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eHealth (EHTH) Q4 2021 Earnings Call Transcript

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eHealth ( EHTH -7.48% )
Q4 2021 Earnings Call
Mar 01, 2022, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, everyone, and welcome to eHealth, Inc.’s conference call to discuss the company’s fourth quarter and fiscal year 2021 financial results. [Operator instructions] It is now my pleasure to turn the floor over to Eli Newbrun-Mintz, investor relations manager. Please go ahead.

Eli Newbrun-MintzInvestor Relations Manager

Good morning, and thank you all for joining us today either by phone or by webcast for a discussion about eHealth, Inc.’s fourth quarter and fiscal year 2021 financial results. On the call this morning, we have Francis Soistman, eHealth’s chief executive officer; and Christine Janofsky, eHealth’s chief financial officer. After management completes its remarks, we will open the line for questions. As a reminder, today’s conference 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 following the call. We will be making forward-looking statements on this call that include statements regarding future events, beliefs and expectations, including statements relating to our expectations regarding our Medicare business, including Medicare enrollments, consumer demand, our competitive advantage and market opportunities; our long-term strategy and financial goals, including our multiyear transformative cost elimination and reduction program; our ability to increase agent productivity and improve customer satisfaction, retention and other quality metrics; our expectations regarding our online enrollments, member acquisition costs and demand generation strategy; our expectations regarding our individual and family business and growth opportunities; our expectations regarding our financial performance, including the profitability of our business, cash flows, conversion rates, customer retention, seasonality, lifetime values, member estimates and fixed and operating expenses; and our full year 2022 financial guidance. Forward-looking statements on this call represent eHealth’s views as of today. You should not rely on these statements as representing our views in the future.

We undertake no obligation or duty to update information contained in these forward-looking statements whether as a result of new information, future events or otherwise. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in our forward-looking statements. We describe these and other risks and uncertainties in our Annual Report on Form 10-K and quarterly reports on Form 10-Q filed with the Securities and Exchange Commission, which you may access through the SEC website or from the investor relations section of our website. We will be presenting certain financial measures on this call that are considered non-GAAP under SEC Regulation G.

For reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure, please refer to the information included in our press release and in our SEC filings, which can be found in the About Us section of our corporate website under the heading investor relations. At this point, I will turn the call over to Francis Soistman.

Francis SoistmanChief Executive Officer

Thanks, Eli, and good morning to everyone joining us today as we report our fiscal year and fourth quarter 2021 financial results. On this call, I will: One, review our AEP performance, including a number of valuable takeaways that are informing our operational and strategic decisions moving forward; two, provide our ’22 annual guidance and our execution priorities for this year, including a multiyear transformative cost elimination and reduction program; and three, share some preliminary thoughts on our long-term strategy and financial goals. But before I delve in, let me take a step back for a moment. Today marks four months since I became CEO of eHealth.

My conviction in the company’s value proposition and mission of connecting Americans with quality, affordable health insurance remains steadfast, and I continue to believe that we have a tremendous opportunity ahead of us with the ability to capture it. We continue to operate in a large and highly attractive growing market. The large and growing Medicare Advantage addressable market remains an important driver for this business. Sectorwide MA enrollment growth last year and initial projections for ’22 show that the fundamental secular drivers have not changed as the program benefits from demographic trends, superior health outcomes and broad-based political support.

The recent advanced rate notice from CMS released in February was a positive development, signaling strong carrier reimbursements and another favorable market environment for 2023. That said, the market is continuing to evolve as the Medicare Advantage ecosystem is experiencing a broader, but fundamental shift away from volume at all costs and toward growth built on the foundation of enrollment quality, enhance customers’ experience and transparency and profitability. This trend will serve to rationalize the Medicare Advantage distribution market, eventually marginalizing those lead generators and distributors that pursue aggressive misleading sales practices. Ultimately, we believe it represents a long-term benefit to customers, carriers and quality brokers such as eHealth.

In light of these market conditions, we continue to view our omnichannel customer-centric strategy as the optimal model for the market. We believe that eHealth provides a tremendous value to beneficiaries through a carrier-agnostic experience that gives consumers access to a broad choice of plans combined with online tools and licensed agent support to find a health plan that best fits their personal needs. eHealth’s omnichannel distribution capabilities represents a competitive advantage to other DTC distributors. And further, we have a meaningful advantage compared to carriers’ in-house distribution that can only offer consumers their own plans.

eHealth also maintains strong relationships with its carrier partners. Since becoming eHealth’s CEO, I personally met with numerous carrier partners, including the sixth largest, and I’m confident that eHealth will remain a key element of the distribution strategy. We will continue to collaborate on providing beneficiaries with a superior shop, buy and enroll experience. At the same time, after completing a thorough review of the company’s operations, I see many opportunities for significant improvement in critical areas.

Accordingly, eHealth is making changes in line with the evolving market. In 2021, we moved from a telesales model dominated by vendor agents to a predominantly proprietary sales force. We implemented a major upgrade of our call center technology to a cloud-based data-driven platform, and we acted quickly and decisively to address enrollment quality goals. We made these changes to better serve Medicare beneficiaries and our carrier partners.

The implementation of quality measures reflects our ongoing collaboration with carriers. We have received positive initial carrier feedback with respect to complaint tracking module or CTM scores, rapid disenrollment and overall retention rates. In addition to improving year-over-year trends, we are also ranking favorably relative to other large brokers on these metrics. In fact, one of our largest Medicare carriers shared that since the implementation of our quality initiatives, our CTM scores are not only coming in better than the rest of their broker channel, but also their in-house distribution.

