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Item 7. Management’s Discussion and Analysis

2025-02-27 compared with 2024-02-29 · 253 added, 271 removed, 335 unchanged (61% of the section changed)

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

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

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

Our mission is to 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.

Our omnichannel consumer engagement platform differentiates our offering from competitors 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.

Multi-Year Business Initiatives

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

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

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

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

We also launched our Company rebrand in October 2023, which included our refreshed marketing plan that differentiates us in the market and included a redesign of our omni-channel user experience.

Our Company rebrand was designed to reflect our transformational work from the past few years and is expected to increase our brand recognition.

Over the past few years, we have focused on our benefit advisors by enhancing their onboarding and training programs, shifted the mix of our telesales capacity towards full-time internal benefit advisors and away from third party vendor agents and expanded our benefit advisor headcount this year ahead of the most recent annual enrollment period.

Additionally, in 2022, we achieved over $110 million in cost savings compared to 2021 while preserving our competitive edge and focusing on initiatives with highest in-period returns on investment.

We also migrated our call center technology to a new cloud-based agent monitoring system, which provided new robust capabilities to train benefit advisors and monitor their performance in real time and made several improvements targeted at expanding our quality assurance efforts and further enhancing the consumer experience.

While these initiatives initially caused a decline in conversion rates and increased talk times, we have experienced improvements in our member retention and profitability metrics.

As a result of positive retention dynamics, higher quality performance and the favorable commissions environment of the past two years, we recognized $48.1 million in net adjustment revenue across most products during 2023.

Additionally, we achieved Medicare Advantage enrollment growth in the fourth quarter annual enrollment period of 2023 as compared to the fourth quarter annual enrollment period of 2022 and experienced increases in constrained LTV of commissions per approved member across most products during 2023 compared to 2022.

In the fourth quarter of 2023, the Individual, Family and Small Business segment was renamed “Employer and Individual”.

The Employer and Individual (“E&I”) 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.

Going forward, we intend to invest in this segment to grow existing products, including individual and family and small business plans and ancillary products.

We also expect to add new products and services and explore adjacent markets within the broader health insurance industry, including pursuing both direct-to-consumer strategies as well as business-to-business strategies for employers of all sizes, including the emerging Individual Coverage Health Reimbursement Arrangements (“ICHRA”) opportunity.

Remote First Workplace

We adjusted our business operations as a result of the COVID-19 pandemic, including shifting to a remote work model and onboarding and training new benefit advisors remotely.

In the third quarter of 2022, we announced a remote first workplace model in the United States.

As a result, except for those employees whose job responsibilities require in-office work, none of our employees are required to work at the office.

As part of the remote first strategy, we executed several subleases of our office space in the United States and vacated other office spaces in which we evaluated the right-of-use assets and other lease related assets including leasehold improvements, furniture and fixtures, and computer equipment for impairment under Accounting Standards Codification (“ASC”) 360.

We believe flexible workforce positions will make us a more attractive employer, increase productivity, and enable us to recruit from a more diverse pool of applicants.

Our plan recommendation tool curates this broad plan selection by analyzing consumer 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 consumers and our benefit advisors.

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

Business Update

In 2024, Medicare Advantage offerings experienced unprecedented disruption as there were plan benefit and premium changes, plan cancellations and market exits due to carriers facing higher medical costs as well as regulatory pressures.

This resulted in elevated consumer demand during the fourth quarter Annual Enrollment Period (“AEP”) relative to prior years.

In 2024, we made a strategic decision to take advantage of this increased consumer demand and invest in significant Medicare enrollment and revenue growth.

We were able to accelerate the growth of our Medicare business while also improving profitability due to significant operational improvements we achieved through our multi-year transformation plan, which was completed in 2023.

In 2024, the Company also benefited from the rebrand we launched in October of 2023, which was designed to communicate our differentiated value proposition as a trusted and transparent advisor.

We further evolved our brand in 2024 complementing it with audience targeting strategies, expansion of our marketing channel mix and a redesign of our omnichannel platform for a seamless user experience.

We believe these initiatives resulted in a significant increase in our brand awareness and in a strong performance of our direct marketing channels, including direct television, mail and paid search.

As a result, we significantly improved our lead quality and drove greater telephonic and online conversion rates in 2024.

We also invested in further personalizing the consumer experience on our platform including a tailored online experience for returning visitors.

Combined with the scaling of our digital marketing channels, this led to a significant increase in our online unassisted Medicare applications compared to 2023.

We continued to focus on our benefit advisors by enhancing their onboarding and training programs, shifting the mix of our telesales capacity towards full-time internal benefit advisors and away from a seasonal advisor staffing model.

We also expanded our benefit advisor headcount to take advantage of increased inbound demand.

In addition to having a greater number of tenured benefit advisors compared to a year ago, we narrowed the gap between the effectiveness of our new and tenured benefit advisors.

We continue to empower our benefit advisors with innovative tools that enhance their productivity and differentiate their services.

As part of our

enhanced retention program, which was especially important this past AEP, our benefit advisors reached out to members whose plans we identified would be impacted by plan cancellations or significant benefit or premium changes.

These efforts were supported by proprietary online tools such as MatchMonitor™, where members could better understand the expected changes to their coverage against their needs and resulted in a strong pipeline of appointments as we entered this past AEP.

During 2024, our business evolved to include 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 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 in our Medicare approved members and a decrease in the corresponding commission revenue.

In contrast, our fee-based BPO arrangements increased, contributing to substantial growth in our other revenue.

Even with this shift, during the year ended December 31, 2024, we observed a 21% increase in 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 29% for the year ended December 31, 2024 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.

Going forward, we plan to remain in a strong competitive position in the market and expect to continue building scaled differentiation within our Medicare Advantage Agency while also pursuing targeted revenue diversification.

We plan to continue investing in enrollment quality, member retention, and in our Employer and Individual (“E&I”) segment to grow existing products and offerings.

We also expect to grow our Medicare Supplement, Individual Health Reimbursement Arrangement (“ICHRA”) and ancillary product offerings, as well as our Amplify offerings.

Change in Expense Allocation Methodology

Beginning in the first quarter of 2024, primarily as a result of vacating excess office space, we modified our methodology used in allocating our facilities-related expenses to marketing and advertising, customer care and enrollment and technology and content.

As a result, these costs are now reported within the “General and administrative” line in our Consolidated Statements of Comprehensive Income (Loss).

We have recast the Consolidated Statements of Comprehensive Income (Loss) for the prior periods presented to conform to our current methodology.

This resulted in a classification change of expenses from marketing and advertising, customer care and enrollment and technology and content into general and administrative.

There was no impact to total operating costs and expenses, loss from operations, net loss or net loss per share attributable to common stockholders on our Consolidated Statements of Comprehensive Income (Loss).

Summary of Selected Metrics

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Approved Members

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

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

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

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Year Ended December 31,

2023 2022 2021

2024 2023 % Change

Medicare Advantage 366,160 290,712 26 %

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Total Approved Members 485,456 429,196 13 %

2023 compared to 2022 – Total approved members declined 10% in 2023 compared to 2022, driven by:

• a 7% decline in Medicare approved members driven by a decrease in approved members across all Medicare products that we market, primarily due to lower variable marketing spend as we focused on implementing operational enhancements to our sales and marketing organizations that ultimately resulted in 22% growth in Medicare Advantage approved members in the fourth quarter of 2023 compared to the same period last year;

• an 18% decline in individual and family plan approved members primarily due to a reduction in member acquisition spend;

• a 21% 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 22% decline in small business health insurance approved members, driven by reduced acquisition spend.

