Newsroom > Press Releases > eHealth, Inc. Announces Third Quarter 2009 Results

eHealth, Inc. Announces Third Quarter 2009 Results

Third Quarter 2009 Overview
-- Revenue of $35.1 million, up 23% over the third quarter of 2008
-- Operating income of $6.5 million, up 45% over the third quarter of 2008
-- Growth in IFP submitted applications of 12% over the third quarter of 2008
-- GAAP operating margins of 18% and non-GAAP operating margins of 22% for the third quarter of 2009
-- GAAP net income of $3.5 million, or $0.14 per diluted share, and non-GAAP net income of $4.3 million, or $0.17 per diluted share, for the third quarter of 2009
-- Cash flow from operations of $7.6 million, down 7% from the third quarter of 2008

MOUNTAIN VIEW, CA--(Marketwire - October 27, 2009) - eHealth, Inc. (NASDAQ: EHTH), the leading online source of health insurance for individuals, families and small businesses, today announced its financial results for the third quarter ended September 30, 2009.
 
Gary Lauer, chief executive officer of eHealth stated, "We are pleased with our third quarter financial results that demonstrate the strength and scalability of eHealth's business model. This is our thirteenth consecutive quarter of revenue growth since becoming a public company. We also completed a $30 million share repurchase program, reducing our total shares outstanding by approximately 7%."
 
Third Quarter Results
Revenue - Revenue totaled $35.1 million for the third quarter of 2009, a 23% increase compared to revenue of $28.5 million for the third quarter of 2008.
Submitted Applications - Submitted applications for individual and family products increased 12% in the third quarter of 2009 to 131,200 applications, compared to 117,300 applications in the third quarter of 2008.
Membership - Estimated membership at September 30, 2009 totaled 726,600 members, a 21% increase over estimated membership of 602,100 at September
30, 2008.
Operating Income - Operating income increased 45% to $6.5 million for the third quarter of 2009, compared to operating income of $4.5 million for the third quarter of 2008. Operating margins were 18% and 16% in the third quarters of 2009 and 2008, respectively. Non-GAAP operating income increased 43% to $7.8 million for the third quarter of 2009, compared to non-GAAP operating income of $5.4 million for the third quarter of 2008. Non-GAAP operating margins were 22% and 19% in the third quarters of 2009 and 2008, respectively. Non-GAAP operating income and margins in the third quarters of 2009 and 2008 exclude $1.3 million and $1.0 million of stock-based compensation expense, respectively.
Pre-tax Income - Pre-tax income for the third quarter of 2009 was $6.6 million, a 22% increase compared to pre-tax income of $5.4 million for the third quarter of 2008. Pre-tax income was unfavorably impacted in the third quarter of 2009 by a decrease in interest income of $0.8 million compared to the third quarter of 2008.
Net Income - Net income for the third quarter of 2009 was $3.5 million, or $0.14 per diluted share. Net income for the third quarter of 2008 was $3.0 million, or $0.12 per diluted share. Non-GAAP net income for the third quarter of 2009 was $4.3 million, or $0.17 per diluted share, compared to non-GAAP net income for the third quarter of 2008 of $3.7 million, or $0.14 per diluted share. Non-GAAP net income and non-GAAP net income per diluted share in the third quarter of 2009 exclude $1.3 million of stock-based compensation expense, adjusted by $0.4 million for estimated net income tax benefit related to stock-based compensation expense. Non-GAAP net income and non-GAAP net income per diluted share in the third quarter of 2008 exclude $1.0 million of stock-based compensation expense, adjusted by $0.3 million for estimated income tax benefit related to stock-based compensation expense.
Cash Flow and Cash Balance - Cash flow from operations for the third quarter of 2009 was $7.6 million, compared to $8.3 million for the third quarter of 2008, representing a decrease of 7%.
 
The third quarter 2008 cash flow statement includes a $1.8 million cash flow benefit from taxes, of which $1.6 million of tax benefit, primarily from the utilization of net operating loss carryforwards, is included in cash flow from operations and $0.2 million of net operating loss carryforwards, from the utilization of excess tax benefits related to share-based payments, is included in cash flow from financing activities. The third quarter 2009 cash flow statement includes a $3.2 million cash flow benefit from taxes, of which $1.8 million of tax benefit, primarily from the utilization of net operating loss carryforwards, is included in cash flow from operations and $1.4 million of net operating loss carryforwards, from the utilization of excess tax benefits related to share-based payments, is included in cash flow from financing activities.
Cash, cash equivalents and short-term marketable securities as of September 30, 2009 totaled $143.4 million, compared to $150.6 million as of December 31, 2008.
 
