Key Metrics: Three Months Ended
Mar. 31, 2016 Jun. 30, 2016 Sept. 30,
2016 Dec. 31,
2016 Mar. 31, 2017 Jun. 30, 2017 Sept. 30,
2017 Dec. 31,
2017
Submitted applications:
Medicare submitted applications (1) 30,900
32,700
24,100
85,300
31,300
31,200
28,900
98,800
IFP submitted applications (2) 74,300
9,800
8,900
45,100
22,000
5,400
5,100
34,900
Other submitted applications (3) 97,400
60,600
56,400
62,100
63,400
53,400
56,000
61,800
Total submitted applications (4) 202,600
103,100
89,400
192,500
116,700
90,000
90,000
195,500

Medicare Advantage submitted applications (5) 23,126
24,923
17,100
56,000
21,800
23,100
21,000
60,000

Estimated membership:
Medicare products (6) 220,300
242,700
242,500
304,900
284,900
300,400
314,500
384,900
IFP products (7) 523,000
481,300
390,400
360,600
265,200
244,900
227,300
224,400
Other products (8) 409,600
381,900
355,400
349,700
342,600
340,500
332,300
327,600
Total estimated membership (9) 1,152,900
1,105,900
988,300
1,015,200
892,700
885,800
874,100
936,900



~~Notes:~~
~~(1)~~		Medicare-related health insurance applications submitted on our website or through our customer care center during the period, including Medicare Advantage, Medicare Part D prescription drug and Medicare Supplement plans. Applications are counted as submitted when the applicant completes the application and either clicks the submit button on our website or provides verbal authorization to submit the application. The applicant may have additional actions to take before the application will be reviewed by the insurance carrier, such as providing additional information. In addition, an applicant may submit more than one application.
~~(2)~~		Major medical Individual and Family plan ("IFP") health insurance applications submitted on our website during the period. Applications are counted as submitted when the applicant completes the application, clicks the submit button on our website and submits the application to us. The applicant may have additional actions to take before the application will be reviewed by the insurance carrier, such as providing additional information. In addition, an applicant may submit more than one application. We define our IFP offerings as major medical individual and family health insurance plans, which does not include Medicare-related, small business or ancillary plans (primarily consisting of short-term, dental, life, vision, and accident insurance plans).
~~(3)~~		Applications for health insurance plans other than Medicare and IFP submitted on our website during the period. Applications for ancillary plans are counted as submitted when the applicant completes the application, clicks the submit button on our website and submits the application to us. Applications for small business plans are counted as submitted when the applicant completes the application, the employees complete their applications, the applicant submits the application to us and we submit the application to the carrier. The applicant may have additional actions to take before the application will be reviewed by the insurance carrier, such as providing additional information. In addition, an applicant may submit more than one application.
~~(4)~~		Applications for all health insurance plans submitted on our website or through our customer care center during the period. See notes (1), (2) and (3) above for more information as to what constitutes a submitted application.
~~(5)~~		Medicare Advantage plan health insurance applications submitted on our website or through our customer care center during the period. Applications are counted as submitted when the applicant completes the application and either clicks the submit button on our website or provides verbal authorization to submit the application. The applicant may have additional actions to take before the application will be reviewed by the insurance carrier, such as providing additional information. In addition, an applicant may submit more than one application. Medicare Advantage submitted applications are included in Medicare submitted applications - See Note1 above for more detail.
~~(6)~~		Estimated number of members active on Medicare-related health insurance as of the date indicated based on the number of members for whom we have received or applied a commission payment during the month of estimation.
~~(7)~~		Estimated number of members active on IFP health insurance plans as of the date indicated. To determine the estimate, 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 is up to six 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 by the percentage of members who do not accept their approved policy from the same month of the previous year 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. For IFP health insurance plans, 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.
~~(8)~~		Estimated number of members active on insurance plans other than Medicare-related health insurance and IFP health insurance plans as of the date indicated. For ancillary health insurance plans (such as short-term, dental, vision, accident and student), we take the sum of (i) the number of members for whom we have received or applied a commission payment for a month that is 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 from the same month of the previous year 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. For small business health insurance plans, we estimate the number of members using the number of initial members at the time the group is approved, and we update this number for changes in membership if such changes are reported to us by the group or carrier in the period it is reported. 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.
~~(9)~~		Estimated number of members active on all insurance plans as of the date indicated. See the notes (6), (7) and (8) above for additional information regarding our calculation of total estimated membership.

Health insurance ~~carrier’s~~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 ~~policies~~plans do so by discontinuing their premium payments to the carrier and do not inform us of the cancellation. Also, some of our members pay their premiums less frequently than monthly. Given the number of months required to observe non-payment of commissions in order to confirm cancellations, we estimate the number of members who are active on insurance policies as of a specified date.

After we have estimated membership for a period, we may receive information from health insurance carriers that would have impacted the estimate if we had received the information prior to the date of estimation. We may receive

commission payments or other information that indicates that a member who was not included in our estimates for a prior period was in fact an active member at that time, or that a member who was included in our estimates was in fact not an active member of ours. For instance, we reconcile information carriers provide to us and may determine that we were not historically paid commissions owed to us, which would cause us to have underestimated membership. Conversely, carriers may require us to return commission payments paid in a prior period due to policy cancellations for members we previously estimated as being active. We do not update our estimated membership numbers reported in previous periods. Instead, we reflect updated information regarding our historical membership in the membership estimate for the current period. As a result of the delay in our receipt of information from insurance carriers, actual trends in our membership are most discernible over periods longer than from one quarter to the next. As a result of the delay we experience in receiving information about our membership, it is difficult for us to determine with any certainty the impact of current conditions on our membership retention. ~~Health care reform and its impacts as well as other factors~~Various circumstances could cause the assumptions and estimates that we make in connection with estimating our membership to be inaccurate, which would cause our membership estimates to be inaccurate. A member who purchases and is active on multiple standalone insurance plans will be counted as a member more than once. For example, a member who is active on both an individual and family health insurance plan and a standalone dental plan will be counted as two continuing members.

2020 compared to 2019 – Medicare estimated membership grew 23% as of December 31, 2020 compared to December 31, 2019 driven by a 32% increase in Medicare Advantage, as well as 12% and 11% increases in Medicare Part D prescription drug plan and Medicare Supplement plan estimated membership, respectively. The overall growth in Medicare estimated membership was due to our investment in our Medicare business. Individual and family plan estimated membership declined by 10% as of December 31, 2020 compared to December 31, 2019 due to market conditions in the individual and family plan market and our decision to shift our investment to our Medicare business. Ancillary plan estimated membership as of December 31, 2020 declined 6% compared to estimated membership as of December 31, 2019 primarily as a result of the decline of estimated membership of dental, short-term health plans, and vision plans.

2019 compared to 2018 – Medicare estimated membership grew 46% as of December 31, 2019 compared to December 31, 2018 primarily driven by a 46% and 52% increase in Medicare Advantage and Medicare Part D prescription drug plan estimated membership, respectively. Individual and family plan estimated membership declined by 15% as of December 31, 2019 compared to December 31, 2018 primarily due to market conditions in the individual and family plan market and our decision to shift our marketing investments towards our Medicare business. Ancillary plan estimated membership declined 4% as of December 31, 2019 compared to December 31, 2018, primarily due to a 9% decline in dental plan estimated membership. Small business estimated membership grew 9% as of December 31, 2019 compared to December 31, 2018, primarily driven by our focus on key partnerships and technology enhancements.

Member Acquisition

Marketing initiatives are an important component of our strategy to increase ~~revenue. Our marketing initiatives are focused on three primary member acquisition channels: direct, marketing partners and online advertising~~revenue and are primarily designed to encourage consumers to complete an application for health insurance. ~~For~~Variable marketing cost represents direct costs incurred in member acquisition from our direct, marketing partners and online advertising channels. In addition, we incur customer care and enrollment expenses (“CC&E”) in assisting applicants during the enrollment process. Variable marketing costs exclude fixed overhead costs, such as personnel related costs, consulting expenses, facilities and other operating costs allocated to the marketing and advertising department.

The following table shows the estimated variable marketing cost per approved member and the estimated customer care and enrollment expense per approved member metrics for the years ~~ended December 31, 2015, 2016~~presented below. The numerator used to calculate each metric is the portion of the respective operating expenses for marketing and ~~2017, applications submitted through us for Medicare-related, individual~~advertising and ~~family, small business~~customer care and ~~ancillary health insurance products from our three~~enrollment that is directly related to member acquisition ~~channels, expressed as a percentage of all health insurance applications submitted through us during the same periods, were as follows:~~

Year Ended December 31,
2015 2016 2017
Source of total submitted applications
(as a percentage of total submitted applications for the year):
Direct 51% 53% 57%
Marketing partners 37% 34% 35%
Online advertising 12% 13% 8%
Total 100% 100% 100%

~~Factors Influencing Commission Revenue~~

~~Our commission revenue is influenced by a number of factors including:~~

~~the number of applications~~ for ~~Medicare-related, individual, family and small business and ancillary health insurance we submit to health insurance carriers that are approved;~~

~~the rate at which the individuals on those applications turn into paying members;~~

~~the commission rates we receive for the health insurance plans that we sell; and~~

our ~~membership retention.~~

~~Submitted Applications.~~ In 2017 we generated 10% Medicare submitted application growth during 2017 compared to 2016, which represented a deceleration from prior years’ growth, driven primarily by the change in our marketing strategy as we de-emphasized less profitable customer acquisition channels and worked on building out the more efficient direct and strategic partner channels. As a result of this strategy, we experienced an improvement in conversion of leads to applications and lower cost of acquisition in the second half of 2017 compared to the first half of 2017 and the same period a year ago, and anticipate that we will see higher growth in Medicare submitted applications in 2018. Our individual and family plan submitted applications declined in 2017 due to a continuing challenging environment in this market, as well as our reduction in marketing spend.

~~Approval Rates and Initial Payment Rates.~~ Approval rates for Medicare-related health insurance remained relatively consistent in 2015, 2016 and 2017. Initial payment rates for approved Medicare-related health insurance plans remained relatively consistent in 2015, but declined slightly in 2016 and 2017 due to a change in carrier mix. As a result of the health care reform prohibition on using pre-existing health conditions as a reason to deny health insurance applications, we have experienced higher approval rates on individual and family plan applications submitted during the open enrollment periods

compared to periods before health care reform implementation. Individual and family health insurance approval rates have historically been lower outside of the open enrollment period than for applications submitted during the open enrollment period. In addition, during the first and second quarters of 2015, our individual and family plan commission revenue benefited from carriers paying us earlier on policies approved during the open enrollment period that ended in 2015 compared to the prior open enrollment period. The timing of carrier payments received during 2016 and 2017 were similar to 2015.

~~Commission Rates~~. The average commission dollars per-member-per-month that we receive for new health insurance plan members varies based upon a number of factors, including the ratio of plans that we sold for which we receive per member-per-month commissions compared to percentage-of-premium commissions, the premiums on the policies we sold, the mix of our members by health insurance carrier and the commission rates we receive from each carrier. Additionally, commission rates may vary by carrier, by geography and by the type of plan purchased by a member.

We observed higher commission rates on Medicare Advantage and Medicare Supplement plans that we sold during the 2016 annual enrollment period for coverage effective in 2017 compared to policies that we sold during the 2015 annual enrollment period for coverage effective in 2016. Our average commission rates for Medicare Advantage and Medicare Supplement plans sold in years prior to 2017 have remained consistent during 2017 compared to 2016.

We have experienced a reduction in our average commission rates for individual and family plans sold during the 2016 open enrollment period for coverage effective in 2017 compared to the 2015 open enrollment period for coverage effective in 2016. Changes in the volume of health insurance applications submitted during the annual open enrollment periods for individual and family plans compared to applications submitted outside of the annual open enrollment period has caused us to experience shifts in the concentration of our membership by health insurance carrier and type of plan purchased and corresponding fluctuations in our average commission rate. Recently, given the significant losses that carriers have sustained in connection with their sale of individual and family health insurance, several health insurance carriers with which we have a relationship, made changes to the commissions they pay us, including reducing or eliminating our commissions for individual and family health insurance enrollments outside of the open enrollment period, reducing or eliminating our commissions for individual and family health insurance plans sold during the 2016 open enrollment period for coverage effective in 2017 and/or reducing our 2017 renewal commissions for individual and family health insurance plans we previously sold in prior years.

~~Retention Rates~~. Our commission revenue is also influenced by our member retention rates. Retention rates are typically lower in the first policy year. Our Medicare Advantage membership retention rates for the first policy year have improved during 2017 compared to 2016, while retention rates for renewal years for Medicare Advantage, Medicare Supplement and Medicare Part D prescription drug plans ~~declined slightly during 2017 compared to 2016. Our~~(collectively, “Medicare Plans”) and for all individual and family ~~plan membership retention rates were negatively impacted by~~major medical plans and short-term health ~~care reform throughout 2016~~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 ~~2017 with 2017 retention rates lower than 2016.~~

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 ~~new~~approved members for Medicare Plans and IFP Plans during the year, with the number of approved members adjusted based on the relative LTV of the product they are purchasing. Since the LTV for any product fluctuates from year to year, the weight given to each product was determined based on their relative LTVs at the time of our adoption of ASC 606.


	Year Ended December 31,
	2020		2019		2018
Medicare:
Estimated CC&E cost per approved MA-equivalent approved member (1)	$	368	$	355	$	315
Estimated variable marketing cost per MA-equivalent approved member (1)	384		330		297
Total Medicare estimated cost per approved member	$	752	$	685	$	612
Individual and Family Plan:
Estimated CC&E cost per IFP-equivalent approved member (2)	$	92	$	102	$	61
Estimated variable marketing cost per IFP-equivalent approved member (2)	83		67		59
Total IFP estimated cost per approved member	$	175	$	169	$	120

_____________

(1)MA-equivalent approved members is a derived metric with a Medicare Part D approved member being weighted at 25% of a Medicare Advantage member and a Medicare Supplement member based on their relative LTVs at the time of our adoption of ASC 606. We calculate the number of approved MA-equivalent members by adding the total number of approved Medicare Advantage and Medicare Supplement members and 25% of the total number of approved Medicare Part D members during the years presented.

(2)IFP-equivalent approved members is a derived metric with a short-term approved member being weighted at 33% of a major medical individual and family health insurance plan member based on their relative LTVs at the time of our adoption of ASC 606. We calculate the number of approved IFP-equivalent members ~~added~~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 ~~2016~~the years presented.

2020 compared to 2019 – Estimated CC&E costs per approved MA-equivalent member increased 4% in 2020 compared to 2019, due to underperformance of vendor agents which led to lower than expected approved members. Estimated variable marketing costs per approved MA-equivalent member increased by 16% in 2020 compared to 2019, due to a larger portion of applications originating from our online marketing channels which tend to have higher average marketing costs, and ~~2017~~it was ~~insufficient~~also impacted by underperformance of vendor agents which resulted in lower than expected approved members. Going forward, we expect a reduction in member acquisition costs per approved MA-equivalent member as a result of improved productivity of our agent force by

shifting to ~~offset~~a predominantly internal employed agent model and, to a lesser extent, an increase in the ~~loss~~percentage of ~~existing~~unassisted online enrollment.

Estimated variable CC&E cost per approved IFP-equivalent member decreased 10% in 2020 compared to 2019 due primarily to a decrease in personnel-related costs and an increase in the number of approved members. Estimated variable marketing cost per approved IFP-equivalent member increased by 24% in 2020 compared to 2019 primarily driven by an increase in variable marketing costs.

2019 compared to 2018 – Estimated CC&E costs per approved MA-equivalent member increased 13% in 2019 compared to 2018, due to our decision to have more customer care agents during the lower volume quarters, and a significant increase in overtime costs and average call length during the peak volume period in the fourth quarter. Estimated variable marketing costs per approved MA-equivalent member increased by 11% in 2019 compared to 2018, due to an increase in online advertising costs and higher variable marketing costs for select initiatives within the direct and partner channels. As we increased our spending on digital advertising channel for accelerated enrollment growth and market share expansion, the average costs were higher per member.

Estimated variable CC&E cost per approved IFP-equivalent member increased 67% in 2019 compared to 2018, also primarily driven by decline in the number of approved members ~~resulting~~for non-qualified health plans, qualified health plans, and short-term products as well as increase in investments of IFP-dedicated customer care agents. Estimated variable marketing cost per approved IFP-equivalent member increased by 14% in 2019 compared to 2018 primarily driven by a decline in the number of approved members for non-qualified health plans, qualified health plans, and short-term products.

Results of Operations

The following table sets forth our operating results and related percentage of total revenues for the years presented below (dollars in thousands):


	Year Ended December 31,
	2020				2019				2018
Revenue:
Commission	$	508,189	87	%	$	466,676	92	%	$	227,211	90	%
Other	74,585		13	%	39,525		8	%	24,184		10	%
Total revenue	582,774		100	%	506,201		100	%	251,395		100	%
Operating costs and expenses (1)
Cost of revenue	4,083		1	%	2,738		1	%	1,228		—	%
Marketing and advertising	209,340		36	%	150,249		30	%	82,939		33	%
Customer care and enrollment	172,895		30	%	134,304		27	%	70,547		28	%
Technology and content	65,188		11	%	47,085		9	%	31,970		13	%
General and administrative	76,452		13	%	64,150		13	%	45,828		18	%
Change in fair value of earnout liability	—		—	%	24,079		4	%	12,300		5	%
Amortization of intangible assets	1,493		—	%	2,187		—	%	2,091		1	%
Restructuring charges	—		—	%	—		—	%	1,865		1	%
Acquisition costs	—		—	%	—		—	%	76		—	%
Total operating costs and expenses	529,451		91	%	424,792		84	%	248,844		99	%
Income from operations	53,323		9	%	81,409		16	%	2,551		1	%
Other income, net	666		—	%	2,090		—	%	755		—	%
Income before income taxes	53,989		9	%	83,499		16	%	3,306		1	%
Provision for income taxes	8,539		1	%	16,612		3	%	3,065		1	%
Net income	$	45,450	8	%	$	66,887	13	%	$	241	—	%

____________

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


	Year Ended December 31,
	2020		2019		2018
Marketing and advertising	$	5,102	$	4,230	$	1,974
Customer care and enrollment	2,723		1,451		816
Technology and content	5,460		3,611		1,675
General and administrative	11,887		13,278		7,824
Restructuring charges	—		—		251
Total stock-based compensation expense	$	25,172	$	22,570	$	12,540

Revenue

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


				Change						Change
	2020			$		%	2019			$		%	2018
Commission	$	508,189		$	41,513	9%	$	466,676		$	239,465	105%	$	227,211
% of total revenue	87		%				92		%				90		%
Other	74,585			35,060		89%	39,525			15,341		63%	24,184
% of total revenue	13		%				8		%				10		%
Total revenue	$	582,774		$	76,573	15%	$	506,201		254,806		101%	$	251,395

2020 compared to 2019 – Commission revenue increased $41.5 million, or 9% in 2020 compared to 2019 due to a $35.2 million increase in commission revenue from the Medicare segment and a $6.3 million increase in commission revenue from Individual, Family and Small Business segment. The increase in commission revenue from the Medicare segment was driven by a 16% increase in Medicare plan approved members, primarily attributable to a 39% growth in Medicare Advantage plan approved members, partially offset by a decrease in net adjustment revenue for the year ended December 31, 2020 compared to 2019 and a decline in the estimated constrained LTV for Medicare Advantage plans. Excluding $42.3 million revenue recorded in the fourth quarter of 2019 related to a change in estimate of expected cash commission collections for Medicare Advantage plans since we began selling such products through the third quarter of 2019, commission revenue increased 20% in 2020 as compared to 2019. The increase in commission revenue from Individual, Family and Small Business segment was primarily driven by a 21% increase in adjustment revenue and a 4% increase in individual and family plan approved members. See Segment Information below for further discussion.

Net adjustment revenue consists of increases in revenue for certain prior period cohorts as well as reductions in revenue for certain prior period cohorts. We recognize positive adjustments to revenue to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. Net adjustment revenue for our Medicare segment in 2020 and 2019 was $5.7 million and $55.3 million, respectively. For our Individual, Family and Small Business segment net adjustment revenue in 2020 and 2019 was $39.8 million and $32.9 million, respectively. See Note 2 – Revenue in our Notes to Consolidated Financial Statements for more information.

Other revenue increased $35.1 million, or 89% in 2020 compared to the same period in 2019 due to an increase in Medicare advertising revenue as a result of an increase in the size and number of advertising programs with certain carriers.

2019 compared to 2018 – Commission revenue increased $239.5 million, or 105% in 2019 compared to 2018 due to a $219.0 million increase in commission revenue from the Medicare segment and a $20.5 million increase in commission revenue from Individual, Family and Small Business segment. The increase in commission revenue from the Medicare segment was attributable to an 81% increase in Medicare plan approved members, higher LTVs for Medicare Advantage plans, and an increase in adjustment revenue from Medicare Advantage plans approved in prior periods. Of the adjustment revenue of $55.3 million for the year ended December 31, 2019, $42.3 million was related to a change in estimate of expected cash commission collections for Medicare Advantage plans since we began selling such products through the third quarter of 2019. The increase in individual and family commission revenue was primarily driven by an increase in LTVs for IFP plans and an increase in adjustment revenue from IFP plans approved in prior periods as we continued to observe longer member duration than initially anticipated at the time of enrollment for these plans

Other revenue increased $15.3 million, or 63%, in 2019 compared to 2018, primarily driven by a $17.4 million growth in Medicare advertising revenue, partially offset by a $2.1 million decline in revenue from our individual and family health insurance ~~membership during those periods. We believe the decline in retention rates~~sponsorship advertising program.

Cost of Revenue

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

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

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


				Change							Change
	2020			$		%		2019			$		%		2018
Cost of revenue	$	4,083		$	1,345	49	%	$	2,738		$	1,510	123	%	1,228
% of total revenue	1		%					1		%					—	%

2020 compared to 2019 – Cost of revenue increased $1.3 million in 2020, compared to $2.7 million in 2019, primarily due to increased activity from our revenue sharing arrangements.

2019 compared to 2018 – Cost of revenue increased $1.5 million in 2019, compared to $1.2 million in 2018, primarily due to an increased amount of payments to marketing partners with whom we have revenue sharing arrangements.

Marketing and Advertising

Marketing and advertising expenses consist primarily of member acquisition expenses associated with our direct, marketing partner and online advertising member acquisition channels, in addition to compensation and other expenses related to marketing, business development, partner management, public relations and carrier relations personnel who support our offerings. We recognize expenses in our direct member acquisition channel in the period in which they are incurred. We generally compensate our marketing partners for referrals based on the consumer submitting a health insurance application on our platform, regardless of whether the consumer's application is approved by the health insurance carrier, or for the referral of a Medicare-related lead to us by the marketing partner. Some of our partners such as pharmacies and hospital networks are not compensated for referrals to us as a result of legal requirements. These organizations have relationships with us to provide their customers and patients with our consumer experience and to help them find the plan that best meets their needs. Some of our marketing partners have tiered arrangements where the amount we pay the marketing partner per submitted application increases as the volume of submitted applications we receive from the marketing partner increases. We recognize these expenditures in the period when a marketing partner’s referral results in the submission of a health insurance application. In our Medicare business, our current emphasis is on reducing the contribution from the lead aggregator marketing channel that is characterized by high acquisition costs and emphasizing strategic partnerships including relationships with health care industry participants, such as pharmacies and hospital networks, and with affiliate organizations where our acquisition costs may be significantly lower.

Since the total volume of submitted applications that we receive from our marketing partners is largely outside of our control, particularly during any short-term period, and because of our tiered marketing partner

arrangements, we could incur expenses in excess of, or below, the amounts we had planned in periods of rapid change in the volume of submitted applications from marketing partner referrals. Similar to our marketing partner channel, expenses in our online advertising channel will increase or decrease in relation to any increase or decrease in consumers referred to our website as a result of search engine advertising or retargeting campaigns. We recognize expenses in our online advertising member acquisition channels in the period in which the consumer clicks on the advertisement. Increases in submitted applications resulting from marketing partner referrals or visitors to our website from our online advertising channel has in the past, and could in the future, result in marketing and advertising expenses significantly higher than our expectations.

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


				Change							Change
	2020			$		%		2019			$		%		2018
Marketing and advertising	$	209,340		$	59,091	39	%	$	150,249		$	67,310	81	%	$	82,939
% of total revenue	36		%					30		%					33		%

2020 compared to 2019 – Marketing and advertising expenses increased by $59.1 million or 39% in 2020, compared to 2019, primarily driven by a $56.3 million increase in Medicare plan related variable advertising costs, and $2.4 million increase in consulting. The increase in variable advertising expenses was due to an increase in our investment for Medicare enrollment growth and the increase in expense as a percentage of revenue reflects lower than expected volumes driven by underperformance of certain marketing channels.

2019 compared 2018 – Marketing and advertising expenses increased by $67.3 million or 81% in 2019, compared to 2018, primarily driven by a $59.3 million increase in Medicare plan related variable advertising costs and a $4.4 million increase in personnel costs due to higher headcount as we continued to invest in our marketing initiatives in Medicare-related products.

Customer Care and Enrollment

Customer care and enrollment expenses primarily consist of compensation and benefits costs for personnel engaged in assistance to applicants who call our customer care center and for enrollment personnel who assist applicants during the enrollment process.

Our customer care and enrollment expenses are summarized as follows (dollars in thousands):


				Change							Change
	2020			$		%		2019			$		%		2018
Customer care and enrollment	$	172,895		$	38,591	29	%	$	134,304		$	63,757	90	%	$	70,547
% of total revenue	30		%					27		%					28		%

2020 compared to 2019 – Customer care and enrollment expenses increased by $38.6 million, or 29%, in 2020 compared to 2019. This increase was primarily driven by $27.5 million increase in personnel costs associated with an increase in customer care and enrollment headcount, $5.1 million increase in consulting expenses, $2.8 million increase in facilities and other operating expenses, $1.3 million increase in stock-based compensation and $1.0 million increase in licensing costs.

2019 compared to 2018 – Customer care and enrollment expenses increased by $63.8 million, or 90%, in 2019 compared to 2018. This increase was primarily due to a $28.4 million increase in personnel costs and a $24.3 million increase for the external agents hired for the AEP in the fourth quarter. The increase in personnel costs resulted from higher headcount in the lower application volume quarters compared to the prior year as we started to hire and train agents earlier in 2019 in preparation for the AEP in the fourth quarter, a significant increase in

overtime costs and average call length during the peak volume period in the fourth quarter, as well as the expenses incurred related to the opening of the new customer care center in Indianapolis.

Historically, we experienced a seasonal increase in customer care and enrollment costs during the third and fourth quarters primarily due to increased customer care center staffing to handle the anticipated increased volume of health insurance transactions during the AEP in the fourth quarter. A significant portion of these costs were due to increased outsourced vendor agent costs. Going forward, we plan to shift to a predominantly internal agent model and will employ and maintain the majority of our health insurance agent force year-round. We expect to increase our internal agents' utilization outside of the enrollment periods by expanding our offerings of ancillary products and increasing our outbound calling efforts. As a result, we expect to incur increased customer care and enrollment costs beginning earlier in 2021 and a reduced level of outsourced vendor agent costs during the fourth quarter AEP season.

Technology and Content

Technology and content expenses consist primarily of compensation and benefits costs for personnel associated with developing and enhancing our website technology as well as maintaining our website. A portion of our technology and content group is located at our wholly-owned subsidiary 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):


				Change							Change
	2020			$		%		2019			$		%		2018
Technology and content	$	65,188		$	18,103	38	%	$	47,085		$	15,115	47	%	$	31,970
% of total revenue	11		%					9		%					13		%

2020 compared to 2019 – Technology and content expenses increased $18.1 million, or 38%, in 2020 compared to 2019, primarily driven by increases of $8.4 million in personnel and compensation costs, $5.8 million in facilities and other operating costs, $3.9 million in amortization of internally developed software and $1.8 in stock-based compensation expense, partially offset by $2.1 million decrease in consulting expense.

2019 compared 2018 – Technology and content expenses increased $15.1 million, or 47%, in 2019 compared to 2018, primarily driven by increases of $5.3 million in personnel and compensation costs, $3.3 million in consulting expenses, and $2.6 million in facilities and other operating costs.

General and Administrative

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

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


				Change							Change
	2020			$		%		2019			$		%		2018
General and administrative	$	76,452		$	12,302	19	%	$	64,150		$	18,322	40	%	$	45,828
% of total revenue	13		%					13		%					18		%

2020 compared to 2019 – General and administrative expenses increased by $12.3 million, or 19%, in 2020 compared to 2019, primarily driven by increases of $5.2 million in compensation and personnel costs, $3.0 million in consulting expense, and $2.8 million in facilities and other operating costs.

2019 compared to 2018 – General and administrative expenses increased by $18.3 million, or 40%, in 2019 compared to 2018, primarily driven by increases of $7.5 million in compensation and personnel costs, $5.4 million in stock-based compensation expense, and $2.5 million in legal and professional fees.

Change in Fair Value of Earnout Liability

During the year ended December 31, 2020, there were no changes in fair value of earnout liability as the earnout consideration was settled in January 2020. During the year ended December 31, 2019, we recorded a $24.1 million increase in the fair value of earnout liability. The adjustment to fair value of earnout liability in 2019 was due to an increase in the value of our common stock since our acquisition of GoMedigap in January 2018.

Amortization of Intangible Assets

Our intangible asset amortization expense is summarized as follows (dollars in thousands):


				Change							Change
	2020			$		%		2019			$		%		2018
Amortization of intangible assets	$	1,493		$	(694)	(32)	%	$	2,187		$	96	5	%	$	2,091
% of total revenue	—		%					—		%					1		%

2020 compared to 2019 – Amortization expense was primarily related to intangible assets purchased through our acquisitions. Amortization expense decreased in 2020 compared to 2019 due to certain intangible assets being fully amortized in 2020.

2019 compared to 2018 – Amortization expense was primarily related to intangible assets purchased through our acquisitions of PlanPrescriber and GoMedigap. Amortization expense in 2019 remained flat compared to 2018.

Other Income, Net

Other income, net, primarily consisted of interest income, sublease income, and margin earned on commissions received from Medicare plan members transferred to us in 2010 through 2012 by a broker partner, partially offset by interest expense on finance leases and debt and other bank fees.

