SANTA CLARA, Calif., July 25, 2019--

Second Quarter 2019 Overview

• Revenue for the second quarter of 2019 was $65.8 million, a 101% increase compared to $32.7 million for the second quarter of 2018.
• GAAP net loss for the second quarter of 2019 was $5.8 million compared to net loss of $12.0 million for the second quarter of 2018.
• Adjusted EBITDA was $0.8 million for the second quarter of 2019 compared to $(10.1) million for the second quarter of 2018.
• Net cash used in operating activities for the second quarter of 2019 was $11.5 millioncompared to $0.3 million for the second quarter of 2018.

eHealth, Inc. (NASDAQ: EHTH), a leading private online health insurance exchange, announced today its financial results for the second quarter ended June 30, 2019.

Scott Flanders, chief executive officer of eHealth stated, "We delivered another strong quarter once again exceeding our expectations and building momentum in our Medicarebusiness that has continued to scale rapidly accompanied by EBITDA margin expansion.  Approved Medicare members grew 78% year-over-year, driving a 105% increase in Medicare revenue year-over-year and a significant increase in Medicaresegment profit.  Based on our performance to-date, access to expanded telesales capacity and continued progress in gaining greater effectiveness across our operations, we are increasing our 2019 revenue and Adjusted EBITDA guidance for the second time this year."

GAAP—Second Quarter of 2019 Results

Revenue—Revenue for the second quarter of 2019 totaled $65.8 million, a 101% increase compared to $32.7 million for the second quarter of 2018. Commission revenue for the second quarter of 2019 totaled $60.6 million, a 98% increase compared to $30.6 million for the second quarter of 2018. Other revenue for the second quarter of 2019 was $5.2 million, a 157% increase compared to $2.0 million for the second quarter of 2018.

Revenue from our Medicare segment was $52.3 million for the second quarter of 2019, a 105% increase compared to $25.5 million for the second quarter of 2018. Revenue from our Individual, Family and Small Business segment was $13.5 million for the second quarter of 2019, an 88% increase compared to $7.2 million for the second quarter of 2018.

Loss from Operations—Loss from operations for the second quarter of 2019 was $12.3 million compared to loss from operations of $16.9 million for the second quarter of 2018. Operating margin was (18.7)% for the second quarter of 2019 compared to (51.8)% for the second quarter of 2018.

Pre-tax Loss—Pre-tax loss for the second quarter of 2019 was $11.6 million compared to pre-tax loss of $16.6 million for the second quarter of 2018.

Benefit from Income Taxes—Benefit from income taxes for the second quarter of 2019 was $5.9 million compared to benefit from income taxes of $4.6 million for the second quarter of 2018.

Net Loss—Net loss for the second quarter of 2019 was $5.8 million, or $0.25 net loss per diluted share, compared to net loss of $12.0 million, or $0.63 net loss per diluted share, for the second quarter of 2018. Net loss for the second quarter of 2019 included a non-cash charge of $7.2 million related to an increase in fair value of the earnout liability assumed in connection with eHealth's acquisition of GoMedigap. 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 (Loss)—Profit from our Medicare segment was $6.1 million for the second quarter of 2019, compared to a loss of $1.5 million for the second quarter of 2018. Profit from our Individual, Family and Small Business segment was $5.3 million for the second quarter of 2019, compared to a loss of $0.6 million for the second quarter of 2018.

Non-GAAP—Second Quarter of 2019 Results

Non-GAAP Operating Income (Loss) & Non-GAAP Net Income (Loss)—Non-GAAP operating income for the second quarter of 2019 was $0.1 million compared to non-GAAP operating loss of $10.7 million for the second quarter of 2018. Non-GAAP operating margin was 0.2% for the second quarter of 2019, compared to (32.8)% for the second quarter of 2018. Non-GAAP net income for the second quarter of 2019 was $2.3 million, or $0.10 non-GAAP net income per diluted share, compared to non-GAAP net loss of $7.5 million, or $0.40 non-GAAP net loss per diluted share, for the second quarter of 2018.

