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EHEALTH, INC. – 10-Q – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 period; 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; 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; 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 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
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Securities and Exchange Commission in February 2021 and amended in April 2021,
and the audited consolidated financial statements and related notes contained
therein.


Overview

We are a leading private health insurance marketplace with a technology and
service platform that provides consumer engagement, education and health
insurance enrollment solutions. Our mission is to connect every person with the
highest quality, most affordable health insurance and Medicare plans for their
life circumstances. Our platform integrates proprietary and third-party
developed educational content regarding health insurance plans with decision
support tools to aid consumers in what has traditionally been a confusing and
opaque health insurance purchasing process, and to help them obtain the health
insurance products that meet their individual health and economic needs. Our
omnichannel consumer engagement platform 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 200 health
insurance carriers across all fifty states and the District of Columbia.


Updates on Business Initiatives

During the third quarter of 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.

In 2021, we shifted the mix of our telesales capacity towards full-time internal
agents and away from third party vendor agents. In October 2021, we entered the
Medicare annual enrollment period with internal agents comprising over 95% of
our total agents, the largest number of full-time employed agents in our history
and compared to approximately 50% at the same time in 2020. We also made other
important changes across our call centers to improve the effectiveness of our
agents and further enhance consumer experience. These changes include the
migration of our call center technology to a cloud-based contact center and
upgraded lead scoring and routing tools. We believe these improvements and new
tools provide better support to our agents in their interactions with consumers
as we enter into the most critical selling season of the year.

Enrollment quality has been our focus since the launch of our retention program
over a year ago, which is ensuring that eHealth presents 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 the third quarter of 2021, we introduced additional mandatory
training for our agents, added a new customer care function to verify certain
Medicare enrollments prior to submission to the carrier, and expanded other
quality assurance efforts. We restructured agent compensation incentives to
place more focus on addressing the longer-term coverage needs of customers. As
part of the recent migration of our call center technology to a cloud-based
contact center, we also implemented a new cloud-based agent monitoring system,
which is expected to provide new robust capabilities to train agents and monitor
their performance in real time. While we expect these initiatives will enhance
the quality of our enrollments generally, the introduction of these efforts to
date has resulted in lower conversion rates and longer average talk times for
telephonic enrollments.

We continuously look for ways to improve the user experience of our online
tools. Ahead of the annual enrollment period, we enhanced our online
capabilities by launching an updated recommendation engine. This engine is
designed to improve the accuracy of personalized plan-matching. It has
machine-learning capabilities and leverages data from online customer
interactions to provide recommendations, which we believe improves the online
shopping experience and helps Medicare eligible consumers navigate increasingly
broad and complex plan choices. Our online Customer Center continues to
strengthen and support our relationships with consumers and to help retain their
business when it's time to review their plan coverage choices. The Customer
Center enables members to create a secure personal profile that stores their
prescription drug regimen, preferred doctors and pharmacies, current coverage,
and other relevant data, and makes this data available to the member and our
licensed agents that they contact. The accessibility of the information
facilities plan selection for our agents and members with accounts and also
incentivizes members to return to us when their needs change.

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Although the investments in our telesales operations, technology and enrollment
quality assurance have negatively impacted our third quarter financial results,
we believe that they will create long-term competitive advantages for us as
carriers place an increasing value on enrollment quality and reduction in
beneficiary complaints.


Changes in Senior Management

In September 2021, we announced the appointment of Christine Janofsky as our
senior vice president, chief financial officer, effective September 2021. We
also announced the resignation of Scott Flanders from his positions as a member
of our board of directors and chief executive officer, effective October 31,
2021, and the appointment of Fran Soistman as a member of our board of directors
and our chief executive officer, effective November 1, 2021. Mr. Flanders has
agreed to provide consulting services to us through December 31, 2021 to assist
with the transition of his duties and responsibilities. These executive changes
resulted in lower general and administrative expenses in the third quarter of
2021, primarily due to the reversal of stock-based compensation expense related
to Mr. Flanders' forfeited equity awards. Severance and other personnel costs
related to Mr. Flanders' separation are included in restructuring and
reorganization charges on our Condensed Consolidated Statement of Comprehensive
Loss in the third quarter of 2021. Part of these severance and other personnel
costs will be recognized during his remaining service period in the fourth
quarter.


COVID-19 Impact Updates

As of September 30, 2021, all of our offices remained open at reduced capacity
and with additional safety and social distancing measures as a result of the
COVID-19 pandemic. eHealth currently plans to operate with a combination of
remote and in-office work in the United States at least through the end of 2021.
We plan to increase the number of in-office employees next year depending upon
the COVID-19 vaccination status of our employees as we intend to have only
vaccinated employees in the office to promote the health and safety of our
employees.

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. Due to the surge of
COVID-19 cases caused by the COVID-19 Delta variant, employees in our California
offices are still required by county order to wear masks while in our offices
regardless of vaccination status. The emergence of Delta and other variants
could cause us to alter our operations and plans for in-office and remote work.
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 Metrics

We rely upon certain metrics to estimate and recognize commission revenue,
evaluate our business performance and facilitate strategic planning. Our
commission revenue is influenced by a number of factors including but not
limited to:

•the number of individuals on applications for Medicare-related, individual and
family, small business and ancillary health insurance plans that are approved by
the relevant health insurance carriers;
•the number of approved members for Medicare-related, individual and family,
small business and ancillary health insurance plans from whom we have received
an initial commission payment; and
•the constrained lifetime value ("LTV"), of approved members for
Medicare-related, individual and family and ancillary health insurance plans we
sell, as well as the estimated annual value of approved members for small
business plans we sell.


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Approved Members

Approved members represent the number of individuals on submitted applications
that were approved by the relevant insurance carrier for the identified product
during the current period. The applications may be submitted in either the
current period or prior periods. Not all approved members ultimately become
paying members.

The following table shows approved members by product for the period presented:
                                              Three Months Ended September 30,                                                Nine Months Ended September 30,
                                            2021                              2020               % Change                  2021                              2020                % Change
Medicare
Medicare Advantage                          36,836                             44,999                 (18) %              222,289                             170,374                  30  %
Medicare Supplement                          4,258                              7,456                 (43) %               18,170                              27,088                 (33) %
Medicare Part D                              5,690                              7,485                 (24) %               20,677                              24,054                 (14) %
Total Medicare                              46,784                             59,940                 (22) %              261,136                             221,516                  18  %
Individual and Family
Non-Qualified Health Plans                   3,241                              2,665                  22  %               12,970                              10,283                  26  %
Qualified Health Plans                       4,991                              1,707                 192  %               16,049                               8,764                  83  %
Total Individual and Family                  8,232                              4,372                  88  %               29,019                              19,047                  52  %
Ancillary
Short-term                                   7,313                              9,784                 (25) %               21,651                              31,368                 (31) %
Dental                                       9,043                             10,136                 (11) %               30,619                              27,568                  11  %
Vision                                       4,332                              3,806                  14  %               13,960                              12,071                  16  %
Other                                        2,396                              2,991                 (20) %                7,413                              11,262                 (34) %
Total Ancillary                             23,084                             26,717                 (14) %               73,643                              82,269                 (10) %
Small Business                               2,320                              3,473                 (33) %                7,856                              10,194                 (23) %
Total Approved Members                      80,420                             94,502                 (15) %              371,654                             333,026                  12  %



Three Months Ended September 30, 2021 and 2020 - Medicare approved members
decreased 22% in the three months ended September 30, 2021 compared to the same
period in 2020. The decrease in total Medicare approved members was primarily
attributable to a decline in telesales conversion rate which was primarily
driven by additional quality initiatives we introduced during the third quarter
of 2021, partially offset by the growth of our online applications.

