EHEALTH, INC. Please read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included under Part II, Item 8 of this Annual Report on Form 10-K. Overview We are a leading private health insurance marketplace with a technology and service platform that provides consumer engagement, education and health insurance enrollment solutions. Our mission is to connect every person with the highest quality, most affordable health insurance and Medicare plans for their life circumstances. Our platform integrates proprietary and third-party developed educational content regarding health insurance plans with decision support tools to aid consumers in what has traditionally been a confusing and opaque health insurance purchasing process, and to help them obtain the health insurance products that meet their individual health and economic needs. Our omnichannel consumer engagement platform is designed to meet the consumer wherever they prefer to engage with us, and enables consumers to use our services online, through interactive chat, or by telephone with a licensed insurance agent. We have created a marketplace that offers consumers a broad choice of insurance products that include thousands of Medicare Advantage, Medicare Supplement, Medicare Part D prescription drug, individual and family, small business and other ancillary health insurance products from over 200 health insurance carriers across all fifty states and theDistrict of Columbia . Impact from COVID-19 We experienced a number of changes in our business related to the impacts from the COVID-19 pandemic. During the first quarter of 2020, we closed our offices inthe United States andChina and shifted our employees to a work-from-home model in response to the virus outbreak. While some of our offices inthe United States remain closed, we reopened our office inChina in the second quarter of 2020 given the improvements in the situation in the region where our office is located. During the third quarter of 2020, we also reopened some of ourU.S. office locations at a reduced capacity with additional safety and social distancing measures. Based on our success in shifting existing agents to work from home, we launched a remote agent model in 2020, tapping into nationwide agent talent to hire full-time customer care agents. We expect this model to provide us with geographic hiring flexibility as we grow our telesales capacity. In addition, we believe the COVID-19 pandemic had an impact on consumer behavior when it comes to selecting and utilizing health insurance. We believe that more seniors are now likely to shop for Medicare products online or over the phone versus a face-to-face meeting with a traditional broker. This should have a positive impact on comparison Medicare platforms such as ours. At the same time, we believe that reduced utilization of healthcare by seniors in 2020 also had a dampening effect on Medicare plan switching during the fourth quarter annual enrollment period, or AEP, of 2020. See Risk Factors in Part I, Item 1A of this Annual Report on Form 10-K for a discussion of risks related to the COVID-19 pandemic.H.I.G. Investment OnFebruary 17, 2021 , we entered into an investment agreement pursuant to which we have agreed to sell to the purchaser at closing, 2,250,000 shares of our newly designated Series A preferred stock at an aggregate purchase price of$225.0 million . The Private Placement is subject to closing conditions, including, among others: (i) the expiration or early termination of the waiting period (and any extension thereof) applicable to the consummation of the Private Placement under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended; (ii) the confirmation by Nasdaq that it has no objection to the terms and conditions of the Private Placement; and (iii) the determination that consummation of the Private Placement would not cause our outside auditor to no longer be 45 -------------------------------------------------------------------------------- deemed independent under the rules and regulations of theSecurities and Exchange Commission or thePublic Company Accounting Oversight Board . The parties have agreed to cooperate with each other and use reasonable best efforts to promptly take such actions to cause the closing conditions to be satisfied as promptly as reasonably practicable.
Summary of Selected Metrics
We rely upon certain metrics to estimate and recognize commission revenue,
evaluate our business performance and facilitate strategic planning. Our
commission revenue is influenced by a number of factors including but not
limited to:
•the number of individuals on applications for Medicare-related, individual and
family, small business and ancillary health insurance plans that are approved by
the relevant health insurance carriers;
•the number of approved members for Medicare-related, individual and family,
small business and ancillary health insurance plans from whom we have received
an initial commission payment; and
•the constrained lifetime value, or LTV, of approved members for
Medicare-related, individual and family and ancillary health insurance plans we
sell as well as the estimated annual value of approved members for small
business plans we sell.
We have included the number of new paying members in our selected metrics to
provide more detail and visibility into new paying member contribution to the
changes in membership. We count an approved member as a new paying member when
we have received a commission payment from the carrier relating to the plan
purchased by the member. Not all approved members become paying members for
various reasons. In addition, for any given period, the rate at which approved
members become new paying members is impacted by the time lag between carrier
approval and our receipt of the commission payment from the carrier. The
difference in our metrics between the number of approved members and new paying
members tends to vary, especially in the first and fourth quarters given this
time lag and given that plans we sell in the fourth quarter do not begin
generating commissions until the first quarter when they become effective.
We have removed submitted applications from our selected metrics given that we
do not recognize revenue based on this metric, and it is not as indicative of
our commission receivable collection as other metrics we do provide.
46
--------------------------------------------------------------------------------Approved Members
Approved members represent the number of individuals on submitted applications
that were approved by the relevant insurance carrier for the identified product
during the current period. The applications may be submitted in either the
current period or prior periods. Not all approved members ultimately become
paying members.
The following table shows approved members by product for the period presented:
Year Ended December 31,
2020 2019 2018
Medicare:
Medicare Advantage 387,652 279,561 148,478
Medicare Supplement 40,551 42,688 29,837
Medicare Part D 74,357 112,677 61,373
Total Medicare 502,560 434,926 239,688
Individual and Family:
Non-Qualified Health Plans 19,578 20,187 23,075
Qualified Health Plans 13,750 11,999 19,575
Total Individual and Family 33,328 32,186 42,650
Ancillaries:
Short-term 41,640 58,687 107,846
Dental 40,455 43,640 47,343
Vision 18,581 21,391 24,638
Other 14,270 22,980 33,500
Total Ancillaries 114,946 146,698 213,327
Small Business 14,809 16,685 19,550
Total Approved Members 665,643 630,495 515,215
2020 compared to 2019 - Medicare approved members increased 16% in 2020 compared
to 2019. The increase in total Medicare approved members was primarily
attributable to a 39% growth in Medicare Advantage plan members, partially
offset by a 34% decline in Medicare Part D plan members. The increase in
approved Medicare Advantage members was primarily driven by strong online
enrollment growth, increased marketing efforts, an increase in our internal
agent productivity and the COVID-19 related special enrollment period in the
second quarter of 2020. During this special enrollment period, certain
individuals were permitted to enroll, disenroll or switch their Medicare
Advantage and Medicare Part D prescription drug plans. However, our approved
application growth was less than expected primarily due to the underperformance
of our outsourced external agent force and, to a lesser extent, increased
competition in our direct television marketing channel during the fourth quarter
2020 AEP. We also believe that external factors, including the pandemic and the
prolonged election cycle, impacted consumer demand on our platform during the
2020 AEP. To address the underperformance of our external agents, we have
determined to shift our agent salesforce to a predominantly internal full-time
agent model as our internal agents have experienced stronger performance and
productivity than our outsourced agents. We began this shift towards the
increased utilization of internal agents near the end of the 2020 AEP.
Individual and Family Plan approved members grew 4% in 2020 compared to 2019
primarily due to a 15% increase in approved members for qualified health plans.
Ancillary plan approved members declined 22% in 2020 compared to 2019 primarily
due to a decrease in short-term health insurance approved members. Small
business group health insurance approved members declined 11% in 2020 compared
to 2019 mainly due to the shift of our focus on our Medicare business.
2019 compared to 2018 - Medicare approved members grew 81% in 2019 compared to 2018. The growth was primarily due to an 88% growth in Medicare Advantage submitted applications and an 84% growth in Medicare
47
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Part D submitted applications. Individual and Family Plan approved members
declined 25% in 2019 compared to 2018, due primarily to market conditions in the
individual and family plan market and our decision to shift our marketing
investments towards our Medicare business. Approved members for all ancillary
products combined declined 31% in 2019 compared to 2018, due primarily to a 46%
decline in short term plan submitted applications. Small business approved
members decreased 15% in 2019 compared to 2018, due primarily to a decrease in
the number of members per application and in the percentage of approved
applications.
New Paying Members
New Paying Members consist of approved members from the period presented and any
periods prior to the period presented from whom we have received an initial
commission payment during the period presented. The following table shows our
new paying member by product for the periods presented below:
Year Ended December 31,
2020 2019 2018
Medicare:
Medicare Advantage 324,916 235,978 134,565
Medicare Supplement 35,649 37,069 48,403
Medicare Part D 104,833 84,369 30,990
Total Medicare 465,398 357,416 213,958
Individual and Family:
Non-Qualified Health Plans 18,279 20,687 27,105
Qualified Health Plans 12,378 10,310 23,199
Total Individual and Family 30,657 30,997 50,304
Ancillaries:
Short-term 41,953 62,124 94,778
Dental 38,253 42,439 45,876
Vision 17,128 21,332 22,604
Other 13,918 21,601 34,029
Total Ancillaries 111,252 147,496 197,287
Small Business 14,362 17,606 18,874
Total New Paying Members 621,669 553,515 480,423
2020 compared to 2019 - Medicare total new paying members grew 30% in 2020
compared to 2019, primarily driven by a 38% increase in Medicare Advantage plan
new paying members and a 24% increase in Medicare Part D prescription drug plan
new paying members. Individual and family plan new paying members declined 1% in
2020 compared to 2019 due to a decrease in new paying members for non-qualified
plans, partially offset by an increase in new paying members for qualified
plans. Ancillary new paying members declined 25% in 2020 compared 2019 due
primarily to a decline in approved members across all ancillary plans. Small
business new paying members declined 18% in 2020 compared to 2019 primarily due
to a decrease in approved members.
