eHealth Inc (EHTH) 2007 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the first quarter 2007 eHealth earnings conference call. (OPERATOR INSTRUCTIONS)

At this time we'll turn the call over to Ms. Trisha Dill, Ashton Partners with Investor Relations.

Thank you, good afternoon and thank you all for joining us today either by phone or webcast. For a discussion about eHealth Inc. 2007 first quarter financial results. On the call this afternoon we'll have Gary Lauer, eHealth's President and Chief Executive Officer; and Stuart Huizinga, eHealth's Chief Financial Officer. After management completes their remarks we will open the lines for questions. As a reminder today's conference call is being recorded.

Before we begin I want to read a forward-looking statement advisory. Matters discussed during this conference call include forward-looking statements. All statements other than statements of historical facts are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as may, will, should, expects, plans, anticipates, believes, estimates, predicts, shall, continue, or the negative of these terms or other comparable terminology. Forward-looking statements are based on assumptions and assessments made by the Company's management based on factors they believe to be appropriate. Forward-looking statements are subject to risks and uncertainties that could cause actual results, developments, and business decisions to differ materially from those contemplated by these statements, including risks and uncertainties associated with acceptance of the Internet as a medium for the purchase of health insurance, retention of the Company's members, changes in the Company's relationship with insurance carriers, system failures or capacity constraints. Dependence upon Internet search engines to attract consumers to visit the Company's website, reliance on marketing partners for the sale of health insurance competition, partner, and company resource allocation, protection of intellectual property and intellectual property rights claims, regulatory penalties, and negative publicity, compliance with insurance and other laws and regulations and changes in laws and regulations.

We describe these and other risks and uncertainties in our annual report on Form 10-K filed with the Securities and Exchange Commission. Please see the section entitled risk factors. The Company undertakes no duty to update or revise any forward-looking statements made during this call. Whether as a result of new information, future events or otherwise. We will be presenting certain financial measures on this call that will be considered non-GAAP under SEC Regulation G. For a reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure please refer to the information included in our press release and in our SEC filings on our corporate website under the heading Investor Relations. At this point I'll turn the call over to Mr. Lauer.

The first quarter of 2007 was successful for eHealth in many ways. We delivered strong financial performance including accelerated growth in revenue and membership. Additionally, this was a quarter where we made significant progress in several strategic areas that we believe will favorably impact the remainder of 2007 and beyond. I will talk more about these strategic areas later in this call. Our financial results continue to illustrate the growing demand and need for our internet services and products. Revenue to the first quarter of 2007 increased 50% over the first quarter of 2006, estimated membership increased 45% over the same quarter a year ago, and the number of members approved during the quarter accelerated to the growth rate of 50%. Additionally, we earned a net income of $2.3 million during the quarter of very strong application demand which increases our marketing and advertising expenses as we've described to you in the past. In fact, our submitted applications in the first quarter of 2007 set an all-time volume record providing us a strong revenue base for future quarters. Stuart Huizinga will describe our financial performance in detail but suffice it to say I am pleased with our first quarter performance.

During the first quarter we made significant progress with many of our important technology initiatives, as we have said many times in the past, the continued evolution and development of our technology makes the eHealth online purchasing process better and more attractive to consumers, businesses, and our carrier partners. We recently issued press releases about some exciting developments relating to our technology because we thought you would benefit from knowing about them in a little more detail. For instance, last week, we announced with Humana, the first implementation of our EPI III technology and this week we announced that United Healthcare's Golden Rule Insurance Company has implemented our EPI III technology as well.

EPI III offers the ability to reduce carrier underwriting response time to submitted applications to a few hours instead of weeks which is typical in the traditional off line sale of health insurance. We believe the quick application turnaround will be appealing to consumers and represents the beginning of a very significant competitive advantage for eHealth and the participating carrier partners. Our goal is to evolve EPI III to the point where review and approval of applications can be essentially instantaneous, satisfying consumers demand to buy it now, not wait until later. We are enthused about the impact EPI III will have on our business and most importantly, the improvement that EPI III makes for the consumer buying process.