During the fourth quarter of 2008, eHealth's board of directors authorized a stock repurchase program of up to $30 million, or ten percent of eHealth's outstanding common stock, whichever is less. Repurchases pursuant to the program began in December 2008 and were completed in September 2009. As of September 30, 2009, 1.9 million shares of common stock had been repurchased in connection with the stock repurchase program at an average price of $15.97 per share including commissions, for a total cost of $30 million, of which approximately 1.8 million shares were repurchased during the nine months ended September 30, 2009 for a total cost of $29.4 million.
 
Year-to-Date Results
Revenue - Revenue totaled $100.5 million for the nine months ended September 30, 2009, a 22% increase compared to revenue of $82.3 million for the nine months ended September 30, 2008.
Operating Income - Operating income increased 21% to $19.0 million for the nine months ended September 30, 2009, compared to operating income of $15.6 million for the nine months ended September 30, 2008. Operating margins were 19% in both nine-month periods ended September 30, 2009 and 2008.
Pre-tax Income - Pre-tax income for the nine months ended September 30, 2009 was $19.8 million, a 6% increase compared to pre-tax income of $18.7 million for the nine months ended September 30, 2008. Pre-tax income was unfavorably impacted in the nine months ended September 30, 2009 by a decrease in interest income of $2.3 million compared to the nine months ended September 30, 2008.
Net Income - Net income for the nine months ended September 30, 2009 was $10.6 million, or $0.41 per diluted share, compared to net income for the nine months ended September 30, 2008 of $10.5 million, or $0.40 per diluted share.
Cash Flow - Cash flow from operations for the nine months ended September 30, 2009 was $20.7 million, compared to $22.8 million for the nine months ended September 30, 2008, representing a decrease of 9%.
 
2009 Guidance
With respect to guidance and based on information currently available, eHealth is revising its revenue and GAAP net income per diluted share guidance for the full year ending December 31, 2009. eHealth is also revising the expected range for stock-based compensation and GAAP income tax rate for the full year ending December 31, 2009.
  • Total revenue is expected to be in the range of $134 million to $136 million, compared to previous guidance of $131 million to $136 million
  • Stock-based compensation expense is expected to be in the range of $4.6 million to $5.0 million, compared to previous guidance of $5 million to $6 million
  • GAAP income tax rate is expected to be in the range of 44% to 46%, compared to previous guidance of 43% to 45%
  • GAAP net income per diluted share is expected to be in the range of $0.53 to $0.61 per share, compared to previous guidance of $0.51 to $0.61 per share
Webcast and Conference Call Information
A Webcast and conference call will be held today, Tuesday, October 27, 2009 at 5:00 p.m. EDT / 2:00 p.m. PDT. 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 866-271-0675 for domestic callers and 617-213-8892 for international callers. The participant passcode is #47841791. A telephone replay will be available two hours following the conclusion of the call for a period of 30 days and can be accessed by dialing 888-286-8010 for domestic callers and 617-801-6888 for international callers. The call ID for the replay is #82254970. 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. is the parent company of eHealthInsurance, the leading online source of health insurance for individuals, families and small businesses. eHealthInsurance presents complex health insurance information in an objective, user-friendly format, enabling the research, analysis, comparison and purchase of health insurance products that best meet consumers' needs. eHealth and eHealthInsurance are registered trademarks of eHealthInsurance Services, Inc.
eHealth, Inc. was founded in 1997 and its technology was responsible for the nation's first Internet-based sale of a health insurance policy. eHealth is headquartered in Mountain View, California. Additional information can be found on eHealth's website, http://www.ehealthinsurance.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 statements regarding eHealth's guidance for total revenue, stock-based compensation expense, GAAP income tax rate, and GAAP net income per diluted share for the year ending December 31, 2009. 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 changes and developments in the structure of the health insurance system in the United States and healthcare system reform, eHealth's rate of growth, changes in the economy, weak economic conditions, consumer awareness of the availability and accessibility of affordable health insurance, changes in member conversion rates and factors affecting conversion, eHealth's ability to continue to increase its membership base and retain its members, eHealth's ability to maintain or expand its relationships with health insurance carriers and marketing partners, negative publicity experienced by eHealth's carrier partners, changes in products offered on eHealth's ecommerce platform, changes in commission payments or carrier underwriting practices, maintaining and enhancing eHealth's brand identity and the effectiveness of eHealth's marketing and public relations efforts, system failures, capacity constraints, data loss or online commerce security risks, continued acceptance of the Internet as a medium for the purchase and sale of health insurance, dependence upon Internet search engines, reliance on marketing partners, the pursuit of new strategies and opportunities in the health insurance market, timing of receipt and accuracy of commission reports and related impact on estimating membership, payment practices of health insurance carriers, competition, eHealth's operations in China and any expansion into foreign countries, success in the sale of sponsorship advertising and the licensing of the use of eHealth's ecommerce platform, success of the health savings account (HSA) platform, protection of intellectual property and defense of intellectual property rights claims, legal liability, regulatory penalties and negative publicity, ability to attract and retain qualified personnel, management of future growth, seasonality, impact of future acquisitions, implementation of internal enterprise systems and maintenance of proper and effective internal controls, impact of provisions for income taxes, changes in laws and regulations, compliance with insurance and other laws and regulations, exposure to online commerce security risks, and the performance, reliability and availability of eHealth's 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, non-GAAP operating margins, non-GAAP pre-tax income, non-GAAP net income and non-GAAP net income per diluted share.
  • Non-GAAP operating income consists of GAAP operating income excluding the effects of expensing stock-based compensation related to stock options, restricted stock and restricted stock units in accordance with SFAS 123(R) beginning in 2006 and amortization of deferred stock-based compensation expense in accordance with APB 25 for grants made prior to 2006.

