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eHealth (NASDAQ:EHTH)
Q4 2019 Earnings Call
Feb 20, 2020, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Q4 and full-year 2019 eHealth, Inc. earnings conference call. [Operator instructions] Please be advised that today's conference is being recorded. [Operator instructions] I would now like to hand the call over to your speaker today, Ms.

Kate Sidorovich, eHealth vice president of investor relations. Thank you. Please go ahead, ma'am.

Kate Sidorovich -- Vice President of Investor Relations

Thank you. Good afternoon and thank you all for joining us today either by phone or by webcast for a discussion about eHealth, Inc.'s fourth-quarter and full-year 2019 financial results. On the call this afternoon, we'll have Scott Flanders, eHealth's chief executive officer; and Derek Yung, chief financial officer. After management completes its remarks, we'll open the lines for questions.

As a reminder, today's conference call is being recorded and webcast from the IR section of our website. A replay of the call will be available on our website following the call. We will be making forward-looking statements on this call that include statements regarding future events, beliefs and expectations, including statements relating to expectations regarding our Medicare business, including Medicare enrollment growth, consumer demand; our competitive advantage; our share of total Medicare and Medicare Advantage enrollment and growth in online Medicare enrollment; our Medicare growth strategy and investments in the Medicare business, including our investments in telesales capacity, marketing initiatives and our technology platform and capabilities; our expectations regarding the profitability of our business, seasonality, operating costs, lifetime dates, retention rates and cost of acquisition; our estimates of the lifetime data of our Medicare plans and our expectations that enhancement to our Medicare Advantage lifestyle data estimation model will provide a more predictable forecasting of residual revenue; and finally, our 2020 full-year guidance and outlook for the first quarter of 2020, including our assumptions and our ability to deliver on our guidance. Forward-looking statements on this call represent eHealth views as of today.

You should not rely on the statements as representing our views in the future. We undertake no obligation or duty to update information contained in these forward-looking statements, whether as a result of new information, future events or otherwise. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in our forward-looking statements. We describe these and other risks and uncertainties in our annual report on Form 10-K and quarterly reports on Form 10-Q filed with the Securities and Exchange Commission, which you may access through the SEC website or from the Investor Relations section of our website.

We will be presenting certain financial measures on this call that are considered non-GAAP under SEC Regulation G. For 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 issued today and in our SEC filings, which can be found in the About Us section of our corporate website under the heading Investor Relations. And at this point, I will turn the call over to Scott Flanders.

Scott Flanders -- Chief Executive Officer

Thank you, Kate, and good afternoon, everyone. 2019 was a record year for eHealth, punctuated by the strongest annual enrollment period in our company's history and financial results that significantly exceeded our 2019 annual guidance across multiple metrics, including revenue, GAAP net income, and adjusted EBITDA. Our Medicare enrollment volumes exceeded our expectations in the first three quarters of the year and building us to more than double our telesales capacity going into this AEP compared to a year ago and to make a significant investment in marketing and technology initiatives. These investments have clearly paid off as we achieved 88% growth in approved Medicare members in the fourth quarter of 2019 compared to a year ago.

Growth in fourth-quarter 2019 approved members for Medicare Advantage products was especially strong at 100%. We achieved these high levels of enrollment growth on a cost-effective basis as evident in our meaningful margin expansion compared to 2018. Equally noteworthy was a 200% year-over-year growth in our fourth-quarter Medicare application submitted online, which represents a combination of fully unassisted and partially assisted agent online enrollments. 36% of our fourth-quarter applications for Medicare major medical products, including Medicare Advantage and Medicare supplement plans, were submitted by our customers online, a meaningful increase compared to 22% a year ago.

Underneath that, the unassisted online enrollments, where customers never interact with one of our sales agents, grew 107%, while partially assisted enrollments grew over 280% in the fourth quarter compared to Q4 of 2018. Our strong fourth-quarter performance allowed us to significantly exceed our full-year 2019 target of customers completing 20% of major medical Medicare enrollments online, with actual online contribution coming in at 27%. These metrics are a strong validation of a strategic pillar of our business that a rapidly growing portion of Medicare customers not only feel comfortable transacting online but will increasingly demand this capability in a maximum choice, consumer-friendly online experience, similar to the evolution seen in other consumer-facing verticals, such as the retail shopping, brokerage, and travel markets. We are facilitating this accelerating trend for digital engagement in the Medicare market with further investments in our omni-channel shopping and enrollment platform, meeting seniors wherever it is easiest and most convenient for them to engage with us, online or on the phone.

Our industry NPS scores are consistently in the 80s to 90s range, demonstrating the value we are providing to our rapidly expanding base of senior customers. eHealth's unique value proposition allowed us to grow our estimated Medicare membership at a rate that is 14 times the growth rate of the overall Medicare market and to grow our estimated Medicare Advantage membership at five times the rate of the Medicare Advantage market. Turning quickly to the individual and family and small business markets, approved members for the individual and family plan products grew 1% during the fourth quarter of 2019 compared to the fourth quarter a year ago. This was in line with essentially flat year-over-year enrollment seen in a broader individual market during the open enrollment and also reflected our continuing emphasis on the Medicare business and allocating our marketing resources.

Approved members for the small business group products declined 16% during the fourth quarter compared to same quarter a year ago as we focused on higher-margin members, while deemphasizing smaller, less profitable groups. In addition to our strong operating results, the fourth-quarter and full-year financials reflect the positive impact of $42.3 million in revenue, resulting from a change in estimate for expected cash commission collections relating to some of our existing Medicare Advantage plans. Last month, when we released our preliminary 2019 results, we were in the process of finalizing our work to enhance the Medicare Advantage lifetime value forecasting model and, therefore, provided our revenue, adjusted EBITDA and earnings ranges on an operating basis, which excluded this positive impact from our change in estimate. Derek will provide more details on these enhancements to our forecasting model and their impact on our financial results.