Individual and family plan approved members grew 88% in the three months ended
September 30, 2021 compared to the same period in 2020 due to the favorable
market environment. The individual and family health insurance market is
benefiting from the passage of the American Rescue Plan Act in March 2021. This
legislation expanded access to premium credits making individual and family
major medical plans more affordable, which allows a larger population to get the
coverage that our major medical plans offer.

Ancillary plan approved members decreased 14% in the three months ended
September 30, 2021 compared to the same period in 2020 primarily due to
decreases in approved members for short-term health insurance plans, dental and
other ancillary insurance, partially offset by an increase in approved members
for vision insurance. Small business group health insurance approved members
declined 33% in the three months ended September 30, 2021 compared to the same
period in 2020 mainly due to the shift of our focus away from the sale of small
business products.

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Nine Months Ended September 30, 2021 and 2020 - Medicare approved members
increased 18% in the nine months ended September 30, 2021 compared to the same
period in 2020. The increase in total Medicare approved members was primarily
attributable to an increase in Medicare Advantage plan members, partially offset
by decreases in Medicare Supplement plan members and Medicare Part D
prescription drug plan members during the nine months ended September 30, 2021
compared to the same period in 2020. The increase in approved Medicare Advantage
members was primarily driven by strong consumer demand, online enrollment
growth, and an increase in our internal agent productivity during the Medicare
Advantage open enrollment period in the first quarter of 2021, partially offset
by a decline in telesales conversion rate during the third quarter of 2021, as
described above.

Individual and family plan approved members grew 52% in the nine months ended
September 30, 2021 compared to the same period in 2020 partially due to the
favorable market environment resulting from the passage of the American Rescue
Plan Act mentioned above.

Ancillary plan approved members declined 10% in the nine months ended September
30, 2021 compared to the same period in 2020 primarily due to declines in
approved members for short-term health insurance plans and other ancillary
plans, partially offset by an increase in approved members for dental and vision
insurance. Small business group health insurance approved members declined 23%
in the nine months ended September 30, 2021 compared to the same period in 2020
mainly due to the shift of our focus away from the sale of small business
products.


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:

                                               Three Months Ended September 30,                                               Nine Months Ended September 30,
                                              2021                            2020                % Change                 2021                              2020                % Change
Medicare
Medicare Advantage                           38,193                            44,528                  (14) %             256,900                            188,059                   37  %
Medicare Supplement                           3,832                             6,912                  (45) %              19,145                             26,386                  (27) %
Medicare Part D                               5,601                             7,378                  (24) %              41,620                             78,588                  (47) %
Total Medicare                               47,626                            58,818                  (19) %             317,665                            293,033                    8  %
Individual and Family
Non-Qualified Health Plans                    3,206                             2,550                   26  %              18,781                             15,920                   18  %
Qualified Health Plans                        4,937                             1,548                  219  %              16,180                             10,600                   53  %
Total Individual and Family                   8,143                             4,098                   99  %              34,961                             26,520                   32  %
Ancillary
Short-term                                    8,703                            10,461                  (17) %              26,909                             32,293                  (17) %
Dental                                        8,862                             9,500                   (7) %              29,765                             26,848                   11  %
Vision                                        4,563                             3,953                   15  %              14,972                             13,170                   14  %
Other                                         2,534                             3,502                  (28) %               7,710                             11,289                  (32) %
Total Ancillary                              24,662                            27,416                  (10) %              79,356                             83,600                   (5) %
Small Business                                2,230                             3,518                  (37) %               8,746                             11,812                  (26) %
Total New Paying Members                     82,661                            93,850                  (12) %             440,728                            414,965                    6  %



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Three Months Ended September 30, 2021 and 2020 - Medicare total new paying
members declined 19% in the three months ended September 30, 2021 compared to
the same period in 2020, attributable to a decline in telesales conversion rate,
partially offset by the growth of our online applications. Individual and family
plan new paying members grew 99% in the three months ended September 30, 2021
compared to the same period in 2020 primarily driven by an increase in approved
members for qualified health plans. Ancillary new paying members declined 10% in
the three months ended September 30, 2021 compared to the same period in 2020
primarily due to a decline in approved members for short-term, dental and other
ancillary insurance plans, partially offset by an increase in approved members
for vision insurance plans. Small business new paying members declined 37% in
the three months ended September 30, 2021 compared to the same period in 2020
primarily due to a decrease in approved members for small business plans.

Nine Months Ended September 30, 2021 and 2020 - Medicare total new paying
members grew 8% in the nine months ended September 30, 2021 compared to the same
period in 2020, primarily driven by an increase in Medicare Advantage plan
approved members, partially offset by decreases in Medicare Part D prescription
drug plan and Medicare Supplement plan approved members. Individual and family
plan new paying members grew 32% in the nine months ended September 30, 2021
compared to the same period in 2020 primarily driven by increases in approved
members for non-qualified and qualified plans. Ancillary new paying members
declined 5% in the nine months ended September 30, 2021 compared to the same
period in 2020 primarily due to a decrease in approved members for short-term
and other ancillary plans. Small business new paying members declined 26% in the
nine months ended September 30, 2021 compared to the same period in 2020
primarily due to a decrease in approved members for small business plans.


Estimated Constrained Lifetime Value of Commissions Per Approved Member

The following table shows our estimated constrained LTV of commissions per
approved member by product for the periods presented below:

                                                               Three Months Ended September 30,
                                                                  2021                    2020                 % Change
Medicare
Medicare Advantage (1)                                    $             975          $        898                      9  %
Medicare Supplement (1)                                                 955                 1,071                    (11) %
Medicare Part D (1)                                                     227                   245                     (7) %
Individual and Family
Non-Qualified Health Plans (1)                                          254                   188                     35  %
Qualified Health Plans (1)                                              296                   244                     21  %
Ancillary
Short-term (1)                                                          157                   149                      5  %
Dental (1)                                                               98                    84                     17  %
Vision (1)                                                               60                    54                     11  %
Small Business (2)                                                      186                   142                     31  %


__________

(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, 2020.