2019 compared to 2018 - Medicare total new paying members grew 67% in 2019
compared to 2018, primarily driven by a 75% increase in Medicare Advantage plan
new paying members and a 172% increase in Medicare Part D prescription drug plan
new paying members. The increases were primarily driven by an increase in
enrollment volume. Individual and family plan new paying members declined 38% in
2019 compared 2018 due to a decrease in new paying members for both
non-qualified and qualified plans. Ancillary new paying members declined 25% in
2019 compared to 2018 primarily due to a decline in approved members across all
ancillary plans. Small business new paying members declined by 7% in 2019
compared to 2018 primarily due to a decrease in approved members.
48
--------------------------------------------------------------------------------Estimated Constrained Lifetime Value of Commissions Per Approved Member
The following table shows our estimated constrained LTV, of commissions per approved member by product for the years presented below:
Year Ended December 31,
2020 2019 2018
Medicare:
Medicare Advantage (1) $ 952 $ 1,013 $ 964
Medicare Supplement (1) 1,125 979 1,047
Medicare Part D (1) 215 238 243
Individual and Family:
Non-Qualified Health Plans (1) 203 213 151
Qualified Health Plans (1) 265 217 141
Ancillaries:
Short-term (1) 162 101 56
Dental (1) 79 70 77
Vision (1) 55 56 55
Small Business (2) 157 159 168
__________
(1)Constrained LTV of commissions per approved member represents commissions
estimated to be collected over the estimated life of an approved member's policy
after applying constraints in accordance with our revenue recognition policy.
The estimate is driven by multiple factors, including but not limited to,
contracted commission rates, carrier mix, estimated average plan duration, the
regulatory environment, and cancellations of insurance plans offered by health
insurance carriers with which we have a relationship. These factors may result
in varying values from period to period. For additional information on
constrained LTV, see Critical Accounting Policies and Estimates.
(2)For small business, the amount represents the estimated commissions we expect
to collect from the plan over the following twelve months. The estimate is
driven by multiple factors, including but not limited to, contracted commission
rates, carrier mix, estimated average plan duration, the regulatory environment,
and cancellations of insurance plans offered by health insurance carriers with
which we have a relationship and applied constraints. These factors may result
in varying values from period to period.
Medicare
2020 compared to 2019 - The constrained LTV of commissions per Medicare Supplement approved member increased by 15% in 2020 compared to 2019, primarily as a result of an increase in estimated average plan duration.
The constrained LTV of commissions per approved member for Medicare Advantage
and Medicare Part D prescription drug plans declined by 6% and 10%,
respectively, in 2020 compared to 2019, primarily due to a decrease in estimated
average plan duration. The decline in estimated average plan duration was driven
by various factors, including our historical emphasis on optimizing member
experience during the initial enrollment process and driving new enrollment
growth with less emphasis and resources allocated to post-transaction
communications and existing member retention. In addition, the decline in
estimated plan duration was also impacted by certain market related factors
including the introduction of the open enrollment period in 2019 which provided
an additional opportunity for Medicare Advantage and Medicare Part D
prescription drugs plan members to change plans. We also believe that a larger
number of Medicare Advantage plan members terminated their plans due to an
increased selection of plans with new features and benefits available to
consumers for the 2020 plan year and the additional opportunities for consumers
to shop and switch Medicare Advantage and Medicare Part D prescription drug
plans
49
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during the recent open enrollment periods. The decline had a more pronounced
impact on our newer member cohorts and on our telephonic enrollments, while our
online enrollments continue to have higher average duration.
During the third quarter of 2020, we initiated a number of programs to improve
our member retention. For example, we have launched a customer retention team,
adjusted the compensation structure of our agents to better align with our
retention goals, and deployed new technologies aimed at improving member
retention, including the launch of our Customer Center. We believe these efforts
will lead to improved plan duration trends during 2021.
2019 compared to 2018 - The constrained LTV of commissions per approved member
for Medicare Advantage plans increased by 5% in 2019 compared to 2018, primarily
due to improved member attrition and higher commission rates. The constrained
LTV for Medicare Supplement approved members declined by 6% primarily as a
result of a decrease in the average plan duration, and the constrained LTV of
commissions per Medicare Part D approved member declined by 2% primarily as a
result of carrier mix.
Individual and Family and Ancillaries
2020 compared to 2019 - The constrained LTV of commissions per approved
qualified health plan member increased by 22% in 2020 compared to 2019 primarily
due to increased estimates of average plan duration. The constrained LTV of
commissions per short-term health insurance approved member increased 60% in
2020 compared to 2019 primarily as a result of selling plans with higher premium
and an increase in estimated average plan duration. The constrained LTV of
commission per approved member for dental plans increased by 13% in 2020
compared to 2019 primarily due to an increase in estimated average plan duration
and lower constraints as a result of reduced volatility based on historical
trends.
2019 compared to 2018 - The constrained LTV of commissions per qualified and
non-qualified health plan for approved members increased by 54% and 41%, in 2019
compared to 2018, respectively, mostly due to improved plan duration. The
constrained LTV of commissions per short-term approved member increased 80% in
2019 compared to 2018, primarily driven by an increase in average plan duration.
50
--------------------------------------------------------------------------------Estimated Membership
Estimated membership represents the estimated number of members active as of the
date indicated based on the number of members for whom we have received or
applied a commission payment during the period of estimation. The following
table shows estimated membership by product as of the periods presented below:
As of December 31,
2020 2019 2018
Medicare (1)
Medicare Advantage 533,282 404,694 276,357
Medicare Supplement 104,188 93,477 70,426
Medicare Part D 238,503 212,478 139,907
Total Medicare 875,973 710,649 486,690
Individual and Family (2) 116,247 128,487 151,904
Ancillaries (3)
Short-term 23,088 27,862 24,192
Dental 118,647 127,083 138,916
Vision 68,587 71,277 73,987
Other 37,033 38,119 38,136
Total Ancillaries 247,355 264,341 275,231
Small Business (4) 45,771 42,638 39,101
Total Estimated Membership 1,285,346 1,146,115 952,926
__________________
(1)To estimate the number of members on Medicare-related health insurance plans,
we take the sum of (i) the number of members for whom we have received or
applied a commission payment for a month that may be up to three months prior to
the date of estimation (after reducing that number using historical experience
for assumed member cancellations over the period being estimated); and (ii) the
number of approved members over that period (after reducing that number using
historical experience for an assumed number of members who do not accept their
approved policy and for estimated member cancellations through the date of the
estimate). To the extent we determine we have received substantially all of the
commission payments related to a given month during the period being estimated,
we will take the number of members for whom we have received or applied a
commission payment during the month of estimation.
(2)To estimate the number of members on Individual and Family health insurance
plans ("IFP"), we take the sum of (i) the number of IFP members for whom we have
received or applied a commission payment for a month that may be up to three
months prior to the date of estimation (after reducing that number using
historical experience for assumed member cancellations over the period being
estimated); and (ii) the number of approved members over that period (after
reducing that number using historical experience for an assumed number of
members who do not accept their approved policy and for estimated member
cancellations through the date of the estimate). To the extent we determine we
have received substantially all of the commission payments related to a given
month during the period being estimated, we will take the number of members for
whom we have received or applied a commission payment during the month of
estimation.
(3)To estimate the number of members on ancillary health insurance plans (such
as short-term, dental and vision insurance), we take the sum of (i) the number
of members for whom we have received or applied a commission payment for a month
that may be up to three months prior to the date of estimation (after reducing
that number using historical experience for assumed member cancellations over
the period being estimated); and (ii) the number of approved members over that
period (after reducing that number using historical experience for an assumed
number of members who do not accept their approved policy and for estimated
member cancellations through the date of the estimate). To the extent we
determine we have received substantially all of the commission payments related
to a given month during the period being estimated, we will take the number of
members for whom we have received or applied a commission payment during the
month of estimation. The one to three-month period varies by insurance product
and is largely dependent upon the timeliness of commission payment and related
reporting from the related carriers.
(4)To estimate the number of members on small business health insurance plans,
we use the number of initial members at the time the group was approved, and we
update this number for changes in membership if such changes are reported to us
by the group or carrier. However, groups generally notify the carrier directly
of policy cancellations and increases or decreases in group size without
informing us. Health insurance carriers often do not communicate policy
cancellation information or group size changes to us. We often are made aware of
policy cancellations and group size changes at the time of annual renewal and
update our membership statistics accordingly in the period they are reported.
51
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Health insurance carriers bill and collect insurance premiums paid by our
members. The carriers do not report to us the number of members that we have as
of a given date. The majority of our members who terminate their plans do so by
discontinuing their premium payments to the carrier and do not inform us of the
cancellation. Also, some of our members pay their premiums less frequently than
monthly. Given the number of months required to observe non-payment of
commissions in order to confirm cancellations, we estimate the number of members
who are active on insurance policies as of a specified date.
After we have estimated membership for a period, we may receive information from
health insurance carriers that would have impacted the estimate if we had
received the information prior to the date of estimation. We may receive
commission payments or other information that indicates that a member who was
not included in our estimates for a prior period was in fact an active member at
that time, or that a member who was included in our estimates was in fact not an
active member of ours. For instance, we reconcile information carriers provide
to us and may determine that we were not historically paid commissions owed to
us, which would cause us to have underestimated membership. Conversely, carriers
may require us to return commission payments paid in a prior period due to
policy cancellations for members we previously estimated as being active. We do
not update our estimated membership numbers reported in previous periods.
