0001333493-20-000183 | 10-Q | XBRL Viewer

13,417

Foreign currency translation adjustment, net of taxes

(21,937)

(30)

Stock issued in equity offering (in shares)

2,760

Shares issued in equity offering

126,051

$ 3

126,048

Settlement of earnout liability (in shares)

295

Settlement of earnout liability

17,264

Ending balance (in shares) at Sep. 30, 2019

34,602

11,571

Ending Balance at Sep. 30, 2019

431,571

$ 35

448,409

$ (199,998)

183,028

Beginning balance (in shares) at Dec. 31, 2018

30,863

11,426

Beginning Balance at Dec. 31, 2018

303,149

$ 31

298,024

$ (199,998)

204,965

127

Ending balance (in shares) at Dec. 31, 2019

34,752

11,616

Ending Balance at Dec. 31, 2019

$ 527,164

$ (1,147)

$ 35

455,159

$ (199,998)

271,852

$ (1,147)

116

Increase (Decrease) in Stockholders' Equity [Roll Forward]

Accounting Standards Update

us-gaap:AccountingStandardsUpdate201613Member

Beginning balance (in shares) at Jun. 30, 2019

34,267

11,482

Beginning Balance at Jun. 30, 2019

$ 443,265

$ 34

449,046

$ (199,998)

194,052

131

Increase (Decrease) in Stockholders' Equity [Roll Forward]

Issuance of common stock in connection with exercise of common stock options (in shares)

335

Issuance of common stock in connection with equity incentive plans

1,913

$ 1

1,912

Repurchase of shares to satisfy employee tax withholding obligations

(8,059)

Repurchase of shares to satisfy employee tax withholding obligations (in shares)

5,510

Foreign currency translation adjustment, net of taxes

(11,024)

(34)

Ending balance (in shares) at Sep. 30, 2019

34,602

11,571

Ending Balance at Sep. 30, 2019

431,571

$ 35

448,409

$ (199,998)

183,028

Beginning balance (in shares) at Dec. 31, 2019

34,752

11,616

Beginning Balance at Dec. 31, 2019

527,164

$ (1,147)

$ 35

455,159

$ (199,998)

271,852

$ (1,147)

116

Increase (Decrease) in Stockholders' Equity [Roll Forward]

Issuance of common stock in connection with exercise of common stock options (in shares)

531

Issuance of common stock in connection with equity incentive plans

1,577

1,576

Repurchase of shares to satisfy employee tax withholding obligations

(17,174)

Repurchase of shares to satisfy employee tax withholding obligations (in shares)

(194)

Other comprehensive income, net of tax

23,000

144

Foreign currency translation adjustment, net of taxes

(14,423)

Stock issued in equity offering (in shares)

2,070

Shares issued in equity offering

228,024

$ 2

228,022

Settlement of earnout liability (in shares)

295

Settlement of earnout liability

28,521

Ending balance (in shares) at Sep. 30, 2020

37,648

11,810

Ending Balance at Sep. 30, 2020

775,686

^[1]

$ 38

719,104

$ (199,998)

256,282

260

Beginning balance (in shares) at Jun. 30, 2020

37,373

11,698

Beginning Balance at Jun. 30, 2020

792,055

$ 37

720,976

$ (199,998)

270,787

253

Increase (Decrease) in Stockholders' Equity [Roll Forward]

Issuance of common stock in connection with exercise of common stock options (in shares)

275

Issuance of common stock in connection with equity incentive plans

263

$ 1

262

Repurchase of shares to satisfy employee tax withholding obligations

(9,014)

Repurchase of shares to satisfy employee tax withholding obligations (in shares)

(112)

Other comprehensive income, net of tax

6,880

Foreign currency translation adjustment, net of taxes

(14,505)

104

Ending balance (in shares) at Sep. 30, 2020

37,648

11,810

Ending Balance at Sep. 30, 2020

$ 775,686

^[1]

$ 38

$ 719,104

$ (199,998)

$ 256,282

$ 260

[1]	Reflects the impact from the adoption of ASC 326 on January 1, 2020. See Note 1 – Summary of Business and Significant Accounting Policies for details.

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Operating activities:
Net loss	$ (14,423)	$ (21,937)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	2,604	2,153
Amortization of internally developed software	5,307	2,443
Amortization of intangible assets	1,207	1,641
Stock-based compensation expense	21,722	13,417
Deferred income taxes	(10,982)	(18,166)
Change in fair value of earnout liability	0	15,106
Other non-cash items	421	(936)
Changes in operating assets and liabilities:
Accounts receivable	(1,522)	2,920
Contract assets – commissions receivable	(16,772)	(11,878)
Prepaid expenses and other assets	(9,398)	(9,346)
Accounts payable	(3,196)	13,155
Accrued compensation and benefits	(7,438)	(2,624)
Accrued marketing expenses	(5,449)	(6,927)
Deferred revenue	23,901	8,207
Accrued expenses and other liabilities	3,059	(1,942)
Net cash used in operating activities	(10,959)	(14,714)
Investing activities:
Capitalized internal-use software and website development costs	(12,082)	(6,356)
Purchases of property and equipment and other assets	(6,454)	(5,616)
Purchases of marketable securities	(180,505)	0
Proceeds from redemption and maturities of marketable securities	70,750	0
Payments for security deposits	0	(72)
Net cash used in investing activities	(128,291)	(12,044)
Financing activities:
Proceeds from issuance of common stock, net of issuance costs	228,024	126,051
Net proceeds from exercise of common stock options	1,577	5,168
Repurchase of shares to satisfy employee tax withholding obligations	(17,174)	(11,511)
Repayment of debt	0	(5,000)
Acquisition-related contingent payments	(8,751)	(9,542)
Principal payments in connection with leases	(121)	(81)
Net cash provided by financing activities	203,555	105,085
Effect of exchange rate changes on cash, cash equivalents and restricted cash	62	8
Net increase in cash, cash equivalents and restricted cash	64,367	78,335
Cash, cash equivalents and restricted cash at beginning of period	26,820	13,089
Cash, cash equivalents and restricted cash at end of period	$ 91,187	$ 91,424

Summary of Business and Significant Accounting Policies

9 Months Ended

Sep. 30, 2020

Accounting Policies [Abstract]

Summary of Business and Significant Accounting Policies

Description of Business – eHealth, Inc. (the “Company,” “eHealth,” “we” or “us”) is a leading 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 omni-channel 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 includes thousands of Medicare Advantage, Medicare Supplement, Medicare Part D prescription drug, individual and family, small business and other ancillary health insurance products from over 180 health insurance carriers across all fifty states and the District of Columbia.