  • Non-GAAP operating margins are calculated by dividing non-GAAP operating income by GAAP total revenue.

  • Non-GAAP net income consists of GAAP net income excluding the effects of expensing stock-based compensation adjusted for estimated income tax benefit related to stock-based compensation expense as well as additional tax expense recorded during the period in accordance with SFAS 123(R).

  • Non-GAAP net income per diluted share is calculated by dividing non-GAAP net income by GAAP weighted average diluted shares outstanding.
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 the company's financial condition and results of operations. Management believes that the use of these non-GAAP financial measures provides consistency and comparability with the company's past financial reports. Management also believes that the exclusion of the items described above provides an additional measure of the company's operating results and facilitates comparisons of the company'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 the company's ongoing operations. Externally, the company believes that these non-GAAP financial measures continue to be useful to investors in their assessment of the company's operating performance.
 
Non-GAAP operating income, non-GAAP operating margins, non-GAAP net income and non-GAAP net income 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 costs associated with the operations of the company's business and do not reflect all of the 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. The company expects to continue to incur stock-based compensation costs described above, and exclusion of these costs, and their related income tax impact, from non-GAAP financial measures should not be construed as an inference that these costs are unusual or infrequent. The company compensates for these limitations by prominently disclosing GAAP operating income, GAAP net income and GAAP net income per diluted share and providing investors with reconciliations from the company'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 and the related reconciliations between these financial measures.
                              EHEALTH, INC.                  CONDENSED CONSOLIDATED BALANCE SHEETS                              (In thousands)                                                December 31, September 30,                                                   2008          2009                                                -----------  -------------Assets                                              (1)      (unaudited)Current assets:  Cash and cash equivalents                     $    94,136  $     100,015  Marketable securities                              56,499         43,434  Accounts receivable                                 2,005          2,204  Deferred income taxes                               7,580          3,875  Prepaid expenses and other current assets           1,874          2,328                                                -----------  -------------Total current assets                                162,094        151,856Property and equipment, net                           4,567          4,003Deferred income taxes                                 1,314          2,271Other assets                                            780            748                                                -----------  -------------Total assets                                    $   168,755  $     158,878                                                ===========  =============Liabilities and stockholders’ equityCurrent liabilities:  Accounts payable                              $     2,190  $       1,563  Accrued compensation and benefits                   4,662          4,982  Accrued marketing expenses                          3,162          4,239  Deferred revenue                                      427            331  Other current liabilities                           2,707          2,045                                                -----------  -------------Total current liabilities                            13,148         13,160Other non-current liabilities                           628          1,591Stockholders’ equity:  Common stock                                           25             25  Additional paid-in capital                        173,095        181,136  Treasury stock shares, at cost                       (639)       (29,999)  Deferred stock-based compensation                     (22)            (1)  Accumulated deficit                               (17,892)        (7,303)  Accumulated other comprehensive income                412            269                                                -----------  -------------Total stockholders’ equity                          154,979        144,127                                                -----------  -------------Total liabilities and stockholders’ equity      $   168,755  $     158,878                                                ===========  =============(1) The condensed consolidated balance sheet at December 31, 2008 has been    derived from the audited consolidated financial statements at that    date.                              EHEALTH, INC.             