(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.

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Medicare

The constrained LTV of commissions per approved member for Medicare Advantage
plans grew by 9%, and declined by 11% and 7%, respectively, for Medicare
Supplement and Medicare Part D prescription drug plans during the three months
ended September 30, 2021 compared to the same period in 2020. The increase in
constrained LTV of Medicare Advantage plans was due to higher commission rates.
The decline in constrained LTV of commissions per approved member for Medicare
Supplement and Medicare Part D prescription drug plans was due to shorter
average plan durations for both products.

Individual and Family and Ancillary

The constrained LTV of commissions per non-qualified health plan approved member
and qualified health plan approved member increased 35% and 21%, respectively,
during the three months ended September 30, 2021 compared with the same period
in 2020 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 5%,
17%, 11%, and 31%, respectively, during the three months ended September 30,
2021 compared with the same period in 2020 primarily due to an increase in
estimated average plan duration.

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 September 30,
                                           2021                    2020
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  %      -  %



The constraints for Medicare Supplement and Medicare Part D prescription drug
plans increased during the three months ended September 30, 2021, 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 September 30, 2021, 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
September 30, 2021, 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 September 30,
                                   2021                       2020         % Change
Medicare (1)
Medicare Advantage               559,235                     421,237           33  %
Medicare Supplement               99,622                      96,525            3  %
Medicare Part D                  216,582                     216,641            -  %
Total Medicare                   875,439                     734,403           19  %

Individual and Family (2)
Non-Qualified Health Plans        84,260                      92,054           (8) %
Qualified Health Plans            23,866                      20,780           15  %
Total Individual and Family      108,126                     112,834           (4) %
Ancillary (3)
Short-term                        17,073                      24,105          (29) %
Dental                           122,126                     116,846            5  %
Vision                            69,210                      67,944            2  %
Other                             32,957                      36,158           (9) %
Total Ancillary                  241,366                     245,053           (2) %
Small Business (4)                45,697                      44,424            3  %
Total Estimated Membership     1,270,628                   1,136,714           12  %


__________________

(1)To estimate the number of members on Medicare-related health insurance plans,
we take the sum of (i) the number of members for whom we have received or
applied a commission payment for a month that may be up to three months prior to
the date of estimation (after reducing that number using historical experience
for assumed member cancellations over the period being estimated); and (ii) the
number of approved members over that period (after reducing that number using
historical experience for an assumed number of members who do not accept their
approved policy and for estimated member cancellations through the date of the
estimate). To the extent we determine through confirmations from a health
insurance carrier that a commission payment is delayed or is inaccurate as of
the date of estimation, we adjust the estimated membership to also reflect the
number of members for whom we expect to receive or to refund a commission
payment. Further, 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.
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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 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.

Historically, our membership estimates in a particular quarter have not been
significantly different when compared to membership data received from carriers
in a subsequent quarter. However, we experienced a larger deviation in the
actual Medicare Advantage membership, which was lower than our initial estimate,
for the first quarter of 2020. This deviation was primarily due to the time
delay in our receiving information from carriers and a higher level of plan
cancellations than expected. The difference between our estimates and carrier
data have returned to our historical ranges since that time.

Medicare-related plan estimated membership as of September 30, 2021 grew 19%
compared to estimated membership as of September 30, 2020 due to a 33% growth in
Medicare Advantage estimated membership and a 3% growth in Medicare Supplement
plan estimated membership. The overall growth in Medicare estimated membership
was due to increased sales of Medicare Advantage plans.

Individual and family plan estimated membership as of September 30, 2021
declined 4% compared to estimated membership as of September 30, 2020 due to
overall market conditions in the individual and family plan market, despite the
recent stabilization and improvement, and the shift of our investment towards
Medicare. Ancillary plan estimated membership as of September 30, 2021 declined
2% compared to estimated membership as of September 30, 2020 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.

                                       36


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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
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 September 30,
                                                               2021                2020              % Change
Medicare

Estimated CC&E cost per approved MA-equivalent approved
member (1)

                                                $     1,099          $     759                    45  %

Estimated variable marketing cost per MA-equivalent
approved member (1)

                                               775                422                    84  %

Total Medicare estimated cost per approved member $ 1,874

    $   1,181                    59  %

Individual and Family Plan
Estimated CC&E cost per IFP-equivalent approved member
(2)

                                                       $       119          $     137                   (13) %

Estimated variable marketing cost per IFP-equivalent
approved member (2)

                                                65                 79                   (18) %
Total IFP estimated cost per approved member              $       184          $     216                   (15) %


__________________

(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 45% in the three
months ended September 30, 2021 compared to the same period in 2020 due to lower
enrollment volume resulting from enrollment quality initiatives, a decline in
our telesales conversion rate and an earlier start to our staffing increase for
the Medicare annual enrollment period this year. In October 2021, we entered
this annual enrollment period with over 95% of our sales force consisting of
internal agents. We believe that this investment in internal telesales capacity
will strengthen our telesales organization and improve enrollment quality going
forward. Estimated variable marketing cost per MA-equivalent member increased
84% 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.

Estimated CC&E cost per approved IFP-equivalent member decreased 13% in the
three months ended September 30, 2021 compared to the same period in 2020 due
primarily to an increase in agent productivity. Estimated variable marketing
cost per IFP-equivalent member decreased 18% in the three months ended September
30, 2021 compared to the same period in 2020 due to an extended special open
enrollment period.


                                       37

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Critical 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 policy is considered to be critical if the nature of the estimates
or assumptions is material due to the levels of subjectivity and judgment
necessary to account for highly uncertain matters or the susceptibility of 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:

•Revenue Recognition and contract assets – commission receivable;
•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,
2020, filed with the SEC on February 26, 2021 and amended on April 29, 2021,
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, 2020,
for a complete discussion of our other critical accounting policies and
estimates.


                                       38

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Results of Operations

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

                                                        Three Months Ended September 30,                                           Nine Months Ended September 30,
                                                     2021                                 2020                                 2021                                 2020
Revenue
Commission                            $        59,191              93  %       $  73,544             78  %       $       276,066             94  %       $ 253,986             88  %
Other                                           4,723               7  %          20,740             22  %                18,619              6  %          35,472             12  %
Total revenue                                  63,914             100  %          94,284            100  %               294,685            100  %         289,458            100  %
Operating costs and expenses (1)
Cost of revenue                                   (25)              -  %             482              1  %                 1,217              -  %           2,160              1  %
Marketing and advertising                      43,317              68  %          33,405             35  %               138,772             47  %         104,042             36  %
Customer care and enrollment                   48,956              77  %          43,342             46  %               121,480             41  %         101,025             35  %
Technology and content                         20,369              31  %          17,673             19  %                63,996             22  %          46,786             16  %
General and administrative                     16,640              26  %          19,942             21  %                57,812             20  %          60,308             21  %
Amortization of intangible assets                 121               -  %             287              -  %                   416              -  %           1,207              -  %