Non-GAAP operating income and non-GAAP operating margin for the second quarter of 2019 are calculated by excluding $4.7 million of stock-based compensation expense, $7.2 million of expense for 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 loss and GAAP operating margin. Non-GAAP net income and non-GAAP net income per diluted share for the second quarter of 2019 are calculated by excluding $4.7 million of stock-based compensation expense, $7.2 million of expense for the change in fair value of earnout liability related to our acquisition of GoMedigap, $0.5 million of amortization of intangible assets and $4.4 million of the income tax effect of these non-GAAP adjustments from GAAP net loss and GAAP net loss per diluted share. Non-GAAP operating loss and non-GAAP operating margin for the second quarter of 2018 are calculated by excluding $3.1 million of stock-based compensation expense, $2.5 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 loss and GAAP operating margin. Non-GAAP net loss and non-GAAP net loss per diluted share for the second quarter of 2018 are calculated by excluding $3.1 millionof stock-based compensation expense, $2.5 million expense for change in fair value of earnout liability related to our acquisition of GoMedigap, $0.5 million of amortization of intangible assets, and $1.7 million of the income tax effect of these non-GAAP adjustments from GAAP net loss and GAAP net loss per diluted share.

Adjusted EBITDA—Adjusted EBITDA was $0.8 million for the second quarter of 2019 compared to $(10.1) million for the second quarter of 2018. 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 benefit from income taxes to GAAP net loss.

Submitted Applications, Approved Members and Estimated Membership

Submitted Applications—The number of submitted applications for all Medicareproducts, which includes Medicare Advantage, Medicare Supplement and Medicare Part D Prescription Drug Plans, was 56,488 in the second quarter of 2019, a 67% increase compared to 33,756 in the second quarter of 2018. The percentage of applications for Medicare Advantage and Medicare Supplement products submitted online through our platform increased from 9% for the second quarter of 2018 to 11% for the second quarter of 2019. The number of submitted applications for major medical Individual and Family plan products increased by 82% in the second quarter of 2019 to 4,271 compared to 2,346 in the second 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 52,569 in the second quarter of 2019, a 78% increase compared to 29,502 in the second quarter of 2018. The number of approved members for major medical individual and family plan products increased by 15% in the second quarter of 2019 to 2,854 compared to 2,489 in the second quarter of 2018.

Estimated Membership—Total estimated membership as of June 30, 2019 was 967,697, a 10% increase compared to the 877,716 estimated members we reported as of June 30, 2018. Estimated Medicare membership as of June 30, 2019 was 521,262, a 32% increase compared to the 393,937 estimated members we reported as of June 30, 2018. Estimated major medical individual and family plan membership as of June 30, 2019 was 133,543, a 21% decrease compared to the 168,278 estimated members we reported as of June 30, 2018.

Cash—Second Quarter of 2019

Cash Flows—Net cash used in operating activities was $11.5 million for the second quarter of 2019 compared to net cash used in operating activities of $0.3 million for the second quarter of 2018.

GAAP—Year-to-Date Results

Revenue—Revenue for the six months ended June 30, 2019 totaled $134.5 million, a 78% increase compared to $75.7 million for the six months ended June 30, 2018. Commission revenue for the six months ended June 30, 2019 totaled $124.8 million, a 75% increase compared to $71.4 million for the six months ended June 30, 2018. Other revenue for the second quarter of 2019 was $9.7 million, a 122% increase compared to $4.4 million for the six months ended June 30, 2018.

Revenue from our Medicare segment was $107.2 million for the six months ended June 30, 2019, a 91% increase compared to $56.2 million for the six months ended June 30, 2018. Revenue from our Individual, Family and Small Business segment was $27.4 million for the six months ended June 30, 2019, a 40% increase compared to $19.5 million for the six months ended June 30, 2018.

Loss from Operations—Loss from operations for the six months ended June 30, 2019 was $21.5 million compared to loss from operations of $23.6 million for the six months ended June 30, 2018. Operating margin was (16.0)% for the second quarter of 2019 compared to (31.2)% for the six months ended June 30, 2018.

Pre-tax Loss—Pre-tax loss for the six months ended June 30, 2019 was $20.2 millioncompared to pre-tax loss of $23.2 million for the six months ended June 30, 2018.

Benefit from Income Taxes—Benefit from income taxes for the six months ended June 30, 2019 was $9.3 million compared to benefit from income taxes of $6.3 million for the six months ended June 30, 2018.