CONDENSED CONSOLIDATED STATEMENTS OF INCOME         (In thousands, except per share amounts, unaudited)                                          Three Months      Nine Months                                             Ended             Ended                                          September 30,     September 30,                                        ----------------- -----------------                                          2008     2009     2008     2009                                        -------- -------- -------- --------Revenue:  Commission                            $ 25,788 $ 31,086 $ 74,663 $ 89,229  Sponsorship, licensing and other         2,687    4,037    7,593   11,250                                        -------- -------- -------- --------Total revenue                             28,475   35,123   82,256  100,479Operating costs and expenses:  Cost of revenue-sharing                    469    1,470    1,338    3,588  Marketing and advertising (1)           11,502   14,266   30,633   40,631  Customer care and enrollment (1)         3,722    3,651   10,655   11,100  Technology and content (1)               3,565    4,126   10,548   11,539  General and administrative (1)           4,731    5,119   13,475   14,671                                        -------- -------- -------- --------Total operating costs and expenses        23,989   28,632   66,649   81,529                                        -------- -------- -------- --------Income from operations                     4,486    6,491   15,607   18,950Interest and other income, net               935      143    3,085      800                                        -------- -------- -------- --------Income before income taxes                 5,421    6,634   18,692   19,750Provision for income taxes                 2,400    3,182    8,173    9,161                                        -------- -------- -------- --------Net income                              $  3,021 $  3,452 $ 10,519 $ 10,589                                        ======== ======== ======== ========Net income per share:  Basic                                 $   0.12 $   0.14 $   0.42 $   0.43  Diluted                               $   0.12 $   0.14 $   0.40 $   0.41Weighted-average number of shares used in per share amounts:  Basic                                   25,060   24,240   24,925   24,627  Diluted                                 25,921   25,152   26,007   25,529(1) Includes stock-based compensation expense as follows:  Marketing and advertising             $    151 $    184 $    484 $    580  Customer care and enrollment                49       92      200      240  Technology and content                     203      312      653      814  General and administrative                 552      702    1,272    1,794                                        -------- -------- -------- --------   Total                                $    955 $  1,290 $  2,609 $  3,428                                        ======== ======== ======== ========                              EHEALTH, INC.             CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                       (In thousands, unaudited)                                   Three Months          Nine Months                                      Ended                 Ended                                   September 30,         September 30,                               --------------------- ---------------------                                 2008       2009       2008       2009                               ---------- ---------- ---------- ----------Operating activitiesNet income                     $    3,021 $    3,452 $   10,519 $   10,589Adjustments to reconcile net income to net cash provided by operating activities:  Deferred income taxes             1,629      1,837      7,146      5,074  Depreciation and   amortization                       467        554      1,271      1,673  Amortization and accretion   on marketable securities,   net                                 --        206         --        607  Stock-based compensation   expense                            955      1,290      2,609      3,428  Excess tax benefits from   stock-based compensation          (216)    (1,351)      (216)    (3,986)  Deferred rent                        (8)        (7)       (43)       (57)  Loss on disposal of property   and equipment                       28          4         39         16  Changes in operating assets   and liabilities:     Accounts receivable             (315)       (93)      (260)      (199)     Prepaid expenses and other      current assets                  734        982        456        386     Other assets                     (11)       182         21        473     Accounts payable                 (13)      (195)       357       (628)     Accrued compensation and      benefits                        181        244       (700)       319     Accrued marketing expenses     1,168        267      1,488      1,077     Deferred revenue                  74       (147)       (85)       (96)     Other current liabilities        563        424        148      1,985     Other non-current      liabilities                      --         --         --         21                               ---------- ---------- ---------- ----------Net cash provided by operating activities                         8,257      7,649     22,750     20,682                               ---------- ---------- ---------- ----------Investing activitiesPurchases of property and equipment                           (933)      (588)    (2,242)    (1,122)Purchase of other assets               --         --         --     (1,280)Purchases of marketable securities                       (11,143)    (2,026)   (61,565)   (40,550)Sales of marketable securities      2,053      3,000     10,120      4,006Maturities of marketable securities                         6,786     13,500     38,379     48,900                               ---------- ---------- ---------- ----------Net cash provided by (used in) investing activities              (3,237)    13,886    (15,308)     9,954                               ---------- ---------- ---------- ----------Financing