In past calls we have talked about our sponsorship and technology licensing business to carriers. I should note that our revenue here has grown over 250% compared to the year ago. The licensing of our technology to carriers allows them to sell their products online. This is a highly strategic area for us because it allows us to expand our presence in the marketplace and further monetize the sale of health insurance. Our first large implementation of our carrier technology licensing service was in 2006 with Premera which operates as life wise in certain states. Premera uses eHealth technology to allow individuals and families to compare Premera health insurance plans and apply for coverage online using electronic signature and payment. The eHealth platform powers direct sales as well as referrals from Premera's agents who use the platform to complete and submit their customers applications online. Premera developed eHealth technology to affiliate health Insurance companies in a phased rollout during 2006. I am pleased to announce now that within the past several weeks, we have launched new carrier technology platforms for Health Net, Coventry, and Vista.

Health Net is currently online with us in California and we expect soon expand Health Net to additional states. Coventry is currently online with us in Louisiana and we also expect to expand Coventry to additional states. Our carrier technology relationships are typically performance based meaning the carrier pays us a transaction fee, not the periodic flat licensing fee, common for software licenses. We believe this model is optimal for the carriers and for eHealth. This is a new strategic business area. We expect to grow significantly over the next several years.

We are also developing a health savings account platform for businesses and we see very exciting market opportunities in this area. This platform will allow eHealth for the first time to market our core individual and family health insurance offerings directly into businesses of all sizes. We expect our HSA platform to offer important new features such as employer funding of HSA's for employees, automated payroll deductions, and the management of individual healthcare expenses online. We plan to launch the HSA platform during the third quarter of this year. I believe that the HSA platform offers an exciting new application and business opportunity for our individual product solutions.

In the marketing area we continue to make progress in building awareness of the eHealth brand and differentiating eHealth as the clear leader for online health insurance solutions. Our brand equity on the Internet is giving our online advertising programs lift and scale. Our IFP submitted applications from the online to advertising channel grew by 71% over the submitted applications in Q1 2006. Additionally, our direct channel continues its strength with a 40% submitted application contribution as a percentage of total submitted applications during the first quarter. The direct channel results also illustrate our growing brand name awareness and visibility. We are pleased with all of these results especially in light of our ability to effectively convert this business.

We have also signed several exciting new marketing agreements since the beginning of the year, including ADP, United Health Care, and Aetna. Our partnership with ADT will allow us to market our solutions to ADT's small business customer base. Our agreements with Aetna and United allow us to work with two of our carrier partners in a very new and different manner. Under these agreements, Aetna and United are able to market our platform directly into their National Associations, affinity groups and Fortune 500 clients, seeking individual health insurance solutions. For states where Aetna or United offer their own individual products, our platform will be modified to present only their products. Outside the carriers coverage area, our platform will present the entire eHealth marketplace of products. We are enthused about this new and innovative sales channel and particularly pleased with this expansion of these carrier relationships.

In the public policy area, we have not seen meaningful new activity for the past 90 days. California governor Arnold Schwarzenegger's health insurance proposal does not appear to be making progress at least not in its current proposed form. On a national level we do not expect new health insurance legislation this year. We believe the market for individual health insurance products will continue to expand and over that next several years, we will see favorable legislation with regard to tax treatment for individual health insurance and further expansion of health savings accounts.

Another note I'd like to make is that on May 1, the winners of the 11th annual Webby awards were announced and we were selected as the winner in the best insurance website category worldwide. The Webby awards is the leading international award honoring excellence on the Internet among 8,000 entries from over 60 countries and all 50 states. This award is a testament to the outstanding customer experience we deliver throughout our website every day we believe. With everything I have briefly described, we are obviously enthused about optimistic about the remainder of 2007 and well beyond. Now I'd like to turn the call to Stuart who will take you through our financial results.

Thanks, Gary, and good afternoon, everyone. I'm pleased to announce our financial results for the first quarter of 2007. Starting at the top line, our revenue for the first quarter was $19.5 million, a 50% increase over the first quarter a year ago. This was an increase in our year-over-year revenue growth rate from the prior quarter when we grew 49%.

