Newsroom > Press Releases > eHealth, Inc. Announces Second Quarter 2017 Results

eHealth, Inc. Announces Second Quarter 2017 Results

Second Quarter 2017 Overview

  • Revenue for the second quarter of 2017 was $28.0 million, a decrease of 25% compared to $37.3 million for the second quarter of 2016.
  • Net loss for the second quarter of 2017 was $17.3 million compared to net loss of $0.5 million for the second quarter of 2016.
  • Adjusted EBITDA for the second quarter of 2017 was $(13.6) million compared to $(2.6) million for the second quarter of 2016.
  • Net cash used in operations for the second quarter of 2017 was $1.0 million compared to net cash provided by operations of $2.6 million for the second quarter of 2016.

MOUNTAIN VIEW, Calif.--Jul. 27, 2017-- eHealth, Inc. (NASDAQ:EHTH), a leading private online health insurance exchange, announced today its financial results for the second quarter of 2017.

Scott Flanders, chief executive officer of eHealth, stated, "We have indicated that 2017 is a transition year for eHealth and our second quarter results reflect this. At the same time, we are making significant headway in executing on our strategic plan, including early success in developing high-value, strategic partnerships in our Medicare business, enhancing the effectiveness of our Medicaresales organization and achieving strong enrollment growth in the small business and Medicare Supplement segments of the health insurance market. We are also preparing our individual and family plan business for improved performance in a turbulent market that we believe continues to hold significant opportunity for eHealth."

GAAP — Second Quarter of 2017 Results

Revenue — Revenue for the second quarter of 2017 totaled $28.0 million, a 25% decrease compared to $37.3 million for the second quarter of 2016. Commission revenue for the second quarter of 2017 totaled $25.8 million, a 26% decrease compared to $34.6 million for the second quarter of 2016. Other revenue for the second quarter of 2017 was $2.2 million, an 18% decrease compared to $2.6 millionfor the second quarter of 2016.

Revenue from our Medicare segment was $11.0 million for the second quarter of 2017, a 14% increase compared to $9.7 million for the second quarter of 2016. Revenue from our Individual, Family and Small Business segment was $16.9 million for the second quarter of 2017, a 39% decrease compared to $27.6 million for the second quarter of 2016.

Loss from Operations — Loss from operations for the second quarter of 2017 was $17.2 millioncompared to loss from operations of $5.8 million for the second quarter of 2016. Operating margin was (62)% for the second quarter of 2017 compared to (16)% for the second quarter of 2016.

Pre-tax Loss — Pre-tax loss for the second quarter of 2017 was $17.1 million compared to pre-tax loss of $5.8 million for the second quarter of 2016.

Provision (Benefit) for Income Taxes — Provision for income taxes for the second quarter of 2017 was $0.1 million compared to benefit for income taxes of $5.4 million for the second quarter of 2016.

Net Loss — Net loss for the second quarter of 2017 was $17.3 million, or $(0.93) per diluted share, compared to net loss of $0.5 million, or $(0.03) per diluted share, for the second quarter of 2016.

Segment Profit (Loss)  Loss from our Medicare segment was $15.1 million for the second quarter of 2017, a 7% increase compared to a loss of $14.1 million for the second quarter of 2016. Profit from our Individual, Family and Small Business segment was $8.4 million for the second quarter of 2017, a 59% decrease compared to $20.5 million for the second quarter of 2016. Segment profit is calculated as revenue for the applicable segment less Marketing and Advertising, Customer Care and Enrollment, Technology and Content and General and Administrative operating expenses, excluding stock-based compensation, depreciation and amortization expense, restructuring benefit and amortization of intangible assets, that are directly attributable to the applicable segment and other indirect Marketing and Advertising, Customer Care and Enrollment and Technology and Content operating expenses, excluding stock-based compensation, depreciation and amortization expense and amortization of intangible assets, allocated to the applicable segment based on usage. Other indirect general and administrative operating expenses are managed in a corporate shared services environment and, since they are not the responsibility of segment operating management, are not allocated to the operating segments and instead reported within Corporate.

Non-GAAP — Second Quarter of 2017 Results

Non-GAAP Operating Loss & Non-GAAP Net Income (Loss) — Non-GAAP operating loss for the second quarter of 2017 was $14.4 million compared to non-GAAP operating loss of $3.5 million for the second quarter of 2016. Non-GAAP operating margin for the second quarter of 2017 was (51)% compared to (9)% for the second quarter of 2016. Non-GAAP net loss for the second quarter of 2017 was $14.4 million, or $(0.78) per diluted share, compared to non-GAAP net income of $1.8 million, or $0.09 per diluted share, for the second quarter of 2016.

Non-GAAP operating loss, non-GAAP net loss and non-GAAP net loss per diluted share for the second quarter of 2017 exclude $2.6 million of stock-based compensation expense and $0.3 million of amortization of intangible assets. Non-GAAP operating loss, non-GAAP net income and non-GAAP net income per diluted share for the second quarter of 2016 exclude $2.2 million of stock-based compensation expense, $0.2 million restructuring benefit and $0.3 million of amortization of intangible assets.

Adjusted EBITDA — Adjusted EBITDA for the second quarter of 2017 was $(13.6) million compared to $(2.6) million for the second quarter of 2016. Adjusted EBITDA is calculated by adding stock-based compensation, depreciation and amortization expense, restructuring benefit, amortization of intangible assets, other income (expense), net and provision (benefit) for income taxes to GAAP net income.