For the full year, eHealth generated revenue of $506.2 million or 101% annual growth, including the positive revenue impact I just described. 2019 adjusted EBITDA was $133.2 million, 296% annual growth, and GAAP net income was $66.9 million, also including the positive revenue adjustment. Revenue for the fourth quarter was $301.7 million, GAAP net income was $88.8 million and adjusted EBITDA was $142.6 million, again reflecting this benefit. Looking ahead, we anticipate the strong momentum we built over the past two years to continue into 2020.

We expect to continue outpacing the overall market growth by leveraging our differentiated omni-channel engagement platform, demonstrated consumer value proposition and our demand-generation expertise. At the midpoint, our 2020 annual guidance calls for nearly 30% revenue growth accompanied by EBITDA margin expansion, including the positive impact from the enhancements to our MA LTV model on our 2019 results. Derek will go over some of the key assumptions behind our guidance in his prepared remarks. On the execution front, we plan to make further enhancements to our platform, with an emphasis on ease and transparency of the online consumer experience.

Our goal for 2020 is to reach a 34% contribution from Medicare major medical applications submitted online. And now I will turn the call over to our chief financial officer, Derek Yung.

Derek Yung -- Chief Financial Officer and Senior Vice President

Thanks, Scott, and good afternoon, everyone. On today's call, I will go over our 2019 financial results in great detail and provide our 2020 annual guidance. eHealth's fourth-quarter and full-year 2019 financial results reflect our strong execution and significant investments in Medicare-related telesales capacity and marketing initiatives throughout the year as we continue to scale our Medicare business, achieving strong revenue and enrollment growth while expanding margins. Our results also included the impact of enhancements made to our Medicare Advantage lifetime value forecasting model that will enable us to better estimate lifetime values of our Medicare Advantage plans.

During the fourth quarter, we worked with an external corporate valuation consultant to assess our existing approach and incorporate statistical tools to increase the accuracy of our Medicare Advantage plan lifetime value estimates with an emphasis on improving our member retention forecasting. Since the adoption of ASC 606 for revenue recognition, our cash collections for Medicare Advantage plans have, in general, exceeded initial estimates suggested by our lifetime value model, reflecting the conservatism of our approach. This dynamic has contributed in the past quarters to the recognition of increasing amounts of residual or tail revenue from Medicare Advantage members approved in prior periods. At the same time, we have limited visibility into the precise timing of the tail revenue recognition.

Under our model, we were assessing residual revenue in the quarter when the entire commission receivable on a Medicare Advantage cohort had been fully collected. The exact timing of that final collection can be difficult to predict. Our enhanced model addresses this forecasting concern. The enhanced model that we now have implemented uses a modified Kaplan-Meier statistical model rather than historical two-year moving averages for the purpose of estimating our Medicare member retention.

It is expected to result in lower volatility of our Medicare Advantage lifetime value estimates and also provide for a more predictable forecasting of residual revenue. We incorporate all relevant historical data into the model with larger weight placed on the most recent three years of observations to improve the accuracy of our lifetime value estimates. Going forward, we will be assessing and booking residual revenue on each Medicare Advantage plan cohort when there's strong statistical evidence it would not result in probable reversal of revenue in the future. Currently, for Medicare Advantage plans, this would be around three years from the time of enrollments.

Three years is about the average life of our Medicare Advantage plans and also represents a mark after which we observe significant decline in retention variability for the remainder of the cohort's life. Our fourth-quarter financial results reflect a $42.3 million positive revenue impact from the change in estimate for expected cash commission collections for Medicare Advantage plans since we began selling such products and through the third quarter of 2019. Total fourth-quarter 2019 tail revenue related to Medicare Advantage plans was $50.8 million. It's important to note that even excluding the positive impact from the enhancement of the Medicare Advantage LTV model, eHealth significantly outperformed our 2019 revenue, GAAP net income and adjusted EBITDA guidance.

And now I will review our fourth-quarter and full-year 2019 financial results. In the Medicare business, our fourth-quarter revenue was $282.6 million. Excluding the $42.3 million impact from the enhancement of the Medicare Advantage lifetime value model, fourth-quarter Medicare revenue was $240.3 million, representing a 98% year-over-year growth. Full-year 2019 Medicare revenue was $447 million.

Excluding the impact of enhancement of the MA LTV model, our full-year Medicare revenue was $404.7 million or a 92% growth compared to a year ago. This strong growth was driven by a combination of growth in approved Medicare members and an increase in non-commission revenue, in particular, revenue generated from our Medicare plan advertising program. For the fourth quarter of 2019, the Medicare segment generated a profit of $149.3 million. Excluding the impact from enhancement of the MA LTV model, Medicare segment profit was $107 million, an increase of 82% compared to a year ago.

For the full-year 2019, Medicare segment profit was $155.2 million or $112.9 million, excluding the impact from the enhancement of an MA LTV model. The estimated number of revenue-generating Medicare members was approximately $711,000 at the end of the fourth quarter of 2019, up from $487,000 at the end of the fourth quarter of 2018 or an increase of 46%. As Scott noted, our 2019 Medicare membership grew well ahead of the overall Medicare enrollments as reported by the CMS. I would also like to address the dynamics in constrained lifetime values of our Medicare members.

During the fourth quarter, we continue to observe favorable changes in retention rates for the Medicare Advantage cohort that we enrolled in the annual enrollment period in the fourth quarter of 2018 in combination with higher commission rates in 2019 compared to 2018 and a positive impact from enhancements to our forecasting model. This contributed to a 2% increase in fourth quarter and a 5% increase in full-year 2019 Medicare Advantage LTVs compared to a year ago. Fourth-quarter and full-year Medicare supplement LTVs both declined by 6% compared to 2018. This was primarily driven by a slight decline in retention rates in this book of business.

