eHealth, Inc. Announces Fourth Quarter 2019 and Fiscal 2019 Results

SANTA CLARA, Calif., Feb. 20, 2020 --

Fourth Quarter 2019 Overview

  • Revenue for the fourth quarter of 2019 was $301.7 million, a 124% increase compared to $134.9 million for the fourth quarter of 2018.
  • GAAP net income for the fourth quarter of 2019 was $88.8 million compared to net income of $26.1 million for the fourth quarter of 2018.
  • Adjusted EBITDA was $142.6 million for the fourth quarter of 2019 compared to $51.9 million for the fourth quarter of 2018.
  • Fourth quarter 2019 revenue and adjusted EBITDA include the positive impact of $42.3 million in revenue resulting from a change in estimate for expected cash commission collections relating to existing Medicare Advantage plans enrolled in prior to the fourth quarter.
  • Fourth quarter 2019 approved members for all Medicare products grew 88% compared to the fourth quarter of 2018.

eHealth, Inc. (NASDAQ: EHTH), a leading private online health insurance exchange, announces today its financial results for the fourth quarter and fiscal year ended December 31, 2019.

Scott Flanders, chief executive officer of eHealth stated, "We ended the year on a strong note, delivering the best annual enrollment period in the company's history and generating financial results that significantly exceeded our 2019 annual guidance across multiple metrics, including revenue, GAAP net income and adjusted EBITDA.  We also significantly increased our Medicare enrollment volumes and the number of major medical Medicare applications submitted online through our platform compared to a year ago - a critical element of our Medicare growth strategy.  I would like to emphasize that the high level of enrollment and revenue growth that we achieved in 2019 were accompanied by meaningful adjusted EBITDA and GAAP net income margin expansion compared to 2018.  Looking ahead, we anticipate the momentum we have built over the past two years to continue into 2020, and we believe we are well-positioned to continue outpacing the overall Medicare market growth as a result of our strong consumer value proposition, the depth of our technology platform and our demand generation expertise."

During the fourth quarter of 2019, eHealth worked with an external corporate valuation consultant to enhance its approach to estimating the lifetime values of plans it sold and to incorporate statistical tools to increase the accuracy of these estimates with an emphasis on improving member retention forecasting.  Fourth quarter and full year 2019 financial results reflect the impact of the changes made to enhance eHealth's Medicare Advantage plan lifetime value forecasting model resulting from this project. Specifically, our fourth quarter and full year 2019 revenue each included a positive impact of $50.8 million from the change in estimate for expected cash commission collections relating to outstanding Medicare Advantage plans. Of this amount, $42.3 million is a change in estimate in expected cash commission collections for Medicare Advantage plans since we began selling such products through the third quarter of 2019.

Unless otherwise specifically indicated, the financial results discussed below include, where applicable, the $42.3 million impact (affected by tax for net income and net income per share) from the change in estimate of expected cash commission collections.

GAAP — Fourth Quarter of 2019 Results

Revenue — Revenue for the fourth quarter of 2019 was $301.7 million, a 124% increase compared to $134.9 million for the fourth quarter of 2018. Commission revenue for the fourth quarter of 2019 was $282.1 million, a 131% increase compared to $122.2 million for the fourth quarter of 2018. Other revenue for the fourth quarter of 2019 was $19.7 million, a 55% increase compared to $12.7 million for the fourth quarter of 2018.

Excluding the impact of the $42.3 million change in estimate discussed above, our total revenue and commission revenue were $259.4 million and $239.8 million, respectively, for the fourth quarter of 2019.

Revenue from our Medicare segment was $282.6 million for the fourth quarter of 2019, a 132% increase compared to $121.6 million for the fourth quarter of 2018. Excluding the impact of the $42.3 million change in estimate discussed above, our Medicare segment revenue was $240.3 million for the fourth quarter of 2019. Revenue from our Individual, Family and Small Business segment was $19.1 million for the fourth quarter of 2019, a 44% increase compared to $13.3 million for the fourth quarter of 2018.

Income from Operations — Income from operations for the fourth quarter of 2019 was $123.1 million compared to income from operations of $41.6 million for the fourth quarter of 2018. Operating margin was 41% for the fourth quarter of 2019 compared to 31% for the fourth quarter of 2018.

Pre-tax Income — Pre-tax income for the fourth quarter of 2019 was $123.4 million compared to pre-tax income of $41.6 million for the fourth quarter of 2018.

Provision for Income Taxes — Provision for income taxes for the fourth quarter of 2019 was $34.6 million compared to provision for income taxes of $15.6 million for the fourth quarter of 2018.

Net Income — Net income for the fourth quarter of 2019 was $88.8 million, or $3.58 net income per diluted share, compared to net income of $26.1 million, or $1.25 net income per diluted share, for the fourth quarter of 2018. Net income for the fourth quarter of 2019 included a non-cash charge of $9.0 million related to an increase in fair value of the earnout liability assumed in connection with eHealth's acquisition of GoMedigap compared to $6.0 million in the fourth quarter of 2018. The increase was driven primarily by eHealth's share price appreciation. The share price appreciation has increased the value of the equity-based portion of the earnout consideration owed to the former holders of GoMedigap equity interests.

Segment Profit — Profit from our Medicare segment was $149.3 million for the fourth quarter of 2019, compared to a profit of $58.7 million for the fourth quarter of 2018. Excluding the impact of the $42.3 million change in estimate discussed above, our Medicare segment profit was $107.0 million for the fourth quarter of 2019. Profit from our Individual, Family and Small Business segment was $8.3 million for the fourth quarter of 2019, compared to $3.5 million for the fourth quarter of 2018.

Non-GAAP — Fourth Quarter of 2019 Results

Non-GAAP Operating Income and Non-GAAP Net Income — Non-GAAP operating income for the fourth quarter of 2019 was $141.8 million, compared to non-GAAP operating income of $51.3 million for the fourth quarter of 2018. Non-GAAP operating margin was 47% for the fourth quarter of 2019, compared to 38% for the fourth quarter of 2018. Non-GAAP net income for the fourth quarter of 2019 was $102.5 million, or $4.13 non-GAAP net income per diluted share, compared to non-GAAP net income of $35.7 million, or $1.72 non-GAAP net income per diluted share, for the fourth quarter of 2018.

Non-GAAP operating income and non-GAAP operating margin for the fourth quarter of 2019 are calculated by excluding $9.2 million of stock-based compensation expense, a $9.0 million expense related to the change in fair value of earnout liability related to our acquisition of GoMedigap, and $0.5 million of amortization of intangible assets from GAAP net operating income and GAAP operating margin. Non-GAAP net income and non-GAAP net income per diluted share for the fourth quarter of 2019 are calculated by excluding $9.2 million of stock-based compensation expense, $9.0 million expense related to the change in fair value of earnout liability related to our acquisition of GoMedigap, $0.5 million of amortization of intangible assets and $5.0 million of the income tax effect of these non-GAAP adjustments from GAAP net income and GAAP net income per diluted share.

Non-GAAP operating income and non-GAAP operating margin for the fourth quarter of 2018 are calculated by excluding $3.1 million of stock-based compensation expense, $6.0 million expense for change in fair value of earnout liability related to our acquisition of GoMedigap, and $0.5 million of amortization of intangible assets from GAAP net operating income and GAAP operating margin. Non-GAAP net income and non-GAAP net income per diluted share for the fourth quarter of 2018 are calculated by excluding $3.1 million of stock-based compensation expense, $6.0 million expense for change in fair value of earnout liability related to our acquisition of GoMedigap, and $0.5 million of amortization of intangible assets from GAAP net income and GAAP net income per diluted share.

Adjusted EBITDA — Adjusted EBITDA was $142.6 million for the fourth quarter of 2019 compared to $51.9 million for the fourth quarter of 2018. Excluding the impact of the $42.3 million change in estimate discussed above, our adjusted EBITDA was $100.3 million for the fourth quarter of 2019. Adjusted EBITDA is calculated by adding stock-based compensation, change in fair value of earnout liability related to our acquisition of GoMedigap, depreciation and amortization expense, acquisition costs, restructuring charges, amortization of intangible assets, other income, net, and provision for income taxes to GAAP net income.