2022 compared to 2021 – Total approved members declined 27% in 2022 compared to 2021, driven by:

• a 28% decline in Medicare approved members due to a decrease in approved members across all Medicare products that we market, reflecting our decision to temporarily pause enrollment volume while implementing various operational initiatives aimed at increasing the effectiveness of our sales and marketing organizations;

• a 22% decline in individual and family plan approved members due to a 36% decline in approved members for qualified health plans and an 8% decline in non-qualified health plan approved members primarily due to a reduction in marketing spend;

• a 26% decline in ancillary approved members across most ancillary plans, which was partly attributed to the decline in individual and family plan enrollment volume as these enrollments can result in additional sales of ancillary products;

• a 15% decline in small business health insurance approved members due to the shift of our focus away from the sale of small business products.

2024 compared to 2023 – Total approved members grew 13% in 2024 compared to 2023, driven by:

• a 21% increase in Medicare approved members driven by:

◦ a 26% increase in Medicare Advantage approved members, due to a 31% increase in Medicare Advantage broker of record submissions primarily as a result of increased consumer demand due to market disruptions during 2024, the strength of our Company rebrand, increased variable marketing spend and an increased number of benefit advisors with improved telesales conversion rates year-over-year,

◦ partially offset by a 20% and 5% decline in Medicare Supplement and Medicare Part D approved members, respectively, primarily caused by 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 24% and 30% 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;

• a 9% decline in ancillary approved members primarily due to declines in dental and short-term approved members.

Estimated Constrained Lifetime Value of Commissions Per Approved Member

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Year Ended December 31,

2023 2022 2021

2024 2023 % Change

Medicare (1)(2)

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Medicare Supplement

1,090 891 22 %

Medicare Part D

172 220 (22) %

Individual and Family (1)

Non-Qualified Health Plans

377 380 (1) %

Qualified Health Plans

Ancillary (1)

156 167 (7) %

Small Business (1)

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

For additional information on constrained LTV, see “Critical Accounting Estimates”.

(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 were 7%, 9% and 7% for Medicare Advantage, Medicare Supplement and Medicare Part D, respectively, for the years ended December 31, 2023 and 2022.

2023 compared to 2022 – The changes in constrained LTV of commissions per approved member consisted of:

• an 8% increase in Medicare Advantage plans, primarily driven by positive trends in commissions collected as a result of more favorable commission rates, carrier mix, and improved retention;

• a 5% decrease in Medicare Supplement plans, primarily due to unfavorable commission rates due to carrier mix, partially offset by favorable retention and increased paid members;

• a 13% increase in Medicare Part D plans, primarily driven by favorable commission rates and improved retention;

• a 11% and 5% increase in qualified and non-qualified plans, respectively, primarily driven by favorable commission rates, partially offset by unfavorable retention trends;

• a 16% and 8% increase in vision and small business plans, respectively, primarily driven by favorable commission rates.

For additional information on constrained LTV, see “Critical Accounting Estimates” below.

(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 year ended December 31, 2024 and 7%, 9% and 7%, respectively, for the year ended December 31, 2023.

2024 compared to 2023 – The changes in constrained LTV of commissions per approved member consisted of:

• flat LTV for Medicare Advantage plans due to decreased estimated average plan durations and lower persistency observations, the impacts of which were offset by increased contracted rates and improved quality metrics;

• a 6% and 4% decrease for Medicare Supplement and Medicare Part D plans, respectively, primarily due to decreased estimated average plan durations and lower persistency observations;

• a 32% increase in non-qualified health plans due to more stable persistency observations and an increase in estimated average plan duration;

• a 7% increase in qualified health plans due to a slight increase in average plan duration;

• a 9% and 3% increase in dental and vision plans, respectively, as a result of an increase in estimated average plan duration;

• a 16% increase per approved small business plan member as a result of an increase in estimated average plan duration and higher commission rates per group.

• a 4% increase in Medicare Advantage plans, primarily driven by a decrease in constraint due to a decline in volatility and the observed increase in LTV trends as well as an improved ratio of approved members who became paying members, partially offset by less favorable retention trends for 2024 cohorts compared to 2023 cohorts;

• a 22% increase in Medicare Supplement plans, primarily due to favorable carrier and contract mix as well as favorable retention;

• a 22% decrease in Medicare Part D plans, primarily driven by unfavorable carrier and contract mix, partially offset by improved retention;

• a 1% decrease in non-qualified health plans primarily driven by unfavorable retention trends;

• a 2% increase in qualified health plans primarily due to favorable carrier and contract mix;

• a 7% decrease in short-term health plans primarily due to unfavorable retention as a result of the regulatory change that decreased term limits for short-term health plans;

• a 17%, 14% and 2% increase in dental, vision and small business plans, respectively, primarily driven by favorable carrier and contract mix.

Estimated Membership

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

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 as well as the number of approved members during the period of estimation from whom we expect to receive commission payments.

There is generally up to a few months lag between newly approved plans and the receipt of commission payments from the health insurance carrier and is most pronounced in the fourth and first quarters of our fiscal year due to the annual and open enrollment periods.

A member who purchases and is active on multiple standalone insurance plans will be counted as a member more than once.

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Given the number of months required to observe non-payment of commissions in order to confirm cancellations, we estimate the number of members who are active on insurance policies as of a specified date.

After we have estimated membership for a period, we may receive information from health insurance carriers that would have impacted the estimate if we had received the information prior to the date of estimation.

After we have estimated membership as of a specified date, we may receive information from health insurance carriers that would have impacted the estimate if we had received the information prior to the date of estimation.

We may receive commission payments or other information that indicates that a member who was not included in our estimates for a prior period was in fact an active member at that time, or that a member who was included in our estimates was in fact not an active member of ours.

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As of December 31,

2023 2022 2021

2024 2023 % Change

Medicare Advantage 690,874 622,896 11 %

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

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

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

To the extent we determine through confirmations from a health insurance carrier that a commission payment is delayed

or is inaccurate as of the date of estimation, we adjust the estimated membership to also reflect the number of members for whom we expect to receive or to refund a commission payment.

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

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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.

2023 compared to 2022 – Total estimated membership declined 6% as of December 31, 2023 compared to December 31, 2022 due to:

• a 3% decline in Medicare estimated membership year over year, driven by:

◦ a 4% and 8% decline in Medicare Advantage and Medicare Part D plans, respectively, primarily due to a decrease in overall Medicare approved applications as we temporarily reduced our investment in demand generation initiatives,

◦ partially offset by an 11% increase in Medicare Supplement plans, primarily driven by an 8% increase in approved members in the fourth quarter of 2023 compared to 2022;

• a 16% decline in individual and family plan estimated membership year over year due to a decrease in approved applications;

• a 16% decline in overall ancillary plan estimated membership year over year, primarily due to a decline in approved applications across most ancillary plans.

