA-equivalent approved member, primarily due to continued efficiencies within our marketing operations.

Individual and Family

Three Months Ended June 30, 2024 and 2023 - Total acquisition cost per IFP-equivalent approved member increased $57, or 20%, during the three months ended June 30, 2024 compared to the same period in 2023, driven by:

• a $54, or 23%, increase in CC&E cost per IFP-equivalent approved member due the overall decline in individual and family plan, ancillary and small business approved members as a result of a decline in our conversion rates;

• a $3, or 5%, increase in variable marketing cost per IFP-equivalent approved member, primarily driven by the decline in approved members as a result of a decline in our conversion rates.

Three Months Ended September 30, 2024 and 2023 – Total acquisition cost per IFP-equivalent approved member increased $153, or 47%, during the three months ended September 30, 2024 compared to the same period in 2023, driven by:

• a $103, or 40%, increase in CC&E cost per IFP-equivalent approved member due to the overall decline in individual and family plan and short-term plan approved members;

• a $50, or 74%, increase in variable marketing cost per IFP-equivalent approved member, primarily driven by the decline in individual and family plan and short-term plan approved members.

Critical Accounting Policies and Estimates

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There have been no changes to our critical accounting policies and estimates described in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission on February 29, 2024, that have had a significant impact on our condensed consolidated financial statements and related notes.

Please refer to Management’s Discussion and Analysis of Financial Condition and Results of

Operations contained in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023, for a complete discussion of our other critical accounting policies and estimates.

Please refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023, for a complete discussion of our other critical accounting policies and estimates.

Results of Operations

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Total revenue $ 58,409 $ 64,718 $ (6,309) (10) % $ 217,229 $ 205,209 $ 12,020 6 %

Three Months Ended June 30, 2024 and 2023 – Commission revenue decreased $3.3 million, or 6%, during the three months ended June 30, 2024 compared to the same period in 2023 due to:

Three Months Ended September 30, 2024 and 2023 – Commission revenue decreased $9.0 million, or 16%, during the three months ended September 30, 2024 compared to the same period in 2023 due to:

• a $5.0 million, or 10%, decrease in commission revenue from our Medicare segment driven by:

◦ lower net adjustment revenue from prior periods enrollments, which was $1.1 million during the three months ended September 30, 2024 compared to $9.3 million in the same period in 2023,

◦ a slight decline in constrained LTV of commissions per approved member for Medicare Advantage and Medicare Part D products,

◦ partially offset by a 14% increase in Medicare Advantage plan approved members.

• a $4.0 million, or 45%, decrease in commission revenue from our E&I segment driven by:

◦ net adjustment revenue from prior periods enrollments of $0.8 million during the three months ended June 30, 2024 compared to $5.3 million in the same period in 2023;

◦ an 18%, 15% and 53% decline in individual and family plan, ancillary product and small business approved members, respectively;

◦ partially offset by improved constrained LTV of commissions per approved member for most products in our E&I segment.

• a $1.2 million, or 2%, increase in commission revenue from our Medicare segment driven by:

◦ a 6% increase in Medicare Advantage plan approved members, partially offset by decreases in Medicare Supplement and Medicare Part D plan approved members;

◦ improved constrained LTV of commissions per approved member for Medicare Advantage and Medicare Supplement products;

◦ partially offset by a net adjustment revenue from prior periods enrollments of $10.7 million during the three months ended June 30, 2024 compared to $13.4 million in the same period in 2023.

Other revenue increased $2.4 million, or 37%, during the three months ended June 30, 2024 compared to the same period in 2023 due to an increase in fee-based revenue due to a shift in some of our Amplify broker of record arrangements to fee-based arrangements.

Six Months Ended June 30, 2024 and 2023 – Commission revenue increased $9.6 million, or 7%, during the six months ended June 30, 2024 compared to the same period in 2023 due to:

◦ lower net adjustment revenue from prior periods enrollments, which was $0.1 million during the three months ended September 30, 2024 compared to $2.9 million in the same period in 2023,

◦ a 23%, 12% and 13% decline in individual and family plan, ancillary product and small business approved members, respectively,

◦ partially offset by improved constrained LTV of commissions per approved member for dental, vision and small business products in our E&I segment.

Other revenue increased $2.7 million, or 36%, during the three months ended September 30, 2024 compared to the same period in 2023 due to an increase in fee-based revenue driven by the shift in some of our Amplify broker of record arrangements to fee-based BPO arrangements, partly offset by a decline in sponsorship revenue.

Nine Months Ended September 30, 2024 and 2023 – Commission revenue increased $0.6 million, during the nine months ended September 30, 2024 compared to the same period in 2023 due to:

• a $10.3 million, or 7%, increase in commission revenue from our Medicare segment driven by:

◦ a 6% increase in overall Medicare plan approved members, specifically driven by increases in Medicare Advantage and Medicare Supplement plan approved members;

◦ improved constrained LTV of commissions per approved member for Medicare Advantage and Medicare Supplement products;

◦ partially offset by a net adjustment revenue from prior periods enrollments of $11.7 million during the six months ended June 30, 2024 compared to $13.5 million in the same period in 2023.

◦ a 6% increase in overall Medicare plan approved members, specifically driven by a 9% growth in Medicare Advantage approved members,

◦ partially offset by lower net adjustment revenue from prior periods enrollments, which was $12.8 million during the nine months ended September 30, 2024 compared to $22.7 million in the same period in 2023.

