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eHealth, Inc. (EHTH) Q4 2022 Earnings Call Transcript

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eHealth, Inc. (NASDAQ:EHTH) Q4 2022 Earnings Conference Call February 28, 2023 8:30 AM ET

Company Participants

Eli Newbrun-Mintz - Senior Investor Relations Manager

Fran Soistman - Chief Executive Officer

John Stelben - Chief Financial Officer

Conference Call Participants

George Sutton - Craig-Hallum

George Hill - Deutsche Bank

Operator

Good afternoon, everyone, and invited to nan eHealth, Inc. Conference Call to talk nan company's Fourth Quarter and Fiscal Year 2022 Financial Results. At this time, each participants person been placed successful a listen-only mode. The level will beryllium unfastened to your questions pursuing nan presentation.

It is my pleasance to move nan level complete to Eli Newbrun-Mintz, Senior Investor Relations Manager. Please spell ahead.

Eli Newbrun-Mintz

Good morning, and convey you each for joining america today. On nan telephone this morning, Fran Soistman, eHealth's Chief Executive Officer and John Stelben, Chief Financial Officer will talk our 4th fourth and fiscal twelvemonth 2022 financial results and our financial outlook for 2023. Following these prepared remarks, we will unfastened nan statement for a Q&A convention pinch manufacture analysts. As a reminder, this telephone is being recorded and webcast from nan Investor Relations conception of our website.

A replay of nan telephone will beryllium disposable connected our website later today. Today's property release, our humanities financial news releases and our filings pinch nan SEC are besides disposable connected our Investor Relations website. We will beryllium making forward-looking statements connected this telephone astir definite matters that are based upon management's existent beliefs and expectations relating to early events, impacting nan institution and our early financial aliases operating performance.

Forward-looking statements connected this telephone correspond eHealth's views arsenic of today, and existent results could disagree materially. We undertake nary responsibility to publically reside aliases update immoderate forward-looking statements successful early filings aliases communications regarding our business aliases results.

The forward-looking statements, we will beryllium making during this telephone are taxable to a number of uncertainties and risks, including, but not constricted to, those described successful today's property release, our Annual Report connected Form 10-K and our different filings pinch nan SEC. We will besides beryllium discussing definite non-GAAP financial measures connected this call. Management's definitions of these non-GAAP measures and reconciliations to nan astir straight comparable GAAP financial measures are included successful today's property release.

With that, I'll move nan telephone complete to Fran Soistman.

Fran Soistman

Thank you, Eli, and bully greeting to everyone joining america today, arsenic we study our fiscal twelvemonth and 4th fourth 2020 financial results. On this call, I will, one, reappraisal our yearly enrollment play performance, which exceeded our expectations and reflected nan early advancement of our translator plan; two, update our strategical and operational priorities for 2023 and finally, stock our outlook for this year.

I'd for illustration to statesman by sharing our position of nan Medicare marketplace and eHealth's critically important role. The Medicare Advantage Program offers beardown worth propositions to seniors done superior wellness outcomes compared to accepted Medicare and a wide action of value and robust plans astatine affordable premiums. Today, seniors person a ample prime of supplier networks, sum options and supplemental benefits, specified arsenic over-the-counter medications, dental, imagination and hearing, arsenic good arsenic rank done nan plans offered by aggregate wellness security carriers.

Further, galore carriers supply beneficiaries pinch entree to programs to reside societal determinants of health, including proscription and nutrient assistance arsenic examples. For definite segments of nan elder demographic, a operation of accepted Medicare pinch Med Sup tin besides beryllium an charismatic prime of wellness coverage, complemented pinch ancillary services, specified arsenic dental, imagination and hearing.

With each nan robust options, however, comes complexity. We position our domiciled successful this manufacture arsenic a trusted and transparent advisor to seniors arsenic they make nan captious determination of assessing their options and choosing a wellness attraction scheme that champion fits their needs and preferences. We are good positioned to present connected this mission, based connected our wide web of starring carriers, unbiased scheme proposal devices and our unsocial omnichannel user platform.

Our omnichannel level allows customers to seamlessly displacement betwixt telephonic, self-serve online and online-assisted interactions pinch eHealth, while researching and enrolling into plan.

Simply put, we purpose to meet consumers connected their terms, guiding them done their wellness security and related options, when, wherever and really they prefer. Our strategical and operational decisions are informed by nan company-wide extremity of being nan golden modular successful value and distribution astatine standard of Medicare, individual, mini group and ancillary products.