2022 compared to 2021 – Total estimated membership was flat as of December 31, 2022 compared to December 31, 2021 due to:

2024 compared to 2023 – Total estimated membership increased 3% as of December 31, 2024 compared to December 31, 2023 due to:

• a 6% increase in Medicare estimated membership year over year, driven by:

◦ a 2% increase in both Medicare Advantage and Medicare Part D plans reflective of new enrollments generated during the year, net of estimated attrition,

◦ partially offset by a 2% decline in Medicare Supplement plans;

• a 2% decline in individual and family plan estimated membership year over year due to a decrease in new enrollments;

• a 9% decline in ancillary plan estimated membership year over year due to the decline of estimated membership across all ancillary plans.

◦ an 11% increase in Medicare Advantage plans, primarily due to an increase in Medicare Advantage approved applications,

◦ partially offset by a 13% decrease in Medicare Supplement plans, driven by a decrease in approved members primarily due to the shift of some broker of record arrangements to fee-based arrangement within our Amplify platform, which are not included in estimated membership;

• a 9% decline in individual and family plan estimated membership year over year due to a decrease in non-qualified health plan approved applications;

• a 4% decline in overall ancillary plan estimated membership year over year, primarily due to a decline in approved applications across several ancillary products;

• a 7% decline in small business plan estimated membership year over year, primarily due to a decrease in approved applications.

Member Acquisition

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Variable marketing costs represent costs incurred in member acquisition from our direct marketing and marketing partner channels.

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

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

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

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

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

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

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

Year Ended December 31,

2023 2022 2021

2024 2023 % Change

Medicare Plans:

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

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

406 449 (10) %

Total acquisition cost per MA-equivalent approved member

$ 755 $ 892 (15) %

Individual and Family Plan:

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

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_____________

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

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

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

We calculate the number of 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 years presented.

2023 compared to 2022 – Total acquisition cost per MA-equivalent approved member increased $32, or 4%, in 2023 compared to 2022, driven by:

• a $74, or 19%, increase in CC&E cost per MA-equivalent approved member due to an increase in costs associated with the hiring and training of a higher number of new benefit advisors in 2023 compared to 2022 as well as a decline in approved members in 2023 compared to 2022;

• partially offset by a $42, or 9%, decrease in variable marketing cost per MA-equivalent approved member, primarily due to continued disciplined marketing spend in 2023 compared to 2022.

2022 compared to 2021 – Total acquisition cost per MA-equivalent approved member decreased $18, or 2%, in 2022 compared to 2021, driven by:

• a $32, or 6%, decrease in variable marketing cost per MA-equivalent approved member primarily due to a decline in our marketing spend as part of our cost savings initiatives in 2022;

• partially offset by a $14, or 4%, increase in CC&E cost per MA-equivalent approved member due to overall lower telephonic conversion rates combined with a large number of full-time Medicare agents relative to our planned demand needs at the beginning of the year until the cost reduction program was implemented in April 2022.

Individual and Family

2023 compared to 2022 – Total acquisition cost per IFP-equivalent approved member increased $49, or 24%, in 2023 compared to 2022, driven by:

• a $60, or 46%, increase in CC&E cost per IFP-equivalent approved member due to an increase in costs associated with the hiring and training of a higher number of new benefit advisors in 2023 and the overall decline in approved members, as well as increased investments in IFP, including ICHRA and state exchange opportunities;

• partially offset by an $11, or 15%, decrease in variable marketing cost per IFP-equivalent approved member, primarily due to more disciplined marketing spend in 2023.

2022 compared to 2021 – Total acquisition cost per IFP-equivalent approved member increased $45, or 28%, in 2022 compared to 2021, driven by:

• a $40, or 44%, increase in CC&E cost per IFP-equivalent approved member primarily due to an increase in the number of benefit advisors as we pursue the emerging opportunities in the ICHRA and state exchange business;

• a $5, or 7%, increase in variable marketing cost per IFP-equivalent member primarily driven by the decline in approved members.

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

(2) 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.

Medicare Plans

2024 compared to 2023 – Total acquisition cost per MA-equivalent approved member decreased $137, or 15% driven by:

• a $94, or 21%, decrease in CC&E cost per MA-equivalent approved member driven by enhanced lead quality and improved conversions due to:

◦ 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 $43, or 10%, decrease in variable marketing cost per MA-equivalent approved member, primarily due to continued efficiencies within our marketing operations.

2024 compared to 2023 – Total acquisition cost per IFP-equivalent approved member increased $126, or 53% driven by:

• a $77, or 43%, increase in CC&E cost per IFP-equivalent due to the overall decline in individual and family plan and short-term plan approved members as well as a higher number of benefit advisors than in the same period last year, and

• a $49, or 80%, increase in variable marketing cost per IFP-equivalent approved member, primarily due to unfavorable channel mix.

Results of Operations

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Year Ended December 31,

2023 2022 2021

Commission $ 461,647 87 % $ 403,924 89 %

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General and administrative 89,765 17 % 99,363 22 %

Amortization of intangible assets — — % — — % 536 — %

Impairment, restructuring and other charges 9,475 2 % — — %

Total operating costs and expenses 508,839 96 % 481,945 106 %

Loss from operations

Income (loss) from operations

23,571 4 % (29,074) (6) %

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6,900 1 % 9,453 2 %

Loss before income taxes

Income (loss) before income taxes

19,312 4 % (30,595) (7) %

Benefit from income taxes

Benefit from (provision for) income taxes

9,255 2 % (2,381) (1) %

Net income (loss)

$ 10,057 2 % $ (28,214) (6) %

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Year Ended December 31,

2023 2022 2021

Marketing and advertising $ 2,413 $ 2,201

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Our commission revenue, other revenue and total revenue are summarized as follows (dollars in thousands):

Change Change

2024 2023 $ %

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• a $71.9 million, or 20%, increase in commission revenue from the Medicare segment driven by:

◦ net adjustment revenue from prior period enrollments of $33.5 million in 2023 compared to $(2.3) million of net adjustment revenue in 2022;

◦ improved constrained LTV of commissions per approved member for Medicare Advantage and Medicare Part D plans;

◦ partially offset by a 7% decline in Medicare plan approved members across all Medicare products that we market;

◦ a decrease in constrained LTV of commissions per approved member for Medicare Supplement plans.

• a $3.2 million, or 8%, increase in commission revenue from the E&I segment primarily driven by:

◦ net adjustment revenue from prior period enrollments of $14.5 million in 2023 compared to $8.7 million of net adjustment revenue in 2022;

◦ improved constrained LTV of commissions per approved member for both qualified and non-qualified plans;

◦ partially offset by a 18% decrease in individual and family plan approved members;

◦ a 21% decline in ancillary product approved members.

Other revenue increased $4.8 million, or 11%, in 2023 compared to 2022 due to an increase in non-broker of record revenue and post-enrollment services we provide to Medicare plan members.

◦ a 26% increase in Medicare Advantage plan approved members,

◦ improved constrained LTV of commissions per approved member for Medicare Advantage and Medicare Supplement plans,

◦ partially offset by lower net adjustment revenue from prior period enrollments, which was $18.7 million in 2024 compared to $33.5 million in 2023, and

◦ decreases in approved membership for both Medicare Supplement and Medicare Part D plans.