activitiesNet proceeds from exercise of common stock options                  85        285      1,426        645Excess tax benefits from stock-based compensation             216      1,351        216      3,986Repurchase of common stock             --    (24,767)        --    (29,360)Principal payments in connection with capital lease         --        (11)        --        (30)                               ---------- ---------- ---------- ----------Net cash provided by (used in) financing activities                 301    (23,142)      1,642   (24,759)                               ---------- ---------- ---------- ----------Effect of exchange rate changes on cash and cash equivalents           3          1         46          2                               ---------- ---------- ---------- ---------- Net increase (decrease) in  cash and cash equivalents         5,324     (1,606)     9,130      5,879 Cash and cash equivalents at  beginning of period              85,201    101,621     81,395     94,136                               ---------- ---------- ---------- ----------Cash and cash equivalents at end of period                 $   90,525 $  100,015 $   90,525 $  100,015                               ========== ========== ========== ==========                              EHEALTH, INC.                     SUMMARY OF SELECTED METRICS                              (Unaudited)                                            Three Months     Three Months                                          Ended September  Ended SeptemberKey Metrics:                                  30, 2008         30, 2009                                          ---------------  ---------------Operating cash flows (1)                  $     8,257,000  $     7,649,000IFP submitted applications (2)                    117,300          131,200IFP approved members (3)                          100,800          111,100Total approved members (4)                        144,400          146,900Total revenue (5)                         $    28,475,000  $    35,123,000Total revenue per estimated member for the period (6)                           $         48.19  $         49.00                                               As of            As of                                           September 30,    September 30,                                               2008             2009                                          ---------------  ---------------IFP estimated membership (7)                      506,100          630,900Total estimated membership (8)                    602,100          726,600                                           Three Months     Three Months                                               Ended            Ended                                           September 30,    September 30,                                               2008              2009                                          ---------------  ---------------Marketing and advertising expenses (9)    $    11,502,000  $    14,266,000Marketing and advertising expenses as a percentage of total revenue (10)                      40%              41%Marketing and advertising expenses excluding stock-based compensation (11)  $    11,351,000  $    14,082,000Marketing and advertising expenses excluding stock based compensation as a percentage of total revenue (12)                      40%              40%Other Metrics:Source of IFP submitted applications (as a percentage of total IFP applications for the period):  Direct (13)                                          39%              43%  Marketing partners (14)                              33%              31%  Online advertising (15)                              28%              26%                                          ---------------  ---------------    Total                                             100%             100%                                          ===============  ===============Acquisition cost per individual on IFP submitted applications (16)              $         65.34  $         74.73Acquisition cost (excluding stock-based compensation) per individual on IFP submitted applications (17)              $         64.48  $         73.77Notes:(1)     Net cash provided by operating activities for the period from the        condensed consolidated statements of cash flows.(2)     IFP applications submitted on eHealth's website during the period.        Applications are counted as submitted when the applicant completes        the application, provides a method for payment and clicks the        submit button on our website and submits the application to us.        The applicant generally has additional actions to take before the        application will be reviewed by the insurance carrier, such as        providing additional information and providing an electronic        signature. In addition, an applicant may submit more than one        application. We include applications for IFP products for which we        receive commissions as well as other forms of payment. We define        our "IFP" offerings as major medical individual and family health        insurance plans, which does not include small business, short-term        major medical, stand-alone dental, life or student health insurance        product offerings.(3)     New IFP members reported to eHealth as approved during the period.        Some members that are approved by a carrier do not accept the        approval and therefore do not become paying members. Does not        include members transferred from Health Benefits Direct        Corporation.(4)     New members for all products reported to eHealth as approved during        the period. Some members that are approved by a carrier do not        accept the approval and therefore do not become paying members.        