• a $9.7 million, or 31%, decrease in commission revenue from our E&I segment driven by:

◦ a net adjustment revenue from prior periods enrollments of $2.3 million during the six months ended June 30, 2024 compared to $6.8 million in the same period in 2023;

◦ lower net adjustment revenue from prior periods enrollments, which was $2.4 million during the nine months ended September 30, 2024 compared to $9.8 million in the same period in 2023,

◦ a 25%, 14% and 29% decline in individual and family plan, ancillary product and small business approved members, respectively,

◦ partially offset by improved constrained LTV of commissions per approved member for most products in our E&I segment.

Other revenue increased $8.7 million, or 71%, during the six months ended June 30, 2024 compared to the same period in 2023 due to an increase in sponsorship revenue as well as fee-based revenue due to a shift in some of our Amplify broker of record arrangements to fee-based arrangements.

◦ partially offset by improved constrained LTV of commissions per approved member for dental, vision and small business products in our E&I segment.

Other revenue increased $11.5 million, or 58%, during the nine months ended September 30, 2024 compared to the same period in 2023 due to an increase in sponsorship revenue as well as fee-based revenue driven by the expansion of our fee-based BPO arrangements.

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

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

Marketing and advertising expenses also include cost of revenue, which consists of 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.

Marketing and advertising expenses also include cost of revenue, which

consists of 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.

We recognize expenses in our direct marketing 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.

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% of total revenue 51 % 45 % 44 % 42 %

Three Months Ended June 30, 2024 and 2023 – Marketing and advertising expenses increased $3.3 million, or 14%, during the three months ended June 30, 2024 compared to the same period in 2023, primarily driven by a $2.7 million increase in variable advertising costs, a $0.7 million increase in personnel costs and a $0.4 million increase in software costs, partly offset by a $0.6 million decrease in fixed marketing costs.

The increase in variable advertising costs was primarily related to our investment in direct marketing channels and reflects our plan to increasingly attract and retain beneficiaries through brand-driven materials and communications in fiscal 2024.

Six Months Ended June 30, 2024 and 2023 – Marketing and advertising expenses increased $9.2 million, or 16%, during the six months ended June 30, 2024 compared to the same period in 2023, primarily driven by a $6.8 million increase in variable advertising costs, a $0.9 million increase in personnel costs, a $0.8 million increase in software costs and a $0.4 million increase in fixed marketing costs as we returned to growth in our Medicare segment after completing our business transformation plan in fiscal 2023.

The increase in variable advertising costs was primarily related to our direct marketing channels and brand investment.

Three Months Ended September 30, 2024 and 2023 – Marketing and advertising expenses increased $0.6 million, or 2%, during the three months ended September 30, 2024 compared to the same period in 2023, primarily driven by a $1.3 million and $0.7 million increase in variable advertising costs and personnel costs, respectively, partly offset by a $1.0 million and $0.2 million decrease in fixed marketing costs and stock-based compensation expense, respectively.

The increase in variable advertising costs was primarily related to our investment in direct mail and affiliate partner channels in fiscal 2024.

Nine Months Ended September 30, 2024 and 2023 – Marketing and advertising expenses increased $9.8 million, or 12%, during the nine months ended September 30, 2024 compared to the same period in 2023, primarily driven by an $8.1 million increase in variable advertising costs, a $1.7 million increase in personnel costs and a $0.6 million increase in other operating costs, particularly software costs.

These increases were partly offset by a $0.6 million decrease in fixed marketing costs.

The increase in variable advertising costs was primarily related to our direct and affiliate partner marketing channels.

Customer Care and Enrollment

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% of total revenue 67 % 60 % 46 % 46 %

Three Months Ended June 30, 2024 and 2023 – Customer care and enrollment expenses decreased $1.4 million, or 5%, during the three months ended June 30, 2024 compared to the same period in 2023, primarily due to a $0.8 million decrease in personnel and compensation costs and a $0.3 million decrease in consulting expenses.

Six Months Ended June 30, 2024 and 2023 – Customer care and enrollment expenses increased $6.4 million, or 12%, during the six months ended June 30, 2024 compared to the same period in 2023, primarily due to increases of $4.9 million in personnel and compensation costs and $1.2 million in licensing costs.

Three Months Ended September 30, 2024 and 2023 – Customer care and enrollment expenses increased $0.4 million, or 1%, during the three months ended September 30, 2024 compared to the same period in 2023, primarily due to a $3.2 million increase in personnel and compensation costs, partly offset by a $2.4 million decrease in other operating expenses, particularly consulting expenses, and a $0.4 million decrease in stock-based compensation expense.

Nine Months Ended September 30, 2024 and 2023 – Customer care and enrollment expenses increased $6.8 million, or 7%, during the nine months ended September 30, 2024 compared to the same period in 2023, primarily due to increases of $9.0 million in personnel and compensation costs and $1.1 million in licensing costs.

The increase in personnel costs reflect the scaling of our agent force supporting our dedicated carrier efforts, retention of a greater number of licensed advisors subsequent to our most recent AEP to support enrollment growth planned for fiscal 2024 and expansion of our member retention efforts.

These increases were offset by a $2.7 million decrease in other operating expenses, particularly consulting expenses, and a $0.7 million decrease in stock-based compensation expense.