Our other income, net is summarized as follows (dollars in thousands):


				Change							Change
	2020			$		%		2019			$		%		2018
Other income, net	$	666		$	(1,424)	(68)	%	$	2,090		$	1,335	177	%	$	755
% of total revenue	—		%					—		%					—		%

2020 compared to 2019 – Other income, net, decreased by $1.4 million or 68% in 2020 compared to 2019 due primarily to a decrease in interest income.

2019 compared to 2018 – Other income, net, increased by $1.3 million or 177% in 2019 compared to 2018 primarily driven by an increase in interest income and an increase in margin earned on from members previously

transferred from a broker partner, partially offset by the accretion of debt related costs incurred from the debt facility that we entered into in 2018 and amended in 2019.

Provision for Income Taxes

The following table presents our provision for income taxes for the years presented below (dollars in thousands):


				Change							Change
	2020			$		%		2019			$		%		2018
Provision for income taxes	$	8,539		$	(8,073)	(49)	%	$	16,612		$	13,547	442	%	$	3,065
Effective tax rate	15.8		%					19.9		%					92.7		%

2020 compared to 2019 – For the year ended December 31, 2020, we recorded a provision for income taxes of $8.5 million representing an effective tax rate of 15.8%, which is lower than the effective tax rate of 19.9% in 2019 primarily due to increased impact from stock-based compensation tax benefits and higher research and development tax credits as compared to 2019.

2019 compared to 2018 – For the year ended December 31, 2019, we recorded a provision for income taxes of $16.6 million representing an effective tax rate of 19.9%, which is lower than the effective federal tax rate of 92.7% for 2018 primarily due to a $2.4 million valuation allowance which was recorded in 2018 against certain state net operating losses.

Segment Information

We report segment information based on how our chief executive officer, who is our chief operating decision maker, or CODM, regularly reviews our operating results, allocates resources, and makes decisions regarding our business operations. The performance measures of our segments include total revenue and profit. Our business structure is comprised of two operating segments:

•Medicare; and

•Individual, Family and Small Business.

Our CODM does not separately evaluate assets by segment, with the exception of commissions receivable, by segment, and therefore assets by segment are not presented.

The Medicare segment consists primarily of commissions earned from our sale of Medicare-related health insurance plans, including Medicare Advantage, Medicare Supplement and Medicare Part D prescription drug plans, and to a lesser extent, ancillary products sold to our Medicare-eligible applicants, including but not limited to, dental and vision plans, as well as our advertising program that allows Medicare-related carriers to purchase advertising on a separate website developed, hosted and maintained by us and our delivery and sale to third parties of Medicare-related health insurance leads generated by our ecommerce platforms and our marketing activities.

The Individual, Family and Small Business segment consists primarily of commissions earned from our sale of individual, family and ~~family plan market~~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 ~~exiting~~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 ~~market altogether or~~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 ~~certain jurisdictions.~~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.

~~Adoption~~Segment profit is calculated as total revenue for the applicable segment less direct and allocated marketing and advertising, customer care and enrollment, technology and content and general and administrative operating expenses, excluding stock-based compensation expense, change in fair value of ~~ASC 2014-09,~~ earnout liability, depreciation and amortization expense, and amortization of intangible assets.

Our operating segment revenue and profit are summarized as follows (in thousands):


			Change						Change
	2020		$		%		2019		$		%		2018
Revenue
Medicare	$	516,762	$	69,801	16	%	$	446,961	$	236,391	112	%	$	210,570
Individual, Family and Small Business	66,012		6,772		11	%	59,240		18,415		45	%	40,825
Total revenue	$	582,774	76,573		15	%	$	506,201	254,806		101	%	$	251,395
Segment profit
Medicare segment profit	$	101,963	(53,271)		(34)	%	$	155,234	94,390		155	%	$	60,844
Individual, Family and Small Business segment profit	39,383		16,015		69	%	23,368		17,565		303	%	5,803
Total segment profit	141,346		(37,256)		(21)	%	178,602		111,955		168	%	66,647
Corporate	(57,664)		(12,290)		27	%	(45,374)		(12,378)		38	%	(32,996)
Stock-based compensation expense	(25,172)		(2,602)		12	%	(22,570)		(10,281)		84	%	(12,289)
Depreciation and amortization	(3,694)		(711)		24	%	(2,983)		(504)		20	%	(2,479)
Change in fair value of earnout liability	—		24,079		(100)	%	(24,079)		(11,779)		96	%	(12,300)
Restructuring charges	—		—		*		—		1,865		(100)	%	(1,865)
Acquisition costs	—		—		*		—		76		(100)	%	(76)
Amortization of intangible assets	(1,493)		694		(32)	%	(2,187)		(96)		5	%	(2,091)
Other income, net	666		(1,424)		(68)	%	2,090		1,335		177	%	755
Income before income taxes	$	53,989	$	(29,510)	(35)	%	$	83,499	$	80,193	2,426	%	$	3,306

_______

* Percentage calculated is not meaningful.

2020 compared to 2019

Revenue – Revenue from ~~Contracts with Customers~~ ~~(Topic 606)~~

~~In May 2014,~~Medicare segment revenue grew $69.8 million or 16% in 2020 compared to 2019, primarily attributable to an increase in Medicare Advantage plan related commission revenue of $35.2 million and an increase in other revenue of $34.6 million. Excluding $42.3 million revenue resulting from a change in estimate recorded in the ~~Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09,~~ ~~Revenue from Contracts with Customers~~ ~~(Topic 606), requiring an entity~~fourth quarter of 2019 regarding expected cash commission collections for Medicare Advantage plans since we began selling such products through the third quarter of 2019, Medicare segment revenue increased 28% in 2020 compared to ~~recognize~~2019.The increase in Medicare Advantage commission revenue ~~when it transfers promised goods or services to customers~~was driven by 39% growth in ~~an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. In April 2016, the FASB issued ASU No. 2016-10,~~ ~~Identifying Performance Obligations and Licensing. ASU 2016-10 provides guidance in identifying performance obligations and determining the appropriate accounting for licensing arrangements.~~Medicare Advantage approved members. The ~~effective date and transition requirements for this ASU are the same as the effective date and transition requirements in Topic 606 (and any other Topic amended by ASU 2014-09).~~

Topic 606 may be adopted retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (modified retrospective method). We will adopt this new accounting standard for the reporting period beginning on January 1, 2018 using the full retrospective method to restate each prior reporting period presented.

~~We have completed a review~~overall growth of our Medicare business ~~processes, systems and controls as part~~was a result of our investment and marketing efforts ~~to adopt~~in this segment and the ~~new revenue recognition standard and are executing on our developed project plan, which includes analyzing the standard’s impact~~

on our contract portfolio, comparing our historical policies and practices to the requirements of the new standard and identifying differences from applying the requirements of the new standard to our contracts. We have implemented necessary internal controls to ensure we adequately evaluate our portfolio of contracts under the five-step model promulgated by FASB to ensure proper assessment of our operating results under the new standard. We do not expect a significant changeincreases in ~~our control environment~~approved application volume due to the ~~adoption~~

open enrollment period in the first quarter and the COVID-19 related special enrollment period introduced in the second quarter. The increase in other revenue was driven by an increase in advertising revenue due to increases in size and number of advertising arrangements.

Revenue from Individual, Family and Small Business segment grew $6.8 million, or 11% in 2020 compared to 2019, primarily attributable to $6.3 million increase in commission revenue. The increase in commission revenue from Individual, Family and Small Business segment was primarily due to an increase in adjustment revenue of $7.0 million in 2020 compared to 2019, partially offset by $0.6 million decrease in commission revenue from members approved during the ~~new standard; however,~~period. We recognized $39.8 million adjustment revenue in 2020 due to stronger retention rates for earlier period cohorts of certain products based on our latest LTV assessment.

Segment Profit – Our Medicare segment profit was $102.0 million in 2020, a decrease of $53.3 million or 34%, compared to 2019. This was primarily due to a $123.1 million increase in operating expenses, excluding stock-based compensation expense, change in earnout liability, depreciation and amortization expenses, and amortization of intangible assets, partially offset by a $69.8 million increase in revenue. The increase in operating expenses was mostly attributable to increases in marketing costs and customer care and enrollment costs as we ~~will continue~~continued to ~~assess until we finalize the impact of the adoption. We are also reporting on the progress of the implementation~~invest in telesales capacity, internal agent counts, agent productivity tools and incentives, customer engagement and retention initiatives, and enhancements to our ~~board of directors and~~technology platform. Our Medicare segment profit was negatively impacted by the ~~audit committee~~underperformance of our ~~board~~outsourced external agent force and certain of ~~directors on a regular basis~~our marketing channels during the ~~project’s duration.~~fourth quarter 2020 AEP. We also believe that some external factors, including the COVID-19 pandemic and, to a lesser extent, the prolonged election cycle, might have influenced consumer demand.

Our Individual, Family and Small Business segment profit was $39.4 million in 2020, an increase of $16.0 million or 69% compared to 2019. The ~~adoption~~increase was primarily driven by a $6.8 million increase in revenue and a $9.2 million decrease in operating expenses, excluding stock-based compensation expense, change in earnout liability, depreciation and amortization expenses, and amortization of intangible assets.

2019 compared to 2018

Revenue – Medicare segment revenue grew $236.4 million or 112% in 2019 compared to 2018, primarily attributable to an increase in Medicare Advantage plan related commission revenue of $196.4 million. This was driven by 88% increase in approved Medicare Advantage applications in 2019 compared to 2018 and an increase in adjustment revenue for Medicare Advantage plans approved in prior periods.

Revenue from Individual, Family and Small Business segment grew $18.4 million or 45% in 2019 compared to 2018, primarily attributable to $11.1 million increase in non-qualified health plans commission revenue and $7.0 million increase in ancillary commission revenue. The increases were primarily attributable to an increase in net adjustment revenue.

Segment Profit – Our Medicare segment profit was $155.2 million in 2019, an increase of $94.4 million or 155%, compared to 2018. This was primarily driven by a $236.4 million increase in revenue, partially offset by a $142.0 million increase in operating expenses, excluding stock-based compensation expense, change in earnout liability, depreciation and amortization expenses, and amortization of intangible assets. The increase in operating expenses was mostly attributable to increased variable marketing costs and customer care and enrollment costs.

Our Individual, Family and Small Business segment profit was $23.4 million in 2019, an increase of $17.6 million or 303% compared to 2018. The increase was primarily driven by an $18.4 million increase in revenue and a $0.9 million increase in operating expenses, excluding stock-based compensation expense, change in earnout liability, depreciation and amortization expenses, and amortization of intangible assets.

Liquidity and Capital Resources

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


	December 31, 2020		December 31, 2019
Cash and cash equivalents	$	43,759	$	23,466
Short-term marketable securities	49,620		—
Total cash, cash equivalents, and short-term marketable securities	$	93,379	$	23,466

We believe our current cash and cash equivalents, credit facility, and expected cash collections will be sufficient to fund our operations for at least twelve months after the ~~new standard~~filing date of this Annual Report on Form 10-K. Our future capital requirements will ~~have a material impact to~~depend on many factors, including our ~~opening balance sheet as~~expected membership, retention rates, and our level of ~~January 1, 2016 due to the cumulative effect of adopting the standard using the full retrospective method.~~investment in technology, marketing and advertising and our customer care initiatives. In addition, our ~~adoption of the new standard will have a material impact on~~cash position could be impacted by further acquisitions and investments we make to pursue our ~~commission revenue and,~~growth strategy.

While we recognize constrained LTV as a result, on our consolidated balance sheets and consolidated statements of comprehensive income (loss) as of and for the years ended December 31, 2016 and 2017. Under the new standard, since our services associated with Medicare-related, individual and family and ancillary health insurance plans are complete once an application is approved by a carrier, we will recognize Medicare-related, individual and family and ancillary health insurance plan commission revenue at the time applications are approved, our collection of the ~~plan~~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 fundour future activities or to execute our financial strategy, we may raise additional capital through bank debt, or public or private equity or debt financing to the extent such funding sources are available.

As of December 31, 2020 and 2019, our cash and cash equivalents totaled $43.8 and $23.5 million, respectively. Cash equivalents, which are comprised of financial instruments with an original maturity of 90 days or less from the date of purchase, primarily consist of money market funds. The increase in cash and cash equivalents reflects $201.2 million of net cash provided by financing activities, partially offset by $73.3 million of net cash used in investing activities and $107.9 million of net cash used in operating activities. See Note 6 — Equity in our Notes to Consolidated Financial Statements for information regarding our equity offering in March 2020. We also had $3.4 million in restricted cash as of December 31, 2020 and December 31, 2019.

As of December 31, 2020 and 2019, we had 1.1 million and 1.0 million shares held in treasury stock, respectively, that were shares repurchased to satisfy tax withholding obligations. As of December 31, 2020 and 2019, we had a total of 11.8 million and 11.6 million shares held in treasury stock, respectively, including 10.7 million shares previously repurchased.

Our cash flows are summarized as follows (in thousands):


	Year Ended December 31,
	2020		2019		2018
Net cash used in operating activities	$	(107,860)	$	(71,492)	$	(3,230)
Net cash used in investing activities	(73,283)		(16,944)		(25,757)
Net cash provided by financing activities	201,249		102,141		1,860

Operating Activities

Net cash used in operating activities primarily consists of net loss, adjusted for certain non-cash items, including change in fair value of earnout liability, deferred income taxes, stock-based compensation expense, depreciation and amortization, amortization of intangible assets and internally developed software, other non-cash items, and the effect of changes in working capital and other activities.

Collection of commissions receivable depends upon the timing of our receipt of commission payments and associated commission reports from health insurance carriers. If we were to experience a delay in receiving a commission payment from a health insurance carrier within a quarter, our operating cash flows for that quarter could be adversely impacted.

A significant portion of our marketing and advertising expenses is driven by the ~~carrier equal to the estimated commissions we expect to collect~~number of health insurance applications submitted on ~~the plan. The estimated commissions we expect to collect on a plan~~our ecommerce platforms. Since our marketing and ~~that we will recognize~~advertising costs are expensed and generally paid as incurred, and since commission revenue is recognized upon approval of ~~the application will vary based on product type and other factors, such as the estimated~~a member but commission ~~rates and the estimated life of the respective policies. These estimates will change with our actual experience after adoption. We~~payments are still in the process of finalizing our estimates by product type. Due to annual services we provide in renewing small business health insurance plans, we expect to recognize small business health insurance plan commission revenue at the time the plan is approved by the carrier, and when it renews each year thereafter, equal to the estimated commissions we expect to collect from the plan over the following 12-months. We have reviewed our contracts with our customers, the carriers whose plans we sell, and determined that we do not incur incremental costs when we enter into new contracts with carriers; therefore, we do not expect to capitalize contract acquisition costs as a result of the adoption of the new standard. The new standard will require us to make significant estimates, including, but not limited to, the estimated consideration to be paid to us over time, our operating cash flows could be adversely impacted by a substantial increase in the ~~estimated life~~volume of ~~plans approved~~applications submitted during a quarter or positively impacted by ~~carriers, or~~a substantial decline in the ~~following 12 months~~volume of applications submitted during a quarter. During the Medicare AEP which takes place during the last quarter of each year, we experience an increase in the number of submitted Medicare-related health insurance applications and marketing and advertising expenses compared to outside of Medicare annual enrollment periods. Similarly, during open enrollment periods for ~~small business~~individual and family health insurance plans ~~for~~ which we are the broker of record. In addition, we are in the process of assessing the impact the adoption of the new standard will have on our accounting for income taxes. Our adoption of the new standard will also significantly change the seasonality of our revenues, primarily with respect to our Medicare-related, individual and family and ancillary health insurance plan commission revenue. Under Topic 606, we expect to recognize significantly lower commission revenue intakes place during the first quarter of each year, ~~when~~we experience an increase in the number of submitted individual and family plan health insurance applications and marketing and advertising expenses compared to outside of open enrollment periods. The timing of open enrollment periods for individual and family health insurance and the Medicare AEP and open enrollment period for Medicare-related health insurance can positively or negatively affect our cash flows during each quarter.

Year Ended December 31, 2020 – Net cash used in operating activities was $107.9 million during the year ended December 31, 2020, primarily driven by cash used from changes in net operating assets and liabilities of $201.3 million, partially offset by net income of $45.5 million and adjustments for non-cash items of $48.0 million. Cash used from changes in net operating assets and liabilities during the year ended December 31, 2020 primarily consisted of an increase of $205.2 million in contract assets – commissions receivable, a decrease of $9.0 million in accrued compensation and benefits, an increase of $6.2 million in prepaid expenses and other assets and a decrease of $2.3 million in deferred revenue, partially offset by increases of $12.3 million in accounts payable, $5.7 million in accrued marketing expenses, and $2.8 million in accrued expenses and other liabilities. Adjustments for non-cash items primarily consisted of $25.2 million of stock-based compensation expense, $8.8 million change in deferred income taxes, $7.8 million of amortization of internally-developed software, and $1.5 million of amortization of intangible assets.

Year Ended December 31, 2019 – Net cash used in operating activities was $71.5 million in 2019, consisted of cash used for working capital needs and other activities of $209.5 million, partially offset by net income of $66.9 million and adjustments for non-cash items totaling $71.1 million. Adjustments for non-cash items primarily consisted of $24.1 million change in fair value of earnout liabilities, $22.6 million of stock-based compensation expense, $16.2 million increase in deferred income taxes, $3.8 million of amortization of internally-developed software, $3.0 million of depreciation and amortization, and $2.2 million of amortization of intangible assets. The cash decrease resulting from changes in working capital in 2019 primarily consisted of $243.4 million increase in commissions receivable, partially offset by increases of $19.7 million in accounts payable, $8.8 million in accrued compensation and benefits, $1.9 million in accrued expenses and other liabilities, $1.7 million in deferred revenue, and $1.0 million in accrued marketing expenses.

Year Ended December 31, 2018 – Net cash used in operating activities was $3.2 million during the year ended December 31, 2018, primarily driven by changes in net operating assets and liabilities of $38.6 million and, partially offset by adjustments for non-cash items of $35.1 million. Adjustments for non-cash items primarily consisted of $12.5 million of stock-based compensation expense, $12.3 million change in fair value of earnout liability, $2.8 million change in deferred income taxes, $2.5 million of depreciation and amortization, $2.2 million of

amortization of internally-developed software, and $2.1 million of amortization of intangible assets. Cash used from changes in net operating assets and liabilities during the year ended December 31, 2018 primarily consisted of increases of $51.0 million in contract assets – commissions receivable and $2.1 million in accounts receivable, partially offset by increases of $6.3 million in accrued marketing expenses, $5.1 million in accrued compensation and benefits, and $1.4 million in accounts payable.

Investing Activities

Our investing activities primarily consist of purchases and redemption of marketable securities, purchases of computer hardware and software to enhance our website and customer care operations, leasehold improvements related to facilities expansion, internal-use software and the purchase of certain intangible assets.

Year Ended December 31, 2020 – Net cash used in investing activities of $73.3 million during 2020 mainly consisted of $180.5 million used to purchase marketable securities, $16.0 million of capitalized internal-use software and website development costs, and $7.8 million used to purchase property and equipment and other assets, partially offset by $131.0 million of proceeds from redemption and maturities of marketable securities.

Year Ended December 31, 2019 – Net cash used in investing activities of $16.9 million during 2019 mainly consisted of $10.2 million of capitalized internal-use software and website development costs and $6.6 million used to purchase property and equipment and other assets.

Year Ended December 31, 2018 – Net cash used in investing activities of $25.8 million during 2018 was due to $14.9 million of net cash used to acquire GoMedigap, $6.3 million of capitalized internal-use software and website development costs, and $4.5 million used to purchase property and equipment and other assets.

Financing Activities

Year Ended December 31, 2020 – Net cash provided by financing activities of $201.2 million during 2020 was primarily attributable to $228.0 million proceeds from issuance of common stock, net of issuance costs and $1.9 million of net proceeds from exercise of common stock options, partially offset by $19.8 million cash used for share repurchases to satisfy employee tax withholding obligations and $8.8 million of acquisition-related contingent consideration payments.

Year Ended December 31, 2019 – Net cash provided by financing activities of $102.1 million during 2019 was primarily attributable to $126.1 million proceeds from issuance of common stock, net of issuance costs and $5.5 million of net proceeds from exercise of common stock options, partially offset by $14.3 million cash used for share repurchases to satisfy employee tax withholding obligations, $9.5 million of acquisition-related contingent payments, and $5.0 million repayment of debt.

Year Ended December 31, 2018 – Net cash provided by financing activities of $1.9 million during 2018 was primarily due to $5.0 million of proceeds from drawing on our line of credit, $2.7 million of net proceeds from exercises of common stock options, partially offset by $4.5 million used for share repurchases to satisfy employee tax withholding obligations, and $1.2 million of debt issuance costs.

Common Stock Issuance

In January 2019, we entered into an underwriting agreement with RBC Capital Markets, LLC and Credit Suisse Securities (USA) LLC as representatives of the several underwriters to issue and sell a total of 2,760,000 shares of our common stock in a public offering, which total included the exercise in full of the underwriters’ option to purchase 360,000 additional shares of common stock, at a price to the public of $48.50 per share, for total net proceeds of $126.2 million, after deducting underwriting discounts, commissions and offering expenses.

In March 2020, we entered into an underwriting agreement to issue and sell a total of 2,070,000 shares of common stock, which total included the exercise in full of the underwriters’ option to purchase 270,000 additional shares of common stock, at a price to the public of $115.00 per share. Net proceeds from the offering were approximately $228.0 million after deducting underwriting discounts, commissions and expenses of the offering. We intend to use the net proceeds of the offering for general corporate purposes, including working capital.

Preferred Stock

On February 17, 2021, we entered into an investment agreement with H.I.G. pursuant to which we have ~~historically recognized commission revenue from Medicare-related renewals~~agreed to sell to H.I.G. at closing, 2,250,000 shares of our newly designated Series A preferred stock at an aggregate purchase price of $225.0 million, at a price of $100 (the “Stated Value” per share of Series A preferred stock) per share. The Private Placement is subject to closing conditions, including, among others: (i) the expiration or early termination of the waiting period (and any extension thereof) applicable to the consummation of the Private Placement under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended; (ii) the confirmation by Nasdaq that it has no objection to the terms and ~~expect~~conditions of the Private Placement; and (iii) the determination that consummation of the Private Placement would not cause our outside auditor to ~~instead record significantly greater commission revenue~~no longer be deemed independent under the rules and regulations of the Securities and Exchange Commission or the Public Company Accounting Oversight Board. The parties have agreed to cooperate with each other and use reasonable best efforts to promptly take such actions to cause the closing conditions to be satisfied as promptly as reasonably practicable.

Dividends will initially accrue on the Series A preferred stock daily at 8% per annum on the Stated Value per share and compound semiannually, payable in kind until the ~~fourth quarter~~second anniversary of the closing date of the Private Placement on June 30 and December 31 of each year, beginning on June 30, 2021, and thereafter 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 will also participate, on an as-converted basis (without regard to conversion limitations) in all dividends paid to the holders of our common stock. If we fail to declare and pay full cash dividend payments as ~~a result~~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 ~~increase~~semiannual period immediately preceding the first Cash Dividend Payment Date at which we failed to pay such accrued cash dividends, until such failure to pay full cash dividends is cured (at which time the dividend rate shall return to the rate prior to such increase). The dividend rights of the Series A preferred stock are senior to all of our other equity securities.

At any time on or after the sixth anniversary of the closing date of the Private Placement, each holder of Series A preferred stock will have the right to require us to redeem all or any portion of the Series A preferred stock for cash at a price calculated as set forth in ~~approved plans~~the certificate of designations. In addition, upon certain change of control events, holders of Series A preferred stock can require us, subject to certain exceptions, to repurchase any or all of their Series A preferred stock.

Credit Agreement

We entered into a credit agreement with Royal Bank of Canada, or RBC, as administrative agent and collateral agent, (the “Credit Agreement”) in September 2018. The Credit Agreement provides for a $40.0 million secured asset-backed revolving credit facility with a $5 million letter of credit sub-facility. On December 20, 2019, we ~~experience~~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.

Eligible Commission Receivables for the immediately succeeding period of six months (excluding the immediately succeeding period of three months), in each case subject to reserves established by RBC, or the Borrowing Base. The proceeds of the loans under the Credit Agreement may be used for working capital and ~~open~~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 December 31, 2020 and 2019, we had no outstanding principal amount under our revolving credit facility. See Note 11 – Debt of Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information regarding this credit agreement and subsequent amendment.

Acquisition

On January 22, 2018, we completed our acquisition of Wealth, Health and Life Advisors, LLC, more commonly known as GoMedigap, a technology-enabled provider of Medicare Supplement enrollment ~~periods.~~services. The acquisition price paid at closing of the transaction consisted of cash of $15.0 million, less $0.1 million cash acquired, and approximately 294,637 shares of our common stock. In addition, we were obligated to pay an additional $20.0 million in cash and 589,275 shares of our common stock, subject to the terms of the acquisition agreement and upon final determination of the achievement of certain milestones in 2018 and 2019. The first and second earnout liability payments were made in February 2019 and January 2020, respectively. See Note 5 – Fair Value Measurements of our Notes to Consolidated Financial Statements for the discussion on the milestone payments.

Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles, or U.S. GAAP, requires us to make judgments, assumptions, and estimates that affect the amounts reported in the consolidated financial statements and the accompanying notes. These estimates and assumptions are based on current facts, historical experience, and various other factors that we believe are reasonable under the circumstances to determine reported amounts of assets, liabilities, revenue and expenses that are not readily apparent from other sources. To the extent there are material differences between our estimates and the actual results, our future consolidated results of ~~operations~~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. TheAmong our significant accounting policies, ~~we believe~~which are described in Note 1 – Summary of Business and Significant Accounting Policies in our Notes to ~~reflect our more significant~~Consolidated Financial Statements, the following accounting policies and specific estimates involve a greater degree of judgments and ~~assumptions~~complexity:

•Revenue recognition and ~~are most critical to understanding~~contract assets - commission receivable;

•Stock-based compensation; and ~~evaluating our reported financial results are as follows:~~

~~Revenue Recognition;~~

~~Stock-Based Compensation;~~

~~Business Combinations;~~

~~Realizability of Long-Lived Assets and;~~

•Accounting for ~~Income Taxes.~~income taxes.

During the year ended December 31, ~~2017,~~2020, there were no significant changes to our critical accounting policies and estimates.

Revenue Recognition and Contract Assets - Commission Receivable

~~We recognize~~Commission Revenue – Our commission revenue ~~for our services when each of the following four criteria is met: persuasive evidence~~results from approval of an arrangement exists; delivery has occurred or services have been rendered; the seller’s price to the buyer is fixed or determinable; and collectability is reasonably assured. Our revenue is primarily comprised of compensation paid to us by health insurance carriers related to insurance plans that have been purchased by a member who used our service. We define a member as an individual currently covered by an insurance plan, including Medicare-related, individual and family, small business and ancillary plans, for which we are entitled to receive compensation from an insurance carrier.

~~Commission Revenue~~

We typically enter into contractual agency relationships with health insurance carriers that are non-exclusive and terminable on short notice by either party for any reason. In addition, health insurance carriers often have the ability to terminate or amend our agreements unilaterally on short notice, including provisions in our agreements relating to our commission rates. The amendment or termination of an agreement we have with a health insurance carrier may adversely impact the commissions we are paid on health insurance plans that we have already sold through the carrier.

For both Medicare Advantage and Medicare Part D prescription drug plans, we receive a fixed, annual commission payment from insurance carriers once the plan is approved by the carrier and either a fixed, monthly or annual commission payment beginning with and subsequent to the second plan year. Additionally, commission rates may be higher in the first twelve months of the plan if the plan is the first Medicare Advantage or Medicare Part D prescription drug plan issued to the member. In the first plan year of a Medicare Advantage and Medicare Part D prescription drug plan, after the health insurance carrier approves the application but during the effective year of the plan, we are paid a fixed commission that is prorated for the number of months remaining in the calendar year. Additionally, if the plan is the first Medicare Advantage or Medicare Part D plan issued to the member, we may receive a higher commission rate that covers a full twelve-month period, regardless of the month the plan was effective. We earn commission revenue for Medicare Advantage and Medicare Part D prescription drug plans for which we are the broker of record, typically until either the policy is cancelled or we otherwise do not remain the agent on the policy. We recognize commission revenue for both Medicare Advantage and Medicare Part D prescription drug plans for the entire plan year once the annual or first monthly commission amount for the plan year is reported to us by the carrier, net of an estimate for future forfeiture amounts due to cancellations. For commissions paid to us on a monthly basis, we record a receivable for the commission amounts to be received over the remainder of the plan year, net of an estimate for commission amounts not expected to be collected due to policy cancellations, which is included in Accounts Receivable in the consolidated balance sheets. We determine that there is persuasive evidence of an arrangement when we have a commission agreement with a health insurance carrier. Our services are complete when a carrier has approved an application in the initial year and when a member has renewed in a renewal year. The seller’s price is fixed or determinable and collectability is reasonably assured when a carrier has approved an application and the carrier reports to us the annual or first monthly renewal commission amount for each plan year.

For individual and family, Medicare Supplement, small business and ancillary plans, our compensation generally represents a flat amount per member per month or a percentage of the premium amount collected by the carrier during the period that a member maintains coverage under a plan (commissions) and, to a much lesser extent, override commissions that health insurance carriers pay us for achieving certain objectives. Premium-based commissions are reported to us after the premiums are collected by the carrier, generally on a monthly basis. We generally continue to receive the commission payment from the relevant insurance carrier until the health insurance plan is cancelled or we otherwise do not remain the agent on the policy. We recognize commission revenue for individual and family, Medicare Supplement, small business and ancillary plans as the commissions are reported to us by the carrier, net of an estimate for future forfeiture amounts due to policy cancellations. We determine that there is persuasive evidence of an arrangement when we have a commission agreement with a health insurance carrier, a carrier reports to us that it has approved an application submitted through our ecommerce platform and the applicant starts making payments on the plan. Our services are complete when a carrier has approved an application. The seller’s price is fixed or determinable and collectability is reasonably assured when commission amounts have been reported to us by a carrier.