Membership & Submitted Applications

Membership — Total estimated membership as of June 30, 2017 was 885,800 members, a 19% decrease compared to 1,100,300 we reported as of June 30, 2016. Estimated Medicare membership as of June 30, 2017 was 300,400, a 26% increase compared to 239,000 we reported as of June 30, 2016. Estimated individual and family plan membership as of June 30, 2017 was 244,900 members, a 49% decrease compared to 481,300 we reported as of June 30, 2016.

Submitted Applications —Submitted applications for all Medicare products, which includes Medicare Advantage, Medicare Supplement and Prescription Drug Plans were 31,200 applications in second quarter of 2017, a 5% decrease compared to 32,700 applications in the second quarter of 2016. Submitted applications for individual and family plan products decreased 45% in the second quarter of 2017 to 5,400 applications covering 8,400 individuals compared to 9,800 applications covering 14,600 individuals in the second quarter of 2016.

Cash — Second Quarter 2017

Cash Flows — Net cash used in operating activities was $1.0 million for the second quarter of 2017 compared to net cash provided by operating activities of $2.6 million for the second quarter of 2016.

GAAP — Year-to-Date Results

Revenue — Revenue for the six months ended June 30, 2017 totaled $106.9 million, a 4% decrease compared to $111.1 million for the six months ended June 30, 2016. Commission revenue for the six months ended June 30, 2017 totaled $102.0 million, a 2% decrease compared to $104.0 million for the six months ended June 30, 2016. Other revenue for the six months ended June 30, 2017 was $4.9 million, a 31% decrease compared to $7.1 million for the six months ended June 30, 2016.

Revenue from our Medicare segment was $69.0 million for the six months ended June 30, 2017, a 30% increase compared to $53.1 million for the six months ended June 30, 2016. Revenue from our Individual, Family and Small Business segment was $37.9 million for the six months ended June 30, 2017, a 35% decrease compared to $58.0 million for the six months ended June 30, 2016.

Income from Operations — Income from operations for the six months ended June 30, 2017 was $14.6 million compared to $17.9 million for the six months ended June 30, 2016. Operating margin was 14% for the six months ended June 30, 2017 compared to 16% for the six months ended June 30, 2016.

Pre-tax Income — Pre-tax income for the six months ended June 30, 2017 was $14.7 millioncompared to $17.8 million for the six months ended June 30, 2016.

Provision (Benefit) for Income Taxes — Benefit for income taxes for the six months ended June 30, 2017 was $1.4 million compared to provision for income taxes of $0.3 million for the six months ended June 30, 2016.

Net Income — Net income for the six months ended June 30, 2017 was $16.2 million, or $0.86 per diluted share, compared to $17.6 million, or $0.96 per diluted share, for the six months ended June 30, 2016.

Segment Profit (Loss)  Profit from our Medicare segment was $15.6 million for the six months ended June 30, 2017, a 315% increase compared to $3.8 million for the six months ended June 30, 2016. Profit from our Individual, Family and Small Business segment was $19.5 million for the six months ended June 30, 2017, a 46% decrease compared to $36.1 million for the six months ended June 30, 2016. Segment profit is calculated as revenue for the applicable segment less Marketing and Advertising, Customer Care and Enrollment, Technology and Content and General and Administrative operating expenses, excluding stock-based compensation, depreciation and amortization expense, restructuring benefit and amortization of intangible assets, that are directly attributable to the applicable segment and other indirect Marketing and Advertising, Customer Care and Enrollment and Technology and Content operating expenses, excluding stock-based compensation, depreciation and amortization expense and amortization of intangible assets, allocated to the applicable segment based on usage. Other indirect general and administrative operating expenses are managed in a corporate shared services environment and, since they are not the responsibility of segment operating management, are not allocated to the operating segments and instead reported within Corporate.

Non-GAAP — Year-to-Date Results

Non-GAAP Operating Income & Non-GAAP Net Income — Non-GAAP operating income for the six months ended June 30, 2017 was $19.8 million compared to $22.2 million for the six months ended June 30, 2016. Non-GAAP operating margin for the six months ended June 30, 2017 was 19% compared to 20% for the six months ended June 30, 2016. Non-GAAP net income for the six months ended June 30, 2017 was $21.4 million, or $1.01 per diluted share, compared to $21.9 million, or $1.20 per diluted share, for the six months ended June 30, 2016.

Non-GAAP operating income, non-GAAP net income and non-GAAP net income per diluted share for the six months ended June 30, 2017 exclude $4.7 million of stock-based compensation expense and $0.5 million of amortization of intangible assets. Non-GAAP operating income, non-GAAP net income and non-GAAP net income per diluted share for the six months ended June 30, 2016 exclude $4.0 million of stock-based compensation expense, $0.2 million restructuring benefit and $0.5 million of amortization of intangible assets.

Adjusted EBITDA — Adjusted EBITDA for the six months ended June 30, 2017 was $21.3 millioncompared to $24.2 million for the six months ended June 30, 2016. Adjusted EBITDA is calculated by adding stock-based compensation, depreciation and amortization expense, restructuring benefit, amortization of intangible assets, other income (expense), net and provision (benefit) for income taxes to GAAP net income.

Membership & Submitted Applications

Submitted Applications —Submitted applications for all Medicare products, which includes Medicare Advantage, Medicare Supplement and Prescription Drug Plans was 62,500 applications in the six months ended June 30, 2017, a 2% decrease compared to 63,600 applications in the six months ended June 30, 2016. Submitted applications for individual and family plan products decreased 67% in the six months ended June 30, 2017 to 27,400 applications covering 39,000 individuals compared to 84,100 applications covering 111,700 individuals in the six months ended June 30, 2016.