• a $14.2 million, or 32%, decrease in commission revenue from the E&I segment primarily driven by:

◦ lower net adjustment revenue from prior period enrollments, which was $4.1 million in 2024 compared to $14.5 million in 2023,

◦ a 24%, 9% and 30% decrease in individual and family plan, ancillary product and small business approved members, respectively,

◦ partially offset by a 17% and 14% improvement in constrained LTV of commissions per approved member for dental and vision plans, respectively.

Other revenue increased $21.8 million, or 45%, in 2024 compared to 2023.

This increase was driven by the expansion of our fee-based BPO arrangements, as well as an increase in sponsorship revenue.

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

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See Segment Information below and Note 2 – Revenue in our Notes to Consolidated Financial Statements for more information on commission revenue.

2022 compared to 2021 – Commission revenue decreased $131.9 million, or 27%, in 2022 compared to 2021 due to:

• a $109.1 million, or 25%, decrease in commission revenue from the Medicare segment driven by:

◦ a 28% decline in Medicare plan approved members across all Medicare products that we market;

◦ partially offset by net adjustment revenue from prior period enrollments of $(2.3) million in 2022 which was favorable compared to $(8.4) million of net adjustment revenue from prior period enrollments in 2021.

• a $22.7 million, or 36%, decrease in commission revenue from the E&I segment driven by:

◦ a 22% decrease in individual and family plan approved members;

◦ a 26% decline in ancillary product approved members;

◦ $8.7 million in net adjustment revenue from prior period enrollments in 2022 compared to $30.2 million of net adjustment revenue from prior period enrollments in 2021.

Other revenue decreased $1.0 million, or 2%, in 2022 compared to the same period in 2021 due to a decrease in advertising revenue.

Cost of Revenue

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

Change Change

2024 2023 $ %

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% of total revenue — % — %

2023 compared to 2022 – Cost of revenue increased $0.1 million in 2023, compared to 2022, primarily due to increased activity from our revenue sharing arrangements.

2022 compared to 2021 – Cost of revenue decreased $0.3 million in 2022, compared to 2021, primarily due to decreased activity from our revenue sharing arrangements.

2024 compared to 2023 – Cost of revenue remained relatively flat in 2024 compared to 2023.

Marketing and Advertising

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.

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.

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.

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

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

Change Change

2024 2023 $ %

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% of total revenue 36 % 38 %

2023 compared to 2022 – Marketing and advertising expenses decreased by $21.8 million, or 11%, in 2023, compared to 2022, primarily driven by a $22.9 million decrease in variable advertising costs and a $2.7 million decrease in consulting costs, partially offset by increases of $2.8 million in personnel related costs and $1.8 million of expenses related to our Company rebrand, which launched in early October 2023.

The decrease in variable advertising expenses was due to a decrease in our direct marketing, specifically online advertising and select lead generation partners as we shifted to a more targeted deployment of our marketing budget to emphasize the highest performing channels.

2022 compared to 2021 – Marketing and advertising expenses decreased by $76.2 million, or 28%, in 2022, compared to 2021, primarily due to a $70.7 million decrease in variable advertising costs, $6.8 million

decrease in stock-based compensation, and $1.4 million decrease in personnel related costs, partially offset by increases of $1.9 million in consulting costs and $1.3 million in facilities and operating costs.

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

2024 compared to 2023 – Marketing and advertising expenses increased by $18.2 million, or 11%, in 2024, compared to 2023, primarily driven by a $16.7 million increase in variable advertising costs and a $2.5 million increase in personnel related costs, partially offset by a decrease of $1.1 million in costs related to our Company rebrand, which was primarily completed in 2023.

The increase in variable advertising expenses was due to an increased investment in our direct marketing during this past AEP, partially offset by a decrease in affiliate partner channels as we emphasized our highest performing marketing channels.

Customer Care and Enrollment

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

Change Change

2024 2023 $ %

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2024 compared to 2023 – Customer care and enrollment expenses increased by $13.9 million, or 9%, in 2024 compared to 2023.

This increase was primarily due to a $17.7 million increase in personnel costs associated with a higher headcount, including to the hiring, training and licensing of our new benefit advisors.

2022 compared to 2021 – Customer care and enrollment expenses decreased by $38.2 million, or 21%, in 2022 compared to 2021.

This decrease was primarily due to a $32.1 million decrease in personnel costs associated with a decrease in headcount, a $5.9 million decrease in consulting expenses and a $0.7 million decrease in stock-based compensation expense, partially offset by a $0.7 million increase in facilities and other operating expenses.

The decrease in personnel costs reflects our targeted headcount reduction implemented in April 2022 and our decision to limit the hiring of new benefit advisors in preparation for the annual enrollment period in the fourth quarter, compared to 2021.

This increase was primarily due to a $19.2 million increase in personnel costs associated with a higher number of benefit advisors, partially offset by a decrease of $4.9 million in consulting expenses.

Technology and Content

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Our technology and content expenses are summarized as follows (dollars in thousands):

Change Change

2024 2023 $ %

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% of total revenue 10 % 13 %

2023 compared to 2022 – Technology and content expenses decreased $17.8 million, or 23%, in 2023 compared to 2022, primarily due to decreases of $10.4 million in personnel and compensation costs due to lower headcount, $5.4 million in facilities and other operating costs and $1.5 million in stock-based compensation expense.

2022 compared to 2021 – Technology and content expenses decreased $5.0 million, or 6%, in 2022 compared to 2021, reflective of our cost reduction program and primarily due to decreases of $4.0 million in stock-based compensation expense, $2.8 million in consulting costs, $1.5 million in personnel and compensation costs

due to lower headcount and a $1.6 million decrease in depreciation and amortization, partially offset by increases of $4.4 million in amortization of internally-developed software and $0.5 million in facilities and other operating costs.

2024 compared to 2023 – Technology and content expenses decreased $5.1 million, or 9%, in 2024 compared to 2023, primarily due to decreases of $3.0 million in amortization of internally developed software, $1.2 million in personnel related costs and $1.2 million in stock-based compensation expense.

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, internal audit, facilities, and internal information technology departments.

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, including audit, tax, legal, government affairs, and information technology fees.

Our general and administrative expenses are summarized as follows (dollars in thousands):

Change Change

2024 2023 $ %

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% of total revenue 17 % 22 %

2023 compared to 2022 – General and administrative expenses increased by $15.0 million, or 21%, in 2023 compared to 2022, primarily driven by increases of $11.6 million in facilities and other operating costs, $5.6 million in compensation and personnel costs and $3.9 million in stock-based compensation expense, partially offset by decreases of $2.7 million in consulting costs, $2.4 million in licensing fees and $1.8 million in depreciation and amortization expense.

2022 compared to 2021 – General and administrative expenses decreased by $3.9 million, or 5%, in 2022 compared to 2021, primarily due to decreases of $9.5 million in facilities and other operating costs and $1.0 million in stock-based compensation expense, partially offset by an increase of $5.9 million in compensation and personnel costs.

Amortization of Intangible Assets

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

Change Change

2023 $ % 2022 $ % 2021

Amortization of intangible assets $ — $ — * $ — $ (536) (100) % $ 536

% of total revenue — % — % — %

2023 compared to 2022 – We had no amortization expense in 2023 or 2022.

2022 compared to 2021 – Amortization expense decreased in 2022 compared to 2021 due to the impairment of our finite-lived intangible assets at December 31, 2021.