Alongside these initiatives, I’ve been focused on strengthening our senior leadership team. Yesterday, we announced that Roman Rariy will join the company as chief operating officer and chief transformation officer, a critical new addition to lead operational excellence and the cost transformation initiative that I will outline shortly. Further, we recently announced that Bob Hurley, an experienced industry veteran and prior eHealth executive, will serve as interim chief revenue officer while we search for a permanent leader. I’m excited to continue building our leadership team through 2022.

I’ll now briefly comment on our 2021 results, which Christine will expand on later in the call. Revenue for 2021 was $538 million, down 8% from the previous year and in line with the revised guidance ranges that we provided in November. Adjusted EBITDA for 2021 was a loss of $22.7 million compared to a positive $91 million in 2020 and slightly below our revised guidance range. 2021 GAAP net loss of $104.4 million included a $46.3 million impairment charge related to our goodwill and intangible assets that was triggered by the continued decline in our market capitalization.

The impairment charges were excluded for the purposes of calculating adjusted EBITDA. The year-over-year decrease in 2021 revenue and profitability were due primarily to a decline in telephonic conversion rates in our Medicare business combined with an increase in average call duration, which reduced our aging capacity during the peak days of the AEP. As we shared on the third quarter earnings call, our telesales underperformance was partially driven by changes to the enrollment process as a result of our quality initiatives that we implemented on an accelerated timeframe. In addition, a major expansion of our internal agent force undertaken ahead of the AEP resulted in a significant contribution from brand new agents to the overall agent mix.

As we introduce additional training requirements and pull back on some of the marketing spend in Q3, this reduced the number of live calls that our newly hired agents could take before the start of the AEP in October, which had an impact on their efficiency ramp. While we saw performance improvements throughout the AEP as new agents gained experience and confidence and our organization started to adjust to the new enrollment process and scripts, we still significantly underperformed execution targets set in the beginning of ’21. Based on our thorough review of Q4 performance, I believe that while external factors and the need to overall our sales practices in the critical weeks leading to the AEP played an important role in our underperformance, a number of internal dynamics, including the operating model of our telesales organization, made us especially vulnerable. We’ve identified a number of changes that will be implemented to make our demand fulfillment model more effective and profitable while continuing to perform within the new framework of heightened focus on quality.

Lower conversions and longer talk times negatively impacted both our enrollment volume and acquisition costs. Cost of acquisition was further impacted by increased competition and some of the demand generation channels such as Direct TV and Direct Mail. Combination of these factors led to some of our marketing programs performing unprofitably as we were unable to make significant enough changes to our marketing spend on short notice. Our 2021 financial results also reflect lower sponsorship funding from carriers.

We have been collaborating with our carrier partners to make modifications to their sponsorship programs to incorporate quality and retention goals among other changes. Our unassisted online business continues to be a bright spot, growing 60% year over year in 2021 and 53% in Q4 and comprising 24% of total Medicare Advantage and Medicare Supplemental submitted applications in Q4 relative to 13% a year ago. We continue to observe favorable retention rates in this channel and see an improved rate of conversion of online visitors to submitted applications. We believe that these higher conversions reflect enhancements to user experience on our platform and customers becoming increasingly comfortable transacting online.

Despite the challenges we face with our AEP enrollments, our total estimated Medicare Advantage membership as of year-end grew 19% compared to 2020. Though I’m not satisfied with our AEP execution, it is important now to take the lessons learned and apply them to improve our strategies and operations for the upcoming year and beyond. Based on our thorough review of the business combined with AEP learnings, my key priorities for 2022 are as follows. Number one, through transformative changes, reduce our cost structure while focusing on operational efficiency and excellence through reengineering and reorganizing.

Our focus will be heavily weighted on growth through profitable channels, which will result in slowing of our year-over-year growth rate. I expect to return to more accelerated growth in 2023 on a substantially improved cost and operational foundation and more effective distribution channels. Two, deploy marketing dollars in a way that will drive better economics. This includes optimizing our marketing channel mix to cut the lowest ROI initiatives and focus on channels where we hold competitive differentiation.

Three, slowdown conventional telephonic enrollment growth, execute a local market-centric telesales model and expand overflow telesales carrier arrangements, which require less investment, lead gen and are characterized by attractive conversion rates. Four, continue growing our attractive online business and enhancing our e-commerce platform through a highly disciplined approach to tech investment. Five, work with carrier partners to find additional ways to create value, including joint quality and retention initiatives with select carriers. And finally, six, pursue cost-effective diversification initiatives, including stronger emphasis on our IFP and ancillary products.

Now, let me take a moment to elaborate further on these six priorities. Cost reductions. Through an ongoing effort between the finance team and our operational leaders, the company has identified and is implementing significant transformation initiatives to improve our cost structure and support future profitability. The program, which is already underway, will result in over $60 million in annualized cost savings.

This includes targeted reduction in fixed expenses and vendor-related spend outside of mission-critical areas as well as changes to variable cost management. Through this program, we expect to achieve significant cost savings while preserving our competitive edge and focusing on initiatives with highest in-period ROIs. Telesales. Our call center headcount is expected to decline year over year before returning to growth in 2023.

We intend to reset our conventional telephonic enrollment growth while making important changes to the telesales operating model. Currently, a majority of our MA agents are selling plans nationwide, representing a large number of carriers. This adds cost and complexity to our operations. Starting this year, we will drive toward a greater agent specialization, including a disciplined local market focus.

I believe this targeted model will improve agents’ knowledge of plans, allowing them to more effectively convert calls and better serve our customers. In addition, we expect these changes to accelerate the efficiency ramp for new agents and reduce our licensing and training costs. Increasing our focus on the overflow services we offer to carriers is yet another way to create a more targeted approach to telesales. In addition to favorable unit economics, they help drive volume all season and deep and carrier relationships.