2017 Guidance

eHealth is reaffirming guidance for the full year ending December 31, 2017 based on information available as of July 27, 2017. These expectations are forward-looking statements and eHealth assumes no obligation to update these statements. Results may be materially different and are affected by the risk factors and uncertainties identified in this release and in eHealth’s annual and quarterly filings with the Securities and Exchange Commission.

  • Total revenue is expected to be in the range of $165 million to $175 million. Revenue from the Medicaresegment is expected to be in the range of $96.5 million to $101.5 million. Revenue from the Individual, Family and Small Business segment is expected to be in the range of $68.5 million to $73.5 million.
  • Adjusted EBITDA(a) is expected to be in the range of $(14.1) million to $(16.1) million.

In millions

         
GAAP net loss     $ (27.8 )   $ (29.8 )
Stock-based compensation expense       10.6       10.6  
Depreciation and amortization       3.4       3.4  
Amortization of intangible assets       1.0       1.0  
Other income (expense), net       (0.1 )     (0.1 )
Benefit for income taxes       (1.2 )     (1.2 )
Adjusted EBITDA(a)     $ (14.1 )   $ (16.1 )
                   
  • Medicare segment loss(b) is expected to be in the range of $(11.5) million to $(12.5) million. Individual, Family and Small Business segment profit(b) is expected to be in the range of $23.5 million to $24.5 million. Corporate(c) shared service expenses, excluding stock-based compensation and depreciation and amortization expense, is expected to be approximately $26.8 million.
  • GAAP net loss per share is expected to be in the range of $(1.49) to $(1.59) per share.
  • Non-GAAP net loss per share(d) is expected to be in the range of $(0.86) to $(0.96) per share.
GAAP net loss per diluted share   $ (1.49 )   $ (1.59 )
Stock-based compensation expense     0.57       0.57  
Amortization of intangible assets     0.06       0.06  
Non-GAAP net loss per diluted share(d)   $ (0.86 )   $ (0.96 )
                 

(a) Adjusted EBITDA is calculated by adding stock-based compensation, depreciation and amortization expense, amortization of intangible assets, other income (expense) and provision (benefit) for income taxes to GAAP net income (loss).

(b) Segment profit (loss) is calculated as revenue for the applicable segment less Marketing and Advertising, Customer Care and Enrollment, Technology and Content and General and Administrative operating expenses, excluding stock-based compensation, depreciation and amortization expense and amortization of intangible assets, that are directly attributable to the applicable segment and other indirect Marketing and Advertising, Customer Care and Enrollment and Technology and Content operating expenses, excluding stock-based compensation, depreciation and amortization expense and amortization of intangible assets, allocated to the applicable segment based on usage.

(c) Corporate consists of other indirect General and Administrative operating expenses, excluding stock-based compensation and depreciation and amortization expense, which are managed in a corporate shared services environment and, since they are not the responsibility of segment operating management, are not allocated to the reportable segments.

(d) Non-GAAP net loss per share is calculated by excluding stock-based compensation expense and intangible asset amortization expense to GAAP net income (loss).

Webcast and Conference Call Information

A Webcast and conference call will be held today, Thursday, July 27, 2017 at 5:00 p.m. Eastern / 2:00 p.m. Pacific Time. The Webcast will be available live on the Investor Relations section on eHealth’s website at http://ir.ehealthinsurance.com. Individuals interested in listening to the conference call may do so by dialing 877 930.8066 for domestic callers and 253 336.8042 for international callers. The participant passcode is 53316154. A telephone replay will be available two hours following the conclusion of the call for a period of seven days and can be accessed by dialing 855 859.2056 for domestic callers and 404 537.3406 for international callers. The call ID for the replay is 53316154. The live and archived webcast of the call will also be available on eHealth's website at http://www.ehealthinsurance.com under the Investor Relations section.

About eHealth, Inc.

eHealth, Inc. (NASDAQ:EHTH) operates http://www.eHealth.com, a leading private online health insurance exchange where individuals, families and small businesses can compare health insurance products from leading insurers side by side and purchase and enroll in coverage online. eHealth offers thousands of individual, family and small business health plans underwritten by many of the nation's leading health insurance companies. eHealth (through its subsidiaries) is licensed to sell health insurance in all 50 states and the District of Columbia. eHealth also offers educational resources and powerful online and pharmacy-based tools to help Medicare beneficiaries navigate Medicare health insurance options, choose the right plan and enroll in select plans online through PlanPrescriber.com (www.PlanPrescriber.com), eHealthMedicare.com (www.eHealthMedicare.com) and Medicare.com (www.Medicare.com).

