eHealth, Inc. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Please read the following discussion and analysis together with our condensed consolidated financial statements and accompanying notes included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024 (the “Annual Report”). This discussion and analysis contains forward-looking statements, which involve risks and uncertainties. As a result of many factors, such as those described under “Cautionary Note Regarding Forward-Looking Statements,” “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report, our actual results may differ materially from those anticipated in these forward-looking statements. Overview 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 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 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 Our fiscal 2025 growth strategy is focused on pursuing deliberate revenue diversification and scaling of our business, evolving our brand awareness for all products and channels, improving member retention and conversions on our platform while continuing to evolve our telesales organization, advancing our digital technology leadership, and strengthening and expanding health insurance carrier partnerships. During the first quarter of 2025, we maintained the momentum we built during the most recent Annual Enrollment Period (“AEP”), which observed strong consumer demand driven by recent Medicare Advantage plan benefit and premium changes, plan cancellations and market exits due primarily to carriers facing higher medical costs and regulatory pressures. As a result, we delivered strong Medicare Advantage enrollment growth in Q1 2025, with 25% growth in total Medicare Advantage submissions, inclusive of our broker of record and fee-based business process outsourcing (“BPO”) arrangements, compared to the same period in 2024. Submissions describe applications that are submitted by individuals online through our eHealth platform or completed with the assistance of our benefit advisors where the individual provides authorization to the benefit advisor to submit the application to the insurance carrier partner. The individual may have additional actions to take before the application will be reviewed by the insurance carrier and not all submissions ultimately become approved members. Additionally, we observed improvements in our cash flow from operations for the three months ended March 31, 2025, compared to the same period in 2024, reflecting strong cash collections from new enrollments. During the first quarter of 2025, we invested in our post-enrollment retention strategy and nearly doubled the size of our retention and customer service team. Despite this investment, Medicare unit margins experienced meaningful expansion in Q1 2025, compared to the same period in 2024. Additionally, we began piloting the 27 Table of Contents integration of artificial intelligence across several components of our telephonic enrollment platform during the second quarter of 2025. Summary of Selected Metrics We rely upon certain metrics to estimate and recognize commission revenue, evaluate our business performance and facilitate strategic planning. Our commission revenue is influenced by a number of factors including but not limited to: • the number of individuals on applications for Medicare-related, individual and family, small business and ancillary health insurance plans that are approved by the relevant health insurance carriers; • the number of approved members for Medicare-related, individual and family, small business and ancillary health insurance plans from whom we have received an initial commission payment; and • the constrained lifetime value (“LTV”) of approved members for Medicare-related, individual and family and ancillary health insurance plans we sell, as well as the estimated annual value of approved members for small business plans we sell. Approved Members 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 for which we are the broker of record. The applications may be submitted in either the current period or prior periods. Not all approved members ultimately become paying members. The following table shows approved members by product for the periods presented: Three Months Ended March 31, % Change 2025 2024 Medicare Medicare Advantage 82,671 65,750 26 % Medicare Supplement 2,565 6,182 (59) % Medicare Part D 2,642 3,575 (26) % Total Medicare 87,878 75,507 16 % Individual and Family 5,817 7,160 (19) % Ancillary 16,925 13,950 21 % Small Business 1,190 1,642 (28) % Total Approved Members 111,810 98,259 14 % Three Months Ended March 31, 2025 and 2024 – Total approved members grew 14% during the three months ended March 31, 2025 compared to the same period in 2024, driven by: • 16% growth in Medicare approved members, as a result of: ◦ a 26% increase in Medicare Advantage approved members due to a 21% increase in Medicare Advantage broker of record submissions primarily as a result of the continued increase in consumer demand due to recent market disruptions, increased variable marketing spend and an increased number of benefit advisors with improved telesales conversion rates year-over-year, ◦ partially offset by a 59% and 26% decline in Medicare Supplement and Medicare Part D approved members, respectively, primarily caused by the shift of some Medicare Supplement 28 Table of Contents broker of record arrangements to fee-based arrangements within our Amplify platform and a shift away from standalone Medicare Part D plans. • 21% growth in ancillary approved members primarily due to a targeted increase in hospital indemnity plan members and an increase in vision plan approved members, partially offset by declines in dental and short-term approved members; • a 19% and 28% decline in individual and family plan and small business health insurance plan approved members, respectively, primarily due to a decrease in volume as we continued to focus on implementing operational enhancements in our E&I segment. Estimated Constrained Lifetime Value of Commissions Per Approved Member The following table shows our estimated constrained LTV of commissions per approved member by product for the periods presented: Three Months Ended March 31, % Change 2025 2024 Medicare (1) (2) Medicare