2024 compared to 2023 – General and administrative expenses decreased by $9.6 million, or 10%, in 2024 compared to 2023, primarily due to decreases of $3.3 million in facilities and other operating costs, $2.4 million in personnel related costs due to lower headcount, $2.1 million in professional fees, and $1.9 million in stock-based compensation expense.

Impairment, Restructuring and Other Charges

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Our impairment, restructuring and other charges are summarized as follows (dollars in thousands):

Change Change

2024 2023 $ %

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% of total revenue 2 % — %

2023 compared to 2022 – We incurred no impairment, restructuring and other charges for the year ended December 31, 2023, compared to $19.6 million for 2022.

The charges from 2022 primarily consisted of $12.1 million related to the subleasing and vacating of several of our office spaces and $7.5 million of severance and other personnel related cost as a result of the restructuring that took place throughout 2022.

2022 compared to 2021 – Impairment, restructuring and other charges for the year ended December 31, 2022 primarily consisted of $12.1 million related to the subleasing and vacating of several of our office spaces, primarily consisting of $9.6 million of operating lease right-of-use asset and $2.2 million of property, plant and equipment impairment charges as well as $7.5 million of severance and other personnel related cost as a result of the restructuring that took place throughout 2022.

In the first half of 2022, we eliminated 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 of restructuring charges.

In the second half of 2022, we incurred pre-tax restructuring charges of $1.3 million for additional eliminated positions.

______________

* Percentage calculated is not meaningful.

2024 compared to 2023 – We incurred $9.5 million in impairment, restructuring and other charges for the year ended December 31, 2024 compared to no impairment, restructuring and other charges for the same period in 2023.

The charges consisted of $7.5 million of impairment related to several of our leased office spaces, which included $7.0 million of operating lease right-of-use asset impairments and $0.5 million of property and equipment impairments.

We also incurred $2.0 million of restructuring charges which primarily related to employee termination benefits as a result of our continued cost-reduction efforts during the first half of fiscal 2024.

Interest Expense

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Our interest expense is summarized as follows (dollars in thousands):

Change Change

2024 2023 $ %

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% of total revenue (2) % (2) %

2023 compared to 2022 – Interest expense increased by $3.3 million, or 44%, primarily driven by a $3.2 million increase in debt interest expense as a result of higher interest rates and $0.5 million of debt issuance cost amortization.

2022 compared to 2021 – Interest expense increased by $6.8 million, or 803%, primarily driven by $5.9 million of interest expense and $1.3 million of debt issuance cost amortization related to the credit agreement with Blue Torch Finance, LLC, which was entered into during the first quarter of 2022.

2024 compared to 2023 – Interest expense increased by $0.2 million, or 2%, primarily driven by higher debt issuance cost amortization as a result of entering into a second amendment of our Credit Agreement and a slight increase in debt interest expense as a result of higher interest rates as compared to 2023.

Other Income, Net

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

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2024 2023 $ %

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2024 compared to 2023 – Other income, net was $6.9 million in 2024 compared to other income, net of $9.5 million in 2023.

The change was primarily driven by an increase of $5.6 million in interest income as a result of favorable short-term investment rates.

2022 compared to 2021 – Other income, net was $3.9 million in 2022 compared to other income, net of $1.6 million in 2021, primarily driven by an increase of $2.6 million in interest income.

Benefit from Income Taxes

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

Change Change

The change was primarily driven by $1.3 million of third-party fees in 2024 as a result of entering into a second amendment of our Credit Agreement and a decrease of $1.2 million in interest income as a result of less favorable short-term investment rates.

Provision for (Benefit from) Income Taxes

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

2024 2023 $ %

Benefit from income taxes

Provision for (benefit from) income taxes

$ 9,255 $ (2,381) $ 11,636 (489) %

Effective tax rate 47.9 % 7.8 %

Year Ended December 31, 2023 – For the year ended December 31, 2023, we recorded a benefit from income taxes of $2.4 million representing an effective tax rate of 7.8%.

In 2023, the effective tax rate was lower than the statutory tax rate due to stock-based compensation adjustments and changes to the valuation allowance, offset by state tax and research and development tax credits.

Year Ended December 31, 2024 – For the year ended December 31, 2024, we recorded a provision for income taxes of $9.3 million representing an effective tax rate of 47.9%.

In 2024, the effective tax rate was higher than the statutory tax rate due to stock-based compensation adjustments and state tax, offset by research and development tax credits.

Year Ended December 31, 2023 – For the year ended December 31, 2023, we recorded a benefit from income taxes of $2.4 million representing an effective tax rate of 7.8%.

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

In 2021, the effective tax rate was lower than the statutory tax rate due to goodwill impairment, stock-based compensation adjustments, changes to the valuation allowance, partially offset by research and development tax credits.

Segment Information

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

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

Our CODM considers budget-to-actual variances on a monthly basis for our segment performance measures when making decisions about allocating capital and personnel to our segments.

These performance measures include total segment revenue and segment gross profit (loss).

Prior to the fourth quarter of 2024, we reported our measure of segment profitability as segment profit (loss).

Accordingly, prior period amounts have been reclassified to conform to the current period presentation, in all material respects.

Our business structure is comprised of two operating segments:

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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 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.

To a lesser extent, the E&I segment consists of amounts earned from our online sponsorship and advertising program that allows carriers to purchase advertising space in specific markets in a sponsorship area on our website, and our technology licensing and lead referral 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.

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.

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, amortization of intangible assets, impairment, restructuring and other charges, interest expense and other income (expense), net.

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

Change Change

The Medicare segment consists primarily of commissions earned as the broker of record from our sale of Medicare-related health insurance plans, including Medicare Advantage, Medicare Supplement and Medicare Part D prescription drug plans, and to a lesser extent, ancillary products sold to our Medicare-eligible beneficiaries, including but not limited to, dental and vision plans.

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

The Medicare segment consists of amounts earned in connection with our advertising programs that allow 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 Medicare segment also generates revenue from our fee-based BPO services where we are not the broker of record and cash is collected in advance or in close proximity to when revenue is recognized.

The E&I segment consists primarily of commissions earned from our sale of individual and family plans, including both qualified and non-qualified, small business health insurance plans and ancillary products sold to our non-Medicare-eligible consumers, including but not limited to, dental, vision and short-term 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 on our website as well as our technology licensing activities.

Segment gross profit (loss) is calculated as total revenue for the applicable segment less variable marketing and advertising, segment CC&E and cost of revenue for the applicable segment.

Variable marketing and advertising expenses represent costs incurred in member acquisition from our direct marketing and marketing partner channels and exclude fixed overhead costs, such as personnel related costs, consulting expenses and other operating costs allocated to the marketing and advertising department.

Segment CC&E expenses include expenses we incur in assisting applicants during the enrollment process and exclude operating costs allocated to the CC&E department.