Forward-Looking Statements

This press release contains statements that are forward-looking statements as defined within the Private Securities Litigation Reform Act of 1995. These include statement regarding the significant progress in executing on our strategic plan, the strategic partnerships in our Medicare business, effectiveness of our Medicare sales organization, strong enrollment growth in the small business and Medicare Supplement segments of the health insurance market, our expectations regarding our individual and family plan business and our revised guidance for the full year ending December 31, 2017, including our guidance for total revenue, revenue from the Medicare segment, revenue from the Individual, Family and Small Business segment, Adjusted EBITDA, loss from the Medicare segment, profit from the Individual, Family and Small Business segment, Corporate shared service expense, GAAP net loss per share and Non-GAAP net loss per share. These forward-looking statements are inherently subject to various risks and uncertainties that could cause actual results to differ materially from the statements made, including risks associated with the impact of healthcare reform; our ability to retain existing members and enroll a large number of new members during the annual healthcare reform open enrollment period and Medicare annual enrollment period; the impact of annual enrollment period for the purchase of individual and family health insurance and its timing on our recognition of revenue; our ability to sell qualified health insurance plans to subsidy-eligible individuals and to enroll subsidy eligible individuals through government-run health insurance exchanges; our ability to comply with CMS guidance and impact on conversion rates as a result of the federal exchange changes to enrollment; competition, including competition from government-run health insurance exchanges; seasonality of our business and the fluctuation of our operating results; our ability to retain existing members and limit member turnover; changes in consumer behaviors and their selection of individual and family health insurance products, including the selection of products for which we receive lower commissions; a reduction of product offerings among carriers and the resulting impact on our commission revenue; carriers exiting the market of selling individual and family health insurance and the resulting impact on our supply and commission revenue; our ability to execute on our growth strategy in the Medicare and small business health insurance markets; the impact of increased health insurance costs on demand; our ability to timely receive and accurately predict the amount of commission payments from health insurance carriers; timing of commission payments from health insurance carriers; medical loss ratio requirements; delays in our receipt of items required to recognize Medicare revenue; changes in member conversion rates; our ability to accurately estimate membership; our relationships with health insurance carriers; customer concentration and consolidation of the health insurance industry; our success in marketing and selling health insurance plans and our unit cost of acquisition; our ability to hire, train and retain licensed health insurance agents and other employees; the need for health insurance carrier and regulatory approvals in connection with the marketing of Medicare-related insurance products; costs of acquiring new members; scalability of the Medicare business; lack of membership growth and retention rates; consumers satisfaction of our service; changes in competitive landscape; our ability to attract and to convert online visitors into paying members; changes in products offered on our ecommerce platform; changes and reductions in commission rates; maintaining and enhancing our brand identity; our ability to derive desired benefits from investments in our business, including membership growth initiatives; dependence on acceptance of the Internet as a marketplace for the purchase and sale of health insurance; reliance on marketing partners; the impact of our direct-to-consumer television marketing efforts; timing of receipt and accuracy of commission reports; payment practices of health insurance carriers; dependence on our operations in China; changes in laws and regulations, including in connection with healthcare reform and/or with respect to the marketing and sale of Medicare plans; compliance with insurance and other laws and regulations; exposure to security risks; and the performance, reliability and availability of our ecommerce platform and underlying network infrastructure. Other factors that could cause operating, financial and other results to differ are described in eHealth’s most recent Quarterly Report on Form 10-Q or Annual Report on Form 10-K filed with the Securities and Exchange Commission and available on the investor relations page of eHealth’s website at http://www.ehealthinsurance.com and on the Securities and Exchange Commission’s website at www.sec.gov. eHealth does not undertake any obligation to update any forward-looking statement to conform the statement to actual results or changes in expectations.

Non-GAAP Financial Information

This press release includes financial measures that are not in accordance with generally accepted accounting principles in the United States (GAAP). To supplement eHealth’s condensed consolidated financial statements presented in accordance with GAAP, eHealth presents investors with certain non-GAAP financial measures, including non-GAAP operating income (loss); non-GAAP operating margins; adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA); non-GAAP net income (loss) and non-GAAP net income (loss) per diluted share.

  • Non-GAAP operating income (loss) consists of GAAP operating income (loss) excluding the following items:
    • the effects of expensing stock-based compensation related to stock options and restricted stock units in accordance with FASB ASC Topic 718,
    • restructuring benefit, and
    • amortization of intangible assets.
  • Non-GAAP operating margins are calculated by dividing non-GAAP operating income (loss) by GAAP total revenue.
  • Adjusted EBITDA is calculated by adding stock-based compensation, depreciation and amortization expense, restructuring benefit, amortization of intangible assets, other income (expense) and provision (benefit) for income taxes to GAAP net income (loss).

eHealth believes that the presentation of these non-GAAP financial measures provide important supplemental information to management and investors regarding financial and business trends relating to eHealth’s financial condition and results of operations. Management believes that the use of these non-GAAP financial measures provides consistency and comparability with eHealth’s past financial reports. Management also believes that the items described above provides an additional measure of eHealth’s operating results and facilitates comparisons of eHealth’s core operating performance against prior periods and business model objectives. This information is provided to investors in order to facilitate additional analyses of past, present and future operating performance and as a supplemental means to evaluate eHealth’s ongoing operations. eHealth believes that these non-GAAP financial measures are useful to investors in their assessment of eHealth’s operating performance.

Non-GAAP operating income (loss), non-GAAP operating margins, Adjusted EBITDA, non-GAAP net income (loss) and non-GAAP net income (loss) per diluted share are not calculated in accordance with GAAP, and should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. Non-GAAP financial measures used in this press release have limitations in that they do not reflect all of the revenue and costs associated with the operations of eHealth’s business and do not reflect income tax as determined in accordance with GAAP. As a result, you should not consider these measures in isolation or as a substitute for analysis of eHealth’s results as reported under GAAP. eHealth expects to continue to incur the stock-based compensation costs and purchased intangible asset amortization costs described above, and exclusion of these costs, and their related income tax benefits, from non-GAAP financial measures should not be construed as an inference that these costs are unusual or infrequent. eHealth compensates for these limitations by prominently disclosing GAAP operating income (loss), GAAP operating margins, GAAP net income (loss) and GAAP net income (loss) per diluted share and providing investors with reconciliations from eHealth’s GAAP operating results to the non-GAAP financial measures for the relevant periods.

The accompanying tables provide more details on the GAAP financial measures that are most directly comparable to the non-GAAP financial measures described above and the related reconciliations between these financial measures.