Technology and Content

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Three Months Ended June 30, 2024 and 2023 – Technology and content expenses decreased $1.4 million, or 10%, during the three months ended June 30, 2024 compared to the same period in 2023, primarily driven by a $0.7 million decrease in amortization of internally developed software and a $0.5 million decrease in personnel and compensation costs due to lower headcount as a result of our continued cost reduction initiative.

Six Months Ended June 30, 2024 and 2023 – Technology and content expenses decreased $2.5 million, or 9%, during the six months ended June 30, 2024 compared to the same period in 2023, primarily driven by a $1.5 million decrease in amortization of internally developed software and a $0.5 million decrease in personnel and compensation costs due to lower headcount as a result of our continued cost reduction initiative.

Three Months Ended September 30, 2024 and 2023 – Technology and content expenses decreased $1.0 million, or 7%, during the three months ended September 30, 2024 compared to the same period in 2023, primarily driven by a $0.8 million decrease in amortization of internally developed software and a $0.5 million decrease in stock-based compensation expense, partly offset by an increase of $0.4 million in other operating expenses.

Nine Months Ended September 30, 2024 and 2023 – Technology and content expenses decreased $3.4 million, or 8%, during the nine months ended September 30, 2024 compared to the same period in 2023, primarily driven by a $2.3 million decrease in amortization of internally developed software, a $0.8 million decrease in stock-based compensation expense and a $0.7 million decrease in personnel and compensation costs, partly offset by an increase of $0.6 million in other operating expenses.

General and Administrative

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

information technology departments.

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

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% of total revenue 35 % 35 % 29 % 35 %

Three Months Ended June 30, 2024 and 2023 – General and administrative expenses decreased $2.6 million, or 11%, during the three months ended June 30, 2024 compared to the same period in 2023, primarily driven by a $0.6 million decrease in professional fees, a $0.6 million decrease in stock based compensation expense, a $0.6 million decrease in facilities and other operating expenses and a $0.5 million decrease in personnel and compensation costs.

Six Months Ended June 30, 2024 and 2023 – General and administrative expenses decreased $7.4 million, or 15%, during the six months ended June 30, 2024 compared to the same period in 2023, primarily driven by a $3.3 million decrease in personnel and compensation costs, a $1.4 million decrease in professional fees, a $1.2 million decrease in facilities and other operating expenses and a $0.6 million decrease in consulting expenses.

Three Months Ended September 30, 2024 and 2023 – General and administrative expenses decreased $2.6 million, or 12%, during the three months ended September 30, 2024 compared to the same period in 2023, primarily driven by a $1.4 million decrease in other operating expenses, a $1.1 million decrease in stock-based compensation expense and a $0.5 million decrease in professional fees, partly offset by a $0.3 million increase in personnel and compensation costs.

Nine Months Ended September 30, 2024 and 2023 – General and administrative expenses decreased $10.0 million, or 14%, during the nine months ended September 30, 2024 compared to the same period in 2023, primarily driven by a $3.4 million decrease in other operating expenses, a $2.9 million decrease in personnel and compensation costs, a $1.9 million decrease in professional fees, a $1.3 million decrease in stock-based compensation expense and a $0.6 million decrease in depreciation expense.

Impairment, Restructuring and Other Charges

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* Percentage calculated is not meaningful.

Three Months Ended June 30, 2024 and 2023 – We incurred $3.0 million in impairment, restructuring and other charges for the three months ended June 30, 2024 compared to no impairment, restructuring and other charges for the three months ended June 30, 2023.

These charges consisted of $1.9 million of impairment charges related to our leased office spaces, primarily related to our operating lease right-of-use assets.

We also incurred $1.1 million of restructuring charges which were primarily related to employee termination benefits as a result of our continued cost reduction efforts since the beginning of fiscal 2024.

Six Months Ended June 30, 2024 and 2023 – We incurred $9.3 million in impairment, restructuring and other charges for the six months ended June 30, 2024 compared to no impairment, restructuring and other charges for the six months ended June 30, 2023.

Three Months Ended September 30, 2024 and 2023 – We incurred $0.1 million in impairment, restructuring and other charges for the three months ended September 30, 2024 compared to no impairment, restructuring and other charges for the same period in 2023.

These charges consisted of restructuring charges which were primarily related to employee termination benefits as a result of our continued cost reduction efforts since the beginning of fiscal 2024.

Nine Months Ended September 30, 2024 and 2023 – We incurred $9.4 million in impairment, restructuring and other charges for the nine months ended September 30, 2024 compared to no impairment, restructuring and other charges for the same period in 2023.

These charges consisted of $7.4 million of impairment related to several of our leased office spaces, which was comprised of $6.9 million of operating lease right-of-use asset impairments and $0.5 million of property and equipment impairments.

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% of total revenue (5) % (4) % (4) % (4) %

Three Months Ended June 30, 2024 and 2023 – Interest expense increased by $0.1 million, or 5%, primarily driven by a $0.1 million increase in debt interest expense as a result of higher interest rates.

Six Months Ended June 30, 2024 and 2023 – Interest expense increased by $0.4 million, or 7%, primarily driven by a $0.2 million increase in debt interest expense as a result of higher interest rates.

Three Months Ended September 30, 2024 and 2023 – Interest expense increased by 1% for the three months ended September 30, 2024 compared to for the three months ended September 30, 2023.

Nine Months Ended September 30, 2024 and 2023 – Interest expense increased by $0.4 million, or 5%, during the nine months ended September 30, 2024 compared to the same period in 2023, primarily driven by a $0.2 million increase in debt interest expense as a result of higher interest rates.