Primary contributors to this revenue growth are strong growth in our membership base and another record setting quarter of override submissions. Our total estimated membership at the end of Q1 2007 grew by 45% over our estimated membership at the end of Q1 a year ago. We once again continued the uninterrupted history of growth we've experienced every quarter since the beginning of our company. The growth rate in estimated membership in the first quarter of 2007 increased as compared to the prior quarters year-over-year growth rate of 42%.

Our growth rate in members approved during the quarter also accelerated in the first quarter of 2007 with a 50% increase over the first quarter of 2006. Approved members for the quarter of 119,600 represented a record, including a record 82,300 approved IFP members. This also was an increase over the 43% year-over-year approved member growth rate from the prior quarter.

Additionally, our product retention continues to be consistent with our historical trends and continues to exceed two years. As Gary described, we continue to significantly grow our revenue from carrier sponsorship and technology licensing activities. Revenue from these sources grew over 250% from 316,000 in the first quarter of 2006 to 1.1 million in the first quarter of 2007. We continue to be enthusiastic about the future revenue potential of these activities.

Our operating expenses for the first quarter increased by 40% compared to the same quarter a year ago from $12 million to $16.8 million. The largest contributor to this increase was growth in marketing and advertising expenses, mainly due to the significant demand growth that we experienced in the first quarter. As we discussed on previous occasions, the first quarter is typically one of our strongest demand quarters of the year, measured in terms of new applications. The first quarter of this year was no exception, as we increased our submitted applications for individual and family products by 20% sequentially from our volumes in the fourth quarter of 2006. A majority of our marketing and advertising expenses are driven by new submitted application volumes and most of those expenses are recorded during the quarter during which the applications are submitted. As a result when we experience strong demand in new applications like we did this quarter our marketing and advertising expenses increase accordingly. We, however, are building a revenue base for future periods.

At the same time, we were able to increase our operating margin from 8% in the first quarter of last year to 14% in the first quarter of this year. We were able to achieve our strong demand growth with continued favorable unit costs of acquisition. One of the measures of our cost of acquisition is total marketing and advertising expenses for a period divided by the total number of individuals included on all submitted applications for individual and family products submitted during the period. Our acquisition costs on that basis increased modestly to $49 per submitted member in the first quarter of 2007, well within the historical range of $42 to $53 for this metric over the past few years. One item of note is that our year-over-year growth in approved members for individual and family product in the first quarter was 43% compared to 23% growth in submitted applications for those products in the same period. This differential highlights the continued significant improvements that we have made in our conversion rates from submitted application to approved application. We place heavy focus on sourcing applicants with a greater likelihood of conversion and on improving the processes that influence that conversion.

Marketing and advertising expenses as a percentage of revenue declined from 37% of revenue in the first quarter of 2006 to 36% of revenue in 2007. We continued to see increased scale in several other expense categories during the first quarter as well. For example, technology and content cost as a percentage of revenue declined from 17% in the first quarter a year ago to 15% this quarter, while customer care and enrollment costs improved from 20% of revenue to 15% for the comparable period. One area of cost as a percentage of revenue has increased over the prior year is in the general and administrative area. This is primarily the result of increased cost of operating as a public company as well as general and administrative costs to support our strategic growth opportunities. This is the first year for which our independent auditors will be required to issue a report related to our internal controls under the provisions of Sarbanes-Oxley. As a result, some of the cost increases here relate to our preparation for this requirement. These costs are expected to continue throughout the remainder of the year.

Pre-tax income increased from $1.1 million in the first quarter of 2006 to $3.9 million in the first quarter of 2007 , a 243% increase. During the first quarter of 2007, we began recognizing tax expense on a fully tax basis for GAAP purposes which increased our effective tax rate from 2% in Q1 a year ago to 41% in the current quarter. However, due to the significant amount of net operating losses that we still have available to offset current and future taxable income, we currently pay cash taxes at a rate of approximately 3% pre-tax income.