Restructuring and reorganization
charges                                           573               1  %               -              -  %                 3,004              1  %               -              -  %

Total operating costs and expenses            129,951             203  %         115,131            122  %               386,697            131  %         315,528            109  %
Loss from operations                          (66,037)           (103) %         (20,847)           (22) %               (92,012)           (31) %         (26,070)            (9) %
Other income (expense), net                       189               -  %            (101)             -  %                   511              -  %             724              -  %
Loss before benefit from income taxes         (65,848)           (103) %         (20,948)           (22) %               (91,501)           (31) %         (25,346)            (9) %
Benefit from income taxes                     (12,834)            (20) %          (6,443)            (7) %               (19,278)            (7) %         (10,923)            (4) %
Net loss                              $       (53,014)            (83) %       $ (14,505)           (15) %       $       (72,223)           (24) %       $ (14,423)            (5) %


____________

(1)Operating costs and expenses include the following amounts of stock-based
compensation expense (in thousands):

                                                   Three Months Ended September 30,               Nine Months Ended September 30,
                                                       2021                   2020                   2021                   2020
Marketing and advertising                      $           2,297          $ 

1,869 $ 6,922 $ 5,138
Customer care and enrollment

                                 740                 527                     1,901               1,762
Technology and content                                     2,380               1,430                     7,483               2,965
General and administrative                                  (183)              2,506                     8,575              11,857

Total stock-based compensation expense         $           5,234          $    6,332          $         24,881          $   21,722




                                       39

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Revenue

Our commission revenue, other revenue and total revenue are summarized as
(dollars in thousands):

                              Three Months Ended September
                                           30,                                Change                     Nine Months Ended September 30,                     Change
                                 2021               2020                $                 %                  2021                   2020                $                %
Commission                   $  59,191           $ 73,544          $ (14,353)            (20) %       $       276,066           $ 253,986          $ 22,080               9  %
% of total revenue                  93   %             78  %                                                       94   %              88  %
Other                            4,723             20,740            (16,017)            (77) %                18,619              35,472           (16,853)            (48) %
% of total revenue                   7   %             22  %                                                        6   %              12  %
Total revenue                $  63,914           $ 94,284          $ (30,370)            (32) %       $       294,685           $ 289,458          $  5,227               2  %



Three Months Ended September 30, 2021 and 2020 - Commission revenue decreased
$14.4 million, or 20%, during the three months ended September 30, 2021 compared
to the same period in 2020 due to an $8.8 million decrease in commission revenue
from the Medicare segment and a $5.5 million decrease in commission revenue from
the Individual, Family and Small Business segment.

The decrease in commission revenue from the Medicare segment during the three
months ended September 30, 2021 compared to the same period in 2020 was due to a
22% decline in approved members primarily attributable to an 18% decline of
approved members for Medicare Advantage plans, partially offset by a 9% increase
in Medicare Advantage LTVs. The decrease in commission revenue from the
Individual, Family and Small Business segment was due primarily to a $7.0
million decrease in net adjustment revenue from members enrolled in prior
periods, partially offset by an 88% increase in approved individual and family
plan members due to a favorable market environment, and higher lifetime values
for individual and family plan and certain ancillary products.

Other revenue declined $16.0 million, or 77%, during the three months ended
September 30, 2021 compared to the same period in 2020 due primarily to a
decrease in Medicare sponsorship and advertising revenue driven by reduced
sponsorship activity, a decline in Medicare enrollment volumes year-over-year,
and timing, with certain advertising arrangements commencing in the fourth
quarter as compared to the third quarter in 2020.

Nine Months Ended September 30, 2021 and 2020 - Commission revenue increased
$22.1 million, or 9%, during the nine months ended September 30, 2021 compared
to the same period in 2020 due to a $12.1 million increase in commission revenue
from the Individual, Family and Small Business segment and a $10.0 million
increase in commission revenue from the Medicare segment.

The increase in commission revenue from the Medicare segment was driven by an
18% increase in Medicare plan approved members, driven primarily by a 30% growth
in Medicare Advantage plan approved members compared to 2020, partially offset
by a decrease in net commission revenue from Medicare members approved in prior
periods which was primarily attributable to Medicare Supplement and Medicare
Part D prescription drug plans. The increase in commission revenue from the
Individual, Family and Small Business segment was primarily driven by a $8.6
million increase in net adjustment revenue, 52% increase in individual and
family major medical plan approved members, 11% increase in dental plan approved
members, and 16% increase in vision plan approved members. See Segment
Information below for further discussion.

Other revenue decreased $16.9 million, or 48%, during the nine months ended
September 30, 2021 compared to the same period in 2020 due to a decrease in
Medicare sponsorship and advertising revenue also related to timing as mentioned
above.

We believe that the nature of our sponsorship arrangements with carriers will
evolve and be driven by the quality of broker enrollments to a greater extent
compared to the prior arrangements which were more focused on volume.


                                       40


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Cost of Revenue

Cost of revenue consists of payments related to health insurance plans sold to
members who were referred to our website by marketing partners with whom we have
revenue-sharing arrangements. In order to enter into a revenue-sharing
arrangement, marketing partners must be licensed to sell health insurance in the
state where the policy is sold. Costs related to revenue-sharing arrangements
are expensed as the related revenue is recognized.

Additionally, cost of revenue includes the amortization of consideration we paid
to certain broker partners in connection with the transfer of their health
insurance members to us as the new broker of record on the underlying plans.
These transfers include primarily Medicare plan members. Consideration for all
book-of-business transfers is being amortized to cost of revenue as we recognize
commission revenue related to the transferred members.

Our cost of revenue is summarized as follows (dollars in thousands):

                          Three Months Ended September                                          Nine Months Ended September
                                       30,                              Change                              30,                             Change
                              2021              2020              $               %                2021              2020              $               %
Cost of revenue           $    (25)           $  482          $ (507)            (105) %       $  1,217           $ 2,160          $ (943)            (44) %
% of total revenue               -    %            1  %                                               -   %             1  %



Three Months Ended September 30, 2021 and 2020 - Cost of revenue decreased by
$0.5 million during the three months ended September 30, 2021, compared to the
same period in 2020, primarily due to decreased activity from our revenue
sharing arrangements.

Nine Months Ended September 30, 2021 and 2020 - Cost of revenue decreased by
$0.9 million during the three months ended September 30, 2021, compared to the
same period in 2020, primarily due to decreased activity from our revenue
sharing arrangements.


Marketing and Advertising

Marketing and advertising expenses consist primarily of member acquisition
expenses associated with our direct, marketing partner and online advertising
member acquisition channels, in addition to compensation and other expenses
related to marketing, business development, partner management, public relations
and carrier relations personnel who support our offerings.

