eHealth, Inc. (NASDAQ:EHTH) Q3 2019 Earnings Conference Call - Final Transcript

Oct 24, 2019 • 05:00 pm ET


eHealth, Inc. (NASDAQ:EHTH) Q3 2019 Earnings Conference Call - Final Transcript


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Derek N. Yung

your reference.

Based on the quality and scale of our call center resources in place, the acceleration of our online enrollments guidance ranges and the strength of our consumer demand we're observing, we are confident in our ability to deliver at the high end of the revenue and EBITDA guidance ranges. This implies a year-over-year growth in 2019 approved Medicare members of over 60%. After what has been an investment quarter, we are forecasting a return to meaningful EBITDA profitability in the fourth quarter, driven by significant sequential increase in enrollment growth and a related increase in our revenue. On a year-over-year basis, we forecast our fourth quarter EBITDA to grow significantly both on a margin and absolute dollar basis relative to the fourth quarter of 2018. The top end of our 2019 EBITDA guidance implies fourth quarter 2019 EBITDA growth of over 50% compared to Q4 of 2018.

I want to remind you that these comments in our guidance are based on current indications of our business and our current estimates, assumptions and judgments, which may change at any time. Our actual results may differ as a result of changes in our estimates, assumptions and judgments. We undertake no obligation to update our comments or our guidance.

Before we turn the call over to the operator, I want to address our membership metrics in context of customer policy retention, a topic that's been top of mind of our investors and analysts over the past few months. In order to compute customer policy retention rates, it's important to keep in mind the following three dynamics: one, our retention rates are more accurately assessed by using the number of paying members that we add in a given period, and not the number of in-period approved members. Our approved Medicare Advantage members have converted into paying members at an average of 92%. In addition, some of the members that are approved in a given quarter don't become paying members until the following quarter, a spillover effect that's especially pronounced during high enrollment quarters.

Second, policy turnover is higher in the first year post approval and starts to decline in the outer years. Policy persistency is particularly strong once a policy has been held for over a year, getting us to our current average policy duration of approximately three years for Medicare Advantage. Three and lastly, due to the pronounced seasonality of our enrollments, it is more accurate to look at churn and other metrics on trailing 12 months' basis. We summarize these points and also provide an example of customer policy retention math as part of our earnings call slides, which are now posted on our Customer Relations website. Our goal has always been to be fully transparent to our investors and analysts, and over the coming quarters we will be revisiting our reported metrics and to evaluate if we can make additions or changes to further that goal.

And now we will open up the call for questions. Operator?