Submitted Applications, Approved Members and Estimated Membership

Submitted Applications — The number of submitted applications for all Medicare products, which includes Medicare Advantage, Medicare Supplement and Medicare Part D Prescription Drug Plans, was 294,808 in the fourth quarter of 2019, a 82% increase compared to 162,216 in the fourth quarter of 2018. The percentage of applications for Medicare Advantage and Medicare Supplement products submitted online through our platform, which is a combination of agent unassisted and partially agent assisted online applications, increased from 22% for the fourth quarter of 2018 to 36% for the fourth quarter of 2019. The number of submitted applications for major medical Individual and Family plan products decreased by 18% in the fourth quarter of 2019 to 15,758 compared to 19,120 in the fourth quarter of 2018.

Approved Members — The number of approved members for all Medicare products, which includes Medicare Advantage, Medicare Supplement and Medicare Part D Prescription Drug Plans, was 273,244 in the fourth quarter of 2019, an 88% increase compared to 145,689 in the fourth quarter of 2018. The number of approved members for major medical individual and family plan products increased by 1% in the fourth quarter of 2019 to 14,547 compared to 14,452 in the fourth quarter of 2018.

Estimated Membership — Total estimated membership as of December 31, 2019 was 1,146,115, a 20% increase compared to the 952,926 estimated members we reported as of December 31, 2018. Estimated Medicare membership as of December 31, 2019 was 710,649, a 46% increase compared to the 486,690 estimated members we reported as of December 31, 2018. Estimated major medical individual and family plan membership as of December 31, 2019 was 128,487, a 15% decrease compared to the 151,904 estimated members we reported as of December 31, 2018.

Cash — Fourth Quarter of 2019

Cash Flows — Net cash used in operating activities was $56.8 million for the fourth quarter of 2019, compared to net cash used in operating activities of $8.7 million for the fourth quarter of 2018.

GAAP — Full Year Results

Revenue — Revenue for the year ended December 31, 2019 was $506.2 million, a 101% increase compared to $251.4 million for the year ended December 31, 2018.  Commission revenue for the year ended December 31, 2019 was $466.7 million, a 105% increase compared to $227.2 million for the year ended December 31, 2018. Other revenue for the year ended December 31, 2019 was $39.5 million, a 63% increase compared to $24.2 million for the year ended December 31, 2018.

Excluding the impact of the $42.3 million change in estimate discussed above, our total revenue and commission revenue were $463.9 million and $424.4 million, respectively, for the year ended December 31, 2019.

Revenue from our Medicare segment was $447.0 million for the year ended December 31, 2019, a 112% increase compared to $210.6 million for the year ended December 31, 2018. Excluding the impact from the change in estimate discussed above, our Medicare segment revenue was $404.7 million for the year ended December 31, 2019. Revenue from our Individual, Family and Small Business segment was $59.2 million for the year ended December 31, 2019, a 45% increase compared to $40.8 million for the year ended December 31, 2018.

Income from Operations — Income from operations for the year ended December 31, 2019 was $81.4 million compared to income from operations of $2.6 million for the year ended December 31, 2018. Operating margin was 16% for the year ended December 31, 2019 compared to 1% for the year ended December 31, 2018.

Pre-tax Income — Pre-tax income for the year ended December 31, 2019 was $83.5 million compared to pre-tax income of $3.3 million for the year ended December 31, 2018.

Provision for Income Taxes — Provision for income taxes for the year ended December 31, 2019 was $16.6 million compared to provision for income taxes of $3.1 million for the year ended December 31, 2018.

Net Income — Net income for the year ended December 31, 2019 was $66.9 million, or $2.73 net income per diluted share, compared to net income of $0.2 million, or $0.01 net income per diluted share, for the year ended December 31, 2018. Net income for the year ended December 31, 2019 included a non-cash charge of $24.1 million related to an increase in fair value of the earnout liability assumed in connection with eHealth's acquisition of GoMedigap compared to $12.3 million for the year ended December 31, 2018. The increase was driven primarily by eHealth's share price appreciation. The share price appreciation has increased the value of the equity-based portion of the earnout consideration owed to the former holders of GoMedigap equity interests.

Segment Profit — Profit from our Medicare segment was $155.2 million for the year ended December 31, 2019, a 155% increase compared to profit of $60.8 million for the year ended December 31, 2018. Excluding the impact of the $42.3 million change in estimate discussed above, our Medicare segment profit was $112.9 million for the year ended December 31, 2019. Profit from our Individual, Family and Small Business segment was $23.4 million for the year ended December 31, 2019, a 303% increase compared to profit of $5.8 million for the year ended December 31, 2018.

Non-GAAP — Full Year Results

Non-GAAP Operating Income and Non-GAAP Net Income — Non-GAAP operating income for the year ended December 31, 2019 was $130.2 million compared to non-GAAP operating income of $31.2 million for the year ended December 31, 2018. Non-GAAP operating margin was 26% for the year ended December 31, 2019, compared to 12% for the year ended December 31, 2018. Non-GAAP net income for the year ended December 31, 2019 was $102.0 million, or $4.16 non-GAAP net income per diluted share, compared to non-GAAP net income of $22.6 million, or $1.11 non-GAAP net income per diluted share, for the year ended December 31, 2018.

Non-GAAP operating income and non-GAAP operating margin for the year ended December 31, 2019 are calculated by excluding $22.6 million of stock-based compensation expense, $24.1 million expense for the change in fair value of earnout liability related to our acquisition of GoMedigap, and $2.2 million of amortization of intangible assets from GAAP operating income and GAAP operating margin. Non-GAAP net income and non-GAAP net income per diluted share for the year ended December 31, 2019 are calculated by excluding $22.6 million of stock-based compensation expense, $24.1 million of expense for the change in fair value of earnout liability related to our acquisition of GoMedigap, $2.2 million of amortization of intangible assets and $13.7 million of the income tax effect of these non-GAAP adjustments from GAAP net income and GAAP net income per share.

Non-GAAP operating income and non-GAAP operating margin for the year ended December 31, 2018 are calculated by excluding $12.3 million of stock-based compensation expense, $12.3 million of expense for change in fair value of earnout liability, $1.9 million of restructuring charges, $2.1 million of amortization of intangible assets and $0.1 million of acquisition costs related to our acquisition of GoMedigap from GAAP net operating income and GAAP operating margin. Non-GAAP net income and non-GAAP net income per diluted share for the year ended December 31, 2018 are calculated by excluding $12.3 million of stock-based compensation expense, $12.3 million of expense for change in fair value of earnout liability, $1.9 million of restructuring charges, $2.1 million of amortization of intangible assets, $0.1 million of acquisition costs related to our acquisition of GoMedigap, and $6.2 million of the income tax effect of these non-GAAP adjustments from GAAP net income and GAAP net income per diluted share.

Adjusted EBITDA — Adjusted EBITDA was $133.2 million for the year ended December 31, 2019 compared to $33.7 million for the year ended December 31, 2018. Excluding the impact of the $42.3 million change in estimate discussed above, our adjusted EBITDA was $90.9 million for the year ended December 31, 2019. Adjusted EBITDA is calculated by adding stock-based compensation, change in fair value of earnout liability related to our acquisition of GoMedigap, depreciation and amortization expense, acquisition costs, restructuring charges, amortization of intangible assets, other income, net and provision for income taxes to GAAP net income.

Submitted Applications and Approved Members

Submitted Applications — The number of submitted applications for all Medicare products, which includes Medicare Advantage, Medicare Supplement and Medicare Part D Prescription Drug Plans was 471,578 applications for the year ended December 31, 2019, a 78% increase compared to 264,903 for the year ended December 31, 2018. The percentage of applications for Medicare Advantage and Medicare Supplement products submitted online through our platform, which include a combination of agent unassisted and partially agent assisted applications, increased from 16% for the year ended December 31, 2018 to 27% for the year ended December 31, 2019. The number of submitted applications for major medical individual and family plan products decreased by 7% for the year ended December 31, 2019 to 27,635 compared to 29,698 for the year ended December 31, 2018.