Our marketing and advertising expenses are summarized as follows (dollars in
thousands):
                                     Three Months Ended September
                                                  30,                               Change                    Nine Months Ended September 30,                     Change
                                        2021               2020               $                %                  2021                   2020                $                %
Marketing and advertising           $  43,317           $ 33,405          $ 9,912              30  %       $       138,772           $ 104,042          $ 34,730              33  %
% of total revenue                         68   %             35  %                                                     47   %              36  %



Three Months Ended September 30, 2021 and 2020 - Marketing and advertising
expenses increased $9.9 million, or 30%, during the three months ended September
30, 2021 compared to the same period in 2020, primarily driven by a $10.2
million increase in Medicare plan related variable advertising, $0.4 million in
stock-based compensation expenses and $0.4 million in facilities and other
costs, partially offset by decreases of $0.6 million in consulting expenses and
$0.6 million in personnel and compensation costs. The increase in variable
advertising expense was due to an increase in our advertising expense per
approved Medicare member, partially offset by a decline in the number of
approved members during the quarter.

Nine Months Ended September 30, 2021 and 2020 - Marketing and advertising
expenses increased $34.7 million, or 33%, during the nine months ended September
30, 2021 compared to the same period in 2020, primarily driven by a $36.1
million increase in Medicare plan related variable advertising and $1.8 million
in stock-based compensation expenses, partially offset by decreases of $2.2
million in consulting expenses and $1.8 million in personnel and compensation
costs. The increase in variable advertising expenses was due to an increase in
our advertising expense through our partner and online channels.

                                       41


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Customer Care and Enrollment

Customer care and enrollment expenses primarily consist of compensation,
benefits, and licensing costs for personnel engaged in assistance to applicants
who call our customer care center and for enrollment personnel who assist
applicants during the enrollment process. Our customer care and enrollment
expenses also include third-party call center costs.

Our customer care and enrollment expenses are summarized as follows (dollars in
thousands):
                              Three Months Ended September
                                           30,                               Change                    Nine Months Ended September 30,                     Change
                                 2021               2020               $                %                  2021                   2020                $                %
Customer care and enrollment $  48,956           $ 43,342          $ 5,614              13  %       $       121,480           $ 101,025          $ 20,455              20  %
% of total revenue                  77   %             46  %                                                     41   %              35  %



Three Months Ended September 30, 2021 and 2020 - Customer care and enrollment
expenses increased $5.6 million, or 13%, during the three months ended September
30, 2021 compared to the same period in 2020, primarily due to increases of
$15.1 million in personnel costs reflecting our investment in earlier onboarding
of our internal telesales team and strengthening our resources in advance of the
Medicare annual enrollment period as noted below and $1.9 million in facilities
and other costs as well as a decline in telephonic conversion rates, partially
offset by decreases of $8.4 million in external agents and consulting expenses,
and $3.2 million in licensing costs.


Nine Months Ended September 30, 2021 and 2020 - Customer care and enrollment
expenses increased $20.5 million, or 20%, during the nine months ended September
30, 2021 compared to the same period in 2020, primarily due to increases of
$28.7 million in personnel costs reflecting our investment in earlier onboarding
of our internal telesales team and strengthening our resources in advance of the
Medicare annual enrollment period as noted below and $2.4 million in facilities
and other costs, partially offset by decreases of $7.0 million in consulting
expenses and $4.4 million in licensing costs. The decrease in licensing costs
was primarily due to previously over-recognized licensing costs that were
adjusted during the first quarter of 2021.

We have shifted to a predominantly internal agent model and intend to employ and
maintain the majority of our health insurance agent force year-round. In 2021,
we started internal agent hiring and training earlier in the year compared to
2020, with the largest headcount increase in the second and third quarters.
During the three months ended September 30, 2021, we made progress expanding and
enhancing our telesales organization and continued to scale our digital
business. In October 2021, we entered the annual enrollment period with over 95%
of our sales force consisting of internal agents, the largest number of
full-time agents in our company's history. We also incurred more spending on
agent training and the expansion of our customer service team in the third and
fourth quarters, including the addition of a new customer care role to verify
Medicare enrollments prior to submission and expanding our quality assurance
efforts. Over time, we expect for these initiatives to result in improved
enrollment quality, higher LTVs, as well as stronger consumer awareness of our
choice platform.


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 September
                                           30,                               Change                 Nine Months Ended September 30,                 Change
                                 2021               2020               $                %               2021               2020                $                %
Technology and content       $  20,369           $ 17,673          $ 2,696              15  %       $  63,996           $ 46,786          $ 17,210              37  %
% of total revenue                  31   %             19  %                                               22   %             16  %



                                       42

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Three Months Ended September 30, 2021 and 2020 - Technology and content expenses
increased $2.7 million, or 15%, during the three months ended September 30, 2021
compared to the same period in 2020 primarily driven by increases of $1.7
million in depreciation and amortization expenses, $1.0 million in stock-based
compensation expense and $0.9 million in personnel and compensation costs due to
higher headcount, partially offset by $0.6 million decrease in facilities and
other operating costs and $0.3 million in consulting expenses.


Nine Months Ended September 30, 2021 and 2020 - Technology and content expenses
increased $17.2 million, or 37%, during the nine months ended September 30, 2021
compared to the same period in 2020 primarily driven by increases of $6.8
million in personnel and compensation costs due to higher headcount, $4.5
million in stock-based compensation expense, $4.3 million in depreciation and
amortization expenses, and $1.2 million in facilities and other operating costs.


General and Administrative

General and administrative expenses include compensation and benefits costs for
personnel working in our executive, finance, investor relations, government
affairs, legal, human resources, internal audit, facilities and internal
information technology departments. These expenses also include fees paid for
outside professional services, including audit, tax, legal, government affairs
and information technology fees.

Our general and administrative expenses are summarized as follows (dollars in
thousands):

                                  Three Months Ended September
                                               30,                               Change                  Nine Months Ended September 30,                 Change
                                     2021               2020                $                %               2021               2020                $                %
General and administrative       $  16,640           $ 19,942          $ (3,302)            (17) %       $  57,812           $ 60,308          $ (2,496)             (4) %
% of total revenue                      26   %             21  %                                                20   %             21  %



Three Months Ended September 30, 2021 and 2020 - General and administrative
expenses decreased $3.3 million, or 17%, during the three months ended September
30, 2021 compared to the same period in 2020, primarily driven by decreases of
$2.7 million in stock-based compensation expenses, $1.8 million in personnel and
compensation costs, and $0.5 million in consulting expenses, partially offset by
an increase of $1.3 million in other professional fees.


Nine Months Ended September 30, 2021 and 2020 - General and administrative
expenses decreased $2.5 million, or 4%, during the nine months ended September
30, 2021 compared to the same period in 2020, primarily driven by decreases of
$3.3 million in stock-based compensation expenses, $2.4 million in personnel and
compensation costs and $1.1 million in consulting expenses, partially offset by
an increase of $2.7 million in other professional fees, $0.8 million in
facilities and other operating costs and $0.5 million in depreciation and
amortization expenses.