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

2024 2023 $ %

Medicare $ 406,467 $ 44,780 12 % $ 361,687 $ (109,530) (23) % $ 471,217

Employer and Individual 46,404 2,735 6 % 43,669 (23,313) (35) % 66,982

Total revenue

Segment profit (loss)

$ 500,638 $ 406,467 $ 94,171 23 %

Variable marketing and advertising

(157,121) (141,487) (15,634) (11) %

Medicare CC&E (150,613) (137,910) (12,703) (9) %

Cost of revenue

(1,396) (1,312) (84) (6) %

Medicare segment gross profit

$ 191,508 $ 125,758 $ 65,750 52 %

Employer and Individual:

Total revenue

$ 31,772 $ 46,404 $ (14,632) (32) %

Segment profit 80,589 69,024 597 % 11,565 (22,061) (66) % 33,626

Corporate (66,534) (13,296) (25) % (53,238) 3,087 5 % (56,325)

Stock-based compensation expense (23,213) (2,897) (14) % (20,316) 12,541 38 % (32,857)

Depreciation and amortization

Variable marketing and advertising

(4,321) (3,304) (1,017) (31) %

E&I CC&E (10,103) (9,214) (889) (10) %

Cost of revenue

(398) (459) 61 13 %

E&I segment gross profit

$ 16,950 $ 33,427 $ (16,477) (49) %

Consolidated:

Total revenue

$ 532,410 $ 452,871 $ 79,539 18 %

Variable marketing and advertising

(161,442) (144,791) (16,651) (12) %

(160,716) (147,124) (13,592) (9) %

Cost of revenue

(1,794) (1,771) (23) (1) %

Total segment gross profit

$ 208,458 $ 159,185 $ 49,273 31 %

A reconciliation of our segment gross profit (loss) to the Consolidated Statements of Comprehensive Income (Loss) for the periods presented is as follows (in thousands):

Year Ended December 31,

Total segment gross profit $ 208,458 $ 159,185

Other marketing and advertising (1)

(29,395) (27,849)

Other CC&E (2)

(2,732) (2,438)

Technology and content (53,520) (58,609)

General and administrative (89,765) (99,363)

Impairment, restructuring and other charges (9,475) —

Amortization of intangible assets — — — % — 536 100 % (536)

Interest expense (11,159) (10,974)

Other income, net 6,900 9,453

Loss before income taxes $ (30,595) 75,794 71 % $ (106,389) 18,501 15 % $ (124,890)

Income (loss) before income taxes

$ 19,312 $ (30,595)

(1) Other marketing and advertising costs consist of fixed marketing and advertising, previously capitalized labor, depreciation and share-based compensation costs.

(2) Other CC&E costs consist of previously capitalized labor, depreciation and share-based compensation costs.

Medicare Segment

2023 compared to 2022 – Revenue from our Medicare segment increased $44.8 million, or 12%, in 2023 compared to 2022, primarily attributable to a $39.5 million increase in Medicare segment commission revenue.

The increase in Medicare segment commission revenue was primarily due to a $42.3 million increase in Medicare Advantage plan commission revenue, driven by $33.5 million in net adjustment revenue in 2023 compared to $(2.3) million in net adjustment revenue in 2022, partially offset by a 4% decline in Medicare Advantage approved members.

Our Medicare segment profit was $54.7 million in 2023, an increase of $64.6 million or 655%, compared to 2022 segment loss of $9.9 million.

This was driven by a $44.8 million increase in revenue and a $19.8 million decrease in operating expenses, excluding stock-based compensation expense, depreciation and amortization expenses, impairment, restructuring and other charges, interest expense and other income (expense).

The decrease in operating expenses was mostly attributable to impacts from the continuation of our transformation initiatives from the prior year.

2022 compared to 2021 – Revenue from our Medicare segment decreased $109.5 million, or 23%, in 2022 compared to 2021, primarily attributable to a $109.1 million decrease in Medicare segment commission revenue.

The decrease in Medicare segment commission revenue was primarily due to a $100.3 million decrease in Medicare Advantage plan commission revenue, driven by a 24% decline in Medicare Advantage approved members.

Our Medicare segment loss was $9.9 million in 2022, a decrease of $2.2 million or 18%, compared to 2021 segment loss of $12.1 million.

This was driven by a $111.7 million decrease in operating expenses, excluding stock-based compensation expense, depreciation and amortization expenses, impairment, restructuring and other charges, interest expense and other income (expense), offset by a $109.5 million decrease in revenue.

The decrease in operating expenses was mostly attributable to impacts from our transformation initiatives in 2022.

2024 compared to 2023 – Revenue from our Medicare segment increased $94.2 million, or 23%, in 2024 compared to 2023, primarily driven by:

• a $71.9 million increase in Medicare segment commission revenue due to:

◦ a $59.1 million increase in Medicare Advantage plan commission revenue, driven by 26% growth in Medicare Advantage plan approved members and improved constrained LTV of commissions per approved Medicare Advantage member,

◦ partially offset by lower net adjustment revenue which was $18.7 million in 2024 compared to $33.5 million in 2023.

• a $19.8 million increase in Medicare segment fee-based revenue driven by growth in our fee-based BPO arrangements.

Our Medicare segment gross profit was $191.5 million in 2024, an increase of $65.8 million or 52%, compared to 2023 segment gross profit of $125.8 million driven by:

• a $94.2 million increase in Medicare segment revenue,

• partially offset by increases of $15.6 million in variable marketing and advertising expenses and $12.7 million in segment CC&E expenses primarily due to the continued execution on our initiatives to attract and retain beneficiaries in 2024, including having a larger group of benefit advisors compared to 2023.

Employer and Individual Segment

2023 compared to 2022 – Revenue from our E&I segment increased $2.7 million, or 6%, in 2023 compared to 2022, primarily attributable to a $3.2 million increase in commission revenue, driven by $14.5 million in net adjustment revenue from prior period enrollments in 2023 compared to net adjustment revenue of $8.7 million in 2022, partially offset by an 18% decline in individual and family plan approved members and a 21% decline in ancillary plan approved members compared to the same period in 2022.

Our E&I segment profit was $25.8 million in 2023, an increase of $4.4 million, or 21%, compared to 2022.

The increase was driven by a $2.7 million increase in revenue and a $1.7 million decrease in operating expenses, excluding stock-based compensation expense, depreciation and amortization expenses, impairment, restructuring and other charges, interest expense and other income (expense).

The decrease in operating expenses was mostly attributable to impacts from our transformation initiatives in 2022.

2022 compared to 2021 – Revenue from our E&I segment decreased $23.3 million, or 35%, in 2022 compared to 2021, primarily attributable to a $22.7 million decrease in commission revenue, driven by a 22% decline in individual and family plan approved members and a 26% decline in ancillary plan approved members compared to the same period in 2021, along with $8.7 million in net adjustment revenue from prior period enrollments in 2022 compared to net adjustment revenue of $30.2 million in 2021.

Our E&I segment profit was $21.4 million in 2022, a decrease of $24.3 million, or 53%, compared to 2021.

The decrease was driven by a $23.3 million decrease in revenue and a $1.0 million increase in operating expenses, excluding stock-based compensation expense, depreciation and amortization expenses, impairment, restructuring and other charges, interest expense and other income (expense).

2024 compared to 2023 – Revenue from our E&I segment decreased $14.6 million, or 32%, in 2024 compared to 2023, primarily driven by a $14.2 million decrease in commission revenue as a result of:

• lower net adjustment revenue year-over-year, which was $4.1 million in 2024 compared to $14.5 million in 2023;

• a 24%, 9% and 30% decline in individual and family plan, ancillary plan and small business plan approved members, respectively, compared to the same period in 2023.