Approved Members — The number of approved members for all Medicare products, which includes Medicare Advantage, Medicare Supplement and Medicare Part D Prescription Drug Plans, was 434,926 for the year ended December 31, 2019, an 81% increase compared to 239,688 for the year ended December 31, 2018. The number of approved members for major medical individual and family plan products declined by 25% for the year ended December 31, 2019 to 32,186 compared to 42,650 for the year ended December 31, 2018.

Cash — Full Year Results

Cash Flows — Net cash used in operating activities was $71.5 million for the year ended December 31, 2019 compared to net cash used in operating activities of $3.2 million for the year ended December 31, 2018.

2020 Guidance

Based on information available as of February 20, 2020, eHealth is providing its guidance for the full year ending December 31, 2020. These expectations are forward-looking statements and eHealth assumes no obligation to update these statements. Actual results may be materially different and are affected by the risk factors and uncertainties identified in this press release and in eHealth's annual and quarterly filings with the Securities and Exchange Commission.

The following guidance is for the full year ending December 31, 2020:

  • Total revenue is expected to be in the range of $580.0 million to $620.0 million. Revenue from the Medicare segment is expected to be in the range of $533.0 million to $569.0 million. Revenue from the Individual, Family and Small Business segment is expected to be in the range of $47.0 million to $51.0 million.
  • Adjusted EBITDA(a) is expected to be in the range of $120.0 million to $135.0 million.
  • Medicare segment profit(b) is expected to be in the range of $152.0 million to $169.0 million, and Individual, Family and Small Business segment profit is expected to be in the range of $17.0 million to $18.0 million.
  • Corporate(c) shared service expenses, excluding stock-based compensation and depreciation and amortization expense, is expected to be in range of $49.0 million to $52.0 million
  • Cash used in operations is expected to be in the range of $52.0 million to $55.0 million, and cash used for capital expenditures is expected to be $18.0 million to $20.0 million.
  • GAAP net income is expected to be in the range of $68.0 million to $83.0 million.
  • GAAP net income per diluted share is expected to be in the range of $2.64 to $3.23 per share.
  • Non-GAAP net income per diluted share(d) is expected to be in the range of $3.56 to $4.09 per share.

 

(a)

Adjusted EBITDA is calculated by adding stock-based compensation, change in fair value of earnout liability, depreciation and amortization expense, amortization of intangible assets, other income, net, and provision for income taxes to GAAP net income.

(b)

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, change in fair value of earnout liability, 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 income per diluted share is calculated by adding stock-based compensation expense per diluted share, change in fair value of earnout liability per diluted share, intangible asset amortization expense per diluted share and the income tax effect of these non-GAAP adjustments to GAAP net income per diluted share.

Webcast and Conference Call Information

A Webcast and conference call will be held today, Thursday, February 20, 2020 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 1180328. 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 1180328. 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 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), Medicare.com (www.Medicare.com) and GoMedigap.com (www.GoMedigap.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 our expected growth in 2020, the acceleration of our online enrollments, our ability to outpace overall Medicare market growth, our estimates regarding total membership, Medicare membership, Individual and Family plan membership and ancillary and small business membership, our estimates regarding constrained lifetime values of commissions per member and constraints on lifetime value by product category, and our guidance for the full year ending December 31, 2020, including our guidance for total revenue and revenue from our Medicare segment and our Individual, Family and Small Business segment, GAAP net income per diluted share and Non-GAAP net income per diluted share, GAAP net income, Adjusted EBITDA, profit from our Medicare segment and our Individual, Family and Small Business segment, Corporate shared service expense, cash used in operations and cash used for capital expenditures.

These forward-looking statements are inherently subject to various risks and uncertainties that could cause actual results to differ materially from the statements made. In particular, we are required by the revenue recognition standard to make numerous assumptions that are based on historical trends and our management's judgment. These assumptions may change over time and have a material impact on our revenue recognition, guidance, and results of operations. Please review the assumptions stated in this press release carefully.

The risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward-looking statements include our ability to retain existing members and enroll new members during the annual healthcare open enrollment period and Medicare annual enrollment period; changes in laws and regulations, including in connection with healthcare reform or with respect to the marketing and sale of Medicare plans; competition, including competition from government-run health insurance exchanges; the seasonality of our business and the fluctuation of our operating results; our ability to accurately estimate membership and lifetime value of commissions; changes in product offerings among carriers on our ecommerce platform and the resulting impact on our commission revenue; our ability to execute on our growth strategy in the Medicare market; exposure to security risks and our ability to safeguard the security and privacy of confidential data; 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; consumer satisfaction of our service; changes in member conversion rates; changes in commission rates; 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 maintain and enhance our brand identity; our ability to derive desired benefits from investments in our business, including membership growth initiatives; reliance on marketing partners; the impact of our direct-to-consumer email, telephone and television marketing efforts; timing of receipt and accuracy of commission reports; payment practices of health insurance carriers; our ability to successfully make and integrate acquisitions; dependence on our operations in China; the restrictions in our debt obligations; compliance with insurance and other laws and regulations; 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.

All forward-looking statements in this press release are based on information available to eHealth as of the date hereof, and eHealth does not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made, except as required by law.

Non-GAAP Financial Information

This press release includes financial measures that are not calculated in accordance with U.S. generally accepted accounting principles (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; non-GAAP net income (loss); non-GAAP net income (loss) per diluted share; and adjusted EBITDA.

  • 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,
    • change in fair value of earnout liability,
    • acquisition costs,
    • restructuring charges, and
    • amortization of intangible assets.
       
  • Non-GAAP operating margins are calculated by dividing non-GAAP operating income (loss) by GAAP total revenue.
     
  • Non-GAAP net income (loss) consists of GAAP net income (loss) excluding the following items:
    • the effects of expensing stock-based compensation related to stock options and restricted stock units,
    • change in fair value of earnout liability,
    • acquisition costs,
    • restructuring charges,
    • amortization of intangible assets, and
    • the income tax impact of non-GAAP adjustments.
       
  • Non-GAAP net income (loss) per diluted share consists of GAAP net income (loss) per diluted share excluding the following items:
    • the effects of expensing stock-based compensation related to stock options and restricted stock units per diluted share,
    • change in fair value of earnout liability per diluted share,
    • acquisition costs per diluted share,
    • restructuring charges per diluted share,
    • amortization of intangible assets per diluted share, and
    • the income tax impact of non-GAAP adjustments per diluted share.
       
  • Adjusted EBITDA is calculated by adding stock-based compensation, change in fair value of earnout liability, depreciation and amortization expense, acquisition costs, restructuring charges, amortization of intangible assets, other income (expense), net and provision (benefit) for income taxes to GAAP net income (loss).

eHealth believes that the presentation of these non-GAAP financial measures provides 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, non-GAAP net income (loss), non-GAAP net income (loss) per diluted share and Adjusted EBITDA 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.