Instead, we reflect updated information regarding our historical membership in
the membership estimate for the current period. As a result of the delay in our
receipt of information from insurance carriers, actual trends in our membership
are most discernible over periods longer than from one quarter to the next. As a
result of the delay we experience in receiving information about our membership,
it is difficult for us to determine with any certainty the impact of current
conditions on our membership retention. Various circumstances could cause the
assumptions and estimates that we make in connection with estimating our
membership to be inaccurate, which would cause our membership estimates to be
inaccurate. A member who purchases and is active on multiple standalone
insurance plans will be counted as a member more than once. For example, a
member who is active on both an individual and family health insurance plan and
a standalone dental plan will be counted as two continuing members.
2020 compared to 2019 - Medicare estimated membership grew 23% as of December
31, 2020 compared to December 31, 2019 driven by a 32% increase in Medicare
Advantage, as well as 12% and 11% increases in Medicare Part D prescription drug
plan and Medicare Supplement plan estimated membership, respectively. The
overall growth in Medicare estimated membership was due to our investment in our
Medicare business. Individual and family plan estimated membership declined by
10% as of December 31, 2020 compared to December 31, 2019 due to market
conditions in the individual and family plan market and our decision to shift
our investment to our Medicare business. Ancillary plan estimated membership as
of December 31, 2020 declined 6% compared to estimated membership as of December
31, 2019 primarily as a result of the decline of estimated membership of dental,
short-term health plans, and vision plans.
2019 compared to 2018 - Medicare estimated membership grew 46% as of December
31, 2019 compared to December 31, 2018 primarily driven by a 46% and 52%
increase in Medicare Advantage and Medicare Part D prescription drug plan
estimated membership, respectively. Individual and family plan estimated
membership declined by 15% as of December 31, 2019 compared to December 31, 2018
primarily due to market conditions in the individual and family plan market and
our decision to shift our marketing investments towards our Medicare business.
Ancillary plan estimated membership declined 4% as of December 31, 2019 compared
to December 31, 2018 , primarily due to a 9% decline in dental plan estimated
membership. Small business estimated membership grew 9% as of December 31, 2019
compared to December 31, 2018 , primarily driven by our focus on key partnerships
and technology enhancements.
52--------------------------------------------------------------------------------
Member Acquisition
Marketing initiatives are an important component of our strategy to increase
revenue and are primarily designed to encourage consumers to complete an
application for health insurance. Variable marketing cost represents direct
costs incurred in member acquisition from our direct, marketing partners and
online advertising channels. In addition, we incur customer care and enrollment
expenses ("CC&E") in assisting applicants during the enrollment process.
Variable marketing costs exclude fixed overhead costs, such as personnel related
costs, consulting expenses, facilities and other operating costs allocated to
the marketing and advertising department.
The following table shows the estimated variable marketing cost per approved
member and the estimated customer care and enrollment expense per approved
member metrics for the years presented below. The numerator used to calculate
each metric is the portion of the respective operating expenses for marketing
and advertising and customer care and enrollment that is directly related to
member acquisition for our sale of Medicare Advantage, Medicare Supplement and
Medicare Part D prescription drug plans (collectively, "Medicare Plans") and for
all individual and family major medical plans and short-term health insurance
(collectively, "IFP Plans"), respectively. The denominator used to calculate
each metric is based on a derived metric that represents the relative value of
the new members acquired. For Medicare Plans, we call this derived metric
Medicare Advantage ("MA")-equivalent members, and for IFP Plans, we call this
derived metric IFP-equivalent members. The calculations for MA-equivalent
members and for IFP-equivalent members are based on the weighted number of
approved members for Medicare Plans and IFP Plans during the year, with the
number of approved members adjusted based on the relative LTV of the product
they are purchasing. Since the LTV for any product fluctuates from year to year,
the weight given to each product was determined based on their relative LTVs at
the time of our adoption of ASC 606.
Year Ended December 31,
2020 2019 2018
Medicare:Estimated CC&E cost per approved MA-equivalent approved member (1)
$ 368
384 330 297
Total Medicare estimated cost per approved member $ 752 $ 685 $ 612
Individual and Family Plan:
Estimated CC&E cost per IFP-equivalent approved member (2) $ 92
83 67 59
Total IFP estimated cost per approved member $ 175 $ 169 $ 120
_____________
(1)MA-equivalent approved members is a derived metric with a Medicare Part D
approved member being weighted at 25% of a Medicare Advantage member and a
Medicare Supplement member based on their relative LTVs at the time of our
adoption of ASC 606. We calculate the number of approved MA-equivalent members
by adding the total number of approved Medicare Advantage and Medicare
Supplement members and 25% of the total number of approved Medicare Part D
members during the years presented.
(2)IFP-equivalent approved members is a derived metric with a short-term
approved member being weighted at 33% of a major medical individual and family
health insurance plan member based on their relative LTVs at the time of our
adoption of ASC 606. We calculate the number of approved IFP-equivalent members
by adding the total number of approved qualified and non-qualified health plan
members and 33% of the total number of short-term approved members during the
years presented.
2020 compared to 2019 - Estimated CC&E costs per approved MA-equivalent member
increased 4% in 2020 compared to 2019, due to underperformance of vendor agents
which led to lower than expected approved members. Estimated variable marketing
costs per approved MA-equivalent member increased by 16% in 2020 compared to
2019, due to a larger portion of applications originating from our online
marketing channels which tend to have higher average marketing costs, and it was
also impacted by underperformance of vendor agents which resulted in lower than
expected approved members. Going forward, we expect a reduction in member
acquisition costs per approved MA-equivalent member as a result of improved
productivity of our agent force by
53
--------------------------------------------------------------------------------shifting to a predominantly internal employed agent model and, to a lesser extent, an increase in the percentage of unassisted online enrollment.
Estimated variable CC&E cost per approved IFP-equivalent member decreased 10% in
2020 compared to 2019 due primarily to a decrease in personnel-related costs and
an increase in the number of approved members. Estimated variable marketing cost
per approved IFP-equivalent member increased by 24% in 2020 compared to 2019
primarily driven by an increase in variable marketing costs.
2019 compared to 2018 - Estimated CC&E costs per approved MA-equivalent member
increased 13% in 2019 compared to 2018, due to our decision to have more
customer care agents during the lower volume quarters, and a significant
increase in overtime costs and average call length during the peak volume period
in the fourth quarter. Estimated variable marketing costs per approved
MA-equivalent member increased by 11% in 2019 compared to 2018, due to an
increase in online advertising costs and higher variable marketing costs for
select initiatives within the direct and partner channels. As we increased our
spending on digital advertising channel for accelerated enrollment growth and
market share expansion, the average costs were higher per member.
Estimated variable CC&E cost per approved IFP-equivalent member increased 67% in
2019 compared to 2018, also primarily driven by decline in the number of
approved members for non-qualified health plans, qualified health plans, and
short-term products as well as increase in investments of IFP-dedicated customer
care agents. Estimated variable marketing cost per approved IFP-equivalent
member increased by 14% in 2019 compared to 2018 primarily driven by a decline
in the number of approved members for non-qualified health plans, qualified
health plans, and short-term products.
54
--------------------------------------------------------------------------------Results of Operations
The following table sets forth our operating results and related percentage of total revenues for the years presented below (dollars in thousands):
Year Ended
2020 2019 2018
Revenue:
Commission $ 508,189 87 % $ 466,676 92 % $ 227,211 90 %
Other 74,585 13 % 39,525 8 % 24,184 10 %
Total revenue 582,774 100 % 506,201 100 % 251,395 100 %
Operating costs and expenses (1)
Cost of revenue 4,083 1 % 2,738 1 % 1,228 - %
Marketing and advertising 209,340 36 % 150,249 30 % 82,939 33 %
Customer care and enrollment 172,895 30 % 134,304 27 % 70,547 28 %
Technology and content 65,188 11 % 47,085 9 % 31,970 13 %
General and administrative 76,452 13 % 64,150 13 % 45,828 18 %
Change in fair value of earnout liability - - % 24,079 4 % 12,300 5 %
Amortization of intangible assets 1,493 - % 2,187 - % 2,091 1 %
Restructuring charges - - % - - % 1,865 1 %
Acquisition costs - - % - - % 76 - %
Total operating costs and expenses 529,451 91 % 424,792 84 % 248,844 99 %
Income from operations 53,323 9 % 81,409 16 % 2,551 1 %
Other income, net 666 - % 2,090 - % 755 - %
Income before income taxes 53,989 9 % 83,499 16 % 3,306 1 %
Provision for income taxes 8,539 1 % 16,612 3 % 3,065 1 %
Net income $ 45,450 8 % $ 66,887 13 % $ 241 - %
____________
(1) Operating costs and expenses include the following amounts of stock-based compensation expense (in thousands):
Year Ended
2020 2019 2018
Marketing and advertising $ 5,102 $ 4,230 $ 1,974
Customer care and enrollment 2,723 1,451 816
Technology and content 5,460 3,611 1,675
General and administrative 11,887 13,278 7,824
Restructuring charges - - 251
Total stock-based compensation expense $ 25,172 $ 22,570 $ 12,540
55--------------------------------------------------------------------------------
Revenue
Our commission revenue, other revenue and total revenue are summarized as follows (dollars in thousands):
Change Change
2020 $ % 2019 $ % 2018
Commission $ 508,189 $ 41,513 9% $ 466,676 $ 239,465 105% $ 227,211
% of total revenue 87 % 92 % 90 %
Other 74,585 35,060 89% 39,525 15,341 63% 24,184
% of total revenue 13 % 8 % 10 %
Total revenue
254,806 101%
2020 compared to 2019 - Commission revenue increased$41.5 million , or 9% in 2020 compared to 2019 due to a$35.2 million increase in commission revenue from the Medicare segment and a$6.3 million increase in commission revenue from Individual, Family and Small Business segment. The increase in commission revenue from the Medicare segment was driven by a 16% increase in Medicare plan approved members, primarily attributable to a 39% growth in Medicare Advantage plan approved members, partially offset by a decrease in net adjustment revenue for the year endedDecember 31, 2020 compared to 2019 and a decline in the estimated constrained LTV for Medicare Advantage plans. Excluding$42.3 million revenue recorded in the fourth quarter of 2019 related to a change in estimate of expected cash commission collections for Medicare Advantage plans since we began selling such products through the third quarter of 2019, commission revenue increased 20% in 2020 as compared to 2019. The increase in commission revenue from Individual, Family and Small Business segment was primarily driven by a 21% increase in adjustment revenue and a 4% increase in individual and family plan approved members. See Segment Information below for further discussion. Net adjustment revenue consists of increases in revenue for certain prior period cohorts as well as reductions in revenue for certain prior period cohorts. We recognize positive adjustments to revenue to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. Net adjustment revenue for our Medicare segment in 2020 and 2019 was$5.7 million and$55.3 million , respectively. For our Individual, Family and Small Business segment net adjustment revenue in 2020 and 2019 was$39.8 million and$32.9 million , respectively. See Note 2 - Revenue in our Notes to Consolidated Financial Statements for more information.