Net income for the first quarter of 2007 increased to $2.3 million or $0.09 per diluted share compared to net income of $1.1 million or $0.06 per diluted share in the same quarter of the prior year. We continue to generate solid cash flow, registering our eighth consecutive quarter of positive operating cash flow. Our cash flow from operations increased from $508,000 in the first quarter of 2006 to $3.4 million for the first quarter of 2007. Operating cash flow was down from the $4.9 million generated in the fourth quarter of 2006 due to the normal seasonal timing of certain cash outlays such as 2006 bonus payouts to employees, pre-payments of certain expenses like insurance, and the sequential increase in marketing advertising expenditures that I discussed previously.

Capital expenditures for the first quarter of 2007 were very modest at $224,000. As a result of these items, our cash balance at March 31, 2007, increased to $93.5 million. And with that we'll open the call for questions. Operator?

(OPERATOR INSTRUCTIONS) We have a question from Mr. Justin Post of Merrill Lynch.

A few questions. First can we start with your outlook for revenues for the year. Are you going to give any update there?

Justin, it's Gary. We, as you know in the last earnings call, we provided guidance which at that time, we indicated would be annual guidance, and I think all I would say today is that we're obviously pleased with our first quarter results. We think we're off to a great start for the year and beyond and we feel very confident and optimistic about certainly making the guidance that we provided to you but no updates beyond that today.

Is your subscriber account at or ahead of where you thought it would be at the beginning of the year at this point?

We didn't give any guidance on that. I'm not going to give anything additional today.

We're certainly pleased with all the metrics that we reported to you today.

Okay. Great, and then on the marketing mix, it looks like the number of members coming from the marketing partner channel were kind of flattish year-over-year. Did a couple partners kind of come off the system or did you try to pair some lower converting partners and what's your outlook for growth there going forward?

We certainly didn't pair partners or lose any significant partners this quarter. What we do see throughout time in our recent history is that the channel mix kind of fluctuates back and fourth and at the current point, we see the online advertising outpacing the partners, that hasn't been the case in the past and we'll see where it goes in the future. We're very optimistic about the prospects for our partner channel, especially looking forward to the launch of the HSA platform that we talked about.

Okay, great and then if you look at the growth of the submitted applications, it was around 23%. Any plans to try to get that growth rate higher all the while keeping your improving conversion rates, any opportunity to do that?

Well, I think -- Justin it's Gary, I think there is. We're pleased with the number of applications we brought in. We're really trying to be judicious here about where and how we source these applications. What it's really about is being able to convert them once we have them and our back end conversions are probably as strong as we've ever seen and we're really pleased with that. That's a combination of a lot of work we have been doing on the side as we evolve and develop the technology to convert better and I think it's also a result of where and how we have been sourcing applications.

Okay, and last question, and I'll get back in the queue. On the opportunity to provide realtime or within one day kind of application approval, do you expect that to maybe help improve demand as people can go to your site and get health insurance much quicker or do you think that's more of a conversion rate improvement? How do you see that playing out and when do you think we might see an effect from that?

Yes, so you're talking about the EPI III Justin, we've just begun to roll it out as you know, with Humana and United. It's too early yet to be able to report on any results or really be able to ascertain exactly how it's acting for us, but our expectations and our plans are really kind of severalfold. First, the ability to be able to get an answer very quickly and to turn this transaction around quickly, we think is a distinct competitive advantage that will increase demand. Based on the sales of that, when someone wants to buy something you want to sell it to them right then and there and I've used this analogy previously with other people but when you go to a car lot to buy a car, the sales team do everything they can to keep you from leaving the lot without first signing you up, because they know once you leave you probably are not going to come back and buy and one of the issues with health insurance, because of the approval process is that someone is motivated, they are incented, they come, they go through the application process, they have made an investment and then they have to wait and wait and wait sometimes and all of a sudden that money they've allocated ends up going someplace else in many cases. We think being able to satisfy the need and demand very quickly if not instantaneously, certainly will increase demand and then to the second part of your question, and I think it's obvious, is a byproduct of that would increase conversion rates as well and could be significantly but we don't know that yet. That's our expectation and our plan and the reason why we've invested in this technology.