As I shared connected our past net call, this ngo has been operationalized done our customer promise outlining our committedness to beneficiaries, consumers and caregivers and nan acquisition they tin expect erstwhile they activity pinch eHealth. We besides stay committed to maintaining adjacent and collaborative relationships pinch our bearer partners and supporting their customer acquisition goals.

Following nan AEP's completion, we person received affirmative preliminary feedback from respective of our largest bearer partners pinch respect to our enrollment quality, including a meaningful simplification successful Medicare Complaint Tracking Module, aliases CTM scores and an betterment successful persistency compared to a twelvemonth ago.

As a reminder, CTMs bespeak beneficiary complaints revenge straight pinch CMS. Since implementing a big of enrollment quality-related initiatives successful nan 3rd 4th of 2021, eHealth has observed a 50% alteration successful its CTM rates from 2021 to nan astir caller AEP based connected preliminary information disposable to date. We besides proceed to person affirmative anecdotal feedback from carriers, including from 1 of our largest bearer partners who stock that our enrollment value metrics are successful statement pinch their ain soul income channel.

We are steadily moving towards our extremity of becoming nan golden modular successful enrollment value wrong our sector, while besides achieving and exceeding our financial targets. Last month, we released our preliminary 4th fourth and fiscal twelvemonth 2022 results, which came successful supra yearly guidance ranges that we provided earlier successful nan year. Today, we will stock much item astir our 4th fourth financial and operating capacity and nan cardinal drivers down our effective AEP execution.

Shortly, aft I joined eHealth arsenic CEO successful November of 2021, we mapped retired a business translator scheme that included respective strategical initiatives, including overhauling our trading and income processes to little nan costs of acquisition, amended nan value of leads and amended our income advisers trading techniques, each pinch nan eventual extremity of improving conversion rates. Further, we were focused connected evolving nan customer travel to create a memorable shop, educate, counsel and enroll experience.

From a financial standpoint, returning to sustainable profitable maturation and affirmative rate travel procreation became our North Star. In early 2022, we initiated a company-wide costs simplification scheme and purposefully slowed down our enrollment growth, choosing to hide connected enrollment measurement that did not support our target margins. During this past AEP, we pursued targeted request procreation campaigns and deemphasize definite channels specified arsenic DIRECTV, while driving beardown capacity wrong our connection and strategical partner channels, arsenic good arsenic done dedicated bearer arrangements.

Driven by changes to our trading programme implemented successful 2022, we were capable to make higher value leads during this AEP compared to a twelvemonth agone and converted them astatine overmuch improved rates wrong our telephone centers.

Higher conversion rates were besides driven by meaningful process improvements successful our telesales organization. For our licence and work agents for use advisers, up of nan AEP, we redesigned our advisor hiring and training program, present caller adviser-facing exertion devices and launched a section marketplace operating exemplary wherever our use advisers specialized by region, which amended aligns our income exemplary pinch nan section community-based quality of healthcare transportation and nan wellness security industry.

To amended span our online and telesales experiences. Last year, we introduced co-browsing and chat capabilities. The online chat tool, successful particular, had a pronounced affirmative effect during nan AEP connected conversion rates for nan online visitors to utilized it. It besides positively impacted support complaint and first retention for these enrollments based connected information we person to date.

In summation to creating a affirmative personification experience, chat besides efficaciously leverages clip and capacity of our use advisers arsenic 1 personification tin negociate aggregate chats simultaneously. As a testament to nan occurrence of these initiatives, our 4th fourth telephonic conversion rates accrued astir 25% compared to Q4 of 2021. This represents a meaningful operating lever fixed nan important telephone measurement we received successful Q4.

Adjusted EBITDA margins connected our 4th fourth Medicare enrollments were much than doubled arsenic Medicare Advantage life values remained unchangeable while full adaptable acquisition costs per approved MA-equivalent personnel declined by 18% compared to a twelvemonth ago.

Through a operation of strategical and operational initiatives, on pinch costs translator measures, we accrued 4th fourth adjusted EBITDA by 76% year-over-year, partially driven by our intentionally reduced enrollment volumes and gross compared to a twelvemonth ago.

Fourth 4th gross of $196.3 cardinal represented a alteration of 19% year-over-year and drove adjusted EBITDA of $49.5 million, up from $28.2 cardinal successful Q4 of '21. Fourth 4th GAAP nett income was $20.7 million.

It's important to statement that complete nan past respective months, we person observed trends suggesting that our manufacture peers are taking akin actions successful position of prioritizing sustainable profitability versus maturation astatine each costs. In fact, we judge that nan Medicare distribution marketplace has reached an inflection constituent pinch brokers refocusing their effort and resources connected enrollment margins and personnel retention.