Other revenue increased
2019 compared to 2018 - Commission revenue increased$239.5 million , or 105% in 2019 compared to 2018 due to a$219.0 million increase in commission revenue from the Medicare segment and a$20.5 million increase in commission revenue from Individual, Family and Small Business segment. The increase in commission revenue from the Medicare segment was attributable to an 81% increase in Medicare plan approved members, higher LTVs for Medicare Advantage plans, and an increase in adjustment revenue from Medicare Advantage plans approved in prior periods. Of the adjustment revenue of$55.3 million for the year endedDecember 31, 2019 ,$42.3 million was related to a change in estimate of expected cash commission collections for Medicare Advantage plans since we began selling such products through the third quarter of 2019. The increase in individual and family commission revenue was primarily driven by an increase in LTVs for IFP plans and an increase in adjustment revenue from IFP plans approved in prior periods as we continued to observe longer member duration than initially anticipated at the time of enrollment for these plans 56 --------------------------------------------------------------------------------
Other revenue increased
Cost of Revenue
Cost of revenue consists of payments related to health insurance plans sold to members who were referred to our website by marketing partners with whom we have revenue-sharing arrangements. In order to enter into a revenue-sharing arrangement, marketing partners must be licensed to sell health insurance in the state where the policy is sold. Costs related to revenue-sharing arrangements are expensed as the related revenue is recognized. Additionally, cost of revenue includes the amortization of consideration we paid to certain broker partners in connection with the transfer of their health insurance members to us as the new broker of record on the underlying plans. These transfers include primarily Medicare plan members. Consideration for all book-of-business transfers is being amortized to cost of revenue as we recognize commission revenue related to the transferred members.
Our cost of revenue is summarized as follows (dollars in thousands):
Change Change
2020 $ % 2019 $ % 2018
Cost of revenue $ 4,083 $ 1,345 49 % $ 2,738 $ 1,510 123 % 1,228
% of total revenue 1 % 1 % - %
2020 compared to 2019 - Cost of revenue increased $1.3 million in 2020, compared
to $2.7 million in 2019, primarily due to increased activity from our revenue
sharing arrangements.
2019 compared to 2018 - Cost of revenue increased $1.5 million in 2019, compared
to $1.2 million in 2018, primarily due to an increased amount of payments to
marketing partners with whom we have revenue sharing arrangements.
Marketing and Advertising
Marketing and advertising expenses consist primarily of member acquisition expenses associated with our direct, marketing partner and online advertising member acquisition channels, in addition to compensation and other expenses related to marketing, business development, partner management, public relations and carrier relations personnel who support our offerings. We recognize expenses in our direct member acquisition channel in the period in which they are incurred. We generally compensate our marketing partners for referrals based on the consumer submitting a health insurance application on our platform, regardless of whether the consumer's application is approved by the health insurance carrier, or for the referral of a Medicare-related lead to us by the marketing partner. Some of our partners such as pharmacies and hospital networks are not compensated for referrals to us as a result of legal requirements. These organizations have relationships with us to provide their customers and patients with our consumer experience and to help them find the plan that best meets their needs. Some of our marketing partners have tiered arrangements where the amount we pay the marketing partner per submitted application increases as the volume of submitted applications we receive from the marketing partner increases. We recognize these expenditures in the period when a marketing partner's referral results in the submission of a health insurance application. In our Medicare business, our current emphasis is on reducing the contribution from the lead aggregator marketing channel that is characterized by high acquisition costs and emphasizing strategic partnerships including relationships with health care industry participants, such as pharmacies and hospital networks, and with affiliate organizations where our acquisition costs may be significantly lower.
Since the total volume of submitted applications that we receive from our marketing partners is largely outside of our control, particularly during any short-term period, and because of our tiered marketing partner
57
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arrangements, we could incur expenses in excess of, or below, the amounts we had
planned in periods of rapid change in the volume of submitted applications from
marketing partner referrals. Similar to our marketing partner channel, expenses
in our online advertising channel will increase or decrease in relation to any
increase or decrease in consumers referred to our website as a result of search
engine advertising or retargeting campaigns. We recognize expenses in our online
advertising member acquisition channels in the period in which the consumer
clicks on the advertisement. Increases in submitted applications resulting from
marketing partner referrals or visitors to our website from our online
advertising channel has in the past, and could in the future, result in
marketing and advertising expenses significantly higher than our expectations.
Our marketing and advertising expenses are summarized as follows (dollars in
thousands):
Change Change
2020 $ % 2019 $ % 2018
Marketing and advertising $ 209,340 $ 59,091 39 % $ 150,249 $ 67,310 81 % $ 82,939
% of total revenue 36 % 30 % 33 %
2020 compared to 2019 - Marketing and advertising expenses increased by $59.1
million or 39% in 2020, compared to 2019, primarily driven by a $56.3 million
increase in Medicare plan related variable advertising costs, and $2.4 million
increase in consulting. The increase in variable advertising expenses was due to
an increase in our investment for Medicare enrollment growth and the increase in
expense as a percentage of revenue reflects lower than expected volumes driven
by underperformance of certain marketing channels.
2019 compared 2018 - Marketing and advertising expenses increased by $67.3
million or 81% in 2019, compared to 2018, primarily driven by a $59.3 million
increase in Medicare plan related variable advertising costs and a $4.4 million
increase in personnel costs due to higher headcount as we continued to invest in
our marketing initiatives in Medicare-related products.
Customer Care and Enrollment
Customer care and enrollment expenses primarily consist of compensation and
benefits costs for personnel engaged in assistance to applicants who call our
customer care center and for enrollment personnel who assist applicants during
the enrollment process.
Our customer care and enrollment expenses are summarized as follows (dollars in
thousands):
Change Change
2020 $ % 2019 $ % 2018
Customer care and enrollment $ 172,895 $ 38,591 29 % $ 134,304 $ 63,757 90 % $ 70,547
% of total revenue 30 % 27 % 28 %
2020 compared to 2019 - Customer care and enrollment expenses increased by $38.6
million , or 29%, in 2020 compared to 2019. This increase was primarily driven by
$27.5 million increase in personnel costs associated with an increase in
customer care and enrollment headcount, $5.1 million increase in consulting
expenses, $2.8 million increase in facilities and other operating expenses, $1.3
million increase in stock-based compensation and $1.0 million increase in
licensing costs.
2019 compared to 2018 - Customer care and enrollment expenses increased by $63.8
million , or 90%, in 2019 compared to 2018. This increase was primarily due to a
$28.4 million increase in personnel costs and a $24.3 million increase for the
external agents hired for the AEP in the fourth quarter. The increase in
personnel costs resulted from higher headcount in the lower application volume
quarters compared to the prior year as we started to hire and train agents
earlier in 2019 in preparation for the AEP in the fourth quarter, a significant
increase in
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overtime costs and average call length during the peak volume period in the
fourth quarter, as well as the expenses incurred related to the opening of the
new customer care center in
Historically, we experienced a seasonal increase in customer care and enrollment costs during the third and fourth quarters primarily due to increased customer care center staffing to handle the anticipated increased volume of health insurance transactions during the AEP in the fourth quarter. A significant portion of these costs were due to increased outsourced vendor agent costs. Going forward, we plan to shift to a predominantly internal agent model and will employ and maintain the majority of our health insurance agent force year-round. We expect to increase our internal agents' utilization outside of the enrollment periods by expanding our offerings of ancillary products and increasing our outbound calling efforts. As a result, we expect to incur increased customer care and enrollment costs beginning earlier in 2021 and a reduced level of outsourced vendor agent costs during the fourth quarter AEP season.