Initial findings of our pilot program indicated that this channel converts better than normalized rates with corresponding stronger margins. We also plan to increase the agility of our sales organization by training and incentivizing our agents to sell through a combination of inbound and outbound customer interaction. This compares to the current model where the vast majority of our MA sales are done through inbound calls. The combination should allow us to better leverage our agents during the low-volume quarters and low-volume parts of the day.

Our ancillary product program, which I will touch upon shortly, is expected to further reduce agent downtime. We will identify opportunities to streamline our sales script and make it more agent and customer friendly within current requirements. Many of the changes made last year were completed on a short notice and focused primarily on satisfying new carrier requirements. We avoided making adjustments during the AEP, but have the time now to finesse the script structure and delivery.

Importantly, we are emphasizing to our agents the criticality of listening carefully to the customers and understanding their specific needs and benefits that they value most, which is just as important as getting through the scripted remarks. Given the significant impact of age and tenure on productivity, we’re placing important emphasis on agent retention, including creating structured career paths within eHealth. Our agent mix will also mature this year compared to last AEP, given a much lower level of hiring embedded in our ’22 financial plan. Online business.

We plan to continue growing our online unassisted enrollments at rates that are significantly higher than the overall market and with favorable member retention and a higher contribution from new to MA enrollment compared to the telephonic channel. Our technology platform remains a key competitive differentiator, and I expect to maintain our technology leadership position through a highly disciplined investment strategy. A key goal for our online business is to continue improving user experience and driving higher conversion rates. Given that we had over 16 million unique online visitors to our Medicare platform, even a small increase in conversion rates deliver significant financial leverage, boosting revenue and reducing acquisition cost per member with a meaningful profitability impact.

One of the takeaways from last year is the importance of unlocking synergies between our telephonic and online channels to allow customers to move seamlessly between the two, depending on their specific preferences. Adding features like live chat, co-browsing and online session capture can help us more effectively convert our online visitors that are comfortable doing some of the research and plan selection online, but might need agent assistance to complete the enrollment. But for beneficiaries who prefer to engage with us over the phone, we will work on enhancements, including tools such as screen sharing and visual aids that will create a more seamless experience and correspondingly improved conversion rates. Demand generation.

On the demand generation side, I see the growing importance of a differentiated message that highlights eHealth’s value proposition, choice and consumer advocacy, accompanied by a marketing resource allocation that is focused on channels where we have a clear competitive differentiation, including online and strategic partner programs. Conversely, we’ve seen diminishing returns on generic advertising in Direct TV and Direct Mail, where our unbranded call to action was drowned out by competitors with similar messages. The limited branded TV advertising that we used in Q4 performed well for us, and going forward, we plan to cut unbranded TV ads to virtually zero. It is also clear to me that the more targeted we were in crafting messages that resonated with a specific audience, the more effective was our marketing spend.

We plan to further enhance our targeting capabilities by leveraging our data analytics and focusing on consumer segmentation across branded online, mail and streaming channels as well as search engine optimization. With respect to carrier relations, my goal is to work with carriers to evolve our model engagement to ensure that we are better aligned with their changing operational priorities and able to address the broader range of their business needs beyond driving enrollment volumes. We made a significant commitment and investment to enhance the consumer experience on our platform, and we’ll be pursuing models that incorporate quality metrics in determining our compensation. Last year, we started to conduct health risk assessments on behalf of some of our carrier partners, a logical extension of the enrollment process.

We also supported one of the large regional players serving as an overflow call center while retaining broker record status on these enrollments. We will continue to identify opportunities to add further value to carriers and diversify our revenue stream by better leveraging our tech platform and telesales infrastructure. Diversification initiatives. eHealth has a history of having a revenue base that is highly concentrated around a single product, which creates operational and financial risk.

We’ve identified and plan to pursue diversification opportunities. This includes leaning into our increased market opportunity for our IFP business, reenergizing our Medicare Supplemental sales and adding new products to our omnichannel platform, including, but not limited to indemnity plans in dental, vision and hearing coverage. Our Medicare Supplemental and ancillary businesses, in particular, will play a big part in increasing Medicare agent utilization during the low-volume quarters of Q2 and Q3. So that encapsulates my priorities for 2022 and beyond.

Before we look ahead to financial guidance for ’22, I’d like to cover a couple of topics. First, I want to highlight Monday’s 8-K filing concerning the successful completion of a $70 million secured debt financing through a term loan. Combined with the significant steps we are taking to rightsize our cost structure, this infusion of capital is an important element of our work to course correct eHealth business this year and return to growth on a substantially improved operational foundation in ’23. Altogether, we are comfortable that we can continue to implement the critical initiatives necessary to getting eHealth back on track.

In concert with our cost discipline efforts and this capital infusion, I would also like to note that we ended the year with $908 million in commissions receivable, representing a constrained estimate of future cash collections on our book of business. This includes $255 million in short-term receivables that are expected to be collected in 2022. As part of the financing process, we engaged services of an independent actuarial firm to validate our receivables and our lifetime value model. Based on their analysis of cohort persistency and commission cash flows, the actuarial experts validated our year-end commissions receivable balance, and we’re comfortable with our process for estimating product LTV.

One last development that I want to share that took place after the quarter end. In late January ’22, we received a subpoena from the U.S. Attorney’s Office for the District of Massachusetts, seeking, among other things, information regarding our arrangements with insurance carriers. We are cooperating fully with this request and intend to do so moving forward.

Transparency is important to me, and that is why we are including this matter on today’s call and in our Form 10-K. As you can appreciate in a situation of this nature, we have limited information that we can share today. We will provide updates if and when appropriate, but we are not going to comment further on it today. Now, I’d like to provide high-level financial guidance for ’22.