Advantage $ 907 $ 952 (5) % Medicare Supplement 1,256 957 31 % Medicare Part D 167 237 (30) % Individual and Family (1) Non-Qualified Health Plans 386 385 — % Qualified Health Plans 415 402 3 % Ancillary (1) Short-term 118 184 (36) % Dental 134 124 8 % Vision 88 84 5 % Small Business (1) 249 215 16 % __________ (1) Constrained LTV of commissions per approved member for Medicare, individual and family and ancillary plans represents commissions estimated to be collected over the estimated life of an approved member’s plan after applying constraints in accordance with our revenue recognition policy. Constrained LTV of commissions per approved member for small business represents the estimated commissions we expect to collect from the plan over the following twelve months. The estimate is driven by multiple factors, including but not limited to, contracted commission rates, carrier mix, estimated average plan duration, the regulatory environment, cancellations of insurance plans offered by health insurance carriers with which we have a relationship and applied constraints. The constraints are applied to help ensure that commissions estimated to be collected over the estimated life of an approved member’s plan are recognized as revenue only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with future commissions receivable from the plan is subsequently resolved. These factors may result in varying values from period to period. For additional information on constrained LTV, see “ Critical Accounting Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2024. (2) The constraints applied to the total estimated lifetime value of commissions we expect to receive for selling the plan after the carrier approves an application in order to derive the constrained LTV of commissions for approved members recognized for Medicare Advantage, Medicare Supplement and Medicare Part D were 5.5%, 9% and 7%, respectively, for the three months ended March 31, 2025 and 7%, 9% and 7%, respectively, for the three months ended March 31, 2024. Three Months Ended March 31, 2025 and 2024 – The changes in constrained LTV of commissions per approved member primarily consisted of: • a 5% decrease in Medicare Advantage plans, reflecting less favorable retention assumptions for the Q1 2025 cohorts compared to Q1 2024 cohorts, partly offset by lower constraint due to a decline in volatility and observed LTV trends; • a 31% increase in Medicare Supplement plans, primarily due to favorable carrier and contract mix and favorable retention assumptions for the Q1 2025 cohorts compared to Q1 2024 cohorts; 29 Table of Contents • a 30% decrease in Medicare Part D plans, primarily driven by unfavorable carrier and contract mix, partially offset by improved retention assumptions for the Q1 2025 cohorts compared to Q1 2024 cohorts; • a 3% increase in qualified health plans, primarily due to improved enrollment quality; • a 36% decrease in short-term plans, primarily driven by unfavorable retention assumptions year-over-year as a result of the regulatory change that decreased term limits for short-term health plans; and • an 8%, 5% and 16% increase in dental, vision and small business plans, respectively, primarily driven by favorable carrier and contract mix. Estimated Membership 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. For example, a member who is active on both an individual and family health insurance plan and a standalone dental plan will be counted as two continuing members. Health insurance carriers bill and collect insurance premiums paid by our members. The carriers do not report to us the number of members that we have as of a given date. The majority of our members who terminate their policies do so by discontinuing their premium payments to the carrier or notifying the carrier directly and do not inform us of the cancellation. Also, some of our members pay their premiums less frequently than monthly. 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 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. For instance, we reconcile information carriers provide to us and may determine that we were not historically paid commissions owed to us, which would cause us to have underestimated membership. Conversely, carriers may require us to return commission payments paid in a prior period due to policy cancellations for members we previously estimated as being active. We do not update our estimated membership numbers reported in previous periods. Instead, we reflect updated information regarding our historical membership in the membership estimate for the current period. If we experience a significant variance in historical membership as compared to our initial estimates, while we keep the prior period data consistent with previously reported amounts, we may provide the updated information in other communications or disclosures. As a result of the delay in our receipt of information from insurance carriers, actual trends in our membership are most discernible over periods longer than from one quarter to the next, making it difficult for us to determine with any certainty the impact of current conditions on our membership retention. Various circumstances could cause the assumptions and estimates that we make in connection with estimating our membership to be inaccurate, which would cause our membership estimates to be inaccurate. 30 Table of Contents The following table shows estimated membership by product as of the dates presented below: As of March 31, % Change 2025 2024 Medicare (1) Medicare Advantage 601,431 594,457 1 % Medicare Supplement 90,917 92,799 (2) % Medicare Part D 180,076 187,534 (4) % Total Medicare 872,424 874,790 — % Individual and Family (1) 69,652 80,928 (14) % Ancillary (1) 175,270 179,224 (2) % Small Business (2) 41,317 45,084 (8) % Total Estimated Membership 1,158,663 1,180,026 (2) % __________________ (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). 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. For ancillary health insurance plans, the one-to-three-month period varies by insurance product and is largely dependent upon the timeliness of commission payment and related reporting from the related carriers. (2) To estimate the number of members on small business health insurance plans, we use the number of initial members at the time the group was approved, and we update this number for changes in membership if such changes are reported to us by the group or carrier. However, groups generally notify the carrier directly of policy cancellations and increases or decreases in group size without informing us. Health insurance carriers often do not communicate policy cancellation information or group size changes to us. 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. March 31, 2025 compared to March 31, 2024 – Total estimated membership declined 2% as of March 31, 2025 compared to March 31, 2024 due to: • a 14%, 2% and 8% decline year-over-year in individual and family plan, ancillary plan and small business plan estimated membership, respectively, primarily due to a decrease in approved applications as we focus on implementing operational enhancements in our E&I segment; • Medicare estimated membership remained flat year-over-year primarily due to: ◦ a 1% increase in Medicare Advantage estimated membership as a result of increased approved applications, ◦ partially offset by a 2% and 4% decrease in Medicare Supplement and Medicare Part D plans, respectively, as a result of decreased approved applications due to the shift of some broker of record arrangements to fee-based arrangements within our Amplify platform, which are not included in estimated membership, as well as a decline in Medicare Part D plan approved applications due to the shift away from standalone Medicare Part D plans. 31 Table of Contents Member Acquisition Marketing initiatives are an important component of our strategy to increase revenue and are primarily designed to encourage consumers to complete an application for health insurance. We calculate and evaluate the customer care and enrollment (“CC&E”) cost per approved member and the variable marketing cost per approved member. We incur CC&E expenses in assisting applicants during the enrollment process. 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 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, for which we are the broker of record. The denominator used to calculate each metric is based on a derived metric that represents the relative value of the new members acquired. For Medicare Plans, we call this derived metric Medicare Advantage (“MA”)-equivalent approved members, and for IFP Plans, we call this derived metric IFP-equivalent approved members. The calculations for MA-equivalent approved members and for IFP-equivalent approved members are based on the weighted number of approved members for Medicare Plans and IFP Plans during the period, with the number of approved members adjusted based on the relative LTV of the product they are purchasing. Since the LTV for any product fluctuates from period to period, the weight given to each product was determined based on their relative LTVs at the time of our adoption of Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers . The following table shows the CC&E cost per approved member and the variable marketing cost per approved member for the periods presented: Three Months Ended March 31, % Change 2025 2024 Medicare CC&E cost per MA-equivalent approved member (1) $ 361 $ 419 (14) % Variable marketing cost per MA-equivalent approved member (1) 393 415 (5) % Total acquisition cost per MA-equivalent approved member $ 754 $ 834 (10) % Individual and Family Plan CC&E cost per IFP-equivalent approved member (2) $ 189 $ 161 17 % Variable marketing cost per IFP-equivalent approved member (2) 119 58 105 % Total acquisition cost per IFP-equivalent approved member $ 308 $ 219 41 % __________________ (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. 32 Table of Contents Medicare Three Months Ended March 31, 2025 and 2024 – Total acquisition cost per MA-equivalent approved member decreased $80, or 10%, during the three months ended March 31, 2025 compared to the same period in 2024, driven by: • a $58, or 14%, decrease in CC&E cost per MA-equivalent approved member due to: ◦ efficiencies resulting from a benefit advisor mix that is more tenured when compared to the same period in 2024 as well as the increased use of screeners to answer calls from beneficiaries, and ◦ continued optimization of our sales force operations driven by enhanced training protocols and new agent-facing sales tools. • a $22, or 5%, decrease in variable marketing cost per MA-equivalent approved member, primarily due to continued marketing efficiencies as our brand continues to scale, enabling improvement in our marketing channel mix. Individual and Family Three Months Ended March 31, 2025 and 2024 – Total acquisition cost per IFP-equivalent approved member increased $89, or 41%, during the three months ended March 31, 2025 compared to the same period in 2024, driven by: • a $28, or 17%, increase in CC&E cost per IFP-equivalent approved member due to the overall decline in individual and family plan and short-term plan approved members; and • a $61, or 105%, increase in variable marketing cost per IFP-equivalent approved member, primarily driven by an increase in marketing spend as we pursue growth in the E&I segment as well as the decline in individual and family plan and short-term plan approved members. Critical Accounting Policies and Estimates The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles requires us to make judgments, assumptions, and estimates that affect the amounts reported in the condensed consolidated financial statements and the accompanying notes. These estimates and assumptions are based on current facts, historical experience, and various other factors that we believe are reasonable under the circumstances to determine reported amounts of assets, liabilities, revenue and expenses that are not readily apparent from other sources. To the extent there are material differences between our estimates and the actual results, our future consolidated results of comprehensive income (loss) may be affected. An accounting policy is considered to be critical if the nature of the estimates or assumptions is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change, and the effect of the estimates and assumptions on financial condition or operating performance. The accounting policies we believe to reflect our more significant estimates, judgments and assumptions and are most critical to understanding and evaluating our reported financial results are as follows: • Revenue recognition and contract assets - commissions receivable; • Stock-based compensation; and • Accounting for income taxes. There have been no changes to our critical accounting policies and estimates described in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission on February 27, 2025, that have had a significant impact on our condensed consolidated financial statements and related notes. Please refer to Management’s Discussion and Analysis of Financial Condition and Results of 33 Table of Contents Operations contained in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024, for a complete discussion of our other critical accounting policies and estimates. Results of Operations The following table sets forth our operating results and related percentage of total revenue for the periods presented (dollars in thousands): Three Months Ended March 31, 2025 2024 Revenue Commission $ 98,946 87 % $ 80,927 87 % Other 14,173 13 % 12,037 13 % Total revenue 113,119 100 % 92,964 100 % Operating costs and expenses (1) Marketing and advertising 41,189 36 % 38,737 42 % Customer care and enrollment 37,221 33 % 32,901 35 % Technology and content 12,601 11 % 13,305 14 % General and administrative 17,310 15 % 19,619 21 % Impairment, restructuring and other charges — — % 6,313 7 % Total operating costs and expenses 108,321 96 % 110,875 119 % Income (loss) from operations 4,798 4 % (17,911) (19) % Interest expense (2,648) (2) % (2,809) (3) % Other income, net 1,576 1 % 2,391 3 % Income (loss) before income taxes 3,726 3 % (18,329) (20) % Provision for (benefit from) income taxes 1,776 2 % (1,345) (1) % Net income (loss) $ 1,950 2 % $ (16,984) (18) % ____________ (1) Operating costs and expenses include the following amounts of stock-based compensation expense (in thousands): Three Months Ended March 31, 2025 2024 Marketing and advertising $ 497 $ 644 Customer care and enrollment 264 524 Technology and content 688 974 General and administrative 2,340 3,398 Total stock-based compensation expense $ 3,789 $ 5,540 34 Table of Contents Revenue Our commission revenue, other revenue and total revenue are summarized as follows (dollars in thousands): Three Months Ended March 31, Change 2025 2024 $ % Commission $ 98,946 $ 80,927 $ 18,019 22 % % of total revenue 87 % 87 % Other 14,173 12,037 2,136 18 % % of total revenue 13 % 13 % Total revenue $ 113,119 $ 92,964 $ 20,155 22 % Three Months Ended March 31, 2025 and 2024 – Commission revenue increased $18.0 million, or 22%, during the three months ended March 31, 2025 compared to the same period in 2024 due to: • a $19.0 million, or 27%, increase in commission revenue from our Medicare segment driven by: ◦ a 16% increase in overall Medicare plan approved members, specifically driven by 26% growth in Medicare Advantage approved members, and ◦ net adjustment revenue from prior periods of $8.0 million during the three months ended March 31, 2025 compared to $1.0 million in the same period in 2024. • a $0.9 million, or 9%, decrease in commission revenue from our E&I segment driven by: ◦ a 19% and 28% decline in individual and family plan and small business plan approved members, respectively, ◦ partially offset by higher net adjustment revenue from prior periods enrollments, which was $2.5 million during the three months ended March 31, 2025 compared to $1.5 million in the same period in 2024 along with improved constrained LTV of commissions per approved member for most products in our E&I segment. Other revenue increased $2.1 million, or 18%, during the three months ended March 31, 2025 compared to the same period in 2024 due to a $4.2 million increase in fee-based revenue driven by the expansion of our fee-based BPO arrangements, partially offset by a $2.0 million decline in sponsorship and advertising revenue. See Summary of Selected Metrics above and Segment Information below for further discussion. 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. Marketing and advertising expenses also include cost of revenue, which consists of payments related to health insurance plans sold to members who were referred to our website by marketing partners with whom we have revenue-sharing arrangements. We recognize direct marketing 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. Some of our marketing partners have tiered arrangements where the amount we pay the marketing partner per submitted application increases as the volume of submitted applications we receive from the marketing partner 35 Table of Contents increases. We recognize these expenditures in the period when a marketing partner’s referral results in the submission of a health insurance application. Advertising costs for our marketing partner channels are expensed as incurred. Increases in submitted applications resulting from marketing partner referrals or visitors to our website from our direct marketing channel have in the past, and could in the future, result in marketing and advertising expenses being significantly higher than our expectations. Our marketing and advertising expenses are summarized as follows (dollars in thousands): Three Months Ended March 31, Change 2025 2024 $ % Marketing and advertising $ 41,189 $ 38,737 $ 2,452 6 % % of total revenue 36 % 42 % Three Months Ended March 31, 2025 and 2024 – Marketing and advertising expenses increased $2.5 million, or 6%, during the three months ended March 31, 2025 compared to the same period in 2024, primarily driven by a $3.9 million increase in variable advertising costs, partly offset by a $1.0 million decrease in fixed marketing costs. The increase in variable advertising costs was due to an increased investment in our direct marketing channels and an increase in affiliate partner channels. Customer Care and Enrollment Customer care and enrollment expenses primarily consist of compensation, benefits and licensing costs for personnel engaged in assistance to applicants who call our advisor enrollment center and for benefit advisors who assist applicants during the enrollment process. Our customer care and enrollment expenses are summarized as follows (dollars in thousands): Three Months Ended March 31, Change 2025 2024 $ % Customer care and enrollment $ 37,221 $ 32,901 $ 4,320 13 % % of total revenue 33 % 35 % Three Months Ended March 31, 2025 and 2024 – Customer care and enrollment expenses increased $4.3 million, or 13%, during the three months ended March 31, 2025 compared to the same period in 2024. This increase was primarily due to a $5.8 million increase in personnel and compensation costs associated with a higher number of screeners, licensed benefit advisors and retention advisors, partially offset by a $1.3 million decrease in other operating expenses due to lower consulting and licensing costs. Technology and Content Technology and content expenses consist primarily of compensation and benefits costs for personnel associated with developing and enhancing our website technology as well as maintaining our website. A portion of our technology and content group is located at our wholly-owned subsidiary in China, where technology development costs are generally lower than in the United States. Our technology and content expenses are summarized as follows (dollars in thousands): Three Months Ended March 31, Change 2025 2024 $ % Technology and content $ 12,601 $ 13,305 $ (704) (5) % % of total revenue 11 % 14 % 36 Table of Contents Three Months Ended March 31, 2025 and 2024 – Technology and content expenses decreased $0.7 million, or 5%, during the three months ended March 31, 2025 compared to the same period in 2024, primarily driven by a $0.4 million decrease in amortization of internally developed software, a $0.3 million decrease in personnel and compensation costs and a $0.3 million decrease in stock-based compensation expense, partly offset by an increase of $0.4 million in other operating costs, particularly consulting expenses. General and Administrative General and administrative expenses include compensation and benefits costs for personnel working in our executive, finance, investor relations, government affairs, legal, compliance, human resources, facilities and internal information technology departments. These expenses also include fees paid for outside professional services, including audit, tax, legal, government affairs and information technology fees. Our general and administrative expenses are summarized as follows (dollars in thousands): Three Months Ended March 31, Change 2025 2024 $ % General and administrative $ 17,310 $ 19,619 $ (2,309) (12) % % of total revenue 15 % 21 % Three Months Ended March 31, 2025 and 2024 – General and administrative expenses decreased $2.3 million, or 12%, during the three months ended March 31, 2025 compared to the same period in 2024, primarily driven by a $1.1 million decrease in professional fees and a $1.1 million decrease in stock-based compensation expense. Impairment, Restructuring and Other Charges Our impairment, restructuring and other charges consist primarily of severance, transition and other related costs and impairment charges. Our impairment, restructuring and other charges are summarized as follows (dollars in thousands): Three Months Ended March 31, Change 2025 2024 $ % Impairment, restructuring and other charges $ — $ 6,313 $ (6,313) (100) % % of total revenue — % 7 % Three Months Ended March 31, 2025 and 2024 – We incurred no impairment, restructuring and other charges for the three months ended March 31, 2025 compared to $6.3 million of impairment, restructuring and other charges for the same period in 2024. These charges in 2024 consisted of $5.5 million of impairment related to several of our leased office spaces, which comprised of $5.1 million of operating lease right-of-use asset impairments and $0.4 million of property and equipment impairments. We also incurred $0.8 million of restructuring charges which were primarily related to employee termination benefits as a result of our cost-reduction efforts during the first quarter of fiscal 2024. 37 Table of Contents Interest Expense Interest expense primarily consists of interest expense and amortization of debt issuance costs related to our Credit Agreement. See Note 12 – Debt in our Notes to Condensed Consolidated Financial Statements for additional information. Our interest expense is summarized as follows (dollars in thousands): Three Months Ended March 31, Change 2025 2024 $ % Interest expense $ (2,648) $ (2,809) $ 161 6 % % of total revenue (2) % (3) % Three Months Ended March 31, 2025 and 2024 – Interest expense decreased by $0.2 million, or 6%, during the three months ended March 31, 2025 compared to the same period in 2024, primarily driven by lower interest rates. Other Income, Net Other income, net, primarily consisted of interest income and margin earned on commissions received from Medicare plan members transferred to us in 2010 through 2012 by a broker partner. Our other income, net, is summarized as follows (dollars in thousands): Three Months Ended March 31, Change 2025 2024 $ % Other income, net $ 1,576 $ 2,391 $ (815) (34) % % of total revenue 1 % 3 % Three Months Ended March 31, 2025 and 2024 – Other income, net, was $1.6 million during the three months ended March 31, 2025, compared to $2.4 million during the three months ended March 31, 2024. The change was primarily due to a $0.8 million decrease in interest income as a result of less favorable short-term investment returns and a decline in average short-term investment balances during the three months ended March 31, 2025. Provision for (Benefit from) Income Taxes Our provision for (benefit from) income taxes is summarized as follows (dollars in thousands): Three Months Ended March 31, Change 2025 2024 $ % Provision for (benefit from) income taxes $ 1,776 $ (1,345) $ 3,121 (232) % Effective tax rate 47.7 % 7.3 % Three Months Ended March 31, 2025 and 2024 – Our effective tax rate of 47.7% for the three months ended March 31, 2025 was higher than our 7.3% effective tax rate for the three months ended March 31, 2024 primarily due to fluctuations in stock-based compensation adjustments, research and developments credits and state taxes. Our effective tax rate for the three months ended March 31, 2025 was higher than the statutory federal tax rate due primarily to state taxes, nondeductible stock-based compensation, lobbying expenses and prior year discrete adjustments, partially offset by research and development credits. 38 Table of Contents 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 in the annual budget and forecasting process along with evaluation of actual performance. 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: • Medicare; and • Employer and Individual. Our CODM does not separately evaluate assets by segment, with the exception of commissions receivable, and therefore assets by segment are not presented. The Medicare segment consists primarily of commissions earned 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 insurance and hospital indemnity 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 also consists of amounts earned in connection with our advertising program that allows Medicare-related carriers to purchase advertising on a separate website developed, hosted and maintained by us or pursuant to which we perform other services as marketing and our delivery and sale to third parties of Medicare-related health insurance leads generated by our ecommerce platforms and our marketing activities. The 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 qualified and non-qualified plans, 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 expenses, segment CC&E expenses 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. 39 Table of Contents Our operating segment revenue and segment gross profit are summarized as follows (in thousands): Three Months Ended March 31, 2025 2024 % Change Medicare: Total revenue $ 103,669 $ 82,388 26 % Variable marketing and advertising (33,753) (30,248) (12) % Medicare CC&E (34,469) (29,949) (15) % Cost of revenue 300 (143) 310 % Medicare segment gross profit $ 35,747 $ 22,048 62 % Three Months Ended March 31, 2025 2024 % Change Employer and Individual: Total revenue $ 9,450 $ 10,576 (11) % Variable marketing and advertising (1,190) (776) (53) % E&I CC&E (2,180) (2,277) 4 % Cost of revenue (92) (118) 22 % E&I segment gross profit $ 5,988 $ 7,405 (19) % Three Months Ended March 31, 2025 2024 % Change Consolidated: Total revenue $ 113,119 $ 92,964 22 % Variable marketing and advertising (34,943) (31,024) (13) % Segment CC&E (36,649) (32,226) (14) % Cost of revenue 208 (261) 180 % Total segment gross profit $ 41,735 $ 29,453 42 % 40 Table of Contents A reconciliation of our segment gross profit to the Condensed Consolidated Statements of Comprehensive Income (Loss) for the periods presented is as follows (in thousands): Three Months Ended March 31, 2025 2024 Total segment gross profit $ 41,735 $ 29,453 Other marketing and advertising (1) (6,454) (7,452) Other CC&E (2) (572) (675) Technology and content (12,601) (13,305) General and administrative (17,310) (19,619) Impairment, restructuring and other charges — (6,313) Interest expense (2,648) (2,809) Other income, net 1,576 2,391 Income (loss) before income taxes $ 3,726 $ (18,329) __________ (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 Three Months Ended March 31, 2025 and 2024 – Revenue from our Medicare segment increased $21.3 million, or 26%, during the three months ended March 31, 2025 compared to the same period in 2024, primarily driven by: • a $19.0 million increase in Medicare segment commission revenue due to: ◦ a $13.0 million increase in Medicare Advantage plan commission revenue, driven by 26% growth in Medicare Advantage plan approved members, and ◦ higher net adjustment revenue which was $8.0 million for the three months ended March 31, 2025 compared to $1.0 million for the three months ended March 31, 2024. • a $2.3 million increase in Medicare segment other revenue driven by a $4.2 million increase from growth in our fee-based BPO arrangements, partially offset by a $2.0 million decline in sponsorship and advertising revenue. Our Medicare segment gross profit was $35.7 million for the three months ended March 31, 2025, an increase of $13.7 million or 62%, compared to the same period in 2024 primarily driven by: • a $21.3 million increase in Medicare segment revenue, • partially offset by increases of $3.5 million in variable marketing and advertising expenses and $4.5 million in segment CC&E expenses primarily due to the continued execution of our initiatives to attract and retain beneficiaries, including having a larger group of screeners and benefit advisors compared to 2024. 41 Table of Contents Employer and Individual Segment Three Months Ended March 31, 2025 and 2024 – Revenue from our E&I segment decreased $1.1 million, or 11%, during the three months ended March 31, 2025 compared to the same period in 2024, primarily driven by a $0.9 million decrease in commission revenue as a result of: • a 19% and 28% decline in individual and family plan and small business plan approved members, respectively, compared to the same period in 2024; • partially offset by higher net adjustment revenue year-over-year, which was $2.5 million for the three months ended March 31, 2025 compared to $1.5 million in three months ended March 31, 2024; Our E&I segment gross profit was $6.0 million for the three months ended March 31, 2025, a decrease of $1.4 million, or 19%, compared to the same period in 2024 primarily driven by: • a $1.1 million decrease in E&I segment revenue; and • an increase of $0.4 million in variable marketing and advertising expenses mostly due to investments in our operational enhancements for our E&I segment that are underway. Liquidity and Capital Resources As of March 31, 2025, we had cash, cash equivalents and short-term marketable securities of $155.6 million. During the three months ended March 31, 2025, we generated operating cash flow of $77.1 million as summarized below. We have historically financed our operations primarily through cash generated from our operations, equity issuances and debt financing. Our principal uses of cash in recent periods have been funding working capital, purchases of short-term investments, the satisfaction of tax withholding obligations in connection with the settlement of restricted stock units, making payments on our operating lease obligations and service and licensing obligations, and complying with our debt servicing requirements and preferred stock dividend payment obligations. Cash and Cash Equivalents Our cash, cash equivalents and short-term marketable securities are summarized as follows (in thousands): March 31, 2025 December 31, 2024 Cash and cash equivalents $ 121,092 $ 39,197 Short-term marketable securities 34,495 43,043 Total cash, cash equivalents and short-term marketable securities $ 155,587 $ 82,240 Cash equivalents, which are comprised of financial instruments with an original maturity of 90 days or less from the date of purchase, primarily consist of money market funds, commercial paper and government securities. We also maintained $3.1 million in restricted cash as of March 31, 2025 and December 31, 2024. Material Cash Requirements Our material cash requirements include our operating leases and service and licensing obligations. See Note 10 – Leases in our Notes to Condensed Consolidated Financial Statements for details of our operating lease obligations. We have entered into service and licensing agreements with third party vendors to provide various services, including network access, equipment maintenance and software licensing. The terms of these services and licensing agreements are generally up to three years. We record the related service and licensing expenses on a straight-line basis, although actual cash payment obligations under certain of these agreements fluctuate over the terms of the agreements. See Note 8 – Commitments and Contingencies in our Notes to Condensed Consolidated Financial Statements. 42 Table of Contents Short-term obligations were $8.4 million for leases and $7.6 million for service and licensing as of March 31, 2025. Long-term obligations were $21.3 million for leases and $2.9 million for service and licensing as of March 31, 2025. We expect to fund these obligations through our existing cash and cash equivalents and cash generated from operations. Convertible Preferred Stock Pursuant to an investment agreement dated February 17, 2021 with Echelon Health SPV, LP (“H.I.G.”) (the “H.I.G. Investment Agreement”), we issued and sold 2,250,000 shares of Series A convertible preferred stock (“Series A Preferred Stock”) at an aggregate purchase price of $225.0 million to H.I.G. in a private placement and received $214.0 million net proceeds on April 30, 2021 . A s of March 31, 2025, we have accrued $1.4 million for cash dividends. The H.I.G. 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 (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 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 in our Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q 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. 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 (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. 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 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 March 31, 2025, the interest rate was 11.57%. For the three months ended March 31, 2025 and 2024 we incurred interest expense of $2.0 million and $2.3 million, respectively. As of March 31, 2025, the carrying value of the loan under the Credit Agreement was $68.8 million and we were in compliance with our loan covenants. See Note 12 – Debt in our Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional information regarding the Credit Agreement. 43 Table of Contents 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 Quarterly Report on Form 10-Q, including to refinance or select other alternative arrangements based on market conditions for our term loan under our Credit Agreement that matures in February 2026. 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. In addition, our cash position could be impacted by the level of investments we make to pursue our strategy. To the extent that available funds are insufficient to fund our future activities or to execute our financial strategy, we may raise additional capital through bank debt, or public or private capital financing to the extent such funding sources are available. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. Cash Activities Our cash flows for the three months ended March 31, 2025 and 2024 are summarized as follows (in thousands): Three Months Ended March 31, 2025 2024 Net cash provided by operating activities $ 77,121 $ 70,761 Net cash provided by (used in) investing activities 5,472 (10,287) Net cash used in financing activities (699) (1,259) Operating Activities Net cash provided by 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 internally developed software, other non-cash items, and the effect of changes in working capital and other activities. Collection of commissions receivable depends upon the timing of our receipt of commission payments and associated commission reports from health insurance carriers. If we were to experience a delay in receiving a commission payment from a significant health insurance carrier within a quarter, our operating cash flows for that quarter could be adversely impacted. While we recognize constrained LTV as revenue at the time applications are approved, our collection of the cash commissions resulting from approved applications generally occurs over a number of years. The expense associated with approved applications, however, is generally incurred at the time of enrollment and generally paid as incurred. As a result, the net cash flow resulting from approved applications is generally negative in the period of revenue recognition and becomes positive over the lifetime of the member. In periods of membership growth, cash receipts associated with new and continuing members may be less than the cash outlays to acquire new members and could adversely impact our operating cash flows. 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. Three Months Ended March 31, 2025 – Net cash provided by operating activities was $77.1 million during the three months ended March 31, 2025 driven by changes in net operating assets and liabilities of $66.2 million, adjustments for non-cash items of $8.9 million and net income of $2.0 million. Cash provided by changes in net 44 Table of Contents operating assets and liabilities during the three months ended March 31, 2025 primarily consisted of decreases of $77.0 million in contract assets – commissions receivable and $13.4 million in accounts receivable, partially offset by decreases of $16.0 million in accounts payable and $7.5 million in accrued marketing expenses. Adjustments for non-cash items primarily consisted of $3.8 million of stock-based compensation expense, $3.5 million of amortization of internally developed software and a $1.5 million increase due to the change in deferred income taxes. Three Months Ended March 31, 2024 – Net cash provided by operating activities was $70.8 million during the three months ended March 31, 2024, primarily driven by changes in net operating assets and liabilities of $73.8 million and adjustments for non-cash items of $14.0 million, partially offset by a net loss of $17.0 million. Cash provided by changes in net operating assets and liabilities during the three months ended March 31, 2024 primarily consisted of decreases of $73.1 million in contract assets – commissions receivable and $2.6 million in accounts receivable and an $8.1 million increase in deferred revenue, partly offset by a decrease of $10.9 million in accrued marketing expenses. Adjustments for non-cash items primarily consisted of $5.5 million of impairment charges, $5.5 million of stock-based compensation expense and $3.9 million of amortization of internally developed software, partially offset by a $1.4 million decrease due to the change in deferred income taxes. Investing Activities Our investing activities primarily consist of purchases and redemption of marketable securities, purchases of computer hardware and software to enhance our website and advisor enrollment center operations and capitalized internal-use software. Three Months Ended March 31, 2025 – Net cash provided by investing activities of $5.5 million for the three months ended March 31, 2025 mainly consisted of $36.3 million in proceeds from the maturities and redemptions of marketable securities, partially offset by $27.4 million used to purchase marketable securities and $3.1 million in capitalized internal-use software and website development costs. Three Months Ended March 31, 2024 – Net cash used in investing activities of $10.3 million for the three months ended March 31, 2024 mainly consisted of $13.8 million used to purchase marketable securities and $2.3 million in capitalized internal-use software and website development costs, partially offset by $6.0 million in proceeds from the maturities and redemptions of marketable securities. Financing Activities Three Months Ended March 31, 2025 – Net cash used in financing activities of $0.7 million for the three months ended March 31, 2025 was due to $0.7 million in repurchases of shares to satisfy employee tax withholding obligations. Three Months Ended March 31, 2024 – Net cash used in financing activities of $1.3 million for the three months ended March 31, 2024 was primarily due to $1.3 million in repurchases of shares to satisfy employee tax withholding obligations. Seasonality Open enrollment periods drive the seasonality of our business. The majority of our commission revenue is typically recognized in the fourth quarter of each calendar year under ASC 606, Revenue from Contracts with Customers . We have historically sold a significant portion of Medicare plans for the year in the fourth quarter during the Medicare AEP, which occurs from October 15 th to December 7 th , when Medicare-eligible individuals are permitted to change their Medicare Advantage and Medicare Part D prescription drug coverage for the following year. As a result, we generate a significant portion of our commission revenue related to new Medicare plan-related enrollments in the fourth quarter. Additionally, our Medicare Advantage plan-related commission revenue is also elevated in the first quarter compared to the second and third quarters as a result of the Medicare Advantage open enrollment period that occurs from January 1 st to March 31 st , when Medicare Advantage plan enrollees may enroll in 45 Table of Contents another Medicare Advantage plan or disenroll from their Medicare Advantage plan and return to the Original Medicare program. Any changes to or additional enrollment periods may change the seasonality of our business. The annual open enrollment period for IFP plans takes place in the fourth quarter of the calendar year, as prescribed under the federal Patient Protection and Affordable Care Act and related amendments in the Health Care and Education Reconciliation Act. As a result, we generate a significant portion of our commission revenue related to IFP plan-related enrollments in the fourth quarter. In the states where the Federally Facilitated marketplace operates as the state health insurance exchange, individuals and families generally are not able to purchase individual and family health insurance outside of the annual enrollment period, unless they qualify for a special enrollment period as a result of certain qualifying events, such as losing employer-sponsored health insurance or moving to another state. Extended open enrollment or special enrollment periods may change the seasonality of our individual and family health insurance business. We incur a significant portion of our marketing and advertising expenses in the fourth quarter as a result of the Medicare AEP and the open enrollment period under the Affordable Care Act. We expect this seasonal trend in marketing and advertising expenses to continue in the foreseeable future. Full-time internal benefit advisors represent the majority of our telesales capacity. We plan to maintain our internal telesales benefit advisors year-round, net of natural attrition, and expect to increase our internal benefit advisors’ utilization outside of the enrollment periods by expanding our offerings of ancillary products and carrier call center outsourcing programs. We also engage seasonal advisors who are not full-time employees to support our seasonally high volume. The magnitude of new agent hiring is driven by our enrollment growth goals for that year. Our customer care and enrollment expenses are typically highest in the fourth quarter and lowest in the second quarter. Recent Accounting Pronouncements See Note 1 – Summary of Business and Significant Accounting Policies in our Notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q for the recently issued accounting standards that could have an effect on us. ITEM 3. 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.