Technology and Content
Technology and content expenses consist primarily of compensation and benefits costs for personnel associated with developing and enhancing our website technology as well as maintaining our website. A portion of our technology and content group is located at our wholly-owned subsidiary inChina , where technology development costs are generally lower than inthe United States . Our technology and content expenses are summarized as follows (dollars in thousands): Change Change 2020 $ % 2019 $ % 2018 Technology and content$ 65,188 $ 18,103 38 %$ 47,085 $ 15,115 47 %$ 31,970 % of total revenue 11 % 9 % 13 % 2020 compared to 2019 - Technology and content expenses increased$18.1 million , or 38%, in 2020 compared to 2019, primarily driven by increases of$8.4 million in personnel and compensation costs,$5.8 million in facilities and other operating costs,$3.9 million in amortization of internally developed software and$1.8 in stock-based compensation expense, partially offset by$2.1 million decrease in consulting expense. 2019 compared 2018 - Technology and content expenses increased$15.1 million , or 47%, in 2019 compared to 2018, primarily driven by increases of$5.3 million in personnel and compensation costs,$3.3 million in consulting expenses, and$2.6 million in facilities and other operating costs.
General and Administrative
General and administrative expenses include compensation and benefits costs for
personnel working in our executive, finance, investor relations, government
affairs, legal, human resources, internal audit, facilities and internal
information technology departments. These expenses also include fees paid for
outside professional services, including audit, tax, legal, government affairs
and information technology fees.
Our general and administrative expenses are summarized as follows (dollars in
thousands):
Change Change
2020 $ % 2019 $ % 2018
General and administrative $ 76,452 $ 12,302 19 % $ 64,150 $ 18,322 40 % $ 45,828
% of total revenue 13 % 13 % 18 %
59-------------------------------------------------------------------------------- 2020 compared to 2019 - General and administrative expenses increased by$12.3 million , or 19%, in 2020 compared to 2019, primarily driven by increases of$5.2 million in compensation and personnel costs,$3.0 million in consulting expense, and$2.8 million in facilities and other operating costs. 2019 compared to 2018 - General and administrative expenses increased by$18.3 million , or 40%, in 2019 compared to 2018, primarily driven by increases of$7.5 million in compensation and personnel costs,$5.4 million in stock-based compensation expense, and$2.5 million in legal and professional fees.
Change in Fair Value of Earnout Liability
During the year endedDecember 31, 2020 , there were no changes in fair value of earnout liability as the earnout consideration was settled inJanuary 2020 . During the year endedDecember 31, 2019 , we recorded a$24.1 million increase in the fair value of earnout liability. The adjustment to fair value of earnout liability in 2019 was due to an increase in the value of our common stock since our acquisition of GoMedigap inJanuary 2018 .
Amortization of Intangible Assets
Our intangible asset amortization expense is summarized as follows (dollars in
thousands):
Change Change
2020 $ % 2019 $ % 2018
Amortization of intangible assets $ 1,493 $ (694) (32) % $ 2,187 $ 96 5 % $ 2,091
% of total revenue - % - % 1 %
2020 compared to 2019 - Amortization expense was primarily related to intangible
assets purchased through our acquisitions. Amortization expense decreased in
2020 compared to 2019 due to certain intangible assets being fully amortized in
2020.
2019 compared to 2018 - Amortization expense was primarily related to intangible assets purchased through our acquisitions of PlanPrescriber and GoMedigap. Amortization expense in 2019 remained flat compared to 2018.
Other Income, Net
Other income, net, primarily consisted of interest income, sublease income, and margin earned on commissions received from Medicare plan members transferred to us in 2010 through 2012 by a broker partner, partially offset by interest expense on finance leases and debt and other bank fees.
Our other income, net is summarized as follows (dollars in thousands):
Change Change
2020 $ % 2019 $ % 2018
Other income, net $ 666 $ (1,424) (68) % $ 2,090 $ 1,335 177 % $ 755
% of total revenue - % - % - %
2020 compared to 2019 - Other income, net, decreased by
2019 compared to 2018 - Other income, net, increased by$1.3 million or 177% in 2019 compared to 2018 primarily driven by an increase in interest income and an increase in margin earned on from members previously 60 -------------------------------------------------------------------------------- transferred from a broker partner, partially offset by the accretion of debt related costs incurred from the debt facility that we entered into in 2018 and amended in 2019. Provision for Income Taxes
The following table presents our provision for income taxes for the years presented below (dollars in thousands):
Change Change
2020 $ % 2019 $ % 2018
Provision for income taxes $ 8,539 $ (8,073) (49) % $ 16,612 $ 13,547 442 % $ 3,065
Effective tax rate 15.8 % 19.9 % 92.7 %
2020 compared to 2019 - For the year ended December 31, 2020 , we recorded a
provision for income taxes of $8.5 million representing an effective tax rate
of 15.8%, which is lower than the effective tax rate of 19.9% in 2019 primarily
due to increased impact from stock-based compensation tax benefits and higher
research and development tax credits as compared to 2019.
2019 compared to 2018 - For the year ended December 31, 2019 , we recorded a
provision for income taxes of $16.6 million representing an effective tax rate
of 19.9%, which is lower than the effective federal tax rate of 92.7% for 2018
primarily due to a $2.4 million valuation allowance which was recorded in 2018
against certain state net operating losses.
Segment Information
We report segment information based on how our chief executive officer, who is our chief operating decision maker, or CODM, regularly reviews our operating results, allocates resources, and makes decisions regarding our business operations. The performance measures of our segments include total revenue and profit. Our business structure is comprised of two operating segments: •Medicare; and •Individual, Family and Small Business.
Our CODM does not separately evaluate assets by segment, with the exception of commissions receivable, by segment, and therefore assets by segment are not presented.
The Medicare segment consists primarily of commissions earned from our sale of
Medicare-related health insurance plans, including Medicare Advantage, Medicare
Supplement and Medicare Part D prescription drug plans, and to a lesser extent,
ancillary products sold to our Medicare-eligible applicants, including but not
limited to, dental and vision plans, as well as our advertising program that
allows Medicare-related carriers to purchase advertising on a separate website
developed, hosted and maintained by us and our delivery and sale to third
parties of Medicare-related health insurance leads generated by our ecommerce
platforms and our marketing activities.
The Individual, Family and Small Business segment consists primarily of
commissions earned from our sale of individual, family and small business health
insurance plans and ancillary products sold to our non-Medicare-eligible
applicants, including but not limited to, dental, vision, and short-term health
insurance. To a lesser extent, the Individual, Family and Small Business segment
consists of amounts earned from our online sponsorship program that allows
carriers to purchase advertising space in specific markets in a sponsorship area
on our website, our licensing to third parties the use of our health insurance
ecommerce technology, and our delivery and sale to third parties of individual
and family health insurance leads generated by our ecommerce platforms and our
marketing activities.
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Marketing and advertising, customer care and enrollment, technology and content
and general and administrative operating expenses that are directly attributable
to a segment are reported within the applicable segment. Indirect marketing and
advertising, customer care and enrollment and technology and content operating
expenses are allocated to each segment based on usage. Other indirect general
and administrative operating expenses are managed in a corporate shared services
environment and, since they are not the responsibility of segment operating
management, are not allocated to the operating segments and instead reported
within Corporate.
Segment profit is calculated as total revenue for the applicable segment less
direct and allocated marketing and advertising, customer care and enrollment,
technology and content and general and administrative operating expenses,
excluding stock-based compensation expense, change in fair value of earnout
liability, depreciation and amortization expense, and amortization of intangible
assets.
Our operating segment revenue and profit are summarized as follows (in
thousands):
Change Change
2020 $ % 2019 $ % 2018
Revenue
Medicare $ 516,762 $ 69,801 16 % $ 446,961 $ 236,391 112 % $ 210,570
Individual, Family and Small
Business 66,012 6,772 11 % 59,240 18,415 45 % 40,825
Total revenue $ 582,774 76,573 15 % $ 506,201 254,806 101 % $ 251,395
Segment profit
Medicare segment profit $ 101,963 (53,271) (34) % $ 155,234 94,390 155 % $ 60,844
Individual, Family and Small
Business segment profit 39,383 16,015 69 % 23,368 17,565 303 % 5,803
Total segment profit 141,346 (37,256) (21) % 178,602 111,955 168 % 66,647
Corporate (57,664) (12,290) 27 % (45,374) (12,378) 38 % (32,996)
Stock-based compensation
expense (25,172) (2,602) 12 % (22,570) (10,281) 84 % (12,289)
Depreciation and amortization (3,694) (711) 24 % (2,983) (504) 20 % (2,479)
Change in fair value of
earnout liability - 24,079 (100) % (24,079) (11,779) 96 % (12,300)
Restructuring charges - - * - 1,865 (100) % (1,865)
Acquisition costs - - * - 76 (100) % (76)
Amortization of intangible
assets (1,493) 694 (32) % (2,187) (96) 5 % (2,091)
Other income, net 666 (1,424) (68) % 2,090 1,335 177 % 755
Income before income taxes $ 53,989 $ (29,510) (35) % $ 83,499 $ 80,193 2,426 % $ 3,306
_______
* Percentage calculated is not meaningful.