Great. Thank you.

Our next question is from Steve Halper of Thomas Weisel Partners.

Yes, just on the mix of the source of IFP submitted applications, so year-over-year, marketing partners went from 39% down to 31%, and online advertising went up from 21 to 29%. Can you explain that? Is that explainable?

Well, I think it's very explainable. The fact that our brand name is becoming better known and more widely recognized on the Internet clearly is having impact for us in the online advertising world with Google. That's one. Secondly, as you know, Yahoo! recently introduced a whole new search capability and we're going to see contribution from that. And third is just the part and parcel all of that, people come to search and every day we believe, in face, we think we know there are more and more people coming online looking for solutions to health insurance questions, topics, problems, issues, whatever, and because our name is becoming we believe better known, more of them are coming through on search to us and we think that that's -- we like that a lot. I think it also helps explain why in such a strong demand quarter 40% of what we sourced came to us direct as well. Once again, it's people recognizing the brand name, the brand name equity and I think having confidence in the brand name to do business with us and through us, but I think that's why you see the strength there and I think that's simply why it's outpaced the partner contributions.

But direct was flat at 40% year-over-year so just as a follow-up question, is it the kind of spaded, was it the spaded desire in this period to kind of ratchet up a little bit on the online advertising? Is that something that you want to control going forward?

Well, I think we do actually control and manage it quite effectively. The opportunity was there for us. We're able to source applications economically and convert them and that's what we did, but the fact that there's a mix change I don't think is any more than just the ebb and flow that we typically see in the business.

Thanks.

You bet.

Our next question is from Bill Morrison from JMP Securities.

Hi. A couple questions. First, on the deal with Aetna and United to I guess resell your technology platform through their affiliate channels, when they are just concurring their own products are you going to get a licensing fee or that or how exactly is that deal structured? That's the first question and I'll ask a follow-up.

Well, almost all the deals we do are performance based, transaction based and this certainly wouldn't be any exception to that, and we really like the performance based methodology because the more successful the partner is, the more that we earn, and we've got a high degree of confidence in the success possibilities and capabilities for these partners, like in Aetna, for example. So, yes, they are transaction based and we're really enthused about these Bill, not just because of the transaction based nature of the economics but this is a brand new area for us in terms of working with carriers and so on, and I think it's an exciting area and I think it also indicates the kind of confidence that these very large companies have in us to embrace us this way and to take us into some of these really important places like where they have got large affinity groups or the Fortune 500 customers.

Okay, thanks. And on the G&A side, Stuart, I just wanted to ask you if you could clarify, should we expect G&A to be consistent through the year on an absolute basis off this quarter? In other words should we expect to run the same level of spending from the 3.5 million or should we expect that to go up on an absolute basis kind of through the year?

It will probably go up a little bit as the year progresses. As I mentioned this is the first year of SOX implementation for us.

Right.

Next couple quarters you'll probably see more expenses in that area through the end of the year, and then once we're through this year looking to reduce those going into next year.

So growth of a similar magnitude from the fourth quarter to the first, or of a lesser magnitude?

No, the lesser magnitude.

Okay, thanks and last question, and not to beat a dead horse, but if you do look at your cost per acquisition cost of $49, I realize it was in the range, but it does look like it was up year-over-year for the first time, and I think since the third quarter of '05 and just curious if you could give us some kind of guidance, should we expect that number to continue trending up towards the high end of the historical range or stay consistent or go down or any kind of commentary you can help us with there? Thanks.

