HEALTH, INC. – 10-Q – MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS – InsuranceNewsNet

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In addition to historical information, this Quarterly Report on Form 10-Q
contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
The words "expect," "anticipate," "believe," "estimate," "target," "goal,"
"project," "hope," "intend," "plan," "seek," "continue," "may," "could,"
"should," "might," "forecast," and variations of such words and similar
expressions are intended to identify such forward-looking statements. These
statements include, among other things, statements regarding our expectations
relating to approved members, new paying members and estimated membership; our
estimates regarding the constrained lifetime value of commissions; our
expectations relating to revenue, operating costs, cash flows and profitability;
our expectations regarding our strategy and investments, including investments
in our e-commerce and call center capabilities, technology, agent training and
quality assurance efforts; our expectations regarding our Medicare business,
including market opportunity, consumer demand and our competitive advantage; our
expectations regarding our individual and family business, including anticipated
trends and our ability to enroll individuals and families into qualified health
plans; the impact of future and existing laws and regulations on our business;
the expected impact of the COVID-19 pandemic on our business; our expectations
regarding commission rates, payment rates, conversion rates, plan termination
rates and duration, membership retention rates and membership acquisition costs;
our expectations regarding health insurance agents licensing and productivity;
our expectations regarding beneficiary complaints, customer experience and
enrollment quality; our expectations relating to the seasonality of our
business; expected competition from government-run health insurance exchanges
and other sources; our expectations relating to marketing and advertising
expense and expected contributions from our marketing and strategic partnership
channels; the timing of our receipt of commission and other payments; our
critical accounting policies and related estimates; liquidity and capital needs;
political, legislative, regulatory and legal challenges; the merits or potential
impact of any lawsuits filed against us; as well as other statements regarding
our future operations, financial condition, prospects and business strategies.

We have based these forward-looking statements on our current expectations about
future events. These statements are not guarantees of future performance and
involve risks, uncertainties and assumptions that are difficult to predict. Our
actual results may differ materially from those suggested by these
forward-looking statements for various reasons, including our ability to retain
existing members and enroll new members during the annual healthcare open
enrollment period, the Medicare annual enrollment period and other special
enrollment periods; changes in laws, regulations and guidelines, including in
connection with healthcare reform or with respect to the marketing and sale of
Medicare plans; competition, including competition from government-run health
insurance exchanges and other sources; the seasonality of our business and the
fluctuation of our operating results; our ability to accurately estimate
membership, lifetime value of commissions and commissions receivable; changes in
product offerings among carriers on our ecommerce platform and the resulting
impact on our commission revenue; our ability to execute on our growth strategy
in the Medicare market; the continued impact of the COVID-19 pandemic on our
operations, business, financial condition and growth prospects, as well as on
the general economy; changes in our management and key employees; exposure to
security risks and our ability to safeguard the security and privacy of
confidential data; our relationships with health insurance carriers; the success
of our carrier advertising and sponsorship program; customer concentration and
consolidation of the health insurance industry; our success in marketing and
selling health insurance plans and our unit cost of acquisition; our ability to
hire, train, retain and ensure the productivity of licensed health insurance
agents and other employees; the need for health insurance carrier and regulatory
approvals in connection with the marketing of Medicare-related insurance
products; changes in the market for private health insurance; consumer
satisfaction of our service and actions we take to improve the quality of
enrollments; changes in member conversion rates; changes in commission rates;
our ability to sell qualified health insurance plans to subsidy-eligible
individuals and to enroll subsidy-eligible individuals through government-run
health insurance exchanges; our ability to maintain and enhance our brand
identity; our ability to derive desired benefits from investments in our
business, including membership growth and retention initiatives; reliance on
marketing partners; the impact of our direct-to-consumer email, telephone and
television marketing efforts; timing of receipt and accuracy of commission
reports; payment practices of health insurance carriers; dependence on our
operations in China; the restrictions in our debt obligations; the restrictions
in our investment agreement with H.I.G; our ability to raise additional capital;
compliance with insurance and other laws and regulations; the outcome of
litigation in which we are involved; the performance, reliability and
availability of our information technology systems, ecommerce platform and
underlying network infrastructure; and those identified under the heading "Risk
Factors" in Part II, Item 1A. of this report and those discussed in our other
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Securities and Exchange Commission filings. Given these risks and uncertainties,
you are cautioned not to place undue reliance on such forward-looking
statements. The forward-looking statements included in this report are made only
as of the date hereof. Except as required by applicable law, we do not
undertake, and specifically decline, any obligation to update any of these
statements or to publicly announce the results of any revisions to any
forward-looking statements, whether as a result of new information, future
events, changes in assumptions or otherwise. The following discussion should be
read in conjunction with our Annual Report on Form 10-K as filed with the
Securities and Exchange Commission in March 2022, and the audited consolidated
financial statements and related notes contained therein.


Insight

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 leverages technology to solve a critical
problem in a large and growing market by aiding consumers in what has
traditionally been a complex, confusing, and opaque health insurance purchasing
process. Our omnichannel consumer engagement platform enables consumers to use
our services online, by telephone with a licensed insurance agent, or through a
hybrid online assisted interaction. We have created a consumer-centric
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 approximately 200 health insurance carriers
across all fifty states and the District of Columbia. Our plan recommendation
tool curates this broad plan selection by analyzing customer health-related
information against plan data for insurance coverage fit. This tool is supported
by a unified data platform and is available to our ecommerce customers and our
licensed agents.