2020 compared to 2019
Revenue - Revenue from Medicare segment revenue grew$69.8 million or 16% in 2020 compared to 2019, primarily attributable to an increase in Medicare Advantage plan related commission revenue of$35.2 million and an increase in other revenue of$34.6 million . Excluding$42.3 million revenue resulting from a change in estimate recorded in the fourth quarter of 2019 regarding expected cash commission collections for Medicare Advantage plans since we began selling such products through the third quarter of 2019, Medicare segment revenue increased 28% in 2020 compared to 2019.The increase in Medicare Advantage commission revenue was driven by 39% growth in Medicare Advantage approved members. The overall growth of our Medicare business was a result of our investment and marketing efforts in this segment and the increases in approved application volume due to the 62 -------------------------------------------------------------------------------- open enrollment period in the first quarter and the COVID-19 related special enrollment period introduced in the second quarter. The increase in other revenue was driven by an increase in advertising revenue due to increases in size and number of advertising arrangements. Revenue from Individual, Family and Small Business segment grew$6.8 million , or 11% in 2020 compared to 2019, primarily attributable to$6.3 million increase in commission revenue. The increase in commission revenue from Individual, Family and Small Business segment was primarily due to an increase in adjustment revenue of$7.0 million in 2020 compared to 2019, partially offset by$0.6 million decrease in commission revenue from members approved during the period. We recognized$39.8 million adjustment revenue in 2020 due to stronger retention rates for earlier period cohorts of certain products based on our latest LTV assessment. Segment Profit - Our Medicare segment profit was$102.0 million in 2020, a decrease of$53.3 million or 34%, compared to 2019. This was primarily due to a$123.1 million increase in operating expenses, excluding stock-based compensation expense, change in earnout liability, depreciation and amortization expenses, and amortization of intangible assets, partially offset by a$69.8 million increase in revenue. The increase in operating expenses was mostly attributable to increases in marketing costs and customer care and enrollment costs as we continued to invest in telesales capacity, internal agent counts, agent productivity tools and incentives, customer engagement and retention initiatives, and enhancements to our technology platform. Our Medicare segment profit was negatively impacted by the underperformance of our outsourced external agent force and certain of our marketing channels during the fourth quarter 2020 AEP. We also believe that some external factors, including the COVID-19 pandemic and, to a lesser extent, the prolonged election cycle, might have influenced consumer demand. Our Individual, Family and Small Business segment profit was$39.4 million in 2020, an increase of$16.0 million or 69% compared to 2019. The increase was primarily driven by a$6.8 million increase in revenue and a$9.2 million decrease in operating expenses, excluding stock-based compensation expense, change in earnout liability, depreciation and amortization expenses, and amortization of intangible assets.
2019 compared to 2018
Revenue - Medicare segment revenue grew$236.4 million or 112% in 2019 compared to 2018, primarily attributable to an increase in Medicare Advantage plan related commission revenue of$196.4 million . This was driven by 88% increase in approved Medicare Advantage applications in 2019 compared to 2018 and an increase in adjustment revenue for Medicare Advantage plans approved in prior periods. Revenue from Individual, Family and Small Business segment grew$18.4 million or 45% in 2019 compared to 2018, primarily attributable to$11.1 million increase in non-qualified health plans commission revenue and$7.0 million increase in ancillary commission revenue. The increases were primarily attributable to an increase in net adjustment revenue. Segment Profit - Our Medicare segment profit was$155.2 million in 2019, an increase of$94.4 million or 155%, compared to 2018. This was primarily driven by a$236.4 million increase in revenue, partially offset by a$142.0 million increase in operating expenses, excluding stock-based compensation expense, change in earnout liability, depreciation and amortization expenses, and amortization of intangible assets. The increase in operating expenses was mostly attributable to increased variable marketing costs and customer care and enrollment costs. Our Individual, Family and Small Business segment profit was$23.4 million in 2019, an increase of$17.6 million or 303% compared to 2018. The increase was primarily driven by an$18.4 million increase in revenue and a$0.9 million increase in operating expenses, excluding stock-based compensation expense, change in earnout liability, depreciation and amortization expenses, and amortization of intangible assets. 63 --------------------------------------------------------------------------------
Liquidity and Capital Resources
Our cash, cash equivalents, and short-term marketable securities are summarized as follows (in thousands):
December 31, 2020 December 31, 2019
Cash and cash equivalents $ 43,759 $ 23,466
Short-term marketable securities 49,620 -
Total cash, cash equivalents, and short-term marketable
securities $ 93,379 $ 23,466
We believe our current cash and cash equivalents, credit facility, and expected
cash collections will be sufficient to fund our operations for at least
twelve months after the filing date of this Annual Report on Form 10-K. Our
future capital requirements will depend on many factors, including our expected
membership, retention rates, and our level of investment in technology,
marketing and advertising and our customer care initiatives. In addition, our
cash position could be impacted by further acquisitions and investments we make
to pursue our growth strategy.
While we recognize constrained LTV as revenue at the time applications are
approved, our collection of the cash commissions resulting from approved
applications generally occurs over a number of years. The expense associated
with approved applications, however, is generally incurred at the time of
enrollment. As a result, the net cash flow resulting from approved applications
is generally negative in the period of revenue recognition and generally becomes
positive over the lifetime of the member. In periods of membership growth, cash
receipts associated with new and continuing members may be less than the cash
outlays to acquire new members. We expect a reduction in cash and cash
equivalents in the future resulting from our continued investments to grow our
business. To the extent that available funds are insufficient to fund our future
activities or to execute our financial strategy, we may raise additional capital
through bank debt, or public or private equity or debt financing to the extent
such funding sources are available.
As of December 31, 2020 and 2019, our cash and cash equivalents totaled $43.8
and $23.5 million , respectively. Cash equivalents, which are comprised of
financial instruments with an original maturity of 90 days or less from the date
of purchase, primarily consist of money market funds. The increase in cash and
cash equivalents reflects $201.2 million of net cash provided by financing
activities, partially offset by $73.3 million of net cash used in investing
activities and $107.9 million of net cash used in operating activities. See Note
6 - Equity in our Notes to Consolidated Financial Statements for information
regarding our equity offering in March 2020 . We also had $3.4 million in
restricted cash as of December 31, 2020 and December 31, 2019 .
As of December 31, 2020 and 2019, we had 1.1 million and 1.0 million shares held
in treasury stock, respectively, that were shares repurchased to satisfy tax
withholding obligations. As of December 31, 2020 and 2019, we had a total of
11.8 million and 11.6 million shares held in treasury stock, respectively,
including 10.7 million shares previously repurchased.
Our cash flows are summarized as follows (in thousands):
Year Ended
2020 2019 2018
Net cash used in operating activities
Net cash used in investing activities (73,283) (16,944) (25,757)
Net cash provided by financing activities 201,249 102,141 1,860
64--------------------------------------------------------------------------------
Operating Activities
Net cash used in operating activities primarily consists of net loss, adjusted for certain non-cash items, including change in fair value of earnout liability, deferred income taxes, stock-based compensation expense, depreciation and amortization, amortization of intangible assets and internally developed software, other non-cash items, and the effect of changes in working capital and other activities. Collection of commissions receivable depends upon the timing of our receipt of commission payments and associated commission reports from health insurance carriers. If we were to experience a delay in receiving a commission payment from a health insurance carrier within a quarter, our operating cash flows for that quarter could be adversely impacted. A significant portion of our marketing and advertising expenses is driven by the number of health insurance applications submitted on our ecommerce platforms. Since our marketing and advertising costs are expensed and generally paid as incurred, and since commission revenue is recognized upon approval of a member but commission payments are paid to us over time, our operating cash flows could be adversely impacted by a substantial increase in the volume of applications submitted during a quarter or positively impacted by a substantial decline in the volume of applications submitted during a quarter. During the Medicare AEP which takes place during the last quarter of each year, we experience an increase in the number of submitted Medicare-related health insurance applications and marketing and advertising expenses compared to outside of Medicare annual enrollment periods. Similarly, during open enrollment periods for individual and family health insurance plans which takes place during the first quarter of each year, we experience an increase in the number of submitted individual and family plan health insurance applications and marketing and advertising expenses compared to outside of open enrollment periods. The timing of open enrollment periods for individual and family health insurance and the Medicare AEP and open enrollment period for Medicare-related health insurance can positively or negatively affect our cash flows during each quarter. Year EndedDecember 31, 2020 - Net cash used in operating activities was$107.9 million during the year endedDecember 31, 2020 , primarily driven by cash used from changes in net operating assets and liabilities of$201.3 million , partially offset by net income of$45.5 million and adjustments for non-cash items of$48.0 million . Cash used from changes in net operating assets and liabilities during the year endedDecember 31, 2020 primarily consisted of an increase of$205.2 million in contract assets - commissions receivable, a decrease of$9.0 million in accrued compensation and benefits, an increase of$6.2 million in prepaid expenses and other assets and a decrease of$2.3 million in deferred revenue, partially offset by increases of$12.3 million in accounts payable,$5.7 million in accrued marketing expenses, and$2.8 million in accrued expenses and other liabilities. Adjustments for non-cash items primarily consisted of$25.2 million of stock-based compensation expense,$8.8 million change in deferred income taxes,$7.8 million of amortization of internally-developed software, and$1.5 million of amortization of intangible assets. Year EndedDecember 31, 2019 - Net cash used in operating activities was$71.5 million in 2019, consisted of cash used for working capital needs and other activities of$209.5 million , partially offset by net income of$66.9 million and adjustments for non-cash items totaling$71.1 million . Adjustments for non-cash items primarily consisted of$24.1 million change in fair value of earnout liabilities,$22.6 million of stock-based compensation expense,$16.2 million increase in deferred income taxes,$3.8 million of amortization of internally-developed software,$3.0 million of depreciation and amortization, and$2.2 million of amortization of intangible assets. The cash decrease resulting from changes in working capital in 2019 primarily consisted of$243.4 million increase in commissions receivable, partially offset by increases of$19.7 million in accounts payable,$8.8 million in accrued compensation and benefits,$1.9 million in accrued expenses and other liabilities,$1.7 million in deferred revenue, and$1.0 million in accrued marketing expenses. Year EndedDecember 31, 2018 - Net cash used in operating activities was$3.2 million during the year endedDecember 31, 2018 , primarily driven by changes in net operating assets and liabilities of$38.6 million and, partially offset by adjustments for non-cash items of$35.1 million . Adjustments for non-cash items primarily consisted of$12.5 million of stock-based compensation expense,$12.3 million change in fair value of earnout liability,$2.8 million change in deferred income taxes,$2.5 million of depreciation and amortization,$2.2 million of 65 -------------------------------------------------------------------------------- amortization of internally-developed software, and$2.1 million of amortization of intangible assets. Cash used from changes in net operating assets and liabilities during the year endedDecember 31, 2018 primarily consisted of increases of$51.0 million in contract assets - commissions receivable and$2.1 million in accounts receivable, partially offset by increases of$6.3 million in accrued marketing expenses,$5.1 million in accrued compensation and benefits, and$1.4 million in accounts payable.