We recognize individual and family, small business and ancillary commission override revenue when reported to us by a carrier based on the actual attainment of predetermined target sales levels or other objectives as determined by the carrier. Commission override revenue, which we recognize on the same basis as individual and family, small business and ancillary commissions, is generally reported to us in a more irregular pattern than such commissions.

statement separately and in different accounting periods, we recognize revenue in the period that we receive the earliest communication, provided we receive the second corroborating communication shortly following the end of the accounting period. If the second corroborating communication is not received shortly following the end of the accounting period, we recognize revenue in the period the second communication is received. During 2014, CMS issued a regulation prohibiting carriers from paying commissions during the fourth quarter on Medicare Advantage and Medicare Part D prescription drug plans sold during the fourth quarter with an effective date in the following year. During the fourth quarters of 2015, 2016 and 2017, we recognized revenue for policies included on a commission statement received prior to the end of the year for which payment was received shortly after year-end and in connection with the carriers’ normal payment cycle during the first quarter of that following year. We use the data in the commission statements to help identify the members for which we are receiving a commission payment and the amount received for each member, and to estimate future forfeiture amounts due to policy cancellations. As a result, we recognize the net amount of compensation earned as the agent in the transaction.

Certain commission amounts are subject to forfeiture if the policy is subsequently cancelled and either the carrier takes back all or a portion of the commission they have paid to us or we will no longer receive monthly commission payments for the remainder of the plan year. We record an estimate for these forfeitures based on our historical cancellation experience using data provided on commission statements. Policy cancellations and the commission amounts, if any, to be taken back by the carrier are typically reported to us by health insurance carriers several months after the policy’s cancellation date. Our estimate for forfeitures payable to a carrier, which is included in Other Current Liabilities in the Consolidated Balance Sheets, includes an estimate of both the reporting time lag and the forfeiture amount, based on our historical experience by policy type. Similarly, our estimate for commission amounts not expected to be collected due to policy cancellations, which is recorded as a reduction of Accounts Receivable in the Consolidated Balance Sheets, includes an estimate of the annual policy cancellation rate, based on our historical experience by policy type. Changes in our historical trends would result in changes to our estimated forfeitures in future periods. There were no changes in our average forfeiture rates or reporting time lag during the years ended December 31, 2015, 2016, and 2017 that had a material impact on our estimate for forfeitures.

We rely on all of our health insurance carriers to report accurately and in a timely manner the amount of commissions earned by us, and we calculate our commission revenue, prepare our financial reports, projections and budgets, and direct our marketing and other operating efforts based on the reports we receive from them. Each month we analyze the reports we receive from health insurance carriers, ~~by comparing them to the database~~which we ~~maintain on~~define as our ~~members. It~~customers under ASC 606. Our commission revenue is ~~often difficult for us to independently determine whether or not carriers are reporting all~~primarily

comprised of commissions ~~due to us, primarily because members on Medicare-related, individual and family, small business and ancillary~~from health insurance ~~policies terminate their policies either~~carriers which is computed using the estimated constrained lifetime values as the “constrained LTVs” of commission payments that we expect to receive.

We estimate commission revenue for each insurance product by ~~contacting~~using a portfolio approach to a group of approved members by plan type and the ~~carrier directly instead of by informing us~~effective month of the cancellation or by discontinuing their premium payments to the carrier. Also, some of our individual, family and small business members pay their premiums less frequently than monthly. This results in our having to identify underpayment or non-payment of commissions on a policy and follow up with a carrier to obtain an explanation and/or request correction of the amount of commissions paid to us.

~~Other Revenue~~

Our sponsorship and advertising program allows carriers to purchase advertising space in specific markets in a sponsorship area on our website. In return, we are typically paid a monthly fee, which is recognized over the period that advertising is displayed, and often a performance fee based on metrics such as submitted health insurance applications, which is recognized when the earned amount are fixed and determinable and all other revenue recognition criteria has been met. We also offer Medicare advertising services, which include website development, hosting and maintenance. In these instances, we are typically paid a fixed, up-front fee,relevant plan, which we ~~recognize~~refer to as ~~revenue over~~“cohorts”. We estimate the ~~service period.~~

Our commercial technology licensing business allows carriers the use of our ecommerce platform to offer their own health insurance policies on their websites and agents to utilize our technology to power their online quoting, content and application submission processes. Typically, we are paid a one-time implementation fee, which we recognize on a straight-line basis over the estimated term of the customer relationship (generally the initial term of the agreement), commencing once the technology is available for use by the third party, and a performance fee based on metrics such as submitted health insurance applications. The metrics used to calculate performance fees for both sponsorship and advertising and technology licensing are based on performance criteria that are either measured based on data tracked by us, or based on data tracked by the third party. In instances where the performance criteria data is tracked by us, we recognize revenue in the period of performance and when all other revenue recognition criteria have been met. In instances where the performance criteria data is tracked by the third party, we recognize revenue when the amounts earned are either fixed or determinable and collection is reasonably assured. Typically, this occurs through our receipt of a cash payment from the third party along with a detailed statement containing the data that is tracked by the third party.

Deferred revenue includes deferred technology licensing implementation fees and amounts billed for deliverables in multiple element arrangements that do not have stand-alone value from other, undelivered elements, as well as amounts billed or collected from sponsorship or technology licensing customers in advance of our performing our service for such customers. It also includes the amount by which both unbilled and billed services provided under our technology licensing arrangements exceed the straight-line revenue recognized to date. We defer commission amounts that have been paid to us related to transactions where our services are complete, but where we cannot currently estimate future forfeitures related to those amounts.

We allocate revenue to all units of accounting within an arrangement with multiple deliverables at the inception of the arrangement using the relative selling price method. The relative selling price method allocates any discount in an arrangement proportionally to each deliverable on the basis of each deliverable’s relative selling price. The relative selling price established for each deliverable is based on vendor-specific objective evidence of fair value (“VSOE”) if available, third-party evidence of selling price if VSOE is not available, or best estimate of selling price if neither VSOE nor third-party evidence is available. When used, the best estimate of selling price reflects our best estimates of what the selling prices of certain deliverables would be if they were sold regularly on a stand-alone basis. Our process for determining best estimate of selling price for deliverables without VSOE or third-party evidence of selling price considers multiple factors that may vary depending upon the unique facts and circumstances related to each deliverable. Key factors considered by us in developing the relative selling prices for our technology licensing fees include prices charged by us for similar offerings and our historical pricing practices. We may also consider additional factors as appropriate, including competition.

A deliverable constitutes a separate unit of accounting when it has stand-alone value and there are no customer-negotiated right of refunds for the delivered elements. If the arrangement includes a customer-negotiated right of refund relative to the delivered item, and the delivery and performance of the undelivered item is considered probable and substantially in our control, the delivered element constitutes a separate unit of accounting. In circumstances when the aforementioned criteria are not met, the deliverable is combined with the undelivered elements, and the allocation of the arrangement consideration and revenue recognition is determined for the combined unit as a single unit. Allocation of the consideration is determined at the inception of the arrangement on the basis of each unit’s relative selling price. After the arrangement consideration has been allocated to each unit of accounting based on their relative selling prices, we apply revenue recognition criteria separately to each respective unit of accounting in the arrangement in accordance with applicable accounting guidance.

~~Adoption of New Revenue Recognition Policy~~

~~In the first quarter of 2018, we will adopt Accounting Standards Update 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606), which will have a material impact on our consolidated financial statements, as discussed in~~ ~~Note 1-Summary of Business and Significant Accounting Policies~~ ~~in the~~ ~~Notes to Consolidated Financial Statements~~ ~~of this Annual Report on Form 10-K~~. ~~Under the new standard, we will be required to estimate~~ commissions we expect to collect ~~from~~for each approved member cohort by evaluating various factors, including but not limited to, commission rates, carrier mix, estimated average plan duration, the regulatory environment, and cancellations of insurance plans offered by health insurance carriers with which we have a relationship. Contract assets - commissions receivable represent the variable consideration for policies that have not renewed yet and therefore are subject to the same assumptions, judgements and estimates used when recognizing revenue as noted above.

For Medicare-related, individual and family and ancillary health insurance plans, ~~as commission revenue over the life of the plan at the time it~~our services are complete once a submitted application is approved by the relevant health insurance carrier. ~~Due~~Accordingly, we recognize commission revenue based upon the total estimated lifetime commissions we expect to receive for selling the plan after the carrier approves an application, net of an estimated constraint. We refer to these as estimated and constrained LTVs for the plan. We provide annual services ~~we provide~~ in selling and renewing small business health insurance ~~plans,~~plans; therefore, we ~~expect to~~ recognize small business health insurance plan commission revenue at the time the plan is approved by the carrier, and when it renews each year thereafter, equal to the estimated commissions we expect to collect from the plan over the following ~~12-months.~~twelve months. Our ~~estimates will be~~estimate of commission revenue for each product line is based on a number of assumptions, ~~including,~~which include, but are not limited to, estimating ~~forfeitures from~~conversion of an approved member to a paying member, forecasting average plan ~~cancellations, customer renewal rates~~duration and ~~expected future~~forecasting the commission ~~rates~~amounts likely to be received per ~~member~~member. These assumptions are based on ~~renewal, product type and carrier. These assumptions will be based on~~our analysis of historical trends for the different cohorts and incorporate management’s ~~judgment.~~judgment in interpreting those trends to apply the constraints discussed below. The estimated average plan duration used to calculate Medicare health insurance plan LTVs historically has been approximately 3-5 years, while the estimated average plan duration used to calculate the LTV for major medical individual and family health insurance plans historically has been approximately six months to 3 years. To the extent we make changes to the assumptions we ~~will~~use to calculate constrained LTVs, we recognize any material impact of the changes to ~~estimated~~ commission revenue in the reporting period in which the change is ~~made.~~made, including revisions of estimated lifetime commissions either below or in excess of previously estimated constrained LTV recognized as revenue.

We recognize revenue for members approved during the period by applying the latest estimated constrained LTV for that product. We recognize adjustment revenue for members approved in prior periods when our cash collections are different from the estimated constrained LTVs. Adjustment revenue is a result of a change in estimate of expected cash collections when actual cash collections have indicated a trend that is different from the estimated constrained LTV for the revenue recognized at the time of approval. Adjustment revenue can be positive or negative and we recognize adjustment revenue when we do not believe there is a probable reversal. We assess the risk of reversal based on statistical analysis given historical information and consideration of the constraints used at the time of approval.

Adjustment revenue can have a significant favorable or unfavorable impact on our revenue and we seek to enhance our LTV estimation models to improve the accuracy and to reduce the fluctuations of our LTV estimates.

Other Revenue – Sponsorship and Advertising – Our sponsorship and advertising program allows carriers to purchase advertising space in specific markets in a sponsorship area on our website. In return, we are typically paid a fee, which is recognized over the period that advertising is displayed, and often a performance fee based on metrics such as submitted health insurance applications, which is recognized when control has been transferred. We also offer Medicare advertising services, which include website development, hosting and maintenance. In these instances, we are typically paid a fixed, up-front fee, which we recognize as revenue as control is transferred ratably over the service period.

Stock-Based Compensation

We recognize stock-based compensation expense in the accompanying Consolidated Statements of Comprehensive ~~Loss~~Income based on the ~~estimated~~ fair value of our stock-based awards over their respective vesting periods, which is generally four years. The estimated grant date fair value of our stock options is determined using the Black-Scholes-Merton pricing model and a single option award approach. The weighted-average expected term for stock options granted is calculated using historical option exercise behavior. The dividend yield is determined by dividing the expected per share dividend during the coming year by the grant date stock price. Through December 31, 2017, we had not declared or paid any cash dividends, and we do not expect to pay any in the foreseeable future. We base the risk-free interest rate on the implied yield currently available on U.S. Treasury zero-coupon issues with a remaining term equal to the expected term of our stock options. Expected volatility is determined using a combination of the implied volatility of publicly traded options in our stock and historical volatility of our stock price. The estimated attainment of performance-based awards and related expense is based on the expectations of revenue and earnings target achievement. The estimated fair value of performance awards with market conditions is determined using the ~~Monte-~~

~~Carlo~~Monte-Carlo simulation model. The assumptions used in calculating the fair value of stock-based payment awards and expected attainment of performance-based awards represent our best estimates, but these estimates involve inherent uncertainties and the application of management judgment. We will continue to use judgment in evaluating the expected term and volatility related to our own stock-based awards on a prospective basis, and incorporating these factors into the model. Changes in key assumptions could significantly impact the valuation of such instruments.

~~Business Combinations~~

We include the results of operations of acquired businesses prospectively from the acquisition date. We allocate the fair value of the purchase consideration of our acquired businesses to the tangible and intangible assets acquired and liabilities assumed based on their The estimated ~~fair values at the acquisition date. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill.~~

When determining the fair values of assets acquired and liabilities assumed, we make significant estimates and assumptions. When provisional amounts are recorded in the reporting period in which a business combination occurs, adjustments to the provisional amounts may be subsequently recognized to reflect new information obtained about facts and circumstances that existed as of the acquisitiongrant date that would have affected the measurement of the amounts recognized at the acquisition date. Adjustments to the provisional amounts identified during the measurement period, which is a period not to exceed one year from the acquisition date, are reported in the period the adjustment is identified by means of an adjustment to goodwill, with the effect on earnings measured as if the provisional amounts had been completed at the acquisition date. Adjustments to amounts recognized in a business combination that occur after the end of the measurement period are recognized in current period operations.

~~Realizability of Long-Lived Assets~~

We assess the realizability of our long-lived assets, including intangible assets and goodwill, whenever events or changes in circumstances indicate the carrying value of such assets may not be recoverable. Factors that we consider in deciding when to perform an impairment review include significant negative industry or economic trends or significant changes or planned changes in our use of the assets. Additionally, we test goodwill and our other indefinite-lived intangible assets for impairment on an annual basis on or about November 30 of each year. When performing the annual goodwill impairment test we first assess qualitative factors to determine whether it is “more likely than not” that the fair value of our ~~reporting unit~~stock options is ~~less than its carrying amount as~~determined using the Black-Scholes-Merton pricing model and a ~~basis~~single option award approach. The weighted-average expected term for ~~determining whether it~~stock options granted is ~~necessary~~calculated using historical option exercise behavior. The dividend yield is determined by dividing the expected per share dividend during the coming year by the grant date stock price. Through December 31, 2020, we had not declared or paid any cash dividends to ~~perform~~common stock holders, and we do not expect to pay any in the ~~two-step goodwill impairment test. When performing~~foreseeable future. We base the ~~annual impairment test for indefinite-lived intangible assets other than goodwill we first assess qualitative factors~~risk-free interest rate on the implied yield currently available on U.S. Treasury zero-coupon issues with a remaining term equal to ~~determine whether it~~the expected term of our stock options. Expected volatility is ~~“more likely than not” that~~determined using a combination of the ~~indefinite-lived intangible is impaired.~~

~~If events or changes in circumstances indicate the carrying value~~implied volatility of such assets may not be recoverable, for long lived assets other than goodwill, including intangible assets with finite useful lives, which include purchased technology, pharmacy relationships, trade names, and trademarks, we measure the recoverability of assets that will continue to be usedpublicly traded options in our ~~operations by comparing the carrying value~~stock and historical volatility of ~~the asset grouping to~~ our estimate of the related total future undiscounted net cash flows. For assets related to our book-of-business transfers, we compare the carrying amount of each asset to the commission revenue expected to be generated by the policies included in each respective book-of-business. Our estimates of commission revenue expected to be generated by each book-of-business include subjective judgments regarding expected policy cancellations. If an asset grouping’s carrying value is not recoverable through the related undiscounted cash flows, the asset grouping is considered to be impaired. The impairment charge is calculated as the amount by which the asset grouping’s carrying value exceeds its fair value, which is defined as the price that would be received from selling an asset in an orderly transaction between market participants at the measurement date.stock price.

We must make subjective judgments in determining the independent cash flows that can be related to specific asset groupings. In addition, we must make subjective judgments regarding the remaining useful lives of assets with finite useful lives. When we determine that the useful life of an asset is shorter than we had originally estimated, we accelerate the rate of amortization over the new remaining useful life of the asset.

Accounting for Income Taxes

We account for income taxes using the liability method. Deferred income taxes are determined based on the differences between the financial reporting and tax bases of assets and liabilities, using enacted statutory tax rates in effect for the year in which the differences are expected to reverse.

Since tax laws and financial accounting standards differ in their recognition and measurement of assets, liabilities, equity, revenues, expenses, gains and losses, differences arise between the amount of taxable income and pretax financial income for a year and between the tax bases of assets or liabilities and their reported amounts in our financial statements. Because we assume that the reported amounts of assets and liabilities will be recovered and settled, respectively, a difference between the tax basis of an asset or a liability and its reported amount in the balance sheet will result in a taxable or a deductible amount in some future years when the related liabilities are settled or the reported amounts of the assets are recovered, which gives rise to a deferred tax asset or liability. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income and to the extent we believe that recovery does not meet the more likely than not criteria, we must establish a valuation allowance. Management judgment is required in determining any valuation allowance recorded against our net deferred tax assets.

As part of the process of preparing our consolidated financial statements, we are required to estimate our income taxes. This process involves estimating our actual current tax expense together with assessing temporary differences that may result in deferred tax assets.

Assessing the realizability of our deferred tax assets is dependent upon several factors, including the likelihood and amount, if any, of future taxable income in relevant jurisdictions during the periods in which those temporary differences become deductible. We forecast taxable income by considering all available positive and negative evidence, including our history of operating income and losses and our financial plans and estimates that we use to manage the business. These assumptions require significant judgment about future taxable income. As ata result, the ~~year ended December 31, 2017, we maintained a full valuation allowance against our federal and state~~amount of deferred tax ~~assets. Any~~assets considered realizable is subject to adjustment in future ~~change in the valuation allowance could have an effect on the income tax provision in our Consolidated Statement of Comprehensive Loss.~~

On December 22, 2017, the Tax Cuts and Jobs Act of 2017, or the “Jobs Act”, was signed into law resulting in significant changes to the Internal Revenue Code. The Jobs Act reduces the federal corporate income tax rate from 35% to 21% effective for tax years beginning after December 31, 2017, changes U.S international taxation from a worldwide tax system to a territorial system, and implements a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017. While we are able to make reasonableperiods if estimates of the impact of the reduction in corporate rates and other changes, the final impact of the Jobs Act may differ from these estimates, as a result of, among other things, changes in our interpretations and assumptions, additional guidance that may be issued by the internal revenue service and resulting actions we may take.future taxable income change.

Future changes in various factors, such as the amount of stock-based compensation we record during the period and the related tax benefit we realize upon the exercise of employee stock options, potential limitations on the

use of our federal and state net operating loss credit carry forwards, pending or future tax law changes including rate changes and the tax benefit from or limitations on our ability to utilize research and development credits, the amount of non-deductible lobbying and acquisition-related costs, changes in our valuation allowance and state and foreign taxes, would impact our estimates, and as a result, could affect our effective tax rate and the amount of income tax expense we record, and pay, in future periods.

~~Results of Operations~~

~~The following table sets forth our operating results and related percentage of total revenues for the years ended December 31, 2015, 2016 and 2017 (dollars in thousands):~~

Year Ended December 31,
2015 2016 2017
Revenue

Commission $ 171,257
90 % $ 170,850
91 % $ 158,424
92 %
Other 18,284
10 % 16,110
9 % 13,931
8 %
Total revenue 189,541
100 % 186,960
100 % 172,355
100 %
Operating costs and expenses:

Cost of revenue 4,178
2 % 3,176
2 % 2,273
1 %
Marketing and advertising 75,571
40 % 72,213
39 % 65,874
38 %
Customer care and enrollment 43,159
23 % 48,718
26 % 59,183
35 %
Technology and content 36,351
19 % 32,749
17 % 32,889
19 %
General and administrative 30,239
16 % 35,216
19 % 39,969
23 %
Acquisition costs —
— % —
— % 621
— %
Restructuring charge (benefit) 4,541
3 % (297 ) — % —
— %
Amortization of intangible assets 1,153
1 % 1,040
1 % 1,040
1 %
Total operating costs and expenses 195,192
104
192,815
103
201,849
117
Loss from operations (5,651 ) (3 )% (5,855 ) (3 )% (29,494 ) (17 )%
Other income (expense), net 45
— % 102
— % 327
— %
Loss before benefit from income taxes (5,606 ) (3 )% (5,753 ) (3 )% (29,167 ) (17 )%
Benefit from income taxes (843 ) — % (871 ) — % (3,755 ) (2 )%
Net loss $ (4,763 ) (3 )% $ (4,882 ) (3 )% $ (25,412 ) (15 )%

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

Year Ended December 31,
2015 2016 2017
Marketing and advertising $ 1,950
$ 1,237
$ 1,033
Customer care and enrollment 477
497
418
Technology and content 1,728
1,836
1,410
General and administrative 2,734
3,696
6,833
Restructuring charges 113
—
—
$ 7,002
$ 7,266
$ 9,694

~~Years Ended December 31, 2015, 2016 and 2017~~

~~Revenue~~

The following table presents our commission revenue, other revenue and total revenue for the years ended December 31, 2015, 2016 and 2017 and the dollar and percentage changes from the prior year (dollars in thousands):

Year Ended Change Year Ended Change Year Ended
December 31, 2015 $ % December 31, 2016 $ % December 31, 2017
Commission $ 171,257
$ (407 ) —% $ 170,850
$ (12,426 ) (7)% $ 158,424
Percentage of total revenue 90 %
91 %
92 %
Other 18,284
(2,174 ) (12)% 16,110
(2,179 ) (14)% 13,931
Percentage of total revenue 10 %
9 %
8 %
Total revenue $ 189,541
$ (2,581 ) (1)% $ 186,960
$ (14,605 ) (8)% $ 172,355

~~2017 compared to 2016~~—Commission revenue decreased $12.4 million, or 7%, in 2017, due to a $33.2 million or 34% decrease in Individual, Family and Small Business commission revenue, partially offset by a $20.8 million, or 28% increase in Medicare commission revenue. The decrease in Individual, Family and Small Business commission revenue was primarily due to a 38% decline in estimated individual and family health insurance membership as of December 31, 2017 compared to December 31, 2016, primarily attributable to lower submitted application volumes and a decline in our membership retention rate in 2017. The increase in Medicare commission revenue was primarily attributable to a 26% increase in estimated Medicare membership as of December 31, 2017 compared to December 31, 2016, in part due to growth in our sale of Medicare Advantage and Medicare Supplement plans and improved retention rates.

Other revenue decreased $2.2 million, or 14%, in 2017 due primarily to decreases of $1.5 million in online sponsorship and advertising revenue, $0.4 million in lead generation revenue and $0.2 million in licensing fees.

~~2016 compared to 2015~~—Commission revenue decreased $0.4 million in 2016, due to a $17.2 million decrease in Individual, Family and Small Business commission revenue, partially offset by a $16.8 million increase in Medicare commission revenue. The decrease in Individual, Family and Small Business commission revenue was primarily due to a 28% decrease in individual and family health insurance estimated membership as of December 31, 2017 compared to December 31, 2016. The increase in Medicare commission revenue was primarily due to a 33% increase in Medicare estimated membership as of December 31, 2017 compared to December 31, 2016.

Other revenue decreased $2.2 million, or 12%, in 2016, due to decreases of $1.4 million in licensing fees, $0.5 million in online sponsorship and advertising revenue and $0.3 million in lead generation revenue.

~~Cost of Revenue~~

Included in cost of revenue are 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.

~~The following table presents our cost of revenue for the years ended December 31, 2015, 2016 and 2017 and the dollar and percentage changes from the prior year (dollars in thousands):~~

Year Ended Change Year Ended Change Year Ended
December 31, 2015 $ % December 31, 2016 $ % December 31, 2017
Cost of revenue $ 4,178
$ (1,002 ) (24 )% $ 3,176
$ (903 ) (28 )% 2,273
Percentage of total revenue 2 %

2 %

1 %

~~2017 compared to 2016~~—Cost of revenue decreased $0.9 million in the 2017 compared to 2016, due primarily to a $0.4 million decrease in amortization expense associated with the consideration we paid to a broker partner in connection with the transfer of several Medicare plan books-of-business to us whereby we became the broker of record on the underlying plans and a $0.4 million decrease in payments to marketing partners with whom we have revenue sharing arrangements for health insurance plans sold to members who were referred to our website.

~~2016 compared to 2015~~—Cost of revenue decreased $1.0 million, or 24%, in 2016 compared to 2015, due primarily to a $0.5 million decrease in payments related to health insurance policies sold to members who were referred to our website by marketing partners with whom we have revenue-sharing arrangements and a $0.4 million decrease in amortization expense associated with the consideration we paid to a broker partner in connection with the transfer of several Medicare plan books-of-business to us whereby we became the broker of record on the underlying policies.

~~Marketing and Advertising~~

The following table presents our marketing and advertising expenses for the years ended December 31, 2015, 2016 and 2017 and the dollar and percentage changes from the prior year (dollars in thousands):

Year Ended Change Year Ended Change Year Ended
December 31, 2015 $ % December 31, 2016 $ % December 31, 2017
Marketing and advertising $ 75,571
$ (3,358 ) (4 )% $ 72,213
$ (6,339 ) (9 )% $ 65,874
Percentage of total revenue 40 %

39 %

38 %

~~2017 compared 2016—~~Marketing and advertising expenses decreased $6.3 million, or 9%, in 2017, primarily due to decreases of $7.8 million in variable advertising costs and $0.3 million in stock-based compensation, partially offset by increases of $1.2 million in personnel costs due to additional headcount and $0.6 million in consulting expenses. The decrease in variable advertising costs was largely attributable to decreases of $13.3 million in online advertising costs and $9.2 million in marketing partner channel costs, partially offset by a $14.7 million increase in direct marketing costs and was driven primarily by our strategy to shift our demand generation in the Medicare market to more cost-effective channels, as well as the lower volume of submitted individual and family applications compared to 2016.

~~2016 compared to 2015~~—Marketing and advertising expenses decreased $3.4 million, or 4%, in 2016, primarily due to decreases of $1.9 million in personnel costs resulting from lower headcount, including executive officer departures, $0.8 million in variable advertising costs and $0.7 million in stock-based compensation expense, largely due to reversal of stock-based compensation resulting from executive officer departures. The decrease in variable advertising costs resulted from decreases of $2.7 million in direct marketing expenses and $2.3 million in marketing partner channel costs, partially offset by a $4.2 million increase in online advertising costs.

~~Customer Care and Enrollment~~

The following table presents our customer care and enrollment expenses for the years ended December 31, 2015, 2016, and 2017 and the dollar and percentage changes from the prior year (dollars in thousands):

Year Ended Change Year Ended Change Year Ended
December 31, 2015 $ % December 31, 2016 $ % December 31, 2017
Customer care and enrollment $ 43,159
$ 5,559
13 % $ 48,718
$ 10,465
21 % $ 59,183
Percentage of total revenue 23 %

26 %

35 %

~~2017 compared to 2016 —~~Customer care and enrollment expenses increased $10.5 million, or 21%, in 2017 compared to 2016, primarily due to growth in our Medicare and small group businesses, which resulted in increases of $6.2 million in personnel costs, $2.1 million in external call center costs, $1.2 million in licensing costs and $0.8 million in facilities and other operating costs.

~~2016 compared to 2015—~~Customer care and enrollment expenses increased $5.6 million, or 13%, in 2016 compared to 2015, largely due to increases of $4.1 million in personnel costs primarily relating to our Medicare business and $1.0 million in facilities and other operating costs.

~~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 majority 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.

~~The following table presents our technology and content expenses for the years ended December 31, 2016 and 2017 and the dollar and percentage changes from the prior year (dollars in thousands):~~

Year Ended Change Year Ended Change Year Ended
December 31, 2015 $ % December 31, 2016 $ % December 31, 2017
Technology and content $ 36,351
$ (3,602 ) (10 )% $ 32,749
$ 140
— % $ 32,889
Percentage of total revenue 19 %

17 %

19 %

~~2017 compared 2016 —~~Technology and content expenses remained relatively flat in 2017 as a result of a $1.2 million increase in personnel costs, offset by decreases of $0.7 million in facilities and other operating costs and $0.4 million in stock-based compensation expense.

~~2016 compared to 2015—Technology and content expenses decreased $3.6 million, or 10%, in 2016 compared to 2015, due to a decrease in personnel costs resulting from lower headcount.~~

~~General and Administrative~~

General and administrative expenses include compensation and benefits costs for staff 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.

The following table presents our general and administrative expenses for the years ended December 31, 2015 2016 and 2017 and the dollar and percentage changes from the prior year (dollars in thousands):

Year Ended Change Year Ended Change Year Ended
December 31, 2015 $ % December 31, 2016 $ % December 31, 2017
General and administrative $ 30,239
$ 4,977
16 % $ 35,216
$ 4,753
13 % $ 39,969
Percentage of total revenue 16 %

19 %

23 %

~~2017 compared to 2016 —~~ General and administrative expenses increased $4.8 million, or 13%, in 2017, primarily due to increases of $3.2 million in stock-based compensation expense, $2.1 million in personnel costs largely due to higher headcount, $0.7 million in lobbying fees, and $0.4 million in facilities and other operating costs, partially offset by decreases of $1.2 million in legal fees and $0.4 million in consulting expenses.

~~2016 compared to 2015~~—General and administrative expenses increased $5.0 million, or 16%, in 2016 compared to 2015, due to increases of $1.9 million in personnel costs primarily resulting from severance and relocation costs related to executive officer changes, $0.9 million in stock-based compensation expense resulting from executive officer changes, $0.9 million in third party fees related to a review and analysis of strategic plans, $0.8 million in legal fees and $0.2 million in lobbying fees.

~~Acquisition Costs~~

~~During 2017 we incurred $0.6 million of costs associated with our acquisition of Wealth, Health and Life Advisors, LLC, which was completed on January 22, 2018.~~

~~Restructuring Charge (Benefit)~~

On March 10, 2015, we implemented an organizational restructuring and cost reduction plan. As part of the plan, we eliminated approximately 160 full-time positions, representing approximately 15% of our workforce primarily in our technology and content and customer care and enrollment groups, and to a lesser extent, in our marketing and advertising and general and administrative groups. We incurred a pre-tax restructuring charge of approximately $3.9 million for employee termination benefits and related costs and $0.6 million for facility and other termination costs. The majority of the restructuring charge was recorded in the first quarter of 2015, when the activities comprising the plan were substantially completed.

~~The following table presents our restructuring benefit for the years ended December 31, 2015, 2016 and 2017 and the dollar change from the prior year (dollars in thousands):~~

Year Ended Change Year Ended Change Year Ended
December 31, 2015 $ % December 31, 2016 $ % December 31, 2017
Restructuring $ 4,541
$ (4,838 ) (107 )% $ (297 ) $ 297
(100 )% $ —
Percentage of total revenue 3 %

— %

—

In the second and third quarters of 2016, we reversed $0.3 million related to facility exit costs as we reoccupied office space we had previously vacated and were also released from a lease for other office space we had previously vacated.