Trade Initiative Updates

During 2021, we made a number of changes to our telesales and online
capabilities with a focus on driving performance and improving enrollment
quality in preparation for the annual enrollment period in the fourth quarter.
We continue to build on these initiatives in 2022. The investments in our
telesales operations, technology and enrollment quality assurance have resulted
in lower conversion rates and longer average talk times for telephonic
enrollments and negatively impacted our first quarter financial results.
However, we are seeing position traction in CTM scores and retention
characteristics for the new enrollments that we added during the 2022 annual
enrollment period ("AEP"), relative to comparable enrollment cohorts from the
2021 and 2020 AEPs. This suggests that the enrollments are of higher quality,
resulting in higher customer satisfaction and increased plan longevity.

Enrollment quality has been our focus since the launch of our retention program
in 2020, which helps ensure that we present Medicare beneficiaries with choices
that best align with their eligibility status, lifestyle, health conditions and
economic means with the goal of minimal disruption in existing provider
relationships. We have been seeking additional ways to improve our customer
experience, enhance accuracy of plan recommendations and reduce disenrollment.
In addition to our quality assurance efforts initiated in 2021, we continue to
introduce further initiatives in our customer care centers. This includes
increased agent specialization by product and geography, improvement of agent
scripts to make them more consumer friendly, an outbound call program that
allows and incentivizes agents to proactively work their pipeline during down
times, and emphasis on extending agents' tenure with us. Furthermore, our agent
mix will be more mature in 2022 compared to a year ago. We expect these
initiatives will build on positive momentum in our conversion rates as we
prepare for AEP.

We are making effort in creating greater collaboration between our digital and
conventional marketing teams to create synergies between our diversified demand
generation channels. We are launching a series of omni-channel tools aimed at
supporting seamless transition of customers between channels, including an
online chat staffed by licensed Medicare agents. These initiatives enhance our
technology differentiation and create a stronger connection between agent driven
and digital organizations.


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Transformation Initiatives - We are implementing a multi-year transformation
initiative to right-size our cost structure and drive future profitability.
These initiatives include targeted reductions in fixed expenses and
vendor-related spend outside of mission critical areas, as well as changes to
variable cost management. Through this program, we expect to achieve ongoing
significant cost savings while preserving our competitive edge and focusing on
initiatives with highest in-period returns on investment. We expect to achieve
over $60 million in annualized cost savings, excluding restructuring costs in
2022 of approximately $10 million to $20 million. We expect the variable cost
reduction to lead to a temporary decline in our Medicare enrollments and revenue
in 2022 before a return to growth in 2023 on a significantly improved
operational and cost foundation. These initiatives are intended to improve our
operations through re-engineering, reorganizing, and better deployment of
marketing expenses. For example, we have de-emphasized underperforming demand
generation channels in favor of channels that bring higher quality leads. In
April 2022, we eliminated over 300 full-time positions, representing
approximately 14% of our workforce, primarily within our customer care and
enrollment group, and to a lesser extent, in our marketing and advertising,
technology and content, and general and administrative groups.


Senior management changes

In January 2022, we announced the termination of chief revenue officer, Timothy
C. Hannan, effective January 31, 2022, and the appointment of Robert S. Hurley
as interim chief revenue officer effective February 1, 2022. Mr. Hurley
previously served as an executive officer of the Company for over 20 years until
his retirement in March 2020.

In February 2022we announced the appointment of Roman Rariy as head
Chief Operating Officer and Chief Transformation Officer, Workforce March 1, 2022.

COVID-19 Impact Updates

We experienced a number of changes in our business related to the impacts from
the COVID-19 pandemic from 2020 onwards. During the first quarter of 2020, we
closed our offices in the United States and China and shifted our employees to a
work-from-home model in response to the virus outbreak. Our office in China has
reopened since the second quarter of 2020 given the improvements in the
situation in the region where our office is located. As of March 31, 2022, all
of our U.S. offices are open at reduced capacity and with additional safety and
social distancing measures. We currently plan to operate with a combination of
remote and in-office work in the United States at least through part of 2022. We
plan to adjust the number of in-office employees during the year depending upon
the COVID-19 situation. The emergence of COVID-19 variants could cause us to
alter our operations and plans for in-office and remote work.

The extent of the impact of the COVID-19 pandemic on our operational and
financial performance will depend on future developments, including the
duration, spread and severity of the pandemic, the availability, effectiveness
and uptake of vaccines for COVID-19, the emergence of new variants of COVID-19
and whether existing vaccines are effective with respect to such variants, the
actions to contain the disease or mitigate its impact, and the duration, timing
and severity of the impact on consumer behavior, including any recession
resulting from the pandemic, all of which are unpredictable. See Risk Factors in
Part II, Item 1A of this Quarterly Report on Form 10-Q for a discussion of risks
related to the COVID-19 pandemic.



Summary of selected measures

We rely on certain measures to estimate and recognize commission income,
assess our business performance and facilitate strategic planning. Our
commission income 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;

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•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 (“LTV”), members approved for
Medicare-linked, individual and family and supplemental health insurance plans that we
sell, as well as the estimated annual value of certified members for small
business plans that we sell.

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 periods presented:
                                           Three Months Ended March 31,
                                                         2022                  2021    % Change
Medicare
Medicare Advantage                                                   82,431           106,884          (23) %
Medicare Supplement                                                   6,556             7,782          (16) %
Medicare Part D                                                       6,823             8,011          (15) %
Total Medicare                                                       95,810           122,677          (22) %
Individual and Family                                                 9,801            11,314          (13) %

Ancillary                                                            18,970            26,511          (28) %

Small Business                                                        2,514             2,948          (15) %
Total Approved Members                                              127,095           163,450          (22) %



Three Months Ended March 31, 2022 and 2021 - Total Medicare approved members
decreased 22% in the three months ended March 31, 2022 compared to the same
period in 2021. The decrease in total Medicare approved members was attributable
to a decrease in approved members across all Medicare products that we market
including Medicare Advantage, Medicare Supplement, and Medicare Part D
prescription drug plans, during the three months ended March 31, 2022 compared
to the same period in 2021. The decrease in Medicare Advantage approved members,
in particular, was driven by a decrease in submitted applications primarily due
to lower telephonic conversion rates and our decision to reduce our investment
in telephonic enrollment growth in 2022.