Investor Relations Contact

Kate Sidorovich, CFA
Vice President, Investor Relations
2625 Augustine Drive, Second Floor
Santa Clara, CA, 95054
650-210-3111
kate.sidorovich@ehealth.com
http://ir.ehealthinsurance.com

EHEALTH, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

 
 

December 31, 2019

 

December 31, 2018

Assets

(Unaudited)

   

Current assets:

     

Cash and cash equivalents

$

23,466

   

$

13,089

 

Accounts receivable

2,332

   

3,601

 

Commissions receivable — current

174,526

   

134,190

 

Prepaid expenses and other current assets

7,822

   

5,288

 

Total current assets

208,146

   

156,168

 

Commissions receivable — non-current

414,696

   

211,668

 

Property and equipment, net

10,518

   

7,684

 

Operating lease right-of-use assets

36,621

   

 

Restricted cash

3,354

   

 

Other assets

18,004

   

11,276

 

Intangible assets, net

10,062

   

12,249

 

Goodwill

40,233

   

40,233

 

Total assets

$

741,634

   

$

439,278

 

Liabilities and stockholders' equity

     

Current liabilities:

     

Accounts payable

$

24,554

   

$

5,688

 

Accrued compensation and benefits

29,578

   

20,763

 

Accrued marketing expenses

12,041

   

11,013

 

Earnout liability — current

37,273

   

20,730

 

Lease liabilities — current

4,759

   

 

Deferred revenue

2,570

   

876

 

Other current liabilities

2,210

   

1,549

 

Total current liabilities

112,985

   

60,619

 

Debt

   

5,000

 

Earnout liability — non-current

   

19,270

 

Deferred income taxes — non-current

64,130

   

47,901

 

Lease liabilities — non-current

34,305

   

 

Other non-current liabilities

3,050

   

3,339

 

Stockholders' equity:

     

Preferred stock

   

 

Common stock

35

   

31

 

Additional paid-in capital

455,159

   

298,024

 

Treasury stock, at cost

(199,998)

   

(199,998)

 

Retained earnings

271,852

   

204,965

 

Accumulated other comprehensive income

116

   

127

 

Total stockholders' equity

$

527,164

   

$

303,149

 

Total liabilities and stockholders' equity

$

741,634

   

$

439,278

 

 

EHEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts, unaudited)

 
 

Three Months Ended December 31,

 

Year ended December 31,

 

2019

 

2018

 

2019

 

2018

Revenue

             

Commission

$

282,081

   

$

122,244

   

$

466,676

   

$

227,211

 

Other

19,667

   

12,673

   

39,525

   

24,184

 

Total revenue

301,748

   

134,917

   

506,201

   

251,395

 

Operating costs and expenses*

             

Cost of revenue

1,956

   

755

   

2,738

   

1,228

 

Marketing and advertising

77,392

   

37,184

   

150,249

   

82,939

 

Customer care and enrollment

52,737

   

26,818

   

134,304

   

70,547

 

Technology and content

15,598

   

8,600

   

47,085

   

31,970

 

General and administrative

21,402

   

13,367

   

64,150

   

45,828

 

Change in fair value of earnout liability

8,973

   

6,000

   

24,079

   

12,300

 

Amortization of intangible assets

546

   

547

   

2,187

   

2,091

 

Restructuring charges

   

   

   

1,865

 

Acquisition costs

   

   

   

76

 

Total operating costs and expenses

178,604

   

93,271

   

424,792

   

248,844

 

Income from operations

123,144

   

41,646

   

81,409

   

2,551

 

Other income, net

266

   

(21)

   

2,090

   

755

 

Income before income taxes

123,410

   

41,625

   

83,499

   

3,306

 

Provision for income taxes

34,586

   

15,554

   

16,612

   

3,065

 

Net income

$

88,824

   

$

26,071

   

$

66,887

   

$

241

 
               

Net income per share:

             

Basic

$

3.74

   

$

1.32

   

$

2.90

   

$

0.01

 

Diluted

$

3.58

   

$

1.25

   

$

2.73

   

$

0.01

 

Weighted-average number of shares used in per share:

             

Basic

23,772

   

19,680

   

23,075

   

19,294

 

Diluted

24,836

   

20,897

   

24,539

   

20,409

 

(1) Includes stock-based compensation as follows:

             

Marketing and advertising

$

2,018

   

$

496

   

$

4,230

   

$

1,974

 

Customer care and enrollment

524

   

251

   

1,451

   

816

 

Technology and content

1,665

   

560

   

3,611

   

1,675

 

General and administrative

4,946

   

1,757

   

13,278

   

7,824

 

Restructuring charges

   

   

   

251

 

Total stock-based compensation expense

$

9,153

   

$

3,064

   

$

22,570

   

$

12,540

 

 

EHEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)

 
 

Three Months Ended December 31,

 

Year ended December 31,

 

2019

 

2018

 

2019

 

2018

Operating activities

             

Net Income

$

88,824

   

$

26,071

   

$

66,887

   

$

241

 

Adjustments to reconcile net income to net cash used in operating activities:

             

Depreciation and amortization

830

   

609

   

2,983

   

2,479

 

Amortization of internally developed software

1,378

   

618

   

3,821

   

2,201

 

Amortization of intangible assets

546

   

547

   

2,187

   

2,091

 

Stock-based compensation expense

9,153

   

3,064

   

22,570

   

12,540

 

Deferred income taxes

34,363

   

15,491

   

16,197

   

2,812

 

Change in fair value of earnout liability

8,973

   

6,000

   

24,079

   

12,300

 

Other non-cash items

181

   

289

   

(755)

   

675

 

Changes in operating assets and liabilities:

             

Accounts receivable

(1,650)

   

(1,462)

   

1,270

   

(2,127)

 

Commissions receivable

(231,486)

   

(80,123)

   

(243,364)

   

(50,967)

 

Prepaid expenses and other assets

8,880

   

8,441

   

(466)

   

232

 

Accounts payable

6,539

   

(99)

   

19,694

   

1,414

 

Accrued compensation and benefits

11,438

   

7,214

   

8,814

   

5,133

 

Accrued marketing expenses

7,955

   

7,955

   

1,028

   

6,320

 

Deferred revenue

(6,513)

   

(4,863)

   

1,694

   

491

 

Accrued expenses and other liabilities

3,811

   

1,530

   

1,869

   

935

 

Net cash used in operating activities

(56,778)

   

(8,718)

   

(71,492)

   

(3,230)

 

Investing activities

             

Capitalized internal-use software and website development costs

(3,875)

   

(1,950)

   

(10,231)

   

(6,294)

 

Purchases of property and equipment and other assets

(1,025)

   

(1,063)

   

(6,641)

   

(4,534)

 

Payments for security deposits

   

   

(72)

   

 

Acquisition of business, net of cash acquired

   

   

   

(14,929)

 

Cash used in investing activities

(4,900)

   

(3,013)

   

(16,944)

   

(25,757)

 

Financing activities

             

Proceeds from issuance of common stock, net of issuance costs

   

   

126,051

   

 

Net proceeds from exercise of common stock options

367

   

658

   

5,535

   

2,688

 

Repurchase of shares to satisfy employee tax withholding obligations

(2,770)

   

(1,106)

   

(14,281)

   

(4,504)

 

Proceeds from line of credit

   

5,000

   

   

5,000

 

Debt issuance costs

(517)

   

(49)

   

(517)

   

(1,221)

 

Repayment of debt

   

   

(5,000)

   

 

Acquisition-related contingent payments

   

   

(9,542)

   

 

Principal payments in connection with leases

(24)

   

(25)

   

(105)

   

(103)

 

Net cash provided by (used in) financing activities

(2,944)

   

4,478

   

102,141

   

1,860

 

Effect of exchange rate changes on cash, cash equivalents and restricted cash

18

   

(6)

   

26

   

(77)

 

Net increase (decrease) in cash, cash equivalents and restricted cash

$

(64,604)

   

$

(7,259)

   

$

13,731

   

$

(27,204)

 

Cash, cash equivalents and restricted cash at beginning of period

91,424

   

20,348

   

13,089

   

40,293

 

Cash, cash equivalents and restricted cash at end of period

$

26,820

   

$

13,089

   

$

26,820

   

$

13,089

 
   

(1)

The ending balance of cash, cash equivalents and restricted cash included $3.4 million of restricted cash as of December 31, 2019. There was no restricted cash as of December 31, 2018.

 

EHEALTH, INC.