Fourth-quarter 2019 revenue from our individual, family and small business segment was $19.1 million, a 44% increase compared to a year ago. Full-year 2019 revenue in this segment was $59.2 million, a 45% increase compared to 2018. Revenue growth was driven primarily by higher lifetime values for our individual and family plan and short-term products, as well as residual or tail revenue from our existing individual and family plan members. This was partially offset by a decline in the number of approved members on individual, small business group and related ancillary products as we continue to focus our investments in the Medicare business.

The individual, family and small business segment remained profitable on a stand-alone basis, generating segment profit of $23.4 million for the full year and $8.3 million for the fourth-quarter 2019. Our estimated individual and family plan membership at the end of fourth quarter was approximately 128,000, down 15% compared to the estimated membership we reported at the end of the fourth quarter a year ago. The estimated number of members on small business products was approximately 43,000 at the end of the year, a 9% increase compared to a year ago. Total revenue for the fourth quarter was $301.7 million.

Excluding the $42.3 million impact from the enhancement of the MA LTV model, fourth-quarter revenue was $259.4 million, an increase of 92% compared to the fourth quarter of 2018. Revenue for the full-year 2019 was $506.2 million. Excluding the impact from enhancement of the MA LTV model, revenue for the full-year 2019 was $463.9 million, an 85% increase compared to 2018. Now I will review our operating expenses and profitability metrics.

In 2019, we delivered meaningful margin expansion for the second year in a row. 2019 adjusted EBITDA margin, excluding the positive impact of enhancement of the MA LTV model, was 20% compared with 13% in 2018, reflecting fixed cost leverage as we grew our revenue base. Including the impact of the enhancement of the MA model, our 2019 adjusted EBITDA margin was 26%. At the same time, variable marketing costs per approved member in our Medicare business increased as we invested for accelerated enrollment growth and market share expansion, leading to higher costs for select initiatives within our direct and partner channels.

A larger contribution from online advertising channels, which, on average, have higher acquisition costs, also led to an increase in marketing costs of acquisition. 2019 variable marketing costs per approved Medicare member grew 11% compared to a year ago. Customer care and enrollment costs per approved Medicare member grew 13% in 2019 compared to 2018. Similar to marketing costs, this annual increase reflects our significant investment in growth of our Medicare business.

First, in 2019, we made a decision to retain a larger number of agents during our low-volume second and third quarters and started to hire and train agents early in the year ahead of the annual enrollment period with a goal of increasing their productivity during the critical selling season and to accommodate our marketing initiatives during the special enrollment period. In addition, during the annual enrollment period, we incur agent overtime costs during peak volume times and also saw longer-than-average call times, reflecting increased selection and complexity of Medicare Advantage plans. Finally, our 2019 customer care enrollment costs include expenses related to the opening of our new telesales center in Indianapolis. Adjusted EBITDA for the fourth quarter of 2019 was $142.6 million, or $100.3 million excluding the impact from the enhancement of the MA LTV model, compared to $51.9 million for the fourth quarter of 2018.

Full-year 2019 adjusted EBITDA was $133.2 million or $90.9 million excluding the impact from the enhancement of the MA LTV model, compared to $33.7 million for the full-year 2018. We calculate adjusted EBITDA by adding restructuring charges, acquisition costs, stock-based compensation, change in fair value of earn-out liability, depreciation and amortization, including the amortization of acquired intangibles, other income and provisioning and benefit for income taxes to our GAAP net income. Including the impact from enhancement of an MA LTV model, our fourth-quarter 2019 GAAP net income was $88.8 million compared to $26.1 million in the fourth quarter of 2018. Full-year 2019 GAAP net income was $66.9 million compared to $0.2 million in 2018.

Excluding the impact from the enhancement of the MA LTV model, our fourth-quarter and full-year 2019 net income would have been lower. Our fourth-quarter 2019 cash flow from operations was negative $56.8 million compared to a negative $8.7 million for the fourth quarter of 2018. For the full-year 2019, cash flow from operations was negative $71.5 million, reflecting significant investments in our Medicare enrollment growth, which accelerated in 2019 relative to growth rates we posted in 2018. I would like to remind you that while we pay the vast majority of our member acquisition expenses in the same quarter when we generate enrollment, most carriers do not pay initial commissions associated with enrollments during the annual enrollment period until January of next year when those policies become effective.

The impact of this timing, our cash cycle was exaggerated in 2019. As we shared on the fourth-quarter call a year ago, in 2018, we saw some commission payments related to our annual enrollment period enrollments come in earlier than we expected with a small percentage of payments being pushed out into the first quarter compared to historical patterns. This development had a beneficial impact in 2018 but had a negative impact on our cash flow from operations in 2019. In January 2020, we received approximately $59 million in commission payments related to the fourth-quarter 2019 enrollments.

Capital expenditures, which include capitalized internally developed software costs, were approximately $16.9 million for the full year. Our cash balance was $26.8 million, including restricted cash, and we had no outstanding debt. We ended the year with commission receivable balance of $589 million. And now I will provide our 2020 annual guidance.

We are forecasting revenue for 2020 to be in the range of $580 million to $620 million with Medicare segment revenue in the range of $533 million to $569 million, and individual, family and small business segment revenue in the range of $47 million to $51 million. We expect GAAP net income for 2020 to be in the range of $68 million to $83 million. We expect 2020 adjusted EBITDA to be in the range of $120 million to $135 million. 2020 Medicare segment profit is expected to be in the range of $152 million to $169 million, and individual, family and small business segment profit is expected to be in the range of $17 million to $18 million.