Individual and family plan approved members declined 13% in the three months
ended March 31, 2022 compared to the same period in 2021 partially due to an
extension of the enrollment period in 2021 that did not occur in 2022.

Ancillary plan approved members declined 28% in the three months ended March 31,
2022 compared to the same period in 2021 primarily due to declines in approved
members for short-term health insurance plans and dental insurance plans. Small
business group health insurance approved members declined 15% in the three
months ended March 31, 2022 compared to the same period in 2021 mainly due to a
decrease in approved groups.


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 members by product for the periods presented below:

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Three months completed March, 31st,

                                                                                        2022                           2021       % Change
Medicare
Medicare Advantage                                                                                         117,643                 140,997               (17) %
Medicare Supplement                                                                                          7,062                   9,996               (29) %
Medicare Part D                                                                                             27,384                  29,139                (6) %
Total Medicare                                                                                             152,089                 180,132               (16) %
Individual and Family                                                                                       16,230                  17,607                (8) %

Ancillary                                                                                                   22,917                  31,591               (27) %

Small Business                                                                                               3,084                   4,125               (25) %
Total New Paying Members                                                                                   194,320                 233,455               (17) %



Three Months Ended March 31, 2022 and 2021 - Total Medicare new paying members
declined 16% in the three months ended March 31, 2022 compared to the same
period in 2021, due primarily to a decrease in approved members for all Medicare
products. Individual and family plan new paying members declined 8% in the three
months ended March 31, 2022 compared to the same period in 2021 due primarily to
decreases in approved members for non-qualified and qualified plans. Ancillary
new paying members declined 27% in the three months ended March 31, 2022
compared to the same period in 2021 primarily due to a decrease in approved
members for short-term and dental insurance plans. Small business new paying
members declined 25% in the three months ended March 31, 2022 compared to the
same period in 2021 primarily due to a decrease in approved members for small
business plans.


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Estimated Limited Lifetime Value of Commissions per Approved Member

The following table shows our estimated LTV commission constraint by
certified member by product for the periods presented below:

                                           Three Months Ended March 31,
                                                 2022                      2021       % Change
 Medicare
 Medicare Advantage (1)           $           948                        $  968           (2) %
 Medicare Supplement (1)                      927                         1,057          (12) %
 Medicare Part D (1)                          213                           217           (2) %
 Individual and Family
 Non-Qualified Health Plans (1)               330                           200           65  %
 Qualified Health Plans (1)                   302                           298            1  %
 Ancillary
 Short-term (1)                               182                           180            1  %
 Dental (1)                                   104                            91           14  %
 Vision (1)                                    62                            59            5  %
 Small Business (2)                           198                           182            9  %


__________

(1)Constrained LTV of commissions per approved member represents commissions
estimated to be collected over the estimated life of an approved member's plan
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 in our Annual
Report on Form 10-K for the year ended December 31, 2021.

(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.

Health Insurance

The constrained LTV of commissions per approved member declined by 2%, 12%, and
2%, respectively, for Medicare Advantage, Medicare Supplement and Medicare Part
D prescription drug plans during the three months ended March 31, 2022 compared
to the same period in 2021. The decrease in constrained LTV was due to decreased
estimates of average plan durations for these products.

Individual and Family and Auxiliary

The constrained LTV of commissions per non-qualified health plan approved member
and qualified health plan approved member increased 65% and 1%, respectively,
during the three months ended March 31, 2022 compared with the same period in
2021 mostly due to increased estimates of average plan duration and a lower
constraint for non-qualified health insurance plans.

The constrained LTV of commissions per approved member for short-term health
insurance, dental, vision, and small business insurance plans increased by 1%,
14%, 5%, and 9%, respectively, during the three months ended March 31, 2022
compared with the same period in 2021 primarily due to an increase in estimated
average plan duration.

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The constraints applied to the total estimated lifetime commissions we expect to
receive for selling the plan after the carrier approves an application in order
to derive the constrained LTV of commissions for approved members recognized for
the periods presented below are summarized as follows:
                                  Three Months Ended March 31,
                                         2022                  2021
Medicare
Medicare Advantage                                    7  %      7  %
Medicare Supplement                                   9  %      5  %
Medicare Part D                                       7  %      5  %
Individual and Family
Non-Qualified Health Plans                            7  %     15  %
Qualified Health Plans                                4  %      4  %
Ancillary
Short-term                                           20  %     20  %
Dental                                                5  %      7  %
Vision                                                5  %      5  %
Other                                                10  %     10  %
Small Business                                        5  %      5  %



The constraints for Medicare Supplement and Medicare Part D prescription drug
plans increased during the three months ended March 31, 2022, as compared to the
same period in the prior year, due to declining LTV trends for these products.
The constraints for non-qualified health plans decreased during the three months
ended March 31, 2022, as compared to the same period in the prior year, due to
stabilization of market conditions and increases in LTV values. The constraints
for dental plans decreased during the three months ended March 31, 2022, as
compared to the same period in the prior year, due to improved LTV trends.


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Estimated Membership

Estimated membership represents the estimated number of members active as of the
date indicated based on the estimation methodology below. The following table
shows estimated membership by product for the periods presented below:
                                       As of March 31,
                                  2022                   2021         % Change
Medicare (1)
Medicare Advantage              585,824                 538,716            9  %
Medicare Supplement             100,006                 104,727           (5) %
Medicare Part D                 219,801                 229,598           (4) %
Total Medicare                  905,631                 873,041            4  %

Individual and Family (2)       104,849                 103,844            1  %

Ancillary (3)                   229,284                 241,415           (5) %

Small Business (4)               47,876                  45,207            6  %
Total Estimated Membership    1,287,640               1,263,507            2  %


__________________

(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 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.