~~Amortization of Intangible Assets~~

~~The following table presents our intangible asset amortization expense for the years December 31, 2015, 2016 and 2017 and the dollar change from the prior year (dollars in thousands):~~

Year Ended Change Year Ended Change Year Ended
December 31, 2015 $ December 31, 2016 $ December 31, 2017
Amortization of intangible assets $ 1,153
$ (113 ) $ 1,040
$ —
$ 1,040
Percentage of total revenue 1 % 1 % 1 %

~~2017 compared to 2016—Amortization expense related to intangible assets purchased through our acquisition of PlanPrescriber was flat in 2017 compared to 2016.~~

~~2016 compared to 2015—~~Amortization expense related to intangible assets purchased through our acquisition of PlanPrescriber decreased in 2016 compared to 2015, due to certain assets that were fully amortized compared to the prior period.

~~Other Income(Expense), Net~~

~~The following table presents our other income (expense), net for the years ended December 31, 2015, 2016 and 2017 and the dollar change from the prior year (dollars in thousands):~~

Year Ended Change Year Ended Change Year Ended
December 31, 2015 $ December 31, 2016 $ December 31, 2017
Other income (expense), net $ 45
$ 57
$ 102
$ 225
$ 327
Percentage of total revenue — % — % — %

Other income (expense), net, for the years ended 2015, 2016 and 2017 primarily consisted of interest income earned on our invested cash, cash equivalents and marketable securities balances, offset by administrative bank fees, investment management fees and interest expense on capital lease obligations.

~~2017 compared to 2016—Other income (expense), net increased $0.2 million in 2017, primarily due to an increase in interest income.~~

~~2016 compared to 2015—~~ ~~Other income (expense), net increased $0.1 million in 2016, primarily due to an increase in interest income.~~

~~Benefit from Income Taxes~~

~~The following table presents our provision (benefit) for income taxes for the years ended December 31, 2015, 2016 and 2017 and the dollar change from the prior year (dollars in thousands):~~

Year Ended Change Year Ended Change Year Ended
December 31, 2015 $ December 31, 2016 $ December 31, 2017
Benefit from income taxes $ (843 ) $ (28 ) $ (871 ) $ (2,884 ) $ (3,755 )
Percentage of total revenue — % — % (2 )%

~~2017 compared to 2016—~~On December 22, 2017, the Tax Cuts and Jobs Act of 2017, or the Jobs Act, was signed into law resulting in significant changes to the Internal Revenue Code. The Jobs Act reduces the federal corporate income tax rate from 35% to 21% effective for tax periods beginning after December 31, 2017; changes U.S international taxation from a

worldwide tax system to a territorial system; and imposes a one-time transition tax on untaxed cumulative foreign earnings and profits as of December 31, 2017. The Act also includes provisions for the elimination of the Alternative Minimum Tax, or AMT, among other changes. We calculated our best estimate of the impact of the Jobs Act in our year end income tax provision in accordance with our understanding of the Jobs Act and guidance available as of the filing date of this Annual Report on Form 10-K and recorded $2.3 million as additional income tax benefit in the fourth quarter of 2017, the period in which the legislation was enacted. Of the $2.3 million, we recorded a provisional amount for 2017 included a benefit of $1.8 million related to the reversal of AMT credits, which are now refundable credits under the provisions of the Jobs Act and recorded as long-term receivables, which are included in other assets in the Consolidated Balance Sheets. We have also remeasured the deferred tax assets and liabilities based on the rate at which they are expected to reverse in the future and recorded a $0.5 million benefit as a result of this remeasurement. The effects of other provisions of the Jobs Act are not expected to have a material impact on our consolidated financial statements, however, the final impact of the Jobs Act may differ from our estimates, due to, among other things, changes in our interpretations and assumptions, additional guidance that may be issued, and resulting actions we may take. In addition, the benefit from income taxes in 2017, includes a $1.7 million decrease in our liability for unrecognized tax benefits due to the expiration of the related statute of limitations, partially offset by a provision for income taxes related to a minimum taxes and a foreign tax rate differential.

~~2016 compared to 2015—~~We recorded a benefit from income taxes of $0.8 million and $0.9 million during the years ended December 31, 2015 and 2016, respectively. The benefit from income taxes in 2015 and 2016, primarily related to a decrease in our liability for unrecognized tax benefits due to the expiration of the related statute of limitations, partially offset by a provision for income taxes related to a minimum taxes and a foreign tax rate differential.

~~Segment Information~~

We report segment information based on how our chief executive officer, who is our chief operating decision maker, or CODM, regularly reviews our operating results, allocates resources, and makes decisions regarding our business operations. The performance measures of our operating segments include revenues and profit and 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, 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 customers, including but not limited to, dental and vision insurance, as well as our advertising program that allows Medicare-related carriers to purchase advertising on a separate website developed, hosted and maintained by us and our delivery and sale to third parties of Medicare-related health insurance leads generated by our ecommerce platforms and our marketing activities.

The Individual, Family and Small Business segment consists primarily of commissions earned from our sale of individual and family and small business health insurance plans and ancillary products sold to our non-Medicare-eligible customers, including but not limited to, dental, vision, life, short term disability and long term disability 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, depreciation and amortization expense and amortization of intangible assets.

~~The following table presents summary results of our operating segments for the years ended December 31, 2015, 2016 and 2017 (in thousands):~~

Year Ended Change Year Ended Change Year Ended
December 31, 2015 $ % December 31, 2016 $ % December 31, 2017
Revenue
Medicare $ 63,163
$ 17,106
27 % $ 80,269
22,315
28 % $ 102,584
Individual, Family and Small Business 126,378
(19,687 ) (16 )% 106,691
(36,920 ) (35 )% 69,771
Total revenue $ 189,541
$ (2,581 ) (1 )% $ 186,960
(14,605 ) (8 )% $ 172,355
Segment profit (loss)
Medicare segment loss $ (23,284 ) $ (9,857 ) 42 % $ (33,141 ) 14,381
(43 )% $ (18,760 )
Individual, Family and Small Business segment profit 59,499
8,406
14 % 67,905
(37,478 ) (55 )% 30,427
Total segment profit (loss) 36,215
(1,451 ) (4 )% 34,764
(23,097 ) (66 )% 11,667
Corporate (25,135 ) (3,936 ) 16 % (29,071 ) 1,481
(5 )% (27,590 )
Stock-based compensation expense (6,889 ) (377 ) 5 % (7,266 ) (2,428 ) 33 % (9,694 )
Depreciation and amortization (4,148 ) 609
(15 )% (3,539 ) 702
(20 )% (2,837 )
Restructuring (charge) benefit (4,541 ) 4,838
(107 )% 297
(297 ) (100 )% —
Amortization of intangible assets (1,153 ) 113
(10 )% (1,040 ) —
— % (1,040 )
Other income (expense), net 45
57
127 % 102
225
221 % 327
Loss before provision (benefit) for income taxes $ (5,606 ) $ (147 ) 3 % $ (5,753 ) (23,414 ) 407 % $ (29,167 )

~~2017 compared to 2016~~

~~Revenue~~

Revenue from our Medicare segment increased $22.3 million, or 28%, in 2017 largely due to a $20.8 million increase in commission revenue and $1.5 million increase in other revenue. The increase in Medicare commission revenue was primarily attributable to a 26% increase in estimated Medicare membership as of December 31, 2017 as well as the receipt of increased renewal commissions per member on Medicare Advantage plans during the first quarter of 2017. Estimated Medicare membership as of December 31, 2017 increased due to higher application submissions and improved conversion rates.

Revenue from our Individual, Family and Small Business segment decreased $36.9 million, or 35%, in 2017, primarily attributable to a $33.2 million decrease in commission revenue and a $3.7 million decrease in other revenue. The decrease in Individual, Family and Small Business commission revenue was primarily due to a 38% decline in estimated individual and family health insurance membership in 2017 primarily attributable to lower application submission and a decrease in the membership retention rate. The decrease in other revenue also resulted from the decrease in individual and family health insurance applications submitted during 2017.

~~Segment Profit (Loss)~~

Loss from our Medicare segment was $18.8 million in 2017, a $14.4 million, or 43%, improvement compared to a loss of $33.1 million in 2016. The improvement in the Medicare segment in 2017 was primarily due to a $22.3 million increase in revenue, partially offset by a $7.8 million increase in operating expenses excluding stock-based compensation, depreciation and amortization expenses and amortization of intangible assets. The increase in operating expenses was primarily attributable to an increase in personnel costs associated with higher headcount, an increase in variable advertising expense associated with the increase in applications and an increase in licensing sales agents.

Profit from our Individual, Family and Small Business segment was $30.4 million in 2017, a $37.5 million, or 55%, decrease compared to profit of $67.9 million from the Individual, Family and Small Business segment in 2016. The decrease in profit from the Individual, Family and Small Business segment in 2017 was primarily due to a $36.9 million decrease in revenue.

~~2016 compared to 2015~~

~~Revenue~~

Revenue from our Medicare segment increased $17.1 million, or 27%, in 2016 compared to 2015 largely attributable to a $16.8 million increase in commission revenue. The increase in commission revenue was primarily due to a 33% increase in Medicare estimated membership for the year ended December 31, 2016 compared to the year ended December 31, 2015.

Revenue from our Individual, Family and Small Business segment decreased $19.7 million, or 16%, in 2016 compared to 2015. The decrease in commission revenue was primarily due to 28% decrease in individual and family health insurance estimated membership in 2016 compared to 2015.

~~Segment Profit (Loss)~~

Loss from our Medicare segment was $33.1 million for the year ended December 31, 2016, a $9.8 million, or 42% increase compared to a loss of $23.3 million for the year ended December 31, 2015. The increase in loss in the Medicare segment in 2016 compared to 2015 was primarily due to an increase in marketing and advertising and customer care and enrollment expenses in the Medicare segment as we continued to invest in growth of our Medicare business, and was only partially offset by an increase in revenue from the Medicare segment.

Profit from our Individual, Family and Small Business segment was $67.9 million in 2016, a $8.4 million, or 14% increase compared to profit of $59.5 million from the Individual, Family and Small Business segment in 2015. The increase in profit from the Individual, Family and Small Business segment in 2016 compared to 2015 was primarily due to a decrease in marketing and advertising expense from the Individual, Family and Small Business segment, partially offset by the decrease in revenue from the Individual, Family and Small Business segment.

~~Liquidity and Capital Resources~~

At December 31, 2017, our cash and cash equivalents totaled $40.3 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. At December 31, 2016, our cash and cash equivalents totaled $61.8 million. The decrease in cash and cash equivalents reflects $15.5 million used in operating activities, $5.1 million used to purchase property and equipment and other assets and $0.9 million used in the net-share settlement of equity awards.

As of December 31, 2017, we have in treasury 574,107 shares that were previously surrendered by employees to satisfy tax withholdings in connection with the vesting of certain restricted stock units. As of December 31, 2016 and December 31, 2017, we had a total of 11,135,590 shares and 11,237,995 shares, respectively, held in treasury.

~~The following table presents a summary of our cash flows for the years ended December 31, 2015, 2016 and 2017 (in thousands):~~

Year Ended December 31,
2015 2016 2017
Net cash provided by (used in) operating activities $ 13,696
$ 4,083
$ (15,541 )
Net cash used in investing activities $ (2,996 ) $ (3,726 ) $ (5,078 )
Net cash (used in) provided by financing activities $ 577
$ (1,269 ) $ (870 )

~~Operating Activities~~

Cash provided by (used in) operating activities primarily consists of net income (loss), adjusted for certain non-cash items including depreciation and amortization; amortization of intangible assets, internally developed software and book-of-business consideration; stock-based compensation expense and the effect of changes in working capital and other activities.

Our commission receipts depend upon the timing of our receipt of commission reports and associated commission payments from health insurance carriers. If we were to experience a delay in receiving a commission payment from a health insurance carrier at the end of a quarter, our operating cash flows for that quarter could be adversely impacted. Additionally, commission override payments are reported to us in a more irregular pattern than premium commissions. For example, a carrier may make a commission override payment to us on an annual basis, which would positively impact our cash flows in the quarter the payment is received.

A significant portion of our marketing and advertising expenses is driven by the number of health insurance applications submitted on our ecommerce platform. Since our marketing and advertising costs are expensed and generally paid as incurred and the cash earned from approved applications is recognized and paid as commissions are subsequently reported to us, 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, we experience an increase in the number of submitted Medicare-related health insurance applications and marketing and advertising expenses compared to outside of Medicare annual enrollment periods. Similarly, during open enrollment periods for individual and family health insurance plans, we experience an increase in the number of submitted individual and family plan health insurance applications and marketing and advertising expenses compared to outside of open enrollment periods. The timing of open enrollment periods for individual and family health insurance and the Medicare annual enrollment period for Medicare-related health insurance affect the positive or negative impacts of our cash flows during each quarter.

Marketing and advertising costs decreased in 2017 compared to 2016 primarily due to a decrease in variable advertising costs as a result of lower application volumes for individual and family health insurance and a decrease in Medicare online advertising expense, partially offset by an increase in expenses from our direct and marketing partner channels. Consistent with prior years, during the fourth quarter of 2017, marketing and advertising costs increased compared to the third quarter of 2017 due to an increase in submitted applications for Medicare plans during the annual enrollment period, and to a lesser extent, an increase in submitted applications for individual and family health insurance during the open enrollment period.

All Medicare Advantage and Medicare Part D prescription drug policies are renewed on January 1, resulting in our recording substantially all Medicare Advantage and Medicare Part D prescription drug plan renewal commission revenue in the first quarter. As a result, we do not recognize significant Medicare renewal commission revenue in the second, third and fourth quarters of each year. Typically, renewal commissions for Medicare Advantage products are paid monthly. As a result, the majority of renewal commissions for Medicare Advantage products has been collected in quarters subsequent to the first quarter.

~~Year Ended December 31, 2017—~~ Cash used in operating activities was $15.5 million during 2017, consisting of a net loss of $25.4 million and cash used by operating assets and liabilities and other activities of $5.8 million, partially offset adjustments for non-cash items of $15.7 million. Adjustments for non-cash items primarily consisted of $9.7 million of stock-based compensation expense, $3.7 million of amortization of intangible assets, internally-developed software and book-of-business consideration and $2.8 million of depreciation and amortization. The cash decrease resulting from changes in net

operating assets and liabilities during the year ended December 31, 2017 primarily consisted of decreases of $2.3 million in other liabilities, $3.1 million in accrued marketing expenses, $1.9 million in accounts payable and $0.6 million in deferred revenue, partially offset by increases of $4.6 million in accrued compensation and benefits, $1.9 million in prepaid expenses and other current assets and $0.7 million in accounts receivable.

~~Year Ended December 31, 2016—~~Our operating activities provided cash of 4.1 million during the year ended December 31, 2016 and consisted of adjustments for non-cash items of 14.2 million, partially offset by a net loss of $4.9 million and cash used by operating assets and liabilities and other activities of $5.3 million. Adjustments for non-cash items primarily consisted of $7.3 million of stock-based compensation expense, $3.6 million of amortization of internally-developed software, book-of-business consideration and intangible assets and $3.5 million of depreciation and amortization. The cash decrease resulting from changes in net operating assets and liabilities during the year ended December 31, 2016 primarily consisted of decreases of $3.5 million in accrued marketing expenses, $3.5 million in accrued compensation and benefits, $1.1 million in accrued expense and other liabilities and $0.5 million in prepaid expenses and other current assets. These decreases were partially offset by increases of $2.2 million in accounts payable, $0.6 million in deferred revenue and $0.4 million in accounts receivable.

~~Year Ended December 31, 2015—~~Our operating activities generated cash of $13.7 million during the year ended December 31, 2015 and consisted of adjustments for non-cash items of $15.0 million and cash used by operating assets and liabilities and other activities of $3.3 million, partially offset by a net loss of $4.8 million. Adjustments for non-cash items primarily consisted of $7.0 million of stock-based compensation expense, $4.1 million of depreciation and amortization and $3.8 million of amortization of internally-developed software, book-of-business consideration and intangible assets. The cash increase resulting from changes in net operating assets and liabilities during the year ended December 31, 2015 primarily consisted of increases of $6.2 million in accrued compensation and benefits, $2.0 million in accrued marketing expenses and $1.0 million in prepaid expense and other assets, partially offset by decreases of $2.9 million in accounts payable, $1.4 million in accounts receivable, $1.2 million in other current liabilities and $0.6 million in deferred revenue.

~~Investing Activities~~

Our investing activities primarily consist of purchases of computer hardware and software to enhance our website and customer care operations, leasehold improvements related to facilities expansion, internal-use software and the purchase of certain intangible assets.

~~Year Ended December 31, 2017~~ —Net cash used in investing activities of $5.1 million during 2017 was due to $3.2 million in capitalized internal-use software and website development costs and $1.9 million used to purchase property and equipment and other assets.

~~Year Ended December 31, 2016~~-Net cash used in investing activities of $3.7 million during the year ended December 31, 2016 was due to $1.8 million in capitalized internal-use software and website development costs and $1.9 million used to purchase property and equipment and other assets.

~~Year Ended December 31, 2015~~-Net cash used in investing activities of $3.0 million during the year ended December 31, 2015 was due to $1.1 million in capitalized internal-use software and website development costs and $1.9 million used to purchases property and equipment and other assets.

~~Financing Activities~~

~~Year Ended December 31, 2017~~ —Net cash used in financing activities of $0.9 million during 2017 was primarily due to $1.0 million proceeds from the exercise of stock options and $1.8 million used to net-share settle the tax obligation related to vesting equity awards.

~~Year Ended December 31, 2016~~—Net cash used in financing activities of $1.3 million during the year ended December 31, 2016 was primarily due to $1.2 million used to net-share settle the tax obligation related to vesting equity awards.

~~Year Ended December 31, 2015~~—Net cash provided by financing activities of $0.6 million during the year ended December 31, 2015 was due to proceeds of $1.6 million from the exercise of stock options offset by $0.9 million used to net- settle the tax obligation related to the vesting equity awards.

~~Future Needs~~

On January 22, 2018, we completed our acquisition of Wealth, Health and Life Advisors, LLC, more commonly known as GoMedigap, a technology-enabled provider of Medicare Supplement enrollment services. This strategic acquisition significantly enhances our growing presence in the Medicare Supplement market, puts us in a stronger position with carriers and strategic partners and allows us to accelerate our projected Medicare plan enrollment growth in 2018 and beyond. The acquisition price paid at closing of the transaction consisted of cash of $15.0 million, less $0.1 million cash acquired, and approximately 294,637 shares of our common stock. In addition, we are obligated to pay an additional $20 million in cash and 589,275 shares of our common stock, subject to the terms of the acquisition agreement and upon final determination of the achievement of certain milestones in 2018 and 2019.

We believe that cash generated from operations and our current cash and cash equivalents will be sufficient to fund our operations, including the additional amounts we are obligated to pay subject to the terms of the acquisition agreement with GoMedigap, for at least twelve months after the filing date of this Annual Report on Form 10-K. Our future capital requirements will depend on many factors, including our expected membership and retention rates, our level of investment in technology, marketing and advertising and our customer care initiatives. In addition, our cash position could be impacted by further acquisitions and investments we make to pursue our growth strategy. We currently do not have any bank debt, line of credit facilities or other borrowing arrangements. To the extent that available funds are insufficient to fund our future activities, we plan to raise additional capital through bank debt, line of credit facilities or public or private equity or debt financing to the extent such funding sources are available.

Contractual Obligations and Commitments

The following table presents a summary of our future minimum payments under non-cancellable operating lease agreements and contractual service and licensing obligations as of December 31, ~~2017~~2020 (in thousands):


Years Ending December 31,	Operating Lease Obligations*		Service and Licensing Obligations		Total Obligations
2021	$	7,644	$	5,775	$	13,419
2022	7,701		3,408		11,109
2023	8,033		2,745		10,778
2024	7,832		2,056		9,888
2025	8,009		1,353		9,362
Thereafter	19,408		1,353		20,761
Total	$	58,627	$	16,690	$	75,317

Years Ending December 31, Operating Lease Obligations Service and Licensing Obligations Total Obligations
2018 $ 3,617
$ 1,998
$ 5,615
2019 2,996
861
3,857
2020 2,994
330
3,324
2021 1,457
—
1,457
2022 1,501
—
1,501
Thereafter 651
—
651
Total commitments $ 13,216
$ 3,189
$ 16,405
_______

~~Operating Lease Obligations~~

~~We lease~~* See Note 10 – Leases of our Notes to Consolidated Financial Statements for details of our operating facilities and certain of our equipment and furniture and fixtures under various operating leases, the latest of which expires in July 2023. Certain of these leases have free or escalating rent payment provisions. We recognize rent expense on our operating leases on a straight-line basis over the terms of the leases, although actual cash payment obligations under certain of these agreements fluctuate over the terms of the agreements. lease obligations.

In March 2012, we entered into an agreement to lease a building in Mountain View, California, adjacent to our headquarters office. The term of the operating lease is ten years from the date the building was delivered to us in August 2013. The base rent increases annually by 3%. As of December 31, 2017, future minimum payments related to this operating lease total $4.2 million over the remaining term of the lease plus our proportionate share of certain operating expenses, insurance costs and taxes for each calendar year during the lease.

In April 2013, we entered into an agreement to lease approximately 20,000 square feet of office space in Westford, Massachusetts. The lease commenced in July 2013 and is for a term of 5 years and 3 months. As of December 31, 2017, future minimum payments totaled approximately $0.4 million over the remaining term of the lease. In March 2018, we announced we will be closing this facility in the first half of 2018.

In August 2014, we renewed our agreement to lease and expanded to approximately 50,000 square feet of office space in Gold River, California. The lease commenced in August 2014 and is for a term of 4 years and 5 months. In 2015, we vacated

approximately 11,200 square feet of this leased office space as a result of a workforce reduction. We reoccupied approximately 5,400 square feet of this previously vacated office space in 2016. As of December 31, 2017, future minimum payments related to this operating lease totaled approximately $3.4 million for the remaining term of the lease.

In August 2017, we entered into an agreement to amend our lease of approximately 28,000 square feet of office space in South Jordan, Utah. This amendment extends the term of this facility lease by 5 years and 3 months from January 2018 to March 2023. As of December 31, 2017, future minimum payments related to this operating lease totaled approximately $3.4 million for the remaining term of the lease.

Service and Licensing Obligations

We have entered into service and licensing agreements with third party vendors to provide various services, including network access, equipment maintenance and software licensing. The terms of these services and licensing agreements are generally up to three years. We record the related service and licensing expenses on a straight-line basis, although actual cash payment obligations under certain of these agreements fluctuate over the terms of the agreements.

Off-Balance Sheet Arrangements

~~We do~~As of December 31, 2020, we did not have any off-balance sheet arrangements, ~~investments~~as defined in ~~special purpose entities~~Item 303(a)(4)(ii) of Regulation S-K, that have or ~~undisclosed borrowings~~are reasonably likely to have a current or ~~debt. Additionally, we are not a party~~future effect on our financial condition, changes in our financial condition, revenue, or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to ~~any derivative contracts or synthetic leases.~~investors.

Recent Accounting Pronouncements

See Note 1 – Summary of Business and Significant Accounting Policies in the Notes to Consolidated Financial Statements for the recently issued accounting standards that could have an effect on us.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our financial instruments that are exposed to concentrations of credit risk principally consist of cash and cash equivalents, marketable securities, accounts receivable, and ~~accounts~~contract assets – commission receivable. ~~As of December 31, 2016~~

Our cash, cash equivalents, short-term marketable securities, and ~~2017,~~restricted cash are summarized as follows (in thousands):


	December 31, 2020		December 31, 2019
Cash and cash equivalents (1) (2)	$	43,759	$	23,466
Short-term marketable securities(2)	49,620		—
Restricted cash	3,354		3,354
Total cash, cash equivalents, short-term marketable securities, and restricted cash	$	96,733	$	26,820

_________________

(1)We deposit our cash and cash equivalents in accounts with major banks and financial institutions and such deposits are in excess of federally insured limits. We also have deposits with a major bank in China that are denominated in both U.S. dollars and Chinese Yuan Renminbi and are not insured by the U.S. federal government.

(2)See Note 5 – Fair Value Measurements in our Notes to Consolidated Financial Statements for more information on our cash and cash equivalents and marketable securities.

Our portfolio of available-for-sale debt securities is exposed to credit and interest rate risk. As of December 31, 2020, we invested $49.6 million in marketable securities primarily consisting of commercial paper and agency bonds with credit rating of AA+ or equivalent by S&P Rating and Moody's Investor Services. The maturity of these securities were ~~invested~~below two years. See Note 5– Fair Value Measurements in our Notes to Consolidated Financial Statements for further discussion on our available-for-sale debt securities.

As of December 31, 2020, our net contract assets consisted of commissions receivable balance of $792.4 million. Our contracts with carriers expose us to credit risk that a financial loss could be incurred if the counterparty does not fulfill its financial obligation. While we are exposed to credit losses due to the non-performance of our counterparties, we consider the risk of this remote. We estimate our maximum credit risk in determining the commissions receivable amount recorded on the balance sheet. Upon the adoption of ASC 326, we recorded $1.5 million of allowance for credit losses for our commissions receivable balance as of December 31, 2019. During the year ended December 31, 2020, we recorded an additional $0.5 million for the allowance for credit losses. See Note 1 – Summary of Business and Significant Accounting Policiesin our Notes to Consolidated Financial Statements for additional information regarding the accounting standard adoption.

Our total contract assets and accounts receivable as of December 31, 2020 and December 31, 2019 are summarized as follows (in thousands):


	December 31, 2020		December 31, 2019
Contract assets – commissions receivable – current	$	219,153	$	174,526
Contract assets – commissions receivable – non-current	573,252		414,696
Accounts receivable	1,799		2,332
Total contract assets and accounts receivable	$	794,204	$	591,554

December 31, 2016 December 31, 2017
Cash ⁽¹⁾
$ 4,066
$ 5,098
Money market funds ⁽²⁾
57,715
35,195
Total cash and cash equivalents $ 61,781
$ 40,293


~~(1)~~	We deposit our cash and cash equivalents in accounts with major banks and financial institutions and such deposits are in excess of federally insured limits. We also have deposits with major banks in China that are denominated in both U.S. dollars and Chinese Yuan Renminbi and are not insured by the U.S. federal government.


~~(2)~~	At December 31, 2016 and 2017 money market funds consisted of investments in U.S. government-sponsored enterprise bonds and discount notes, U.S. government treasury bills and notes and repurchase agreements collateralized by U.S. government obligations.

We do not require collateral or other security for our accounts receivable. As of December 31, 2017, two customers represented 23% and 22%, respectively, for a combined total of 45% of our $9.9 million outstanding accounts receivable balance. As of December 31, 2016, three customers represented 23%, 20% and 11%, respectively, or a combined total of 54%, of our $9.2 million outstanding accounts receivable balance. No other customers represented 10% or more of our total accounts receivable at December 31, 2016 and December 31, 2017. We believe the potential for collection issues with any of our customers was minimal as of December 31, 2017. Accordingly, our estimate for uncollectible amounts at December 31, 2017 was not material.

~~Significant Customers~~

Substantially all revenue for the years ended December 31, 2015, 2016, and 2017 was generated from customers located in the United States. Carriers representing 10% or more of our total revenue for the years ended December 31, 2015, 2016 and 2017 are presented in the table below:

Year Ended December 31,
2015 2016 2017
Humana 23 % 23 % 22 %
UnitedHealthcare ¹
11 % 13 % 16 %
Aetna ²
10 % 10 % 9 %


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


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

Foreign Currency Exchange Risk

~~To date, substantially~~Substantially all of our revenue has been derived from transactions denominated in United States Dollars. We have exposure to adverse changes in exchange rates associated with operating expenses of our foreign operations, which are denominated in Chinese Yuan Renminbi. Foreign currency fluctuations have not had a

material impact historically on our results of operations; however, ~~there can be no assurance that future fluctuations will not have material adverse effects on our results of operations.~~they may in the future. We have not engaged in any foreign currency hedging or other derivative transactions to date.

ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to the Consolidated Financial Statements




Report of Independent Registered Public Accounting Firm	73 75

Consolidated Balance Sheets	74 77

Consolidated Statements of Comprehensive ~~Loss~~Income	75 78

Consolidated Statements of Stockholders’ Equity	76 79

Consolidated Statements of Cash Flows	77 80

Notes to Consolidated Financial Statements	78 81

~~The supplementary financial information required by this Item 8 is included in~~ ~~Note 10~~ ~~to the Consolidated Financial Statements under the caption “Selected Quarterly Financial Data (Unaudited)~~.”

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of eHealth, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of eHealth, Inc. (the Company) as of December 31, ~~2017~~2020 and ~~2016,~~2019, the related consolidated statements of comprehensive ~~loss,~~income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, ~~2017,~~2020, and the related notes (collectively referred to as the ~~"consolidated~~“consolidated financial ~~statements"~~statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, ~~2017~~2020 and ~~2016,~~2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, ~~2017,~~2020, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, ~~2017,~~2020, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 ~~Framework)~~framework) and our report dated ~~March 16, 2018~~February 26, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.


						Revenue recognition: Estimated constrained lifetime value of commission revenue
Description of the Matter						The Company recognized commission revenue of approximately $508.2 million in 2020 and related commissions receivable were approximately $792.4 million at December 31, 2020. As described in Notes 1 and 2 to its consolidated financial statements, the Company’s commission revenue is recognized as the amount of the total estimated lifetime value of the commissions expected to be received when a member obtains a plan through the Company and is approved by the carrier (“LTV”). Auditing management’s determination of the LTV of commission revenue was especially complex and highly judgmental due to the complexity of the models used and the subjectivity required by the Company to estimate the amount and timing of future cash flows, calculate the amount of commission revenue that is probable of not being reversed, and determine the timing and amount of any adjustment revenue that results from changes in the estimates of previously recorded LTV. The Company utilizes statistical tools and methodologies to estimate member attrition, which is a key driver when estimating the amount and timing of future cash flows and can be particularly volatile during the first several years. To determine the initial constraint to be applied to LTV, the Company evaluates the difference between prior estimates of LTV and actual cash received and applies judgment to determine the constraint to apply. For the ongoing evaluation of the constraint, the Company also analyzes whether circumstances have changed and considers any known or potential modifications to the inputs into LTV and the factors that can impact the amount of cash expected to be collected in future periods such as commission rates, carrier mix, estimated average plan duration, changes in laws and regulations, and cancellations of insurance plans offered by health insurance carriers with which the Company has a relationship. The Company also compares actual versus expected cash collections of previously recorded LTV and assesses qualitative and quantitative factors to determine whether adjustment revenue should be recognized and, if so, the amount and timing of such.
How We Addressed the Matter in Our Audit						We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s process to estimate the amount and timing of future cash flows and LTV. These processes and controls include those covering the models and methods used to calculate LTV, the use of management judgment to determine the constraint applied to LTV, management’s evaluation of any required adjustments to previously recorded LTV estimates, and the completeness and accuracy of the data used in such estimates and calculations. Our audit procedures also included, among others, evaluating the methodology used and significant assumptions discussed above, and testing the completeness and accuracy of the underlying data used by the Company. We involved our valuation specialists to assist in our testing of the estimated average plan duration, which includes member attrition assumptions, including performing certain corroborative calculations. We inspected and compared the results of the Company’s retrospective review analysis of historical estimates for certain plan effective years to historical cash collection experience, including reperforming the calculations and validating the completeness and accuracy of the underlying data used. In addition, we performed inquiries of key personnel regarding their evaluation of changes to LTV, the adjustments made to the constraint for current and expected future economic conditions, and any decisions on the timing and amount of adjustment revenue recognized. We also reviewed analyst reports, press releases, and other relevant third-party and/or industry trends data for contrary evidence including competitor data.