Other Income, Net

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Three Months Ended June 30, 2024 and 2023 – Other income, net, was $2.3 million during the three months ended June 30, 2024, compared to other income, net, of $2.8 million during the three months ended June 30, 2023.

The change was primarily due to a $0.2 million increase in interest income as a result of more favorable short-term investment returns.

Six Months Ended June 30, 2024 and 2023 – Other income, net, was $4.7 million during the six months ended June 30, 2024, compared to other income, net, of $4.8 million during the six months ended June 30, 2023.

Three Months Ended September 30, 2024 and 2023 – Other income, net, was $1.7 million during the three months ended September 30, 2024, compared to other income, net, of $2.7 million during the three months ended September 30, 2023.

The change was primarily due to a $0.6 million decrease in interest income as a result of less favorable short-term investment returns during the three months ended September 30, 2024.

Nine Months Ended September 30, 2024 and 2023 – Other income, net, was $6.4 million during the nine months ended September 30, 2024, compared to other income, net, of $7.5 million during the nine months ended September 30, 2023.

The change was primarily due to a $0.5 million decrease in interest income as a result of less favorable short-term investment returns during the nine months ended September 30, 2024.

Benefit from Income Taxes

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Effective tax rate 4.3 % 6.3 % 4.1 % 9.7 %

Three Months Ended June 30, 2024 and 2023 – Our effective tax rate of 1.8% for the three months ended June 30, 2024 was lower than our 9.8% effective tax rate for the three months ended June 30, 2023 primarily due to fluctuations in stock-based compensation adjustments and the change from using an annualized effective tax rate method to using the actual effective tax rate to calculate our provision for income taxes.

Our effective tax rate for the three months ended June 30, 2024 was lower than the statutory federal tax rate due primarily to stock-based compensation adjustments, non-deductible lobbying expenses and changes in our valuation allowance, partially offset by research and development credits and state taxes.

Six Months Ended June 30, 2024 and 2023 – Our effective tax rate of 4.0% for the six months ended June 30, 2024 was lower than our 12.4% effective tax rate for the six months ended June 30, 2023 primarily due to fluctuations in stock-based compensation adjustments and the change from using an annualized effective tax rate method to using the actual effective tax rate to calculate our provision for income taxes.

Our effective tax rate for the six months ended June 30, 2024 was lower than the statutory federal tax rate due primarily to stock-based compensation adjustments, non-deductible lobbying expenses and changes in our valuation allowance, partially offset by research and development credits and state taxes.

Three Months Ended September 30, 2024 and 2023 – Our effective tax rate of 4.3% for the three months ended September 30, 2024 was lower than our 6.3% effective tax rate for the three months ended September 30, 2023, primarily due to fluctuations in stock-based compensation adjustments.

Our effective tax rate for the three months ended September 30, 2024 was lower than the statutory federal tax rate due primarily to changes in our valuation allowance on certain U.S.

deferred tax assets, stock-based compensation adjustments and non-deductible lobbying expenses, partially offset by research and development credits and state and local taxes.

Nine Months Ended September 30, 2024 and 2023 – Our effective tax rate of 4.1% for the nine months ended September 30, 2024 was lower than our 9.7% effective tax rate for the nine months ended September 30, 2023 primarily due to fluctuations in stock-based compensation adjustments.

Our effective tax rate for the nine months ended September 30, 2024 was lower than the statutory federal tax rate due primarily to changes in our valuation allowance on certain U.S.

deferred tax assets, stock-based compensation adjustments and non-deductible lobbying expenses, partially offset by research and development credits and state and local taxes.

Segment Information

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

The Medicare segment consists primarily of amounts earned from our sale of Medicare-related health insurance plans, including Medicare Advantage, Medicare Supplement and Medicare Part D prescription drug plans, fees earned for the performance of administrative services, amounts earned from our non-broker-of-record, or fee-based, arrangements, our performance of various post-enrollment services for members and to a lesser extent, amounts earned from our sale of ancillary products sold to our Medicare-eligible customers, including but not limited to, dental and vision plans, as well as amounts we are paid in connection with our advertising program for marketing and other services.

The Medicare segment consists primarily of amounts earned from our sale of Medicare-related health insurance plans, including Medicare Advantage, Medicare Supplement and Medicare Part D prescription drug plans, fees earned for the performance of administrative services, amounts earned from our non-broker-of-record, or fee-based BPO, arrangements, our performance of various post-enrollment services for members and to a lesser extent, amounts earned from our sale of ancillary products sold to our Medicare-eligible customers, including but not limited to, dental and vision plans, as well as amounts we are paid in connection with our advertising program for marketing and other services.

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

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

Our results below reflect our updated methodology used in allocating certain expenses beginning in the

first quarter of fiscal 2024, and results from the prior period presented have been recast to conform with the current period presentation.

Our results below reflect our updated methodology used in allocating certain expenses beginning in the first quarter of fiscal 2024, and results from the prior period presented have been recast to conform with the current period presentation.

The performance of each reportable segment is evaluated based on several factors, including revenue and segment profit (loss), which is calculated as total revenue for the applicable segment less direct and indirect allocated marketing and advertising, customer care and enrollment, technology and content and general and administrative operating expenses, excluding stock-based compensation expense, depreciation and amortization, impairment, restructuring and other charges, interest expense and other income (expense), net.