Basis of Presentation – The accompanying condensed consolidated balance sheets as of September 30, 2020 and December 31, 2019, the condensed consolidated statements of comprehensive loss and stockholders’ equity for the three and nine months ended September 30, 2020 and 2019, and the condensed consolidated statements of cash flows for the nine months ended September 30, 2020 and 2019, respectively, are unaudited. The condensed consolidated balance sheet data as of December 31, 2019 was derived from the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the Securities and Exchange Commission on March 2, 2020. The accompanying financial statements and related notes should be read in conjunction with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K.

The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") for interim financial information and reflect all normal recurring adjustments that are necessary to present fairly the results for the interim periods presented. The condensed consolidated financial statements include the accounts of eHealth, Inc. and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Certain information and disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted in accordance with those rules and regulations. Certain reclassifications have been made to conform with the current presentation. However, the Company believes that the disclosures made are adequate to make the information not misleading.

The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2019 and include all adjustments necessary for the fair presentation of our financial position as of September 30, 2020 and December 31, 2019, and our results of operations for the periods presented. Our financial position as of September 30, 2020, results of operations for the three and nine months ended September 30, 2020, and cash flows for the nine months ended September 30, 2020 were not materially impacted by the COVID-19 pandemic but the Company is continuously assessing the evolving situation related to the pandemic. The results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for any subsequent period or for the year ending December 31, 2020 and therefore should not be relied upon as an indicator of future results.

Significant Accounting Polices, Estimates and Judgements – The preparation of condensed consolidated financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported and disclosed in the condensed consolidated financial statements and accompanying notes. On an ongoing basis, we evaluate our estimates, including those related to, but not limited to, the commissions we expect to collect for each approved member cohort, allowance for credit loss, the useful lives of intangible assets, fair value of investments, recoverability of intangible assets, valuation allowance for deferred income taxes, provision (benefit) for income taxes and the assumptions used in determining stock-based compensation. We base our estimates of the carrying value of certain assets and liabilities on historical experience and on various other assumptions that we believe to be reasonable. Actual results may differ from these estimates.

With the exception of the change for the accounting of credit losses as a result of the adoption of Accounting Standard Updates (“ASU”) No. 2016-13, Financial Instruments – Credit Losses discussed below, there have been no material changes to our significant accounting policies discussed in our Annual Report on Form 10-K for the year ended December 31, 2019.

Seasonality – Open enrollment periods drive the seasonality of our business. A greater number of our Medicare-related health insurance plans are sold in our fourth quarter during the Medicare annual enrollment period when Medicare-eligible individuals are permitted to change their Medicare Advantage, Medicare Supplement, and Medicare Part D prescription drug coverage for the following year. As a result, our Medicare plan-related commission revenue is highest in our fourth quarter. Any changes or additional enrollment periods may change the seasonality of our business. For instance, due to the recent reintroduction of the Medicare Advantage open enrollment period that takes place in the first quarter of the year, our first quarter is generally the second-highest revenue generating quarter.

The majority of our major medical individual and family health insurance plans are sold in the fourth quarter during the annual open enrollment period under the federal Patient Protection and Affordable Care Act and related amendments in the Health Care and Education Reconciliation Act. Individuals and families generally are not able to purchase major medical individual and family health insurance outside of the open enrollment period, unless they qualify for a special enrollment period as a result of certain qualifying events, such as losing employer-sponsored health insurance or moving to another state.

Recently Adopted Accounting Pronouncement

Financial Instruments – Credit Losses (Topic 326) – In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326), that requires companies to present certain financial assets net of the amount expected to be collected. The guidance requires the measurement of expected credit losses to be based on relevant information from past events, including historical experiences, current conditions and reasonable and supportable forecasts that affect collectability. Contract assets – commissions receivable were the Company's only financial assets that were materially impacted by this guidance.

We adopted ASU 2016-13, including applicable amendments in other ASUs issued subsequent to ASU 2016-13, using a modified retrospective transition method on January 1, 2020 for all financial assets measured at amortized cost. Results for periods after January 1, 2020 are presented under ASU 2016-13 while prior period amounts continue to be reported under the previous accounting standards. We recorded a $1.1 million decrease, net of income taxes, to retained earnings as of January 1, 2020 for the cumulative effect of adopting ASU 2016-13. See Note 3 – Supplemental Financial Statement Information for further discussion on credit losses.

The impact from the adoption of ASU 2016-13 is summarized as follows (in thousands):


Balance Sheet Impact:	December 31, 2019		Transition Adjustments		January 1, 2020
Contract assets – commissions receivable – current	$	174,526	$	(71)	$	174,455
Contract assets – commissions receivable – non-current	414,696		(1,442)		413,254
Other assets*	18,004		366		18,370
Total assets	741,634		(1,147)		740,487

Retained earnings	271,852		(1,147)		270,705

____________

*Adjustment to Other assets is due to the increase in deferred tax assets resulting from the adoption of ASU 2016-13.

Financial Instruments (Topic 820) – In 2018, the FASB issued ASU No. 2018-13, to change the disclosure requirements for fair value measurement with the objective of improving the effectiveness of the notes to financial statements. This new guidance removed and modified certain disclosure requirements under Topic 820. We adopted this guidance in the first quarter of 2020 with no material impact on our condensed consolidated financial statements.

Intangible – Goodwill and Other (Topic 350) – In 2017, the FASB issued ASU 2017-04 to simplify the subsequent measurement of goodwill by removing the requirement to perform a hypothetical purchase price allocation to compute the implied fair value of goodwill to measure impairment. Instead, any goodwill impairment will equal the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. In addition, the guidance eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. This standard is effective for annual or any interim goodwill impairment test in fiscal years beginning after December 15, 2019. We adopted this guidance in the first quarter of 2020 with no material impact on our condensed consolidated financial statements.

Accounting Pronouncements Not Yet Adopted

Income Taxes (Topic 740) – In December 2019, the FASB issued ASU No. 2019-12, Income Tax, Simplifying the Accounting for Income Taxes, which aims to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and improve consistent application of and simplify U.S. GAAP for other areas under this Topic by clarifying existing guidance. ASU 2019-12 will be effective for us beginning January 1, 2021. The amendments in this standard update have individually different adoption approaches. We do not anticipate a material impact on our consolidated financial statements and disclosures from the adoption of this standard update.