 
EHEALTH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, unaudited)
 
    December 31,  

   June 30,   

    2016   2017
    (1)    
Assets        
Current assets:        
Cash and cash equivalents   $ 61,781     $ 66,080  
Accounts receivable     9,213       18,614  
Prepaid expenses and other current assets     5,148       4,699  
Total current assets     76,142       89,393  
Property and equipment, net     5,608       5,220  
Other assets     4,473       4,863  
Intangible assets, net     8,580       8,060  
Goodwill     14,096       14,096  
Total assets   $ 108,899     $ 121,632  
Liabilities and stockholders’ equity        
Current liabilities:        
Accounts payable   $ 5,112     $ 2,344  
Accrued compensation and benefits     10,920       10,121  
Accrued marketing expenses     7,158       4,609  
Deferred revenue     959       392  
Other current liabilities     3,775       4,605  
Total current liabilities     27,924       22,071  
Non-current liabilities     3,374       1,430  
Stockholders’ equity:        
Common stock     29       30  
Additional paid-in capital     272,778       277,132  
Treasury stock, at cost     (199,998 )     (199,998 )
Retained earnings     4,616       20,777  
Accumulated other comprehensive income     176       190  
Total stockholders’ equity     77,601       98,131  
Total liabilities and stockholders’ equity   $ 108,899     $ 121,632  
                 
(1)   The condensed consolidated balance sheet at December 31, 2016 has been derived from the audited consolidated financial statements at that date.
     
 
EHEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts, unaudited)
 
    Three Months Ended   Six Months Ended
    June 30,   June 30,
    2016   2017   2016   2017
Revenue                
Commission   $ 34,649     $ 25,802     $ 104,036     $ 101,984  
Other     2,628       2,155       7,085       4,912  
Total revenue     37,277       27,957       111,121       106,896  
Operating costs and expenses:                
Cost of revenue     533       204       2,717       1,833  
Marketing and advertising     12,936       14,240       33,818       29,295  
Customer care and enrollment     10,611       12,012       21,011       24,121  
Technology and content     8,289       7,932       16,796       16,004  
General and administrative     10,615       10,534       18,543       20,526  
Restructuring benefit     (158 )           (158 )      
Amortization of intangible assets     260       260       520       520  
Total operating costs and expenses     43,086       45,182       93,247       92,299  
Income (loss) from operations     (5,809 )     (17,225 )     17,874       14,597  
Other income (expense), net     (21 )     90       (32 )     116  
Income (loss) before provision (benefit) for income taxes     (5,830 )     (17,135 )     17,842       14,713  
Provision (benefit) for income taxes     (5,354 )     125       284       (1,448 )
Net income (loss)   $ (476 )   $ (17,260 )   $ 17,558     $ 16,161  
                 
Net income (loss) per share:                
Basic   $ (0.03 )   $ (0.93 )   $ 0.96     $ 0.88  
Diluted   $ (0.03 )   $ (0.93 )   $ 0.96     $ 0.86  
                 
Weighted-average number of shares used in per share amounts:                
Basic     18,258       18,481       18,206       18,424  
Diluted     18,258       18,481       18,296       18,750  
                 
(1) Includes stock-based compensation as follows:                
Marketing and advertising   $ 417     $ 220     $ 972     $ 435  
Customer care and enrollment     147       124       270       136  
Technology and content     473       274       908       668  
General and administrative     1,140       1,951       1,859       3,463  
Total stock-based compensation expense   $ 2,177     $ 2,569     $ 4,009     $ 4,702  
                                 
 
EHEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
 
    Three Months Ended   Six Months Ended
    June 30,   June 30,
    2016   2017   2016   2017
Operating activities                
Net income (loss)   $ (476 )   $ (17,260 )   $ 17,558     $ 16,161  
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:                
Depreciation and amortization     929       751       1,934       1,513  
Amortization of internally developed software     221       360       435       651  
Amortization of book-of-business consideration     6       3       1,603       1,160  
Amortization of intangible assets     260       260       520       520  
Stock-based compensation expense     2,177       2,569       4,009       4,702  
Other non-cash items     (22 )     8       (53 )     (51 )
Changes in operating assets and liabilities:                
Accounts receivable     5,694       9,288       (4,284 )     (9,401 )
Prepaid expenses and other assets     (415 )     (195 )     (568 )     (88 )
Accounts payable     635       619       (630 )     (2,798 )
Accrued compensation and benefits     (52 )     2,224       (5,887 )     (799 )
Accrued marketing expenses     (1,290 )     1,363       (9,022 )     (2,549 )
Deferred revenue     175       (338 )     115       (567 )
Other liabilities     (5,283 )     (621 )     1,526       (995 )
Net cash provided by (used in) operating activities     2,559       (969 )     7,256       7,459  
Investing activities                
Purchases of property and equipment and other assets     (1,907 )     (1,105 )     (2,318 )     (2,769 )
Net cash used in investing activities     (1,907 )     (1,105 )     (2,318 )     (2,769 )
Financing activities                
Net proceeds from exercise of common stock options     60       48       60       48  
Cash used to net-share settle equity awards     (668 )     (95 )     (944 )     (395 )
Principal payments in connection with capital leases     (23 )     (30 )     (43 )     (62 )
Net cash used in financing activities     (631 )     (77 )     (927 )     (409 )
Effect of exchange rate changes on cash and cash equivalents     4       3       (7 )     18  
Net increase (decrease) in cash and cash equivalents     25       (2,148 )     4,004       4,299  
Cash and cash equivalents at beginning of period     66,689       68,228       62,710       61,781  
Cash and cash equivalents at end of period   $ 66,714     $ 66,080     $ 66,714     $ 66,080  
                                 
