Cantor Fitzgerald (12/20) - Before the market open today, 12/20, HIIQ provided an update regarding its business strategy and ongoing strategic review process. We spoke with management following the news release. The company remains focused on building out its Medicare business, which we believe should be a core long-term growth driver. We believe HIIQ's Medicare progress has been successful thus far, recognizing it is still early.
The company indicated to us that it will be de-emphasizing its legacy IFP business going forward. We note that this does not mean the company will exit the business in the near term. Additionally, HIIQ is focused on maximizing cash flows in its IFP business and enhancing its e-commerce capabilities. The company believes that its existing book of IFP business (e.g., policies in force, expected renewals) should generate about $170 million in net cash flows from existing IFP contract assets and commissions payable. Importantly, HIIQ expects that a "significant amount" of this operating cash flow will be available in 2020. Management indicated to us that the company will monetize the future revenue stream to help cash flow. We note that eHealth (EHTH - Overweight) took a similar strategy (credit agreement) in 2018.
We believe this suggests the company has financial stability and should be able to generate cash flow in the near-term. We believe this may make the asset more attractive to a potential buyer. We note that the company's strategic review process remains ongoing. We believe HIIQ could provide an update soon, recognizing that this could come after January. We continue to view the shares as highly compelling at current levels.
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