Revenue

9 Months Ended

Sep. 30, 2019

Revenue from Contract with Customer [Abstract]

Revenue

Disaggregation of Revenue – The table below disaggregates our revenue by product (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Medicare
Medicare Advantage	$	41,901	$	36,735	$	168,834	$	113,185
Medicare Supplement	7,321		8,229		32,384		25,082
Medicare Part D	329		1,805		7,148		5,906
Total Medicare	49,551		46,769		208,366		144,173
Individual and Family (1)
Non-Qualified Health Plans	9,915		3,146		12,585		11,592
Qualified Health Plans	1,466		839		3,559		4,900
Total Individual and Family	11,381		3,985		16,144		16,492
Ancillary
Short-term	2,438		3,151		6,724		7,162
Dental	4,452		1,420		5,791		3,138
Vision	1,798		537		2,228		1,294
Other	847		1,104		2,693		2,778
Total Ancillary	9,535		6,212		17,436		14,372
Small Business	1,723		1,938		6,975		6,576
Commission Bonus	1,354		858		5,065		2,982
Total Commission Revenue	73,544		59,762		253,986		184,595
Other Revenue	20,740		10,151		35,472		19,858
Total Revenue	$	94,284	$	69,913	$	289,458	$	204,453

_____________

(1)We define our individual and family plan offerings as major medical individual and family health insurance plans, which does not include Medicare-related, small business or ancillary plans. Individual and family health insurance plans include both qualified and non-qualified plans. Qualified health plans are individual and family health insurance plans that meet the requirements of the Affordable Care Act and are offered through the government-run health insurance exchange in the relevant jurisdiction. Non-qualified health plans are individual and family health insurance plans that meet the requirements of the Affordable Care Act and are not offered through the exchange in the relevant jurisdiction. Individuals that purchase non-qualified health plans cannot receive a subsidy in connection with the purchase of non-qualified plans.

Revenue Recognition Based on Estimated Constrained LTV

Our revenue primarily consists of commission revenue generated from health insurance carriers, which we define as our customers under the Accounting Standards Codification 606 – Revenue from Contracts with Customers (“ASC 606”). We recognize revenue for plans approved during the period by applying the latest estimated constrained lifetime value (“LTV”) for that product. We recognize adjustment revenue for plans approved in prior periods when changes in assumptions for constrained LTV calculations are made and when there is sufficient evidence demonstrating a trend that is different from the estimated constrained LTV at the time of approval resulting in a change in estimate to expected cash collections. 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 adjustment revenue to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. We assess the risk of significant revenue reversal based on statistical and qualitative analysis given historical information and current market conditions.

Our 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 different cohorts and incorporate management’s judgment in interpreting those trends and in applying the constraints discussed below. For our Medicare commission revenue, which represented 82% and 78% of our total commission revenue for the nine months ended September 30, 2020 and 2019, respectively, the estimated average plan duration, which is the average length of time paying members are active on their plans, used to calculate Medicare health insurance plan LTVs historically has been approximately 3 years for Medicare Advantage plans, approximately 5 years for Medicare Part D prescription drug plans, and approximately 5 years for Medicare Supplement plans. While the average plan duration has been approximately 3 years for Medicare Advantage plans, certain members may have a duration of up to 15 years. The estimated average plan duration used to calculate the LTV for major medical individual and family health insurance plans historically has been approximately 1.5 to 2 years. For short term health insurance plan LTVs, the estimated average plan duration historically has been approximately six months. For all other ancillary health insurance plan LTVs, the estimated average plan duration has historically varied from 1 to 3 years.

Constraints are applied to LTV for revenue recognition purposes to help ensure that the total estimated lifetime commissions expected to be collected for an approved member’s plan are recognized as revenue only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with future commissions receivable from the plan is subsequently resolved. Significant judgment can be involved in determining the constraint. To determine the constraints to be applied to LTV, we compare prior calculations of LTV to actual cash received and review the reasons for any variations. We then apply judgment in assessing whether the difference between historical cash collections and LTV is representative of differences that can be expected in future periods. We also analyze whether circumstances have changed and consider any known or potential modifications to the inputs into LTV in light of the factors that can impact the amount of cash expected to be collected in future periods, including but not limited to commission rates, carrier mix, plan duration, cancellations of insurance plans offered by health insurance carriers with which we have a relationship, changes in laws and regulations, and changes in the economic environment. We evaluate the appropriateness of our constraints on a quarterly basis, and we update our assumptions when we observe a sufficient amount of evidence that would suggest that the long-term expectation underlying the assumptions has changed.

Since the adoption of ASC 606, we re-compute LTVs for all outstanding cohorts on a quarterly basis. We continually review and monitor changes in the data used to estimate LTV and compare the cash received for each cohort to our original estimates at the time of approval. The fluctuations of cash received for each cohort as compared to our estimates and the fluctuations in LTV can be significant and may or may not be indicative of the need to adjust revenue for prior period cohorts. Changes in LTV may result in an increase or a decrease to revenue and a corresponding increase or decrease to contract assets – commissions receivable. We analyze these fluctuations and, to the extent we see changes in our estimates of the cash commission collections that we believe are indicative of an increase or decrease to prior period LTVs, we adjust revenue for the affected cohorts at the time such determination is made and when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. As we accumulate more historical data, we continue to enhance our LTV estimation models using statistical tools to increase the accuracy of LTV estimates with an emphasis on improving member attrition forecasting. The enhancements to the LTV estimation model provide greater statistical certainty on expected cash collections, particularly for earlier period cohorts where there is more historical data available.

During the first half of 2020, our LTV estimation models indicated increases in LTVs and estimates of future cash collections for earlier period cohorts of certain products within our Individual, Family and Small Business segment. However, after considering various market factors and recent changes due to the impact of COVID-19 on the U.S. economy, such as increases in unemployment rate, potential delays in insurance premium payments and/or health insurance carrier commission payments, potential changes to enrollment periods, and potential changes to qualified health plan subsidies, we limited the adjustment revenue recognized during the six months ended June 30, 2020 to actual cash collected in excess of previously recognized revenue for certain individual and family and ancillary plan cohorts.

During the three months ended September 30, 2020, despite the impact of COVID-19 and uncertainties regarding the Presidential election and the U.S. economy, we continued to observe stronger member retention rates in our latest LTV assessment for the majority of the earlier period cohorts of certain products in our Individual, Family and Small Business segment. Based on our evaluation of the updated LTV models and current retention trends, we recognized $18.2 million of net adjustment revenue for the Individual, Family and Small Business segment during the three months ended September 30, 2020.

We will continue to monitor our member retention rates as compared to our forecasts and other market factors and evaluate whether any addition or reduction of adjustment revenue shall be recorded as we continue to assess our LTV models in future periods.

Commission revenue by segment is summarized as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Medicare
Commission Revenue from Members Approved During the Period (1)	$	52,040	$	43,888	$	205,330	$	141,898
Net Commission Revenue from Members Approved in Prior Periods (2)	(698)		3,813		8,966		5,226
Total Medicare Segment Commission Revenue	$	51,342	$	47,701	$	214,296	$	147,124
Individual, Family and Small Business
Commission Revenue from Members Approved During the Period (1)	$	4,012	$	4,392	$	14,170	$	14,403
Net Commission Revenue from Members Approved in Prior Periods (2)	18,190		7,669		25,520		23,068
Total IFP/SMB Segment Commission Revenue	$	22,202	$	12,061	$	39,690	$	37,471

Total Commission Revenue from Members Approved During the Period (1)	$	56,052	$	48,280	$	219,500	$	156,301
Total Net Commission Revenue from Members Approved in Prior Periods (2) (3)	17,492		11,482		34,486		28,294
Total Commission Revenue	$	73,544	$	59,762	$	253,986	$	184,595

_____________

(1)These amounts include commission bonus revenue.

(2)These amounts reflect our revised estimates of cash collections for certain members approved prior to the relevant reporting period that are recognized as net adjustment revenue within the relevant reporting period. The net adjustment revenue includes both increases in revenue for certain prior period cohorts as well as reductions in revenue for certain prior period cohorts.

(3)The impacts of total net commission revenue from members approved in prior periods were $0.66 and $0.49 per basic and diluted share for the three months ended September 30, 2020 and 2019, respectively; and $1.33 and $1.24 per basic and diluted share for the nine months ended September 30, 2020 and 2019, respectively. The total reductions to revenue from members approved in prior periods were $5.3 million and $2.1 million for the nine months ended September 30, 2020 and 2019, respectively, and $3.7 million and $0.6 million for the three months ended September 30, 2020 and 2019, respectively. These reductions to revenue primarily related to the Medicare segment.

Balance Sheet Related Disclosures [Abstract]

The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-URI http://asc.fasb.org/topic&trid=49130388

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 10
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130551-203045

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 13
-Subparagraph (b)(2)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130556-203045

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (b)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 9
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130550-203045

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (e)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (a)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (d)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 15
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130558-203045

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (c)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

+ Details

Supplemental Financial Statement Information

9 Months Ended

Sep. 30, 2020

Supplemental Financial Statement Information

Cash, Cash Equivalents and Restricted Cash

We consider all investments with an original maturity of 90 days or less from the date of purchase to be cash equivalents. Cash and cash equivalents are stated at fair value. We also invested in marketable securities that are measured and recorded at fair value. See Note 4 – Fair Value Measurements for further discussion about our marketable securities. As of September 30, 2020 and December 31, 2019, our cash, cash equivalent and restricted cash balances were invested as follows (in thousands):


	September 30, 2020		December 31, 2019
Cash	$	41,441	$	16,205
Cash equivalents	46,392		7,261
Restricted cash	3,354		3,354
Total cash, cash equivalents and restricted cash	$	91,187	$	26,820

As of September 30, 2020 and December 31, 2019, we had $3.4 million of restricted cash which was classified as a non-current asset on our Condensed Consolidated Balance Sheets. This amount collateralizes letters of credit related to certain lease commitments.

Contract Assets and Accounts Receivable

We do not require collateral or other security for our contract assets and accounts receivable. We believe the potential for collection issues with any of our customers was minimal as of September 30, 2020.

Our contract assets and accounts receivable consisted of the following for the periods presented (in thousands):


	September 30, 2020		December 31, 2019
Contract assets – commissions receivable – current	$	158,773	$	174,526
Contract assets – commissions receivable – non-current	445,572		414,696
Accounts receivable	3,854		2,332
Total contract assets and accounts receivable	$	608,199	$	591,554

We estimate the allowance for credit loss balance using relevant available information from internal and external sources, related to past events, current conditions, and reasonable and supportable forecasts. Specifically, for the purpose of measuring the probability of default parameters, we utilize Capital IQ’s, Standard & Poor’s and Moody’s analytics. Our estimates of loss given default are determined by using our historical collections data as well as historical information obtained through our research and review of other insurance related companies. Our estimated exposure at default is determined by applying these internal and external data sources to our commission receivable balances. As such, we apply an immediate reversion method and revert to historical loss information when computing our credit loss exposure. Credit loss expenses are assessed quarterly and included in general and administrative expense on our Condensed Consolidated Statement of Comprehensive Loss.

Subsequent to the adoption of ASC 326, we considered the impact of recent events and global economic condition when evaluating the appropriate adjustments to our allowance as of September 30, 2020. Determining the extent of these adjustments in the three and nine months ended September 30, 2020 was especially challenging because we do not have any historical loss information for a period of similar economic decline. We considered the current and expected future economic and market conditions surrounding the COVID-19 pandemic and determined that the estimate of credit losses was not materially impacted as of September 30, 2020. Credit loss expenses recorded during the three and nine months ended September 30, 2020 were immaterial.

Our contract assets – commission receivable activities, net of credit loss allowance are summarized as follows (in thousands):


	Nine Months Ended September 30, 2020
	Medicare Segment		IFP/SMB Segment		Total
Beginning balance	$	550,922	$	38,300	$	589,222
Commission revenue from members approved during the period	205,330		14,170		219,500
Net commission revenue adjustments from members approved in prior period	8,966		25,520		34,486
Cash receipts	(201,256)		(35,957)		(237,213)
Net change in credit loss allowance*	(1,536)		(114)		(1,650)
Ending balance	$	562,426	$	41,919	$	604,345


	Nine Months Ended September 30, 2019
	Medicare Segment		IFP/SMB Segment		Total
Beginning balance	$	311,977	$	33,881	$	345,858
Commission revenue from members approved during the period	141,898		14,403		156,301
Net commission revenue adjustments from members approved in prior period	5,226		23,068		28,294
Cash receipts	(133,425)		(39,292)		(172,717)

Ending balance	$	325,676	$	32,060	$	357,736

_____________

*Amount consists of transition adjustment of $1.5 million related to the adoption of ASC 326 as of January 1, 2020 and the subsequent credit loss adjustment of $0.1 million during the nine months ended September 30, 2020. See Note 1 – Summary of Business and Significant Accounting Policies for details regarding the adoption impact.

Credit Risk

Our financial instruments that are exposed to concentrations of credit risk principally consist of cash, cash equivalents, contract assets – commissions receivable, and accounts receivable. We invest our cash and cash equivalents with major banks and financial institutions and, at times, such investments are in excess of federally insured limits. We also have deposits with a major bank in China that are denominated in both U.S. dollars and Chinese Yuan Renminbi and are not insured by the U.S. federal government. The deposits in China were $3.4 million as of September 30, 2020.

We do not require collateral or other security for either our contract assets or accounts receivable. Carriers that represented 10% or more of our total contract assets and accounts receivable balance are summarized as of the dates presented below:


	September 30, 2020		December 31, 2019
Humana	21	%	22	%
Aetna (1)	21	%	20	%
UnitedHealthCare (2)	20	%	20	%

_____________

(1)Aetna also includes other carriers owned by Aetna.

(2)UnitedHealthcare also includes other carriers owned by UnitedHealthcare .

Prepaid Expenses and Other Current Assets – Prepaid expenses and other current assets are summarized as follows (in thousands):


	September 30, 2020		December 31, 2019
Prepaid maintenance contracts	$	7,485	$	3,853
Prepaid expenses	9,537		2,207
Prepaid insurance	680		918

Income tax receivable	1,041		584
Other	592		260
Prepaid expenses and other current assets	$	19,335	$	7,822

Fair Value Measurements

9 Months Ended

Sep. 30, 2020

Fair Value Disclosures [Abstract]

Fair Value Measurements

We define fair value as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques we use to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. We classify the inputs used to measure fair value into the following hierarchy:


Level 1			Unadjusted quoted prices in active markets for identical assets or liabilities;
Level 2			Unadjusted quoted prices in active markets for similar assets or liabilities; or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active; or inputs other than quoted prices that are observable for the asset or liability; and
Level 3			Unobservable inputs for the asset or liability.

Our financial assets and liabilities measured at fair value on a recurring basis are summarized below by their classification within the fair value hierarchy for the period presented below (in thousands):


	As of September 30, 2020
	Carrying Value		Level 1		Level 2		Level 3		Total
Assets
Cash equivalents
Money market funds	$	16,205	$	16,205	$	—	$	—	$	16,205
Commercial paper	30,187		—		30,187		—		30,187

Short-term marketable securities
Commercial paper	47,380		—		47,380		—		47,380
Agency bonds	56,259		—		56,259		—		56,259
Treasury bills	4,999		—		4,999		—		4,999
Long-term marketable securities
Agency bonds	1,294		—		1,294		—		1,294
Total assets measured and recorded at fair value	$	156,324	$	16,205	$	140,119	$	—	$	156,324


	As of December 31, 2019
	Carrying Value		Level 1		Level 2		Level 3		Total
Assets
Cash equivalents
Money market funds	$	7,261	$	7,261	$	—	$	—	$	7,261
Liabilities
Earnout liability – current	$	37,273	$	—	$	—	$	37,273	$	37,273

Our cash equivalents invested in money market funds and commercial paper with original maturity of 90 days or less were classified as Level 1. We endeavor to utilize the best available information in measuring fair value. We used observable prices in active markets in determining the classification of our investments as Level 1.

As of September 30, 2020, our Level 2 assets included our available for sale marketable securities, which consisted of commercial paper, agency bonds and treasury bills with maturity less than two years. We classify our marketable debt securities within Level 2 in the fair value hierarchy, because we use quoted market prices to the extent available or alternative pricing sources and models utilizing market observable inputs to determine fair value. Our portfolio primarily consisted of financial

instruments with credit rating of AA+ or equivalent by S&P Rating and Moody's Investor Services. There were no transfers between the hierarchy levels during the nine months ended September 30, 2020.

The following table summarizes our cash equivalents and available-for-sale debt securities by contractual maturity (in thousands):


	As of September 30, 2020
	Amortized Cost		Fair Value
Due in 1 year	$	154,940	$	155,030
Due in 1 year through 5 years	1,288		1,294


Total	$	156,228	$	156,324

Unrealized gains and losses on available-for-sale debt securities are included in accumulated other comprehensive income and summarized as follows as of September 30, 2020:


	Amortized Cost		Unrealized Gain		Unrealized Loss		Fair Value
Cash equivalents
Money market funds	$	16,205	$	—	$	—	$	16,205
Commercial paper	30,188		—		(1)		30,187

Short-term marketable securities
Commercial paper	47,348		33		(1)		47,380
Agency bonds	56,201		58		—		56,259
Treasury bills	4,998		1		—		4,999
Long-term marketable securities
Agency bonds	1,288		6		—		1,294
Total	$	156,228	$	98	$	(2)	$	156,324

As of September 30, 2020, there were twenty securities in net loss positions and their unrealized losses were immaterial. We did not record any credit losses regarding our available-for-sales debt securities during the nine months ended September 30, 2020.

Earnout Liabilities

Our earnout liabilities in connection with our GoMedigap acquisition in 2018 were recognized at fair value. We measured the earnout liability using internally developed assumptions; therefore, it is classified as Level 3. The fair value of the earnout liability was measured using probability-weighted analysis and was discounted using a rate that appropriately captured the risk associated with the obligation. Key assumptions included new enrollments and volatility for the years ended December 31, 2019 and 2018 and our stock price at the time of payment.

Earnout liability activities are summarized as follows (in thousands):


Balance as of December 31, 2019	$	37,273
Change in fair value	—
Settlements	(37,273)
Balance as of September 30, 2020	$	—

In February 2019, we made the first earnout payment to GoMedigap consisting of $9.5 million in cash and 294,608 shares of our common stock with a value of $17.3 million. In January 2020, we made the second and last payment, which consisted of $8.8 million in cash and 294,608 shares of our common stock with a value of $28.5 million.

Stockholders' Equity Note [Abstract]

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Equity

9 Months Ended

Sep. 30, 2020

Equity

Public Offering of Common Stock – Pursuant to an effective registration statement which was filed on December 17, 2018, and amended on January 22, 2019 and March 2, 2020, we entered into an underwriting agreement in March 2020 to issue a total of 2,070,000 shares of common stock, which 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.

Stock Repurchase Programs – We had no stock repurchase activity during the three and nine months ended September 30, 2020. In addition to 10,663,888 shares repurchased under our previous repurchase programs, we have in treasury 1,146,720 shares as of September 30, 2020 that were previously surrendered by employees to satisfy tax withholding due in connection with the vesting of certain restricted stock units. As of September 30, 2020 and December 31, 2019, we had a total of 11,810,608 shares and 11,615,558 shares, respectively, held in treasury.

For accounting purposes, common stock repurchased under our stock repurchase programs is recorded based upon the settlement date of the applicable trade. Such repurchased shares are held in treasury and are presented using the cost method.

Stock-Based Compensation Expense – Our stock-based compensation expense is summarized as follows by award types (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Common stock options	$	254	$	542	$	867	$	1,745
Restricted stock units	6,078		4,968		20,855		11,672
Total stock-based compensation expense	$	6,332	$	5,510	$	21,722	$	13,417

Our stock-based compensation expense is summarized as follows by operating functions (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Marketing and advertising	$	1,869	$	872	$	5,138	$	2,212
Customer care and enrollment	527		369		1,762		927
Technology and content	1,430		729		2,965		1,946
General and administrative	2,506		3,540		11,857		8,332

Total stock-based compensation expense	$	6,332	$	5,510	$	21,722	$	13,417
Amount capitalized internal-use software	548		—		1,278		—
Total stock-based compensation	$	6,880	$	5,510	$	23,000	$	13,417

Net Loss Per Share

9 Months Ended

Sep. 30, 2020

Earnings Per Share [Abstract]

Net Loss Per Share

Basic net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding for the period. Diluted net loss per share is computed by dividing the net loss for the period by the weighted average number of common and common equivalent shares outstanding during the period. Diluted net loss per share is computed giving effect to all potential dilutive common stock equivalent shares, including options and restricted stock units. The dilutive effect of outstanding awards is reflected in diluted net loss per share by application of the treasury stock method.

The following table sets forth the computation of basic and diluted net loss per share (in thousands, except per share amounts):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Basic and Diluted:
Net loss	$	(14,505)	$	(11,024)	$	(14,423)	$	(21,937)
Shares used in per share calculation – basic and diluted	26,487		23,493		25,838		22,840
Net loss per share – basic and diluted	$	(0.55)	$	(0.47)	$	(0.56)	$	(0.96)

For the three and nine months ended September 30, 2020 and 2019, we had securities outstanding that could potentially dilute earnings per share, but the shares from the assumed conversion or exercise of these securities were excluded in the computation of diluted net loss per share as their effect would have been anti-dilutive. The number of outstanding anti-dilutive shares that were excluded from the computation of diluted net loss per share consisted of the following (in thousands):


	Three Months Ended September 30,		Nine Months Ended September 30,
	2020	2019	2020	2019
Common stock options	414	729	453	850
Restricted stock units	599	1,461	748	1,537
Total	1,013	2,190	1,201	2,387

Commitments and Contingencies

9 Months Ended

Sep. 30, 2020

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Operating Leases

Refer to Note 9 – Leases for commitments related to our operating leases.

Contingencies

From time to time, we receive inquiries from governmental bodies and also may be subject to various legal proceedings and claims arising in the ordinary course of business. We assess contingencies to determine the degree of probability and range of possible loss for potential accrual in our consolidated financial statements. An estimated loss contingency is accrued in the consolidated financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Legal proceedings or other contingencies could result in material costs, even if we ultimately prevail.

Legal Proceedings

Securities Class Action – On April 8, 2020 and April 29, 2020, two purported class action lawsuits were filed against us, our chief executive officer, Scott N. Flanders, our chief financial officer, Derek N. Yung, and our then-chief operating

officer, David K. Francis, in the United States District Court for the Northern District of California. The cases are captioned Patel v. eHealth, Inc., et al., Case No. 5:20-cv-02395 (N.D. Cal.) and Bertrand v. eHealth, Inc. et al., Case No. 3:20-cv-02967 (N.D. Cal.). The complaints allege, among other things, that we and Messrs. Flanders, Yung and Francis made materially false and misleading statements and/or failed to disclose material information regarding our accounting and modeling assumptions, rate of member churn and our profitability during the alleged class period of March 19, 2018 to April 7, 2020. The complaints allege that we and Messrs. Flanders, Yung and Francis violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The complaints seek compensatory and (in the Patel lawsuit) punitive damages, attorneys’ fees and costs, and such other relief as the court deems proper. On June 24, 2020, the Court consolidated the above-referenced matters under the caption In re eHealth Securities Litig., Master File No. 4:20-cv-02395-JST (N.D. Cal.). The Court also appointed a lead plaintiff and lead counsel for the consolidated matter. The lead plaintiff filed an amended complaint on August 25, 2020, which Defendants moved to dismiss. The motion to dismiss is set to be heard by the court on February 17, 2021.

Derivative Actions – On July 7, 2020 and October 13, 2020, two derivative lawsuits were filed against our chief executive officer, Mr. Flanders, our chief financial officer, Mr. Yung, our then-chief operating officer, Mr. Francis, and the members of our Board of Directors (collectively, the “Individual Defendants”), in the United States District Court for the Northern District of California and the Superior Court of California, County of Santa Clara. The cases are captioned Chernet v. Flanders et al., Case No. 3:20-cv-04477-SK (N.D. Cal.), and Lincolnshire Police Pension Fund v. Flanders et al., Case No. 20CV371555 (Cal. Super. Ct.), and also name the Company as a nominal defendant. The complaints allege, among other things, that beginning on March 19, 2018, the Individual Defendants made or caused the Company to make materially false and misleading statements and/or failed to disclose material information regarding our accounting and modeling assumptions, rate of member churn, profitability, and internal controls. Both complaints purport to assert claims for breach of fiduciary duty, unjust enrichment and waste of corporate assets. The Chernet lawsuit also alleges that the Individual Defendants violated Sections 14(a), 10(b), and 20(a) of the Securities Exchange Act of 1934, and asserts claims for abuse of control and gross mismanagement. The complaints seek damages, restitution, attorneys’ fees and costs, and certain measures with respect to the Company’s corporate governance and internal procedures, and (in the Lincolnshire lawsuit) equitable and/or injunctive relief.

The Gonzalez and Le’Vias Complaints – On April 6, 2018, a former employee, Lupita Gonzalez, filed a complaint against us in the Superior Court of the State of California for the County of Sacramento (the “Gonzalez Complaint”). The Gonzalez Complaint is brought under the California Private Attorney General Act (“PAGA”) on behalf of all current and former hourly-paid or non-exempt employees who work or have worked for us in California. The claim alleges that we violated wage and hour laws with respect to these non-exempt employees, including, among other things, the failure to comply with California law as to (i) the payment of overtime wages; (ii) the payment of minimum wages; (iii) providing compliant meal and rest periods, (iv) the payment of wages earned during employment and owed upon the termination of employment; (v) providing complete and accurate wage statements, (vi) keeping of accurate payroll records; and (vii) the proper reimbursement for necessary business-related expenses and costs. The Gonzalez Complaint seeks penalties and costs, expenses and attorneys’ fees.

On July 1, 2019, two other current or former employees, Michael Le’Vias and Ramona Meadows, filed a related complaint against us and eHealth Ins. Serv. Co., in the Superior Court of the State of California for the County of Santa Clara (the “Le’Vias Complaint”). A substantial overlap exists between the facts and circumstances alleged in the Gonzalez Complaint and the Le’Vias Complaint. Specifically, the Le’Vias Complaint is also brought under PAGA on behalf of all current and former hourly-paid or non-exempt employees who work or have worked for us in California. The claim alleges that we violated wage and hour laws with respect to these non-exempt employees, including, among other things, the failure to comply with California law as to (i) the payment of overtime wages; (ii) the payment of minimum wages; (iii) providing compliant meal and rest periods, (iv) the payment of wages earned during employment and owed upon the termination of employment; (v) providing complete and accurate wage statements, (vi) keeping of accurate payroll records; and (vii) the proper reimbursement for necessary business-related expenses and costs. The Le’Vias Complaint seeks unpaid wages, penalties and costs, expenses and attorneys’ fees.

The parties have agreed to resolve both the Le’Vias and Gonzalez Complaints and have executed a settlement agreement to resolve both matters, which settlement will require court approval. In the interim, the parties have filed notices of conditional settlement in both matters, and the April 13, 2020 trial date for the Gonzalez matter was vacated.

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. As the benefits of these agreements are experienced uniformly over the applicable contractual periods, 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.

Our future minimum payments under non-cancellable contractual service and licensing obligations as of September 30, 2020 are summarized as follows (in thousands):


For the Years Ending December 31,	Service and Licensing Obligations
Remainder of 2020	$	2,593
2021	4,538
2022	2,484
2023	1,797
2024	1,582
Thereafter	2,706
Total	$	15,700

Segment and Geographic Information

9 Months Ended

Sep. 30, 2020

Segment Reporting [Abstract]

Segment and Geographic Information

Operating Segments

We report segment information based on how our chief executive officer, who is our chief operating decision maker ("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. Please refer to Note 1 – Summary of Business and Significant Accounting Policies of the Notes to Consolidated Financial Statements in Part II, Item 8 of the Annual Report on Form 10-K for the year ended December 31, 2019 for our accounting policies relating to operating segments.

The following table presents summary results of our operating segments for the three and nine months ended September 30, 2020 and 2019 (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Revenue:
Medicare	$	70,361	$	57,189	$	246,891	$	164,357
Individual, Family and Small Business	23,923		12,724		42,567		40,096
Total revenue	$	94,284	$	69,913	$	289,458	$	204,453

Segment profit (loss):
Medicare segment profit (loss)	$	(16,010)	$	(11,004)	$	19,380	$	5,917
Individual, Family and Small Business segment profit	18,286		3,753		23,459		15,045
Total segment profit (loss)	2,276		(7,251)		42,839		20,962
Corporate	(15,581)		(11,568)		(43,376)		(30,380)
Stock-based compensation expense	(6,332)		(5,510)		(21,722)		(13,417)
Change in fair value of earnout liability	—		5,400		—		(15,106)
Depreciation and amortization	(923)		(765)		(2,604)		(2,153)
Amortization of intangible assets	(287)		(547)		(1,207)		(1,641)


Other (income) expense, net	(101)		568		724		1,824
Loss before benefit from income taxes	$	(20,948)	$	(19,673)	$	(25,346)	$	(39,911)

There were no inter-segment revenue transactions for the periods presented. With the exception of contract assets – commissions receivable, which is presented by segment in Note 3 – Supplemental Financial Statement Information, our CODM does not separately evaluate assets by segment, and therefore, assets by segment are not presented.

Geographic Information

Our long-lived assets primarily consist of property and equipment and internally-developed software. Our long-lived assets are attributed to the geographic location in which they are located. Long-lived assets by geographical area are summarized as follows (in thousands):


	September 30, 2020		December 31, 2019
United States	$	38,561	$	64,408
China	452		471
Total	$	39,013	$	64,879

Significant Customers

Substantially all revenue for the three and nine months ended September 30, 2020 and 2019 was generated from customers located in the United States. Carriers representing 10% or more of our total revenue for the three and nine months ended September 30, 2020 and 2019 are presented in the table below:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Humana	26	%	26	%	21	%	24	%
UnitedHealthcare (1)	17	%	18	%	21	%	18	%
Aetna (2)	12	%	17	%	14	%	17	%

__________

(1)UnitedHealthcare also includes other carriers owned by UnitedHealthcare.

(2) Aetna also includes other carriers owned by Aetna.

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
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Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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Reference 3: http://www.xbrl.org/2003/role/disclosureRef
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Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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Reference 5: http://www.xbrl.org/2003/role/disclosureRef
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Reference 9: http://www.xbrl.org/2003/role/disclosureRef
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-Section 50
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-URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8736-108599

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 42
-URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e9054-108599

Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 15
-URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8657-108599

Reference 13: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 21
-Subparagraph (b)
-URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8721-108599

Reference 14: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-URI http://asc.fasb.org/topic&trid=2134510

+ Details

Leases

9 Months Ended

Sep. 30, 2020

Leases [Abstract]

Leases

We have operating and finance leases for our corporate offices and certain equipment. Our leases have remaining lease terms of one month to nine years. Our operating lease expense recognized under ASC 842 was $2.1 million and $2.0 million for the three months ended September 30, 2020 and 2019, respectively, and $6.4 million and $4.9 million for the nine months ended September 30, 2020 and 2019, respectively. Our cash outflows related to operating leases were $5.2 million and $3.5 million for the nine months ended September 30, 2020 and 2019, respectively. During the nine months ended September 30, 2020 and 2019, we had non-cash investing activities of $10.9 million and $39.2 million, respectively, related to right-of-use assets on the Condensed Consolidated Statements of Cash Flows, of which $23.3 million related to the adoption of ASC 842 as of January 1, 2019.

Supplemental information as of September 30, 2020 related to leases is as follows (in thousands):


Operating lease right-of-use assets	$	43,886
Operating lease liabilities	$	47,511
Weighted-average remaining lease term of operating leases	7.5 years
Weighted-average discount rate used to recognize operating lease right-of-use-assets	5.4		%

As of September 30, 2020, maturities of operating lease liabilities are as follows (in thousands):


Year ending December 31,
Reminder of 2020	$	1,915
2021	7,644
2022	7,701
2023	8,033
2024	7,832
Thereafter	27,416
Total lease payments	60,541
Less imputed interest	(13,030)
Total	$	47,511

Operating Lease Obligations

We lease our operating facilities and certain of our equipment, furniture and fixtures under various operating leases, the latest of which expires in January 2030. Certain of these leases have free or escalating rent payment provisions. We recognize rent expense on our operating leases on a straight-line basis over the terms of the leases, although actual cash payment obligations under certain of these agreements fluctuate over the terms of the agreements.

In January 2020, we entered into an amendment to the lease agreement for our Gold River, California, office of 63,206 square feet. The amended lease term commenced on January 1, 2020 and has been extended to December 31, 2027. As of September 30, 2020, the total expected future minimum payments were $13.0 million over the remaining term of the lease plus our proportionate share of certain operating expenses, insurance costs and taxes for each calendar year during the lease. In addition, we have an option to extend the lease for one additional period of five years at the end of the lease term and will receive a one-time refurbishment allowance from the landlord if the option to renew is exercised.

On August 19, 2019, we entered into an amendment to the lease agreement for our Santa Clara, California office to expand our office space to a total of 45,657 square feet from 32,492 square feet. The lease term for the expanded office space commenced on April 15, 2020. The term of the lease for the expanded office space was coterminous with the term of the lease for the existing space, which is scheduled to expire on March 31, 2029. As of September 30, 2020, the expected future minimum payments related to our Santa Clara office totaled $21.0 million, including $6.1 million from this amendment, over the remaining term of the lease plus our proportionate share of certain operating expenses, insurance costs and taxes for each calendar year during the lease.

Debt	9 Months Ended
Debt	Sep. 30, 2020
Debt Disclosure [Abstract]
Debt	Debt On September 17, 2018, we entered into a Credit Agreement with Royal Bank of Canada (“RBC”), as administrative agent and collateral agent (the “Credit Agreement”). The Credit Agreement provides for a $40.0 million secured asset-backed revolving credit facility with a $5.0 million letter of credit sub-facility. On December 20, 2019, we amended our revolving credit facility agreement with RBC (the “Amendment”) and increased the borrowing amount from $40.0 to $75.0 million. The maturity date has been extended to December 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 by 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 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 (the “Borrowing Base”). The proceeds of the loans under the Credit Agreement may be used for working capital and general corporate purposes. The borrowers 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, we paid a one-time facility fee of 1.75% of the total commitments of $40.0 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. The availability under the credit facility is up to the lesser of $40 million or the Borrowing Base, which may be reduced from time to time pursuant to the Credit Agreement. The Amendment increased the availability up to the lesser of $75.0 million or the Borrowing Base, which may be reduced from time to time pursuant to the Credit Agreement. Financial covenants in the original Credit Agreement required that we maintain Excess Availability (as defined in the Credit Agreement) at or above $6 million at any time. The Amendment also changed the financial covenants to require us to maintain at least $6.0 million of Excess Availability at all times or, if greater, up to $11.3 million depending on our borrowing base as determined by eligible past and future commission receivables. In addition, the Amendment also included changes in the payment conditions to, among other things, require us to have at least $10.0 million of liquidity or, if greater, up to $18.8 million depending on our borrowing base as determined by eligible past and future commission receivables, in order for us to make certain permitted acquisitions, investments, distributions and payments of indebtedness. The Amendment also stated the seasonal amount thresholds used in connection with the cash dominion and field examination covenants in the Credit Agreement. We incurred $1.2 million of issuance costs in connection with the Credit Agreement, which were capitalized as part of Other assets on our Consolidated Balance Sheet in the period we entered into the Credit Agreement. The Amendment did not change the interest rate. In connection with the Amendment, we incurred closing costs totaling $0.5 million, which were capitalized and recorded as Other assets on our Consolidated Balance Sheet as of December 31, 2019. The remaining balance of unamortized issuance costs was $0.8 million and $1.1 million as of September 30, 2020 and December 31, 2019. As of September 30, 2020, we had no outstanding borrowings under our revolving credit facility.

Income Taxes

9 Months Ended

Sep. 30, 2020

Income Tax Disclosure [Abstract]

Income Taxes

The following table summarizes our benefit from income taxes and our effective tax rates for the three and nine months ended September 30, 2020 and 2019 (in thousands, except effective tax rate):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
Loss before benefit from income taxes	$	(20,948)		$	(19,673)		$	(25,346)		$	(39,911)
Benefit from income taxes	(6,443)			(8,649)			(10,923)			(17,974)
Effective tax rate	30.8		%	44.0		%	43.1		%	45.0		%

For the three months ended September 30, 2020, we recognized a benefit from income taxes of $6.4 million, representing an effective tax rate of 30.8% which was higher than the statutory federal tax rate due primarily to stock-based compensation adjustments, lobbying expenses and state taxes, partially offset by research and development credits. For the three months ended September 30, 2019, we recognized a benefit from income taxes of $8.6 million, representing an effective tax rate of 44.0%, which was higher than the statutory federal tax rate due primarily to stock-based compensation adjustments, lobbying expenses, and state taxes, partially offset by research and development credits.

For the nine months ended September 30, 2020, we recognized a benefit from income taxes of $10.9 million, representing an effective tax rate of 43.1%, which was higher than the statutory federal tax rate due primarily to stock-based compensation adjustments, lobbying expenses and state taxes, partially offset by research and development credits. For the nine months ended September 30, 2019, we recognized a benefit from income taxes of $18.0 million, representing an effective tax rate of 45.0%, which was higher than the statutory federal tax rate due primarily to stock-based compensation adjustments, lobbying expenses and state taxes, partially offset by research and development credits.

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. We continue to recognize our deferred tax assets as of September 30, 2020, as we believe it is more likely than not that the net deferred tax assets will be

realized, with the exception of certain state net operating losses that are expected to expire unutilized which have a valuation allowance.

The Coronavirus Aid, Relief and Economic Security ("CARES") Act was signed into law on March 27, 2020. The business tax provisions of the CARES Act include temporary changes to income based tax laws, including the ability to utilize net operating losses, interest expense deductions, alternative minimum tax credit refunds, charitable contributions, and depreciation of qualified improvement property. The income tax provisions of the CARES Act did not have a material impact on our Condensed Consolidated Financial Statements for the three and nine months ended September 30, 2020.