 
EHEALTH, INC.
SEGMENT INFORMATION
(In thousands, unaudited)
 
    Three Months Ended   Six Months Ended
    June 30,   June 30,
    2016   2017   2016   2017

Revenue

               
Medicare   $ 9,679     $ 11,014     $ 53,146     $ 68,988  
Individual, Family and Small Business     27,598       16,943       57,975       37,908  
Total revenue   $ 37,277     $ 27,957     $ 111,121     $ 106,896  
                 

Segment profit (loss)

               
Medicare segment profit (loss)   $ (14,131 )   $ (15,107 )   $ 3,760     $ 15,588  
Individual, Family and Small Business segment profit     20,526       8,404       36,081       19,483  
Total segment profit (loss)     6,395       (6,703 )     39,841       35,071  
Corporate     (8,996 )     (6,942 )     (15,662 )     (13,739 )
Stock-based compensation expense     (2,177 )     (2,569 )     (4,009 )     (4,702 )
Depreciation and amortization     (929 )     (751 )     (1,934 )     (1,513 )
Restructuring benefit     158             158        
Amortization of intangible assets     (260 )     (260 )     (520 )     (520 )
Other income (expense), net     (21 )     90       (32 )     116  
Income (loss) before provision (benefit) for income taxes   $ (5,830 )   $ (17,135 )   $ 17,842     $ 14,713  
                         

Note:

We evaluate our business performance and manage our operations as two distinct reporting segments - Medicare and Individual, Family and Small Business.
 
(1)   The Medicare segment consists primarily of amounts earned from our sale of Medicare-related health insurance plans, including Medicare Advantage, Medicare Supplement and Medicare Part D prescription drug plans, and to a lesser extent, ancillary products sold to our Medicare-eligible customers, including but not limited to, dental, vision, life, short term disability and long term disability insurance, our advertising program that allows Medicare-related carriers to purchase advertising on a separate website developed, hosted and maintained by us and our delivery and sale to third parties of Medicare-related health insurance leads generated by our ecommerce platforms and our marketing activities.
(2)   The Individual, Family and Small Business segment consists primarily of amounts earned from our sale of individual and family and small business health insurance plans and ancillary products sold to our non-Medicare-eligible customers, including but not limited to, dental, vision, life, short term disability and long term disability insurance. To a lesser extent, the Individual, Family and Small Business segment consists of amounts earned from our online sponsorship program that allows carriers to purchase advertising space in specific markets in a sponsorship area on our website, our licensing to third parties the use of our health insurance ecommerce technology and our delivery and sale to third parties of individual and family health insurance leads generated by our ecommerce platforms and our marketing activities.
(3)   Segment profit (loss) is calculated as revenue for the applicable segment less Marketing and Advertising, Customer Care and Enrollment, Technology and Content and General and Administrative operating expenses, excluding stock-based compensation, depreciation and amortization expense and amortization of intangible assets, that are directly attributable to the applicable segment and other indirect Marketing and Advertising, Customer Care and Enrollment and Technology and Content operating expenses, excluding stock-based compensation, depreciation and amortization expense and amortization of intangible assets, allocated to the applicable segment based on usage.
(4)   Corporate consists of other indirect General and Administrative operating expenses, excluding stock-based compensation, depreciation and amortization expense, which are managed in a corporate shared services environment and, since they are not the responsibility of segment operating management, are not allocated to the reportable segments.
     
 

EHEALTH, INC.

SUMMARY OF SELECTED METRICS

(Unaudited)

 
    Three Months Ended       Six Months Ended    

Key Metrics:

  June 30,       June 30,    
            Percent           Percent
    2016   2017   Change   2016   2017   Change
Submitted applications:                        
Medicare submitted applications (1)   32,700   31,200   (5 )%   63,600   62,500   (2 )%
IFP submitted applications (2)   9,800   5,400   (45 )%   84,100   27,400   (67 )%
Other submitted applications (3)   60,600   53,400   (12 )%   158,000   116,800   (26 )%
Total submitted applications (4)   103,100   90,000   (13 )%   305,700   206,700   (32 )%
                         
Medicare Advantage submitted applications (5)   24,900   23,100   (7 )%   48,000   44,900   (6 )%
         
         
    As of June 30,    
            Percent
    2016   2017   Change
Estimated membership:            
Medicare products (6)   239,000   300,400   26 %
IFP products (7)   481,300   244,900   (49 )%
Other products (8)   380,000   340,500   (10 )%
Total estimated membership (9)   1,100,300   885,800   (19 )%
               

Notes:

 
(1)   Medicare-related health insurance applications submitted on our website or through our customer care center during the period, including Medicare Advantage, Medicare Part D prescription drug and Medicare Supplement plans. Applications are counted as submitted when the applicant completes the application and either clicks the submit button on our website or provides verbal authorization to submit the application. The applicant may have additional actions to take before the application will be reviewed by the insurance carrier, such as providing additional information. In addition, an applicant may submit more than one application.
(2)   Major medical Individual and Family plan ("IFP") health insurance applications submitted on our website during the period. Applications are counted as submitted when the applicant completes the application, clicks the submit button on our website and submits the application to us. The applicant may have additional actions to take before the application will be reviewed by the insurance carrier, such as providing additional information. In addition, an applicant may submit more than one application. We define our IFP offerings as major medical individual and family health insurance plans, which does not include Medicare-related, small business or ancillary plans (primarily consisting of short-term, dental, life, vision, and accident insurance plans).
(3)   Applications for health insurance plans other than Medicare and IFP submitted on our website during the period. Applications for ancillary plans are counted as submitted when the applicant completes the application, clicks the submit button on our website and submits the application to us. Applications for small business plans are counted as submitted when the applicant completes the application, the employees complete their applications, the applicant submits the application to us and we submit the application to the carrier. The applicant may have additional actions to take before the application will be reviewed by the insurance carrier, such as providing additional information. In addition, an applicant may submit more than one application.
(4)   Applications for all health insurance plans submitted on our website or through our customer care center during the period. See notes (1), (2) and (3) above for more information as to what constitutes a submitted application.
(5)  