Net Loss—Net loss for the six months ended June 30, 2019 was $10.9 million, or $0.48net loss per diluted share, compared to net loss of $16.9 million, or $0.89 net loss per diluted share, for the six months ended June 30, 2018. Net loss for the six months ended June 30, 2019 included a non-cash charge of $20.5 million related to an increase in fair value of the earnout liability assumed in connection with eHealth's acquisition of GoMedigap. 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 $16.9 million for the six months ended June 30, 2019, an 891% increase compared to profit of $1.7 million for the six months ended June 30, 2018. Profit from our Individual, Family and Small Business segment was $11.3 million for the six months ended June 30, 2019, a 293% increase compared to profit of $2.9 million for the six months ended June 30, 2018.

Non-GAAP—Year-to-Date Results

Non-GAAP Operating Income (Loss) & Non-GAAP Net Income (Loss)—Non-GAAP operating income for the six months ended June 30, 2019 was $8.0 million compared to non-GAAP operating loss of $12.5 million for the six months ended June 30, 2018. Non-GAAP operating margin was 6.0% for the six months ended June 30, 2019, compared to (16.5)% for the six months ended June 30, 2018. Non-GAAP net income for the six months ended June 30, 2019 was $9.5 million, or $0.42 non-GAAP net income per diluted share, compared to non-GAAP net loss of $8.9 million, or $0.47 non-GAAP net loss per diluted share, for the six months ended June 30, 2018.

Non-GAAP operating income and non-GAAP operating margin for the six months ended June 30, 2019 are calculated by excluding $7.9 million of stock-based compensation expense, $20.5 million of expense for the change in fair value of earnout liability related to our acquisition of GoMedigap, and $1.1 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 six months ended June 30, 2019 are calculated by excluding $7.9 million of stock-based compensation expense, $20.5 millionof expense for the change in fair value of earnout liability related to our acquisition of GoMedigap, $1.1 million of amortization of intangible assets and $9.1 million of the income tax effect of these non-GAAP adjustments from GAAP net loss and GAAP net loss per share. Non-GAAP operating loss and non-GAAP operating margin for the six months ended June 30, 2018 are calculated by excluding $5.7 million of stock-based compensation expense, $2.5 million change in fair value of earnout liability, $1.9 millionof restructuring charges, $1.0 million of amortization of intangible assets and $0.1 millionof acquisition costs related to our acquisition of GoMedigap from GAAP net operating loss and GAAP operating margin. Non-GAAP net loss and non-GAAP net loss per diluted share for the six months ended June 30, 2018 are calculated by excluding $5.7 million of stock-based compensation expense, $2.5 million change in fair value of earnout liability, $1.9 million of restructuring charges, $1.0 million of amortization of intangible assets, $0.1 million of acquisition costs related to our acquisition of GoMedigap, and $3.1 million of the income tax effect of these non-GAAP adjustments from GAAP net loss and GAAP net loss per diluted share.

Adjusted EBITDA—Adjusted EBITDA was $9.4 million for the six months ended June 30, 2019 compared to $(11.3) million for the six months ended June 30, 2018. 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 benefit from income taxes to GAAP net loss.

Submitted Applications and Approved Members

Submitted Applications—The number of submitted applications for all Medicareproducts, which includes Medicare Advantage, Medicare Supplement and Medicare Part D Prescription Drug Plans was 120,334 applications in the six months ended June 30, 2019, a 75% increase compared to 68,785 in the six months ended June 30, 2018. The percentage of applications for Medicare Advantage and Medicare Supplement products submitted online through our platform increased from 8% for the six months ended June 30, 2018 to 12% for the six months ended June 30, 2019. The number of submitted applications for major medical individual and family plan products decreased by 16% in the six months ended June 30, 2019 to 7,498 compared to 8,916 in the six months ended June 30, 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 110,468 in the six months ended June 30, 2019, a 73% increase compared to 63,840 in the six months ended June 30, 2018. The number of approved members for major medical individual and family plan products decreased by 45% in the second quarter of 2019 to 14,452 compared to 26,388 in the six months ended June 30, 2018.

Cash—Year-to-Date Results

Cash Flows—Net cash provided by operating activities was $1.2 million for the six months ended June 30, 2019 compared to net cash provided by operating activities of $10.4 million for the six months ended June 30, 2018.