We expect for total revenues to decline approximately 10% at the midpoint of guidance. Underneath that, our new Medicare enrollments are expected to decline at a similar rate with telephonic enrollments declining at a faster pace, while online unassisted enrollments continue to grow at high double-digit percentages. Our plan for a decline in Medicare enrollment growth for ’22 before returning to growth in 2023 will allow us to reevaluate and prioritize our investment strategy, improve the structure of our telesales organization and focus on driving volume from marketing channels that offer favorable ROIs. We also expect to generate strong double-digit growth in ’22 in our IFP and ancillary enrollments.

Through our multiyear cost transformation program, we expect to achieve annualized cost savings in excess of $60 million, excluding restructuring costs in ’22 with additional savings to come in 2023 and beyond. As mentioned earlier, we are well underway on executing on this program and have dedicated senior leadership to drive a successful outcome. 2022 EBITDA loss is expected to be $50.5 million at the midpoint of guidance and net loss is expected to be $135.5 million at the midpoint. This partially reflects our conservative forecast of 0 tail revenue compared to approximately $30 million in ’21.

Christine will go into greater detail behind guidance ranges and key assumptions. As far as longer-term outlook, equipped with valuable learnings from this AEP, we are poised to make the necessary changes and position ourselves for profitable growth in the Medicare and broader health insurance market. I see a tremendous opportunity ahead of us as the second year of the COVID pandemic comes to an end. It is clear to me than ever that digital and telephonic-enabled broker channels provide a crucial service to Medicare beneficiaries.

For years, customers have trusted brokers to assist them, find a health insurance plan that meets their needs, but as face-to-face meetings become less attractive due to COVID accompanied by the changing digital knowledge of the senior population, several organizations within the DTC sector filled the void with technology and enabled solutions. The growing acceptance of technology solutions and shopping for and enrolling into Medicare plans is reflected in over 16 million unique visitors, 6.9 million quoted sessions in 2021, 300,000 accounts created in our customer center to date and about a quarter of our Q4 ’21 MA enrollments completed through our online unassisted channel. We are currently in the process of our three-year strategic planning. At a high level, my goal is to return to enrollment revenue growth in our Medicare business in 2023 on a substantially enhanced operational foundation.

We also expect to continue growing our non-Medicare revenue, including our IFP and ancillary products. As we resume growth, we expect to maintain a disciplined approach to expense management, resulting in positive EBITDA margin in ’23. We also currently expect operating cash flow to improve next year. However, we are not yet forecasting to become cash flow positive in ’23.

Strong positive cash flow management remains among our highest near-term objectives. And now, I will return the call over to our CFO, Christine Janofsky, who will review our Q4 ’21 results in greater detail and provide our ’22 annual guidance ranges. Christine?

Christine JanofskyChief Financial Officer

Thank you, Fran. Our ’21 financial performance was impacted by industry dynamics as well as company-specific challenges and investments we had to make as we manage through the changing regulatory and competitive landscape. Operationally, we made a number of important changes to our telesales organization last year, including a shift to a predominantly full-time in-house agent force, a major call center technology upgrade and an implementation of comprehensive enrollment quality initiatives. These changes were critical and I believe, necessary for the long-term success of our company.

We also exited the year with a number of actionable takeaways that have now been incorporated into our business planning. We continue to see the Medicare Advantage opportunity as extremely attractive and are taking steps to return to growth in this important market on a more targeted basis and with an improved cost structure. In formulating our operational plan for 2022 and the years beyond, we have prioritized the balance between optimizing cash flow and profitability, finding the right level of growth and identifying opportunities to diversify our revenue base. Before discussing our ’21 results and forward-looking plans, I’d like to share some thoughts on our current KPI framework.

When ASC 606 accounting was implemented by our sector, it introduced a new standard for assessing broker performance, creating more focus on the top of the funnel, specifically on the number of new approved members in each reporting period. While we believe enrollment growth is important, we believe there are other factors that are critical to understanding the business. In the current market environment, being able to judge the quality of the underlying membership base is more important than ever. While approved applications and LTVs are helpful metrics for measuring strength at the top of the funnel and we continue to have conviction in both, we believe a more comprehensive story is told by also looking at the combination of total estimated paying membership, cash collections per member and total commissions receivable.

These metrics show the impact of new member adds net of estimated churn while providing valuable information about the recurring cash that the commissions receivable asset is generating and is expected to generate in the future. As you can see on Slides 5 and 6 of our earnings call presentation available on the investor relations website, eHealth grew each of these indicators year over year in 2021. While we continue to provide guidance for revenue and net income, we believe it is important to also consider these cash-driven metrics as investors assess our business. Despite recent volatility and industry churn and the negative impact on LTVs in our sector, our member base is solid, growing and generating an increasing amount of cash per policy.

The overall quality of our commissions receivable and historical reliability of our LTV assumptions is also reflected by our aggregate tail revenue, which has been positive each year since ASC 606 was introduced. And now, I’ll move to our fourth quarter and fiscal year 2021 financial results. Fourth quarter 2021 revenue was $243.5 million, down 17% on a year-over-year basis. Full year revenue of $538.2 million was down 8%.

The GAAP net loss for the fourth quarter was $32.2 million, and for the full year, GAAP net loss was $104.4 million. Fourth quarter adjusted EBITDA was $28.2 million, down from $86.7 million in Q4 2020 and for the full year, our adjusted EBITDA loss was $22.7 million compared to positive $91.4 million in 2020. I want to acknowledge that our full year adjusted EBITDA came in slightly below the guidance range that we provided in November. This is not something that we believe is acceptable and one of my top priorities as CFO is to enhance our forecasting processes across all key operational areas of the organization.