Corporate share services, excluding stock-based compensation and depreciation and amortization expense, is expected to be in the range of $49 million to $52 million. GAAP income per diluted share for 2020 is expected to be in the range of $2.64 to $3.23 per share. Non-GAAP income per diluted share for 2020 is expected to be in the range of $3.56 to $4.09 per share. Cash used in operations is expected to be in the range of $52 million to $55 million and cash used for capital expenditures is expected to be $18 million to $20 million.

At the midpoint, our 2020 revenue guidance implies a 29% growth compared to our 2019 revenue, excluding the $42.3 million positive impact due to enhancement of the Medicare Advantage lifetime value model. This growth is expected to be driven primarily by Medicare enrollment growth. Similar to last year, our 2020 guidance assumes no improvement in Medicare lifetime values. Based on the midpoint of our adjusted EBITDA guidance, we expect to generate a margin of 21% and margin expansion of approximately 150 basis points compared to our 2019 adjusted EBITDA margin of 20% after excluding a positive impact of the $42.3 million from the enhancement of the MA LTV model.

This margin expansion is expected to be driven primarily by continuing leverage in our fixed costs. At the same time, we will continue to invest for growth in our telesales capacity and marketing with combined marketing and customer care enrollment expenses growing roughly in line with projected 2020 revenue growth. On a per-approved-member basis in our Medicare business, we expect to drive improvements in customer care enrollment costs in 2020 to an increased contribution from fully unassisted online enrollments to total Medicare applications, further leverage from our agent-facing technology tools and managing for stronger cost efficiencies in our outsourced telesales model. Marketing cost per approved Medicare member are expected to stay roughly in line with 2019 levels.

Finally, I would like to make some comments with respect to the seasonality we expect this year. We're currently expecting a similar pattern in terms of each quarter's percentage contribution, total annual revenue as in 2019, excluding the impact from enhancement of our MA LTV model during the fourth quarter of 2019. The fourth quarter will continue to contribute disproportionately to revenue and earnings driven by the timing of Medicare annual enrollment period and Obamacare open enrollment period selling seasons. In the first quarter of 2020, we expect adjusted EBITDA to be relatively flat compared to the first quarter of 2019.

I want to remind you that these comments in our guidance are based on current indications of our business, our current estimates, assumptions and judgments, which may change at any time. Our actual results may differ as a result of changes in our estimates, assumptions, and judgments. We undertake no obligation to update our comments or our guidance. In conclusion, we ended 2019 on a strong note, delivering record performance during the annual enrollment period and expanding our share of the Medicare market.

We're now pacing well ahead of our five-year financial plan that we share investors in May of 2019 and anticipate updating our long-term projections later this year. With that, I'll turn it back to operator for questions.

Questions & Answers:


Operator

[Operator instructions] Your first question is from Jailendra Singh of Credit Suisse.

Jailendra Singh -- Credit Suisse -- Analyst

Hey, guys. Thanks a lot. I would like to better understand the 29% comment you're making in terms of growth year over year. I mean, if you ex out and you pick out 42.3% number, but if you ex out all the enhancement in the LTV model, how your core revenue growth would have looked from 2019 to 2020? Is this still 29% number? I'm just trying to understand that.

Derek Yung -- Chief Financial Officer and Senior Vice President

Yes. So Jailendra, good question. So the 29% off of the midpoint of the guidance is a comparison to 2019 revenue, excluding the $42.3 million.

Jailendra Singh -- Credit Suisse -- Analyst

So will you exclude 42.3% or will you exclude 50.8%? And 2020 number does not include any benefit from tail revenue of -- under this new enhancement.

Derek Yung -- Chief Financial Officer and Senior Vice President

Jailendra, in the 2020 guidance, there is implied tail revenue and the expectation for tail revenue from the Medicare business, when you exclude the $42.3 million, is to be flat.

Jailendra Singh -- Credit Suisse -- Analyst

OK. And then I'd like to better understand the implication for the increase in the percentage of online enrollment, clearly pretty impressive increase from 22% to 36%. That should have given a pretty decent margin leverage than what you actually reported. Is there something in a way you are incentivizing your brokers that you may not be yet realizing the full benefit of online enrollment, at least on the assisted side? Any color on that?

Derek Yung -- Chief Financial Officer and Senior Vice President

Yes, it's a good question, Jailendra. So within that increase, as Scott said in his prepared comments, is there are two components. One around unassisted online enrollments, where there is no interaction with call center agents, which is the type that I think you were just referencing, and assisted online enrollments where the beneficiary would spend some time consulting with our sales agents in the call center but then subsequently finished the application online. And both of those, we see both of those as positive customer experiences and the assisted online enrollment, in particular, is one where people would be more comfortable and need a little bit more help, but is an ability that allows them to be able to take time and make a decision later on if they want to continue with the application process.

We also see that area as a growth area in allowing more of our customers to experience an online enrollment experience and really help us engage customers in a way that is just strictly through online techniques.

Dave Francis -- Chief Operating Officer

Jailendra, it's Dave Francis. The other thing to consider is that we're continuing to invest marginal profits into growing the business. On the unassisted online side of the business, where there is no interaction with the salesperson, we are investing, as we talked about consistently, that savings to drive more business into the online channel. So as the business matures from a growth perspective, yes, we will get even more incremental benefit from a profit perspective, but at the moment, we're taking that incremental profit benefit and plowing it back into additional growth in the business to get more scale.

Either way, we're always focused on making sure that we're driving high-margin business, as you can see in the expanding EBITDA margins, with a high focus on profitability, even though we continue to invest in outsize growth of the business.

Jailendra Singh -- Credit Suisse -- Analyst

OK. And then my last question. Any thoughts around your financial flexibility and in timing around any potential capital raise based on your current cash and balance sheet and give cash flow guidance? It seems you might have to raise capital at some point. Just wondering how we're thinking about the timing there.