/s/ Ernst & Young LLP

We have served as the Company's auditor since 2000.

Redwood City, California

February 26, 2021

~~March 16, 2018~~

EHEALTH, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except ~~share and~~ per share ~~information)~~amounts)


	December 31, 2020*		December 31, 2019
Assets
Current assets:
Cash and cash equivalents	$	43,759	$	23,466
Short-term marketable securities	49,620		0
Accounts receivable	1,799		2,332
Contract assets – commissions receivable – current	219,153		174,526
Prepaid expenses and other current assets	16,661		7,822
Total current assets	330,992		208,146
Contract assets – commissions receivable – non-current	573,252		414,696
Property and equipment, net	14,609		10,518
Operating lease right-of-use assets	42,558		36,621
Restricted cash	3,354		3,354
Other assets	26,455		18,004
Intangible assets, net	8,569		10,062
Goodwill	40,233		40,233
Total assets	$	1,040,022	$	741,634
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	36,921	$	24,554
Accrued compensation and benefits	20,542		29,578
Accrued marketing expenses	17,788		12,041
Earnout liability – current	0		37,273
Lease liabilities – current	5,192		4,759
Deferred revenue	308		2,570
Other current liabilities	3,657		2,210
Total current liabilities	84,408		112,985
Commitments and contingencies	0		0


Deferred income taxes – non-current	72,317		64,130
Lease liabilities – non-current	41,369		34,305
Other non-current liabilities	4,370		3,050
Stockholders’ equity:
Preferred stock, par value $0.001 per share; 10,000 authorized; NaN issued and outstanding	0		0
Common stock, par value $0.001 per share; 100,000 authorized; 37,755 and 34,752 issued as of December 31, 2020 and 2019, respectively; 25,924 and 23,136 outstanding as of December 31, 2020 and 2019, respectively	38		35
Additional paid-in capital	721,013		455,159
Treasury stock, at cost: 11,831 and 11,616 shares as of December 31, 2020 and 2019, respectively	(199,998)		(199,998)
Retained earnings	316,155		271,852
Accumulated other comprehensive income	350		116
Total stockholders’ equity	837,558		527,164
Total liabilities and stockholders’ equity	$	1,040,022	$	741,634

_____________

December 31, 2016 December 31, 2017
Assets
Current assets:
Cash and cash equivalents $ 61,781
$ 40,293
Accounts receivable 9,213
9,894
Prepaid expenses and other current assets 5,148
4,845
Total current assets 76,142
55,032
Property and equipment, net 5,608
4,705
Other assets 4,473
7,317
Intangible assets, net 8,580
7,540
Goodwill 14,096
14,096
Total assets $ 108,899
$ 88,690
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable $ 5,112
$ 3,246
Accrued compensation and benefits 10,920
15,498
Accrued marketing expenses 7,158
4,088
Deferred revenue 959
385
Other current liabilities 3,775
3,430
Total current liabilities 27,924
26,647
Non-current liabilities 3,374
900
Stockholders’ equity:
Preferred stock: $0.001 par value; Authorized shares: 10,000,000; Issued and outstanding shares: none —
—
Common stock: $0.001 par value; Authorized shares: 100,000,000; Issued shares: 29,492,141 and 29,879,952 at December 31, 2016 and 2017, respectively; Outstanding shares: 18,356,551 and 18,641,957 at December 31, 2016 and 2017, respectively 29
30
Additional paid-in capital 272,778
281,706
Treasury stock, at cost: 11,135,590 and 11,237,995 shares at December 31, 2016 and 2017, respectively (199,998 ) (199,998 )
Retained earnings (accumulated deficit) 4,616
(20,796 )
Accumulated other comprehensive income 176
201
Total stockholders’ equity 77,601
61,143
Total liabilities and stockholders’ equity $ 108,899
$ 88,690
* Reflects the impact from the adoption of ASC 326 on January 1, 2020. See Note 1 – Summary of Business and Significant Accounting Policies for details.

The accompanying notes are an integral part of these consolidated financial statements.

EHEALTH, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE ~~LOSS~~INCOME

(In thousands, except per share amounts)


	Year Ended December 31,
	2020		2019		2018
Revenue
Commission	$	508,189	$	466,676	$	227,211
Other	74,585		39,525		24,184
Total revenue	582,774		506,201		251,395
Operating costs and expenses
Cost of revenue	4,083		2,738		1,228
Marketing and advertising	209,340		150,249		82,939
Customer care and enrollment	172,895		134,304		70,547
Technology and content	65,188		47,085		31,970
General and administrative	76,452		64,150		45,828
Amortization of intangible assets	1,493		2,187		2,091
Change in fair value of earnout liability	0		24,079		12,300
Restructuring charges	0		0		1,865
Acquisition costs	0		0		76
Total operating costs and expenses	529,451		424,792		248,844
Income from operations	53,323		81,409		2,551
Other income, net	666		2,090		755
Income before income taxes	53,989		83,499		3,306
Provision for income taxes	8,539		16,612		3,065
Net income	$	45,450	$	66,887	$	241
Net income per share:
Basic	$	1.75	$	2.90	$	0.01
Diluted	$	1.68	$	2.73	$	0.01
Weighted-average number of shares used in per share amounts:
Basic	26,025		23,075		19,294
Diluted	27,014		24,539		20,409
Comprehensive income:
Net income	$	45,450	$	66,887	$	241
Unrealized holding gain for available for sale debt securities, net of tax	28		0		0
Foreign currency translation adjustment	206		(11)		(75)
Comprehensive income	$	45,684	$	66,876	$	166

Year Ended December 31,
2015 2016 2017
Revenue
Commission $ 171,257
$ 170,850
$ 158,424
Other 18,284
16,110
13,931
Total revenue 189,541
186,960
172,355
Operating costs and expenses:
Cost of revenue 4,178
3,176
2,273
Marketing and advertising 75,571
72,213
65,874
Customer care and enrollment 43,159
48,718
59,183
Technology and content 36,351
32,749
32,889
General and administrative 30,239
35,216
39,969
Acquisition costs —
—
621
Restructuring charge (benefit) 4,541
(297 ) —
Amortization of intangible assets 1,153
1,040
1,040
Total operating costs and expenses 195,192
192,815
201,849
Loss from operations (5,651 ) (5,855 ) (29,494 )
Other income (expense), net 45
102
327
Loss before benefit from income taxes (5,606 ) (5,753 ) (29,167 )
Benefit from income taxes (843 ) (871 ) (3,755 )
Net loss $ (4,763 ) $ (4,882 ) $ (25,412 )
Net loss per share:
Basic $ (0.26 ) $ (0.27 ) $ (1.37 )
Diluted $ (0.26 ) $ (0.27 ) $ (1.37 )
Weighted-average number of shares used in per share amounts:
Basic 18,008
18,272
18,512
Diluted 18,008
18,272
18,512
Comprehensive loss:

Net loss $ (4,763 ) $ (4,882 ) $ (25,412 )
Foreign currency translation adjustment, net of taxes 14
(17 ) 25
Comprehensive loss $ (4,749 ) $ (4,899 ) $ (25,387 )

~~The accompanying notes are an integral part of these consolidated financial statements.~~

~~EHEALTH, INC.~~

~~CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY~~

~~(In thousands)~~

Common Stock Treasury Stock
Shares Amount
Additional Paid-in
Capital
Shares Amount Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Income Total Stockholders’ Equity
Balance at December 31, 2014 28,776
$ 29
$ 259,007
(10,946 ) $ (199,998 ) $ 14,261
$ 179
$ 73,478
Issuance of common stock in connection with exercise of common stock options and release of vested restricted stock units, net of cash used to net settle equity awards 395
—
662
(80 ) —
—
—
662
Stock-based compensation expense —
—
7,030
—
—
—
—
7,030
Foreign currency translation adjustment, net of taxes —
—
—
—
—
—
14
14
Net loss —
—
—
—
—
(4,763 ) —
(4,763 )
Balance at December 31, 2015 29,171
29
266,699
(11,026 ) (199,998 ) 9,498
$ 193
76,421
Issuance of common stock in connection with exercise of common stock options and release of vested restricted stock units, net of cash used to net settle equity awards 321
—
(1,187 ) (110 ) —
—
—
(1,187 )
Stock-based compensation expense —
—
7,266
—
—
—
—
7,266
Foreign currency translation adjustment, net of taxes —
—
—
—
—
—
(17 ) (17 )
Net loss —
—
—
—
—
(4,882 ) —
(4,882 )
Balance at December 31, 2016 29,492
29
272,778
(11,136 ) (199,998 ) 4,616
176
77,601
Issuance of common stock in connection with exercise of common stock options and release of vested restricted stock units, net of cash used to net settle equity awards 388
1
(766 ) (102 ) —
—
—
(765 )
Stock-based compensation expense —
—
9,694
—
—
—
—
9,694
Foreign currency translation adjustment, net of taxes —
—
—
—
—
—
25
25
Net loss —
—
—
—
—
(25,412 ) —
(25,412 )
Balance at December 31, 2017 29,880
$ 30
$ 281,706
(11,238 ) $ (199,998 ) $ (20,796 ) $ 201
$ 61,143

The accompanying notes are an integral part of these consolidated financial statements.

EHEALTH, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)


	Common Stock			Additional Paid-in Capital		Treasury Stock			Retained Earnings		Accumulated Other Comprehensive Income		Total Stockholders’ Equity
	Shares	Amount				Shares	Amount







Balance at December 31, 2017	29,880	$	30	$	281,706	11,238	$	(199,998)	$	204,724	$	202	$	286,664
Issuance of common stock in connection with equity incentive plans	688	1		2,687		—	—		—		—		2,688
Repurchase of shares to satisfy employee tax withholding obligations	—	—		(4,504)		188	—		—		—		(4,504)
Shares issued for GMG acquisition	295	—		5,595		—	—		—		—		5,595
Stock-based compensation expense	—	—		12,540		—	—		—		—		12,540
Other comprehensive income, net of tax	—	—		—		—	—		—		(75)		(75)
Net income	—	—		—		—	—		241		—		241
Balance as of December 31, 2018	30,863	31		298,024		11,426	(199,998)		204,965		127		303,149
Issuance of common stock in connection with equity incentive plans	834	1		5,534		—	—		—		—		5,535
Repurchase of shares to satisfy employee tax withholding obligations	—	—		(14,281)		190	—		—		—		(14,281)
Shares issued in equity offering	2,760	3		126,048		—	—		—		—		126,051
Settlement of earnout liability	295	—		17,264		—	—		—		—		17,264
Stock-based compensation expense	—	—		22,570		—	—		—		—		22,570
Other comprehensive income, net of tax	—	—		—		—	—		—		(11)		(11)
Net income	—	—		—		—	—		66,887		—		66,887
Balance as of December 31, 2019	34,752	35		455,159		11,616	(199,998)		271,852		116		527,164
Cumulative effect from the adoption of ASU 2016-13	—	—		—		—	—		(1,147)		—		(1,147)
Issuance of common stock in connection with equity incentive plans	638	1		1,940		—	—		—		—		1,941
Repurchase of shares to satisfy employee tax withholding obligations	—	—		(19,808)		215	—		—		—		(19,808)
Shares issued in equity offering	2,070	2		228,022		—	—		—		—		228,024
Settlement of earnout liability	295	—		28,521		—	—		—		—		28,521
Stock-based compensation	—	—		27,179		—	—		—		—		27,179
Other comprehensive income, net of tax	—	—		—		—	—		—		234		234
Net income	—	—		—		—	—		45,450		—		45,450
Balance as of December 31, 2020	37,755	$	38	$	721,013	11,831	$	(199,998)	$	316,155	$	350	$	837,558

The accompanying notes are an integral part of these consolidated financial statements.

EHEALTH, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)


	Year Ended December 31,
	2020		2019		2018
Operating activities:
Net income	$	45,450	$	66,887	$	241
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization	3,694		2,983		2,479
Amortization of internally developed software	7,756		3,821		2,201
Amortization of intangible assets	1,493		2,187		2,091
Stock-based compensation expense	25,172		22,570		12,540
Deferred income taxes	8,817		16,197		2,812
Change in fair value of earnout liability	0		24,079		12,300

Other non-cash items	1,091		(755)		675
Changes in operating assets and liabilities:
Accounts receivable	533		1,270		(2,127)
Contract assets – commissions receivable	(205,209)		(243,364)		(50,967)
Prepaid expenses and other assets	(6,180)		(466)		232
Accounts payable	12,294		19,694		1,414
Accrued compensation and benefits	(9,036)		8,814		5,133
Accrued marketing expenses	5,747		1,028		6,320
Deferred revenue	(2,262)		1,694		491

Accrued expenses and other liabilities	2,780		1,869		935
Net cash used in operating activities	(107,860)		(71,492)		(3,230)
Investing activities:
Capitalized internal-use software and website development costs	(16,005)		(10,231)		(6,294)
Purchases of property and equipment and other assets	(7,751)		(6,641)		(4,534)
Purchases of marketable securities	(180,505)		0		0
Proceeds from redemption and maturities of marketable securities	130,978		0		0
Payments for security deposits	0		(72)		0
Acquisition of business, net of cash acquired	0		0		(14,929)
Net cash used in investing activities	(73,283)		(16,944)		(25,757)
Financing activities:
Proceeds from issuance of common stock, net of issuance costs	228,024		126,051		0
Net proceeds from exercise of common stock options	1,941		5,535		2,688
Repurchase of shares to satisfy employee tax withholding obligations	(19,808)		(14,281)		(4,504)
Proceeds from line of credit	0		0		5,000
Debt issuance costs	0		(517)		(1,221)
Repayment of debt	0		(5,000)		0
Acquisition-related contingent payments	(8,751)		(9,542)		0
Principal payments in connection with leases	(157)		(105)		(103)
Net cash provided by financing activities	201,249		102,141		1,860
Effect of exchange rate changes on cash, cash equivalents and restricted cash	187		26		(77)
Net increase (decrease) in cash, cash equivalents and restricted cash	20,293		13,731		(27,204)
Cash, cash equivalents and restricted cash at beginning of period	26,820		13,089		40,293
Cash, cash equivalents and restricted cash at end of period	$	47,113	$	26,820	$	13,089


Supplemental disclosure of cash flows
Cash paid for interest	$	0	$	42	$	44
Cash refunds from (paid for) income taxes, net	$	882	$	741	$	(139)

Year Ended December 31,
2015 2016 2017
Operating activities

Net loss $ (4,763 ) $ (4,882 ) $ (25,412 )
Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization 4,148
3,539
2,837
Amortization of internally developed software 627
936
1,464
Amortization of book-of-business consideration 2,006
1,649
1,167
Amortization of intangible assets 1,153
1,040
1,040
Stock-based compensation expense 7,002
7,266
9,694
Deferred income taxes 101
114
(401 )
Other non-cash items 106
(233 ) (101 )
Changes in operating assets and liabilities:

Accounts receivable (1,447 ) 434
(681 )
Prepaid expenses and other assets 997
(486 ) (1,933 )
Accounts payable (2,949 ) 2,227
(1,866 )
Accrued compensation and benefits 6,180
(3,466 ) 4,578
Accrued marketing expenses 1,991
(3,540 ) (3,070 )
Deferred revenue (642 ) 567
(574 )
Accrued restructuring charges 433
(433 ) —
Other current liabilities (1,247 ) (649 ) (2,283 )
Net cash provided by (used in) operating activities 13,696
4,083
(15,541 )
Investing activities

Capitalized internal-use software and website development costs
(1,117 ) (1,837 ) (3,210 )
Purchases of property and equipment and other assets (1,879 ) (1,889 ) (1,868 )
Net cash used in investing activities (2,996 ) (3,726 ) (5,078 )
Financing activities

Net proceeds from exercise of common stock options 1,572
62
1,037
Cash used to net-share settle equity awards (922 ) (1,248 ) (1,802 )
Principal payments in connection with capital leases (73 ) (83 ) (105 )
Net cash provided by (used in) financing activities 577
(1,269 ) (870 )
Effect of exchange rate changes on cash and cash equivalents 18
(17 ) 1
Net increase (decrease) in cash and cash equivalents 11,295
(929 ) (21,488 )
Cash and cash equivalents at beginning of period 51,415
62,710
61,781
Cash and cash equivalents at end of period $ 62,710
$ 61,781
$ 40,293
Supplemental disclosure of non-cash investing and financing activities
Capital lease obligations incurred $ 156
$ 51
$ 76
Supplemental disclosure of cash flows
Cash paid for interest $ 34
$ 14
$ 20
Cash paid for income taxes, net of refunds $ 6
$ 628
$ 219

The accompanying notes are an integral part of these ~~condensed~~ consolidated financial statements.

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 -– Summary of Business and Significant Accounting Policies

Description of ~~Business—~~Business – eHealth, Inc. (the “Company,” “eHealth,” “we” or “us”) is a leading private health insurance exchange for individuals, families and small businesses in the United States. Through our website addresses (www.eHealth.com, www.eHealthInsurance.com, www.eHealthMedicare.com, www.Medicare.com, www.PlanPrescriber.com and www.GoMedigap.com), consumers can get quotes from leading health insurance carriers, compare plans side-by-side, and apply for and purchase Medicare-related, individual and family, small business and ancillary health insurance plans. We actively market the availability of Medicare-related insurance plans and offer Medicare plan comparison tools and educational materials for Medicare-related insurance plans, including Medicare Advantage, Medicare Supplement and Medicare Part D prescription drug plans. Our ecommerce technology also enables us to deliver consumers’ health insurance applications electronically to health insurance carriers. We are licensed to market and sell health insurance in all 50 states and the District of Columbia.

~~Principles~~Basis of ~~Consolidation —The~~Presentation – Our consolidated financial statements include the accounts of eHealth, Inc. and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. ~~GAAP”~~GAAP.”). Certain prior period amounts have been reclassified to conform with our current period presentation.

Operating Segments — – We report segment information based on how our chief executive officer, who is our chief operating decision maker ~~("CODM"~~(“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~~2 operating ~~segments~~segments:

•~~Medicare~~Medicare; and

•Individual, Family and Small Business

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 customers, including but not limited to, dental and vision insurance, as well as our advertising program that allows Medicare-related carriers to purchase advertising on a separate website developed, hosted and maintained by us and our delivery and sale to third parties of Medicare-related health insurance leads generated by our ecommerce platforms and our marketing activities.

The Individual, Family and Small Business segment consists primarily of commissions earned from our sale of individual and family and small business health insurance plans and ancillary products sold to our non-Medicare-eligible customers, including but not limited to, dental, vision, ~~life,~~ short term disability and long term disability insurance. To a lesser extent, the Individual, Family and Small Business segment ~~consists of~~includes 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 ~~two~~2 operating segments and are presented as a reconciling item to our consolidated financial results.

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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, depreciation and amortization expense and amortization of intangible assets.

Use of Estimates —– The preparation of consolidated financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported and disclosed in the consolidated financial statements and accompanying notes. On an ongoing basis, we evaluate our estimates, including those related to, but not limited to, the useful lives of intangible assets, fair value of investments, ~~fair value of our acquired Medicare books-of-business,~~ recoverability of intangible assets, ~~estimates~~the commissions we expect to collect for ~~commission forfeitures,~~each approved member cohort, valuation allowance for deferred income taxes, provision for income taxes and the assumptions used in determining stock-based compensation. We base

~~EHEALTH, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

our estimates of the carrying value of certain assets and liabilities on historical experience and on various other assumptions that we believe to be reasonable. Actual results may differ from these estimates.

~~Reclassifications —~~ For presentation purposes, certain prior period amounts have been reclassified to conform to the reporting in the current period financial statements. Specifically, for the years ended December 31, 2015 and 2016, we reclassified $0.6 million and $0.8 million, respectively, of operating expenses related to our licensing department, which was previously reported as general and administrative expense, to customer care and enrollment expense. This reclassification did not affect previously reported net loss, cash flows or stockholders' equity.

Cash ~~Equivalents—~~Equivalents – We consider all investments with an original maturity of 90 days or less from the date of purchase to be cash equivalents. Cash and cash equivalents are stated at fair value.

Property and ~~Equipment—~~Equipment – Property and equipment are stated at cost, less accumulated depreciation and amortization. ~~Capital~~Finance lease amortization expenses are included in depreciation expense in our Consolidated Statements of Comprehensive ~~Loss.~~Income. Maintenance and minor replacements are expensed as incurred. Depreciation and amortization isexpenses are computed using the straight-line method based on estimated useful lives as follows:

Computer equipment and software

5 years

Office equipment and furniture

5 years

Leasehold ~~improvements~~improvements*

~~Lesser of useful life (typically~~ 5

10 ~~years) or related lease term~~years

_______

~~Maintenance and minor replacements are expensed as incurred.~~

* Lesser of useful life or related lease term

See Note 2~~- Balance Sheet Accounts~~4 – Supplemental Financial Statement Information of the Notes to Consolidated Financial Statements for additional information regarding our property and equipment.

Business Combinations — – We allocate the fair value of the ~~purchase~~acquisition consideration oftransferred in exchange for our acquired businesses to the tangible assets, liabilities and intangible assets acquired based on their estimated fair values at the acquisition date. The excess of the fair value of ~~purchase~~acquisition consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Acquisition-related costs are recognized separately from the business combination and are expensed as incurred.

Goodwill and Intangible ~~Assets—~~Assets – Goodwill represents the excess of the consideration paid over the estimated fair value of assets acquired and liabilities assumed in a business combination. In the event that we realign our reporting units, we allocate our goodwill to the new reporting units using the relative fair value approach. We test our goodwill for impairment on an annual basis in the fourth quarter of each year or whenever events or changes in circumstances indicate that the asset may be impaired. Factors that we consider in deciding when to perform an impairment test include significant negative industry or economic trends or significant changes or planned changes in our use of the intangible assets.

~~We realigned~~

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Our goodwill is allocated among our ~~reporting units into two operating~~ 2 segments, ~~during the year ended December 31, 2016, at which time we allocated $3.7 million and $10.4 million of the carrying value of the goodwill to the~~(1) Medicare and (2) Individual, Family and Small ~~Business segments, respectively, based on the relative fair value of the operating segments. We continued to report the same two segments during the year ended December 31, 2017 and no~~Business. NaN goodwill impairment has been identified in any of the years ~~presented.~~presented in the accompanying Consolidated Statements of Comprehensive Income.

Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate a potential reduction in their fair values below their respective carrying amounts. Intangible assets with finite useful lives, which include purchased technology, pharmacy and customer relationships, trade names, and certain trademarks, are amortized over their estimated useful lives.

Goodwill and intangible assets are considered non-financial assets and therefore, subsequent to their initial recognition are not revalued at fair value each reporting period unless an impairment charge is recognized.

~~EHEALTH, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

amortization over the assets’ new, remaining useful life. We evaluated the remaining useful lives of our intangible assets with finite lives and determined no material adjustments to the remaining lives were required. See Note 4 – Supplemental Financial Statement Information of the Notes to Consolidated Financial Statements for additional information regarding our intangible assets.

~~Book-of-Business Transfers—~~We have entered into several agreements with a broker partner, whereby the partner transferred certain of its existing Medicare plan members to us as the broker of record on the underlying policies. The first of these book-of-business transfers occurred in November 2010 and the most recent in June 2012. Total consideration for these books-of-business amounted to $13.9 million. Consideration for these books-of-business is included in prepaid expenses and other current assets and in other assets in the accompanying Consolidated Balance Sheets. The consideration, which was based on the discounted commissions expected to be received over the remaining life of each transferred Medicare plan member, is being amortized to cost of revenue in the Consolidated Statements of Comprehensive Loss and is presented as amortization of book-of-business consideration in the Consolidated Statements of Cash Flows as we recognize commission revenue related to the transferred Medicare plan members. The amount of consideration we amortize to cost of revenue each quarter is proportional to the amount of commission revenue we recognize on the underlying policies each quarter in relation to the total amount of remaining commission revenue expected to be recognized. Amortization expense recorded to cost of

~~revenue for these books-of-business for the years ended December 31, 2015, 2016 and 2017 totaled $2.0 million, $1.6 million and $1.2 million, respectively.~~

Other Long-Lived ~~Assets—~~Assets – We evaluate other long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value.

Revenue ~~Recognition—~~Recognition – Our commission revenue consists of commission payments from health insurance carriers whose health insurance policies are purchased through our ecommerce platforms or telephonically via our customer care center, and bonus payments which are generally based on our attaining predetermined target sales levels or other objectives, as determined by the health insurance carriers. In addition, we also generate revenue from non-commission sources, which include online sponsorship, advertising, lead referrals, and technology licensing.0

We account for revenue under ASC 606 – Revenue from Contracts with Customers. The core principle of ASC 606 is to recognize revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration the entity expects to be entitled in exchange for those goods or services. Accordingly, we recognize revenue for our services ~~when each~~through the application of the following ~~four criteria is met: persuasive evidence~~steps:

•Identification of ~~an arrangement exists; delivery has occurred~~the contract, or ~~services have been rendered;~~contracts, with a customer.

•Identification of the ~~seller’s~~performance obligations in the contract.

•Determination of the transaction price.

•Allocation of the transaction price to the ~~buyer is fixed~~performance obligations in the contract.

•Recognition of revenue when, or ~~determinable; and collectability is reasonably assured.~~ as, we satisfy a performance obligation.

Commission Revenue — Our commission revenue results from approval of an application from health insurance carriers, which we define as our customers under ASC 606. Our commission revenue is primarily comprised of ~~compensation paid~~commissions from health insurance carriers which is computed using the estimated constrained lifetime value of commission payments that we expect to usreceive. We estimate commission revenue for each insurance product by using a portfolio approach to a group of approved members by plan type and the effective month of the relevant plan, which we refer to as “cohorts”. We recognize revenue for plans approved during the period by applying the latest estimated constrained lifetime value (“LTV”) for that product. We recognize

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

adjustment revenue for plans approved in prior periods when changes in assumptions for constrained LTV calculations are made and when there is sufficient evidence demonstrating a trend that is different from the estimated constrained LTV at the time of approval resulting in a change in estimate to expected cash collections. Net adjustment revenue consists of increases in revenue for certain prior period cohorts as well as reductions in revenue for certain prior period cohorts. We recognize positive adjustments to revenue to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. We assess the risk of significant revenue reversal based on statistical and qualitative analysis given historical information and current market conditions.

Our commission revenue for each product line is based on a number of assumptions, which include, but are not limited to, estimating conversion of an approved member to a paying member, forecasting average plan duration and forecasting the commission amounts likely to be received per member. These assumptions are based on our analysis of historical trends for the different cohorts and incorporate management’s judgment in interpreting those trends and applying the constraints discussed below. For our Medicare commission revenue, which represented 86%, 87% and 83% of our total commission revenue for the years ended December 31, 2020, 2019 and 2018, respectively, the estimated average plan duration, which is the average length of time paying members are active on their plans, used to calculate Medicare health insurance plan LTVs historically has been approximately 3 years for Medicare Advantage plans, approximately 5 years for Medicare Part D prescription drug plans, and approximately 5 years for Medicare Supplement plans. While the average plan duration has been approximately 3 years for Medicare Advantage plans, certain members may have a duration of up to approximately 13 years. The estimated average plan duration used to calculate the LTV for major medical individual and family health insurance plans historically has been approximately 1.5 to 2 years. For short term health insurance plan LTVs, the estimated average plan duration historically has been less than six months. For all other ancillary health insurance plan LTVs, the estimated average plan duration has historically varied from 1 to 3 years.

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

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

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

enhancements to the LTV estimation model provide greater statistical certainty on expected cash collections, particularly for earlier period cohorts where there is more historical data available.

For both Medicare Advantage and Medicare Part D prescription drug plans, we receive a fixed, annual commission payment from insurance carriers once the plan is approved by the carrier and either a fixed, monthly, or annual commission payment beginning with and subsequent to the second plan year. ~~Additionally, commission rates may be higher in the first twelve months of the plan if the plan is the first Medicare Advantage or Medicare Part D prescription drug plan issued to the member.~~ In the first plan year of a Medicare Advantage and Medicare Part D prescription drug plan, after the health insurance carrier approves the application but during the effective year of the plan, we are paid a fixed commission that is prorated for the number of months remaining in the calendar year. Additionally, if the plan is the first Medicare Advantage or Medicare Part D prescription drug plan issued to the member, we may receive a higher commission rate that covers a full twelve-month period, regardless of the month the plan was effective. We earn commission revenue for Medicare Advantage and Medicare Part D prescription drug plans for which we are the broker of record, typically until either the policy is cancelled or we otherwise do not remain the agent on the policy. We recognize commission revenue for both Medicare Advantage and Medicare Part D prescription drug plans for the entire plan year once the annual or first monthly commission amount for the plan year is reported to us by the carrier, net of an estimate for future forfeiture amounts due to plan cancellations. For commissions paid to us on a monthly basis, we record a receivable for the commission amounts to be received over the remainder of the plan year, net of an estimate for commission amounts not expected to be collected due to plan cancellations, which is included in Accounts Receivable in the accompanying Consolidated Balance Sheets. We continue to receive the commission payments from the relevant insurance carrier typically until either the policy is cancelled or we otherwise do not remain the agent on the policy. We determine that there is persuasive evidence of an arrangement when we have a commission agreement with a health insurance carrier. Our services are complete when a carrier has approved an application in the initial year and when a member has renewed in a renewal year. The seller’s price is fixed or determinable and collectability is reasonably assured when a carrier has approved an application and the carrier reports to us the annual or first monthly renewal commission amount for each plan year.