Yes, Bill, I think the conservative approach here would be to expect that it could be toward the higher end of the range, frankly that is how we've always looked at it and kind of working around the Company with it. We've had and we commented on this in the past and I've said this myself personally that I think our cost of acquisition in many quarters has been extraordinarily low and that we've got an awful lot of room there to be able to increase the cost of acquisition and still be very highly profitable and at $49 on a per submitted member basis, I would, let me reaffirm and reinforce that, we are still very very low and there's a lot of room to move here. We're just trying to be once again, judicious about where we're going and how we're going about it. Obviously we had more on line advertising in this past quarter and we paid for some of that so you see some of that effect, but I certainly am not at all concerned about $49. We think it's a great number and we could increase that by several dollars and be very very profitable with the members that we're bringing in. So, it's not something that is a concern to me today.

One quick last quick follow-up. I guess the only thing that I was expecting was, I think we talked about in the past that you would get some efficiency with the (Inaudible) so in other words I would have expected your buy with getting more efficient now that you're able to bid on a market by market, state by state basis. Are you seeing that or where is kind of the, is it just that you're deciding to become more aggressive and pay more for the leads or what exactly is driving the cost higher?

Well, I think it's just the fact that we've been aggressive and we've really been seizing the opportunity where it is. Panama is still early and I think it's way too early yet to expect to see the kinds of efficiencies and the economics that you might expect and we certainly didn't see that in this past quarter. You probably saw it in Yahoo!'s financial results as well. They still got some work to do there but we're enthused about that but again, we had a good online advertising quarter. We're pleased with it, the conversions at the back end are very very strong and very high, so that's just, if anything, that's the single largest contributor to the $49.

Thanks a lot.

You bet.

We'll take our next question from Neil Gagnon with Gagnon Securities. Your line is muted. We're still not able to hear you, sir.

I'm sorry, can you hear me?

We can hear you now, sir.

Sorry. On the health savings account business, can you give us some sense about the potential size of that versus the current business?

Well, Neil, it's a great question. We think it's very very significant. Hard to quantify that today. Clearly the number of employers that are providing health benefits to employees is on the decline and has been for some time. We've seen the individual market expand right before our eyes as a result of that. We know through experience that there are more and more businesses that are looking for alternatives to group plans, i.e. individual plans and finding ways to somehow co-fund. It's also a way to better manage the healthcare fixed cost that many businesses have. So when you just take a few of those things as factors, for example, we think that this could be very very significant.

In fact we look at this as a whole new application area and in some ways as a whole new platform and a whole new site as well that takes advantage of the engine that we've built over the past several years with the individual products. The other reason we're enthused about it is that the only resource that exists with the individual products with having the breadth and depth that we have today is at eHealth. We think that combines with this HSA platform and what we're engineering and planning to be something that's very easy to use and very intuitive, it's a very significant opportunity. Again I wish I could quantify it. I can't today.

Okay. Second question, when you went public, for the first time, you had various hopes, I would call it, about what your operating margins might be in the future. Yet, we see this software license subscription kind of business building and now you tell us you have this new area of doing business with carriers. Might those ultimate margins be higher than you were thinking a year or so ago?

They may. The carrier technology licensing business is a very high margin business, because what we're doing is simply allowing the carrier to use an identical twin version of what we run on our site, so it's not a separate software application. It is one and one only version that we run. Every time we make an update to our software, or a newer version, that flows through to the carrier as well, so most of the R&D for that is already spent on our core platform, so we got a small team of engineers to support this. We co-host. We've got some servers, but the cost of all of that when you scale it against the revenue here are nominal so yes the margin potential there is very high and could certainly be higher than the core business.

The reason I ask, Gary, because that little piece of business is just quietly creeping up very nicely.

Neil, we like that. The reason I'm even more enthused about it is and you and I have discussed this in the past is that I think strategically, it creates yet another barrier to entry and further solidifies our position in the marketplace and the landscape because what it really does is it further expands our footprint across this marketplace and allows us yet another way to monetize the health insurance transaction. And I'd like to note as well, when I talked about Premera Life-wise, I mentioned they had agents and brokers using this technology as well and so not only today are we monetizing the transaction of a health insurance carrier but at Premera, and this is an interesting pilot, we're also finding a way now to monetize that agent and broker transaction as well.

Thank you very much.

Thank you.

We'll take the next question from Carl McDonald of CIBC.