2019 Guidance

eHealth is revising its guidance for the full year ending December 31, 2019 based on information available as of July 25, 2019. 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, 2019:

• Total revenue is expected to be in the range of $365 million to $385 million, compared with previous guidance of $315 million to $335 million. Revenue from the Medicare segment is expected to be in the range of $318 million to $333 million, compared with previous guidance of $281 million to $297 million. Revenue from the Individual, Family and Small Business segment is expected to be in the range of $47 million to $52 million, compared with previous guidance of $34 million to $38 million.
• Assuming the impact of the non-cash charge related to an increase in fair value of the earnout liability in connection with eHealth's acquisition of GoMedigap remains at $0.82 per diluted share, GAAP net income per diluted share for 2019 is expected to be in the range of $0.62 to $0.82 per share, compared with previous guidance of $0.60 to $0.79 per share.
• Non-GAAP net income per diluted share(a) is expected to be in the range of $1.77 to $1.97per share, compared with previous guidance of $1.54 to $1.73 per share.
• Assuming the impact of the non-cash charge related to an increase in fair value of the earnout liability in connection with eHealth's acquisition of GoMedigap remains at $20.5 million, we expect GAAP net income for 2019 to be in the range of $15.5 million to $20.5 million, compared with previous guidance of $15.0 million to $20.0 million.
• Adjusted EBITDA(b) is expected to be in the range of $65 million to $70 million, compared with previous guidance of $55 million to $60 million.
• 2019 Medicare segment profit(c) is expected to be in the range of $96 million to $99 million, compared with previous guidance of $90 million to $94 million, and Individual, Family and Small Business segment profit is expected to be in the range of $10 million to $12 million, compared with previous guidance of breakeven to $1 million.
• Corporate(d) shared service expenses, excluding stock-based compensation and depreciation and amortization expense, is expected to be approximately $41 million, compared with previous guidance of $35 million.
• Cash used in operations is expected to be in the range of $50 million to $55 million, compared with previous guidance of $20 million to $25 million, and cash used for capital expenditures is expected to be $15 million to $17 million, compared with previous guidance of $13 million to $14 million.

 

Webcast and Conference Call Information

A Webcast and conference call will be held today, Thursday, July 25, 2019 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 6597788. 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 6597788. 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 2019, our ability to scale our Medicare business, our expanded telesales capacity, the effectiveness of our operations, 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 revised guidance for the full year ending December 31, 2019, 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; the impact of the annual enrollment period on the purchase of individual and family health insurance and its timing on our recognition of revenue; changes in laws and regulations, including in connection with healthcare reform or with respect to the marketing and sale of Medicareplans; the success of our sale of short-term health insurance; our ability to comply with CMS guidance and the impact on conversion rates from federal exchange changes to enrollment; competition, including competition from government-run health insurance exchanges; the seasonality of our business and the fluctuation of our operating results; changes in consumer behaviors and their selection of individual and family health insurance products, including the selection of products for which we receive lower commissions; changes in product offerings among carriers on our ecommerce platform and the resulting impact on our commission revenue; carriers exiting the market of selling individual and family health insurance and the resulting impact on our supply and commission revenue; our ability to execute on our growth strategy in the Medicare and small business health insurance markets; exposure to security risks and our ability to safeguard the security and privacy of confidential data; the impact of increased health insurance costs on demand; our ability to timely receive and accurately predict the amount of commission payments from health insurance carriers; medical loss ratio requirements; our ability to accurately estimate membership and lifetime value of commissions; our relationships with health insurance carriers; customer concentration and consolidation of the health insurance industry; our success in marketing and selling health insurance plans and our unit cost of acquisition; our ability to hire, train and retain licensed health insurance agents and other employees; the need for health insurance carrier and regulatory approvals in connection with the marketing of Medicare-related insurance products; costs of acquiring new members; scalability of the Medicarebusiness; consumer satisfaction of our service; changes in member conversion rates and our ability to attract and convert online visitors into paying members; 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'swebsite 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) 584-2700
kate.sidorovich@ehealth.com
http://ir.ehealthinsurance.com

 

 

 

Segment Information

We evaluate our business performance and manage our operations as two distinct reporting segments:

• Medicare; and
• Individual, Family and Small Business.

 

 

 

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.

 

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.

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.

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

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.

Constrained Lifetime Value of Commissions Per Approved Member

 

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 an annual 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.

Expense Metrics Per Approved Member

 

Explanation of Adjustments

 

Explanation of Adjustments

 

Explanation of Adjustments

 

Explanation of Adjustments