For individual and family, Medicare Supplement, small business and ancillary plans, our ~~compensation~~commissions generally ~~represents~~represent a flat amount per member per month or a percentage of the premium amount collected by the carrier during the period that a member maintains coverage under a ~~plan (commissions) and, to a much lesser extent, override commissions that health insurance carriers pay us for achieving certain objectives.~~plan. Premium-based commissions are reported to us after the premiums are collected by the carrier, generally on a monthly basis. We generally continue to receive the commission payment

~~EHEALTH, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

from the relevant insurance carrier until the health insurance plan is cancelled or we otherwise do not remain the agent on the policy. We

For Medicare-related, individual and family and ancillary health insurance plans, our services are complete once a submitted application is approved by the relevant health insurance carrier. Accordingly, we recognize commission revenue based upon the total estimated lifetime commissions we expect to receive for ~~individual~~selling the plan after the carrier approves an application, net of an estimated constraint. We refer to these as estimated and ~~family, Medicare Supplement,~~constrained LTVs for the plan. We provide annual services in selling and renewing small business ~~and ancillary plans as~~health insurance plans; therefore, we recognize small business health insurance plan commission revenue at the ~~commissions are reported to us~~time the plan is approved by the carrier, ~~net of an estimate for future forfeiture amounts due~~and when it renews each year thereafter, equal to ~~policy cancellations. We determine that there is persuasive evidence of an arrangement when~~the estimated commissions we ~~have a commission agreement with a health insurance carrier, a carrier reports~~expect to ~~us that it has approved an application submitted through our ecommerce platform and~~collect from the ~~applicant starts making payments on~~plan over the plan. Our services are complete when a carrier has approved an application. The seller’s price is fixed or determinable and collectability is reasonably assured when commission amounts have been reported to us by a carrier.following twelve months.

Commissions for all health insurance plans we sell are reported to us by a cash payment and commission statement. We generally receive these communications simultaneously. In instances when we receive the cash payment and commission statement separately and in different accounting periods, we recognize revenue in the period that we receive the earliest communication, provided we receive the second corroborating communication shortly following the end See Note 2 – Revenue of the accounting period. If the second corroborating communication is not received shortly following the end of the accounting period, we recognize revenue in the period the second communication is received. During 2014, the CentersNotes to Consolidated Financial Statements for Medicare and Medicaid Services (“CMS”) issued a regulation prohibiting carriers from paying commissions during the fourth quarter on Medicare Advantage and Medicare Part D prescription drug plans sold during the fourth quarter with an effective date in the following year. During the fourth quarters of 2015, 2016 and 2017, we recognized revenue for policies included on aadditional information regarding our commission statement received for those periods, respectively, for which payment was received shortly after year-end and in connection with the carriers’ normal payment cycle during the first quarters of 2016, 2017 and 2018. We use the data in the commission statements to help identify the members for which we are receiving a commission payment and the amount received for each member, and to estimate future forfeiture amounts due to policy cancellations. As a result, we recognize the net amount of compensation earned as the agent in the transaction. Changes in our historical trends would result in changes to our estimated forfeitures in future periods. There were no changes in our average forfeiture rates or reporting time lag during the years ended December 31, 2015, 2016 and 2017, which had a material impact on our estimate for forfeitures. revenue.

Certain commission amounts are subject to forfeiture if the plan is subsequently cancelled and either the carrier takes back all or a portion of the commission they have paid to us or we will no longer receive monthly commission payments for the remainder of the plan year. We record an estimate for these forfeitures based on our historical cancellation experience using data provided on commission statements. Policy cancellations and the commission amounts, if any, to be taken back by the carrier are typically reported to us by health insurance carriers several months after the policy’s cancellation date. Our estimate for forfeitures payable to a carrier, which is included in other current liabilities in the Consolidated Balance Sheets, includes an estimate of both the reporting time lag and the forfeiture amount, based on our historical experience by policy type. Similarly, our estimate for commission amounts not expected to be collected due to policy cancellations, which is recorded as a reduction of accounts receivable in the Consolidated Balance Sheets, includes an estimate of the annual policy cancellation rate, based on our historical experience by policy type.

Other Revenue

– Our sponsorship and advertising program allows carriers to purchase advertising space in specific markets in a sponsorship area on our website. In return, we are typically paid a ~~monthly~~ fee, which is recognized over the period that advertising is displayed, and often a performance fee based on metrics such as submitted health insurance applications, which is recognized when ~~the earned amounts are fixed and determinable.~~control has been transferred. We also offer Medicare advertising services, which include website development, hosting and maintenance. In these instances, we are typically paid a fixed, up-front fee, which we recognize as revenue as control is transferred ratably over the service period.

~~EHEALTH, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

applications. The ~~metrics used to calculate~~ performance fees ~~for both sponsorship and advertising and technology licensing~~ are based on performance ~~criteria that are either measured based on data tracked by us, or based on data tracked by the third party.~~criteria. In instances where the performance criteria data is tracked by us, we recognize revenue in the period of performance and when all other revenue recognition criteria has been met. In instances where the performance criteria data is tracked by the third party, we recognize revenue when ~~the~~reversal of such amounts ~~earned are either fixed or determinable and collection~~ is ~~reasonably assured. Typically, this occurs through our receipt of a cash payment from the third party along with a detailed statement containing the data that is tracked by the third party.~~not likely to occur.

Deferred ~~Revenue—~~Revenue – Deferred revenue includes deferred ~~technology licensing implementation~~ fees and amounts billed ~~for deliverables, including professional services, in multiple element arrangements that do not have stand-alone value from other, undelivered elements, as well as amounts billed~~to or collected from advertising, sponsorship or technology licensing customers in advance of our performing our service for such

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

customers. It also includes the amount by which both unbilled and billed services provided under our technology licensing arrangements exceed the ~~straight-line~~ revenue recognized to date. ~~We defer commission amounts that have been paid~~

Incremental Costs to usObtain a Contract — Our sales compensation plans, which are directed at converting leads into approved members, represent fulfillment costs and not costs to obtain a contract with a customer. Additionally, we reviewed compensation plans related to ~~transactions where our services~~personnel responsible for identifying new health insurance carriers and entering into contracts with new health insurance carriers and concluded that no incremental costs are ~~complete, but where we cannot currently estimate future forfeitures~~incurred to obtain such contracts. Therefore, costs related ~~to those amounts.~~these compensation plans are expensed as incurred.

Cost of ~~Revenue—~~Revenue – Included in cost of revenue are payments related to health insurance policies 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 a broker partner in connection with the transfer of their Medicare-related health insurance members to us as the new broker of record on the underlying policies.

Marketing and Advertising ~~Expenses—~~Expenses – Marketing and advertising expenses consist primarily of member acquisition expenses associated with our direct, marketing partner and online advertising member acquisition channels, in addition to compensation and other expenses related to marketing, business development, partner management, public relations and carrier relations personnel who support our offerings. We recognize direct marketing expenses in our direct member acquisition channel in the period in which they are incurred. We recognize online marketing expenses associated with search advertising in the period in which the consumer clicks on the advertisement. Advertising costs incurred in the years ended December 31, ~~2015, 2016~~2020, 2019 and ~~2017~~2018 totaled ~~$66.5~~$178.9 million, ~~$64.8~~$122.6 million, and ~~$56.0~~$64.4 million, respectively.

Our direct channel expenses primarily consist of costs for direct mail, email marketing and television and radio advertising. Advertising costs for our direct channel are expensed the first time the related advertising takes place. Our marketing partner channel expenses primarily consist of fees paid to marketing partners with which we have a relationship. Our

~~EHEALTH, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

online advertising channel expenses primarily consist of paid keyword search advertising on search engines and retargeting campaigns. Advertising costs for our marketing partner channel and our online advertising channel are expensed as incurred.

Research and Development ~~Expenses—~~Expenses – Research and development expenses consist primarily of compensation and related expenses incurred for employees on our engineering and technical ~~teams.~~teams, which are expensed as incurred. Research and development costs, which totaled ~~$10.6~~$9.1 million, ~~$8.9~~$8.1 million and ~~$7.6~~$6.9 million for the years ended December 31, ~~2015, 2016~~2020, 2019 and ~~2017,~~2018, respectively, are included in technology and content expense in the accompanying Consolidated Statements of Comprehensive ~~Loss.~~Income.

~~Deferred Contract Costs—~~Deferred contract costs primarily represent direct costs related to professional services provided in connection with technology licensing arrangements that are accounted for as a single unit of accounting. The direct professional services costs are deferred up until the commencement of revenue recognition of the single unit and then recognized as cost of revenue ratably over the same period as the related revenue.

Internal-Use Software and Website Development ~~Costs—~~Costs – We capitalize costs of materials, consultants and compensation and benefits costs of employees who devote time to the development of internal-use software during the application development stage. The amortization of these assets are recorded in technology and content. Our judgment is required in determining the point at which various projects enter the phases at which costs may be capitalized, in assessing the ongoing value of the capitalized costs and in determining the estimated useful lives over which the costs are amortized, which is generally ~~three~~3 years. For the years ended December 31, ~~2015, 2016~~2020, 2019 and ~~2017,~~2018, we capitalized internal-use software and website development costs of ~~$1.1~~$18.0 million, ~~$1.8~~$10.2 million and ~~$3.2~~$6.3 million respectively, and recorded amortization expense of ~~$0.6~~$7.8 million, ~~$0.9~~$3.8 million, and ~~$1.5~~$2.2 million respectively. Capitalized internal-use software and website development costs are included in Other Assets on our Consolidated Balance Sheets and were $24.6 million and $14.7 million as of December 31, 2020 and 2019, respectively.

Stock-Based ~~Compensation—~~Compensation – We recognize stock-based compensation expense in the accompanying Consolidated Statements of Comprehensive ~~Loss~~Income based on the fair value of our stock-based awards over their respective vesting periods, which is generally ~~four~~4 years. The estimated grant date fair value of our stock options is determined using the Black-Scholes-Merton pricing model and a single option award approach. The weighted-average expected term for stock options granted is calculated using historical option exercise behavior. The dividend yield is determined by dividing the expected per share dividend during the coming year by the grant date stock price. Through December 31, 2017, we had not declared or paid any cash dividends, and we do not expect to pay any in the foreseeable future. We base the risk-free interest rate on the implied yield currently available on U.S. Treasury zero-coupon issues with a remaining term equal to the expected term of our stock options. Expected volatility is determined using a combination of the implied volatility of publicly traded options in our stock and historical volatility of our stock price. The estimated attainment of performance-based awards and

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

related expense is based on the expectations of revenue and earnings target achievement. The estimated fair value of performance awards with market conditions is determined using the Monte-Carlo simulation model. The assumptions used in calculating the fair value of stock-based payment awards and expected attainment of performance-based awards represent our best estimates, but these estimates involve inherent uncertainties and the application of management judgment. We will continue to use judgment in evaluating the expected term and volatility related to our own stock-based awards on a prospective basis, and incorporating these factors into the model. Changes in key assumptions could significantly impact the valuation of such instruments. The estimated grant date fair value of our stock options is determined using the Black-Scholes pricing model and a single option award approach. The weighted-average expected term for stock options granted is calculated using historical option exercise behavior. The dividend yield is determined by dividing the expected per share dividend during the coming year by the grant date stock price. Through December 31, 2020, we had not declared or paid any cash dividends to common stockholders, and we do not expect to pay any in the foreseeable future. We base the risk-free interest rate on the implied yield currently available on U.S. Treasury zero-coupon issues with a remaining term equal to the expected term of our stock options. Expected volatility is determined using a combination of the implied volatility of publicly traded options in our stock and historical volatility of our stock price.

401(k) ~~Plan—In September 1998, our~~Plan – Our board of directors adopted a defined contribution retirement plan ~~(401(k) Plan),~~("401(k) Plan") in 1998, which qualifies under Section 401(k) of the Internal Revenue Code of 1986. Participation in the 401(k) Plan is available to substantially all employees in the United States. Employees can contribute up to 25% of their salary, up to the federal maximum allowable limit, on a before-tax basis to the 401(k) Plan. Employee contributions are fully vested when contributed. Our contributions to the 401(k) Plan are discretionary and are expensed when incurred. We also match employee contributions to our 401(k) Plan at ~~25%~~100% of an employee’s contribution each pay period, up to a maximum of 1%3% of the employee’s salary during such pay ~~period.~~period for the year ended December 31, 2020, compared to 25% contribution match, with maximum of 3% and 2% for the years ended December 31, 2019 and 2018, respectively. Our matching contributions are expensed as incurred and vest one-third for each of the first three years of the recipient’s service. The recipient is fully vested in all 401(k) Plan matching contributions after three years of service. We recognized expense of ~~$0.3~~$3.5 million, ~~$0.3~~$2.3 million and ~~$0.4~~$1.0 million for the years ended December 31, ~~2015, 2016~~2020, 2019 and ~~2017,~~2018, respectively, related to 401(k) matching contributions.

Income ~~Taxes—~~Taxes – We account for income taxes using the liability method. Deferred income taxes are determined based on the differences between the financial reporting and tax bases of assets and liabilities, using enacted statutory tax rates in effect for the year in which the differences are expected to reverse.

We utilize a two-step approach for evaluating uncertain tax positions. Step one, Recognition, requires a company to determine if the weight of available evidence indicates that a tax position is more likely than not to be sustained upon audit, including resolution of related appeals or litigation processes, if any. Step two, Measurement, is based on the largest amount of

~~EHEALTH, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

benefit, which is more likely than not to be realized on ultimate settlement. We record interest and penalties related to uncertain tax positions as income tax expense in the consolidated financial statements.

~~Seasonality—~~Seasonality – A greater number of our Medicare-related health insurance plans are sold in our fourth quarter during the Medicare annual enrollment period when Medicare-eligible individuals are permitted to change their Medicare Advantage and Medicare Part D prescription drug coverage for the following year. ~~Additionally, substantially all of the Medicare Advantage and Medicare Part D prescription drug policies we have sold renew on January 1 of each year, resulting in~~As a result, our ~~recognizing substantially all renewal Medicare Advantage and Medicare Part D prescription drug plan commission revenue in our first quarter. Our~~ Medicare plan-related commission revenue is highest in our fourth quarter. Any changes or additional enrollment periods may change the seasonality of our business. For instance, due to the recent reintroduction of the Medicare Advantage open enrollment period that takes place in the first quarter ~~and~~of the year, our first quarter is ~~higher in our fourth quarter compared to our second and third quarters.~~generally the second-highest revenue generating quarter.

The majority of our individual and family health insurance plans are sold in the fourth quarter during the annual open enrollment period as defined under the federal Patient Protection and Affordable Care Act and related amendments in the Health Care and Education Reconciliation Act. Individuals and families generally are not able to

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

purchase individual and family health insurance outside of these open enrollment periods, unless they qualify for a special enrollment period as a result of certain qualifying events, such as losing employer-sponsored health insurance or moving to another ~~state.~~state due to the recent COVID-19 pandemic.

~~Recent~~Recently Adopted Accounting Pronouncements

~~Compensation — Stock Compensation~~Financial Instruments – Credit Losses (Topic ~~718) —~~326) – In ~~May 2017,~~June 2016, the Financial Accounting ~~Standard~~Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. ~~2017-09,~~ ~~Compensation—Stock Compensation~~2016-13, Financial Instruments – Credit Losses (Topic ~~718): Scope~~326), that requires companies to present certain financial assets net of ~~Modification Accounting, which provides~~the amount expected to be collected. The guidance ~~about which changes~~requires the measurement of expected credit losses to be based on relevant information from past events, including historical experiences, current conditions and reasonable and supportable forecasts that affect collectability. Contract assets – commissions receivable were our only financial assets that were materially impacted by this guidance.

We adopted ASU 2016-13, including applicable amendments in other ASUs issued subsequent to ASU 2016-13, using a modified retrospective transition method on January 1, 2020 for all financial assets measured at amortized cost. Results for periods after January 1, 2020 are presented under ASU 2016-13 while prior period amounts continue to be reported under the previous accounting standards. We recorded a $1.1 million decrease, net of income taxes, to retained earnings as of January 1, 2020 for the cumulative effect of adopting ASU 2016-13. See Note 4 – Supplemental Financial Statement Information for further discussion on credit losses.

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


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

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

____________

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

Cloud Computing Arrangements (Topic 350) – In 2018, the FASB issued ASU No. 2018-15, which amends ASC 350-40 to address a customer's accounting for implementation costs incurred in a cloud computing arrangement (CCA) that is a service contract. The update conforms the requirements of capitalizing costs incurred in a CCA that is a service contract with the accounting guidance on capitalizing costs associated with developing or ~~conditions~~obtaining internal-use software. This update amends ASC 350 to include in its scope implementation costs of a ~~share-based payment award require an entity~~CCA that is a service contract and clarifies that a customer should apply ASC 350-40 to ~~apply modification accounting in Topic 718. ASU 2017-09~~determine which implementation costs should be capitalized. The new guidance is effective for ~~fiscal years~~annual and interim reporting periods beginning after December 15, ~~2017 and interim periods within those fiscal years. ASU 2017-09 is to be applied on a prospective basis to an award modified on or after the adoption date.~~2019. We ~~will adopt ASU 2017-09~~adopted this guidance prospectively in the first quarter of 2020. Cloud computing implementation costs incurred in hosting arrangements are capitalized and recorded in Other assets on our Consolidated Balance Sheet, and were immaterial for the year ended December 31, 2020.

Financial Instruments (Topic 820) – In 2018, the FASB issued ASU No. 2018-13, to change the disclosure requirements for fair value measurement with the objective of improving the effectiveness of the notes to financial statements. This new guidance removed and ~~do not expect~~modified certain disclosure requirements under Topic 820. We adopted this guidance in the ~~adoption~~first quarter of ~~this new standard to have a~~2020 with no material impact on our consolidated financial statements.

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Intangible – Goodwill ~~Impairment~~and Other (Topic 350) — – In ~~January~~ 2017, the FASB issued ASU ~~No.~~ 2017-04 ~~Simplifying~~to simplify the ~~Test for Goodwill Impairment (Topic 350). Under~~subsequent measurement of goodwill by removing the ~~new standard,~~requirement to perform a hypothetical purchase price allocation to compute the implied fair value of goodwill to measure impairment. Instead, any goodwill impairment ~~would be measured as~~will equal the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying ~~value~~amount of goodwill. ~~This ASU~~In addition, the guidance eliminates ~~existing guidance~~the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that ~~requires an entity~~qualitative test, to ~~determine~~perform Step 2 of the goodwill impairment by calculating the implied fair value of goodwill by hypothetically assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. The newtest. This standard is effective for annual ~~periods, and~~or any interim ~~periods within those annual periods,~~goodwill impairment test in fiscal years beginning after December 15, 2019. We adopted this guidance in the first quarter of 2020 with no material impact on our consolidated financial statements.

Recent Accounting Pronouncement Not Yet Adopted

Income Taxes (Topic 740) – In December 2019, ~~with early adoption permitted~~the FASB issued ASU No. 2019-12, Income Tax, Simplifying the Accounting for ~~annual goodwill impairment tests performed after~~Income Taxes, which aims to simplify the accounting by removing certain exceptions to the general principles in Topic 740 and improve consistent application of and simplify GAAP for other areas under this Topic by clarifying existing guidance. ASU 2019-12 is effective for us beginning January 1, ~~2017.~~2021. The amendments in this standard ~~must be applied prospectively. Upon~~update have individually different adoption ~~the standard will impact how we assess goodwill for impairment.~~approaches. We do not ~~expect ASU 2017-04 will have~~anticipate a material impact on our consolidated financial ~~statements.~~statements and disclosures from the adoption of this standard update.

~~Statement of Cash Flows (Topic 230) —~~ Codification Improvements–In ~~November 2016,~~October 2020, the FASB issued ASU No. ~~2016-18,~~ ~~Statement~~2020-10, Codification Improvements. ASU 2020-10 is intended to facilitate codification updates for technical corrections, such as conforming amendments, clarifications to guidance, simplifications to wording or structure of ~~Cash Flows (Topic 230): Restricted Cash, which clarifies~~ guidance, onand other minor improvements. It contains amendments that improve the ~~classification and presentation~~consistency of ~~restricted cash~~the codification by including all disclosure guidance in the ~~statement of cash flows. Under the~~appropriate disclosure section and other updates that varies in nature. ASU changes in restricted cash and restricted cash equivalents would be included along with those of cash and cash equivalents in the statement of cash flows. As a result, entities would no longer present transfers between cash/equivalents and restricted cash/equivalents in the statement of cash flows. In addition, a reconciliation between the balance sheet and the statement of cash flows would be disclosed when the balance sheet includes more than one line item for cash/equivalents and restricted cash/equivalents. ASU 2016-18 will be2020-10 is effective for us beginning on January 1, ~~2018 and will be applied on a retrospective basis.~~2021. We do not ~~expect the adoption of this new standard will have~~anticipate a material impact on our consolidated financial ~~statements.~~statements and disclosures from adoption of this standard update.

Debt with Conversion and Other Options (Topic 470) and Contracts in Entity's Own Equity (Topic 815) – In ~~August 2016,~~June 2020, the FASB issued No. 2020-06 to simplify the accounting for convertible instruments and improve the usefulness and relevance of information regarding convertible instruments. This ASU ~~No. 2016-15,~~ ~~Statement~~reduce the number of ~~Cash Flows (Topic 230): Classification of Certain Cash Receipts~~accounting models for converting debt instruments and ~~Cash Payments~~.convertible preferred stock. ASU ~~2016-15 provides guidance on how certain cash receipts and cash payments are presented on the statement of cash flows. ASU 2016-15~~2020-06 is effective for ~~annual reporting periods~~us beginning ~~after December 15, 2017.~~January 1, 2022, with early adoption permitted. We ~~will adopt ASU 2016-15 in~~are currently evaluating the ~~first quarter of 2018 and we do not expect the adoption of this new standard will have a material impact~~potential effect on our consolidated financial ~~statements.~~statements and related disclosures.

~~Leases (Topic 842) —~~ ~~In February 2016, the FASB issued ASU No. 2016-02,~~ ~~Leases (Topic 842).~~ ASU 2016-02 requires lessees to recognize a right-of-use asset and lease liability for all leases with terms of more than 12 months. Recognition, measurement, and presentation of expenses will depend on classification as a finance or operating lease; for

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 2 – Revenue

~~lessors,~~

Disaggregation of Revenue – The table below depicts the ~~guidance modifies the classification criteria~~disaggregation of revenue by product and ~~the accounting for sales-type~~is consistent with how we evaluate our financial performance (in thousands):


	Year Ended December 31,
	2020		2019		2018
Medicare
Medicare Advantage	$	374,981	$	339,810	$	143,445
Medicare Supplement	48,526		40,345		31,166
Medicare Part D	12,909		26,824		14,609
Total Medicare	436,416		406,979		189,220
Individual and Family (1)
Non-Qualified Health Plans	20,813		17,559		6,470
Qualified Health Plans	5,856		6,866		5,789
Total Individual and Family	26,669		24,425		12,259
Ancillary
Short-term	9,494		10,524		5,583
Dental	9,354		5,238		2,717
Vision	3,896		2,002		1,467
Other	4,392		3,985		4,941
Total Ancillary	27,136		21,749		14,708
Small Business	9,568		9,922		8,595
Commission Bonus	8,400		3,601		2,429
Total Commission Revenue	508,189		466,676		227,211

Other Revenue
Sponsorship and Advertising Revenue	68,383		35,375		15,796
Other	6,202		4,150		8,388
Total Other Revenue	74,585		39,525		24,184
Total Revenue	$	582,774	$	506,201	$	251,395

_______

(1)We define our individual and direct finance leases. The guidance also eliminates existing real estate-specific provisions for all entities. The new standard is effective for annual reporting periods beginning after December 15, 2018, including interim periods withinfamily plan offerings as major medical individual and family health insurance plans, which does not include Medicare-related, small business or ancillary plans. Individual and family health insurance plans include both qualified and non-qualified plans. Qualified health plans are individual and family health insurance plans that reporting period. Early adoption is permitted. We are currently considering our timing of adoption and are in the process of evaluating the impact of the adoption of ASU 2016-02 on our consolidated financial statements.

~~Revenue Recognition (Topic 606) —~~ ~~In May 2014, the FASB issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606)~~, requiring an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. In April 2016, the FASB issued ASU No. 2016-10, ~~Identifying Performance Obligations and Licensing~~. ASU 2016-10 provides guidance in identifying performance obligations and determining the appropriate accounting for licensing arrangements. The effective date and transition requirements for this ASU are the same as the effective date and transition requirements in Topic 606 (and any other Topic amended by ASU 2014-09).ASU 2014-09 may be adopted retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (modified retrospective method). We will adopt this new accounting standard for the reporting periods beginning on January 1, 2018, using the full retrospective method to restate each prior reporting period presented.

We have completed a review of our business processes, systems and controls as part of our effort to adopt the new revenue recognition standard and are executing on our developed project plan that includes analyzing the standard’s impact on our contract portfolio, comparing our historical policies and practices tomeet the requirements of the ~~new standard~~Affordable Care Act and ~~identifying differences from applying~~are offered through the government-run health insurance exchange in the relevant jurisdiction. Non-qualified health plans are individual and family health insurance plans that meet the requirements of the ~~new standard to our contracts. We have implemented necessary internal controls to ensure we adequately evaluate our portfolio of contracts under~~Affordable Care Act and are not offered through the five-step model promulgated by the FASB to ensure proper assessment of our operating results under the new standard. We do not expect a significant change in our control environment due to the adoption of the new standard; however, we will continue to assess as we finalize the impact of the adoption. We are also reporting on the progress of the implementation to our board of directors and the audit committee of our board of directors on a regular basis during the project’s duration.

The adoption of the new standard will have a material impact to our opening balance sheet as of January 1, 2016 due to the cumulative effect of adopting under the full retrospective method. In addition, our adoption of the new standard will have a material impact on our commission revenue and, as a result, on our consolidated balance sheets and consolidated statements of comprehensive income (loss) as of and for the years ended December 31, 2016 and 2017. Under the new standard, since our services associated with Medicare-related, individual and family and ancillary health insurance plans are complete once an application is approved by a carrier, we will recognize Medicare-related, individual and family and ancillary health insurance plan commission revenue at the time the plan is approved by the carrier equal to the estimated commissions we expect to collect on the plan. The estimated commissions we expect to collect on a plan and that we will recognize as revenue upon approval of the application will vary based on product type and other factors, such as the estimated commission rates and the estimated life of the respective policies. These estimates will change with our actual experience after adoption. We are stillexchange in the ~~process~~relevant jurisdiction. Individuals that purchase non-qualified health plans cannot receive a subsidy in connection with the purchase of finalizing our estimates by product type. Due to annual services we provide in renewing small business health insurance plans, we expect to recognize small business health insurance plan commission revenue at the time the plan is approved by the carrier, and when it renews each year thereafter, equal to the estimated commissions we expect to collect from the plan over the following 12-months. We have reviewed our contracts with our customers, the carriers whose plans we sell, and determined that we do not incur incremental costs when we enter into new contracts with carriers; therefore, we do not expect to capitalize contract acquisition costs as a result of the adoption of the new standard. Topic 606 will require us to make significant estimates, including, but not limited to, the estimated consideration to be paid to us over the estimated life of plans approved by carriers, or the following 12 months for small business health insurance plans, for which we are the broker of record. In addition, we are in the process of assessing the impact of the adoption of the new standard will have on our accounting for income taxes. Our adoption of the new standard will also significantly change the seasonality of our revenues, primarily with respect to our Medicare-related, individual and family and ancillary health insurance plan commission revenue. Under Topic 606, we expect to recognize significantly lower commission revenue in the first quarter of each year when we have historically recognized commission revenue from Medicare-related renewals and expect to instead record significantly greater commission revenue in the fourth quarter of each year as a result of the increase in approved plans we experience during the fourth quarter annual and open enrollment periods.non-qualified plans.

Year Ended December 31,
2015 2016 2017
Humana 23 % 23 % 22 %
UnitedHealthcare ¹
11 % 13 % 16 %
Aetna ²
10 % 10 % 9 %


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


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

~~Note 9 – Selected Quarterly Financial Data (Unaudited)~~

~~Selected summarized quarterly financial information for 2016 and 2017 is as follows (in thousands, except per share amounts):~~

For the Year Ended December 31, 2017 First
Quarter
Second
Quarter

Third
Quarter

Fourth
Quarter
Year
Revenue $ 78,939
$ 27,957
$ 26,619
$ 38,840
$ 172,355
Income (loss) from operations 31,822
(17,225 ) (20,705 ) (23,386 ) (29,494 )
Net income (loss) 33,421
(17,260 ) (20,616 ) (20,958 ) (25,412 )
Net income (loss) per share:

Basic $ 1.82
$ (0.93 ) $ (1.11 ) $ (1.12 ) $ (1.37 )
Diluted $ 1.80
$ (0.93 ) $ (1.11 ) $ (1.12 ) $ (1.37 )

For the Year Ended December 31, 2016 First
Quarter
Second
Quarter

Third
Quarter

Fourth
Quarter
Year
Revenue $ 73,844
$ 37,277
$ 32,079
$ 43,760
$ 186,960
Income (loss) from operations 23,683
(5,809 ) (6,916 ) (16,813 ) (5,855 )
Net income (loss) 18,034
(476 ) (5,736 ) (16,704 ) (4,882 )
Net income (loss) per share:

Basic $ 0.99
$ (0.03 ) $ (0.31 ) $ (0.91 ) $ (0.27 )
Diluted $ 0.99
$ (0.03 ) $ (0.31 ) $ (0.91 ) $ (0.27 )

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the lease-related assets and liabilities recorded on the Consolidated Balance Sheet for the periods presented below (in thousands):


	December 31, 2020		December 31, 2019
Operating lease right-of-use assets	$	42,558	$	36,621

Lease liabilities – current	$	5,192	$	4,759
Lease liabilities – non-current	41,369		34,305
Total operating lease liabilities	$	46,561	$	39,064

Supplemental information related to leases are as follows (in thousands):


	December 31, 2020			December 31, 2019
Operating cash outflows from operating leases	$	7,090		$	5,464
Non-cash investing activities relating to operating lease right-of-use assets	$	10,919		$	40,646
Weighted-average remaining lease term of operating leases	7.2 years			7.6 years
Weighted-average discount rate used to recognize operating lease right-of-use-assets	5.4		%	5.9		%

As of December 31, 2020, maturities of operating lease liabilities are as follows (in thousands):


Year ending December 31,
2021	$	7,644
2022	7,701
2023	8,033
2024	7,832
2025	8,009
Thereafter	19,408
Total lease payments (1)	58,627
Less imputed interest	(12,066)
Total	$	46,561

____________

(1)Noncancellable sublease income for the years ending December 31, 2021, 2022 and 2023 of $1.2 million, $0.4 million and $0.4 million, respectively, are not included in the table above.