SEGMENT INFORMATION

(In thousands, unaudited)

 
 

Three Months Ended December 31,

 

%
Change

 

Year ended December 31,

 

%
Change

 

2019

 

2018

   

2019

 

2018

 

Revenue

                     

Medicare (1)

$

282,604

   

$

121,606

   

132

%

 

$

446,961

   

$

210,570

   

112

%

Individual, Family and Small Business (2)

19,144

   

13,311

   

44

%

 

59,240

   

40,825

   

45

%

Total revenue

$

301,748

   

$

134,917

   

124

%

 

$

506,201

   

$

251,395

   

101

%

Segment profit

                     

Medicare segment profit (3)

$

149,317

   

$

58,671

   

154

%

 

$

155,234

   

$

60,844

   

155

%

Individual, Family and Small Business segment profit (3)

8,323

   

3,512

   

137

%

 

23,368

   

5,803

   

303

%

Total segment profit

157,640

   

62,183

   

154

%

 

178,602

   

66,647

   

168

%

Corporate (4)

(14,994)

   

(10,317)

   

45

%

 

(45,374)

   

(32,996)

   

38

%

Stock-based compensation expense

(9,153)

   

(3,064)

   

199

%

 

(22,570)

   

(12,289)

   

84

%

Change in fair value of earnout liability

(8,973)

   

(6,000)

   

50

%

 

(24,079)

   

(12,300)

   

96

%

Depreciation and amortization

(830)

   

(609)

   

36

%

 

(2,983)

   

(2,479)

   

20

%

Amortization of intangible assets

(546)

   

(547)

   

%

 

(2,187)

   

(2,091)

   

5

%

Acquisition costs

   

   

*

 

   

(76)

   

(100)

%

Restructuring charges

   

   

*

 

   

(1,865)

   

(100)

%

Other income, net

266

   

(21)

   

*

 

2,090

   

755

   

177

%

Income before income taxes

$

123,410

   

$

41,625

   

196

%

 

$

83,499

   

$

3,306

   

2,426

%

*

Percentage not meaningful.

 

Segment Information

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 and vision, 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, family and small business health insurance plans and ancillary products sold to our non-Medicare-eligible customers, including but not limited to, dental, vision, and short-term 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 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, acquisition costs, change in fair value of earnout liability, restructuring charges 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, because they are not the responsibility of segment operating management, are not allocated to the reportable segments.

 

EHEALTH, INC.

SUMMARY OF SELECTED METRICS

COMMISSION REVENUE BY PRODUCT

(In thousands, unaudited)

 
 

Three Months Ended December 31,

 

%
Change

 

Year ended December 31,

 

%
Change

 

2019

 

2018

   

2019

 

2018

 

Medicare

                     

Medicare Advantage

$

226,625

   

$

85,797

   

164

%

 

$

339,810

   

$

143,445

   

137

%

Medicare Supplement

15,263

   

12,860

   

19

%

 

40,345

   

31,166

   

29

%

Medicare Part D

20,918

   

11,730

   

78

%

 

26,824

   

14,609

   

84

%

Total Medicare

262,806

   

110,387

   

138

%

 

406,979

   

189,220

   

115

%

Individual and Family (1)

                     

Non-Qualified Health Plans

5,967

   

3,084

   

93

%

 

17,559

   

6,470

   

171

%

Qualified Health Plans

1,966

   

783

   

151

%

 

6,866

   

5,789

   

19

%

Total Individual and Family

7,933

   

3,867

   

105

%

 

24,425

   

12,259

   

99

%

Ancillaries

                     

Short-term

3,362

   

1,340

   

151

%

 

10,524

   

5,583

   

89

%

Dental

2,100

   

1,106

   

90

%

 

5,238

   

2,717

   

93

%

Vision

708

   

610

   

16

%

 

2,002

   

1,467

   

36

%

Other

1,207

   

1,282

   

(6)

%

 

3,985

   

4,941

   

(19)

%

Total Ancillaries

7,377

   

4,338

   

70

%

 

21,749

   

14,708

   

48

%

Small Business

3,346

   

2,768

   

21

%

 

9,922

   

8,595

   

15

%

Commission Bonus

619

   

884

   

(30)

%

 

3,601

   

2,429

   

48

%

Total Commission Revenue

$

282,081

   

$

122,244

   

131

%

 

$

466,676

   

$

227,211

   

105

%

   
                         

(1)

We define our individual and family plan offerings as major medical individual and family health insurance plans, which does not include Medicare-related, small business or ancillary plans. Individual and family health insurance plans include both qualified and non-qualified plans. Qualified health plans are individual and family health insurance plans that meet the requirements of the Affordable Care Act and are offered through the government-run health insurance exchange in the relevant jurisdiction. Non-qualified health plans are individual and family health insurance plans that meet the requirements of the Affordable Care Act and are not offered through the exchange in the relevant jurisdiction. Individuals that purchase non-qualified health plans cannot receive a subsidy in connection with the purchase of those plans.

 

EHEALTH, INC.

SUMMARY OF SELECTED METRICS

COMMISSION REVENUE SUMMARY

(Unaudited)

 
 

Three Months Ended December 31,

 

Year ended December 31,

 

2019

 

2018

 

2019

 

2018

Medicare

             

Commission Revenue from Members Approved During the Period (1)

$

214,018

   

$

111,781

   

$

355,916

   

$

192,382

 

Net Commission Revenue from Members Approved in Prior Periods (2) (3)

50,066

   

(62)

   

55,292

   

(124)

 

Total Medicare Segment Commission Revenue

264,084

   

111,719

   

411,208

   

192,258

 

Individual, Family and Small Business

             

Commission Revenue from Members Approved During the Period (1)

8,211

   

7,746

   

22,614

   

24,079

 

Net Commission Revenue from Members Approved in Prior Periods (3)

9,786

   

2,779

   

32,854

   

10,874

 

Total Individual, Family and Small Business Segment Commission Revenue

17,997

   

10,525

   

55,468

   

34,953

 

Total Commission revenue

$

282,081

   

$

122,244

   

$

466,676

   

$

227,211

 
   
                         

(1)

These amounts include commission bonus revenue.

(2)

For the fourth quarter and full year 2019, net commission revenue for Medicare members approved in prior periods were $50.1 million and $55.3 million, respectively, each included a positive impact of $50.8 million from the change in estimate for expected cash commission collections relating to outstanding Medicare Advantage plans. Of this amount, $42.3 million is a change in estimate in expected cash commission collections for Medicare Advantage plans since we began selling such products through the third quarter of 2019.

(3)

These amounts reflect our revised estimates of cash collections for certain members approved prior to the relevant reporting period that are recognized as adjustments to revenue within the relevant reporting period. These amounts include revenue associated with renewing small business health insurance members.

 

EHEALTH, INC.

SUMMARY OF SELECTED METRICS

SUBMITTED APPLICATIONS

(Unaudited)

 
 

Three Months Ended December 31,

 

%
Change

 

Year ended December 31,

 

%
Change

 

2019

 

2018

   

2019

 

2018

 

Medicare (1)

                     

Medicare Advantage (2)

178,560

   

90,693

   

97

%

 

299,415

   

159,753

   

87

%

Medicare Supplement (2)

22,392

   

18,072

   

24

%

 

54,328

   

40,252

   

35

%

Medicare Part D

93,856

   

53,451

   

76

%

 

117,835

   

64,898

   

82

%

Total Medicare

294,808

   

162,216

   

82

%

 

471,578

   

264,903

   

78

%

Individual and Family (3)

                     

Non-Qualified Health Plans

9,982

   

12,161

   

(18)

%

 

18,325

   

18,580

   

(1)

%

Qualified Health Plans

5,776

   

6,959

   

(17)

%

 

9,310

   

11,118

   

(16)

%

Total Individual and Family

15,758

   

19,120

   

(18)

%

 

27,635

   

29,698

   

(7)

%

Ancillaries (4)

                     

Short-term

12,635

   

26,969

   

(53)

%

 

55,077

   

102,608

   

(46)

%

Dental

9,678

   

14,645

   

(34)

%

 

38,650

   

46,073

   

(16)

%

Vision

5,056

   

8,288

   

(39)

%

 

18,301

   

22,399

   

(18)

%

Other

4,856

   

9,656

   

(50)

%

 

23,468

   

42,415

   

(45)

%

Total Ancillaries

32,225

   

59,558

   

(46)

%

 

135,496

   

213,495

   

(37)

%

Small Business (5)

2,747

   

3,458

   

(21)

%

 

8,095

   

8,693

   

(7)

%

Total Submitted Applications

345,538

   

244,352

   

41

%

 

642,804

   

516,789

   

24

%

 

Submitted Applications

 

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.