Our E&I segment gross profit was $17.0 million in 2024, a decrease of $16.5 million, or 49%, compared to 2023 primarily driven by:

• a $14.6 million decrease in E&I segment revenue;

• increases of $1.0 million in variable marketing and advertising and $0.9 million in segment CC&E expenses mostly attributable to investments in our operational enhancements for our E&I segment that are underway.

Liquidity and Capital Resources

As of December 31, 2024, we had cash, cash equivalents and short-term marketable securities of $82.2 million.

During the year ended December 31, 2023, our operating outflow was $6.7 million, as summarized below.

During the year ended December 31, 2024, our operating cash outflow was $18.4 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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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 and $3.2 million in restricted cash as of December 31, 2023 and December 31, 2022, respectively.

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

Material Cash Requirements

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in a private placement and received $214.0 million net proceeds on April 30, 2021.

During the year ended December 31, 2023, we made our 2% semiannual cash dividend payment in the aggregate amount of $3.5 million.

During the year ended December 31, 2024, we paid cash dividends in the aggregate amount of $5.6 million.

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

In addition, the Company is required to maintain an Asset Coverage Ratio (as defined in the H.I.G.

Investment Agreement) of at least 2.5x, which increased from 2.0x in August 2023 (the “Minimum Asset Coverage Ratio”) and a Minimum Liquidity Amount (as defined in the H.I.G.

Investment Agreement) of at least 2.5x (the “Minimum Asset Coverage Ratio”) and a Minimum Liquidity Amount (as defined in the H.I.G.

Investment Agreement).

Failure to maintain the Minimum Asset Coverage Ratio or the Minimum Liquidity Amount as of the date or the time period as required by the H.I.G.

Failure to maintain the Minimum Asset Coverage Ratio or the Minimum Liquidity Amount as of the date or 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 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.

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

As of December 31, 2023, we complied with the Minimum Liquidity Amount.

See Note 6 – Convertible Preferred Stock in our Notes to Consolidated Financial Statements for more information.

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.

Our failure to maintain the Minimum Asset Coverage Ratio does not entitle H.I.G.

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.

On March 13, 2024, the Nominating and Corporate Governance Committee of our Board of Directors approved the appointment of a board observer designated by H.I.G.

As of November 30, 2024, we were no longer in compliance with the Minimum Liquidity Amount.

The non-compliance with the Minimum Asset Coverage Ratio or the Minimum Liquidity Amount does not entitle H.I.G.

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.

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 (the “Original Credit Agreement), which agreement was subsequently amended on August 16, 2022 (the “First Amendment”) to update our borrowing benchmark from LIBOR to SOFR (as amended by the First Amendment, the “First Amended Credit Agreement”).

On November 1, 2024, we entered into a second amendment (the "Second Amendment") to the First Amended Credit Agreement (as amended by the Second Amendment, 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.

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

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

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

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 the 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.

The Second Amendment reduced the margin from 7.50% to 7.00% for Adjusted Term SOFR loans and from 6.50% to 6.00% for base rate loans.

As of December 31, 2024, the interest rate was 11.78%.

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As of December 31, 2024, the carrying value of the loan under the Credit Agreement was $68.5 million and we were in compliance with our loan covenants.

See Note 12 – Debt in our Notes to Consolidated Financial Statements regarding our previously terminated credit agreement with RBC and additional information regarding the Credit Agreement.

See Note 12 – Debt in our Notes to Consolidated Financial Statements for additional information regarding the Credit Agreement.

Availability and Use of Cash

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 Annual Report on Form 10-K, 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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Year Ended December 31,

2023 2022 2021

Net cash used in operating activities $ (18,366) $ (6,692)

Net cash provided by (used in) investing activities (15,893) 25,861 (12,631)

Net cash provided by (used in) financing activities (6,224) 63,838 213,241

Net cash used in investing activities

(48,421) (15,893)

Net cash used in financing activities

(9,674) (6,224)

Operating Activities

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

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

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

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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.

A significant portion of our marketing and advertising expense is directly correlated with the number of health insurance applications submitted on our ecommerce platforms.

Since our marketing and advertising costs are expensed and generally paid as incurred, and since commission revenue is recognized upon approval of a member but commission payments are paid to us over time, our operating cash flows could be adversely impacted

by a substantial increase in the volume of applications submitted during a quarter or positively impacted by a substantial decline in the volume of applications submitted during a quarter.

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

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

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

Year Ended December 31, 2023 – Net cash used in operating activities was $6.7 million during 2023 was, primarily driven by a net loss of $28.2 million and changes in net operating assets and liabilities of $19.6 million, partially offset by adjustments for non-cash items of $41.2 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.

Year Ended December 31, 2024 – Net cash used in operating activities of $18.4 million during 2024 was primarily driven by changes in net operating assets and liabilities of $81.7 million, partially offset by adjustments for non-cash items of $53.3 million and net income of $10.1 million.

Cash used from changes in net operating assets and liabilities during 2024 primarily consisted of increases of $81.9 million in contract assets – commissions receivable, $12.8 million in accounts receivable and $4.2 million in prepaid expenses, partially offset by a decrease of $16.2 million in accounts payable.

Adjustments for non-cash items primarily consisted of $19.9 million of stock-based compensation expense, $14.4 million of amortization of internally developed software, $9.2 million in deferred income taxes, $7.5 million of impairment charges and $2.0 million in depreciation and amortization expense.

Year Ended December 31, 2023 – Net cash used in operating activities of $6.7 million during 2023 was, primarily driven by a net loss of $28.2 million and changes in net operating assets and liabilities of $19.6 million, partially offset by adjustments for non-cash items of $41.2 million.

Cash used from changes in net operating assets and liabilities during 2023 primarily consisted of increases of $33.6 million in contract assets – commissions receivable and $1.9 million in prepaid expenses as well as a decrease of $3.4 million in accrued marketing expenses, partially offset by increases of $20.1 million in accrued compensation and benefits.

Adjustments for non-cash items primarily consisted of $23.2 million of stock-based compensation expense and $17.4 million of amortization of internally developed software and $2.5 million in depreciation and amortization expense, partially offset by $2.7 million in deferred income taxes.

Year Ended December 31, 2022 – Net cash used in operating activities was $26.9 million during 2022, primarily driven by a net loss of $88.7 million, partially offset by changes in net operating assets and liabilities of $24.7 million and adjustments for non-cash items of $37.2 million.

Cash provided by changes in net operating assets and liabilities during 2022 primarily consisted of decreases of $23.8 million in contract assets – commissions receivable and $13.5 million in prepaid expenses as well as an increase of $4.2 million in accrued compensation and benefits, partially offset by decreases of $12.6 million in accrued marketing expenses and $7.0 million in accounts payable.

Adjustments for non-cash items primarily consisted of $20.3 million of stock-based compensation expense, $17.3 million of amortization of internally-developed software, and $12.1 million of impairment charges on right-of use assets and associated property, plant and equipment, partially offset by $18.4 million in deferred income taxes.

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

Cash used from changes in net operating assets and liabilities during 2021 primarily consisted of an increase of $116.0 million in contract assets – commissions receivable, a decrease of $23.1 million in accounts payable, an increase of $7.9 million in prepaid expenses, and a decrease of $4.1 million in accrued compensation and benefits, partially offset by an increase of $18.6 million in accrued marketing expenses.