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.

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 or notifying the carrier
directly and do not
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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. If we experience a significant
variance in historical membership as compared to our initial estimates, we keep
the prior period data consistent with previously reported amounts, while we may
provide the updated information in other communications or disclosures. 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.

Medicare-related plan estimated membership as of March 31, 2022 grew 4% compared
to estimated membership as of March 31, 2021 due to a 9% growth in Medicare
Advantage estimated membership, offset by a 5% and 4% decline in Medicare
Supplement plan and Medicare Part D plan estimated membership, respectively. The
overall growth in Medicare estimated membership was due to new paying members we
added over the last twelve months, net of churn.

Individual and family plan estimated membership as of March 31, 2022 grew 1%
compared to estimated membership as of March 31, 2021 due to overall market
conditions in the individual and family plan market, including recent
stabilization and improvement. Ancillary plan estimated membership as of March
31, 2022 declined 5% compared to estimated membership as of March 31, 2021
primarily as a result of the decline in short-term health plans estimated
membership.


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
("CC&E") expenses 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 periods 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
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approved members for Medicare Plans and IFP Plans during the period, 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 period to
period, the weight given to each product was determined based on their relative
LTVs at the time of our adoption of Accounting Standards Codification 606 -
Revenue from Contracts with Customers ("ASC 606").
                                                              Three Months Ended March 31,
                                                                 2022                  2021              % Change
Medicare

Estimated CC&E Cost per Approved MA Equivalent Approved
member (1)

                                                $           441          $     278                    59  %

Estimated variable marketing cost per MA equivalent
certified member (1)

                                                   545                353                    54  %
Total Medicare estimated cost per approved member         $           986          $     631                    56  %

Individual and family plan
Estimated CC&E Cost per IFP Equivalent Approved Member
(2)

                                                       $            88          $      63                    40  %

Estimated variable marketing cost per IFP equivalent
certified member (2)

                                                    49                 44                    11  %
Total IFP estimated cost per approved member              $           137          $     107                    28  %


__________________

(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 period 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
period presented.


Estimated CC&E cost per approved MA-equivalent member increased 59% in the three
months ended March 31, 2022 compared to the same period in 2021 due to lower
enrollment volume while having more agents than the prior year and a decline in
our telesales conversion rate resulting from enrollment quality initiatives. We
believe that this investment in our telesales organization will improve our
competitive positioning and drive higher quality enrollments characterized by
improved persistency. Estimated variable marketing cost per MA-equivalent member
increased 54% primarily due to lower enrollment volume as a result of lower
conversion rates from our telephonic leads. In addition, a greater focus on our
online advertising channel also contributed to the increase as it carries higher
per enrollment marketing costs but lower customer care and enrollment costs.

The estimated cost of CC&E per approved IFP equivalent member has increased by 40% over the
three months completed March 31, 2022 compared to the same period in 2021 due to
mainly to an increase in the number of agents in anticipation of the volume
increases for the remainder of 2022. Estimated variable cost of marketing per
IFP equivalent member increased by 11% in the three months ended March 31, 2022
compared to the same period in 2021.

Significant Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity
with U.S. generally accepted accounting principles 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.

An accounting method is considered critical if the nature of the estimates
or assumptions are important due to levels of subjectivity and judgment
necessary to take into account highly uncertain questions or the susceptibility of

                                       36


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such matters to change, and the effect of the estimates and assumptions on
financial condition or operating performance. The accounting policies we believe
to reflect our more significant estimates, judgments and assumptions and are
most critical to understanding and evaluating our reported financial results are
as follows:

• Recognition of contractual income and assets – commissions to be received;
•Stock-based compensation; and
• Accounting for income taxes.

There have been no changes to our critical accounting policies and estimates
described in our Annual Report on Form 10-K for the year ended December 31,
2021, filed with the SEC on March 1, 2022, that have had a significant impact on
our condensed consolidated financial statements and related notes. Please refer
to Management's Discussion and Analysis of Financial Condition and Results of
Operations contained in Part II, Item 7 of our Annual Report on Form 10-K for
the year ended December 31, 2021, for a complete discussion of our other
critical accounting policies and estimates.


                                       37


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Operating results

Our operating results and related percentage of total revenue are summarized
below for the periods presented (in thousands of dollars):

                                                                      Three Months Ended March 31,
                                                                             2022                   2021
Revenue
Commission                                                                               $  93,850             89  %       $ 127,052             95  %
Other                                                                                       11,400             11  %           7,162              5  %
Total revenue                                                                              105,250            100  %         134,214            100  %
Operating costs and expenses (1)
Cost of revenue                                                                               (127)             -  %             996              1  %
Marketing and advertising                                                                   58,454             56  %          50,874             38  %
Customer care and enrollment                                                                42,164             40  %          34,162             25  %
Technology and content                                                                      19,663             19  %          23,163             17  %
General and administrative                                                                  19,987             19  %          23,054             17  %
Amortization of intangible assets                                                                -              -  %             176              -  %

Restructuring and reorganization charges                                                     4,823              5  %           2,431              2  %

Total operating costs and expenses                                                         144,964            139  %         134,856            100  %
Loss from operations                                                                       (39,714)           (38) %            (642)             -  %
Other income (expense), net                                                                 (1,021)            (1) %             150              -  %
Loss before income taxes                                                                   (40,735)           (39) %            (492)             -  %
Provision for (benefit from) income taxes                                                   (7,993)            (8) %             308              -  %
Net loss                                                                                 $ (32,742)           (31) %       $    (800)            (1) %


____________

(1)Operating charges and expenses include the following amounts of shares
compensation expense (in thousands):