The decrease in stock-based compensation expenses for both three and nine months
ended September 30, 2021 compared to the same periods in the prior year was
primarily attributable to a $4.1 million credit related to forfeited equity
awards due to our chief executive officer’s separation.

                                       43


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Amortization of Intangible Assets

Our intangible asset amortization expense is summarized as follows (dollars in
thousands):
                               Three Months Ended September
                                            30,                             Change                  Nine Months Ended September 30,                  Change
                                   2021              2020              $               %                 2021                 2020              $               %
Amortization of intangible
assets                         $    121            $  287          $ (166)            (58) %       $        416            $ 1,207          $ (791)            (66) %
% of total revenue                    -    %            -  %                                                  -    %             -  %



Amortization expense was primarily related to intangible assets purchased
through our acquisitions. Amortization expense decreased during the three and
nine months ended September 30, 2021 compared to the same periods in 2020 due to
certain intangible assets being fully amortized during the three and nine months
ended September 30, 2021.


Restructuring and Reorganization Charges

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 September                                         Nine Months Ended September
                                               30,                              Change                             30,                              Change
                                      2021               2020              $              %                2021              2020              $               %
Restructuring and reorganization
charges                          $     573             $    -          $  573             *           $   3,004            $    -          $ 3,004             *
% of total revenue                       1     %            -  %                                              1    %            -  %


_______

* Percentage calculated is not meaningful.

Three Months Ended September 30, 2021 and 2020 – Restructuring and
reorganization charges for the three months ended September 30, 2021 consisted
of the severance and other personnel related cost related to the separation
arrangement with our chief executive officer in September 2021.

Nine Months Ended September 30, 2021 and 2020 - Restructuring and reorganization
costs for the nine months ended September 30, 2021 primarily consisted of the
severance and other personnel related cost related to the restructuring that
took place in the first quarter of 2021. In February 2021, our board of
directors approved a plan to terminate the employment of certain employees in
certain locations. As part of this plan, we eliminated approximately 89
full-time positions, representing approximately 5% of our workforce, primarily
in the United States within the customer care and enrollment groups, and to a
lesser extent, in our marketing and advertising and general and administrative
groups. In addition, we recognized severance and other personnel related costs
related to our chief executive officer's separation as described above.


                                       44


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Other Income (Expense), 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):
                                                                                                       Nine Months Ended September
                              Three Months Ended September 30,                 Change                              30,                             Change
                                    2021                2020             $               %                2021              2020              $               %
Other income (expense), net  $         189            $ (101)         $ 290             (287) %       $    511            $  724          $ (213)            (29) %
% of total revenue                       -    %            -  %                                              -    %            -  %



Three Months Ended September 30, 2021 and 2020 - Other income (expense), net
increased $0.3 million during the three months ended September 30, 2021 compared
to the same period in 2020 due to multiple individually immaterial items.

Nine Months Ended September 30, 2021 and 2020 – Other income (expense), net
decreased $0.2 million during the nine months ended September 30, 2021 compared
to the same period in 2020 due primarily to a decrease in interest income.

Benefit from Income Taxes

Our benefit from income taxes are summarized as follows (dollars in thousands):
                           Three Months Ended September 30,                 Change                     Nine Months Ended September 30,                     Change
                                2021               2020                $                %                  2021                   2020                $                %
Benefit from income taxes  $  (12,834)          $ (6,443)         $ (6,391)             99  %       $       (19,278)          $ (10,923)         $ (8,355)             76  %
Effective tax rate               19.5   %           30.8  %                                                    21.1   %            43.1  %



Three Months Ended September 30, 2021 and 2020 - Our effective tax rate of 19.5%
for the three months ended September 30, 2021 was lower compared to 30.8% for
the three months ended September 30, 2020 primarily due to a decrease in excess
tax benefits associated with stock-based compensation. Our effective tax rate
for the three months ended September 30, 2021 and 2020 were higher than the
statutory federal tax rate due primarily to stock-based compensation
adjustments, and non-deductible lobbying expenses and state taxes, partially
offset by research and development credits.

Nine Months Ended September 30, 2021 and 2020 - Our effective tax rate of 21.1%
for the nine months ended September 30, 2021 was lower compared to 43.1% for the
nine months ended September 30, 2020 primarily due to a decrease in excess tax
benefits associated with stock-based compensation. Our effective tax rate for
the nine months ended September 30, 2021 and 2020 were higher than the statutory
federal tax rate due primarily to stock-based compensation adjustments, and
non-deductible lobbying expenses and state taxes, partially offset by research
and development credits.


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Segment Information

We report segment information based on how our chief executive officer, who is
our 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 separately evaluate assets by segment, with the exception of
commissions receivable, 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. During the first quarter of 2021, we modified the
calculation of segment profit to exclude the amortization of capitalized
software development cost to enhance comparability of our financial metrics with
peer companies.


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Our operating segment revenue and profit (loss) are summarized as follows (in
thousands):
                                Three Months Ended September 30,                   Change                   Nine Months Ended September 30,                   Change
                                    2021                2020                $                  %                2021                2020                $                 %
Revenue:
Medicare                        $   46,381          $  70,361          $ (23,980)              (34) %       $  240,633          $ 246,891          $  (6,258)              (3) %
Individual, Family and Small
Business                            17,533             23,923             (6,390)              (27) %           54,052             42,567             11,485               27  %
Total revenue                   $   63,914          $  94,284          $ (30,370)              (32) %       $  294,685          $ 289,458          $   5,227                2  %
Segment profit (loss):
Medicare segment profit (loss)
(1)                             $  (52,882)         $ (14,139)         $ (38,743)              274  %       $  (46,141)         $  23,993          $ (70,134)            (292) %
Individual, Family and Small
Business segment profit (1)         12,499             18,487             (5,988)              (32) %           38,476             24,153             14,323               59  %
Total segment profit (loss)        (40,383)             4,348            (44,731)           (1,029) %           (7,665)            48,146            (55,811)            (116) %
Corporate                          (14,827)           (15,581)               754                (5) %          (43,206)           (43,376)               170                -  %
Stock-based compensation
expense                             (5,234)            (6,332)             1,098               (17) %          (24,881)           (21,722)            (3,159)              15  %

Depreciation and amortization
(2)                                 (4,899)            (2,995)            (1,904)               64  %          (12,840)            (7,911)            (4,929)              62  %
Amortization of intangible
assets                                (121)              (287)               166               (58) %             (416)            (1,207)               791              (66) %

Restructuring and
reorganization charges                (573)                 -               (573)                   *           (3,004)                 -             (3,004)                  *
Other income (expense), net            189               (101)               290              (287) %              511                724               (213)             (29) %
Loss before benefit from income
taxes                           $  (65,848)         $ (20,948)         $ (44,900)              214  %       $  (91,501)         $ (25,346)         $ (66,155)             261  %


_______

*   Percentage calculated is not meaningful.
(1)During the first quarter of 2021, we revised the calculation of segment
profit by excluding amortization of capitalized software development costs to
enhance comparability of our financial metrics with peer companies. The
amortization of capitalized software development costs were $3.4 million and
$2.1 million for the three months ended September 30, 2021 and 2020,
respectively, and were $9.1 million and $5.3 million for the nine months ended
September 30, 2021 and 2020, respectively.
(2)Depreciation and amortization has been adjusted to include amortization of
software development costs.