Derek Yung -- Chief Financial Officer and Senior Vice President

Yes, good question. We have adequate capital between the cash on the balance sheet and access to revolver to fund the growth plan that's outlined in our guidance. Should we decide to invest in more growth, we'll have to seek financing, and we have a number of options to do that. One of those options is potentially increasing the size of revolver, which we did successfully this past Q4.

Jailendra Singh -- Credit Suisse -- Analyst

Thanks a lot.

Operator

And your next question is from George Hill of Deutsche Bank.

George Hill -- Deutsche Bank -- Analyst

Hi, guys. I'm going to pretend that I'm smart enough to understand the Kaplan-Meier's model when I ask a couple of these questions.

Derek Yung -- Chief Financial Officer and Senior Vice President

We know you are, so I know you want to dig into that.

George Hill -- Deutsche Bank -- Analyst

I do, but probably, most of those questions will have to come off-line. I guess, first, could you talk about what the LTV would have been in Q4 under the old standard or before the adjustment?

Derek Yung -- Chief Financial Officer and Senior Vice President

It would have been slightly lower but not really material difference. So the enhanced model -- the benefit of the enhanced model wasn't necessary to have a higher LTV. It was to give us statistical evidence and give us the confidence that we can recognize revenue based on observations that we've seen and commented on previously around cash collections being higher than initial estimates.

George Hill -- Deutsche Bank -- Analyst

OK. That's helpful. And then I guess one of the things where you guys outperformed our model was in Med D, given that Med D is kind of a shrinking product versus MA. I guess can you just talk about the dynamic where you guys seem to disproportionately take share in the Med D book of business or grow Med D kind of -- grow Med D in a way that it kind of doesn't reflect market growth of the product?

Dave Francis -- Chief Operating Officer

Well, so, George, it's Dave. I'll answer it this way. We talk a lot about the tools that we put into the marketplace for customers to help them better determine what plan is best for them. And a lot of that has to do with the drugs that they take.

So whether it's on the MAPD side or just on the Part D side, both our agents and our online tools for customers we're seeing a lot of gravitational pull toward them because it helps people make more intelligent decisions about what they should be buying. So again, as we continue to invest in the technology side of the business, and I think we've talked about the fact that the large majority of our Part D business is done online, unassisted that we're seeing the value of those investments pay off in terms of customer engagement and follow-through on outsized growth in that part of the business as well.

George Hill -- Deutsche Bank -- Analyst

OK. And I guess my last one before I hop back in is you guys have already provided guidance for the year and you've talked about the earnings guidance in Q1. Is there any commentary you can provide on what type of MA activity you're seeing in Q1, either as it relates to churn or new people stepping on board? But just kind of interested -- I mean, we know the guidance is out there, just kind of interested in the dynamic you're seeing.

Derek Yung -- Chief Financial Officer and Senior Vice President

The business is, I would say, on plan. The expectation that we had for this Q1 was modeled after what we observed last year, which is there are a population of people who will take advantage of the open enrollment period to allow them to be able to switch into a client that they think it's better for them. So we do have the benefit of hindsight of Q1 last year's experience, where last year, we didn't when we hadn't seen this OE period in a long period of time. So we're able to invest into that a little bit more this year, but in general, I would say things are tracking on plan for Q1.

Scott Flanders -- Chief Executive Officer

The business is strong, and we feel really good about where we sit at the moment.

George Hill -- Deutsche Bank -- Analyst

OK. I'll hop back in the queue. Thanks.

Operator

Your next question is from Greg Peters of Raymond James.

Greg Peters -- Raymond James -- Analyst

Good afternoon. I think in your prepared comments, you spoke about the 2018 vintage with the retention running a little bit ahead of plan last year. And I'm just curious about how you're thinking about retention characteristics for the 2019 vintage. Considering it's so much larger than the 2018 vintage, it seems like it could be a little bit more volatile, but perhaps you have a view on that.

Derek Yung -- Chief Financial Officer and Senior Vice President

It's a good question, Greg. We're not trying to convey that we expect it to be more volatile, if that's what you're picking up. From a forecasting and estimation perspective, this year, we have the observation from last year of how the open enrollment period in Q1 will play into customer retention and churn. That was a big wildcard last year.

We did our best in making the estimates of what it could be and invest in, and this year, now with the experience last year, we were able to do better. We are guiding to a flat LTV. And then behind that is largely an expectation that there will be no significant deviation from the churn or policy situation we see in Medicare in 2020.

Greg Peters -- Raymond James -- Analyst

OK. I want to pivot another comment. You talked about your cost per acquired member, and you said -- I think you said you expect them to be relatively flat in 2020 relative to 2019. Can you talk about what kind of -- can you talk about your demand generation expertise? The reason why I'm asking is we're hearing about incidences of other competitors in the marketplace paying much higher acquisition costs than you guys are.

I'm just trying to reconcile some market talk with what you guys are reporting.

Derek Yung -- Chief Financial Officer and Senior Vice President

Yes. So let me clarify a couple of other things numerically. As you did hear correctly, that for Medicare marketing variable costs per approved member, we're expecting that to be flat year over year. We did also mention in prepared remarks that we expect our customer care enrollment cost per approved member to improve year over year.

And in total, for the P&L, we are saying that for our sales and marketing and customer care enrollment cost to grow the same way as revenue. So you heard that correctly. On the marketing side, we haven't seen what you mentioned impeding our growth. I think that's evident in our numbers.

We have seen higher degree of competition in channels like direct response TV, and the competition set for us is primarily still our carrier partners and FMOs. There are, of course, other brokers as well, but really the competition set that we see emerging more so than channel like DirecTV, really, carriers and FMOs. Again, in the market, we haven't seen that affect us in that manner. We do have a competitive advantage in our marketing and in strategic partnerships.