 

(1)

Medicare-related health insurance applications submitted on our website or through our customer care center during the period, including Medicare Advantage, Medicare Supplement and Medicare Part D prescription drug plans.

(2)

The percentage of applications for Medicare Advantage and Medicare Supplement products submitted online through our platform, which is a combination of agent unassisted and partially agent assisted online applications, increased from 22% for the three months ended December 31, 2018 to 36% for the three months ended December 31, 2019. The percentage of applications for Medicare Advantage and Medicare Supplement products submitted online through our platform, which is a combination of agent unassisted and partially agent assisted online applications, increased from 16% for the twelve months ended December 31, 2018 to 27% for the twelve months ended December 31, 2019.

(3)

Major medical individual and family plan ("IFP") health insurance applications submitted on our website during the period. 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.

(4)

Ancillaries consists primarily of short-term, dental and vision insurance plans submitted on our website during the period.

(5)

Applications for small business health insurance 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.

 

EHEALTH, INC.

SUMMARY OF SELECTED METRICS

APPROVED MEMBERS

(Unaudited)

 
 

Three Months Ended December 31,

 

%
Change

 

Year ended December 31,

 

%
Change

 

2019

 

2018

   

2019

 

2018

 

Medicare

                     

Medicare Advantage

167,073

   

83,376

   

100

%

 

279,561

   

148,478

   

88

%

Medicare Supplement

16,178

   

12,170

   

33

%

 

42,688

   

29,837

   

43

%

Medicare Part D

89,993

   

50,143

   

79

%

 

112,677

   

61,373

   

84

%

Total Medicare

273,244

   

145,689

   

88

%

 

434,926

   

239,688

   

81

%

Individual and Family

                     

Non-Qualified Health Plans

9,937

   

11,360

   

(13)

%

 

20,187

   

23,075

   

(13)

%

Qualified Health Plans

4,610

   

3,092

   

49

%

 

11,999

   

19,575

   

(39)

%

Total Individual and Family

14,547

   

14,452

   

1

%

 

32,186

   

42,650

   

(25)

%

Ancillaries

                     

Short-term

13,996

   

28,163

   

(50)

%

 

58,687

   

107,846

   

(46)

%

Dental

11,619

   

14,623

   

(21)

%

 

43,640

   

47,343

   

(8)

%

Vision

6,283

   

9,060

   

(31)

%

 

21,391

   

24,638

   

(13)

%

Other

5,326

   

8,053

   

(34)

%

 

22,980

   

33,500

   

(31)

%

   Total Ancillaries

37,224

   

59,899

   

(38)

%

 

146,698

   

213,327

   

(31)

%

Small Business

6,317

   

7,537

   

(16)

%

 

16,685

   

19,550

   

(15)

%

Total Approved Members

331,332

   

227,577

   

46

%

 

630,495

   

515,215

   

22

%

 

Approved Members

 

Approved members represents the number of individuals on submitted applications that were approved by the relevant insurance carrier for the identified product during the relevant period. Approved members may not pay for their plan and become paying members.

 

EHEALTH, INC.

SUMMARY OF SELECTED METRICS

ESTIMATED MEMBERSHIP

(Unaudited)

 
 

As of December 31,

 

%
Change

 

2019

 

2018

 

Medicare (1)

         

Medicare Advantage

404,694

   

276,357

   

46

%

Medicare Supplement

93,477

   

70,426

   

33

%

Medicare Part D

212,478

   

139,907

   

52

%

Total Medicare

710,649

   

486,690

   

46

%

Individual and Family (2)

128,487

   

151,904

   

(15)

%

Ancillaries (3)

         

Short-term

27,862

   

24,192

   

15

%

Dental

127,083

   

138,916

   

(9)

%

Vision

71,277

   

73,987

   

(4)

%

Other

38,119

   

38,136

   

%

Total Ancillaries

264,341

   

275,231

   

(4)

%

Small Business (4)

42,638

   

39,101

   

9

%

Total Estimated Membership

1,146,115

   

952,926

   

20

%

   
                         

(1)

To estimate the number of members on Medicare-related health insurance plans, we take the sum of (i) the number of members for whom we have received or applied a commission payment for a month that may be 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 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.

(2)

To estimate the number of members on Individual and Family health insurance plans ("IFP"), 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 may be 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 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.

(3)

To estimate the number of members on ancillary health insurance plans (such as short-term, dental and vision insurance), we take the sum of (i) the number of members for whom we have received or applied a commission payment for a month that may be 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 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.

(4)

To estimate the number of members on small business health insurance plans, we use the number of initial members at the time the group was approved, and we update this number for changes in membership if such changes are reported to us by the group or carrier. 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.

EHEALTH, INC.
SUMMARY OF SELECTED METRICS
ESTIMATED MEMBERSHIP (Continued)
(Unaudited)

Estimated Membership

Estimated membership represents the estimated number of members active as of the date indicated based on the number of members for whom we have received or applied a commission payment during the month of estimation.

Health insurance carriers bill and collect insurance premiums paid by our members. The 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 our 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.

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. 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. Healthcare 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.

SUMMARY OF SELECTED METRICS

CONSTRAINED LIFETIME VALUE OF

COMMISSIONS PER APPROVED MEMBER

(Unaudited)

 
 

Three Months Ended December 31,

 

%
Change

 

Year ended December 31,

 

%
Change

 

2019

 

2018

   

2019

 

2018

 

Medicare

                     

Medicare Advantage (1)

$

1,052

   

$

1,029

   

2

%

 

$

1,013

   

$

964

   

5

%

Medicare Supplement (1)

$

990

   

$

1,058

   

(6)

%

 

$

979

   

$

1,047

   

(6)

%

Medicare Part D (1)

$

233

   

$

235

   

(1)

%

 

$

238

   

$

243

   

(2)

%

Individual and Family

                     

Non-Qualified Health Plans (1)

$

252

   

$

167

   

51

%

 

$

213

   

$

151

   

41

%

Qualified Health Plans (1)

$

267

   

$

198

   

35

%

 

$

217

   

$

141

   

54

%

Ancillaries

                     

Short-term (1)

$

135

   

$

52

   

160

%

 

$

101

   

$

56

   

80

%

Dental (1)

$

77

   

$

72

   

7

%

 

$

70

   

$

77

   

(9)

%

Vision (1)

$

63

   

$

66

   

(5)

%

 

$

56

   

$

55

   

2

%

Small Business (2)

$

158

   

$

165

   

(4)

%

 

$

159

   

$

168

   

(5)

%

   

Constrained Lifetime Value of Commissions Per Approved Member

   

(1)

Constrained lifetime value ("LTV") of commissions per approved member represents commissions estimated to be collected over the estimated life of an approved member's policy after applying constraints in accordance with our revenue recognition policy. The estimate is driven by multiple factors, including but not limited to, contracted commission rates, carrier mix, estimated average plan duration, the regulatory environment, and cancellations of insurance plans offered by health insurance carriers with which we have a relationship. These factors may result in varying values from period to period.

(2)

For small business, the amount represents the estimated commissions we expect to collect from the plan over the following twelve months. The estimate is driven by multiple factors, including but not limited to, contracted commission rates, carrier mix, estimated average plan duration, the regulatory environment, and cancellations of insurance plans offered by health insurance carriers with which we have a relationship and applied constraints. These factors may result in varying values from period to period.

 

EHEALTH, INC.