Note 11 – Debt

On September 17, 2018, we entered into a Credit Agreement with Royal Bank of Canada (“RBC”), as administrative agent and collateral agent (the “Credit Agreement”). The Credit Agreement provides for a $40.0 million secured asset-backed revolving credit facility with a $5.0 million letter of credit sub-facility.

On December 20, 2019, we amended our revolving credit facility agreement with RBC (the “Amendment”) and increased the borrowing amount from $40.0 to $75.0 million. The maturity date has been extended to December 20, 2022.

110

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The borrowing base under the Credit Agreement is comprised of an amount equal to (a) the lesser of (i) eighty percent (80%) of Eligible Commissions Receivables (as defined in the Credit Agreement) we actually collected during the immediately preceding period of three months or (ii) eighty percent 80%) of our Eligible Commission Receivables for the immediately succeeding period of three months, plus (b) fifty percent (50%) of our Eligible Commission Receivables for the immediately succeeding period of six months (excluding the immediately succeeding period of three months), in each case subject to reserves established by RBC (the “Borrowing Base”). The proceeds of the loans under the Credit Agreement may be used for working capital and general corporate purposes. The Borrowers have the right to prepay the loans under the Credit Agreement in whole or in part at any time without penalty. Subject to availability under the Borrowing Base, amounts repaid may be reborrowed.

Amounts not borrowed under the Credit Agreement will be 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 the closing of the Credit Agreement, we paid a one-time facility fee of 1.75% of the total commitments of $40.0 million. We also paid a one-time closing fee of 0.5% of the new commitment of $75.0 million in connection with the Amendment. The Company is also obligated to pay other customary administration fees for a credit facility of this size and type.

The availability under the credit facility was up to the lesser of $40.0 million or the Borrowing Base in the original credit agreement. The Amendment increased the availability up to the lesser of $75.0 million or the Borrowing Base, which may be reduced from time to time pursuant to the Credit Agreement.

Financial covenants in the original Credit Agreement required that we maintain Excess Availability (as defined in the Credit Agreement) at or above $6.0 million at any time. The Amendment also changed the financial covenants to require us to maintain at least $6.0 million of Excess Availability at all times or, if greater, up to $11.3 million depending on our borrowing base as determined by eligible past and future commission receivables. In addition, the Amendment also included changes in the payment conditions to, among other things, require us to have at least $10.0 million of liquidity or, if greater, up to $18.8 million depending on our borrowing base as determined by eligible past and future commission receivables, in order for us to make certain permitted acquisitions, investments, distributions and payments of indebtedness. The Amendment also stated the seasonal amount thresholds used in connection with the cash dominion and field examination covenants in the Credit Agreement.

We incurred $1.2 million of issuance costs in connection with the Credit Agreement, which were capitalized as part of Other assets on our Consolidated Balance Sheet in the period we entered into the Credit Agreement. The Amendment did not change the interest rate. In connection with this Amendment, we incurred closing costs totaling $0.5 million, which were capitalized and recorded as Other assets on our Consolidated Balance Sheet as of December 31, 2020. The remaining balance of unamortized issuance costs was $0.7 million and $1.1 million as of December 31, 2020 and 2019, respectively.

As of December 31, 2020, we had 0 outstanding borrowings under our revolving credit facility.

111

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 12 – Income Taxes

The components of our income before provision for income taxes were as follows (in thousands):


	Year Ended December 31,
	2020		2019		2018
United States	$	53,078	$	82,391	$	2,458
Foreign	911		1,108		848
Income before provision for income taxes	$	53,989	$	83,499	$	3,306

The federal and state income tax provision is summarized as follows (in thousands):


	Year Ended December 31,
	2020		2019		2018
Current:
Federal	$	0	$	0	$	5
State	88		75		48
Foreign	(361)		326		213
Total current	(273)		401		266
Deferred:
Federal	7,303		13,594		165
State	1,245		2,635		2,648
Foreign	264		(18)		(14)
Total deferred	8,812		16,211		2,799
Provision for income taxes	$	8,539	$	16,612	$	3,065

In 2020, we had worldwide consolidated income before tax of $54.0 million, and tax expense of $8.5 million, with an annual effective tax rate of 15.8%.

The effective tax rate of our provision for income taxes differs from the federal statutory rate as follows:


	Year Ended December 31,
	2020		2019		2018
Statutory rate	21.0	%	21.0	%	21.0	%
State income taxes, net of federal benefit	2.2		2.6		(7.2)
Stock-based compensation shortfalls (windfalls), net	(7.9)		(7.0)		(29.4)
Non-deductible stock-based compensation	2.2		2.5		21.6
Non-deductible lobbying expenses	0.8		1.0		15.2
Research and development credits	(2.2)		(0.9)		(17.1)
Changes in valuation allowance	0.1		0		72.8

Foreign income tax and income inclusion	(0.7)		0.1		6.8
Non-deductible parking expense	0		0.2		3.1
Other permanent differences	0.3		0.4		5.9
Effective tax rate	15.8	%	19.9	%	92.7	%

112

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, together with operating losses and tax credit carryforwards.

The tax effects of significant items comprising our deferred taxes as of December 31, 2020 and 2019 were as follows (in thousands):


	December 31, 2020		December 31, 2019
Deferred tax assets:
Net operating losses	$	104,860	$	60,023
Accruals and reserves	2,557		4,143
Operating lease liabilities	11,368		9,471
Intangible assets	2,592		6,306
Tax credits	7,805		5,818
Stock-based compensation	4,500		2,835
Fixed assets	111		203
Other	176		187
Total deferred tax assets	133,969		88,986
Valuation allowance	(2,479)		(2,407)
Total deferred tax assets net of valuation allowance	131,490		86,579
Deferred tax liabilities:
Commissions receivable	(193,416)		(141,566)
Right-of-use assets	(10,391)		(8,879)
Total deferred tax liabilities	(203,807)		(150,445)
Net deferred tax liabilities	$	(72,317)	$	(63,866)

Assessing the realizability of our deferred tax assets is dependent upon several factors, including the likelihood and amount, if any, of future taxable income in relevant jurisdictions during the periods in which those temporary differences become deductible. We forecast taxable income by considering all available positive and negative evidence, including our history of operating income and losses and our financial plans and estimates that we use to manage the business. These assumptions require significant judgment about future taxable income. As a result, the amount of deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income change.

The valuation allowance was recorded as a result of increased uncertainty regarding our future taxable income and a lack of sources of other taxable income to realize certain net operating losses and credits prior to expiration. The change in our valuation allowance is summarized as follows (in thousands):


Deferred Tax Assets - Valuation Allowance	Balance at beginning of year		Provision for income taxes		Balance at end of year
Year Ended December 31, 2020	$	2,407	$	72	$	2,479
Year Ended December 31, 2019	2,407		0		2,407
Year Ended December 31, 2018	0		2,407		2,407

113

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The net operating loss and tax credit carryforwards as of December 31, 2020 are summarized as follows (in thousands):


	Amount		Expires
Net operating losses, federal (with expiration)	$	39,194	2034
Net operating losses, federal (without expiration)	381,001		Indefinite
Net operating losses, state	283,700		2021
Tax credits, federal	7,373		2021
Tax credits, state	7,754		n/a

Utilization of the net operating loss carryforwards and credits may be subject to a substantial annual limitation due to ownership changes that may have occurred or that could occur in the future, as required by Section 382 of the Internal Revenue Code and similar state provisions. These ownership change limitations may limit the amount of net operating loss carryforwards and other tax attributes that can be utilized annually to offset future taxable income and tax, respectively.

A reconciliation of the beginning and ending amount of our unrecognized tax benefits is as follows (in thousands):


	Year Ended December 31,
	2020		2019		2018




Beginning balance	$	4,709	$	3,740	$	3,096
Increase based on tax positions related to the prior year	0		0		70
Lapse of statute of limitations	(8)		0		(5)
Additions based on tax positions related to the current year	1,629		969		579
Ending balance	$	6,330	$	4,709	$	3,740

As of December 31, 2020, the total amount of gross unrecognized tax benefits was $6.3 million, of which $5.7 million, if recognized, would affect our effective tax rate. As of December 31, 2019, the total amount of gross unrecognized tax benefits was $4.7 million, of which $4.2 million, if recognized, would affect our effective tax rate.

We record interest and penalties related to unrecognized tax benefits in income tax expense. As of December 31, 2020, the amount accrued for estimated interest related to uncertain tax positions was immaterial. We did not record an accrual for penalties.

Included in the balance of income tax liabilities and accrued interest as of December 31, 2020 is an immaterial amount related to tax positions for which it is reasonably possible that the statute of limitations will expire in various jurisdictions and income tax exams will close within the next twelve months.

We are subject to taxation in various jurisdictions, including federal, state and foreign. Our federal and state income tax returns are generally not subject to examination by taxing authorities for fiscal years before 2001 due to our net operating losses and credits carryforward.

The Coronavirus Aid, Relief and Economic Security (“CARES”) Act was signed into law on March 27, 2020. The business tax provisions of the CARES Act include temporary changes to income based tax laws, including the ability to utilize net operating losses, interest expense deductions, alternative minimum tax credit refunds, charitable contributions, and depreciation of qualified improvement property. The income tax provisions of

114

EHEALTH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

the CARES Act did not have a material impact on our Consolidated Financial Statements for the year ended December 31, 2020.

Note 1013 – Subsequent ~~Events~~Event

~~GoMedigap Acquisition~~

On January 22, 2018, we completed our acquisition of all outstanding membership interests of Wealth, Health and Life Advisors, LLC, more commonly known as GoMedigap, a technology-enabled provider of Medicare Supplement enrollment services. The acquisition price primarily consisted of cash of $15.0 million, less $0.1 million cash acquired, and approximately 294,637 shares of our common stock. In addition, we are obligated to pay an additional $20 million in cash and 589,275 shares of our common stock, subject to the terms of the acquisition agreement and upon final determination of the achievement of certain milestones in 2018 and 2019.

~~Restructuring Activities~~

On February ~~25, 2018, our Board~~17, 2021,we entered into an investment agreement with an affiliate of ~~Directors approved a plan~~H.I.G. Capital (together with its affiliated funds, “H.I.G.”), pursuant to ~~close our sales call center in Massachusetts~~which we have agreed to issue and sell to ~~terminate the employment~~affiliated entities of other employees in other locations. As part of this plan, we expect to eliminate approximately 110 full-time positions, representing approximately 10% of our workforce, primarily within customer care and enrollment. We expect to incur approximately $2.0 million to $2.4 million for employee termination benefits and related costs as well as approximately $0.3 million to $0.5 million in contract termination and other restructuring charges. Substantially allH.I.G., 2,250,000 shares of the ~~restructuring charges are expected to result in cash expenditures. These restructuring charges are expected to be recorded in the first half~~Company’s newly designated Series A preferred stock for an aggregate purchase price of ~~2018, when the activities comprising the plan are expected to be substantially completed.~~$225.0 million.

115


~~ITEM 9.~~	~~CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE~~

ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Our Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures ~~pursuant to~~as defined in Rules ~~13a-15(f)~~13a-15(e) and ~~15d-15(f)~~15d-15(e) under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this Annual Report on Form 10-K.

Based on management’s evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, ~~2017~~2020 based on the guidelines established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Our internal control over financial reporting includes policies and procedures that provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles.

Based on the results of our evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, ~~2017.~~2020. We reviewed the results of management’s assessment with our Audit Committee.

Ernst & Young LLP, our independent registered public accounting firm, has issued a report on the Company’s internal control over financial reporting as of December 31, ~~2017,~~2020, which is presented below.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the three months ended December 31, ~~2017~~2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management, including our chief executive officer and chief financial officer, believes that our disclosure controls and our internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, our management does not expect that our disclosure controls or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

117

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of eHealth, Inc.

Opinion on Internal Control over Financial Reporting

We have audited eHealth, Inc.’s internal control over financial reporting as of December 31, ~~2017,~~2020, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, eHealth, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, ~~2017,~~2020, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2020 consolidated ~~balance sheets~~financial statements of the Company as of December 31, 2017 and 2016, the related consolidated statements of comprehensive loss, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2017, and the related notes and our report dated ~~March 16, 2018~~February 26, 2021 expressed an unqualified opinion thereon.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.



/s/ Ernst & Young LLP
Redwood City, California
~~March 16, 2018~~February 26, 2021


~~ITEM 9B.~~	~~OTHER INFORMATION~~

ITEM 9B.OTHER INFORMATION

None.

PART III


~~ITEM 10.~~	~~DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE~~

ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information concerning our directors, executive officers, compliance with Section 16(a) of the Securities Exchange Act of 1934, as amended, and corporate governance required by this Item 10 of Form 10-K is incorporated by reference from the information contained in the Definitive Proxy Statement for the Annual Meeting of Stockholders, which is expected to be filed within 120 days after our fiscal year ended December 31, ~~2017.~~2020.

We have adopted a code of ethics that applies to all employees, including our principal executive officer, Scott Flanders, principal financial officer, ~~David Francis,~~Derek Yung, principal accounting officer, John Pierantoni. and all other executive officers. The code of ethics is available on the ~~about us/investor relations/corporate~~ governance page of our website at ~~www.eHealth.com~~ir.ehealthinsurance.com. A copy may also be obtained without charge by contacting investor relations, attention Vice President of Investor Relations, ~~440 East Middlefield Road, Mountain View,~~2625 Augustine Drive, Second Floor, Santa Clara, CA, ~~94043~~95054 or by calling (650) ~~210-3111.~~584-2700.

We plan to post on our website at the address described above any future amendments or waivers of our Code of Conduct.

ITEM 11. EXECUTIVE COMPENSATION

The information required by Item 11 of Form 10-K is incorporated herein by reference from the information contained in the Definitive Proxy Statement for the Annual Meeting of Stockholders, which is expected to be filed within 120 days after our fiscal year ended December 31, ~~2017.~~2020.


~~ITEM 12.~~	~~SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS~~

ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by Item 12 of Form 10-K is incorporated herein by reference from the information contained in the Definitive Proxy Statement for the Annual Meeting of Stockholders, which is expected to be filed within 120 days after our fiscal year ended December 31, ~~2017.~~2020.


~~ITEM 13.~~	~~CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE~~

ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by Item 13 of Form 10-K is incorporated herein by reference from the information contained in the Definitive Proxy Statement for the Annual Meeting of Stockholders, which is expected to be filed within 120 days after our fiscal year ended December 31, ~~2017.~~2020.


~~ITEM 14.~~	~~PRINCIPAL ACCOUNTANT FEES AND SERVICES~~

ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by Item 14 of Form 10-K is incorporated herein by reference from the information contained in the Definitive Proxy Statement for the Annual Meeting of Stockholders, which is expected to be filed within 120 days after our fiscal year ended December 31, ~~2017.~~2020.

119

PART IV


~~ITEM 15.~~	~~EXHIBITS AND FINANCIAL STATEMENT SCHEDULES~~

ITEM 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) We have filed the following documents as part of this Annual Report on Form 10-K:

1. Consolidated Financial Statements

Information in response to this Item is included in Item 8 of Part II of this Annual Report on Form 10-K.

2. Financial Statement Schedules

All schedules are omitted because they are not applicable, not required or because the required information is included in the consolidated financial statements or notes thereto.

3. Exhibits

See Item 15(b) below.

(b)Exhibits— – We have filed, or incorporated into this Annual Report on Form 10-K by reference, the exhibits listed on the accompanying Index to Exhibits of this Annual Report on Form 10‑K.

(c)Financial Statement Schedule— – See Item 15(a) above.


~~ITEM 16.~~	~~FORM 10-K SUMMARY~~

ITEM 16.FORM 10-K SUMMARY

None.

120

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

~~March 16, 2018~~

February 26, 2021

eHealth, Inc.



/s/ SCOTT N. FLANDERS						/s/ ~~DAVID K. FRANCIS~~DEREK N. YUNG
Scott N. Flanders Chief Executive Officer						~~David K. Francis~~Derek N. Yung Chief Financial Officer



		~~/s/ JAY W. JENNINGS~~
		~~Jay W. Jennings~~ ~~Principal Accounting Officer~~

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on ~~March 16, 2018.~~

February 26, 2021.



~~Signature~~		~~Title~~

~~/s/ SCOTT N. FLANDERS~~		~~Chief Executive Officer (Principal Executive Officer) and Director~~
~~Scott N. Flanders~~

~~/s/ DAVID K. FRANCIS~~		~~Chief Financial Officer (Principal Financial Officer)~~
~~David K. Francis~~

~~/s/ JAY W. JENNINGS~~		~~Senior Vice President of Finance (Principal Accounting Officer)~~
~~Jay W. Jennings~~

~~/s/ ELLEN O. TAUSCHER~~		~~Chair of Board of Directors~~
~~Ellen O. Tauscher~~

~~/s/ MICHAEL D. GOLDBERG~~		~~Director~~
~~Michael D. Goldberg~~

~~/s/ RANDALL S. LIVINGSTON~~		~~Director~~
~~Randall S. Livingston~~

~~/s/ JACK L. OLIVER III~~		~~Director~~
~~Jack L. Oliver III~~

~~EXHIBIT INDEX~~



Signature						Title

/s/ SCOTT N. FLANDERS						Chief Executive Officer (Principal Executive Officer) and Director
Scott N. Flanders

/s/ DEREK N. YUNG						Chief Financial Officer
Derek N. Yung						(Principal Financial Officer)

/s/ JOHN PIERANTONI						Chief Accounting Officer
John Pierantoni						(Principal Accounting Officer)

/s/ ANDREA BRIMMER						Director
Andrea Brimmer

/s/ BETH A. BROOKE						Director
Beth A. Brooke

/s/ MICHAEL D. GOLDBERG						Director
Michael D. Goldberg

/s/ RANDALL S. LIVINGSTON						Director
Randall S. Livingston

/s/ JACK L. OLIVER III						Director
Jack L. Oliver III

/s/ DALE B. WOLF						Director
Dale B. Wolf

121

EXHIBIT INDEX

Exhibit
Number

Incorporation by Reference Herein

~~Exhibit~~

~~Number~~

Description of Exhibit

Form

Date

~~3.1~~2.1

Purchase Agreement dated January 16, 2018 by and among eHealth, Inc., Wealth, Health and Life Advisors, LLC (d/b/a GoMedigap), WHL Advisors, Inc., Qavah Ventures, LLC, Richard Cantu, Kevin Walbrick, and Kevin Walbrick as the exclusive member representative thereunder

Current Report on Form 8-K
(File No. 001-33071)

January 16, 2018

3.1

Amended and Restated Certificate of Incorporation of the Registrant

Registration Statement on

Form S-l, as amended

(File No. 333-133526)

April 25, 2006

3.2

Amended and Restated Bylaws of the Registrant

Current Report on Form 8‑K (File No. 001-33071)

November 17, 2008

4.1

Form of the Registrant’s Common Stock Certificate

Registration Statement on

Form S-l, as amended

(File No. 333-133526)

June 28, 2006

10.1*4.2

Description of Capital Stock

Annual Report on Form 10-K
(File No. 001-33071)

March 2, 2020

10.1*

Form of Indemnification Agreement entered into between the Registrant and its directors and officers

Registration Statement on

Form S-l, as amended

(File No. 333-133526)

April 25, 2006

10.2*

†

Form of Indemnification Agreement adopted in 2021

10.3*

Employment Agreement, dated May 31, 2016, between Scott N. Flanders and eHealth, Inc.

Quarterly Report on Form 10-Q

(File No. 001-33071)

August 8, 2016

10.3*10.4*

Employment Agreement, dated July 11, 2016, between David Francis and eHealth, Inc.

Quarterly Report on Form 10-Q

(File No. 001-33071)

August 8, 2016

10.4*10.5*

~~Form of Severance Letter with Robert Hurley~~

~~Quarterly Report on Form 10-Q~~

~~(File No. 001-33071)~~

~~August 8, 2016~~

10.5*

Letter Agreement, dated November 17, 2005, between Jack L. Oliver III and ~~the Registrant~~ eHealth, Inc.

Registration Statement on

Form S-l, as amended
(File No. 333-133526)

April 25, 2006

10.6*

Employment Agreement, dated June 4, 2018, between Derek Yung and eHealth, Inc.

Quarterly Report on Form 10-Q
(File No. 001-33071)

August 7, 2018

10.7*

Employment Agreement, dated as of February 20, 2020, between eHealthInsurance Services, Inc. and Robert Hurley.

Current Report on Form 8-K
(File No. 001-33071)

February 21, 2020

10.8*

†

Severance Agreement, dated as of February 10, 2021 , between Timothy Hannan and eHealth, Inc.

10.9

Investment Agreement, dated as of February 17, 2021, by and between eHealth, Inc. and Echelon Health SPV, LP

Current Report on Form 8-K (File No. ~~333-133526)~~001-33071)

~~April 25, 2006~~February 18, 2021

10.6*10.10

~~Separation~~Credit Agreement, dated September 17, 2018, by and ~~Release~~among eHealth, Inc., eHealthInsurance Services, Inc., Wealth, Health and ~~Consulting~~Life Advisors, LLC, PlanPrescriber, Inc., Royal Bank of Canada and other lenders identified therein

Current Report on Form 8-K
(File No. 001-33071)

September 19, 2018

10.10.1

Amendment No. 1 to Credit Agreement, dated October 16, 2018, by and among eHealth, Inc., eHealthInsurance Services, Inc., Wealth, Health and Life Advisors, LLC, PlanPrescriber, Inc., Royal Bank of Canada and other lenders identified therein

Quarterly Report on Form 10-Q
(File No. 001-33071)

August 8, 2019

10.10.2

Amendment No. 2 to Credit Agreement, dated July 2, 2019, by and among eHealth, Inc., eHealthInsurance Services, Inc., Wealth, Health and Life Advisors, LLC, PlanPrescriber, Inc., Royal Bank of Canada and other lenders identified therein

Quarterly Report on Form 10-Q
(File No. 001-33071)

August 8, 2019

10.10.3

Amendment No. 3 to Credit Agreement, dated December 20, 2019, by and among eHealth, Inc., eHealthInsurance Services, Inc., Wealth, Health and Life Advisors, LLC, PlanPrescriber, Inc., Royal Bank of Canada and other lenders identified therein

Current Report on Form 8-K
(File No. 001-33071)

December 26, 2019

10.11

Security Agreement, dated September 17, 2018, by and among eHealth, Inc., eHealthInsurance Services, Inc., PlanPrescriber, Inc., Wealth, Health and Life Advisors, LLC, and Royal Bank of Canada

Current Report on Form 8-K
(File No. 001-33071)

September 19, 2018

10.12

Guaranty, dated September 17, 2018, by and between PlanPrescriber, Inc. and Royal Bank of Canada

Current Report on Form 8-K
(File No. 001-33071)

September 19, 2018

10.13

Lease Agreement, dated March ~~31, 2017,~~29, 2018, between ~~Tom Tsao~~Ascentris-116b, LLC and eHealth, Inc.

Current Report on Form 8-K
(File No. 001-33071)

April 2, 2018

10.14

Lease Agreement, dated April 25, 2018, between Augustine Bowers LLC and eHealthInsurance Services, Inc.

~~Quarterly~~Current Report on Form ~~10-Q~~

8-K
(File No. 001-33071)

~~May 5, 2017~~April 30, 2018

~~10.7~~10.14.1

First Amendment to Lease, dated August 19, 2019, between Augustine Bowers LLC and eHealthInsurance Services, Inc.

Current Report on Form 8-K (File No. 001-33071)

August 21, 2019

122

10.15

Lease Agreement, dated May 2004, between eHealthInsurance Services, Inc. and Brian Avery, Trustee of the 1983 Avery Investments Trust, as amended

Registration Statement on

Form S-l, as amended

~~(File~~ (File No. 333-133526)

April 25, 2006

~~10.7.1~~10.15.1

First Amendment to Lease Agreement, effective as of May 15, 2009, between eHealthInsurance Services, Inc. and Brian Avery, Trustee of the 1983 Avery Investments Trust

Current Report on Form 8‑K

(File No. 001-33071)

May 21, 2009

~~10.7.2~~10.15.2

Second Amendment to Lease Agreement, effective as of August 5, 2010 between eHealth Insurance Services, Inc. and Brian Avery, Trustee of the 1983 Avery Investments Trust

Current Report on Form 8‑K

(File No. 001-33071)

August 18, 2010

~~10.7.3~~10.15.3

Third Amendment to Lease Agreement, effective as of July 8, 2011, between eHealthInsurance Services, Inc. and Brian Avery, Trustee of the 1983 Avery Generations Trust

Current Report on Form 8-K

(File No. 001-33071)

July 12, 2011

~~10.8~~10.15.4

Fourth Amendment to Lease Agreement, effective as of July 13, 2018, between eHealthInsurance Services, Inc. and Brian Avery, Trustee of the 1983 Avery Investments Trust

Quarterly Report on Form 10-Q
(File No. 001-33071)

November 6, 2018

10.16

Standard Lease Agreement, dated June 10, 2004, between eHealthInsurance Services, Inc. and Gold Pointe E LLC, as amended

Registration Statement on

Form S-l, as amended

(File No. 333-133526)

April 25, 2006

~~10.8.1~~10.16.1

Fourth Amendment to Standard Lease Agreement (Office), effective as of November 6, 2007, between eHealthInsurance Services, Inc. and Carlsen Investments, LLC

Current Report on Form 8-K

(File No. 001-33071)

November 7, 2007

~~10.8.2~~10.16.2

Sixth Amendment to Lease and Acknowledgment to Standard Lease Agreement, dated August 29, 2012, between Carlsen Investments, LLC and eHealthInsurance Services, Inc.

Current Report on Form 8-K

(File No. 001-33071)

August 31, 2012

~~10.8.3~~10.16.3

Seventh Amendment to Lease and Acknowledgment to Standard Lease Agreement, dated August 6, 2014, between Carlsen Investments, LLC and eHealthInsurance Services, Inc.

Quarterly Report on Form 10-Q

(File No. 001-33071)

August 8, 2014

10.16.4

~~10.8.4~~

Eighth Amendment to Standard Lease Agreement (Officer) and Partial Termination of Lease dated June 23, 2016 between Carlsen Investments, LLC and eHealthInsurance Services, Inc.

Current Report on Form 8-K

(File No. 001-33071)

June 28, 2016

~~10.8.5~~10.16.5

Ninth Amendment to Lease and Acknowledgment to Standard Lease Agreement (Office) dated August 17, 2016 between Carlsen Investments, LLC and eHealthInsurance Services, Inc.

Current Report on Form 8-K

(File No. 001-33071)

August 22, 2016

~~10.9~~10.16.6

~~Office~~Tenth Amendment to Lease ~~Contract, dated March 31, 2006, among Xiamen Torch Hi-tech Industrial Development Zone Finance~~and Acknowledgment to Standard Lease Agreement (Office) between Carlsen Investments, LLC and eHealthInsurance Services, Center, Xiamen Software Industry Investment & Development Co., Ltd. and eHealth China (Xiamen) Technology Co., Ltd.; Appendix 1 to Office Lease Contract; and Property Management Service Contract, dated April 4, 2006, between Xiamen Software Industry Investment & Development Co., Ltd. and eHealth China (Xiamen) Technology Co., Ltd.Inc.

~~Registration Statement on~~

~~Form S-l, as amended~~

~~(File No. 333-133526)~~

~~April 25, 2006~~

~~10.9.1~~

Appendix 3 to Office Lease Contract, dated November 25, 2007, among Xiamen Torch Hi-tech Industrial Development Zone Finance Services Center, Xiamen Software Industry Investment & Development Co., Ltd. and eHealth China (Xiamen) Technology Co., Ltd.

~~Annual~~Current Report on Form ~~10-K~~

8-K
(File No. 001-33071)

~~March 17, 2008~~April 12, 2019

~~10.9.2~~10.16.7

Eleventh Amendment ~~Two~~ to ~~Property Management Service Contract, effective January 16, 2008,~~Lease and Acknowledgment to Standard Lease Agreement (Office) between ~~Xiamen Software Industry Investment & Development Co., Ltd.~~Carlsen Investments, LLC and ~~eHealth China (Xiamen) Technology Co., Ltd.~~eHealthInsurance Services, Inc.

~~Annual~~Current Report on Form ~~10-K~~

8-K
(File No. 001-33071)

~~March 17, 2008~~February 4, 2020

~~10.9.3~~10.16.8

~~Appendix 4~~Twelfth Amendment to ~~Office~~ Lease ~~Contract,~~and Acknowledgment to Standard Lease Agreement (Office), dated ~~March 27, 2008, among Xiamen Torch Hi-tech Industrial Development Zone Finance~~August 28, 2020, between Carlsen Investments, LLC and eHealthInsurance Services, ~~Center, Xiamen Software Industry Investment & Development Co., Ltd. and eHealth China (Xiamen) Technology Co., Ltd.~~Inc.

Quarterly Report on Form 10-Q

(File No. 001-33071)

~~May 12, 2008~~November 5, 2020

~~10.9.4~~10.17

Appendix 5 to Office Lease Contract, dated May 19, 2009, among Xiamen Torch Hi-tech Industrial Development Zone Finance Services Center, Xiamen Software Industry Investment & Development Co., Ltd. and eHealth China (Xiamen) Technology Co., Ltd.

~~Current Report on Form 8‑K~~

~~(File No. 001-33071)~~

~~May 21, 2009~~

~~10.9.5~~

Office Lease Contract, dated September 23, 2009, among Xiamen Torch Hi-tech Industrial Development Zone Finance Services Center, Xiamen Software Industry Investment & Development Co., Ltd. and eHealth China (Xiamen) Technology Co., Ltd.