Adjustments for non-cash items primarily consisted of $32.9 million of stock-based compensation expense, $12.9 million of amortization of internally-developed software, partially offset by $21.5 million 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, capitalized internal-use software and security deposit payments.

Year Ended December 31, 2023 – Net cash used in investing activities of $15.9 million during 2023 mainly consisted of $54.5 million used to purchase marketable securities and $8.7 million of capitalized internal-use software and website development costs, primarily offset by $49.4 million of proceeds from redemption and maturities of marketable securities.

Year Ended December 31, 2022 – Net cash provided by investing activities of $25.9 million during 2022 mainly consisted of $49.8 million of proceeds from redemption and maturities of marketable securities, partially

offset by $15.3 million of capitalized internal-use software and website development costs and $8.4 million used to purchase marketable securities.

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

Year Ended December 31, 2024 – Net cash used in investing activities of $48.4 million during 2024 mainly consisted of $97.0 million used to purchase marketable securities and $10.8 million of capitalized internal-use software and website development costs, partially offset by $61.4 million of proceeds from redemption and maturities of marketable securities.

Year Ended December 31, 2023 – Net cash used in investing activities of $15.9 million during 2023 mainly consisted of $54.5 million used to purchase marketable securities and $8.7 million of capitalized internal-use software and website development costs, partially offset by $49.4 million of proceeds from redemption and maturities of marketable securities.

Financing Activities

Year Ended December 31, 2024 – Net cash used in financing activities of $9.7 million during 2024 was primarily attributable to $5.6 million of preferred stock cash dividends, $3.4 million of cash used for share repurchases to satisfy employee tax withholding obligations and $1.1 million for payment of debt issuance costs.

Year Ended December 31, 2023 – Net cash used in financing activities of $6.2 million during 2023 was primarily attributable to $3.5 million of preferred stock cash dividends and $3.3 million of cash used for share repurchases to satisfy employee tax withholding obligations.

Year Ended December 31, 2022 – Net cash provided by financing activities of $63.8 million during 2022 was primarily attributable to $64.9 million of net proceeds from debt financing and $2.2 million of net proceeds from exercises of common stock options, partially offset by $3.1 million of cash used for share repurchases to satisfy employee tax withholding obligations.

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

See Note 6 – Convertible Preferred Stock in our Notes to Consolidated Financial Statements for information regarding our preferred stock transaction in 2021 .

We also had $3.1 million and $3.1 million in restricted cash as of December 31, 2024 and 2023, respectively.

As of December 31, 2023 and 2022, we had 2.1 million and 1.7 million shares held in treasury stock, respectively, that were shares repurchased to satisfy tax withholding obligations.

As of December 31, 2023 and 2022, we had a total of 12.8 million and 12.4 million shares held in treasury stock, respectively, including 10.7 million shares previously repurchased.

As of December 31, 2024 and 2023, we had a total of 13.4 million and 12.8 million shares held in treasury stock, respectively.

This included 2.7 million and 2.1 million shares, respectively, as of December 31, 2024 and 2023 that were repurchased to satisfy tax withholding obligations and 10.7 million shares previously repurchased as of December 31, 2024 and 2023.

See Item 1 , Business – Seasonality, for information regarding seasonal impacts on our business and financial condition and results of operations.

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Revenue Recognition and Contract Assets - Commissions Receivable

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

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

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

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

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

We estimate the commissions we expect to collect for each approved member cohort by evaluating various factors, including but not limited to, commission rates, carrier mix, estimated average plan duration, the regulatory environment, and cancellations of insurance plans offered by health insurance carriers with which we have a relationship.

Contract assets - commissions receivable represent the variable consideration for policies that have not renewed yet and therefore are subject to the same assumptions, judgements and estimates used when recognizing revenue as noted above.

For Medicare, 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 constrained LTVs for the plan.

Commission Revenue – Our commission revenue results from approval of a submitted 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 (“LTV”) of commission payments that we expect to receive after the health insurance carrier approves the application, net of an estimated constraint.

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 estimate the commissions we expect to collect by evaluating various factors, including but not limited to estimating conversion of an approved member to a paying member, forecasting average plan duration and forecasting the commission amounts likely to be received per member.

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

The estimated average plan duration used to calculate Medicare health insurance plan LTVs historically has been approximately 2 to 5 years, while the estimated average plan duration used to calculate the LTV for major medical individual and family health insurance plans historically has been approximately 1.5 to 2 years.

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.

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

The estimated average plan duration used to calculate Medicare health insurance plan LTVs historically has been approximately 2-5 years, while the estimated average plan duration used to calculate the LTV for major medical individual and family health insurance plans historically has been approximately 1.5 to 2 years.

We determine the constraint for each product by comparing cash collection patterns to our assumptions and analyze the drivers for variations.

We then apply judgment in assessing whether the difference between historical cash collections and LTV is representative of differences 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, changes in laws and regulations and cancellations of insurance plans offered by health insurance carriers with which we have a relationship.

We evaluate the appropriateness of our constraints on an annual basis, and we update our assumptions when we observe a sufficient amount of evidence that would suggest that the long-term expectation underlying the assumptions has changed.

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

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

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

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

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

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

Stock-Based Compensation

We recognize stock-based compensation expense in the accompanying Consolidated Statements of Comprehensive 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 and one year for non-employee directors or the one-year anniversary of achieving performance criteria for performance-based awards.

The estimated attainment of performance-based awards and related expense is based on the achievement of certain financial targets over a predetermined performance period, subject to the discretion of the Company's compensation committee.

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

We recognize stock-based compensation expense in the accompanying Consolidated Statements of Comprehensive Income (Loss) ratably based on the fair value of our stock-based awards over their respective requisite service periods, typically the vesting period, which is generally three to four years for service-based awards for employees and one year for outside directors or the one-year anniversary of achieving performance criteria for performance-based awards.

Stock-based compensation expense is recognized net of estimated forfeitures.

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.

compensation committee.

The estimated grant date fair value of market-based performance awards is determined using the Monte-Carlo simulation model and requires the input of subjective assumptions.

The estimated fair value for non-market-based performance stock units is estimated on the date of grant based on the current market price of our common shares.

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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.

Since tax laws and financial accounting standards differ in their recognition and measurement of assets, liabilities, equity, revenues, expenses, gains and losses, differences arise between the amount of taxable income and pretax financial income for a year and between the tax bases of assets or liabilities and their reported amounts in our financial statements.

Since tax laws and financial accounting standards differ in their recognition and measurement of assets, liabilities, equity, revenue, expenses, gains and losses, differences arise between the amount of taxable income and pretax financial income for a year and between the tax bases of assets or liabilities and their reported amounts in our financial statements.

Because we assume that the reported amounts of assets and liabilities will be recovered and settled, respectively, a difference between the tax basis of an asset or a liability and its reported amount in the balance sheet will result in a taxable or a deductible amount in some future years when the related liabilities are settled or the reported amounts of the assets are recovered, which gives rise to a deferred tax asset or liability.

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

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

As a result, this could affect our effective tax rate and the amount of income tax expense we record, and pay, in future periods.

Recent Accounting Pronouncements

See Note 1 – Summary of Business and Significant Accounting Policies in the Notes to Consolidated Financial Statements for the 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 Consolidated Financial Statements for the recently issued accounting standards that could have an effect on us.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act, we are not required to provide the information called for by this Item.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis