eHealth, Inc. 2026 Q2 Earnings Call

Thank you all for joining us. On the call today, Derrick Duke, eHealth's Chief Executive Officer, and John Dolan, Chief Financial Officer, will discuss our second quarter 2026 financial results. Following these prepared remarks, we will open the line for a Q&A session with industry analysts. As a reminder, this call is being recorded and webcast from the investor relations section of our website. A replay of the call will be available on our website later today. Today's press release, our historical financial news releases, and our filings with the SEC are also available on our investor relations site. We will be making forward-looking statements on this call about certain matters that are based upon management's current beliefs and expectations relating to future events impacting the company and our future financial or operating performance.

Forward-looking statements on this call represent eHealth's views as of today. Actual results could differ materially. We undertake no obligation to publicly address or update any forward-looking statements except as required by law. The forward-looking statements we will be making during this call are subject to a number of uncertainties and risks, including, but not limited to, those described in today's press release and in our most recent annual report on Form 10-K and our subsequent filings with the SEC. We will also be discussing certain non-GAAP financial measures on this call. Management's definitions of these non-GAAP measures and reconciliation to the most directly comparable GAAP financial measures are included in today's press release. With that, I will turn the call over to Derrick Duke.

Good afternoon. Thank you for joining us today. Our second quarter results reflect the deliberate choices we made going into 2026. We entered the year with a strategy centered on three priorities: building our lifetime advisory model, materially improving our cash flow profile, and making targeted investments in long-term growth opportunities such as ICHRA. Second quarter revenue was $33.6 million. GAAP net loss was $23.6 million. Adjusted EBITDA was a negative $21.8 million. Operating cash flow for the first six months was $30.8 million. Overall, these results were in line to slightly above our expectations. More importantly, we remain on track to achieve our key financial objectives for the year, including our cost savings targets and significant operating cash flow improvement compared to 2025. For the first six months of the year, non-GAAP operating expenses declined by $42 million compared to the prior year.

We are creating a leaner operating model while preserving our key strategic capabilities and pursuing initiatives that we believe will drive long-term shareholder value. We continue to project annual variable cost savings of more than $60 million and fixed cost savings of approximately $30 million. Before discussing our operational progress, I'd like to spend a few minutes on the broader market environment. Despite recent disruption, the long-term opportunity in Medicare Advantage remains compelling. Medicare Advantage enrollment has now reached more than 35.5 million beneficiaries. While growth has moderated compared to prior years as carriers focus more heavily on profitability, the underlying demographic drivers supporting the market remain firmly intact. We continue to see strong demand from seniors with beneficiaries who are just turning 65, selecting Medicare Advantage at disproportionately high rates. Longer term, the Congressional Budget Office projects MA penetration to increase from approximately 55% today to 63% by 2034.

After more than two years of disruption, we believe the industry is now gradually moving towards greater stability. We have begun discussions with our carrier partners ahead of the upcoming annual enrollment period. Several of those conversations corroborate this view. In June, CMS finalized the maximum broker commission increase at 4.5% for plan year 2027. However, carrier approaches are likely to vary by geography, product type, and specific strategic priorities. We expect to gain greater visibility into carrier plans during the third quarter as AEP preparations accelerate. One thing has become increasingly clear throughout this period of industry change. The market is rewarding high quality, retention-oriented distribution models. That trend aligns exceptionally well with our strategy. Within the tele broker channel, we continue to see consolidation and rationalization as participants adjust to a new operating environment.

Against that backdrop, we believe the value eHealth provides to both consumers and carriers is as important as it has ever been. For beneficiaries, we serve as a trusted advisor with access to extensive plan inventory, which is especially critical during periods of elevated change. For carriers, we help deliver highly targeted member acquisition strategies and what we believe are among the highest quality enrollments within our distribution channel, supporting both member experience and carrier margin objectives. One of the most important milestones of the second quarter was the launch of our lifetime advisory model. The lifetime advisory approach shifts our relationship with members beyond a one-time enrollment interaction to a model of ongoing engagement throughout the year. Our advisors are equipped to help beneficiaries evaluate plan changes, address gaps in coverage, navigate healthcare decisions, and identify additional products that may improve financial security.

Beyond elevating consumer experience, we believe this creates significant opportunities to increase member value through ancillary product cross-selling. As expected, second quarter enrollments and revenue declined year-over-year. Under the new model, we are concentrating our marketing spend in the first and especially fourth quarters when we see the greatest return on our investment. In the second and third quarters, we are focusing our advisors on engaging with their existing members. We have made meaningful progress in the initial months following the lifetime advisory model launch. Operationally, we have deployed advisor training programs, coaching initiatives, and new advisor tools that provide a centralized view of a member, enable personalized communications, and generate data-driven recommendations for effective member engagement. On the product side, we launched final expense in Q2 and laid the foundation for additional ancillary product offerings.

Importantly, we have seen early validation of the core assumptions underpinning the strategy. First, consumers are responding positively to relationship-based engagement. Second, cross-selling opportunities appear significant. We are shifting the KPIs for measuring the success of this model in the same direction towards more holistic member-driven metrics. It starts with member retention. The core objective of the model is to deepen our relationship with members and remain engaged throughout the year. We believe improving retention over time will be one of our most important measures of success. We also plan to track ancillary product cross-sell rates and member-based lifetime value across multiple products. Early indicators have been encouraging, with second-quarter ancillary cross-sell rates doubling compared to a year ago.

This represents the number of advisor-assisted ancillary product applications submitted by customers aged 65 and older in relation to the number of advisor-assisted applications for major medical Medicare products, including Medicare Advantage and Medicare Supplement plans. While we will continue to measure and report policy-based lifetime value under ASC 606, our internal focus is increasingly shifting towards member-driven metrics that better reflect the broader value of long-term relationships. As the lifetime advisory model matures, we also expect unit margins to improve, driven in part by referrals becoming a larger contributor to total enrollments. Because advisors are central to the success of this strategy, advisor retention and productivity will be important indicators that we track closely. Another area where we continue to make progress is artificial intelligence. Our approach to AI is straightforward.

We believe technology can improve efficiency, scalability, and customer experience while still recognizing the critical role licensed insurance professionals play in providing personalized guidance and peace of mind for consumers. Today, AI is already supporting several of our customer-facing functions, including after-hours interactions, call screening, and certain customer service inquiries. For the upcoming AEP, we plan for AI-enabled call screening to replace the majority of manual screening processes. We are also exploring opportunities to expand our AI deployments into more complex customer service inquiries. Beyond consumer engagement, AI plays an important role across our back-office functions. We have expanded its use within product management, software development, and UX design. These capabilities helped us accelerate development of technology supporting the lifetime advisory model in about half the time we would have needed in the past.

Another important application involves carrier plan content ingestion, historically one of our most data and labor-intensive activities. Through AI-enabled automation, we believe we can reduce manual effort substantially while improving accuracy. Looking ahead, we see numerous opportunities across customer-facing workflows, advisor enablement, and internal operations. Collectively, we believe our AI initiatives have the potential to enhance scalability, improve service levels, and reduce costs over time. In addition to Medicare, the second pillar of our three-year strategy is achieving measured, profitable growth within the under 65 consumer market. ICHRA is a key component of that effort. The long-term trend toward ICHRA adoption continues to strengthen as employers seek more flexible and cost-effective healthcare solutions. Industry forecasts suggest ICHRA could cover approximately five million lives by 2029. Our strategy is to build a scalable platform that connects employers, employees, brokers, and benefit administrators through a seamless experience.

While ICHRA is not expected to be a significant contributor to our 2026 financial results, with revenue forecasted to remain below $5 million this year, our focus today is on establishing the foundation for future growth. That means developing our pipeline, expanding strategic partnerships, strengthening broker relationships, and continuing to refine our operating model. We believe the market opportunity is attractive, and we are pursuing it with the same disciplined, capital-efficient approach that we are applying across the broader organization. To conclude, our priorities for 2026 remain unchanged. First, build and scale the lifetime advisory model to deepen member relationships, improve retention, and increase long-term member value. Second, continue improving our cash flow profile with a goal of achieving break even or better operating cash flow at the midpoint of our guidance. Third, advance diversification initiatives, including ancillary products and ICHRA.

Looking ahead, we continue to expect a return to sustainable revenue growth on a streamlined cost foundation beginning in 2027. We believe that growth will be driven by three primary factors. The transition from acquisition-based economics or recurring relationship economics, growth within ICHRA, and selective expansion of our carrier-dedicated business Amplify. We are encouraged by signs of improving stability across the Medicare Advantage ecosystem. While work remains, carrier sentiment and industry fundamentals appear increasingly constructive compared to where they stood a year ago. As we enter the second half of the year, preparations for AEP are underway. We plan to meet with carrier partners, scale our demand generation engine, and begin the operational work necessary to support another successful enrollment season. We believe we are well-positioned to execute against our goals. Thank you for your continued support. I'll now turn the call over to our CFO, John Dolan.