First question is on the attrition rate. It looked like it was improved versus last year. Just wondering if you had any color on what the drivers there were?

Our retention rate that we see is very much within the normal range for us. There really isn't anything that's changed. We're really seeing things as they normally are.

You view this rate of attrition then as something that is probably sustainable for the balance of the year?

If you look back at our history, you'll see it fluctuating up and down in a range from quarter to quarter, and so this happens to be a quarter where it's showing up at the lower end of the range and I'm sure in another quarter you'll see it more towards the high end of the range, if it's going to fluctuate back and forth there, but it stays in a very narrow range.

Okay. Second question is on the stock comp expense that was recorded this quarter. Is that a decent run rate or do you expect that will fluctuate as well?

It will fluctuate but only upwards because what happens is as we grant additional stock awards and as our stock price increases or stays the same or goes down, it's really the additional awards that will drive higher expense rate for that.

Okay. And last question is if you could give any color on the April, the number of April applications that you've received? If not a specific number then sort of directionally relative to the first quarter, did it tick down in sort of the normal seasonal pattern?

It's Gary. We can't comment on what's going on inside this quarter right now. I guess the only thing I would say is that we're pleased with the demand momentum that we've seen over the past several quarters we've reported, and as I said earlier, we're really pleased with the start to this year and we just got to set up to have a very very strong year and go into 2008 as well.

Okay, thank you.

Question from Justin Post of Merrill Lynch.

Thank you. Gary, could you talk about driving submitted application demand going forward? What do you think your best sources are as far as your profit mix to get potentially and keep that submitted application number maybe North of 20%? What's your plans there?

Well, Justin, I think several things. Continued branding of the eHealth name is one. Second part and parcel to that is the media attention that we continue to enjoy and we referenced in the Wall Street Journal last week for example, that list just goes on and on. I saw something last night we were in Kipplingers, just a number of things like that. Thirdly, word of mouth continues. We think anecdotally it will be very good. Fourthly, we believe that we know that every day as I said earlier, there are more and more people coming to the Internet looking for solutions to health kinds of issues and health insurance is becoming more and more common thing that people are coming to learn about and presumably buy if we do the right job. Our partnerships, the partnerships we described today, ADT, some of these big carriers and so on.

We think the HSA platform as we roll that out in the third quarter has got very significant potential to bring us into yet a whole new category of potential consumers and/or employees or individuals for buying health savings accounts. We think that the continued endorsement of us by the carriers to use our technology and so on once again makes coming online to buy health insurance a more viable thing for people and I think it appears to be more of a safe harbor as well. I mean, this is just seven or eight things off the top of my head and then of course we'll continue to be very aggressive in what we do in the areas of search, partners, and other marketing kinds of activities.

Great. Thank you.

We'll take our next question from Steve Halper of Thomas Weisel Partners.

Just a clarification on the option expense, based on your expectation for future stock awards, is it safe to say that we're looking at $0.01 per share per quarter? Or does it have the potential to go up from there?

By design, when we gave our guidance this year, we gave our guidance without stock based comp. It really is dependent on the timing and amount of options that are granted and what happens with the stock price as well and so I'm not really prepared to give any color or guidance on that one.

Let's assume the stock remains flat just based on your plan to issue more stock.

Oh, again, it really depends on timing and amounts and just I haven't given any guidance on that. I'm not prepared to give any additional.

Steve, it's Gary. One thing I would add though, is that we will continue to incent our employees with stock options and restricted stock units and so on. We think that's important, that's how we built the Company, we want to continue to do that. I just think it's a really good business and management practice.

Got it. Thanks.

At this time there are no questions. (OPERATOR INSTRUCTIONS) And with that I'd like to turn the call back over to the presenters for closing remarks.

Well, this is Gary Lauer. I just want to thank everyone for your participation and interest in the Company and for all of you who are shareholders, thank you very much for owning a part of our business and we look forward to working with you and speaking with you over the ensuing weeks and quarters.

Thank you for joining us on the call. You may now disconnect.