Does not include members transferred from Health Benefits Direct        Corporation.(5)     Total revenue (from all sources) recognized during the period from        the condensed consolidated statements of income.(6)     Calculated as total revenue recognized during the period (see note        (5) above) divided by average estimated membership for the period        (calculated as beginning and ending estimated membership for all        products for the period, divided by two). Ending membership        includes an estimated number of members transferred from Health        Benefits Direct Corporation during 2009, net of estimated        cancelations since their transfer, of approximately 25,000        members.  See our  2008 Annual Report on Form 10-K - Item 7 -        Management's Discussion and Analysis of Financial Condition and        Results of Operations - Summary of Selected Metrics for additional        information regarding our calculation of estimated membership.(7)     Estimated number of members active on IFP insurance policies as of        the date indicated. Amounts as of September 30, 2009 include the        estimated number of members transferred from Health Benefits Direct        Corporation during 2009, net of estimated cancelations since their        transfer, of approximately 25,000 members. See our  2008 Annual        Report on Form 10-K - Item 7 - Management's Discussion and Analysis        of Financial Condition and Results of Operations - Summary of        Selected Metrics for additional information regarding our        calculation of estimated membership.(8)     Estimated number of members active on all insurance policies as of        the date indicated. Amounts as of September 30, 2009 include the        estimated number of members transferred from Health Benefits Direct        Corporation during 2009, net of estimated cancelations since their        transfer, of approximately 25,000 members. See our  2008 Annual        Report on Form 10-K - Item 7 - Management's Discussion and Analysis        of Financial Condition and Results of Operations - Summary of        Selected Metrics for additional information regarding our        calculation of estimated membership.(9)     Marketing and advertising expenses for the period from the        condensed consolidated statements of income.(10)    Calculated as marketing and advertising expenses for the period        (see note (9) above) divided by total revenue for the period (see        note (5) above).(11)    Non-GAAP marketing and advertising expenses excluding stock-based        compensation for the period. See Non-GAAP Financial Information        above and the reconciliation of GAAP to Non-GAAP marketing and        advertising expenses below.(12)    Calculated as non-GAAP marketing and advertising expenses for the        period (see note (11) above) divided by total revenue for the        period (see note (5) above). See Non-GAAP Financial Information        above and the reconciliation of GAAP to Non-GAAP marketing and        advertising expenses below.(13)    Percentage of IFP submitted applications from applicants who came        directly to the eHealth website through algorithmic search engine        results or otherwise. See note (2) above for further information as        to what constitutes a submitted application.(14)    Percentage of IFP submitted applications from applicants sourced        through eHealth's network of marketing partners. See note (2) above        for further information as to what constitutes a submitted        application.(15)    Percentage of IFP submitted applications from applicants sourced        through paid search and other online advertising activities. See        note (2) above for further information as to what constitutes a        submitted application.(16)    Calculated as marketing and advertising expenses for the period        (see note (9) above) divided by the number of individuals on IFP        applications submitted on eHealth's website during the period. This        metric may not reflect the true acquisition cost.(17)    Calculated as non-GAAP marketing and advertising expenses for the        period (see note (11) above) divided by the number of individuals        on IFP applications submitted on eHealth's website during the        period. This metric may not reflect the true acquisition cost        exclusive of the impact of stock-based compensation allocated to        marketing and advertising expenses.                              EHEALTH, INC.                   GAAP TO NON-GAAP RECONCILIATION            FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2009         (In thousands, except per share amounts, unaudited)Statement of Income Reconciliation                            Three Months Ended September 30, 2009                    -------------------------------------------------------                               GAAP                              Non-GAAP                              Percent                            Percent                      GAAP    of Total               Non-GAAP    of Total                    Reported  Revenue   Adjustments  Results     Revenue                    --------- --------  ----------- --------- ------------Revenue:  Commission        $  31,086       89% $        -- $  31,086           89%  Sponsorship,   licensing and   other                4,037       11           --     4,037           11                    --------- --------  ----------- --------- ------------Total revenue          35,123      100           --    35,123          100Operating costs and expenses:  Cost