                                                   Three Months Ended March 31,
                                                                            2022          2021
Marketing and advertising                                                 $   313      $  2,485
Customer care and enrollment                                                  454           469
Technology and content                                                      1,850         2,743
General and administrative                                                  2,668         5,705

Total stock-based compensation expense                                    $ 5,285      $ 11,402




                                       38

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Revenue

Our commission income, other income and total income are summarized as follows
follows (in thousands of dollars):

                                                                     Three Months Ended March 31,                    Change
                                                                                                             2022               2021                $                 %
Commission                                                                                               $  93,850          $ 127,052          $ (33,202)            (26) %
% of total revenue                                                                                              89  %              95  %
Other                                                                                                       11,400              7,162              4,238              59  %
% of total revenue                                                                                              11  %               5  %
Total revenue                                                                                            $ 105,250          $ 134,214          $ (28,964)            (22) %



Three Months Ended March 31, 2022 and 2021 - Commission revenue decreased $33.2
million, or 26%, during the three months ended March 31, 2022 compared to the
same period in 2021 due to a $27.8 million decrease in commission revenue from
the Medicare segment and a $3.0 million decrease in commission revenue from the
Individual, Family and Small Business segment.

The decrease in commission revenue from the Medicare segment was driven by a 22%
decrease in Medicare plan approved members, driven primarily by a 23% decline in
Medicare Advantage plan approved members compared to 2021. The decrease in
commission revenue from the Individual, Family and Small Business segment was
primarily due to a 28% decrease in ancillary plan approved members, a 13%
decrease in individual and family major medical plan approved members, and a
$2.8 million decrease in net adjustment revenue. See Segment Information below
for further discussion.

Other income increased $4.2 millioni.e. 59%, during the three months ended
March 31, 2022 compared to the same period in 2021 due to an increase
Medicare advertising revenue.

Revenue cost

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 (in thousands of dollars):

                                     Three Months Ended March 31,               Change
                                                                           2022         2021          $             %
Cost of revenue                                                          $ (127)      $ 996       $ (1,123)       (113) %
% of total revenue                                                            -  %        1  %



Three Months Ended March 31, 2022 and 2021 - Cost of revenue decreased by $1.1
million during the three months ended March 31, 2022, compared to the same
period in 2021, primarily due to decreased activity from our revenue sharing
arrangements.


                                       39

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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.

Our marketing and advertising expenses are summarized as follows (dollars in
thousands):

                                                                              Three Months Ended March 31,                   Change
                                                                                                                     2022              2021               $                %
Marketing and advertising                                                                                         $ 58,454          $ 50,874          $ 7,580              15  %
% of total revenue                                                                                                      56  %             38  %



Three Months Ended March 31, 2022 and 2021 - Marketing and advertising expenses
increased $7.6 million, or 15%, during the three months ended March 31, 2022
compared to the same period in 2021, primarily driven by a $8.1 million increase
in Medicare plan related variable advertising, $0.6 million in personnel and
compensation costs, and $0.6 million in consulting expenses, partially offset by
decreases of $2.2 million in stock-based compensation expenses. The increase in
variable advertising expenses was due to an increase in our advertising expense
through our partner and online channels.

Customer service and registration

Customer support and registration fees consist primarily of compensation,
benefits and license fees for personnel engaged in assisting claimants
who call our customer service center and for registration staff who help
candidates during the registration process.

Our customer care and enrollment expenses are summarized as follows (dollars in
thousands):
                                                                       Three Months Ended March 31,                   Change
                                                                                                              2022              2021               $                %
Customer care and enrollment                                                                               $ 42,164          $ 34,162          $ 8,002              23  %
% of total revenue                                                                                               40  %             25  %



Three Months Ended March 31, 2022 and 2021 - Customer care and enrollment
expenses increased $8.0 million, or 23%, during the three months ended March 31,
2022 compared to the same period in 2021, primarily due to increases of $7.9
million in personnel cost from increased headcount, $1.4 million in facilities
and other costs, and $1.3 million in licensing costs, partially offset by
decreases of $2.6 million in consulting expenses.

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 in China, where
technology development costs are generally lower than in the United States.

Our technology and content expenses are summarized as follows (dollars in
thousands):
                                                                       Three Months Ended March 31,                   Change
                                                                                                              2022              2021                $                %
Technology and content                                                                                     $ 19,663          $ 23,163          $ (3,500)            (15) %
% of total revenue                                                                                               19  %             17  %



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Three Months Ended March 31, 2022 and 2021 - Technology and content expenses
decreased $3.5 million, or 15%, during the three months ended March 31, 2022
compared to the same period in 2021 primarily driven by decreases of $1.4
million in personnel and compensation costs due to lower capitalized project
costs, $1.4 million in facilities and other operating costs, $0.9 million in
stock-based compensation expense, and $0.8 million in consulting costs,
partially offset by an increase of $1.0 million in amortization of internally
developed software.


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):

                                                                           Three Months Ended March 31,                   Change
                                                                                                                  2022              2021                $                %
General and administrative                                                                                     $ 19,987          $ 23,054          $ (3,067)            (13) %
% of total revenue                                                                                                   19  %             17  %



Three Months Ended March 31, 2022 and 2021 - General and administrative expenses
decreased $3.1 million, or 13%, during the three months ended March 31, 2022
compared to the same period in 2021, primarily driven by decreases of $3.0
million in stock-based compensation expenses, $0.6 million in facilities and
other operating costs, and $0.6 million in consulting expenses, partially offset
by an increase of $1.3 million in other professional fees.


Amortization of intangible assets

Our intangible asset amortization expense is summarized as follows (dollars in
thousands):
                                                                         Three Months Ended March 31,                 Change
                                                                                                               2022            2021              $               %
Amortization of intangible assets                                                                            $    -          $  176          $ (176)            (100) %
% of total revenue                                                                                                -  %            -  %


Depreciation expense decreased in the three months ended March 31, 2022
compared to the same periods in 2021 due to the depreciation of our finite life assets
intangible fixed assets December 31, 2021.