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Employer and Individual (799) 4,810 (5,609) (117) % 4,743 19,372 (14,629) (76) %

Segment profit

2,164 4,826 (2,662) (55) % 15,125 11,914 3,211 27 %

Segment profit (loss) (18,732) (10,521) (8,211) (78) % (3,607) 1,393 (5,000) (359) %

Corporate (16,100) (17,576) 1,476 8 % (48,417) (56,953) 8,536 15 %

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Medicare Segment

Three Months Ended June 30, 2024 and 2023 – Revenue from our Medicare segment increased $3.8 million, or 7%, during the three months ended June 30, 2024 compared to the same period in 2023 due to a $2.6 million increase in fee-based revenue and a $1.2 million increase in commission revenue.

The increase in fee-based revenue was driven by a shift in some of our Amplify broker-of-record arrangements to fee-based arrangements.

The increase in Medicare segment commission revenue is due primarily to a 6% increase in Medicare Advantage plan approved members, increased constrained LTV of commissions per approved member for Medicare Advantage and Medicare Supplement products, as well as an increase of $0.6 million in Medicare segment bonus revenue.

These increases were partially offset by lower net adjustment revenue from prior period enrollments, which was $10.7 million for the three months ended June 30, 2024, compared to $13.4 million for the same period in 2023.

Our Medicare segment profit was $1.3 million during the three months ended June 30, 2024, an improvement of $3.3 million, compared to a segment loss of $2.1 million for the same period in 2023.

This increase was primarily driven by a $3.8 million increase in revenue from our Medicare segment, partially offset by a $0.5 million increase in operating expenses from our Medicare segment, excluding stock-based compensation expense, depreciation and amortization, impairment, restructuring and other charges, interest expense and other income, net.

The increase in operating expenses was mostly attributable to continued implementation of our initiatives to attract and retain beneficiaries in fiscal 2024.

Six Months Ended June 30, 2024 and 2023 – Revenue from our Medicare segment increased $24.4 million, or 21%, during the six months ended June 30, 2024 compared to the same period in 2023, primarily attributable to a $15.3 million increase in commission revenue.

The increase in Medicare segment commission revenue is primarily due to a $4.7 million and $4.4 million increase in Medicare Advantage plan and Medicare Supplement plan related commission revenue, respectively, driven by an 8% growth in both Medicare Advantage plan and Medicare Supplement plan approved members.

Additionally, the increase in Medicare segment commission was due to improved constrained LTV of commissions per approved member for Medicare Advantage plans and Medicare Supplement plans compared to the same period in the prior year.

These increases were partially offset by $11.7 million in net adjustment revenue from prior period enrollments for the six months ended June 30, 2024, compared to $13.5 million in net adjustment revenue for the same period in 2023 in our Medicare segment.

Our Medicare segment profit was $9.6 million during the six months ended June 30, 2024, an improvement of $12.2 million, compared to a segment loss of $2.6 million for the same period in 2023.

This increase was primarily driven by a $24.4 million increase in revenue from our Medicare segment, partially offset by an $12.1 million increase in operating expenses from our Medicare segment, excluding stock-based compensation expense, depreciation and amortization, impairment, restructuring and other charges, interest expense and other income, net.

The increase in operating expenses was mostly attributable to continued implementation of our initiatives to attract and retain beneficiaries in fiscal 2024.

Three Months Ended September 30, 2024 and 2023 – Revenue from our Medicare segment decreased $2.3 million, or 4%, during the three months ended September 30, 2024 compared to the same period in 2023 primarily due to a $5.0 million decrease in commission revenue and a $1.2 million decline in sponsorship revenue, partly offset by a $4.0 million increase in fee-based revenue.

The decrease in Medicare segment commission revenue is primarily driven by $8.2 million less in net adjustment revenue from prior period enrollments year-over-year, partly offset by a 14% increase in Medicare Advantage plan approved members and increased constrained LTV of commissions per approved member for Medicare Supplement products.

The increase in fee-based revenue was driven by the shift in some of our Amplify broker-of-record arrangements to fee-based BPO arrangements.

Our Medicare segment loss increased $2.6 million during the three months ended September 30, 2024 compared to the same period in 2023.

This increase was primarily driven by a $2.3 million decrease in revenue from our Medicare segment.

Nine Months Ended September 30, 2024 and 2023 – Revenue from our Medicare segment increased $22.1 million, or 13%, during the nine months ended September 30, 2024 compared to the same period in 2023, attributable to an $11.8 million increase in other revenue and a $10.3 million increase in commission revenue.

The increase in other revenue was primarily driven by a $7.1 million increase in fee-based revenue, which was driven by growth in our fee-based BPO arrangements, and a $5.0 million increase in sponsorship revenue.

The increase in Medicare segment commission revenue was primarily due to a 9% growth in Medicare Advantage plan approved

members and improved constrained LTV of commissions per approved member for Medicare Supplement plans compared to the same period in the prior year, partially offset by $10.0 million less in net adjustment revenue from prior period enrollments year-over-year.

Our Medicare segment loss improved $9.6 million during the nine months ended September 30, 2024 compared to the same period in 2023.

This improvement was primarily driven by a $22.1 million increase in revenue from our Medicare segment, partially offset by a $12.4 million increase in operating expenses from our Medicare segment, excluding stock-based compensation expense, depreciation and amortization, impairment, restructuring and other charges, interest expense and other income, net.