~~Quarterly Report on Form 10-Q~~

~~(File No. 001-33071)~~

~~November 9, 2009~~

~~10.9.6~~

~~Property Management Service Contract, effective September 24, 2009, between Xiamen Software Industry Investment & Development Co., Ltd. and eHealth China (Xiamen) Technology Co., Ltd.~~

~~Quarterly Report on Form 10-Q~~

~~(File No. 001-33071)~~

~~November 9, 2009~~

~~10.9.7~~

~~Supplemental Agreement,~~ effective as of ~~April~~September 1, ~~2013,~~2019, between eHealth China (Xiamen) Technology Co., ~~Ltd.~~Ltd and Xiamen Software Industry Investment & Development Co., Ltd.

Current Report on Form 8-K

~~(File~~ (File No. 001-33071)

~~May 15, 2013~~September 6, 2019

~~10.9.8~~10.17.1

~~Supplemental Agreement,~~Property Management Service Contract, effective as of September ~~9, 2013,~~1, 2019, between eHealth China (Xiamen) Technology Co., ~~Ltd.~~Ltd and Xiamen Software Industry Investment & Development Co., Ltd.

~~Quarterly~~Current Report on Form ~~10-Q~~

~~(File~~8-K (File No. 001-33071)

~~August 8, 2014~~September 6, 2019

~~10.9.9~~10.17.2

~~Supplemental Agreement,~~Office Lease Contract, effective as of September ~~1, 2014,~~15, 2019, between eHealth China (Xiamen) Technology Co., ~~Ltd.~~Ltd and Xiamen Software Industry Investment & Development Co., Ltd.

Current Report on Form 8-K

~~(File~~ (File No. 001-33071)

September ~~22, 2014~~6, 2019

~~10.9.10~~10.17.3

~~Supplemental Agreement,~~Property Management Service Contract, effective as of September 15, ~~2014,~~2019, between eHealth China (Xiamen) Technology Co., ~~Ltd.~~Ltd and Xiamen Software Industry Investment & Development Co., Ltd.

Current Report on Form 8-K

~~(File~~ (File No. 001-33071)

September ~~22, 2014~~

6, 2019

10.18

~~10.9.11~~

~~Supplemental Agreement, effective as of September 1, 2015, between eHealth China (Xiamen) Technology Co., Ltd. and Xiamen Software Industry Investment & Development Co., Ltd.~~

~~Quarterly Report on Form 10-Q~~

~~(File No. 001-33071)~~

~~August 7, 2015~~

~~10.10~~

Lease Agreement, dated March 23, 2012, between 340 Middlefield, LLC and eHealth, Inc.

Current Report on Form 8-K (File No. 001-33071)

March 27, 2012

~~10.10.1~~10.18.1

First Amendment to Lease Agreement, effective as of May 28, 2013, between 340 Middlefield, LLC and eHealth, Inc.

Current Report on Form 8-K (File No. 001-33071)

May 29, 2013

~~10.11~~10.18.2

Sublease, dated November 2, 2018, between JJ Lake Corporation and eHealth, Inc.

Current Report on Form 8-K (File No. 001-33071)

November 30, 2018

10.18.3

Consent to Sublease, dated November 27, 2018, by and among 340 Middlefield, LLC, JJ Lake Corporation and eHealth, Inc.

Current Report on Form 8-K (File No. 001-33071)

November 30, 2018

10.19

Office Lease, dated May 7, 2012, between Lake Pointe Three, LC, and eHealthInsurance Services, Inc.

Quarterly Report on Form 10-Q (File No. 001-33071)

August 9, 2012

123

~~10.11.1~~10.19.1

Subordination, Non-Disturbance and Attornment Agreement dated as September 14, 2016 by and among Deutsche Bank, AG, SLC Lake Pointe Equities LLC and eHealthInsurance Services, Inc.

Quarterly Report on Form 10-Q

(File No. 001-33071)

November 8, 2016

~~10.11.2~~10.19.2

Amendment No. 1 to Lease, dated August 17, 2017, between SLC Lake Pointe SPE LLC and eHealthInsurance Services, Inc.

Current Report on Form 8-K

(File No. 001-33071)

August 22, 2017

~~10.11.3~~10.19.3

†

Amendment No. 2 to Lease, dated December 12, 2017, between SLC Lake Pointe SPE LLC and eHealthInsurance Services, Inc.

10.12*

~~Executive Bonus Plan~~

~~Quarterly Report on Form 10-Q~~

~~(File No. 001-33071)~~

~~November 7, 2017~~

10.13*

~~Executive Bonus Plan 2017~~

~~Quarterly Report on Form 10-Q~~

~~(File No. 001-33071)~~

~~May 5, 2017~~

10.14*

~~eHealth, Inc. Performance Bonus Plan~~

~~Definitive Proxy Statement on Schedule 14A (File No. 001-33071)~~

~~April 28, 2014~~

10.15*

~~2006 Equity Incentive Plan of the Registrant, as amended and restated June 15, 2010~~

~~Current Report on Form 8‑K (File No. 001-33071)~~

~~June 21, 2010~~

10.15.1*

~~Form of Notice of Stock Option Grant and Stock Option Agreement under the 2006 Equity Incentive Plan of the Registrant~~

Annual Report on Form 10-K (File No. 001-33071)

March ~~21, 2007~~19, 2018

10.15.2*10.19.4

~~Form of Notice of Stock Option Grant~~Amendment No. 3 to Lease, dated March 20, 2019, between SLC Lake Pointe SPE LLC and ~~Stock Option Agreement (Initial Director Grant) under the 2006 Equity Incentive Plan of the Registrant~~eHealthInsurance Services, Inc.

~~Annual~~Current Report on Form ~~10-K (File~~8-K
(File No. 001-33071)

March ~~21, 2007~~26, 2019

10.15.3*10.19.5

~~Form of Notice of Stock Option Grant~~Amendment No. 4 to Lease, dated November 19, 2019, between SLC Lake Pointe SPE LLC and ~~Stock Option Agreement (Annual Director Grant) under the 2006 Equity Incentive Plan of the Registrant~~eHealthInsurance Services, Inc.

~~Annual~~Current Report on Form ~~10-K (File~~8-K
(File No. 001-33071)

~~March 21, 2007~~November 19, 2019

10.15.4*10.20

~~Form of Notice of Stock Unit Grant~~Sublease Agreement, dated June 3, 2019, between Home Point Financial Corporation and ~~Stock Unit Agreement under the 2006 Equity Incentive Plan of the Registrant~~eHealthInsurance Services, Inc.

~~Annual~~Current Report on Form ~~10-K (File~~8-K
(File No. 001-33071)

~~March 21, 2007~~June 7, 2019

10.15.5*10.20.1

~~Form of Notice of Initial Outside Director Stock Unit Grant Under the 2006 Equity Incentive Plan of the Registrant~~Office Lease, dated June 3, 2019, between Precedent Lakeside Acquisitions, LLC and eHealthInsurance Services, Inc.

~~Annual~~Current Report on Form ~~10-K (File~~8-K
(File No. 001-33071)

~~March 13, 2009~~June 7, 2019

10.15.6*10.20.2

~~Form of Notice of Annual Outside Director Stock Unit Grant Under the 2006 Equity Incentive Plan of the Registrant~~Consent to Sublease, dated June 3, 2019, between Home Point Financial Corporation, eHealthInsurance Services, Inc. and Precedent Lakeside Acquisitions, LLC.

~~Annual~~Current Report on Form ~~10-K (File~~8-K
(File No. 001-33071)

~~March 13, 2009~~June 7, 2019

10.15.7*10.21*

~~Form of Outside Director Stock Unit Agreement~~Executive Bonus Plan

~~Annual Report on Form 10-K (File No. 001-33071)~~

~~March 13, 2009~~

10.15.8*

~~Form of Notice of Stock Unit Grant and Stock Unit Agreement (Performance-Based Vesting) under the 2006 Equity Incentive Plan of the Registrant~~

Quarterly Report on Form 10-Q ~~(File~~
(File No. 001-33071)

~~May 6, 2011~~November 7, 2017

10.15.9*10.22*

~~Form of Notice of Stock Unit Grant~~Amended and ~~Stock Unit Agreement (Performance-Based Vesting) under the 2006 Equity Incentive Plan of the Registrant~~

~~Quarterly Report on Form 10-Q (File No. 001-33071)~~

~~May 7, 2013~~

10.16*

Restated 2014 Equity Incentive Plan ~~of the Registrant~~

~~Definitive Proxy Statement~~Current Report on

~~Schedule 14A (File~~ Form 8-K
(File No. 001-33071)

~~April 28, 2014~~June 14, 2019

10.16.1*10.22.1*

Form of Notice of Stock Option Grant and Stock Option Agreement under the 2014 Equity Incentive Plan of the Registrant

Registration Statement on

Form S-8 (File No. 333-196675)

June 11, 2014

10.22.2*

10.16.2*

Form of Notice of Stock Unit Grant and Stock Unit Agreement under the 2014 Equity Incentive Plan of the Registrant

Registration Statement on

Form S-8 (File No. 333-196675)

June 11, 2014

10.16.3*10.22.3*

Form of Notice of Stock Unit Grant and Stock Unit Agreement (Initial Director Grant) under the 2014 Equity Incentive Plan of the Registrant

Registration Statement on

Form S-8 (File No. 333-196675)

June 11, 2014

10.16.4*10.22.4*

Form of Notice of Stock Unit Grant and Stock Unit Agreement (Annual Director Grant) under the 2014 Equity Incentive Plan of the Registrant

Registration Statement on

Form S-8 (File No. 333-196675)

June 11, 2014

~~10.16.5~~10.22.5

Form of Notice of Stock Option Grant and Stock Option Agreement (People’s Republic of China) under the 2014 Equity Incentive Plan of the Registrant

Registration Statement on

Form S-8 (File No. 333-196675)

June 11, 2014

~~10.16.6~~10.22.6

Form of Notice of Stock Unit Grant and Stock Unit Agreement (People’s Republic of China) under the 2014 Equity Incentive Plan of the Registrant

Registration Statement on

Form S-8 (File No. 333-196675)

June 11, 2014

10.16.7*10.22.7*

Form of Notice of Stock Unit Grant and Stock Unit Agreement (Performance-Based Vesting) under the 2014 Equity Incentive Plan of the Registration

Current Report on Form 8-K

(File No. 001-33071)

March 23, 2015

10.16.8*10.22.8*

Form of Notice of Stock Option Grant and Stock Option Agreement (Performance-Based Vesting) under the 2014 Equity Incentive Plan of eHealth, Inc.

Quarterly Report on Form 10-Q

(File No. 001-33071)

August 8, 2016

10.16.9*10.22.9*

Form of Notice of Stock Unit Grant and Stock Unit Agreement (Performance-Based Vesting) under the 2014 Equity Incentive Plan of eHealth, Inc.

Quarterly Report on Form 10-Q

(File No. 001-33071)

August 8, 2016

10.16.10*10.23*

~~Notice of Stock Option Grant and Stock Option Agreement (Performance-Based Vesting) granted to Scott N. Flanders on June 3, 2016~~

~~Quarterly Report on Form 10-Q~~

~~(File No. 001-33071)~~

~~August 8, 2016~~

10.16.11*

~~Notice of Stock Unit Grant and Stock Unit Agreement (Performance-Based Vesting) granted to Scott N. Flanders on June 3, 2016~~

~~Quarterly Report on Form 10-Q~~

~~(File No. 001-33071)~~

~~August 8, 2016~~

10.19*

Form of Deferral Election Form for Newly Eligible Individual with Existing Awards

Quarterly Report on Form 10-Q

(File No. 001-33071)

November 6, 2015

10.19.1*10.23.1*

Form of Deferral Election Form for Eligible Individual for Award to be Granted in the Next Calendar Year

Quarterly Report on Form 10-Q

(File No. 001-33071)

November 6, 2015

~~21.1~~10.24*

†

2020 Employee Stock Purchase Plan

Current Report on Form 8-K (File No. 001-33071)

June 15, 2020

21.1

List of Subsidiaries

Annual Report on Form 10-K (File No. 001-33071)

March 19, 2018

23.1

†

Consent of Independent Registered Public Accounting Firm

31.1

†

Certification of Scott N. Flanders, Chief Executive Officer of eHealth, Inc., pursuant to Exchange Act Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002.~~2002

31.2

†

Certification of ~~David K. Francis,~~Derek N. Yung, Chief Financial Officer of eHealth, Inc., pursuant to Exchange Act Rule 13a‑14(a) and 15d‑14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

‡

Certification of Scott N. Flanders, Chief Executive Officer of eHealth, Inc., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

124

32.2

‡

Certification of ~~David F. Francis,~~Derek N. Yung, Chief Financial Officer of eHealth, Inc., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS

†

Inline XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH

†

Inline XBRL Taxonomy Extension Schema Document

101.CAL

†

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

†

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

†

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

†

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

The cover page from the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, formatted in Inline XBRL and contained in Exhibit 101

† Filed herewith.

‡ Furnished herewith.

* Indicates a management contract or compensatory plan or arrangement.

~~113~~

125



Delaware						56-2357876
(State or other jurisdiction of incorporation or organization)						~~56-2357876~~ (I.R.S Employer Identification No)



Title of ~~Each Class~~each class		Trading Symbol	Name of ~~Each Exchange~~each exchange on ~~Which Registered~~which registered
Common Stock, par value $0.001 per share		EHTH	The ~~NASDAQ~~Nasdaq Stock Market LLC
	~~(NASDAQ Global Select Market)~~


					PAGE
Summary of Risk Factors					2
Forward-Looking Statements					3
PART I
Item 1.			Business		4
Item 1A.			Risk Factors		15
Item 1B.			Unresolved Staff Comments		41
Item 2.			Properties		41
Item 3.			Legal Proceedings		42
Item 4.			Mine Safety Disclosures		42

							PART I	~~PAGE~~II
Item 1.			~~Business~~5.	4
~~Item 1A.~~	~~Risk Factors~~	14
~~Item 1B.~~	~~Unresolved Staff Comments~~	42
~~Item 2.~~	~~Properties~~	42
~~Item 3.~~	~~Legal Proceedings~~	42
~~Item 4.~~	~~Mine Safety Disclosures~~	43
	~~PART II~~
~~Item 5.~~	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	43
Item 6.			Selected Consolidated Financial Data		4544
Item 7.			Management’s Discussion and Analysis of Financial Condition and Results of Operations		4745
Item 7A.			Quantitative and Qualitative Disclosures About Market Risk		7072
Item 8.			Financial Statements and Supplementary Data		7274
Item 9.			Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		~~102~~116
Item 9A.			Controls and Procedures		~~103~~116
Item 9B.			Other Information		~~106~~119
			~~PART III~~
PART III
Item 10.			Directors, Executive Officers and Corporate Governance		~~107~~119
Item 11.			Executive Compensation		~~107~~119
Item 12.			Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		~~107~~119
Item 13.			Certain Relationships and Related Transactions, and Director Independence		~~107~~119
Item 14.			Principal Accountant Fees and Services		~~107~~119

PART IV
Item 15.			Exhibits and Financial Statement Schedules		~~108~~120
Item 16.			Form 10-K Summary		~~108~~120
					Signatures	~~109~~121
					Exhibit Index	~~110~~122



	High		Low
First Quarter 2017	$	12.75	$	10.33
Second Quarter 2017	$	19.53	$	10.41
Third Quarter 2017	$	25.65	$	14.63
Fourth Quarter 2017	$	28.59	$	17.17
Year 2017	$	28.59	$	10.33
	High		Low
First Quarter 2016	$	10.96	$	8.14
Second Quarter 2016	$	15.14	$	8.45
Third Quarter 2016	$	14.39	$	8.98
Fourth Quarter 2016	$	11.61	$	6.38
Year 2016	$	15.14	$	6.38


	12/31/2015		12/31/2016		12/31/2017		12/31/2018		12/31/2019		12/31/2020
eHealth, Inc.	$	100.00	$	106.71	$	174.05	$	384.97	$	962.73	$	707.52
Nasdaq Composite	$	100.00	$	108.87	$	141.13	$	137.12	$	187.44	$	271.64
RDG Internet Composite	$	100.00	$	104.75	$	157.67	$	156.03	$	207.10	$	318.18


~~ITEM 5.~~	~~MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES~~



	12/31/2012		12/31/2013		12/31/2014		12/31/2015		12/31/2016		12/31/2017
eHealth, Inc.	$	100.00	$	103.31	$	97.82	$	74.26	$	105.57	$	76.01
NADAQ Composite	$	100.00	$	130.61	$	147.52	$	146.84	$	178.69	$	235.59
RDG Internet Composite	$	100.00	$	163.02	$	158.81	$	224.05	$	235.33	$	338.52



Consolidated Statements of Operations Data (in thousands, except per share amounts):	Year Ended December 31,
	2013			2014			2015			2016			2017
Revenue:
Commission	$	153,383		$	158,626		$	171,257		$	170,850		$	158,424
Other	25,797			21,051			18,284			16,110			13,931
Total revenue	179,180			179,677			189,541			186,960			172,355
Operating costs and expenses:
Cost of revenue	5,461			4,494			4,178			3,176			2,273
Marketing and advertising ⁽¹⁾	71,660			69,732			75,571			72,213			65,874
Customer care and enrollment ⁽¹⁾	35,099			42,745			42,540			47,930			59,183
Technology and content ⁽¹⁾	32,579			40,390			36,351			32,749			32,889
General and administrative ⁽¹⁾	29,235			27,549			30,858			36,004			39,969
Acquisition costs	—			—			—			—			621
Restructuring ⁽¹⁾	—			—			4,541			(297		)	—
Amortization of intangible assets	1,414			1,529			1,153			1,040			1,040
Total operating costs and expenses	175,448			186,439			195,192			192,815			201,849
Income (loss) from operations	3,732			(6,762		)	(5,651		)	(5,855		)	(29,494		)
Other income (expense), net	(92		)	(98		)	45			102			327
Income (loss) before provision (benefit) for income taxes	3,640			(6,860		)	(5,606		)	(5,753		)	(29,167		)
Provision (benefit) for income taxes	1,917			9,345			(843		)	(871		)	(3,755		)
Net income (loss)	$	1,723		$	(16,205	)	$	(4,763	)	$	(4,882	)	$	(25,412	)
Net income (loss) per share:
Basic	$	0.09		$	(0.88	)	$	(0.26	)	$	(0.27	)	$	(1.37	)
Diluted	$	0.09		$	(0.88	)	$	(0.26	)	$	(0.27	)	$	(1.37	)
Weighted average number of shares used in per share amounts:
Basic	19,145			18,367			18,008			18,272			18,512
Diluted	19,846			18,367			18,008			18,272			18,512



	As of December 31,
	2013		2014		2015		2016		2017
Consolidated Balance Sheet Data (in thousands):
Cash and cash equivalents	$	107,055	$	51,415	$	62,710	$	61,781	$	40,293
Working capital	$	97,220	$	39,738	$	45,606	$	48,218	$	28,385
Total assets	$	166,426	$	106,664	$	113,319	$	108,899	$	88,690
Non-current liabilities	$	6,165	$	6,449	$	4,962	$	3,374	$	900
Retained earnings (Accumulated deficit)	$	30,466	$	14,261	$	9,498	$	4,616	$	(20,796	)
Total stockholders’ equity	$	133,017	$	73,478	$	76,421	$	77,601	$	61,143



Revenue By Segment Data (in thousands)	Year Ended December 31,
	2015		2016		2017
Commission revenue
Medicare	$	57,508	$	74,340	$	95,146
Individual, Family and Small Business	113,749		96,510		63,278
Total commission revenue	171,257		170,850		158,424
Other revenue
Medicare	5,655		5,929		7,438
Individual, Family and Small Business	12,629		10,181		6,493
Total other revenue	18,284		16,110		13,931
Total revenue	$	189,541	$	186,960	$	172,355


~~ITEM 7.~~	ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



Key Metrics:	Three Months Ended
	Mar. 31, 2016	Jun. 30, 2016	Sept. 30, 2016	Dec. 31, 2016	Mar. 31, 2017	Jun. 30, 2017	Sept. 30, 2017	Dec. 31, 2017
Submitted applications:
Medicare submitted applications (1)	30,900	32,700	24,100	85,300	31,300	31,200	28,900	98,800
IFP submitted applications (2)	74,300	9,800	8,900	45,100	22,000	5,400	5,100	34,900
Other submitted applications (3)	97,400	60,600	56,400	62,100	63,400	53,400	56,000	61,800
Total submitted applications (4)	202,600	103,100	89,400	192,500	116,700	90,000	90,000	195,500

Medicare Advantage submitted applications (5)	23,126	24,923	17,100	56,000	21,800	23,100	21,000	60,000

Estimated membership:
Medicare products (6)	220,300	242,700	242,500	304,900	284,900	300,400	314,500	384,900
IFP products (7)	523,000	481,300	390,400	360,600	265,200	244,900	227,300	224,400
Other products (8)	409,600	381,900	355,400	349,700	342,600	340,500	332,300	327,600
Total estimated membership (9)	1,152,900	1,105,900	988,300	1,015,200	892,700	885,800	874,100	936,900



	Year Ended			Change				Year Ended			Change				Year Ended
	December 31, 2015			$			%	December 31, 2016			$			%	December 31, 2017
Commission	$	171,257		$	(407	)	—%	$	170,850		$	(12,426	)	(7)%	$	158,424
Percentage of total revenue	90		%					91		%					92		%
Other	18,284			(2,174		)	(12)%	16,110			(2,179		)	(14)%	13,931
Percentage of total revenue	10		%					9		%					8		%
Total revenue	$	189,541		$	(2,581	)	(1)%	$	186,960		$	(14,605	)	(8)%	$	172,355



Years Ending December 31,	Operating Lease Obligations		Service and Licensing Obligations		Total Obligations
2018	$	3,617	$	1,998	$	5,615
2019	2,996		861		3,857
2020	2,994		330		3,324
2021	1,457		—		1,457
2022	1,501		—		1,501
Thereafter	651		—		651
Total commitments	$	13,216	$	3,189	$	16,405



	December 31, 2016		December 31, 2017
Cash ⁽¹⁾	$	4,066	$	5,098
Money market funds ⁽²⁾	57,715		35,195
Total cash and cash equivalents	$	61,781	$	40,293


~~ITEM 6.~~	~~SELECTED CONSOLIDATED FINANCIAL DATA~~


	Year Ended December 31,
	2020	2019	2018
Medicare:
Medicare Advantage	387,652	279,561	148,478
Medicare Supplement	40,551	42,688	29,837
Medicare Part D	74,357	112,677	61,373
Total Medicare	502,560	434,926	239,688
Individual and Family:
Non-Qualified Health Plans	19,578	20,187	23,075
Qualified Health Plans	13,750	11,999	19,575
Total Individual and Family	33,328	32,186	42,650
Ancillaries:
Short-term	41,640	58,687	107,846
Dental	40,455	43,640	47,343
Vision	18,581	21,391	24,638
Other	14,270	22,980	33,500
Total Ancillaries	114,946	146,698	213,327
Small Business	14,809	16,685	19,550
Total Approved Members	665,643	630,495	515,215


	Year Ended December 31,
	2020	2019	2018
Medicare:
Medicare Advantage	324,916	235,978	134,565
Medicare Supplement	35,649	37,069	48,403
Medicare Part D	104,833	84,369	30,990
Total Medicare	465,398	357,416	213,958
Individual and Family:
Non-Qualified Health Plans	18,279	20,687	27,105
Qualified Health Plans	12,378	10,310	23,199
Total Individual and Family	30,657	30,997	50,304
Ancillaries:
Short-term	41,953	62,124	94,778
Dental	38,253	42,439	45,876
Vision	17,128	21,332	22,604
Other	13,918	21,601	34,029
Total Ancillaries	111,252	147,496	197,287
Small Business	14,362	17,606	18,874
Total New Paying Members	621,669	553,515	480,423


	As of December 31,
	2020	2019	2018
Medicare (1)
Medicare Advantage	533,282	404,694	276,357
Medicare Supplement	104,188	93,477	70,426
Medicare Part D	238,503	212,478	139,907
Total Medicare	875,973	710,649	486,690
Individual and Family (2)	116,247	128,487	151,904
Ancillaries (3)
Short-term	23,088	27,862	24,192
Dental	118,647	127,083	138,916
Vision	68,587	71,277	73,987
Other	37,033	38,119	38,136
Total Ancillaries	247,355	264,341	275,231
Small Business (4)	45,771	42,638	39,101
Total Estimated Membership	1,285,346	1,146,115	952,926


	Years Ended December 31,
	2020		2019		2018
Medicare
Commission Revenue from Members Approved During the Period (1)	$	440,722	$	355,916	$	192,382
Net Commission Revenue from Members Approved in Prior Periods (2)	5,665		55,292		(124)
Total Medicare Segment Commission Revenue	$	446,387	$	411,208	$	192,258
Individual, Family and Small Business
Commission Revenue from Members Approved During the Period (1)	$	21,971	$	22,614	$	24,079
Net Commission Revenue from Members Approved in Prior Periods (2)	39,831		32,854		10,874
Total Individual, Family and Small Business Segment Commission Revenue	$	61,802	$	55,468	$	34,953

Total Commission Revenue from Members Approved During the Period (1)	$	462,693	$	378,530	$	216,461
Total Net Commission Revenue from Members Approved in Prior Periods (2)(3)	45,496		88,146		10,750
Total Commission Revenue	$	508,189	$	466,676	$	227,211


Acquisition Consideration
Cash paid	$	15,000
Fair value of equity awards issued to GoMedigap members (1)	5,595
Estimated fair value of earnout liability	27,700
	$	48,295
Allocation
Cash and cash equivalents	$	71
Contract assets – commissions receivable – current	4,371
Prepaid expenses and other current assets	11
Contract assets – commissions receivable – non-current	11,103
Property and equipment, net	174
Accounts payable	(110)
Accrued compensation and benefits	(132)
Other current liabilities	(130)
Net tangible assets acquired	15,358
Intangible assets	6,800
Goodwill	26,137
Total intangible assets acquired	32,937
Total net assets acquired	$	48,295


Technology	$	2,000
Trade names, trademarks and website addresses	4,800
Total intangible assets	$	6,800


	December 31, 2020		December 31, 2019
Cash	$	39,552	$	16,205
Cash equivalents	4,207		7,261
Cash and cash equivalents	$	43,759	$	23,466
Restricted cash	3,354		3,354
Total cash, cash equivalents and restricted cash	$	47,113	$	26,820


	December 31, 2020
Beginning balance	$	0
Impact from the adoption of ASU 2016-13	1,513
Current period provision for expected credit losses	513



Ending balance	$	2,026


	Year Ended December 31, 2020
	Medicare Segment		IFP/SMB Segment		Total
Beginning balance	$	550,922	$	38,300	$	589,222
Commission revenue from members approved during the period	440,722		21,971		462,693
Net commission revenue adjustments from members approved in prior period	5,665		39,831		45,496
Cash receipts	(255,781)		(47,199)		(302,980)
Net change in credit loss allowance*	(1,891)		(135)		(2,026)
Ending balance	$	739,637	$	52,768	$	792,405


	Year Ended December 31, 2019
	Medicare Segment		IFP Segment		Total
Beginning balance	$	311,977	$	33,881	$	345,858
Commission revenue from members approved during the period	355,916		22,614		378,530
Net commission revenue adjustments from members approved in prior period	55,292		32,854		88,146
Cash receipts	(172,263)		(51,049)		(223,312)

Ending balance	$	550,922	$	38,300	$	589,222


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


	December 31, 2020		December 31, 2019
Prepaid maintenance contracts	$	7,715	$	3,853
Prepaid expenses	6,628		2,207
Prepaid insurance	1,672		918

Income tax receivable	51		584
Other	595		260
Prepaid expenses and other current assets	$	16,661	$	7,822



	December 31, 2016		December 31, 2017
Capitalized project costs	$	2,735	$	4,481
Security deposits	589		545
Deferred tax assets	204		232
Book-of-business transfers, net	665		30
Other assets	280		2,029
Other assets	$	4,473	$	7,317


	December 31, 2020							December 31, 2019
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted-average remaining useful life	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Weighted-average remaining useful life
Technology	$	2,000	$	(1,945)	$	55	0.1	$	2,000	$	(1,278)	$	722	1.1
Pharmacy and customer relationships	9,500		(9,500)		0		0.0	9,500		(9,183)		317		0.3
Trade names, trademarks and website addresses	5,700		(2,300)		3,400		7.1	5,700		(1,791)		3,909		8.0
Total intangible assets subject to amortization	$	17,200	$	(13,745)	3,455			$	17,200	$	(12,252)	$	4,948
Indefinite-lived trademarks and domain names					5,114		Indefinite					5,114		Indefinite
Intangible assets					$	8,569						$	10,062



	December 31, 2016		December 31, 2017
Payable to carriers – estimate for forfeitures	$	3,030	$	1,807
Professional fees	307		1,012
Other accrued expenses	438		611
Total other current liabilities	$	3,775	$	3,430



	December 31, 2016		December 31, 2017
Deferred rent – non-current	$	830	$	724
Income tax payable – non-current	1,978		19
Deferred tax liabilities	443		71
Other non-current liabilities	123		86
Total non-current liabilities	$	3,374	$	900



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


	December 31, 2020
	Carrying Value		Level 1		Level 2		Level 3		Total
Assets
Cash equivalents
Money market funds	$	4,207	$	4,207	$	0	$	0	$	4,207

Short-term marketable securities
Commercial paper	14,197		0		14,197		0		14,197
Agency bonds	35,423		0		35,423		0		35,423



Total assets measured at fair value	$	53,827	$	4,207	$	49,620	$	0	$	53,827


	As of December 31, 2019
	Carrying Value		Level 1		Level 2		Level 3		Total
Assets
Cash equivalents
Money market funds	$	7,261	$	7,261	$	0	$	0	$	7,261
Liabilities
Earnout liability - current	$	37,273	$	0	$	0	$	37,273	$	37,273


	As of December 31, 2020				As of December 31, 2019
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in 1 year	$	53,788	$	53,827	$	7,261	$	7,261


	Amortized Cost		Unrealized Gain		Unrealized Loss		Fair Value
Cash equivalents
Money market funds	$	4,207	$	0	$	0	$	4,207


Short-term marketable securities
Commercial paper	14,197		0		0		14,197
Agency bonds	35,384		40		(1)		35,423



Total	$	53,788	$	40	$	(1)	$	53,827






Balance as of December 31, 2018	$	40,000
Change in fair value	24,079
Settlements	(26,806)
Balance as of December 31, 2019	37,273

Settlements	(37,273)
Balance as of December 31, 2020	$	0


	December 31, 2020	December 31, 2019
Stock options issued and outstanding	527	649
Restricted stock units issued and outstanding	2,370	2,201
Shares available for grant	1,509	2,197
Total shares reserved	4,406	5,047