SUMMARY OF SELECTED METRICS

CONSTRAINTS ON LIFETIME VALUE

OF COMMISSIONS PER APPROVED MEMBER

(Unaudited)

 
 

Three Months and Year ended December 31,

 

2019

 

2018

Medicare

     

Medicare Advantage

7

%

 

7

%

Medicare Supplement

5

%

 

5

%

Medicare Part D

5

%

 

5

%

Individual and Family

     

Non-Qualified Health Plans

15

%

 

15

%

Qualified Health Plans

20

%

 

20

%

Ancillaries

10

%

 

10

%

Small Business

%

 

%

 

Constraints on Lifetime Value of Commissions Per Approved Member

 

Constraints are applied to derive LTV of commissions per approved member for revenue recognition in accordance with our revenue recognition policy. The constraints are applied to help ensure that commissions estimated to be collected over the estimated life of an approved member's plan are recognized as revenue only to the extent that is it probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with future commissions receivable from the plan is subsequently resolved. We evaluate constraints on a quarterly basis for factors affecting our estimate of LTV of commissions per approved member and apply management judgment to determine the constraints based on current trends impacting our business.

 

EHEALTH, INC.

SUMMARY OF SELECTED METRICS

EXPENSE METRICS PER APPROVED MEMBER

(Unaudited)

 
 

Three Months Ended December 31,

 

%
Change

 

Year ended December 31,

 

%
Change

 

2019

 

2018

   

2019

 

2018

 

Medicare variable cost per approved member

                     

Medicare variable marketing cost per approved Medicare Advantage ("MA")-equivalent member (1)

$

317

   

$

275

   

15

%

 

$

330

   

$

297

   

11

%

Medicare customer care and enrollment ("CC&E") cost per approved MA-equivalent member (2)

$

242

   

$

226

   

7

%

 

$

355

   

$

315

   

13

%

Total Medicare cost per approved member

$

559

   

$

501

   

12

%

 

$

685

   

$

612

   

12

%

                       

Individual and Family Plan ("IFP") variable cost per approved member

                     

IFP variable marketing cost per approved IFP-equivalent member (3)

$

104

   

$

77

   

35

%

 

$

67

   

$

59

   

14

%

IFP CC&E cost per approved IFP-equivalent member (4)

$

80

   

$

46

   

74

%

 

$

102

   

$

61

   

67

%

Total IFP cost per approved member

$

184

   

$

123

   

50

%

 

$

169

   

$

120

   

41

%

 

Expense Metrics Per Approved Member

 

(1)

Variable marketing cost per approved MA-equivalent member represents direct costs incurred in member acquisition for Medicare Advantage, Medicare Supplement and Medicare Part D plans from our direct marketing partners and online advertising channels divided by MA-equivalent approved members in a given period. MA-equivalent members is a derived metric and is equal to the sum of Medicare Part D approved members divided by 4, the number of Medicare Advantage approved members and the number of Medicare Supplement approved members in the given period.

(2)

Medicare CC&E cost per approved MA-equivalent member is equal to the CC&E expense of our Medicare business included in our operating costs divided by MA-equivalent approved members in a given period. MA-equivalent approved members is a derived metric and is equal to the sum of Medicare Part D approved members divided by 4, the number of Medicare Advantage approved members and the number of Medicare Supplement approved members in the given period.

(3)

Variable marketing cost per approved IFP-equivalent member represents direct costs incurred in member acquisition for IFP plans from our direct, marketing partners and online advertising channels divided by IFP-equivalent approved members in a given period. IFP-equivalent approved members is a derived metric and is equal to the sum of the number of short-term approved members divided by 3 and the IFP approved members in the given period.

(4)

IFP CC&E cost per approved IFP-equivalent member is equal to the CC&E expense of our IFP business included in our operating costs divided by IFP-equivalent approved members in a given period. IFP-equivalent approved members is a derived metric and is equal to the sum of the number of short-term approved members divided by 3 and the IFP approved members in the given period.

 

EHEALTH, INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(In thousands, except per share amounts, unaudited)

 
 

Three Months Ended December 31,

 

Year ended December 31,

 

2019

 

2018

 

2019

 

2018

 

Amount

 

% of
Revenue

 

Amount

 

% of
Revenue

 

Amount

 

% of
Revenue

 

Amount

 

% of
Revenue

GAAP marketing and advertising expense

$

77,392

   

26%

 

$

37,184

   

28%

 

$

150,249

   

30%

 

$

82,939

   

33%

Stock-based compensation expense (1)

(2,018)

   

(1)%

 

(496)

   

—%

 

(4,230)

   

(1)%

 

(1,974)

   

(1)%

Non-GAAP marketing and advertising expense

$

75,374

   

25%

 

$

36,688

   

27%

 

$

146,019

   

29%

 

$

80,965

   

32%

                               

GAAP customer care and enrollment expense

$

52,737

   

17%

 

$

26,818

   

20%

 

$

134,304

   

27%

 

$

70,547

   

28%

Stock-based compensation expense (1)

(524)

   

—%

 

(251)

   

—%

 

(1,451)

   

—%

 

(816)

   

—%

Non-GAAP customer care and enrollment expense

$

52,213

   

17%

 

$

26,567

   

20%

 

$

132,853

   

26%

 

$

69,731

   

28%

                               

GAAP technology and content expense

$

15,598

   

5%

 

$

8,600

   

6%

 

$

47,085

   

9%

 

$

31,970

   

13%

Stock-based compensation expense (1)

(1,665)

   

(1)%

 

(560)

   

—%

 

(3,611)

   

(1)%

 

(1,675)

   

(1)%

Non-GAAP technology and content expense

$

13,933

   

5%

 

$

8,040

   

6%

 

$

43,474

   

9%

 

$

30,295

   

12%

                               

GAAP general and administrative expense

$

21,402

   

7%

 

$

13,367

   

10%

 

$

64,150

   

13%

 

$

45,828

   

18%

Stock-based compensation expense (1)

(4,946)

   

(2)%

 

(1,757)

   

(1)%

 

(13,278)

   

(3)%

 

(7,824)

   

(3)%

Non-GAAP general and administrative expense

$

16,456

   

5%

 

$

11,610

   

9%

 

$

50,872

   

10%

 

$

38,004

   

15%

                               

GAAP income from operations

$

123,144

   

41%

 

$

41,646

   

31%

 

$

81,409

   

16%

 

$

2,551

   

1%

Stock-based compensation expense (1)

9,153

   

3%

 

3,064

   

2%

 

22,570

   

4%

 

12,289

   

5%

Change in fair value of earnout liability (2)

8,973

   

3%

 

6,000

   

4%

 

24,079

   

5%

 

12,300

   

5%

Amortization of intangible assets (3)

546

   

—%

 

547

   

—%

 

2,187

   

—%

 

2,091

   

1%

Restructuring charges (4)

   

—%

 

   

—%

 

   

—%

 

1,865

   

1%

Acquisition costs (5)

   

—%

 

   

—%

 

   

—%

 

76

   

—%

Non-GAAP income from operations

$

141,816

   

47%

 

$

51,257

   

38%

 

$

130,245

   

26%

 

$

31,172

   

12%

                               

GAAP net income

$

88,824

   

29%

 

$

26,071

   

19%

 

$

66,887

   

13%

 

$

241

   

—%

Stock-based compensation expense (1)

9,153

   

3%

 

3,064

   

2%

 

22,570

   

4%

 

12,289

   

5%

Change in fair value of earnout liability (2)

8,973

   

3%

 

6,000

   

4%

 

24,079

   

5%

 

12,300

   

5%

Amortization of intangible assets (3)

546

   

—%

 

547

   

—%

 

2,187

   

—%

 

2,091

   

1%

Restructuring charges (4)

   

—%

 

   

—%

 

   

—%

 

1,865

   

1%

Acquisition costs (5)

   

—%

 

   

—%

 

   

—%

 

76

   

—%

Tax effect of non-GAAP adjustments (6)

(4,965)

   

(2)%

 

(23)

   

—%

 

(13,747)

   

(3)%

 

(6,220)

   

(2)%

Non-GAAP net income

$

102,531

   

34%

 

$

35,659

   

26%

 

$

101,976

   

20%

 

$

22,642

   

9%

 

Explanation of Adjustments

 

(1)

Non-GAAP income from operations, non-GAAP net income, and non-GAAP expenses exclude the effect of expensing stock-based compensation related to stock options and restricted stock units.