In summation to bringing a much logical attack to request generation, which benefits each players successful nan industry, we spot this inclination arsenic having a affirmative effect connected consumers arsenic brokers spot accrued accent connected nan wide customer enrollment experience, including scheme fresh and a semipermanent personnel retention.

During nan 4th quarter, we managed our liquidity overmuch much efficaciously than we initially forecasted. More specifically, full rate outflow for fiscal twelvemonth 2022, excluding nan effect of our $70 cardinal word indebtedness and associated costs and nett securities activities was $44 million, favorable to our guidance scope of $110 cardinal to $90 cardinal of outflow. We ended nan twelvemonth pinch capable liquidity to support our business needs and objectives successful 2023.

Business transformations are driven by people, and successful nan play of clip pursuing our past net call, we rounded retired nan elder activity squad pinch 3 caller additions. John Stelben joined eHealth arsenic Chief Financial Officer successful November of 2022. John has important financial activity acquisition successful healthcare, astir precocious astatine CVS Health, Aetna, wherever he had aggregate roles, including CFO, Government Services division, covering Medicare, Medicaid, national labor programme and nationalist speech businesses.

John has already made its effect felt driving nan improvement of our 2023 financial plan. This year, we announced that Ketan Babaria joined eHealth, arsenic our Chief Digital Officer. Ketan's extended way grounds building strategical integer roadworthy maps astatine customer-focused companies make him nan perfect personification to further our exertion activity successful nan sector.

Third and finally, Lara Sasken returned to eHealth astatine nan opening of February, arsenic Senior Vice President of Communications. Lara returns pinch a wealthiness of knowledge and acquisition to erstwhile again lead eHealth's connection initiatives and activities.

With these 3 hires, I've completed nan caller elder activity squad that's executing connected our translator plan, strategical initiatives and pursuing nan breathtaking opportunities we spot up of us.

We are pleased pinch nan important operational achievements made complete nan people of past year, culminating successful a successful yearly enrollment period. However, we are conscionable getting started, and spot moreover greater upside to nan ratio of our trading and income organizations. In 2022, we intentionally reduced enrollment volumes and full revenue, arsenic we implemented basal organizational and operational changes yet pinch nan extremity of returning to sustainable profitable growth.

We expect to execute this done disciplined measurement growth, further betterment successful our enrollment margins, strict fixed costs controls and processing gross streams extracurricular of our halfway MA agent business. At nan midpoint, our 2023 yearly guidance reflects 6% gross growth, while achieving important year-over-year betterment successful adjusted EBITDA. John will elaborate further successful his remarks that will travel mine.

Moving now to our 2023 operational priorities. These objectives are meant to build connected nan occurrence of our transformational initiatives implemented past twelvemonth and bespeak our committedness to continued betterment crossed each areas of operations. The 4 objectives are arsenic follows. First, we proceed to build connected past year's advancement pinch an eHealth's omnichannel trading and lead procreation engine. Second, to amended conversion rates crossed our full enrollment level sloppy of really nan customer chooses to interact pinch eHealth. Third, to present nan adjacent shape of our customer retention strategy. And finally, to further diversify eHealth's gross streams.

I'll now supply further item connected each of these objectives. First, we will proceed building retired our unified omnichannel trading engine. Last year, we importantly improved our lead value and lowered our acquisition costs by narrowing down our trading channels and campaigns to prosecute only nan highest ROI initiatives. This year, we spot an opportunity to commencement diversifying our transmission operation done a disciplined test-based approach, retired of nan beardown activity of our CMO, Michelle Barbeau, our reengineered trading initiatives will beryllium progressively driven by assemblage segmentation and targeting, leveraging differentiated messages that highlights what's unsocial astir eHealth and extending touch points pinch non-converting website visitors arsenic good arsenic our existing customers.

We will besides beryllium aligning our trading motor much intimately pinch nan caller building of our telesales statement by emphasizing section marketplace and product-specific campaigns. Ultimately, nan extremity is to further customer engagement and found a beardown chopped marque that efficaciously communicates our differentiated worth proposition arsenic a afloat transparent advisor to customers successful a analyzable wellness security industry.

Second, we will proceed to prioritize improving user acquisition and conversion rates crossed our full level sloppy of really nan customer first interacted pinch eHealth aliases really nan last enrollment is made. As I mentioned earlier successful nan call, past year's preamble of nan caller omnichannel features, including co-browsing and chat capabilities had a affirmative effect connected our expertise to adjacent sales. This year, we will beryllium further refining our integer chimney to make nan personification acquisition moreover much frictionless and intuitive.

Another extremity of these optimizations is to heighten nan accuracy of nan accusation we cod successful bid to supply nan champion advisory work and scheme recommendations. On nan telesales side, we are expanding nan percent of use advisers who will specialize into nan surface science and/or product, which has demonstrated a affirmative effect connected nan extent of their expertise and effectiveness successful serving our customers.

On nan exertion side, activity is already underway to adhd a caller characteristic that further enhances nan enrollment acquisition done aggregate touch points successful our omnichannel customer journey. The basal occurrence of eHealth's income cognition depends connected our finance successful group and we'll proceed to foster nan standard and profession maturation of our beardown guidelines of use advisers.

Our 3rd privilege is to present nan adjacent shape of our customer retention strategy pinch nan volition of reaching fierce two-year goals that we person group for ourselves internally. Our retention programme starts earlier nan enrollment done trading and branding built to create long-lasting impressions.

One of nan keys to our branding strategy is to create a lasting consciousness of who eHealth is and what we do pinch nan eventual extremity of semipermanent customer loyalty. The retention effort continues during nan enrollment process by providing an fantabulous customer acquisition and optimal scheme matching done enhanced proposal analytics devices and carries connected station enrollment done continued engagement utilizing a data-driven approach, targeting nan optimal times to prosecute our existing customers.

The occurrence of these initiatives will beryllium measured by our expertise to support our beneficiaries successful nan eHealth advisory ecosystem moreover arsenic they move plans aliases carriers based connected changes to nan individual needs aliases scheme design. In aggregate, this caller retention strategy will bring a much thoughtful attack to building a year-round personalized narration pinch our beneficiaries, focusing connected precocious effect alternatively than higher measurement customer communications.

The 4th and last operational privilege is to further diversify eHealth's gross stream. While we proceed to clasp nan utmost condemnation successful nan MA opportunity, we judge supplementing agent of grounds Medicare Advantage income pinch different gross streams will thief america amended our LTV to CAC ratios, while playing an important domiciled connected our way to reaching sustainable profitability and improved liquidity.

This includes our scheme to grow dedicated bearer arrangements, BPO business opportunities to relationship for a larger stock of full enrollments. These arrangements play to our halfway strengths and are becoming a valuable supplement to our halfway M&A business arsenic they transportation nary nonstop trading costs and tin connection charismatic portion economics. In fact, earlier this month, we learned we person nan winning connection for a caller bearer dedicated statement pinch 1 of our awesome bearer partners successful support of this strategy.

We besides scheme to spot an accrued accent connected our individual, family and mini business aliases IFP segment, which has been consistently profitable complete nan past respective years. We judge that nan increasing take of nan individual coverage, wellness reimbursement statement aliases ICRA and nan imaginable effect for Medicaid redetermination will thrust accrued liking and request for awesome aesculapian IFP plans and create incremental opportunities for eHealth successful this market.

This year, we besides scheme to marketplace targeted investments for maturation successful our Medicare supplement and ancillary merchandise business. Additionally, we will beryllium leaning into nan personnel engagement services that some deepen our narration pinch beneficiaries and connection valuable gross opportunities successful nan little measurement quarters of nan year.

Recapping 2022, it was a pivotal twelvemonth successful progressing towards our extremity of sustainable, profitable maturation while strengthening our opinionated arsenic a golden modular successful wellness security and ancillary merchandise distribution and standard and demonstrating eHealth's worth proposition to our bearer partners. We expect to proceed to build connected this momentum successful 2023 pinch a number of impactful operational initiatives underway.

The guidance we published earlier this greeting arsenic portion of our net merchandise is suggestive of nan advancement we proceed to make arsenic an statement and puts eHealth connected a way towards achieving profitable maturation successful 2024.

Further, we are presently successful nan process of readying our first Investor Day since 2019, to beryllium held in-person successful New York successful May of this year, wherever we intend to talk our longer-term strategical and financial goals.

Finally, I would for illustration to return a infinitesimal to admit eHealth's elder activity team, our guidance and each nan labor of nan institution for their important activity that supported nan beardown results that we reported today.

It is inspiring to spot nan committedness and nan dedication of our teams crossed nan organization, agreed and their extremity pinch helping beneficiaries find nan champion imaginable wellness attraction coverage. I judge this squad will proceed to excel successful 2023 and I look guardant to sharing our advancement passim nan coming year.

I'll now walk baton to our Chief Financial Officer, John Stelben. John?

John Stelben

Thank you, Fran. I'm excited to subordinate eHealth astatine this captious clip successful nan company's evolution. Our 2022 financial results bespeak nan effect of a transformational scheme that touched each area of nan organization, drove beardown execution during nan yearly enrollment play and allowed america to participate this twelvemonth connected a importantly reduced costs tally complaint and successful a coagulated liquidity position.

In nan 4th quarter, we achieved important improvements successful captious financial and operating metrics compared to Q4 a twelvemonth ago. We turned to profitability connected a GAAP nett income ground and reported a meaningful description of adjusted EBITDA margins year-over-year, contempt an intentional simplification successful enrollment measurement and full revenue. This was accomplished successful portion by driving higher value leads to our omnichannel user level and converting those leads astatine higher rates compared to a twelvemonth ago.

In mentation for this AEP, we made a determination to trim our full trading walk and our licensed use advisor headcount compared to a twelvemonth ago, while we implemented a much disciplined ROI-driven attack to request procreation and focused connected expanding use advisor productivity.

The accent connected champion performing trading channels and higher telesales conversion led to a important summation successful per portion gross separator successful our Medicare business compared to past year. We defined per portion gross separator arsenic a dispersed betwixt life value, aliases LTV, and full adaptable acquisition costs per enrollment.

Fourth 4th Medicare Advantage LTVs grew 2% year-over-year, while mixed 4th fourth trading and telesales caused existent approved Medicare personnel declined 18%.

The resulting Q4 per portion gross separator for Medicare Advantage scheme was 29%, supra our expectations and meaningful betterment compared to 12% successful nan 4th fourth of past year. I spot further upside to this important metric, arsenic we proceed to execute connected nan translator plan, which is reflected successful our 2023 yearly guidance.

Moving to our topline results. Fourth 4th 2022 gross was $196.3 million, down 19% connected a year-over-year basis. This gross diminution represents an intentional determination to advancement nan institution towards profitable growth, which temporarily decreased but much businesslike trading spend. Fourth halfway Medicare Advantage approved members were astir $131,000 aliases a alteration of 26% compared to Q4 of 2021. Total Medicare approved applications for fiscal twelvemonth 2022 of 161,500 were down 33% year-over-year.

Fourth 4th Medicare conception gross was $180.4 million, down 22% year-over-year. At nan aforesaid time, Medicare conception profit of $53.2 cardinal was up sharply by 56% compared to Q4 2021. Our expertise to make importantly higher profitability connected little income and trading finance represents an important operating level. As we scheme to resume enrollment maturation successful adjacent AEP, we expect to do truthful connected this improved operational and costs foundation, driving further increases successful Medicare conception and wide profitability.

In Q4, 29% of Medicare vantage applications were submitted to our online unassisted channel, and 34% were online assisted. We position our omnichannel level arsenic an important differentiator and scheme to proceed making targeted investments successful further enhancing customer acquisition connected our level and driving higher conversions.

Fourth 4th MA LTV of 1,033 grew 2% year-over-year representing an summation successful mean committee rates arsenic good arsenic stabilizing retention. Fourth 4th tail gross successful our Medicare business was a affirmative $6.7 cardinal reflecting favorable persistency inclination connected immoderate of our humanities cohorts.

Our estimated Medicare Advantage paying rank astatine nan extremity of nan twelvemonth was astir 646,000 lines, up 2% from 2021 year-end. Our full estimated Medicare membership, including Med Stock and medicine supplier scheme policies was 976,000 lives besides up 2% connected a year-over-year basis. Fourth 4th Medicare non-commission gross comprised chiefly of bearer advertizing gross was $25 cardinal down 2% from Q4 of 2021.

Moving connected to our individual family and mini business aliases IFP segment, which besides includes our ancillary products. Fourth 4th conception gross was $15.9 million, an summation of 23% year-over-year, driven chiefly by an summation successful tail revenue. We proceed watching favorable retention trends connected our awesome aesculapian IFP products pinch Q4 LTVs up 16% for non-subsidized plans and up 6% for qualified plans. At nan aforesaid time, IFP enrollment volumes decreased year-over-year. The take of nan ACO merchandise is scaling slower than we primitively expected and we correspondingly adjusted down our 4th fourth trading fund successful nan IFP segment.

Segment profit was $9.2 cardinal compared to $7.2 cardinal a twelvemonth ago. Full twelvemonth gross of $405.4 cardinal was down 25% compared to fiscal 2021. Underneath that, Medicare gross was $361.7 cardinal was down 23% and IFP and SMB gross of $43.7 cardinal was down 35%.

Moving now to costs and profitability. In April 22, we launched a costs simplification programme pinch a extremity to accelerate our return to profitable maturation and scope affirmative rate travel procreation done targeted cuts to some our adaptable and fixed costs. The programme generated $114 cardinal and nett operating costs savings compared to 2021, which exceeded our soul goals.

The astir pronounced effect of costs reductions was seen successful Q4, our highest operating disbursal quarter. Importantly, we entered 2023 successful this caller costs foundation, reflecting important year-over-year simplification successful first 4th costs compared to Q1 of 2022.

Our full 4th fourth non-GAAP operating expense, which excludes stock-based compensation, restructuring charges, amortization of intangibles and impairment charges was $152.3 million, a simplification of $68.6 cardinal aliases 31% compared to Q4 of 2021.

Fourth 4th GAAP nett income was $20.7 cardinal compared to a nett nonaccomplishment of $32.2 cardinal successful Q4 a twelvemonth ago. Fourth 4th adjusted EBITDA was $49.5 million, an summation of 76% from $28.2 cardinal successful Q4 2021. Full twelvemonth 2022 GAAP nett nonaccomplishment was $88.7 million, pinch adjusted EBITDA of antagonistic $41.7 million.

Our rate travel for fiscal twelvemonth 2022 importantly outperformed our guidance, driven chiefly by much effective deployment of trading and telephone halfway budgets and forecasted better-than-expected rate collections connected immoderate of our rank cohorts and outperformance of nan goals group nether our costs simplification program.

Total rate outflow, excluding nan effect of our word indebtedness and nett securities activities was $44 cardinal compared to an outflow of $110 cardinal to $90 cardinal contemplated by our guidance.

We ended nan twelvemonth successful a beardown liquidity position pinch $144.4 cardinal successful cash, rate equivalents and marketable securities. This compares to $123.2 cardinal astatine nan extremity of 2021. Our equilibrium expanse besides reflects $242.8 cardinal and short-term committee receivables expected to beryllium collected complete nan adjacent 12 months and $641.6 cardinal successful semipermanent committee receivables.

eHealth affirmative nett waste gross for 2022 points to nan value and continued stableness of our commissions receivable balance. In fact, our nett waste gross crossed each products has been affirmative each twelvemonth since we adopted ASC 606 successful 2018.

Moving connected now to our financial guidance for 2023. We are forecasting full gross to beryllium successful nan scope of $420 cardinal to $440 million. We expect GAAP nett nonaccomplishment to beryllium successful nan scope of $55 cardinal to $35 million. We expect adjusted EBITDA to beryllium successful nan scope of antagonistic $15 cardinal to affirmative $5 million. Operating rate travel is expected to beryllium successful nan scope of antagonistic $30 cardinal to antagonistic $15 million.

At nan midpoint of our guidance, we expect to turn gross by astir 6% compared to a twelvemonth ago, pinch akin underlying maturation successful Medicare loans. We besides expect to present meaningful betterment successful profitability, driven by continued rightsizing of our request procreation and use advisor-related spend, improvements to our trading ratio and telesales conversions, and an associated summation of LTV to CAC margin, and a affirmative effect from nan costs simplification programme launched successful April 2022.

We proceed to beryllium laser-focused connected defense guidance and will beryllium implementing targeted cuts connected nan fixed costs broadside to furniture connected apical of savings achieved past year. Our adjusted EBITDA guidance represents a year-over-year betterment of astir $37 cardinal astatine nan midpoint, including affirmative adjusted EBITDA astatine nan precocious extremity of our guidance range.

The yearly guidance besides reflects our gross diversification efforts, including stronger contributions from Med Sup, IFP, and ancillary products, bearer dedicated arrangements, and further supplementary gross opportunities.

At nan aforesaid time, we expect a diminution successful bearer advertizing gross compared to 2022. While our 2022 results and guidance for this twelvemonth show important advancement successful improving our operating and financial performance, including cardinal profitability metrics, eHealth's semipermanent extremity is to scope a tally complaint of profitable growth, coupled pinch affirmative rate travel generation. This involves diversifying our gross streams, improving our portion economics, improving retention, and managing our fixed costs to summation leverage. These efforts, coupled pinch moving superior management, will move america towards that goal.

Looking astatine our operating rate travel guidance for this year, nan midpoint of our scope implies an outflow of $22.5 million, a flimsy betterment compared to 2022. This year-over-year betterment is surely not arsenic pronounced arsenic what we task for GAAP nett income and adjusted EBITDA. This was driven by nan seasonal timing of our rate collections and our operating determination of decelerating enrollment maturation past AEP.

Given that nan mostly of first commissions associated pinch AEP income travel successful during nan first quarter, our Q1 2023 rate collections will bespeak nan reduced enrollment volumes from its past AEP.

At nan aforesaid time, nan rate use of nan finance we will beryllium making this twelvemonth to resume enrollment maturation this coming AEP will not beryllium felt until Q1 of 2024. In fact, connected a trailing 12-month basis, ending March 31, 2024, we expect to beryllium correct astir breakeven connected an operating rate travel basis.

Based connected nan ending rate equilibrium and our rate travel projections, we judge we person capable liquidity to execute connected our 2023 operating plans.

I would besides for illustration to remark connected our expectations for Q1. Given that our extended costs simplification programme was not implemented until April of past year, we expect a important diminution successful trading and customer attraction enrollment expenses successful nan first 4th of 2023 compared to Q1 of 2022. As a result, we besides expect a corresponding alteration successful our first 4th enrollment measurement resulting revenue. Q1 gross is expected to diminution successful excess of 30% year-over-year. We expect, however, for adjusted EBITDA successful nan first 4th to beryllium astir level compared to Q1 2022.

Operator, please unfastened nan statement for questions.

Question-and-Answer Session

Operator

Thank you. Ladies and gentlemen, we will now statesman nan question-and-answer session. [Operator Instructions] Your first mobility comes from George Sutton of Craig-Hallum. Please spell ahead.

George Sutton

Thank you. It is bully to beryllium capable to opportunity congratulations connected nan results and outlook. So your co-browsing and chat tools, which were evidently very successful, I'm funny really overmuch you were capable to usage those this play versus arsenic we look further retired into nan future? Will that go a much important portion of your offering and therefore, person a bigger effect overall?

Fran Soistman

George, it's Fran. Thanks for nan encouraging words, and we're conscionable arsenic happy to beryllium capable to put a grin connected your look and each of our – each those who screen us. Your mobility is simply a bully one. I think, it's adjacent to opportunity that, our chat capabilities, was an important contributor to our AEP performance. I tin besides show you that, we were making adjustments to that chat capacity passim nan AEP. So it's adjacent to say, we didn't bask each of its benefits, meaning it didn't execute arsenic beardown arsenic I deliberation it could person done nan opening of AEP, but erstwhile we made immoderate people corrections, it really kicked successful alternatively nicely. And that – conscionable to beryllium transparent, it was astir moving nan chat capacity further up into nan telephone arsenic opposed to nan enrollment, it was done much successful nan shopping experience.

So it works. It's scalable and it provides a awesome acquisition for beneficiaries and it surely supports our efforts to summation conversion rates. Co-browsing, a small different successful that it's really astir providing a amended acquisition for beneficiaries arsenic good arsenic enhancing our agents' capabilities done nan shop advise, amended and enroll process. It takes – but could beryllium viewed arsenic a one-dimensional encounter, meaning verbal to now verbal and sharing of nan screen, truthful nan documents tin beryllium viewed simultaneously pinch nan conversation, which conscionable makes for a overmuch much productive process and a overmuch much favorable acquisition for beneficiaries. So I do spot america evolving our capabilities this twelvemonth and adding caller capabilities beyond nan chat.

George Sutton

That's great. One different question. When we look astatine nan 6% maturation expected for 2023, and I'm not judge what macro numbers you're looking at. Are you assuming that arsenic a stock maintenance? Is that a humble stock gain? How are you reasoning of your comparative capacity successful 2023?

A – Fran Soistman

Sure. I'll start, and I'll surely inquire John to supplement my comments. It's an important growth, meaning that it's coming from a much diversified group of products and capabilities. It's -- successful nan past, it's been astir wholly reliant connected agent grounds accepted Medicare Advantage business. And it's dispersed retired overmuch much wide betwixt our MA business, our dedicated bearer business Med Sup and ancillary. So it's -- and those -- peculiarly nan dedicated bearer and Med Sup, ancillary person overmuch much favorable rate travel dynamics, which is important, arsenic I cognize you admit to meet our liquidity needs. So fto maine spot if John, would for illustration to adhd to that.

John Stelben

Yes, George, I would opportunity that nan BPO woody that Fran mentioned successful his prepared remarks, positive betterment successful Medicare sup income thrust a bully chunk of nan year-over-year growth, but we still person absolute maturation successful nan halfway MA business.

George Sutton

Okay. Perfect. Thanks, guys.

Operator

Thank you. The adjacent mobility comes from Daniel Grosslight of Citi Group. Please spell ahead.

Q – Unidentified Analyst

Hi. This is Louis [ph] connected for Daniel Grosslight. I conscionable had 1 speedy question. With greater accent connected retaining agents, what is your attack extracurricular nan engaged AEP and OEP season? And really should we deliberation astir supplier costs passim nan year? Thank you.

A – Fran Soistman

I missed nan very first portion of that. I heard nan past portion successful position of supplier compensation. Let maine reside that, and I'll inquire you to repetition your first portion of nan question. The supplier compensation is market-based. It's performance-based arsenic well. So clearly, we request to beryllium marketplace competitory successful attracting nan talent that we request for our telesales capabilities. And that has not been a situation successful nan past year, and we're already underway to statesman ramping up for nan existent year. So -- but it each starts pinch marketplace competitory compensation and nan accent connected performance, which is pretty, I would say, accordant pinch nan industry. And nan first portion of your question?

Q – Unidentified Analyst

The first portion of my mobility is much truthful what is your task extracurricular of nan engaged AEP and APC seasons? And really should we deliberation astir that?

A – Fran Soistman

For nan first 3 quarters of nan year. Well, I deliberation nan astir important constituent would beryllium successful nan first 4th were successful 2022, we spent a reasonably ample sum of adaptable costs for trading activities to support our agents. We're being overmuch much prudent this year. And clearly, we want to support agents productive, but we tin do that done nan advancement we've made connected nan lead value side, truthful we don't person to walk arsenic much. But keeping our agents productive, and we've besides begun ramping up our Med Sup capabilities. So you tin waste that each twelvemonth around, arsenic you know, and we judge that, that's going to beryllium a contributor for our gross goals arsenic good arsenic keeping agents productive and sharp

Q – Unidentified Analyst

Thank you.

Operator

Thank you. [Operator Instructions] The adjacent mobility comes from George Hill from Deutsche Bank. Please spell ahead.

George Hill

Yes. Good greeting guys and acknowledgment for taking nan question. Fran, arsenic you guys look to diversify nan gross streams pinch nan bearer dedicated segments, I’d opportunity benignant of nan other of really nan business exemplary has been built historically connected nan MA side. I guess, truthful tin you talk astir really you deliberation astir those 2 businesses benignant of moving side-by-side? And does 1 thin to compete pinch nan different -- and do you interest astatine each astir benignant of being capable to support that unbiased benignant of shopping constituent for nan MA consumer?

Fran Soistman

George, acknowledgment for nan question. Good to perceive you. They complement 1 another. I mean, this business, whether it's dedicated bearer aliases accepted aliases Medicare Advantage selling, it’s nan same. It's merchandise expertise. It's nan expertise to perceive cautiously to beneficiary’s needs and preferences and past thief them done that shopping experience. They don't compete successful that. We support nan purity of eHealth, if you will, erstwhile we correspond each of our bearer partners. And past nan dedicated carriers deliberation of america arsenic an hold of their statement and that's walled disconnected from nan remainder of eHealth.

So it simply provides them nan dedicated bearer partner pinch an opportunity to attraction exclusively connected their merchandise arsenic an extension. So, dedicated group supporting that and ne'er awkward to meet successful position of eHealth arsenic an independent, neutral channel, distribution channel.

George Hill

No. I mean, I ideate that you guys tin astir apt negociate that beautiful separately. If I could do 2 speedy follow-ups, I deliberation astir apt astir investors are focused astir benignant of rate travel and whether aliases not nan institution will request to raise superior astatine immoderate constituent successful nan future.

Given that, what you've provided today, it looks for illustration that astir apt won't beryllium need? And past conscionable if you could talk for different 2nd astir nan fixed costs, you're talking astir targeting. I would emotion to perceive much astir wherever these costs savings are coming from. Thank you.

Fran Soistman

Sure. Again, acknowledgment for nan questions. I'll return nan first, and I'll inquire John to return nan second. Our liquidity base, based connected each of our modeling, we're successful bully style for 2023, but to your point, longer term, we are looking astatine each of our options for sources of superior to make judge that eHealth tin proceed to execute up to our expectations and capitalize connected opportunities, while manufacture opportunities. So I consciousness a batch of attraction is connected that, getting bully guidance from our Board. And I'm assured we'll person thing much to study connected successful nan adjacent respective months. John, do you want to return nan fixed costs question?

John Stelben

Sure. On nan fixed costs, location are respective areas. I mean it's really you look astatine everything, but it's going to beryllium continued connected our space. We're a virtual first company. We surely took impairment against that to trim early rent costs. It's going to beryllium vendor costs, package redundancies and utilizing our group much efficiently, arsenic we grow.

George Hill

Great. I admit nan color, guys. Thank you.

Operator

Thank you. There are nary further questions astatine this time. Please proceed pinch closing remarks.

Fran Soistman

This is Fran again. Thank you again for joining america this morning. We look guardant to our conversations successful nan coming days and weeks. Thank you, Operator.

Operator

Thank you. Ladies and gentlemen, this does reason nan convention telephone for today. We convey you for your participation. And inquire that you please disconnect your lines.

Editor: Naga



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