So we have discussed in the past that is a growing area for us. We have strategic relationships with the largest pharmacies, hospital networks, carriers and so on. And from a cost of acquisition perspective, it is an area that, on average, is better than our direct marketing. And other than online marketing, it is an area that we would expect to grow faster than others from a marketing perspective.

Greg Peters -- Raymond James -- Analyst

OK. The final question would be I know you highlighted the substantial growth in your commission receivable, both current and noncurrent. Can you talk about -- and I know you mentioned some of this in your prepared remarks. Can you talk about the expense associated with that receivable? Maybe the biggest piece would be the noncurrent.

Is there any expense associated with that, or is that pure cash?

Derek Yung -- Chief Financial Officer and Senior Vice President

So the commission receivable represents the cash collections to be collected associated with the commissions that we earn from carriers for the policies that we help acquire customers for them on their behalf. So once that's happened, and it's actually the reason why we recognize the revenue we do, our service obligation is completed, and therefore, we recognize the lifetime value of that. From an operating perspective, other than reconciling the cash coming in and the cash that we should be being paid as a broker record, there's no other costs associated with that.

Scott Flanders -- Chief Executive Officer

There's no cost against it, Greg. The costs have been expensed in period, and it's all cash to be collected free of additional charge.

Operator

And your next question is from Frank Morgan of RBC Capital Markets.

Frank Morgan -- RBC Capital Markets -- Analyst

Good afternoon. Just one -- quickly a couple of housekeeping. What's the implied share count in your guidance?

Derek Yung -- Chief Financial Officer and Senior Vice President

25.7 million, fully diluted.

Frank Morgan -- RBC Capital Markets -- Analyst

OK. And in terms of the growth in the unassisted and assisted online enrollment, have you had any time yet to figure out what the retention is in that kind of cohort of your business over the long haul?

Derek Yung -- Chief Financial Officer and Senior Vice President

Frank, we have looked at that in the past. We haven't seen significant deviations in general depending on someone is telephonic, unassisted online or assisted online. With that said, as you heard in the prepared remarks, we had a significant increase in the assisted online submission applications. So that is a newer component, and it's obviously too early to be able to see and predict any long-term differences.

Given the conversion rates and the customer feedback around that experience, we will be surprised if there is any difference in there, and if there is, it's most likely positive.

Scott Flanders -- Chief Executive Officer

Yes. Frank, the thing to keep in mind relative to these assisted online enrollments is that the tools that we put in the hand of the agents, in terms of allowing the agents to then hand off the online enrollment piece to the customer either through an email or through a text exchange, is a set of tools that is unique to us and is something that builds the confidence as we have seen in the customer as they make their decision. So it's too early for some of these products to be showing any kind of meaningful deviation from historical retention norms. But given the increased level of conversion that we see when those products are used and the what we believe is a higher level of confidence in the customer's purchase decision, we think that there's nothing but potential upside there relative to persistency of that part of the book relative to what we've seen with the pure telephonic in the past.

Frank Morgan -- RBC Capital Markets -- Analyst

Got you. And then I think you commented that the tail revenue you're expecting it to actually be flat. What was the tail revenue?

Derek Yung -- Chief Financial Officer and Senior Vice President

So for the full year, Medicare, yes, Medicare tail revenue was $55 million, so that includes the $42.3 million. So then the remainder is $13 million, and it's flat in the guidance going into 2020.

Frank Morgan -- RBC Capital Markets -- Analyst

OK. And just to be -- so is the $42.3 million, is that actual cash received? Or is that just...

Derek Yung -- Chief Financial Officer and Senior Vice President

Well, it's not cash received on a numeric basis. It is our revised expectations, what is expected to be collected from those clients.

Frank Morgan -- RBC Capital Markets -- Analyst

OK. And then I guess, finally, just some recent discussions we've had with some of the carriers, they've talked about some of the strategic value of third-party -- benefits of third-party broker relationships. And seeking their input really about targeting specific markets, but also impact on input on plan design. Have you seen this? Is this happening in any of your markets? And do you think it -- what do you think the long-term implications would be for you, if so? Thanks.

Scott Flanders -- Chief Executive Officer

Yes. Frank, we don't get into a lot of plan design discussions per se with our carrier partners. We do spend a lot of time talking with our carrier partners about what we are seeing in different parts of the market. And we occupy a unique perch within the Medicare Advantage market, in particular, the Medicare market generally, as it relates to the market approach and choice approach that we deploy and that we are ingesting a tremendous amount of information on a very granular basis across the entire country relative to who is doing what from a premium benefit design and pricing perspective.

So we are able to engage with the carriers and talk with them with a level of intelligence that allows them to go into the next year thinking a little bit more intelligently about how they want to approach different markets, benefit design and that sort of thing. But as it relates to specifically getting into plan design and whatnot with the carrier partners, they typically take a lot of the information that we give them and then go in and do their blackbox work. And it's part of the partnership that we have with them but not a lot of involvement in design, but certainly a lot of involvement on the intelligence side.

Operator

And your next question is from Dave Styblo of Jefferies.

Dave Styblo -- Jefferies -- Analyst

Hi, there. Good afternoon. Thanks for the questions. First one was just to circle back on the agent count.

So I think you guys were looking to double that in '19, and maybe you did and a little bit more than that was the end result. I'm curious, can you give us an update on your plans for hiring and growth in telesales agents, both that you guys have or also metrics that we could think about for those that you're outsourcing, and how you're going to use that to flex up and down and how that growth compares to the core revenue growth?

Scott Flanders -- Chief Executive Officer

Yes. So Dave, we're not going to give out specific agent counts right now, but I can give you a little bit more color. So this last year, we did invest significantly in gross agent counts that were higher than they were in 2018. We took the success that we had on the outsourced model in 2018 and levered that even further into our agent counts in '19.