                                       41


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Restructuring and reorganization costs

Our restructuring and reorganization charges consist primarily of severance,
transition and other related costs. Our restructuring and reorganization charges
are summarized as follows (dollars in thousands):
                                                                           Three Months Ended March 31,                  Change
                                                                                                                  2022             2021              $                %
Restructuring and reorganization charges                                                                       $ 4,823          $ 2,431          $ 2,392             98%
% of total revenue                                                                                                   5  %             2  %



Three Months Ended March 31, 2022 and 2021 - Restructuring and reorganization
costs for the three months ended March 31, 2022 primarily consisted of the
severance and other personnel related cost related to the restructuring that
took place in early second quarter of 2022. We completed a reduction in force in
April 2022 in which we eliminated approximately 339 full-time positions,
representing approximately 14% of our workforce, primarily in within the
customer care and enrollment groups, and to a lesser extent, in our marketing
and advertising and general and administrative groups.


Other income (expenses), net

Other income (expense), 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 (expense), net is summarized as follows (dollars in
thousands):
                                                                       Three Months Ended March 31,                  Change
                                                                                                              2022             2021               $                %
Other income (expense), net                                                                                $ (1,021)         $  150          $ (1,171)            (781) %
% of total revenue                                                                                               (1) %            -  %



Three Months Ended March 31, 2022 and 2021 - Other income (expense), net
decreased $1.2 million during the three months ended March 31, 2022 compared to
the same period in 2021 due primarily to interest expense for the Term Loan
Credit Agreement entered in the first quarter of 2022 and expenses related to
the termination of the RBC revolving credit facility at the same time.

Benefit from income tax

Our benefit from income taxes are summarized as follows (dollars in thousands):
                                                                      Three Months Ended March 31,                   Change
                                                                                                             2022              2021               $                 %
Provision for (benefit from) income taxes                                                                 $ (7,993)         $   308          $ (8,301)           (2,695) %
Effective tax rate                                                                                            19.6  %         (62.6) %



Three Months Ended March 31, 2022 and 2021 - Our effective tax rate of 19.6% for
the three months ended March 31, 2022 was lower compared to (62.6)% for the
three months ended March 31, 2021 primarily due to a one-time state tax
adjustment in 2021 that did not occur in 2022. Our effective tax rate for the
three months ended March 31, 2022 was lower than the statutory federal tax rate
due primarily to stock-based compensation adjustments and non-deductible
lobbying expenses, partially offset by research and development credits and
state taxes.


                                       42

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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 (loss). Our business structure is comprised of two operating segments:

•Medicare; and
•Individual, Family and Small Business.

Our CODM does not assess assets separately by segment, with the exception of
commissions to be received, 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 to purchase other marketing and
advertising services, as well as 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.

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 (loss) 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, depreciation and
amortization expense, amortization of intangible assets, and restructuring and
reorganization charges.


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The revenue and profit (loss) of our operating segment are summarized as follows (in
thousands):

                                                                          Three Months Ended March 31,                    Change
                                                                                                                  2022               2021                $                 %
Revenue:
Medicare                                                                                                      $  95,067          $ 121,021          $ (25,954)             (21) %
Individual, Family and Small Business                                                                            10,183             13,193             (3,010)             (23) %
Total revenue                                                                                                 $ 105,250          $ 134,214          $ (28,964)             (22) %
Segment profit (loss)
Medicare segment profit (loss)                                                                                $ (14,817)         $  24,545          $ (39,362)            (160) %
Individual, Family and Small Business segment profit                                                              5,254              8,052             (2,798)             (35) %
Segment profit (loss)                                                                                            (9,563)            32,597            (42,160)            (129) %
Corporate                                                                                                       (15,265)           (15,286)                21              *
Stock-based compensation expense                                                                                 (5,285)           (11,402)             6,117              (54) %

Depreciation and amortization (1)                                                                                (4,778)            (3,944)              (834)              21  %
Amortization of intangible assets                                                                                     -               (176)               176             (100) %

Restructuring and reorganization charges                                                                         (4,823)            (2,431)            (2,392)              98  %
Other income (expense), net                                                                                      (1,021)               150             (1,171)            (781) %
Loss before income taxes                                                                                      $ (40,735)         $    (492)         $ (40,243)            8179  %


_______

* The calculated percentage is not significant.

(1) Depreciation has been adjusted to include the amortization of
software development costs.

Revenue

Three Months Ended March 31, 2022 and 2021 - Revenue from our Medicare segment
declined $26.0 million, or 21%, during the three months ended March 31, 2022
compared to the same period in 2021, attributable to a $27.8 million decrease in
commission revenue, partially offset by a $4.4 million increase in sponsorship
and advertising revenue. The decrease in Medicare segment commission revenue is
primarily due to a decrease in Medicare Advantage plan related commission
revenue of $25.4 million. The decrease in Medicare Advantage commission revenue
was driven by 23% decline in Medicare Advantage plan approved members.

Revenue from our Individual, Family and Small Business segment declined $3.0
million, or 23%, during the three months ended March 31, 2022 compared to the
same period in 2021, primarily attributable to a $3.0 million decrease in
commission revenue. Based on our evaluation of the updated LTV models and
retention trends, we recognized $0.4 million in net adjustment revenue, a
decrease of $2.8 million during the three months ended March 31, 2022 compared
to the same period in 2021. The decrease in commission revenue is attributable
to a decline of 28% in ancillary approved members and a decline of 13% in
individual and family approved members.