The increase in operating expenses was mostly attributable to the continued implementation of our initiatives to attract and retain beneficiaries in fiscal 2024, including having a larger group of benefit advisors this period compared to the same period last year.

Employer and Individual Segment

Three Months Ended June 30, 2024 and 2023 – Revenue from our E&I segment decreased $4.7 million, or 42%, during the three months ended June 30, 2024 compared to the same period in 2023, primarily attributable to a $4.6 million decrease in commission revenue driven by lower net adjustment revenue from prior period enrollments.

Net adjustment revenue from prior period enrollments for the three months ended June 30, 2024 was $0.8 million, compared to $5.3 million for the same period in 2023.

Revenue also decreased due to declines in individual and family plan, ancillary product and small business approved members, partially offset by an increase in LTV of commissions per approved member for most products in our E&I segment.

The reduced volumes are a result of our focus on implementing operational enhancements in the E&I segment and we plan to return to enrollment growth in the fourth quarter of fiscal 2024.

Our E&I segment profit was $0.9 million during the three months ended June 30, 2024, a decrease of $6.0 million, or 87%, compared to segment profit of $6.9 million for the same period in 2023.

The decrease was primarily driven by a $4.7 million decrease in our E&I segment revenue and a $1.3 million increase in our E&I segment operating expenses, excluding stock-based compensation expense, depreciation and amortization, impairment, restructuring and other charges, interest expense and other income, net.

The increase in operating expenses was mostly attributable to investments in operational enhancements for our E&I segment that are underway in fiscal 2024.

Six Months Ended June 30, 2024 and 2023 – Revenue from our E&I segment decreased $6.0 million, or 26%, during the six months ended June 30, 2024 compared to the same period in 2023, primarily attributable to a $5.7 million decrease in commission revenue driven by lower net adjustment revenue from prior period enrollments.

Net adjustment revenue from prior period enrollments for the six months ended June 30, 2024 was $2.3 million, compared to $6.8 million in the same period in 2023.

The reduced volumes are a result of our focus on implementing operational enhancements in the E&I segment, and we plan to return to enrollment growth in the fourth quarter of fiscal 2024.

Our E&I segment profit was $5.5 million during the six months ended June 30, 2024, a decrease of $9.0 million, or 62%, compared to segment profit of $14.6 million for the same period in 2023.

Three Months Ended September 30, 2024 and 2023 – Revenue from our E&I segment decreased $4.0 million, or 44%, during the three months ended September 30, 2024 compared to the same period in 2023, primarily attributable to a $4.0 million decrease in commission revenue driven $2.8 million less in net adjustment revenue from prior period enrollments year-over-year.

The reduced volumes are a result of our focus on implementing operational enhancements in the E&I segment.

Our E&I segment loss was $0.8 million during the three months ended September 30, 2024, compared to segment profit of $4.8 million for the same period in 2023.

The change was primarily driven by a $4.0 million decrease in our E&I segment revenue and a $1.6 million increase in our E&I segment operating expenses, excluding stock-based compensation expense, depreciation and amortization, impairment, restructuring and other charges, interest expense and other income, net.

The increase in operating expenses was mostly attributable to investments in operational enhancements for our E&I segment that are underway.

Nine Months Ended September 30, 2024 and 2023 – Revenue from our E&I segment decreased $10.1 million, or 31%, during the nine months ended September 30, 2024 compared to the same period in 2023, primarily due to a $9.7 million decrease in commission revenue driven by $7.3 million less in net adjustment revenue from prior period enrollments year-over-year.

The reduced volumes are a result of our focus on implementing operational enhancements in the E&I segment.

Our E&I segment profit was $4.7 million during the nine months ended September 30, 2024, a decrease of $14.6 million, or 76%, compared to segment profit of $19.4 million for the same period in 2023.

The decrease was primarily driven by a $10.1 million decrease in our E&I segment revenue and a $4.6 million increase in our E&I segment operating expenses, excluding stock-based compensation expense, depreciation and amortization, impairment, restructuring and other charges, interest expense and other income, net.

The increase in operating expenses was mostly attributable to investments in our operational enhancements for our E&I segment that are underway in fiscal 2024.

The increase in operating expenses was mostly attributable to investments in our operational enhancements for our E&I segment that are underway.

Liquidity and Capital Resources

As of June 30, 2024, we had cash, cash equivalents and short-term marketable securities of $151.1 million.

During the six months ended June 30, 2024, we generated operating cash flow of $38.6 million as summarized below.

As of September 30, 2024, we had cash, cash equivalents and short-term marketable securities of $117.8 million.

During the nine months ended September 30, 2024, we generated operating cash flow of $9.3 million as summarized below.

We have historically financed our operations primarily through cash generated from our operations, equity issuances and debt financing.

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

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Cash and cash equivalents $ 64,032 $ 115,722

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

We also maintained $3.1 million in restricted cash as of June 30, 2024 and December 31, 2023.

We also maintained $3.1 million in restricted cash as of September 30, 2024 and December 31, 2023.

Material Cash Requirements

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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.

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

Short-term obligations were $9.0 million for leases and $3.0 million for service and licensing as of June 30, 2024.

Long-term obligations were $27.1 million for leases and $0.1 million for service and licensing as of June 30,

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

Short-term obligations were $8.9 million for leases and $8.6 million for service and licensing as of September 30, 2024.

Long-term obligations were $24.8 million for leases and $4.1 million for service and licensing as of September 30, 2024.