Medicare Advantage plan health insurance applications submitted on our website or through our customer care center during the period. Applications are counted as submitted when the applicant completes the application and either clicks the submit button on our website or provides verbal authorization to submit the application. The applicant may have additional actions to take before the application will be reviewed by the insurance carrier, such as providing additional information. In addition, an applicant may submit more than one application. Medicare Advantage submitted applications are included in Medicare submitted applications - See Note 1 above for more detail.

(6)   Estimated number of members active on Medicare-related health insurance as of the date indicated. See the note below for additional information regarding our calculation of Medicare estimated membership.
(7)   Estimated number of members active on IFP health insurance plans as of the date indicated. See the note below for additional information regarding our calculation of IFP estimated membership.
(8)   Estimated number of members active on insurance plans other than Medicare-related health insurance and IFP health insurance plans as of the date indicated. See the note below for additional information regarding our calculation of other estimated membership.
(9)   Estimated number of members active on all insurance plans as of the date indicated. See the note below for additional information regarding our calculation of total estimated membership.
     

Note:

Health insurance carriers bill and collect insurance premiums paid by our members. Health insurance carriers do not report to us the number of members that we have as of a given date. The majority of our members who terminate their policies do so by discontinuing their premium payments to the carrier and do not inform us of the cancellation. Also, some of members pay their premiums less frequently than monthly. Given the number of months required to observe non-payment of commissions in order to confirm cancellations, we estimate the number of members who are active on insurance policies as of a specified date. We estimate the number of continuing members on all policies as of a specific date as follows:

  • For Medicare-related health insurance plans, we take the number of members for whom we have received or applied a commission payment during the month of estimation.
  • For IFP health insurance plans, we take the sum of (i) the number of IFP members for whom we have received or applied a commission payment for a month that is up to six months prior to the date of estimation after reducing that number using historical experience for assumed member cancellations over the period being estimated; and (ii) the number of approved members over that period (after reducing that number by the percentage of members who do not accept their approved policy from the same month of the previous year for estimated member cancellations through the date of the estimate). To the extent we determine we have received substantially all of the commission payments related to a given month during the period being estimated, we will take the number of members for whom we have received or applied a commission payment during the month of estimation.
  • For ancillary health insurance plans (such as short-term, dental, vision, accident and student), we take the sum of (i) the number of members for whom we have received or applied a commission payment for a month that is up to three months prior to the date of estimation (after reducing that number using historical experience for assumed member cancellations over the period being estimated); and (ii) the number of approved members over that period (after reducing that number using historical experience for an assumed number of members who do not accept their approved policy from same month of the previous year and for estimated member cancellations through the date of the estimate). To the extent we determine we have received substantially all of the commission payments related to a given month during the period being estimated, we will take the number of members for whom we have received or applied a commission payment during the month of estimation. The one to three-month period varies by insurance product and is largely dependent upon the timeliness of commission payment and related reporting from the related carriers. For small business health insurance plans, we estimate the number of members using the number of initial members at the time the group is approved, and we update this number for changes in membership if such changes are reported to us by the group or carrier in the period it is reported. However, groups generally notify the carrier directly of policy cancellations and increases or decreases in group size without informing us. Health insurance carriers often do not communicate policy cancellation information or group size changes to us. We often are made aware of policy cancellations and group size changes at the time of annual renewal and update our membership statistics accordingly in the period they are reported.

A member who purchases and is active on multiple standalone insurance plans will be counted as a member more than once. For example, a member who is active on both an individual and family health insurance plan and a standalone dental plan will be counted as two continuing members.

After we have estimated membership for a period, we may receive information from health insurance carriers that would have impacted the estimate if we had received the information prior to the date of estimation. We may receive commission payments or other information that indicates that a member who was not included in our estimates for a prior period was in fact an active member at that time, or that a member

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

 
EHEALTH, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands, except per share amounts, unaudited)
 
    Three Months Ended June 30,
    2016   2017
        Percent of       Percent of
        Total       Total
    Amount   Revenue   Amount   Revenue
GAAP marketing and advertising expense   $ 12,936     35%   $ 14,240     51%
Stock-based compensation expense (1)     (417 )   (1)%     (220 )   (1)%
Non-GAAP marketing and advertising expense   $ 12,519     34%   $ 14,020     50%
                 
GAAP customer care and enrollment expense   $ 10,611     28%   $ 12,012     43%
Stock-based compensation expense (1)     (147 )   —%     (124 )   —%
Non-GAAP customer care and enrollment expense   $ 10,464     28%   $ 11,888     43%
                 
GAAP technology and content expense   $ 8,289     22%   $ 7,932     28%
Stock-based compensation expense (1)     (473 )   (1)%     (274 )   (1)%
Non-GAAP technology and content expense   $ 7,816     21%   $ 7,658     27%
                 