Segment profit (loss)

Three Months Ended March 31, 2022 and 2021 - Our Medicare segment loss was $14.8
million during the three months ended March 31, 2022, a decrease of $39.4
million, or 160%, compared to segment profit of $24.5 million for the same
period in 2021. This was primarily due to a $13.4 million increase in operating
expenses, excluding stock-based compensation expense, depreciation and
amortization expense, restructuring and reorganization charges, and other income
(expense), as well as a $26.0 million decrease in revenue. The increase in
operating expenses was mostly attributable to a higher agent work force in 2022
compared to the prior year as well as higher spending on certain marketing
channels, especially online marketing.

Our Individual, Family and Small Business segment profit was $5.3 million during
the three months ended March 31, 2022, a decrease of $2.8 million, or 35%
compared to the same period in 2021. The decrease was primarily driven by a $3.0
million decrease in revenue and a $0.2 million decrease in operating expenses,
excluding
                                       44

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stock-based compensation expense, amortization expense,
restructuring and reorganization charges, and other income (expenses).

Cash and capital resources

Material cash needs

Our material cash requirements include our operating leases and service and
licensing obligations. See Note 10 - Leases in our Notes to Condensed
Consolidated Financial Statements for the details of our operating lease
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. See Note 8 - Commitments and Contingencies in our Notes to Condensed
Consolidated Financial Statements.

Short-term obligations were $7.7 million for leases and $10.4 million for
service and licensing as of March 31, 2022. Long-term obligations were $41.4
million for leases and $8.9 million for service and licensing as of March 31,
2022. We expect to fund these obligations through our existing cash and cash
equivalents and cash generated from operations.

Our future capital requirements will depend on many factors, including our
enrollment volume, membership, retention rates, telesales conversion rates, and
our level of investment in technology and content, marketing and advertising,
customer care and enrollment, and other initiatives. In addition, our cash
position could be impacted by the level of investments we make to pursue our
strategy. 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. Alternatively, we may decide to reduce
expenses in order to manage liquidity. These reductions could adversely impact
the growth of membership and revenue.

We believe our current cash and cash equivalents, along with the proceeds from
the term loan we obtained on February 28, 2022, and expected cash collections
will be sufficient to fund our operations for at least 12 months after the
filing date of this Quarterly Report on Form 10-Q.

Our cash, cash equivalents, and short-term marketable securities are summarized
as follows (in thousands):
                                                            March 31, 2022           December 31, 2021
Cash and cash equivalents                                 $       220,563          $           81,926
Short-term marketable securities                                   10,938                      41,306
Total cash, cash equivalents, and short-term marketable
securities                                                $       231,501          $          123,232



                                       45

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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. Alternatively, we may decide to reduce
marketing and advertising, customer care and enrollment, technology and content,
or other expenses in order to manage liquidity. These reductions could adversely
impact our rate of membership and revenue growth.

As of March 31, 2022, our cash and cash equivalents totaled $220.6 million. 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 and commercial paper. The increase in cash and cash
equivalents reflects $65.4 million of net cash provided by financing activities,
partially offset by $47.1 million of net cash provided by operating activities
and $26.1 million of net cash provided by investing activities. We also
maintained $3.2 million in restricted cash as of March 31, 2022 and December 31,
2021.

The following table presents a summary of our cash flows for the three months
finished March 31, 2022 (in thousands):

                                                                   Three 

Months ended March, 31st,

                                                                    2022                    2021
Net cash provided by operating activities                    $        47,112          $      42,809
Net cash provided by investing activities                             26,121                 10,497
Net cash provided by (used in) financing activities                   65,373                 (4,790)




Operating Activities

Net cash provided by operating activities primarily consists of net loss,
adjusted for certain non-cash items, including, 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 expense 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
annual enrollment period that takes place during the last quarter of each year
and the reintroduced Medicare Advantage open enrollment period in the first
quarter of the year, we experience an increase in the number of submitted
Medicare-related health insurance applications and marketing and advertising
expenses compared to outside of these enrollment periods. Similarly, during the
open enrollment period for individual and family health insurance plans which
typically takes place during the fourth 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
                                       46


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registration periods. The calendar of registration periods for individuals and families
health insurance plans, the annual Medicare enrollment period, and the open
the enrollment period for Medicare-related health insurance can positively or
negatively affect our cash flow in each quarter.

Three Months Ended March 31, 2022 - Net cash provided by operating activities
was $47.1 million during the three months ended March 31, 2022, primarily driven
by changes in net operating assets and liabilities of $77.6 million and
adjustments for non-cash items of $2.2 million, partially offset by a net loss
of $32.7 million. Adjustments for non-cash items primarily consisted of $5.3
million of stock-based compensation expense and $3.8 million of amortization of
intangible assets and internally-developed software, partially offset by an $8.0
million decrease due to the change in deferred income taxes. Cash provided by
changes in net operating assets and liabilities during the three months ended
March 31, 2022 primarily consisted of decreases of $77.1 million in contract
assets - commissions receivable, $12.4 million in prepaid expenses and other
current asset, and increases of $4.8 million in accrued expenses and other
liabilities, partly offset by decreases of $16.8 million in accrued marketing
expense and $5.5 million in accounts payable.

Three Months Ended March 31, 2021 - Net cash provided by operating activities
was $42.8 million during the three months ended March 31, 2021, primarily driven
by changes in net operating assets and liabilities of $28.2 million and a net
loss of $0.8 million, partially offset by adjustments for non-cash items of
$15.4 million. Adjustments for non-cash items primarily consisted of $11.4
million of stock-based compensation expense, $3.0 million of amortization of
intangible assets and internally-developed software, and $1.1 million of
depreciation and amortization. Cash used from changes in net operating assets
and liabilities during the three months ended March 31, 2021 primarily consisted
of decreases of $50.6 million in contract assets - commissions receivable and
$4.2 million in prepaid expenses and other current asset, increases of $4.1
million in accrued compensation and benefits and $1.3 million in accrued
expenses and other liabilities, partially offset by decreases of $25.8 million
in accounts payable and $6.7 million in accrued marketing expense. Cash
collection during the three months ended March 31, 2021 increased primarily
driven by enrollment growth and increases in commission rates for new
enrollments, as compared to the three months ended March 31, 2020.