of   revenue-sharing      1,470        4           --     1,470            4  Marketing and   advertising (1)     14,266       41         (184)   14,082           40  Customer care and   enrollment (1)       3,651       10          (92)    3,559           10  Technology and   content (1)          4,126       12         (312)    3,814           11  General and   administrative (1)   5,119       15         (702)    4,417           13                    --------- --------  ----------- --------- ------------Total operating costs and expenses    28,632       82       (1,290)   27,342           78                    --------- --------  ----------- --------- ------------Income from operations             6,491       18        1,290     7,781           22Interest and other income, net              143        0           --       143            0                    --------- --------  ----------- --------- ------------Income before income taxes           6,634       19        1,290     7,924           23Provision for income taxes (2)       3,182        9          398     3,580           10                    --------- --------  ----------- --------- ------------Net income          $   3,452       10% $       892 $   4,344           12%                    ========= ========  =========== ========= ============Net income per share:  Basic             $    0.14           $      0.04 $    0.18  Diluted           $    0.14           $      0.03 $    0.17Weighted-average number of shares used in per share amounts:   Basic               24,240                24,240    24,240   Diluted             25,152                25,152    25,152Explanation of adjustments(1)     Non-GAAP results exclude the effect of expensing stock-based        compensation related to stock options, restricted stock and        restricted stock units in accordance with SFAS 123(R) beginning in        2006, in addition to the amortization of deferred stock-based        compensation expense in accordance with APB 25 for grants made        prior to 2006.(2)     Non-GAAP net income and non-GAAP net income per share exclude        stock-based compensation expense listed in note (1) above, adjusted        for estimated income tax benefit related to stock-based        compensation expense.                              EHEALTH, INC.                   GAAP TO NON-GAAP RECONCILIATION           FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2008        (In thousands, except per share amounts, unaudited)Statement of Income Reconciliation                          Three Months Ended September 30, 2008                -----------------------------------------------------------                               GAAP                              Non-GAAP                             Percent                              Percent                   GAAP      of Total                 Non-GAAP   of Total                 Reported     Revenue   Adjustments   Results     Revenue                ----------- ----------  ----------- ----------- ----------Revenue:  Commission    $    25,788         91% $        -- $    25,788         91%  Sponsorship,   licensing and   other              2,687          9           --       2,687          9                ----------- ----------  ----------- ----------- ----------Total revenue        28,475        100           --      28,475        100Operating costs and expenses:  Cost of   revenue-   sharing              469          2           --         469          2  Marketing and   advertising (1)   11,502         40         (151)     11,351         40  Customer care   and   enrollment (1)     3,722         13          (49)      3,673         13  Technology and   content (1)        3,565         13         (203)      3,362         12  General and   administra-   tive (1)           4,731         17         (552)      4,179         15                ----------- ----------  ----------- ----------- ----------Total operating costs and expenses            23,989         84         (955)     23,034         81                ----------- ----------  ----------- ----------- ----------Income from operations           4,486         16          955       5,441         19Interest and other income, net                    935          3           --         935          3                ----------- ----------  ----------- ----------- ----------Income before income taxes         5,421         19          955       6,376         22Provision for income taxes (2)            2,400          8          300       2,700          9                ----------- ----------  ----------- ----------- ----------Net income      $     3,021         11% $       655 $     3,676         13%                =========== ==========  =========== =========== ==========Net income per share:  Basic         $      0.12             $      0.03 $      0.15  Diluted       $      0.12             $      0.02 $      0.14Weighted- average number of shares used in per share amounts:   Basic             25,060                  25,060      25,060   Diluted           25,921                  25,921      25,921Explanation of adjustments(1)     Non-GAAP results exclude the effect of expensing stock-based        compensation related to stock options, restricted stock and        restricted stock units in accordance with SFAS 123(R) beginning in        2006, in addition to the amortization of deferred stock-based        compensation expense in accordance with APB 25 for grants made        prior to 2006.(2)     Non-GAAP net income and non-GAAP net income per share exclude        stock-based compensation expense listed in note (1) above, adjusted        for estimated income tax benefit related to stock-based        compensation expense.