We also expanded our internal capacity through this Indianapolis sales facility, as well as expanding in both the Gold River and Salt Lake City offices. As we approach this year, we are looking to obviously further expand to take advantage of the market growth opportunities that we continue to see robustly ahead of us, and we will use the ability to lever the internal and external forces in a way that allow us, as Derek described, to bring down our incremental cost of customer acquisition on the sales cost side, the CC&E side, by being a little bit more optimized relative to how we play with that mix of internal versus external, understanding that we will have, on a gross basis, more agents, particularly as we go into the fourth quarter of this year.

Dave Styblo -- Jefferies -- Analyst

OK. And just to understand management's philosophy, I mean, if there's an opportunity in the market to go small, you doubled last year and maybe got validation of what you were doing, why not double it again or grow it by 50%? Or is it something where you just want to be a little bit more measured and making sure you don't get ahead of your skis? Or is there just some training lag capacity infrastructure that you have to contemplate as you grow that rapidly?

Scott Flanders -- Chief Executive Officer

Yes. I mean, it's a balance between cost and making sure that we continue to manage the business to grow it as aggressively as possible without breaking it. We talked last year about the fact that we wanted to put as many plates on each end of the bar without breaking the machine, and there is a nontrivial amount of management of a sales organization as large as we have been growing it. And it is, quite frankly, the rate limiter until we get even more of the business going online and letting the machines do all of the work.

The ability for us from both a cost and a management perspective to grow that business as aggressively as possible without making it break is what we are acutely attuned to. So as we look at the -- I would say, as you look at the guidance that we put out last year and then how we performed against it, it's a similar way as to how we are looking at growing the business this year.

Derek Yung -- Chief Financial Officer and Senior Vice President

And Dave, I understand your question. I think there's also a timing aspect to it, too. We have put out our guidance. But as we have done in previous year, we'll continue to evaluate what really we expect to invest in Q4 as we get closer given any improvement we see in our technology and also just generally what we see as an opportunity to get more market share later on in the year.

Dave Styblo -- Jefferies -- Analyst

OK, great. And then just a last one from a margin expansion standpoint. I know you guys want to update your longer-term projections at some point. But sitting around the 21%, 22% margin, your bull case was to get to 35% in 2023.

I'm curious, are you willing to talk about that relative to where you think you can go? Are we on track? Maybe you're making more investments right now to grow the top line, but how should we think about the cadence of the margin expansion over time going forward?

Derek Yung -- Chief Financial Officer and Senior Vice President

Yes. So I commented that we'll be working on a revised five-year outlook later on this year as we've done in the past couple of years. In reference to how we perform in '19 compared to the long-term plan that we have published last year, on the revenue side, we're a full year ahead of that plan. On the EBITDA margin, we're somewhere in between next year and the year after, so we're not full year ahead.

But from an EBITDA dollar perspective, we're actually ahead by a full year as well. So what you're saying generally is as we are growing at faster rates that we had expected given the opportunity in front of us, we are investing more into it. And on a kind of comparative basis, on a margin percentage, we're not getting to that point. But certainly, we're delivering on the EBITDA dollars that we would expect, and we're, in fact, a full year ahead of that.

Operator

Your next question is from Mike Newshel of Evercore ISI.

Mike Newshel -- Evercore ISI -- Analyst

Thanks, yes. Maybe to follow up on the agent discussion, can you just comment on the external agent vendor performance in AEP and why productivity was so much better than the initial guidance? Was it just conservatism, or did the lead allocation algorithms perform well? Were there certain pockets or certain vendors that performed much better than you expected?

Scott Flanders -- Chief Executive Officer

There was a combination of all of those. I think we did go in with a bit of a conservative view just to make sure that we weren't overstating our ability to deliver there. But candidly, the performance of the outsourced agents improved almost daily throughout the entire AEP selling season. A lot of that had to do with the tools that we deployed into all of the sales centers, both internal and external, and the new agents just becoming more comfortable and fluent with the technology.

That, along with the fact that the marketing and the business development side of the business, continue to drive high-quality business into the sales centers. It all added up to conversion rates that were ahead of our expectations. We were really pleased with everybody's performance, both internal and external.

Mike Newshel -- Evercore ISI -- Analyst

And I understand you're not telling us how many agents you're adding, but since you have so many agents that were new this year that are returning, does guidance assume any significant productivity improvements in the existing agent base?

Derek Yung -- Chief Financial Officer and Senior Vice President

The guidance assumes same level of productivity from our agents in total.

Mike Newshel -- Evercore ISI -- Analyst

Thanks.

Operator

Your next question is from George Sutton of Craig-Hallum.

George Sutton -- Craig-Hallum Capital Group LLC -- Analyst

Thank you. I don't know if we're letting Scott answer questions, but I will ask the very commonly seemed question I am getting from buy-side folks, and that is, George, if I missed this stock in the story, and I wanted to address the question from the perspective of market share that you had both in 2019 and market share you think you could obtain over the next handful of years, particularly given that your 2020 outlook assumes you'll continue to gain meaningful share.

Scott Flanders -- Chief Executive Officer

Yes. Hi, George, thanks for giving me a chance to say something. We're still in the early stage of share capture, and we're dancing around this here, but to put a sharper point on it, our guidance is impacted by our current balance sheet. And we wanted to guide within what capital we can represent we have access to today.

We do believe the market, that we can penetrate it more fully if we had more cash, and we will evaluate that as we get further into the year. As Dave and Derek both said, the year has started off strong. We're ahead of plan. We're ahead of guidance, and we have every reason to think that our increasing share will be maintained.

We think also that we are at the early stage of a secular shift from purchasing Medicare across the kitchen table to first telephonic and now telephonic-assisted with online and online-assisted with telephonic and an increasing shift to fully online. And we're just perfectly positioned for all three, and it's always been my philosophy in the consumer businesses that I've run is you meet the consumer where they are. And we think we've done that. We invested ahead of consumer, in terms of our tech stack and our consumer experience online, but it's catching up to us now.