Revenue

Three Months Ended September 30, 2021 and 2020 - Revenue from our Medicare
segment declined $24.0 million, or 34%, during the three months ended September
30, 2021 compared to the same period in 2020, primary attributable to a $15.2
million decrease in sponsorship and advertising revenue and an $8.8 million
decrease in commission revenue.

Revenue from our Individual, Family and Small Business segment declined $6.4
million, or 27%, during the three months ended September 30, 2021 compared to
the same period in 2020, primarily attributable to a $7.0 million decrease in
net adjustment revenue. Despite the extension of the COVID-related special
enrollment period through August 15, 2021 and an increase in subsidies to
certain individuals who purchase qualified health plans, we continued to observe
stronger member retention rates in our LTV assessments 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
retention trends, we recognized $10.0 million in net adjustment revenue during
the three months ended September 30, 2021, compared to $17.1 million recognized
in the same period in 2020.

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Nine Months Ended September 30, 2021 and 2020 - Revenue from our Medicare
segment declined $6.3 million, or 3%, during the nine months ended September 30,
2021 compared to the same period in 2020, primary attributable to a $16.2
million decrease in sponsorship and advertising revenue, partially offset by a
$10.0 million increase in commission revenue. The increase in Medicare segment
commission revenue is primarily driven by an increase in Medicare Advantage plan
related commission revenue of $40.4 million, partially offset by a $20.7 million
decrease in net adjustment revenue which was largely attributable to our
Medicare Part D prescription drug plans and a decline in the LTV of Medicare
Supplement and Medicare Part D prescription drug plans. The increase in Medicare
Advantage commission revenue was driven by 30% growth in Medicare Advantage plan
approved members.

Revenue from our Individual, Family and Small Business segment grew $11.5
million, or 27%, during the nine months ended September 30, 2021 compared to the
same period in 2020, primarily attributable to a $12.1 million increase in
commission revenue. Despite the extension of the COVID-related special
enrollment period through August 15, 2021 and an increase in subsidies to
certain individuals who purchase qualified health plans, we continued to observe
stronger member retention rates in our LTV assessments 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
retention trends, we recognized $29.1 million in net adjustment revenue, an
increase of $8.6 million during the nine months ended September 30, 2021
compared to the same period in 2020. Our Individual, Family and Small Business
segment is benefiting from the passage of the American Rescue Plan Act in March
2021. This legislation expanded access to premium credits making individual and
family health plans more affordable, which allows a larger population to get
quality coverage that our major medical plans offer.

Segment Profit (Loss)

Three Months Ended September 30, 2021 and 2020 - Our Medicare segment loss was
$52.9 million during the three months ended September 30, 2021, an increase of
$38.7 million, or 274%, compared to segment loss of $14.1 million for the same
period in 2020. This was primarily due to a $24.0 million decrease in revenue
and a $14.8 million increase in operating expenses, excluding stock-based
compensation expense, depreciation and amortization expenses, amortization of
intangible assets, and restructuring and reorganization charges. The increase in
operating expenses was mostly attributable to increases in marketing costs and
customer care and enrollment costs as we continued to invest in telesales
capacity, internal agent counts, agent productivity tools and incentives,
customer engagement and retention, enrollment quality initiatives, and
enhancements to our technology platform. These investments were made in
preparation for the annual enrollment period in the fourth quarter.

Our Individual, Family and Small Business segment profit was $12.5 million
during the three months ended September 30, 2021, a decrease of $6.0 million, or
32% compared to the same period in 2020. The decrease was primarily driven by a
$6.4 million decrease in revenue and a $0.4 million decrease in operating
expenses, excluding stock-based compensation expense, depreciation and
amortization expenses, amortization of intangible assets, and restructuring and
reorganization charges.


Nine Months Ended September 30, 2021 and 2020 - Our Medicare segment loss was
$46.1 million during the nine months ended September 30, 2021, a decrease of
$70.1 million, or 292%, compared to segment profit of $24.0 million for the same
period in 2020. This was primarily due to a $63.9 million increase in operating
expenses, excluding stock-based compensation expense, depreciation and
amortization expenses, amortization of intangible assets, and restructuring and
reorganization charges, as well as a $6.3 million decrease in revenue. The
increase in operating expenses was mostly attributable to our enrollment quality
initiatives and our investments in preparation for the annual enrollment period
in the fourth quarter.

Our Individual, Family and Small Business segment profit was $38.5 million
during the nine months ended September 30, 2021, an increase of $14.3 million,
or 59% compared to the same period in 2020. The increase was primarily driven by
a $11.5 million increase in revenue and a $2.8 million decrease in operating
expenses, excluding stock-based compensation expense, depreciation and
amortization expenses, amortization of intangible assets, and restructuring and
reorganization charges.


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Liquidity and Capital Resources

Our cash, cash equivalents, and short-term marketable securities are summarized
as follows (in thousands):

                                                           September 30, 2021           December 31, 2020
Cash and cash equivalents                                 $          157,530          $           43,759
Short-term marketable securities                                      70,212                      49,620
Total cash, cash equivalents, and short-term marketable
securities                                                $          227,742          $           93,379



We believe our current cash and cash equivalents, credit facility and expected
cash collections will be sufficient to fund our operations for at least
twelve months after the filing date of this Quarterly Report on Form 10-Q. 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, marketing and advertising, customer care
and other initiatives. In addition, our cash position could be impacted by
further acquisitions and the level of investments we make to pursue our
strategy.

While we recognize constrained LTV as revenue at the time applications are
approved, our collection of the cash commissions resulting from approved
applications generally occurs over a number of years. The expense associated
with approved applications, however, is generally incurred at the time of
enrollment. As a result, the net cash flow resulting from approved applications
is generally negative in the period of revenue recognition and generally becomes
positive over the lifetime of the member. In periods of membership growth, cash
receipts associated with new and continuing members may be less than the cash
outlays to acquire new members. We expect a reduction in cash and cash
equivalents in the future resulting from our continued investments to grow our
business. To the extent that available funds are insufficient to fund our future
activities or to execute our financial strategy, we may raise additional capital
through bank debt, or public or private equity or debt financing to the extent
such funding sources are available. 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 September 30, 2021, our cash and cash equivalents totaled $157.5 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 $210.9 million of net cash provided by financing
activities, partially offset by $60.3 million of net cash used in operating
activities and $36.8 million of net cash used in investing activities. We also
maintained $3.4 million in restricted cash as of September 30, 2021 and December
31, 2020.