GAAP general and administrative expense   $ 10,615     28%   $ 10,534     38%
Stock-based compensation expense (1)     (1,140 )   (3)%     (1,951 )   (7)%
Non-GAAP general and administrative expense   $ 9,475     25%   $ 8,583     31%
                 
GAAP loss from operations   $ (5,809 )   (16)%   $ (17,225 )   (62)%
Stock-based compensation expense (1)     2,177     6%     2,569     9%
Restructuring benefit (2)     (158 )   —%        

—%

Amortization of intangible assets (3)     260     1%     260     1%
Non-GAAP loss from operations   $ (3,530 )   (9)%   $ (14,396 )   (51)%
                         

Explanation of adjustments

(1)   Non-GAAP loss from operations and non-GAAP expenses exclude the effect of expensing stock-based compensation related to stock options and restricted stock units in accordance with FASB ASC Topic 718.
(2)   Non-GAAP loss from operations excludes restructuring benefit.
(3)   Non-GAAP loss from operations excludes amortization of intangible assets.
     
 
EHEALTH, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands, except per share amounts, unaudited)
 
    Six Months Ended June 30,
    2016   2017
        Percent of       Percent of
        Total       Total
    Amount   Revenue   Amount   Revenue
GAAP marketing and advertising expense   $ 33,818     30%   $ 29,295     27%
Stock-based compensation expense (1)     (972 )   (1)%     (435 )   —%
Non-GAAP marketing and advertising expense   $ 32,846     30%   $ 28,860     27%
                 
GAAP customer care and enrollment expense   $ 21,011     19%   $ 24,121     23%
Stock-based compensation expense (1)     (270 )   —%     (136 )   —%
Non-GAAP customer care and enrollment expense   $ 20,741     19%   $ 23,985     22%
                 
GAAP technology and content expense   $ 16,796     15%   $ 16,004     15%
Stock-based compensation expense (1)     (908 )   (1)%     (668 )   (1)%
Non-GAAP technology and content expense   $ 15,888     14%   $ 15,336     14%
                 
GAAP general and administrative expense   $ 18,543     17%   $ 20,526     19%
Stock-based compensation expense (1)     (1,859 )   (2)%     (3,463 )   (3)%
Non-GAAP general and administrative expense   $ 16,684     15%   $ 17,063     16%
                 
GAAP income from operations   $ 17,874     16%   $ 14,597     14%
Stock-based compensation expense (1)     4,009     4%     4,702     4%
Restructuring benefit (2)     (158 )   —%         —%
Amortization of intangible assets (3)     520     —%     520     —%
Non-GAAP income from operations   $ 22,245     20%   $ 19,819     19%
                         

Explanation of adjustments

(1)   Non-GAAP income from operations and non-GAAP expenses exclude the effect of expensing stock-based compensation related to stock options and restricted stock units in accordance with FASB ASC Topic 718.
(2)   Non-GAAP income from operations excludes restructuring benefit.
(3)   Non-GAAP income from operations excludes amortization of intangible assets.
 
EHEALTH, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands, except per share amounts, unaudited)
 
    Three Months Ended   Six Months Ended
    June 30,   June 30,
    2016   2017   2016   2017
GAAP net income (loss)   $ (476 )   $ (17,260 )   $ 17,558     $ 16,161  
Stock-based compensation expense (1)     2,177       2,569       4,009       4,702  
Restructuring benefit (3)     (158 )           (158 )      
Amortization of intangible assets (4)     260       260       520       520  
Non-GAAP net income (loss)   $ 1,803     $ (14,431 )   $ 21,929     $ 21,383  
                 
GAAP net income (loss) per diluted share   $ (0.03 )   $ (0.93 )   $ 0.96     $ 0.86  
Stock-based compensation expense (1)     0.12       0.14       0.22       0.14  
Restructuring benefit (3)     (0.01 )           (0.01 )      
Amortization of intangible assets (4)     0.01       0.01       0.03       0.01  
Non-GAAP net income (loss) per diluted share   $ 0.09     $ (0.78 )   $ 1.20     $ 1.01  
                 
GAAP net income (loss)   $ (476 )   $ (17,260 )   $ 17,558     $ 16,161  
Stock-based compensation expense (1)     2,177       2,569       4,009       4,702  
Depreciation and amortization (2)     929       751       1,934       1,513  
Restructuring benefit (3)     (158 )           (158 )      
Amortization of intangible assets (4)     260       260       520       520  
Other income (expense), net (5)     21       (90 )     32       (116 )
Provision (benefit) for income taxes (6)     (5,354 )     125       284       (1,448 )
Adjusted EBITDA   $ (2,601 )   $ (13,645 )   $ 24,179     $ 21,332  
                                 

Explanation of adjustments

(1)   Non-GAAP net income (loss), Non-GAAP net income (loss) per share and Adjusted EBITDA exclude the effect of expensing stock-based compensation related to stock options and restricted stock units in accordance with FASB ASC Topic 718.
(2)   Adjusted EBITDA excludes depreciation and amortization.
(3)   Non-GAAP net income (loss), Non-GAAP net income (loss) per share and Adjusted EBITDA exclude restructuring benefit.
(4)   Non-GAAP net income (loss), Non-GAAP net income (loss) per share and Adjusted EBITDA exclude amortization of intangible assets.
(5)   Adjusted EBITDA excludes other income (expense), net.
(6)   Adjusted EBITDA excludes provision (benefit) for income taxes.
     

 

Source: eHealth, Inc.

Investor Relations Contact:
eHealth, Inc.
Kate Sidorovich, CFA, 650-210-3111
Vice President Investor Relations
kate.sidorovich@ehealth.com
http://ir.ehealthinsurance.com