And that's why we feel very strongly just about our accelerating growth rates against the market itself, but also the margin expansion. We think we're just perfectly positioned.

George Sutton -- Craig-Hallum Capital Group LLC -- Analyst

That's very helpful. So one other question relative to Medicare plan finder issues coming out of Q4. There was a fairly large number of unhappy customers coming from medicare.gov. I'm curious if you have specific programs to target those folks in this new or expanded open enrollment period in Q1.

Dave Francis -- Chief Operating Officer

Yes. The short answer is yes, with a very large caveat, but we don't know exactly who those folks are. Unfortunately, we'd love for them to raise their hand. We do think that they're out there in the marketplace finding their way to us.

And back to one of the earlier questions, I do believe that that's part of what drove some of our outperformance on the online side of the business, both in major medical and in Part D business. But the fact remains that our NPS scores, as Scott mentioned earlier on the telephonics side, are still in the high 80s, low 90s. And we're seeing just significant growth on the online side of the business that more customers are going to the web, and they're finding satisfaction with the tool set and the capabilities that they have to enroll on our platform.

George Sutton -- Craig-Hallum Capital Group LLC -- Analyst

Perfect. Thank you.

Operator

And your next question is from Tobey Sommer of SunTrust.

Tobey Sommer -- SunTrust Robinson Humphrey -- Analyst

Thank you. As we look at your plans to increase productivity and margin, could you discuss your major initiatives for '20, which, in my understanding, may include working with the indirect channel, as well as exploiting some of the investments you've made in databases and platforms that can kind of shorten the time that it takes to do an enrollment over the phone and make customer experience better?

Dave Francis -- Chief Operating Officer

Yes. So Tobey, we've talked a lot about the fact that on both the partner side and levering some other tools in the marketplace that getting more customer information, more data specific to each and every customer to enable either our agents or the online platform to provide a more friction-free and more accurate assessment of what's the best product for that customer to get them to the right place faster and easier from a plan selection and enrollment perspective, it's a key area of focus for us. A lot of the technology investments that Derek referred to in his remarks are related specifically to that. How do we integrate more deeply with our business partners and the hospital pharmacy, affinity and increasingly the financial services markets? How do we access customer data through tools like Blue Button and what have you to be able to know more about our customers to make the enrollment decision and process that much easier and more confidence-inspiring for them? And that is a key area of focus for us and is an area where we think we've got a large lead in the marketplace and continue to invest to extend and maintain that lead.

Tobey Sommer -- SunTrust Robinson Humphrey -- Analyst

One follow-up question if I could. In terms of the share gains that you are taking in the market, do you have a sense for whether they're coming from other brokers or from the managed care companies themselves or a combination of both? Thanks.

Scott Flanders -- Chief Executive Officer

We think they're coming from the more traditional brokers.

Operator

And your final question is from Lisa Springer of Singular Research.

Lisa Springer -- Singular Research -- Analyst

Thank you. My question concerns the unassisted and partially assisted applications submitted online with a positive trend in that. Looking forward, say, over a three- to five-year period and as you build out the technology platform, how should we think about the percentage looking forward? And do you think you'll encounter a natural ceiling at some point that it will be very difficult to make it higher than, say, 50% to 70% of the applications?

Derek Yung -- Chief Financial Officer and Senior Vice President

So it's built in our guidance expectation in 2020 that our overall online submission for applications in Medicare will be 34%. Within that, there's growth in both the assisted and unassisted online application submission. On your question of whether there's a natural ceiling, it's a good one and a good one that we ask internally as well. Clearly, there is a trend as people age in the Medicare, who are more tech savvy, they will have a greater incentive to using the tools online.

With that said, if you were to analyze feature by feature our technology engagement and capabilities, they are good. They are not best in the class when you look across other industries that are more mature with e-commerce. So our product and technologies feel strongly that even without the secular trend around people aging in, there are improvements to be made on our ability to capture people more online, both assisted and unassisted.

Dave Francis -- Chief Operating Officer

Yes. And Lisa, there likely is a ceiling at some point. I mean, it's a demographic and a very complex set of products that lends itself to wanting more help. With that said, we're investing heavily to put those tools in -- as many of those tools as possible in the customers' hands.

The other piece here is that we -- internally, about a year and a half ago, we set a very aggressive goal. We even had T-shirts printed up that said 50 and five, which was to have 50% of our enrollments within a five-year period to go online. We saw that as one of those big hairy probably unachievable but we're going to go for it goals anyway and the way we're tracking, we are going to get there a lot sooner than we had anticipated originally. So we're really pleased with the trajectory of both the assisted and the unassisted traffic that we're seeing.

It shows the power and the uniqueness of our platform. And as Derek and Scott have said, we're going to continue to invest heavily into that to make sure customers had exactly what they want and need from a tool and engagement perspective and take advantage of the uniqueness of our value prop in that regard.

Operator

[Operator signoff]

Duration: 65 minutes

Call participants:

Kate Sidorovich -- Vice President of Investor Relations

Scott Flanders -- Chief Executive Officer

Derek Yung -- Chief Financial Officer and Senior Vice President

Jailendra Singh -- Credit Suisse -- Analyst

Dave Francis -- Chief Operating Officer

George Hill -- Deutsche Bank -- Analyst

Greg Peters -- Raymond James -- Analyst

Frank Morgan -- RBC Capital Markets -- Analyst

Dave Styblo -- Jefferies -- Analyst

Mike Newshel -- Evercore ISI -- Analyst

George Sutton -- Craig-Hallum Capital Group LLC -- Analyst

Tobey Sommer -- SunTrust Robinson Humphrey -- Analyst

Lisa Springer -- Singular Research -- Analyst

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