Investing activities

Our investing activities primarily consist of purchases, maturities, and
redemptions of marketable securities as well as purchases of computer hardware
and software to enhance our website and customer care operations, leasehold
improvements related to facilities expansion, capitalized internal-use software
and website development costs and security deposit payments.

Three months completed March 31, 2022 – Net cash provided by investing activities of
$26.1 million for the three months ended March 31, 2022 consisted mainly of
$34.3 million the proceeds of maturities and redemptions of negotiable shares
securities, partially offset by $4.2 million for internal use capitalized
software and website development costs and $3.9 million used to buy
negotiable securities.

Three Months Ended March 31, 2021 - Net cash provided by investing activities of
$10.5 million for the three months ended March 31, 2021 mainly consisted $23.4
million proceeds from the maturities and redemptions of marketable securities,
partially offset by $7.8 million used to purchase marketable securities, $3.2
million in capitalized internal-use software and website development costs and
$1.9 million used to purchase property and equipment and other assets.


Fundraising activities

Three Months Ended March 31, 2022 - Net cash provided by financing activities of
$65.4 million for the three months ended March 31, 2022 was primarily due to
$64.9 million of net proceeds from debt financing and $1.1 million of net
proceeds from the exercise of common stock options, partially offset by $0.5
million in repurchases of shares to satisfy employee tax withholding
obligations.

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Three months completed March 31, 2021 – Net cash used in financing activities of
$4.8 million for the three months ended March 31, 2021 was mainly due to
repurchase of shares to satisfy employee withholding obligations.

Convertible preferred shares

On April 30, 2021 (the "Closing Date"), we issued and sold 2,250,000 shares of
our newly designated Series A convertible preferred stock ("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. We
received $214.0 million net proceeds from the private placement with Echelon
Health SPV, LP ("H.I.G."), net of sales commissions and certain transaction
fees.

Dividends on our outstanding shares of Series A preferred stock accrue daily at
8% per annum on the Stated Value per share and compound semiannually, payable in
kind until April 30, 2023, which is the second anniversary of the Closing Date,
on June 30 and December 31 of each year, beginning on June 30, 2021, and will
thereafter become 6% payable in kind and 2% payable in cash in arrears on June
30 and December 31 of each year, beginning on June 30, 2023 (each, a "Cash
Dividend Payment Date"). Dividends payable in kind will be cumulative. The
Series A preferred stock also participates, 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.

Beginning on April 30, 2027, which is the sixth anniversary of the Closing Date,
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.

From March 31, 2022no Series A preferred shares have been
converted and the balance of our Series A Preferred Shares was $239.8 million,
including a change in the redemption value of the $2.5 million and charges to pay
dividends paid in kind $4.7 millionwhich was equivalent to 3.0 million
common shares on a converted basis. See Note 6 – Convertible
Preferred shares in our notes to the condensed consolidated financial statements
included in this Quarterly Report on Form 10-Q for more information.

Term credit agreement

We entered into a term loan credit agreement (the "Term Loan Credit Agreement")
with Blue Torch Finance LLC, as administrative agent and collateral agent, and
the other lenders party thereto in February 2022. The Term Loan Credit Agreement
provides for a $70.0 million secured term loan credit facility, which term loans
were made available to us on February 28, 2022. We terminated our credit
agreement with Royal Bank of Canada ("RBC"), pursuant to which we had an up to
$75 million revolving credit facility in connection with our receiving the loan
under the Term Loan Credit Agreement.

The proceeds of the loans under the Term Loan Credit Agreement may be used for
working capital and general corporate purposes, to refinance our credit
agreement with Royal Bank of Canada and to pay fees and expenses in connection
with the entry into the Term Loan Credit Agreement. The term loan bears
interest, at our option, at either a rate based on the London Interbank Offered
Rate ("LIBOR") for the applicable interest period or a base rate, in each case
plus a margin. The base rate is the highest of the prime rate, the federal funds
rate plus 0.50% and one month adjusted LIBOR plus 1.0%. The margin is 7.50% for
LIBOR loans and 6.50% for base rate loans and the Term Loan Credit Agreement
includes customary "fallback" provisions with respect to potential
                                       48


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transition from the LIBOR. The outstanding obligations under the Term Loan
Credit Agreement are payable in full on the maturity date. The Term Loan Credit
Agreement matures in February of 2025. We have the right to prepay the loans
under the Term Loan Credit Agreement in whole or in part at any time, subject,
in the case of certain mandatory prepayments or any voluntary prepayment of the
loans under the Term Loan Credit Agreement after February 28, 2023, to an exit
fee. Our obligations under the Term Loan Credit Agreement are guaranteed by
certain of our material domestic subsidiaries and substantially all of our
assets and the assets of such guarantors, in each case, subject to customary
exclusions. We are obligated to pay administration fees in connection with the
Term Loan Credit Agreement.

As of March 31, 2022, we had $65.0 million outstanding principal amount under
our Term Loan Credit Agreement, net of closing costs. See Note 12 - Debt of
Notes to Condensed Consolidated Financial Statements included in this Quarterly
Report on Form 10-Q for additional information regarding this credit agreement
and subsequent amendment.


Recent accounting pronouncements

See Note 1 - Summary of Business and Significant Accounting Policies in the
Notes to Condensed Consolidated Financial Statements of this Quarterly Report on
Form 10-Q for recently issued accounting standards that could have an effect on
us.
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