Moving to Medicare. Full year 2021 Medicare segment revenue was $471.2 million, down 9% year over year. Medicare commission revenue for the year declined 3%, reflecting a small increase in commissions from in-period enrollments driven primarily by higher Medicare Advantage LTVs and offset by a decline in tail revenue compared to 2020. Fourth quarter Medicare segment revenue was $230.6 million, down 15% on a year-over-year basis.

Q4 Medicare commission revenue declined 11% year over year, driven primarily by a 15% decline in overall Medicare-approved members and partially offset by higher MA LTVs. Within our Medicare Advantage product, our estimated paying membership as of December 31, 2021, grew 19% year over year to $633,000. Q4 lifetime values of our Medicare Advantage members increased 7% year over year to $1,017, primarily as a result of higher broker compensation rates and increased contribution from new to MA enrollments. Fourth quarter Medicare supplement LTVs declined while PDP LTVs stayed flat year over year.

Total Medicare membership across all products was approximately 959,000 or a 10% increase compared to 2020 year-end. Q4 2021 Medicare advertising revenue declined to $25.5 million from $37.8 million in Q4 of 2020 or 32% year over year. For the full year, Medicare advertising revenue was $41.9 million, down from $70.4 million in 2020. As Fran touched on in his prepared remarks, carriers are rethinking their sponsorship program to place a stronger emphasis on the quality of broker enrollments.

We believe this could be a favorable trend for eHealth in the long term given the investment we are making to be at the forefront of quality initiatives in our sector. Medicare segment loss for fiscal 2021 was $12.1 million. Segment loss was driven by a combination of higher CC&E spend in Q2 and Q3 as the company ramped its internal agent force earlier in the year as well as a decline in telephonic conversion rates and increase in average talk time for our agents in the second half of the year. Medicare segment profits were also impacted by a 40% year-over-year decline in high-margin Medicare advertising revenue.

Q4 Medicare segment profit was $34.1 million, down from $84.8 million in Q4 of 2020, reflecting the same operating trends that impacted our annual profitability. Our online business continued to scale with unassisted online submissions comprising 15% of total 2021 submitted apps for our Medicare Advantage and Medicare Supplement products, up from 10% in 2020. Unassisted online submissions represented 24% of total apps in the fourth quarter compared to 13% in Q4 of 2020. Conversion rates for our online submission channel also increased year over year as we continue to gain leverage from investment in our e-commerce platform and talent upgrade in our digital marketing team.

Our customer center also had a successful AEP, scaling total accounts to about 300,000 from 100,000 a year ago. With respect to retention trends, Q4 was a relatively neutral quarter with flat trailing 12-month churn numbers compared to Q3 of 2021. It’s important to note that Q4 data doesn’t yet reflect most of the churn that takes place during the AEP given that members remain on their original plans until January 1. We will get an initial read on retention and renewal activity for the AEP, OEP cycle in April and plan to include these observations in our next earnings release.

Data that will report as part of Q1 earnings will reflect early retention trends on members cohorts we enrolled following the implementation of an enhanced enrollment process in the second half of ’21. Cash collections from our older MA cohorts have remained within the assumptions for their LTVs, and we recognized a total of $2.7 million in net positive tail revenue in fiscal 2021. Across all product lines, 2021 tail revenue was a positive $30.3 million. We have now recognized a total of more than $150 million of tail revenue over the last three years, despite an industrywide uptick in churn.

We see these results as a validation of the efficacy of our historical LTV estimates. Moving to our individual, family and small business segment. 2021 segment revenue was $67 million, up 1% year over year. Segment revenue reflected a 28% growth in approved IFP members accompanied by double-digit increases in LTVs for major medical individual products, offset by a decline in some of the ancillary product enrollments such as short-term coverage.

IFP and SMB segment profit increased by 13% to $45.7 million in fiscal 2021, primarily driven by strong enrollment growth and favorable persistency of our IFP products. Q4 IFP and SMB segment revenue was $12.9 million or a 45% decline, and segment profit was $7.2 million or a 55% decline, primarily due to lower tail revenue of $3.4 million compared to tail revenue of $14.3 million in Q4 of 2020. Now, turning to expenses. Our total non-GAAP operating expense, which excludes stock-based compensation, restructuring charges, amortization of intangibles and impairment charges increased 15% in fiscal 2021 relative to 2020.

With respect to our fixed costs, 2021 non-GAAP technology and content spend was $73.8 million or an increase of 24%, driven by costs related to our implementation of a cloud-based call center solution as well as continued investment in user experience and tools on our e-commerce platform. 2021 non-GAAP G&A was flat year over year at $64.4 million. Moving to variable costs. 2021 non-GAAP marketing and advertising expense was up 29% year over year.

In preparation for the AEP, we made a significant commitment to demand generation programs based on the strength of our performance and attractive unit economics observed during the first half of the year. Although we saw a decline in telephonic conversions and longer talk times in late July, August, following the implementation of our enrollment quality initiatives, we expected for conversion rates to rebound during AEP. However, these rates didn’t recover sufficiently and came in well below our earlier expectations and were one of the key factors behind our guidance revision in November. The decline in rates at which our agents were able to convert telephonic leads negatively impacted the ROI on our marketing.

While we were able to dial down some of our marketing spend during Q4, we couldn’t make a more substantial adjustment to many of the marketing programs on short notice. 2021 marketing cost per approved Medicare member grew 37% compared to a year ago, a higher contribution from online marketing to the overall channel mix as well as year-over-year increase in lead costs in select channels also contributed to a higher marketing cost per approved Medicare member. Online marketing is one of the priority channels for us, driving high persistency enrollments that are more likely to be fulfilled without agent assistance compared to other channels. 2021 non-GAAP CC&E increased 4% to $176.5 million compared to a year ago, reflecting our transition to a primarily internal sales force with an earlier hiring ramp.