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

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During 2023, we made cash dividend payments in the aggregate amount of $3.5 million .

During the second quarter of 2024 we made a cash dividend payment of $2.7 million.

During the second quarter of 2024 we made a cash dividend payment of $2.7 million and as of September 30, 2024, we have accrued $1.4 million for cash dividends.

Investment Agreement also provides certain redemption rights on or after April 2027.

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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 the 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.

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.

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

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to accelerate the redemption of the Series A Preferred Stock nor is it expected to materially impact our ability to generate and obtain adequate amounts of cash to meet our short-term or long-term requirements.

As of June 30, 2024, we were in compliance with the Minimum Liquidity Amount.

As of September 30, 2024, we were in compliance with the Minimum Liquidity Amount.

Term Loan Credit Agreement

On February 28, 2022, we entered into a term loan credit agreement providing for a $70.0 million secured term loan credit facility with Blue Torch Finance LLC, as administrative agent and collateral agent, and other lenders party thereto, which agreement was subsequently amended on August 16, 2022 (as amended, the “Credit Agreement”) to update our borrowing benchmark from LIBOR to SOFR.

The Credit Agreement matures in February 2025.

On February 28, 2022, we entered into a term loan credit agreement providing for a $70.0 million secured term loan credit facility with Blue Torch Finance LLC, as administrative agent and collateral agent, and other lenders party thereto, which agreement was subsequently amended on August 16, 2022 (as so amended, the “Credit Agreement”) to update our borrowing benchmark from LIBOR to SOFR.

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

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

As of June 30, 2024, the interest rate was 13.11%.

For the three and six months ended June 30, 2024 we incurred interest expense on the credit facility of $2.3 million and $4.6 million, respectively.

For the three and six months ended June 30, 2023 we incurred interest expense of $2.2 million and $4.4 million , respectively.

As of June 30, 2024, the carrying value of the loan under the Credit Agreement was $68.7 million and we were in compliance with our loan covenants.

As of September 30, 2024, the interest rate was 12.82%.

For the three and nine months ended September 30, 2024 we incurred interest expense on the credit facility of $2.3 million and $6.9 million, respectively.

For the three and nine months ended September 30, 2023 we incurred interest expense of $2.4 million and $6.8 million , respectively.

As of September 30, 2024, the carrying value of the loan under the Credit Agreement was $69.2 million and we were in compliance with our loan covenants.

On November 1, 2024, we entered into a second amendment (the "Second Amendment") to the Credit Agreement which extends the maturity date of the Credit Agreement from February 2025 to February 2026 and, among other things, reduces the overall interest rate of the term loan beginning on the effective date of the Second Amendment.

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

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We believe our current cash, cash equivalents and short-term marketable securities, including the proceeds from the equity financing we obtained on April 30, 2021 under the H.I.G.

Investment Agreement and the term loan we obtained on February 28, 2022 under the Credit Agreement, and expected cash collections will be sufficient to fund our operations for at least 12 months after the filing date of this Quarterly Report on Form 10-Q as well as to refinance or select other alternatives based on market conditions for our term loan under our Credit Agreement that matures in February 2025.

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

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Cash Activities

Our cash flows for the six months ended June 30, 2024 and 2023 are summarized as follows (in thousands):

Six Months Ended

Our cash flows for the nine months ended September 30, 2024 and 2023 are summarized as follows (in thousands):

Nine Months Ended

September 30,

Net cash provided by operating activities $ 9,296 $ 26,694

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

Six Months Ended June 30, 2024 – Net cash provided by operating activities was $38.6 million during the six months ended June 30, 2024, primarily driven by changes in net operating assets and liabilities of $59.5 million and adjustments for non-cash items of $24.0 million, partially offset by a net loss of $45.0 million.

Our fee-based BPO arrangements generate fee-based revenue, which is recorded in other revenue, and cash is collected in advance or in close proximity to when revenue is recognized.

Nine Months Ended September 30, 2024 – Net cash provided by operating activities was $9.3 million during the nine months ended September 30, 2024, primarily driven by changes in net operating assets and liabilities of $66.1 million and adjustments for non-cash items of $30.7 million, partially offset by a net loss of $87.4 million.

Cash provided by changes in net operating assets and liabilities during the nine months ended September 30, 2024 primarily consisted of a decrease of $104.6 million in contract assets – commissions receivable, partially offset by decreases of $14.6 million in accrued compensation and benefits and $11.1 million in accrued marketing expenses as well as an increase of $9.9 million in prepaid expenses and other assets and an increase of $1.9 million in accounts receivable.

Adjustments for non-cash items primarily consisted of $15.1 million of stock-based compensation expense, $11.0 million of amortization of internally developed software and $7.4 million of impairment charges, partially offset by a $4.3 million decrease due to the change in deferred income taxes.

Cash provided by changes in net operating assets and liabilities during the six months ended June 30, 2024 primarily consisted of a decrease of $86.7 million in

contract assets – commissions receivable and $2.8 million in accounts receivable, a $2.3 million increase in accrued expenses and other liabilities and a $2.0 million increase in deferred revenue, partly offset by decreases of $20.8 million in accrued compensation and related expenses and $12.5 million in accrued marketing expenses.

Six Months Ended June 30, 2023 – Net cash provided by operating activities was $51.4 million during the six months ended June 30, 2023, primarily driven by changes in net operating assets and liabilities of $80.0 million and adjustments for non-cash items of $14.8 million, partially offset by a net loss of $43.4 million.