Investing Activities
Our investing activities primarily consist of purchases and redemption of marketable securities, purchases of computer hardware and software to enhance our website and customer care operations, leasehold improvements related to facilities expansion, internal-use software and the purchase of certain intangible assets.
Year EndedDecember 31, 2020 - Net cash used in investing activities of$73.3 million during 2020 mainly consisted of$180.5 million used to purchase marketable securities,$16.0 million of capitalized internal-use software and website development costs, and$7.8 million used to purchase property and equipment and other assets, partially offset by$131.0 million of proceeds from redemption and maturities of marketable securities. Year EndedDecember 31, 2019 - Net cash used in investing activities of$16.9 million during 2019 mainly consisted of$10.2 million of capitalized internal-use software and website development costs and$6.6 million used to purchase property and equipment and other assets. Year EndedDecember 31, 2018 - Net cash used in investing activities of$25.8 million during 2018 was due to$14.9 million of net cash used to acquire GoMedigap,$6.3 million of capitalized internal-use software and website development costs, and$4.5 million used to purchase property and equipment and other assets. Financing Activities Year EndedDecember 31, 2020 - Net cash provided by financing activities of$201.2 million during 2020 was primarily attributable to$228.0 million proceeds from issuance of common stock, net of issuance costs and$1.9 million of net proceeds from exercise of common stock options, partially offset by$19.8 million cash used for share repurchases to satisfy employee tax withholding obligations and$8.8 million of acquisition-related contingent consideration payments. Year EndedDecember 31, 2019 - Net cash provided by financing activities of$102.1 million during 2019 was primarily attributable to$126.1 million proceeds from issuance of common stock, net of issuance costs and$5.5 million of net proceeds from exercise of common stock options, partially offset by$14.3 million cash used for share repurchases to satisfy employee tax withholding obligations,$9.5 million of acquisition-related contingent payments, and$5.0 million repayment of debt. Year EndedDecember 31, 2018 - Net cash provided by financing activities of$1.9 million during 2018 was primarily due to$5.0 million of proceeds from drawing on our line of credit,$2.7 million of net proceeds from exercises of common stock options, partially offset by$4.5 million used for share repurchases to satisfy employee tax withholding obligations, and$1.2 million of debt issuance costs. Common Stock Issuance InJanuary 2019 , we entered into an underwriting agreement withRBC Capital Markets, LLC andCredit Suisse Securities (USA) LLC as representatives of the several underwriters to issue and sell a total of 2,760,000 shares of our common stock in a public offering, which total included the exercise in full of the underwriters' option to purchase 360,000 additional shares of common stock, at a price to the public of$48.50 per share, for total net proceeds of$126.2 million , after deducting underwriting discounts, commissions and offering expenses. 66 -------------------------------------------------------------------------------- InMarch 2020 , we entered into an underwriting agreement to issue and sell a total of 2,070,000 shares of common stock, which total included the exercise in full of the underwriters' option to purchase 270,000 additional shares of common stock, at a price to the public of$115.00 per share. Net proceeds from the offering were approximately$228.0 million after deducting underwriting discounts, commissions and expenses of the offering. We intend to use the net proceeds of the offering for general corporate purposes, including working capital. Preferred Stock OnFebruary 17, 2021 , we entered into an investment agreement with H.I.G. pursuant to which we have agreed to sell to H.I.G. at closing, 2,250,000 shares of our newly designated Series A preferred stock at an aggregate purchase price of$225.0 million , at a price of$100 (the "Stated Value" per share of Series A preferred stock) per share. The Private Placement is subject to closing conditions, including, among others: (i) the expiration or early termination of the waiting period (and any extension thereof) applicable to the consummation of the Private Placement under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended; (ii) the confirmation by Nasdaq that it has no objection to the terms and conditions of the Private Placement; and (iii) the determination that consummation of the Private Placement would not cause our outside auditor to no longer be deemed independent under the rules and regulations of theSecurities and Exchange Commission or thePublic Company Accounting Oversight Board . The parties have agreed to cooperate with each other and use reasonable best efforts to promptly take such actions to cause the closing conditions to be satisfied as promptly as reasonably practicable. Dividends will initially accrue on the Series A preferred stock daily at 8% per annum on the Stated Value per share and compound semiannually, payable in kind until the second anniversary of the closing date of the Private Placement onJune 30 andDecember 31 of each year, beginning onJune 30, 2021 , and thereafter 6% payable in kind and 2% payable in cash in arrears onJune 30 andDecember 31 of each year, beginning onJune 30, 2023 (each, a "Cash Dividend Payment Date"). Dividends payable in kind will be cumulative. The Series A preferred stock will also participate, on an as-converted basis (without regard to conversion limitations) in all dividends paid to the holders of our common stock. If we fail to declare and pay full cash dividend payments as required by the certificate of designations for the Series A preferred stock for two consecutive Cash Dividend Payment Dates, the cash dividend rate then in effect shall increase one time by 2%, retroactive to the first day of the semiannual period immediately preceding the first Cash Dividend Payment Date at which we failed to pay such accrued cash dividends, until such failure to pay full cash dividends is cured (at which time the dividend rate shall return to the rate prior to such increase). The dividend rights of the Series A preferred stock are senior to all of our other equity securities. At any time on or after the sixth anniversary of the closing date of the Private Placement, each holder of Series A preferred stock will have the right to require us to redeem all or any portion of the Series A preferred stock for cash at a price calculated as set forth in the certificate of designations. In addition, upon certain change of control events, holders of Series A preferred stock can require us, subject to certain exceptions, to repurchase any or all of their Series A preferred stock.
Credit Agreement
We entered into a credit agreement with Royal Bank of Canada, or RBC, as administrative agent and collateral agent, (the "Credit Agreement") inSeptember 2018 . The Credit Agreement provides for a$40.0 million secured asset-backed revolving credit facility with a$5 million letter of credit sub-facility. OnDecember 20, 2019 , we amended our revolving credit facility agreement with RBC (the "Amendment") and increased the maximum borrowing amount to$75.0 million and extended the expiration toDecember 20, 2022 . The borrowing base under the Credit Agreement is comprised of an amount equal to (a) the lesser of (i) eighty percent (80%) of Eligible Commissions Receivables (as defined in the Credit Agreement) we actually collected during the immediately preceding period of three months or (ii) eighty percent (80%) of our Eligible Commission Receivables for the immediately succeeding period of three months, plus (b) fifty percent (50%) of our 67 -------------------------------------------------------------------------------- Eligible Commission Receivables for the immediately succeeding period of six months (excluding the immediately succeeding period of three months), in each case subject to reserves established by RBC, or the Borrowing Base. The proceeds of the loans under the Credit Agreement may be used for working capital and general corporate purposes. We have the right to prepay the loans under the Credit Agreement in whole or in part at any time without penalty. Subject to availability under the Borrowing Base, amounts repaid may be reborrowed. Amounts not borrowed under the Credit Agreement are subject to a commitment fee of 0.5% per annum on the daily unused portion of the credit facility, to be paid in arrears on the first business day of each calendar quarter. At closing of the Credit Agreement, we paid a one-time facility fee of 1.75% of the total commitments of$40 million . We also paid a one-time closing fee of 0.5% of the new commitment of$75.0 million in connection with the Amendment. We are also obligated to pay other customary administration fees for a credit facility of this size and type. As ofDecember 31, 2020 and 2019, we had no outstanding principal amount under our revolving credit facility. See Note 11 - Debt of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information regarding this credit agreement and subsequent amendment.
Acquisition
OnJanuary 22, 2018 , we completed our acquisition of Wealth, Health andLife Advisors, LLC , more commonly known as GoMedigap, a technology-enabled provider of Medicare Supplement enrollment services. The acquisition price paid at closing of the transaction consisted of cash of$15.0 million , less$0.1 million cash acquired, and approximately 294,637 shares of our common stock. In addition, we were obligated to pay an additional$20.0 million in cash and 589,275 shares of our common stock, subject to the terms of the acquisition agreement and upon final determination of the achievement of certain milestones in 2018 and 2019. The first and second earnout liability payments were made inFebruary 2019 andJanuary 2020 , respectively. See Note 5 - Fair Value Measurements of our Notes to Consolidated Financial Statements for the discussion on the milestone payments.
Critical Accounting Policies and Estimates
The preparation of financial statements and related disclosures in conformity withU.S. generally accepted accounting principles, orU.S. GAAP, requires us to make judgments, assumptions, and estimates that affect the amounts reported in the consolidated financial statements and the accompanying notes. These estimates and assumptions are based on current facts, historical experience, and various other factors that we believe are reasonable under the circumstances to determine reported amounts of assets, liabilities, revenue and expenses that are not readily apparent from other sources. To the extent there are material differences between our estimates and the actual results, our future consolidated results of comprehensive income may be affected.
Among our significant accounting policies, which are described in Note 1 - Summary of Business and Significant Accounting Policies in our Notes to Consolidated Financial Statements, the following accounting policies and specific estimates involve a greater degree of judgments and complexity:
•Revenue recognition and contract assets - commission receivable; •Stock-based compensation; and •Accounting for income taxes.
During the year ended
Revenue Recognition and Contract Assets - Commission Receivable
Commission Revenue - Our commission revenue results from approval of an application from health insurance carriers, which we define as our customers under ASC 606. Our commission revenue is primarily
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--------------------------------------------------------------------------------comprised of commissions from health insurance carriers which is computed using the estimated constrained lifetime values as the "constrained LTVs" of commission payments that we expect to receive.
We estimate commission revenue for each insurance product by using a portfolio
approach to a group of approved members by plan type and the effective month of
the relevant plan, which we refer to as "cohorts". We estimate the commissions
we expect to collect for each approved member cohort by evaluating various
factors, including but not limited to, commission rates, carrier mix, estimated
average plan duration, the regulatory environment, and cancellations of
insurance plans offered by health insurance carriers with which we have a
relationship. Contract assets - commissions receivable represent the variable
consideration for policies that have not renewed yet and therefore are subject
to the same assumptions, judgements and estimates used when recognizing revenue
as noted above.
For Medicare-related, individual and family and ancillary health insurance
plans, our services are complete once a submitted application is approved by the
relevant health insurance carrier. Accordingly, we recognize commission revenue
based upon the total estimated lifetime commissions we expect to receive for
selling the plan after the carrier approves an application, net of an estimated
constraint. We refer to these as estimated and constrained LTVs for the plan. We
provide annual services in selling and renewing small business health insurance
plans; therefore, we recognize small business health insurance plan commission
revenue at the time the plan is approved by the carrier, and when it renews each
year thereafter, equal to the estimated commissions we expect to collect from
the plan over the following twelve months. Our estimate of commission revenue
for each product line is based on a number of assumptions, which include, but
are not limited to, estimating conversion of an approved member to a paying
member, forecasting average plan duration and forecasting the commission amounts
likely to be received per member. These assumptions are based on our analysis of
historical trends for the different cohorts and incorporate management's
judgment in interpreting those trends to apply the constraints discussed below.
The estimated average plan duration used to calculate Medicare health insurance
plan LTVs historically has been approximately 3-5 years, while the estimated
average plan duration used to calculate the LTV for major medical individual and
family health insurance plans historically has been approximately six months to
3 years. To the extent we make changes to the assumptions we use to calculate
constrained LTVs, we recognize any material impact of the changes to commission
revenue in the reporting period in which the change is made, including revisions
of estimated lifetime commissions either below or in excess of previously
estimated constrained LTV recognized as revenue.
We recognize revenue for members approved during the period by applying the
latest estimated constrained LTV for that product. We recognize adjustment
revenue for members approved in prior periods when our cash collections are
different from the estimated constrained LTVs. Adjustment revenue is a result of
a change in estimate of expected cash collections when actual cash collections
have indicated a trend that is different from the estimated constrained LTV for
the revenue recognized at the time of approval. Adjustment revenue can be
positive or negative and we recognize adjustment revenue when we do not believe
there is a probable reversal. We assess the risk of reversal based on
statistical analysis given historical information and consideration of the
constraints used at the time of approval.
Adjustment revenue can have a significant favorable or unfavorable impact on our
revenue and we seek to enhance our LTV estimation models to improve the accuracy
and to reduce the fluctuations of our LTV estimates.
Other Revenue - Sponsorship and Advertising - Our sponsorship and advertising
program allows carriers to purchase advertising space in specific markets in a
sponsorship area on our website. In return, we are typically paid a fee, which
is recognized over the period that advertising is displayed, and often a
performance fee based on metrics such as submitted health insurance
applications, which is recognized when control has been transferred. We also
offer Medicare advertising services, which include website development, hosting
and maintenance. In these instances, we are typically paid a fixed, up-front
fee, which we recognize as revenue as control is transferred ratably over the
service period.
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--------------------------------------------------------------------------------Stock-Based Compensation
We recognize stock-based compensation expense in the accompanying Consolidated Statements of Comprehensive Income based on the fair value of our stock-based awards over their respective vesting periods, which is generally four years. The estimated attainment of performance-based awards and related expense is based on the expectations of revenue and earnings target achievement. The estimated fair value of performance awards with market conditions is determined using the Monte-Carlo simulation model. The assumptions used in calculating the fair value of stock-based payment awards and expected attainment of performance-based awards represent our best estimates, but these estimates involve inherent uncertainties and the application of management judgment. We will continue to use judgment in evaluating the expected term and volatility related to our own stock-based awards on a prospective basis, and incorporating these factors into the model. Changes in key assumptions could significantly impact the valuation of such instruments. The estimated grant date fair value of our stock options is determined using the Black-Scholes-Merton pricing model and a single option award approach. The weighted-average expected term for stock options granted is calculated using historical option exercise behavior. The dividend yield is determined by dividing the expected per share dividend during the coming year by the grant date stock price. ThroughDecember 31, 2020 , we had not declared or paid any cash dividends to common stock holders, and we do not expect to pay any in the foreseeable future. We base the risk-free interest rate on the implied yield currently available onU.S. Treasury zero-coupon issues with a remaining term equal to the expected term of our stock options. Expected volatility is determined using a combination of the implied volatility of publicly traded options in our stock and historical volatility of our stock price.
Accounting for Income Taxes
We account for income taxes using the liability method. Deferred income taxes are determined based on the differences between the financial reporting and tax bases of assets and liabilities, using enacted statutory tax rates in effect for the year in which the differences are expected to reverse. Since tax laws and financial accounting standards differ in their recognition and measurement of assets, liabilities, equity, revenues, expenses, gains and losses, differences arise between the amount of taxable income and pretax financial income for a year and between the tax bases of assets or liabilities and their reported amounts in our financial statements. Because we assume that the reported amounts of assets and liabilities will be recovered and settled, respectively, a difference between the tax basis of an asset or a liability and its reported amount in the balance sheet will result in a taxable or a deductible amount in some future years when the related liabilities are settled or the reported amounts of the assets are recovered, which gives rise to a deferred tax asset or liability. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income and to the extent we believe that recovery does not meet the more likely than not criteria, we must establish a valuation allowance. Management judgment is required in determining any valuation allowance recorded against our net deferred tax assets. As part of the process of preparing our consolidated financial statements, we are required to estimate our income taxes. This process involves estimating our actual current tax expense together with assessing temporary differences that may result in deferred tax assets. Assessing the realizability of our deferred tax assets is dependent upon several factors, including the likelihood and amount, if any, of future taxable income in relevant jurisdictions during the periods in which those temporary differences become deductible. We forecast taxable income by considering all available positive and negative evidence, including our history of operating income and losses and our financial plans and estimates that we use to manage the business. These assumptions require significant judgment about future taxable income. As a result, the amount of deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income change.
Future changes in various factors, such as the amount of stock-based compensation we record during the period and the related tax benefit we realize upon the exercise of employee stock options, potential limitations on the
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use of our federal and state net operating loss credit carry forwards, pending
or future tax law changes including rate changes and the tax benefit from or
limitations on our ability to utilize research and development credits, the
amount of non-deductible lobbying and acquisition-related costs, changes in our
valuation allowance and state and foreign taxes, would impact our estimates, and
as a result, could affect our effective tax rate and the amount of income tax
expense we record, and pay, in future periods.
Contractual Obligations and Commitments
The following table presents a summary of our future minimum payments under
non-cancellable operating lease agreements and contractual service and licensing
obligations as of
Service and
Operating Lease Licensing
Years Ending December 31, Obligations* Obligations Total Obligations 2021 $ 7,644 $ 5,775 $ 13,419 2022 7,701 3,408 11,109 2023 8,033 2,745 10,778 2024 7,832 2,056 9,888 2025 8,009 1,353 9,362 Thereafter 19,408 1,353 20,761 Total$ 58,627 $ 16,690 $ 75,317 _______
* See Note 10 - Leases of our Notes to Consolidated Financial Statements for details of our operating lease obligations.
Service and Licensing Obligations
We have entered into service and licensing agreements with third party vendors to provide various services, including network access, equipment maintenance and software licensing. The terms of these services and licensing agreements are generally up to three years. We record the related service and licensing expenses on a straight-line basis, although actual cash payment obligations under certain of these agreements fluctuate over the terms of the agreements.
Off-Balance Sheet Arrangements
As ofDecember 31, 2020 , we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K, that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenue, or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors.
Recent Accounting Pronouncements
See Note 1 - Summary of Business and Significant Accounting Policies in the Notes to Consolidated Financial Statements for the recently issued accounting standards that could have an effect on us.
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