Customer care and enrollment costs per approved Medicare member grew 4% in 2021 compared to 2020 as a result of this earlier hiring ramp along with the lower conversion rates we experienced, partially offset by a larger percentage of applications submitted online with no agent interaction. Turning to our balance sheet and cash flows. Our 2021 operating cash flow was negative $162.6 million compared to negative $107.9 million in 2020. We ended the year with $123.2 million in cash, cash equivalents and marketable securities.

Our balance sheet also reflects $254.8 million in short-term commissions receivable expected to be collected over the next 12 months and $653.4 million in long-term commissions receivable. Our commissions receivable asset has continued to grow with combined short-term and long-term receivables ending 2021, up 15% on a year-over-year basis. As a reminder, the Medicare Advantage portion of our commissions receivable is constrained at 7% relative to our actuarial models for lifetime values. As Fran mentioned, our year-end commission receivables balance and LTV model have been validated in early 2022 by an independent actuarial firm as part of our financing process.

For 2022, we are laser-focused on rightsizing the cost structure to drive future profitability. We have taken immediate action to identify and implement significant transformation initiatives. This includes significant changes to our fixed costs aimed at eliminating the nonessential spending and maximizing returns on the ongoing investment in areas that promote our competitive differentiation. We are also making significant changes to our management of variable costs.

On the marketing side, we are pursuing a reduction in acquisition costs per approved Medicare member through a highly targeted approach to demand generation. This includes cutting all programs that fall below our ROI targets and focusing on channels where eHealth has a strong competitive advantage and where we can drive high quality, high LTV enrollments. As Fran mentioned, we are also reducing our call center staffing targets and telephonic enrollment growth for this year’s AEP compared to 2021 while we are rightsizing the company and putting in place multiple initiatives aimed at increasing the efficiency and utilization of our in-house agents. We expect to continue generating strong enrollment growth in our online unassisted channel.

Through these initiatives and changes in strategy, we expect to achieve significant cost savings of approximately $60 million in 2022, excluding restructuring charges of $10 million to $15 million. Now, moving to guidance for fiscal 2022. We are forecasting 2022 revenue to be in the range of $448 million to $470 million. We expect GAAP net loss for 2022 to be in the range of negative $147 million to negative $124 million.

We expect 2021 adjusted EBITDA to be in the range of negative $64 million to negative $37 million. Total cash flow, excluding the impact of our $70 million term loan and associated costs, is expected to be in the range of negative $140 million to negative $120 million. As you likely noticed, we have removed segment-level guidance as well as some additional metrics. As we pursue a number of strategic and operational initiatives, as outlined by Fran, we would like for our investors to focus on the overall revenue, cash flow and profitability goals.

I’d like to go over a few key operational assumptions behind the ’22 guidance. At the midpoint of our revenue guidance range, we assume an approximately 10% decline in approved MA members, reflecting primarily our temporary pullback in the telephonic enrollment channel. Another important variable driving our 2022 approved member forecast is the telephonic conversion rate. Given that we didn’t introduce enrollment quality initiatives until the second half of last year, we are facing a tough comparison on our conversion metric in the first and second quarters of the year.

As a result, we are currently forecasting a decline in telephonic conversion rate in the first and second quarters, followed by an increase in Q3 and Q4 compared to the same quarters a year ago. Our guidance currently assumes flat MA LTVs and 0 tail revenue across all products and a year-over-year decline in carrier advertising or sponsorship revenue. On the acquisition cost side, we expect marketing COA per approved Medicare member to decline in mid-single digits, and agent cost per approved member could increase in mid-single digits compared to 2021. Similar to conversions, we expect to see a negative trend in these metrics in the first half of the year, offset — and in the case of CC&E, partially offset by an improvement in Q3 and Q4.

Revenue in our IFP SMB segment is expected to grow, driven by increased IFP and ancillary sales accompanied by favorable LTVs for the IFP product. We also expect to sell more ancillaries in our Medicare business to better leverage our agent force during the off-peak times. Specifically, as it pertains to the first quarter, we expect revenue to be down 20% or more year over year and adjusted EBITDA loss of $30 million or more. The primary drivers here are lower telephonic conversion rates compared to a very strong Q1 in 2021 as well as little to no impact from our transformation program that we are just beginning to implement.

We expect to see the benefits of this initiative more fully beginning in Q2 of this year. I want to remind you that these comments in our guidance are based on current indications for 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.

Fran and I remain committed to build back to profitable growth that we know this industry can support. Our objectives for this upcoming year are to optimize our operations across the board, but especially within our marketing and telephonic sales organizations to be able to reach our goal of profitable growth in 2023. We are laser-focused on reducing our fixed costs and nonaccretive variable costs while bolstering the targeted nature of our lead generation and sales efforts. We look forward to updating you all on our progress.

And with that, I’ll turn the call over to the operator for Q&A.

Questions & Answers:

Operator

Thank you. [Operator instructions] Our first question will come from Elizabeth Anderson with Evercore ISI. Please go ahead.

Elizabeth AndersonEvercore ISI — Analyst

Hi, guys. Thanks so much for the question. I was wondering if you could go into a little bit more detail about what drove the LTV growth in the quarter? And then also, I just wanted to understand a little bit better how you decided on sort of the optimal growth rate for 2022? Thank you.

Christine JanofskyChief Financial Officer

Thank you so much for the question. As we think about the LTV growth in 2021, we saw higher commission rates and coming in. And then also higher new to Medicare enrollments coming through the LTVs for 2022 to see that nice growth year over year.

Operator

Thank you. Our next question will come from George Sutton with Craig-Hallum. Please go ahead.

George SuttonCraig-Hallum Capital Group — Analyst

Fran, I’m particularly interested in your comments, having just spoken with the top six brokers, some of who have been fairly open about their concerns about the e-broker channel. So I’m curious if you could give us a little better sense of how you’re differentiated in those takeaways from some of the other e-brokers?

Francis SoistmanChief Executive Officer

Good morning, George, and thanks for the question. I think that the primary difference is when we reengineered our sales process and put in place the script and the validation of verification process at the end and continue to work that throughout the AEP, not only did we see performance improvement as measured by a reduction in CTMs and rapid disenrollments, but our carrier partners were very quick to point out that they, too, are seeing eHealth’s performance stronger than many of their other partners. So — and we continue to work that. That’s one of the focus areas for this year is to evaluate where there’s opportunities to streamline the script, make the script more effective and make sure the agents are very comfortable with this, but also to be very cognizant of the need to listen carefully to what our beneficiaries are telling them in terms of what’s important to them and what they need.

So I think that’s really the primary difference is they see it in their CTMs, and we see it in customer satisfaction, still opportunities. Thank you.

Operator

Thank you. Our next question will come from Jailendra Singh with Credit Suisse. Please go ahead.

Jailendra SinghCredit Suisse — Analyst

Thank you and good morning, everyone. I actually wanted to get your thoughts with respect to MA LTV in particular. One of your peers recently increased constrained to 15%. Just curious why you think 7% is still the right number for you guys? And any differences in the underlying approach or business mix, which might explain that difference?

Christine JanofskyChief Financial Officer

Jailendra, thank you so much for the question. As we commented on our remarks, both Fran and I, we had an independent third-party actuarial firm come in and validate not only our commissions receivable, but our LTV methodology. And we’re comfortable with the assumptions that we have within our LTV and the current constraints that we have. And in addition to that, as we think about the tail revenue that we’ve seen coming in, we’ve recorded tail revenue each of the past three years consistently.

So that provides additional comfort around our LTV assumptions.

Francis SoistmanChief Executive Officer

Just to supplement that, it’s comforting to know that between our independent auditors and having an independent actuarial firm evaluate our receivable and LTVs, we’re all very aligned with the valuation. So it’s — it is something that is constantly evaluated, and we want to get ahead of the curve as opposed to trailing it so that we don’t get any kind of impairment scenario.

Operator

Thank you. Our next question will come from Steven Valiquette with Barclays. Please go ahead.

Steven ValiquetteBarclays — Analyst

Thanks. Good morning, everyone. So as you discussed some of the KPIs to focus on more versus which ones to focus on less in the early part of the slide deck today. I guess, I’m curious where the LTV, the customer acquisition cost or LTV to CAC ratio stacks up in that level of importance from your perspective now? And what’s a good long-term target for that ratio just in light of all the cost cutting and more efficient marketing effort that you’re talking about going forward? Thanks.

Francis SoistmanChief Executive Officer

Good morning, Steven. Thanks, again, for the question. I think it’s fair to say that the LTV to CAC ratio is a very important metric. We want to put — today, our measurement of it, I think, is a little too holistic as opposed to having precision around every single channel.

I think we do a really good job of our online measurements, but I think there’s opportunities to refine that process. We don’t have what I would call sophisticated cost accounting system, but it’s — so there is some degree of variance. But in terms of how we spend our precious capital or how we invest our precious capital on marketing, lead gen, the CAC to LTV ratio is the most appropriate measure. So I’d say, it’s as important as any key financial measure.

I would put it in the top three.

Steven ValiquetteBarclays — Analyst

OK. And somewhat tied into that just quickly. I know you said you’re in the process of doing the three-year planning, the new three-year planning. But on a preliminary basis, is there a goal for eHealth to generate positive operating cash flow sometime within that three-year period? Or is that still potentially not realistic, just given the trajectory of the business? Thanks again.

Francis SoistmanChief Executive Officer

It’s something we talk about with the high degree of frequency in terms of what do we have to do. As you know, the portfolio is heavily weighted toward Medicare Advantage, and there lies the challenge. I think as we continue to grow through a focus on diversification and have a different cash flow performance or cash flow cycles for other business segments, I think we’ll make important progress toward the goal. We won’t get to positive cash flow in ’23 and ’24.

It may be possible. It all depends on how effective we are with our focus on marketing optimization and channel profitability and taking down or retiring channels that don’t perform, reengineering those that can be improved upon. So it’s still a goal, but it’s an audacious goal. I think it’s fair to say in the environment of what’s needed to support growth in the MA business in particular.

Christine JanofskyChief Financial Officer

And before we go to the next question, I just wanted to follow up on a question that Elizabeth, the second part of your question on overall growth assumptions for our ’22 revenue guidance. So a couple of the assumptions around that really are from an LTV perspective, we’re keeping that flat year over year. We have a decline in the overall revenue, so not only call volume, but as we think about the conversion rates, the first half of the year is a decline in ’22 versus ’21, within an increase in the conversion rates in the latter half of the year from a year-over-year perspective. And then focusing on the expense side, really lowering our marketing spend as we’ve commented on and focusing on the higher return channels and then looking across our fixed expenses.

Operator

Thank you. Our next question will come from Daniel Grosslight with Citi. Please go ahead.

Anna KruszenskiCiti — Analyst

This is Anna Kruszenski on for Daniel. I wanted to go back to the scalability of the online business. I think in the past, you guys have mentioned that growth in this channel is largely driven by investments in marketing resources. Just wondering if you could provide some color on what your strategy is for allocating marketing spend at this channel as you really focus on that?

Francis SoistmanChief Executive Officer

Well, thanks, Anna. And please pass along our congratulations to Daniel. OK. We’re really pleased, very pleased, very excited about the performance of our online unassisted channel.

The performance in ’21 was one of the real highlights of the year. The challenge that we’re going to have going forward is the seasonal costs for lead gen. Search engine optimization is critically important, but it’s like an auction process. And there are times when there’s such great demand, it just drives up the overall lead generation cost, which at some point during the AEP cycle, the economics just didn’t work.

So we’ve talked about — we have some good measurements of like, say, for example, the first two weeks of AEP and the last two weeks of AEP, and know that they generally run much, much higher, and it’s really how do we deploy the money, when do we deploy the money. And so I think our level of sophistication with our analytics work is helping us prepare to be even more efficient with those dollars. And we may not be as active throughout the entire AEP period, meaning we’re going to pick our spots strategically when we invest in those leads to get the right financial outcome. Phillip will supplement that.

Phillip MorelockSenior Vice President, Chief Digital Officer

Sure. I think one of the important things to keep in mind, too, is the key driver is really conversion rate. So as we continue to compete in the market and we’re competing against others and in digital marketing, we are in a highly dynamic and competitive market. And like Fran said, it’s an auction, right? So while we are reacting in real time on the marketing side, reality is, we make investments throughout the year in the conversion rate and that’s through improving our user experience.

It’s through thinking about which marketing channels we want to test our way into. And so as the search engine space gets more and more crowded over time with other brokers getting into it, it’s important for us to have a diversity of channels and to really understand how to convert users from each of those channels.

Francis SoistmanChief Executive Officer

Yes. And one last comment I would make is that we have identified opportunities to manage the top of the funnel through closure. There is an opportunity with people that start through our online unassisted, but don’t complete it. And that percentage is, I’d say, it’s a good opportunity to improve the conversion rate.

So to Phillip point, we really have a line of sight as to a couple of things we can do that are manageable and some technology that Phillip and his team are introducing this year, including chatbot support and live agent intervention, will, I think, play an important role in increasing that conversion rate going forward.

Operator

Thank you. Our next question will come from Tobey Sommer with Truist. Please go ahead.

Tobey SommerTruist Securities — Analyst

Thank you. Given the highly competitive nature and in some cases, irrational pricing during AEP, do you think that consolidation within the DTC space has to occur? And if so, what are the mechanisms for that given the cash burn at the largest entities?

Francis SoistmanChief Executive Officer

Good morning, Tobey. Anticipated that question. I would characterize the sector as sort of at an inflection point. And how it shakes out over the next two, three years remains to be seen, of course, but our focus is on our business, what we can do to affect it.

Clearly, we’ll be monitoring what is occurring with our competitors. I don’t know if acquisitions is going to be the all-in-all solution here. I do think that there will be a shakeout among competitors, both e-brokers as well as the aggregators over the next couple of years because the economics don’t support the present environment in terms of the number of competitors and the financial arrangements that we’re in. So I do think that we will see change how that — what form that takes, I think, will — in fact, I don’t think there’ll be a cookie cutter.

I think there’ll be a lot of different approaches to this. Stay tuned.

Operator

Thank you. Our next question will come from George Hill with Deutsche Bank. Please go ahead.

George HillDeutsche Bank — Analyst

Good morning, Fran and Christine, and thanks for taking the questions. I have a few. I’ll just lump them all in here that they’re around cash. I guess, first, with respect to the cost-cutting initiatives, can you tell us what the cash costs of those will be? Second one, Christine, I don’t know if you have the ability to walk us through kind of quarterly cash flow and quarterly cash balance expectations as we think about 2022, and I know that you guys have the financing coming in from Blue Torch.

And Fran, I think that you said that you guys will be negative cash flow again in 2023. I guess my thought there is, do you guys anticipate needing to raise capital again? And do the receivables balance on the balance sheet include receivables that have already been sold? I know that was a lot.

Christine JanofskyChief Financial Officer

So let me — yes, George, good morning, and thank you so much for the question. And let me start with a couple of things. As we think about liquidity and cash needs, certainly, based on the financing that we have just announced and the transformation initiatives and the program that’s underway, we have sufficient liquidity to complete our business plan through 2022. And just to make sure everybody is aware, really an important takeaway is that we are very committed to being that responsible steward of cash as we think about things on a go-forward basis.

From a cash flow perspective, what we’ve guided to from an overall for 2022 is being in the range, excluding the impact of that term loan is a negative $140 million to negative $120 million. Things will change as we’re focusing on those initiatives throughout the year, but that’s what we’re really focused on from a cash perspective and ensuring that any of those costs that are nonessential that we’re eliminating those costs.

Francis SoistmanChief Executive Officer

George, just one other comment. As far as the securitization or the selling of receivables, we’ve not done that. Our secured facility is not structured in that way. It’s a loan.

And we certainly are interested in seeing if there is indeed a market out there for securitization. Given the strength of the receivable, I think it could be very attractive for both eHealth as well as a prospective lender.

George HillDeutsche Bank — Analyst

OK. Yeah, we know that prior regime has sold some receivables, I just want to make sure that I understood how the balance was represented. Thank you.

Operator

Thank you. I’m showing no further questions at this time. I will now turn the call back over to Fran Soistman for any further remarks.

Francis SoistmanChief Executive Officer

Operator, thank you, and thank you all for joining us this morning, and have a great day.

Christine JanofskyChief Financial Officer

Good bye.

Operator

[Operator signoff]

Duration: 74 minutes

Call participants:

Eli Newbrun-MintzInvestor Relations Manager

Francis SoistmanChief Executive Officer

Christine JanofskyChief Financial Officer

Elizabeth AndersonEvercore ISI — Analyst

George SuttonCraig-Hallum Capital Group — Analyst

Jailendra SinghCredit Suisse — Analyst

Steven ValiquetteBarclays — Analyst

Anna KruszenskiCiti — Analyst

Phillip MorelockSenior Vice President, Chief Digital Officer

Tobey SommerTruist Securities — Analyst

George HillDeutsche Bank — Analyst

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