(2)

Non-GAAP income from operations and non-GAAP net income exclude the change in fair value of earnout liability related to the acquisition of GoMedigap, which was completed in January 2018.

(3)

Non-GAAP income from operations and non-GAAP net income exclude amortization of intangible assets.

(4)

Non-GAAP income from operations and non-GAAP net income exclude restructuring charges.

(3)

Non-GAAP income from operations and non-GAAP net income exclude costs related to the acquisition of GoMedigap, which was completed in January 2018.

(6)

Non-GAAP net income exclude the tax effect of non-GAAP adjustments.

 

EHEALTH, INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(In thousands, except per share amounts, unaudited)

 
 

Three Months Ended December 31,

 

Year ended December 31,

 

2019

 

2018

 

2019

 

2018

GAAP net income

$

88,824

   

$

26,071

   

$

66,887

   

$

241

 

Stock-based compensation expense (1)

9,153

   

3,064

   

22,570

   

12,289

 

Change in fair value of earnout liability (2)

8,973

   

6,000

   

24,079

   

12,300

 

Amortization of intangible assets (3)

546

   

547

   

2,187

   

2,091

 

Restructuring charges (4)

   

   

   

1,865

 

Acquisition costs (5)

   

   

   

76

 

Tax effect of non-GAAP adjustments (6)

(4,965)

   

(23)

   

(13,747)

   

(6,220)

 

Non-GAAP net income

$

102,531

   

$

35,659

   

$

101,976

   

$

22,642

 
               

GAAP net income per diluted share

$

3.58

   

$

1.25

   

$

2.73

   

$

0.01

 

Stock-based compensation expense (1)

0.37

   

0.15

   

0.92

   

0.60

 

Change in fair value of earnout liability (2)

0.36

   

0.29

   

0.98

   

0.60

 

Amortization of intangible assets (3)

0.02

   

0.03

   

0.09

   

0.10

 

Restructuring charges (4)

   

   

   

0.09

 

Acquisition costs (5)

   

   

   

 

Tax effect of non-GAAP adjustments (6)

(0.20)

   

   

(0.56)

   

(0.29)

 

Non-GAAP net income per diluted share

$

4.13

   

$

1.72

   

$

4.16

   

$

1.11

 
               

GAAP net income

$

88,824

   

$

26,071

   

$

66,887

   

$

241

 

Stock-based compensation expense (1)

9,153

   

3,064

   

22,570

   

12,289

 

Change in fair value of earnout liability (2)

8,973

   

6,000

   

24,079

   

12,300

 

Depreciation and amortization (7)

830

   

609

   

2,983

   

2,479

 

Amortization of intangible assets (3)

546

   

547

   

2,187

   

2,091

 

Restructuring charges (4)

   

   

   

1,865

 

Acquisition costs (5)

   

   

   

76

 

Other income, net (8)

(266)

   

21

   

(2,090)

   

(755)

 

Provision for income taxes (9)

34,586

   

15,554

   

16,612

   

3,065

 

Adjusted EBITDA

$

142,646

   

$

51,866

   

$

133,228

   

$

33,651

 
 

Explanation of Adjustments

 

(1)

Non-GAAP net income, non-GAAP net income per diluted share and adjusted EBITDA exclude the effect of expensing stock-based compensation related to stock options and restricted stock units.

(2)

Non-GAAP net income, non-GAAP net income per diluted share and adjusted EBITDA exclude the change in fair value of earnout liability related to the acquisition of GoMedigap, which was completed in January 2018.

(3)

Non-GAAP net income, non-GAAP net income per diluted share and adjusted EBITDA exclude amortization of intangible assets.

(4)

Non-GAAP net income, non-GAAP net income per diluted share and adjusted EBITDA exclude restructuring charges.

(5)

Non-GAAP net income, non-GAAP net income per diluted share and Adjusted EBITDA exclude costs related to the acquisition of GoMedigap, which was completed in January 2018.

(6)

Non-GAAP net income and non-GAAP net income per diluted share exclude the tax effect of non-GAAP adjustments.

(7)

Adjusted EBITDA excludes depreciation and amortization.

(8)

Adjusted EBITDA excludes other income, net.

(9)

Adjusted EBITDA excludes provision for income taxes.

 

EHEALTH, INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

ADJUSTED EBITDA EXCLUDING CHANGES IN ESTIMATES

(In thousands, except per share amounts, unaudited)

 
 

Three Months Ended December 31,

 

Year ended December 31,

 

2019

 

2018

 

2019

 

2018

GAAP net income

$

88,824

   

$

26,071

   

$

66,887

   

$

241

 

Change in estimate

(42,308)

   

   

(42,308)

   

 

Stock-based compensation expense (1)

9,153

   

3,064

   

22,570

   

12,289

 

Change in fair value of earnout liability (2)

8,973

   

6,000

   

24,079

   

12,300

 

Depreciation and amortization (3)

830

   

609

   

2,983

   

2,479

 

Amortization of intangible assets (4)

546

   

547

   

2,187

   

2,091

 

Restructuring charges (5)

   

   

   

1,865

 

Acquisition costs (6)

   

   

   

76

 

Other income, net (7)

(266)

   

21

   

(2,090)

   

(755)

 

Provision for income taxes (8)

34,586

   

15,554

   

16,612

   

3,065

 

Adjusted EBITDA excluding changes in estimates

$

100,338

   

$

51,866

   

$

90,920

   

$

33,651

 
 

Explanation of Adjustments

 

(1)

Adjusted EBITDA exclude the effect of expensing stock-based compensation related to stock options and restricted stock units.

(2)

Adjusted EBITDA exclude the change in fair value of earnout liability related to the acquisition of GoMedigap, which was completed in January 2018.

(3)

Adjusted EBITDA excludes depreciation and amortization.

(4)

Adjusted EBITDA exclude amortization of intangible assets.

(5)

Adjusted EBITDA exclude restructuring charges.

(6)

Adjusted EBITDA exclude costs related to the acquisition of GoMedigap, which was completed in January 2018.

(7)

Adjusted EBITDA excludes other income, net.

(8)

Adjusted EBITDA excludes provision for income taxes.

 

EHEALTH, INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GUIDANCE

(In millions, except per share amounts, unaudited)

 
 

Year Ending December 31, 2020

 

Low

 

High

GAAP net income

$

68.0

   

$

83.0

 

Stock-based compensation expense

28.0

   

26.0

 

Amortization of intangible assets

1.5

   

1.5

 

   Tax effect of non-GAAP adjustments

(5.9)

   

(5.5)

 

Non-GAAP net income (1)

$

91.6

   

$

105.0

 
       

GAAP net income per diluted share

$

2.64

   

$

3.23

 

Stock-based compensation expense

1.09

   

1.01

 

Amortization of intangible assets

0.06

   

0.06

 

   Tax effect of non-GAAP adjustments

(0.23)

   

(0.21)

 

Non-GAAP net income per diluted share (2)

$

3.56

   

$

4.09

 
       

GAAP net income

$

68.0

   

$

83.0

 

Stock-based compensation expense

28.0

   

26.0

 

Depreciation and amortization

5.0

   

4.0

 

Amortization of intangible assets

1.5

   

1.5

 

Other income, net

   

(1.0)

 

Provision for income taxes

17.5

   

21.5

 

Adjusted EBITDA (3)

$

120.0

   

$

135.0

 
 

Explanation of Adjustments

 

(1)

Non-GAAP net income is calculated by adding stock-based compensation, amortization of intangible assets, and the income tax effect of non-GAAP adjustments to GAAP net income.

(2)

Non-GAAP net income per diluted share is calculated by adding stock-based compensation expense per diluted share, amortization of intangible assets per diluted share, and the income tax effect of non-GAAP adjustments to GAAP net income per diluted share.

(3)

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