The following table presents a summary of our cash flows for the nine months
ended September 30, 2021 (in thousands):

                                                   Nine Months Ended 

September 30,

                                                         2021               

2020

Net cash used in operating activities       $        (60,321)                  $ (10,959)
Net cash used in investing activities                (36,822)               

(128,291)

Net cash provided by financing activities            210,914                     203,555




Operating Activities

Net cash used in 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.

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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
enrollment periods. The timing of enrollment periods for individual and family
health insurance plans, the Medicare annual enrollment period and the open
enrollment period for Medicare-related health insurance can positively or
negatively affect our cash flows during each quarter.

Nine Months Ended September 30, 2021 - Net cash used in operating activities was
$60.3 million during the nine months ended September 30, 2021, primarily driven
by net loss of $72.2 million and changes in net operating assets and liabilities
of $7.0 million, partially offset by adjustments for non-cash items of $18.9
million. Adjustments for non-cash items primarily consisted of $24.9 million of
stock-based compensation expense, $9.6 million of amortization of intangible
assets and internally-developed software, and $3.7 million of depreciation and
amortization, partially offset by a $20.1 million decrease due to the change in
deferred income taxes. Cash used from changes in net operating assets and
liabilities during the nine months ended September 30, 2021 primarily consisted
of decreases of $26.9 million in accounts payable, $6.5 million in accrued
marketing expense, increases of $20.8 million in prepaid expenses and other
current asset, and decreases in $0.1 million in accrued compensation and
benefits, partially offset by decreases of $35.2 million in contract assets -
commissions receivable, increases of $10.2 million in deferred revenue and $1.4
million in accrued expenses and other liabilities.

Nine Months Ended September 30, 2020 - Net cash used in operating activities was
$11.0 million during the nine months ended September 30, 2020, primarily driven
by changes in net operating assets and liabilities of $16.8 million and a net
loss of $14.4 million, partially offset by adjustments for non-cash items
totaling $20.3 million. Adjustments for non-cash items primarily consisted of
$21.7 million of stock-based compensation expense, $6.5 million of amortization
of intangible assets and internally developed software, and $2.6 million of
depreciation and amortization, partially offset by an $11.0 million change in
deferred income taxes. Cash used from changes in net operating assets and
liabilities during the nine months ended September 30, 2020 primarily consisted
of increases of $16.8 million in contract assets - commissions receivable, $9.4
million in prepaid expenses and other current assets and $1.5 million in
accounts receivable, decreases of $7.4 million in accrued compensation and
benefits, $5.4 million in accrued marketing expenses, and $3.2 million in
accounts payable, partially offset by increases of $23.9 million in deferred
revenue and $3.1 million in accrued expenses and other liabilities.


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.

Nine Months Ended September 30, 2021 - Net cash used in investing activities of
$36.8 million for the nine months ended September 30, 2021 mainly consisted of
$89.0 million used to purchase marketable securities, $12.6 million in
capitalized internal-use software and website development costs and $3.6 million
used to purchase property and equipment and other assets, partially offset by
$68.3 million proceeds from the maturities and redemptions of marketable
securities.

Nine Months Ended September 30, 2020 - Net cash used in investing activities of
$128.3 million for the nine months ended September 30, 2020 was due to $180.5
million in purchases of marketable securities, $12.1 million in capitalized
internal-use software and website development costs and $6.5 million used to
purchase property and equipment and other assets, partially offset by $70.8
million proceeds from the maturities and redemptions of marketable securities.


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Financing Activities

Nine Months Ended September 30, 2021 - Net cash provided by financing activities
of $210.9 million for the nine months ended September 30, 2021 was primarily due
to $214.0 million net proceeds from issuance of convertible preferred stock and
$5.0 million net proceeds from exercise of common stock options, partially
offset by $8.0 million in repurchases of shares to satisfy employee tax
withholding obligations.

Nine Months Ended September 30, 2020 - Net cash provided by financing activities
of $203.6 million for the nine months ended September 30, 2020 was primarily due
to $228.0 million net proceeds from the issuance of common stock in a public
equity offering and $1.6 million of net proceeds from the exercise of common
stock options, partially offset by $17.2 million in repurchases of shares to
satisfy employee tax withholding obligations and $8.8 million of
acquisition-related contingent payments.


Convertible Preferred Stock

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.

As of September 30, 2021, no shares of the Series A preferred stock have been
converted and the balance of our Series A preferred stock was $225.4 million,
including a change in the redemption value of $3.8 million and the accrued
paid-in-kind dividends of $7.6 million, which was equivalent to 2.9 million
shares of common stock on an as-converted basis. See Note 6 - Convertible
Preferred Stock in our Notes to Condensed Consolidated Financial Statements
included in this Quarterly Report on Form 10-Q for additional information.


Credit Agreement

We entered into a credit agreement with Royal Bank of Canada ("RBC") as
administrative agent and collateral agent, (the "Credit Agreement") in September
2018. 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 maximum borrowing amount to $75.0 million
and extended the expiration 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 during the
immediately
                                       51


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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. We
have the right to prepay the loans under the Credit Agreement in whole or in
part at any time without penalty. Subject to availability under the Borrowing
Base, amounts repaid may be reborrowed. Amounts not borrowed under the Credit
Agreement are subject to a commitment fee of 0.5% per annum on the daily unused
portion of the credit facility, to be paid in arrears on the first business day
of each calendar quarter. At closing of the Credit Agreement, we paid a one-time
facility fee of 1.75% of the total commitments of $40 million. We also paid a
one-time closing fee of 0.5% of the new commitment of $75.0 million in
connection with the Amendment. We are also obligated to pay other customary
administration fees for a credit facility of this size and type.

As of September 30, 2021, we had no outstanding principal amount under our
revolving credit facility. 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.


Common Stock Issuance

Pursuant to an effective registration statement that 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.


Contractual Obligations and Commitments

Our material contractual obligation generally include operating lease
liabilities and non-cancellable contractual service and licensing obligations.
See Note 10 - Leases in the Notes to Condensed Consolidated Financial Statements
for information about our operating lease obligations. See Note 8 - Commitments
and Contingencies in the Notes to Condensed Consolidated Financial Statements
for the information about our non-cancellable contractual service and licensing
obligations.


Off-Balance Sheet Arrangements

As of September 30, 2021, we did not have any off-balance sheet arrangements
that have or are reasonably likely to have a current or future effect on our
financial condition, changes in our financial condition, revenues, or expenses,
results of operations, liquidity, capital expenditures, or capital resources
that is material to investors.


Recent Accounting Pronouncements

See Note 1 - Summary of Business and Significant Accounting Policies in the
Notes to 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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