Adjustments for non-cash items primarily consisted of $11.2 million of stock-based compensation expense and $9.1 million of amortization of internally developed software, partially offset by a $6.7 million decrease due to the change in deferred income taxes.

Cash provided by changes in net operating assets and liabilities during the six months ended June 30, 2023 primarily consisted of decreases of $95.0 million in contract assets – commissions receivable and $2.0 million in accounts receivable, partly offset by decreases of $17.3 million in accrued marketing expenses.

Nine Months Ended September 30, 2023 – Net cash provided by operating activities was $26.7 million during the nine months ended September 30, 2023, primarily driven by changes in net operating assets and liabilities of $83.5 million and adjustments for non-cash items of $23.6 million, partially offset by a net loss of $80.4 million.

Cash provided by changes in net operating assets and liabilities during the nine months ended September 30, 2023 primarily consisted of a decrease of $104.2 million in contract assets – commissions receivable and an increase of $6.1 million in accrued compensation and benefits, partly offset by a decrease of $16.3 million in accrued marketing expenses and an increase of $12.6 million in prepaid expenses and other assets.

Adjustments for non-cash items primarily consisted of $17.7 million of stock-based compensation expense and $13.2 million of

amortization of internally developed software, partially offset by a $9.3 million decrease due to the change in deferred income taxes.

Investing Activities

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

Six Months Ended June 30, 2024 – Net cash used in investing activities of $23.7 million for the six months ended June 30, 2024 mainly consisted of $37.4 million used to purchase marketable securities and $4.9 million in capitalized internal-use software and website development costs, partially offset by $19.0 million in proceeds from the maturities and redemptions of marketable securities.

Six Months Ended June 30, 2023 – Net cash used in investing activities of $40.8 million for the six months ended June 30, 2023 mainly consisted of $48.6 million used to purchase marketable securities and $4.2 million in capitalized internal-use software and website development costs, partially offset by $12.4 million in proceeds from the maturities and redemptions of marketable securities.

Nine Months Ended September 30, 2024 – Net cash used in investing activities of $56.4 million for the nine months ended September 30, 2024 mainly consisted of $85.9 million used to purchase marketable securities and $8.1 million in capitalized internal-use software and website development costs, partially offset by $39.0 million in proceeds from the maturities and redemptions of marketable securities.

Nine Months Ended September 30, 2023 – Net cash used in investing activities of $16.5 million for the nine months ended September 30, 2023 mainly consisted of $48.6 million used to purchase marketable securities and $7.0 million in capitalized internal-use software and website development costs, partially offset by $40.9 million in proceeds from the maturities and redemptions of marketable securities.

Financing Activities

Six Months Ended June 30, 2024 – Net cash used in financing activities of $4.2 million for the six months ended June 30, 2024 was primarily due to a $2.7 million payment of preferred stock dividends and $1.9 million in repurchases of shares to satisfy employee tax withholding obligations.

Six Months Ended June 30, 2023 – Net cash used in financing activities of $1.7 million for the six months ended June 30, 2023 was primarily due to $1.1 million in repurchases of shares to satisfy employee tax withholding obligations and $0.9 million in payments of preferred stock dividends.

Nine Months Ended September 30, 2024 – Net cash used in financing activities of $4.7 million for the nine months ended September 30, 2024 was primarily due to a $2.7 million payment of preferred stock dividends and $2.3 million in repurchases of shares to satisfy employee tax withholding obligations.

Nine Months Ended September 30, 2023 – Net cash used in financing activities of $2.6 million for the nine months ended September 30, 2023 was primarily due to $1.9 million in repurchases of shares to satisfy employee tax withholding obligations and $0.9 million in payments of preferred stock dividends.

Open enrollment periods drive the seasonality of our business.

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The majority of our individual and family health insurance plans are sold in the fourth quarter during the annual open enrollment period as prescribed under the federal Patient Protection and Affordable Care Act and related amendments in the Health Care and Education Reconciliation Act.

In the states where the Federally Facilitated marketplace operates as the state health insurance exchange, individuals and families generally are not

able to purchase individual and family health insurance outside of the annual enrollment period, unless they qualify for a special enrollment period as a result of certain qualifying events, such as losing employer-sponsored health insurance or moving to another state.

In the states where the Federally Facilitated marketplace operates as the state health insurance exchange, individuals and families generally are not able to purchase individual and family health insurance outside of the annual enrollment period, unless they qualify for a special enrollment period as a result of certain qualifying events, such as losing employer-sponsored health insurance or moving to another state.

Extended open enrollment or special enrollment periods may change the seasonality of our individual and family health insurance business.

We incur a significant portion of our marketing and advertising expense, which is directly correlated with the number of health insurance applications submitted on our ecommerce platforms, in the fourth quarter as a result of the Medicare AEP and the open enrollment period under the Affordable Care Act.

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

for new approved applications generally occurring after the plan becomes effective, our operating cash flows could be adversely impacted by a substantial increase in the volume of applications submitted during a quarter or positively impacted by a substantial decline in the volume of applications submitted during a quarter.

Full-time internal benefit advisors represent the majority of our telesales capacity.

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Recent Accounting Pronouncements

See Note 1 – Summary of Business and Significant Accounting Policies in the Notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q for recently issued accounting standards that could have an effect on us.

See Note 1 – Summary of Business and Significant Accounting Policies in our Notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q for recently issued accounting standards that could have an effect on us.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis