eHealth, Inc. (EHTH) CEO Fran Soistman on Q1 2022 Results - Earnings Call Transcript

EHealth, Inc. (NASDAQ:EHTH) Q1 2022 Earnings Conference Call May 3, 2022 5:00 PM ET

Company Participants

Fran Soistman – Chief Executive Officer

Christine Janofsky – Chief Financial Officer

Phillip Morelock – Chief Digital Officer

Eli Newbrun-Mintz – Senior Investor Relations Manager

Robert Hurley – Chief Revenue Officer

Conference Call Participants

Elizabeth Anderson – Evercore ISI

Jonathan Young – Credit Suisse

George Sutton – Craig-Hallum

Daniel Grosslight – Citi

Operator

Good afternoon, everyone and welcome to eHealth, Inc's Conference Call to discuss the company's First Quarter 2022 financial results. At this time, all participants have been placed in a listen-only mode. The floor will open for your questions following the presentation. It is now my pleasure to turn the floor over to Eli Newbrun-Mintz, Investor Relations Manager. Please go ahead.

Eli Newbrun-Mintz

Good afternoon and thank you all for joining us today, either by phone or by webcast for a discussion about eHealth, Inc's First Quarter 2022 Financial Results. On the call this afternoon, we have Fran Soistman, eHealth's Chief Executive Officer, and Christine Janofsky. eHealth's Chief Financial Officer. After management completes it's remarks, we will open the line for questions. As a reminder, today's conference call is being recorded in 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 includes 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 expectations regarding trends in the Medicare distribution market, 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, including growth opportunities and our competitive advantage. 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 on 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 Fran Soistman.

Fran Soistman

Thank you Eli, and good afternoon, everyone joining us today for our first quarter 2022 earnings call. During my prepared remarks, I will discuss our first quarter financial results, update you on our progress on the execution of the strategic plan that we laid out on last quarter's earnings call and describe the early impact we are seeing from our enrollment quality initiatives. Our first quarter '22 revenue was in line with an adjusted EBITDA was ahead of our expectations. While the enrollment quality initiatives that we introduced in July of last year are still impacting telephonic conversion rates, we've also seen encouraging quality and retention metrics from the most recent Annual Enrollment Period cohort, members that we enroll during the fourth quarter with the policy effective date of January 1st, '22. The initial traction we're seeing through the early part of 2022 combined with positive carrier feedback, reinforces our belief that eHealth can establish itself as a leader in Medicare distribution as this market moves away from volume at all costs and towards growth built on a foundation of enrollment quality, enhance consumer experience, and cash flow generation. One of the key priorities for me and the leadership team is to leverage this trend and to enhance member economics and return the company to profitable growth.

As an increasing number of Americans age in the Medicare eligibility every day, we believe we are well-positioned to connect them efficiently and appropriately for the best plans to serve their needs based on our broad plan selection, consumer - centric approach, and data-driven recommendation algorithms. Our omni -channel shopping and enrollment capabilities give eHealth an advantage in attracting a broad range of customers, including younger Medicare eligible and new to M&A enrollees. eHealth online platform is also a differentiator for our Individual family and small business segments, where more than 90% of it enrollments are completed online with no agent assistance. In line with our strategic plan, we're slowing down our conventional telephonic enrollment growth while continuing to invest in online business to expand and capture market share. The number of visitors to our online Medicare platform, top 3.2 million in Q1 representing 24% year-over-year growth. First quarter total Medicare Advantage online, unassisted applications grew to more than 11,000 submissions, up 50% compared to Q1 of 2021.

In contrast, total Medicare Advantage enrollments, including telephonic and partially assisted applications declined 22%, Q1 '22 total revenues of $105 million was down 22% relative to Q1, '21, primarily driven by telephonic conversion rates, which were down on a year-over-year basis. GAAP net loss in the quarter was $33 million. Adjusted EBITDA for the first quarter was a loss of $25 million compared to positive $17 million a year ago. During the quarter, we generated $47 million in operating cash flow. While we're not satisfied with the year-over-year declines in revenue and adjusted EBITDA, we're seeing a positive traction in CTM scores and retention characteristics from the new enrollments that we added during the 2022 annual enrollment period, relative to the comparable enrollment cohorts from the 2021 and 2020 annual enrollment periods. This is based on the preliminary data we have received to the end of April. The data suggests that although we have a comparatively lower telephonic conversion rate in Q1 resulting in lower volume, the enrollments we brought in are of higher quality that will lead to higher customer satisfaction, increased plan longevity, and over time, higher lifetime values. This progress on CTMs and retention for the newest M&A cohort has helped fuel productive conversations with our carrier partners, who increasingly are emphasizing measures of enrollment quality in evaluating their channel partners.

We see this as an opportunity to expand our relationships with carriers to adjacent areas given our common goal of improving the experience of beneficiaries through plan enrollment, and utilization processes. Our data available through the end of April, also indicates that during the AEP and OEP, we saw lower-than-expected persistency from some of our older MA cohorts. This impacted the overall persistency rates for our book of business, and further highlighted the importance of operational changes we've introduced last year as the market environment and consumer behavior continues to evolve. Its important to note that some of the policy churn that we see is reflective of members switching plans, but remaining with eHealth's platform, continuing to generate commission revenue for us. Our 2021 recapture rate was approximately 9%. During the first quarter, we started to execute on the strategic plan I outlined on our previous earnings calls.

This concluded the rollout of the cost transformation program towards the end of the quarter. We are on track to generate approximately $60 million in annualized cost savings this year. Given that a large portion of total expected savings are coming from our variable acquisition spend, you will see the impact building up throughout the year. As part of the plan, we are taking a more thoughtful approach to every area of our operations. This includes focusing on marketing channels with best ROIs, driving more enrollments through our online fulfillment that is characterized by favorable member economics, retaining our best performing agents, and investing into training and career paths, and shifting our variable acquisition costs to geographic markets that have the highest financial and strategic value for us. Although we are in the very early stages of executing on the strategic plan, we're seeing positive signs, including an increase in our telephonic conversion rates in the first month of Q2 on a quarter-over-quarter basis, as well as against our expectations. This is an encouraging indicator given the conversions typically declined sequentially in Q2, following the completion of the open enrollment period on March 31st.

Further initiatives are underway in our customer care centers aimed to continue lifting conversions while preserving the emphasis on quality. This includes increased agent specialization by product and geography, improvement of agent scripts to make them more consumer-friendly, and an outbound call program that allows and incentivizes agents to proactively work their pipeline during the downtimes, which can be especially impactful in Q2 and Q3. We also aim to extend agents tenure with eHealth, which provides for a higher-quality and more effective sales force. We expect that this year's agent mix will already be more mature compared to a year ago when we aggressively ramped up our internal agent force as we shifted away from the outsourced spending model. We are encouraged by the progress we've made in our telesales, including conversion rates and we'll continue to build on this as we prepare for the AP. We're also making progress in our efforts to deliver our agents higher-quality leads by improving our marketing strategies and operations. We began 2022 by bringing in new marketing leadership with a mission of greater collaboration between our digital and conventional marketing teams to create synergies between our diversified demand generation channels.

This effort is supported by product and technology teams that are launching a series of omni -channel tools that allow seamless transition of customers between channels. To that end, we have launched online chat capabilities, staff by licensed Medicare agents, and agent co-browsing capabilities with additional omni -channel. tools in the pipeline. We are excited about these initiatives that further enhance our technology differentiation and create a stronger connection between the agent driven and digital organizations. In our view, this omni -channel approach reflects the needs of seniors and consumers in general, who are increasingly proficient online, but demand flexibility in how they interact with the platform.

This approach is critical to our company's mission of meeting customers on their terms whether it's through a mobile device or laptop, by speaking to one of our licensed agents over the phone, or online chat or a combination of touch points. We're also de -emphasizing the underperforming demand-generating channels in favor of channels that bring in higher-quality, higher ROI leads. In Q1, this meant taking the pedal off of our direct TV marketing channel and allocating additional resources to our online advertising and partner marketing channels compared to Q1 a year ago while we work towards creating the optimal channel mix that will be aligned with our broader strategic goals. While we have currently reduced our reliance from direct channel with DR TV contributing less than 1% of total applications in Q1, we are reevaluating our longer-term strategy for the entire direct channel, including direct mail, television, and email efforts.

Maintaining some exposure to these channels is important given our target demographic and we are assessing, among other things, the impact of building out differentiated branded programs in these areas to replace generic campaigns, as well as tailoring a message to specific segments of the population to address their unique needs and preferences. We are also evaluating the spillover impact that our investment in the direct channel might have one other channels such as digital and overall consumer awareness of eHealth.

Our online platform continues to play an important role in our long-term strategy as the combination of assisted and unassisted online submissions have made up the majority of our submitted Medicare applications for the past two consecutive quarters. We continue to observe favorable unit economics, including a larger proportion of high LTV new to M&A enrollments through our online channels. As unassisted online applications continue to grow as a percentage of total submitted apps, this will also contribute to a greater scalability of our business and mitigate the impact of telephonic conversions on the overall performance for the company. During the second and third quarters, we plan to focus on testing our demand generation initiatives to design the optimal channel mix for the AEP and building a rightsize agent force that is trained and resource for success. We also expect to use the upcoming quarters to explore opportunities to supplement our Medicare Advantage revenue by further emphasizing our MedSup, IFP, and ancillary business lines.

I look forward to updating you on those efforts as the year progresses. As a reminder, the following six priorities as described on last quarter's earnings call, are the foundational principles of our 2022 operating plan. Number one, through transformer changes, reduce our cost structure while focusing on operational efficiency and excellence through re-engineering and reorganizing. Two, deploy marketing dollars in a way that will drive better economics. This includes optimizing our marketing channel mix to cut lowest ROI initiatives and focus on channels where we hold strong competitive differentiation, 3. Slowdown conventional telephonic enrollment growth, pivot to more overflow telesales carrier arrangements, which requires less investment in lead generation and execute a local market - centric telesales model, 4. Continue growing our online business and enhancing our e-commerce platform through a highly disciplined approach to technology investments, 5. Work with carrier partners to find additional ways to create value, including joint quality and retention initiatives, and 6. Pursue cost-effective diversification initiatives, including stronger emphasis on our IFP and ancillary products.

As we execute on these initiatives, the improvement in Medicare member margins as characterized by the spread between lifetime values and total acquisition costs is one of the key goals for myself and the team. Enhancing unit economics combined with fixed cost rationalization is at the core of our plan of returning to profitable growth and pursuing continuing margin expansion after that. We're in the process of finalizing our three-year strategic financial plan through 2025 and we'll be presenting it to our Board of Directors in June for their input and approval. Based on this timing, we plan to share our longer-term financial goals with investors in the second half of this year. I'll turn the call to Christine for some additional detail on our financials.

Christine Janofsky

Thank you, Fran. And good afternoon, everybody. We delivered first quarter top-line results that were in line with, and profitability results slightly ahead of our expectations, driven mostly by the positive impact of increased carrier advertising revenue. At the same time, revenue and profitability metrics declined on a year-over-year basis, reflecting primarily lower telephonic conversion rates, compared to Q1 of 2021. First quarter 2022, total revenue was $105.3 million down 22% on a year-over-year basis. GAAP net loss for the first quarter was $32.7 million compared to a net loss of $0.8 million in the first quarter of 2021. Adjusted EBITDA was negative $24.8 million down from positive $17.3 million in Q1 2021. First quarter, Medicare revenue of $95.1 million declined 21% compared to a year ago, driven primarily by a 22% decrease in approved Medicare members. Total Medicare approved applications were 95,800, including 82,400 Medicare Advantage approved applications, which decreased year-over-year by 23%.

The enrollment quality initiatives that we implemented in July of last year continued to impact the rate at which our customer care agents convert telephonic leads into submitted Medicare applications. First-quarter telephonic conversions were down approximately 30% compared to Q1 of 2021, our first-quarter following an aggressive pivot to an internal agent force and before the enrollment quality initiatives were implemented. In addition to having an impact on our enrollment volume, lower telephonic conversions also drove up our per member acquisition costs as the year-over-year increased and marketing and call center spend resulted in fewer applications compared to a year ago. We also saw an increase in lead costs in some of our demand generation channels. Our current LTV to CAC spread is not acceptable to us and improving member profitability is at the core of our strategic plans. We expect to lower our per member acquisition costs in the second half of the year compared to a year ago, through a combination of cutting marketing spend, in channels generating enrollments below our margin goals, and increasing our conversion rates in the call center.

In fact, our conversion rates second quarter-to-date, increased sequentially compared to Q1. We are encouraged by this early performance, as typically, we would expect, telephonic conversion rates to decline sequentially, entering Q2 rather than increase. Our online business continues to generate strong growth at attractive conversions with 50% growth in Medicare Advantage applications submitted online, unassisted, compared to a year ago. Online unassisted submissions in Q1 made up 11.5% of Medicare Advantage apps, up from just 6% in Q1 2021. Q1 Medicare sponsorship revenue was $10.5 million or 88% increase compared to Q1 2021. This increase in sponsorship revenue was mostly driven by timing relative to the prior year when we received a majority of carrier sponsorship dollars in the second half of the year.

It is also a recognition of significant effort that eHealth has put into enrollment quality in collaboration with our carrier partners. Medicare segment loss was $14.8 million compared to a segment profit of $24.5 million in Q1 of 2021. The difference in segment profit year-over-year was driven primarily by conversion rates in our cost center, as well as fixed cost run rate associated with the shift to a fully in-house agent model. Acquisition costs per approved MA member was $986 or a 56% increase from $631 in the year-ago quarter. We arrive at this number by taking the sum of CC&E per approved MA member and variable marketing cost per approved MA member. While our acquisition cost per approved member increase compared to Q1 a year ago, our fixed costs for the combination of GAAP tech and content and G&A declined 14% year-over-year. We expect our cost transformation initiatives to generate additional leverage for our fixed costs as we progress through fiscal 2022.

Total estimated MA membership increased 9% on a year-over-year basis to 586,000 total members. TTM cash collections per estimated MA equivalent paying member also increased to $441 from $431 in Q1 of 2021. Trailing 12-month commissions, cash collections in our Medicare business were over $325.3 million, up 8% year-over-year. As discussed on the Q4 call, these numbers tell an important story about the size, quality, and cash-generating potential of our book of business. Moving to some of the preliminary retention trends we observed during the AEP and OEP. Approved applications for the cohort with a policy effective date of January 1st 2022 have a retention rate more than 10% better through the first four active months than the comparable 2021 and 2020 cohorts over that same time period.

Additionally, CTM scores for this new cohort have shown significant year-over-year improvement with select carriers sharing with us net scores for this cohort have been improved two fold compared to last year.

While we still believe there is work to do to keep our newest cohort engaged and retained on their plans, this initial data is encouraging evidence, of the efficacy of our new approach to enrollments focused on quality and long-term retention. The improved retention characteristics for our newest cohort of enrollments was offset by an increase in lapses for some of the older cohorts. As we have observed, increased marketing in the industry leading to higher switching behavior and cohorts enrolled prior to our quality enhancement initiative. Our Medicare Advantage recapture rate for 2021 was 9.4%. This metrics shows the percentage of eHealth customers who changed plans, but remained within enrollment ecosystem, either telephonically or online. It is an important measure of customer loyalty and value-added, from the perspective of the beneficiary. As we transact a larger share of our enrollments online and grow the number of members on our customer center platform, we expect the cost of recapture to trend down, providing for increasingly attractive member level economics.

Medicare Advantage LTVs of $948 declined 2% year-over-year, reflecting reduced persistency on some of our older cohorts. As a reminder, under 606 LTVs are driven by historical retention data going back three years, we continue to expect flat MA LTVs for FY2022. Residual or tail revenue in the Medicare segment was flat year-over-year at around $50,000, in line with our expectations. It was $3.5 million for the company on a consolidated basis, mostly driven by our Small Business segment. Turning to our Individual Family and Small Business segment, first quarter revenue for this segment was $10.2 million, a 23% decrease compared to a year ago.

This was primarily driven by a lower positive tail adjustment revenue in the segment, which declined to $3 million from $5.3 million in Q1 2021. The individual family and small business segment generated segment profit of $5.3 million compared to $8 million in the first quarter of 2021. Now, I would like to review our operating expenses and some of the cost rationalization measures we are taking. First-quarter tech and content expense declined 15% while G&A expense declined 13% compared to a year ago, yielding roughly $6 million in total fixed cost savings. Moving to our variable costs, customer care and enrollment costs grew 23% and marketing and advertising grew 15% compared to a year ago. The increase in CC&E expense reflects higher agent headcount that we had in Q1 compared to a year ago. As a reminder, last year we pivoted aggressively to an in-house telesales model, cutting the majority of our outsourced agents following the conclusion of the fourth-quarter AEP. Marketing spend increased through a combination of our investments in leads for our online business, as well as demand generation for our telesales segment to maintain utilization of our agent headcount.

As Fran shared earlier, starting in Q2, you will see a gradual reduction in our variable expenses across marketing and customer care and enrollment. We expect a decline of over $50 million in our variable spend in 2022 on a GAAP basis with the overall goal of $60 million in cost savings, including fixed costs compared to full year of 2021. Our first quarter cash flow from operations was $47.1 million compared to $43 million for the first quarter of 2021. Because of the seasonality of cash collection dynamics in the industry, the first quarter is typically our strongest in terms of cash-generation. As of March 31, we had $232 million in cash, cash equivalents, and marketable securities with $70 million of debt following last quarter's financing agreement with Blue Torch.

Our balance sheet also reflects a significant commissions receivable balance of approximately $831 million that is comprised of $204 million that we expect to collect over the next 12 months, and $627 million in long-term commissions receivable. This compares with total commissions receivable of $742 million as of March 31st, 2021. We are reaffirming our 2022 annual guidance expectations, which are 2022 total revenue in the range of $448 million to $470 million, GAAP net loss for 2022 in the range of $106 million to $83 million, adjusted EBITDA in the range of negative $64 million to negative $37 million, and total cash flow, excluding the impact of the $70 million term loan and associated costs is expected to be in the range of negative $140 million to negative $120 million.

Given that Q2 is the last quarter when we are comparing against that period last year before the enrollment quality measures were introduced, we are expecting a continued decline in revenue and EBITDA compared to 2021. This is consistent with our financial and operational plan for the year to slow down growth. We expect a year-over-year decline in revenue in excess of the year-over-year decline we saw in Q1 due to our deliberate plan to reduce call center headcount, and marketing costs in the second quarter. We continue to expect lower telephonic conversion rates to negatively affect adjusted EBITDA.

As Fran mentioned, we are currently in the process of building our three-year plan through 2025, and we'll be sharing appropriate components of our longer-term vision with investors later this year. This plan will be built with the explicit goal of returning to profitable growth and reaching cash flow positive, by a trailing 12-month basis as quickly as possible. With that, I'd like to turn the call back over to the operator for Q&A.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from the line of Elizabeth Anderson from Evercore ISI. Your question, please.

Elizabeth Anderson

Hi, guys. Thanks so much for the question. I have -- one question I had on the quarter was improving the unassisted online sign-ups. What was the driver in that? How did you push people more towards that or maybe you didn't push them, they went themselves? Can you talk about some of the dynamics that happened in that market or was it purely like a mechanical thing because the assisted sign-ups declined? Thank you.

Fran Soistman

Hi, Elizabeth. It's Fran. Nice to hear your voice and thanks for the question. Our digital platform continues to be one of the best stories at eHealth both un -assisted and assisted. And I would say that we continue to refine our SEO SEM and all of our marketing strategies to support that digital asset. And it continues to contribute in a very meaningful way to eHealth's growth in a much more financially viable way. So I wouldn't say there's any single contributor. It's a combination of our marketing optimization strategy with that asset.

Elizabeth Anderson

Got it. And one thing I know across the broader healthcare and DTC healthcare spaces, there has been a concern about marketing channels and spend in that. Obviously you pointed to improving [Indiscernible] in better ROI on the marketing channels. Can you help us think through what's an example of one of those channels and how you expect to pivot to those different channels over the course of the year.

Fran Soistman

Yeah. I'll start. Morelock is here and I'll ask him to share a little more detail. You're right. The cost of acquisition continues to be a challenge, not just for us, but I think everyone in the sector, as well as carriers. I've talked to some carrier partners and they too are experiencing some challenges with respect to lead gen cost. I would say there is no one particular channel that I would say is a darling right now, I think they're all under some degree of pressure, some under more pressure than others. Probably a number of different theories that I could point to in terms of what may be contributing to that. Competition certainly plays into it, and supply/demand certainly, is a big component of the competition. I would say that as we have continued to try to meet consumers where they want to be met, even with our digital platform, we are learning that there are some elements in terms of the technology that we bring to bear, whether it's a differentiation between someone who is utilizing a personal computer versus a mobile phone. It produces some different outcomes. And even how we buy the leads for those different pieces of technology can alter the performance, both on the sales side and the retention side. So the more you drill down into the detail, both on the sales and the persistency, you learn more and more about how dynamic this business is. Let me ask Phillip to expand on that.

Philip Morelock

That was well said and the only thing I would really add to that is, that's [Indiscernible] in our data platform, cumulative in nature. We have added to our data capabilities pretty robustly over the past 2, 3 years. And so our knowledge of this market and the different marketing channels and the data that we've collected over time allows us to be pretty nimble in response to the signal that Fran was talking about, that we get from consumers from the market. So we can [Indiscernible] channel if necessary. We can optimize our experience for the segments of visitors that we get to our platform.

Elizabeth Anderson

Got it. One last one for me. I know you said the churn for the new cohort is about 10 percentage points better than we were previously expecting. It did look like the overall churn went up about 300 basis points year-over-year. Is it just that it's going to take us another year until we have enough new people that have been signed up with us, higher quality metrics that will come, overcome some of those maybe older cohorts that have been churning at higher rates? I guess my question is, would you expect -- what timeline that you now expect churn numbers to start improving?

Fran Soistman

This is Fran again. I'll start, and I'll ask Christine to share her perspective as well. Again, as we continue to drill down on the churn, we uncovered something that was truly interesting with respect to churn this year. In our prepared remarks we mentioned that we did have some positives with respect to the first year and that indicated that our quality initiatives are indeed working. Some of the older cohorts did churn at a higher rate than we had seen in the past. But when we drill down further, we identified a particular carrier that historically had been performing well above the average in a favorable manner. In other words, their persistency was greater than the average, this time, progressed to the mean, so to speak, and performed consistent with the average. And that one carrier really drove largely the change in the persistency for our book of business, this one carrier. So it's not a systemic issue. One large carrier can early move the needle, good or bad.

Elizabeth Anderson

Got it.

Christine Janofsky

And that's after the [Indiscernible] Elizabeth, is also important, the fact that the most recent AP Corkwood is smaller in size compared to some of the historical AP Corkwood. So as we see more of those members coming in, post enrollment, quality improvements, they'll start impacting, which overall will churn numbers more significantly.

Elizabeth Anderson

Got it. That makes sense. Thank you, guys, very much.

Operator

Thank you. Our next question comes from the line of Jonathan Young from Credit Suisse. Your question, please.

Jonathan Yong

Thanks for taking my question. I guess, some of the MCOs has talked about reducing their dependence on third-party brokers on a go-forward basis. I guess, has this manifested in your conversations with your carrier partners? And how does this affect your thinking about the go-forward plans for this year and future AEPs?

Fran Soistman

Hi, Jonathan, thanks for the question. I would characterize our relationships with our carrier partners as very good. We have regular conversations. I know everyone uses the term partnership loosely, but I really do believe we have a partnership relationship with most, if not nearly all of our key carriers. Those keys described as having a significant volume. They're collaborative. We try to solve a common challenge and that is retention. We're very aligned. We follow 606 accounting. Carriers don't, but they think like 606. They're all about lifetime value. We just happen to reflect that, with respect to the way we book revenue. So we're very aligned. And while there may be talk about this and maybe some will follow through. I don't know whether they would do it across the board, but we're having more collaborative conversations about how we work together to improve the retention. And always focused on improving the beneficiary experience. That's really what's paramount for us and for the carrier partners that we've worked with.

Jonathan Yong

Okay. And then you mentioned cutting marketing and advertising spend in 2H '22. I guess -- to what extent is there of flexibility within the guidance that by reducing this advertising spend that there won't be share loss greater than you expect or do you expect to effectively offset that by higher persistency, etc, or how are you thinking about the dynamic of cutting that advertising along with membership growth?

Fran Soistman

Sure. I'm going to let Christine to share her thoughts on this as well. We baked that into our plan and we've reflected that in improved conversion rates which we're working on now and ramping up towards a higher expectation as we get into the fourth quarter, AEP season. And a lot of things will make that happen. It's not just marketing optimization, it's our operating model. Training of our -- further training of our agents to lead changes, improving the quality of our lead generation. I mean, there's a whole host of things that have to occur to improve the conversion rates. So that's all baked into our assumptions. So it's not all the way in a [Indiscernible] by any means. Christine, do you want to?

Christine Janofsky

Sure. Thank you, Fran. And thank you, Jonathan, for the question. I would absolutely agree with Fran, and also what you said. It's a combination of different factors. And as we think about those variable costs related to marketing and CC&E, we'll start to realize some of those optimization savings in Q2 with the majority of that more being realized in the back half of the year, largely concentrated in Q4. As a reminder, when we head into the AEP in Q4, that's where our largest spend is from marketing perspective. So it's a combination of factors around the operating model, optimizing marketing, focusing on those rate channels to provide the right ROI as we head into the AEP season. Jonathan, just to quickly mention, we obviously cannot speak on behalf of the entire market, but it seems like our peers will also be moving to a more rational approach to spending. This growth, accelerated growth, came at a marketing cost, that probably moving forward, will not be sustainable. So that will mitigate some of the market share impact as well.

Jonathan Yong

Okay, great. Thanks.

Operator

Thank you. Our next question comes from the line of George Sutton from Craig-Hallum. Your question, please.

George Sutton

Thank you. Fran, you mentioned the positive carrier feedback you've had to your new quality initiatives, and I'm curious if you can go into any more detail there. Certainly, Eman in particular has been somewhat open about their concerns about the third-party broker channel. And I sense that you are getting some different feedback from them given some of these initiatives. Could you walk through that?

Fran Soistman

Sure, George. Thanks for the question. We're very pleased with the progress we're making, but we keep the Champaign on ice. The CTMs -- it really does take I would say a joint effort between in our case, eHealth and our carrier partners because we have to be in lock step working together. It's not something that -- there are certainly many things we can control ourselves, but we get a much better outcome when we are working together with our carrier partners to make sure that there's a -- what are the real friction points? It's -- and how can we resolve those or eliminate those friction points. The feedback we're getting from, I would say, all of the major carrier partners when we do regular check-ins, this isn't qualitative, this is quantitative as well, there's demonstrated reductions in CTMs on a per thousand basis, not minimal. It's pretty significant and we're getting the pats on the backs as well. But like I said, you never declare success. You've got to keep working it every day. So I don't want to call out any one carrier. I think that it's fair to say that we work at this with all of our carrier partners because every beneficiary should have the same experience.

George Sutton

Right. By the way, I certainly congratulate you on your reduction in investment in telephonic and increase investment focused on online. I think that's the way to go. I'm curious because under the training side, which affects the telephonic side, again, it seems the carriers are talking about some how influencing some of that training. And I'm just curious how much do you feel is in your control versus out of your control as we go into this next season?

Fran Soistman

I would say we feel very much in control. We own it, we're accountable, we -- even though there is an oversight responsibility to that, that the carriers have because they have the contractual relationship with CMS, but there is no doubt that we are responsible and accountable and we -- I'd say we work in a very collaborative manner to keep our carrier partners in touch and always up to speed with what we're doing. So, there's no surprises. I don't know if I'm really answering the question. I -- but I'm kind of surprised that I didn't know there was something going on. I have Bob here and -- Bob I don't think there's anywhere we've been told it's changing on that respect. I think it's -

Robert Hurley

It's very collaborative process with carriers. We definitely show it in our training programs. They do offer their input to the training programs and best practices as well. So they do offer some good input. We try to incorporate that into our training practices, but we absolutely do control the outcome of that experience in the call center.

Fran Soistman

All of our calls are recorded. So, Dave, I can audit.

George Sutton

Nothing eHealth specific. This is more what carriers have talked about, But last question, if I could, and really off of Kate's point that there is a reduced amount of spend likely to be seen across the board from a lot of different players. It really suggests, again, to those of us watching that there's just too many players and I'm just curious if you've given any thoughts on consolidation in the spaces as you see it likely or not.

Fran Soistman

Well, it remains to be seen what's going to happen in the sector. I think the sector is in an inflection point. We're focused on eHealth. We are working on our cost structure, working on our marketing optimization, working on our carrier partner relationships and taking care of our beneficiaries every day, and that's plenty to keep us busy. We'll see how things shake out.

George Sutton

I understand. Thank you.

Operator

Thank you. [Operator Instructions] Our next question comes from the line of Daniel Grosslight from Citi. Your question, please.

Daniel Grosslight

Hi, guys. Thanks for taking the question. You've now had an AEP and OEP under your belt with some of your new quality initiatives that initially weighed on productivity during AEP, and will continue to weigh on productivity. But I'm wondering if you can comment specifically on the trends in productivity you've seen from this OEP from agents hired during AEP. And what I'm really looking for is quantification of productivity, whether it's conversion rates and talk times, this OEP. And again from those agents hired during AEP versus perhaps some new agents hired during OEP. Any uplift in productivity you are seeing, this OEP.

Fran Soistman

Daniel. We maybe be unique. We have reduced our agent force towards the end of OEP. Perhaps we're somewhat unique. We were frankly, overstaffed for OEP, given the volume of calls that we had. And I'm not happy about that situation. We had I think a little too much idle capacity. Truth be known, and that will not happen again. We took action in early part of Q2. So I can't give you a good answer to that, for us, because we've [Indiscernible] hired any.

Daniel Grosslight

Got it. Okay. So it sounds like you were a little overstaffed during AEP, kept some unproductive agents on board, which have since been cut? Can you disclose how many agents you currently have?

Christine Janofsky

We don't provide that information. We did speak about cutting, or at least not hiring any additional agents into the AEP. So the current plan that's underlying the guidance, really relies on the current [Indiscernible] called, being more productive in terms of conversion rates, and also online, continuing to grow at pretty significant double digit growth rates. Yeah, we don't disclose specific numbers.

Daniel Grosslight

Got it. And then just turning to the IFP segment, we have Medicaid re-determination likely coming back in the second half of this year. I'm curious if there's -- how you're factoring in the potential to recapture some of those folks who are rolling off of Medicaid and into the exchanges. Is that factored into your guidance at all?

Fran Soistman

Good question, Daniel. It really isn't. We don't focus too much on the QHP side as much as -- we work with the state exchanges, of course, where we can, but we're focused more on the small group and the individual consumer HRAs. That's where there's more growth opportunities. So if it does materialize, we'll be ready but we didn't bake it into our forecast.

Daniel Grosslight

Got it.

Fran Soistman

And as you know, ebbs and flows with the economy, when the economy is under pressure, you generally see the enrollment growth. We didn't make any crazy assumptions about -- there will be a big recession and enrollment would take off so we played it pretty conservative.

Daniel Grosslight

Make sense. Thank you.

Operator

Thank you. This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Fran Soistman for any further remarks.

Fran Soistman

Thank you, Operator. And I just want to thank everyone for joining us this afternoon and we'll be talking soon.

Operator

Thank you, ladies and gentlemen, for participation in today's conference. This does conclude the program. You may now disconnect. Good day.