MOUNTAIN VIEW, Calif., Oct. 25, 2018 -- 

Third Quarter 2018 Overview

• Revenue for the third quarter of 2018 was $40.8 million, a 30% increase compared to $31.5 million for the third quarter of 2017.
• GAAP net loss for the third quarter of 2018 was $9.0 million compared to net loss of $2.2 million for the third quarter of 2017.
• Adjusted EBITDA was $(6.9) million for the third quarter of 2018 compared to $(12.5) million for the third quarter of 2017.
• Net cash used in operations for the third quarter of 2018 was $4.9 million compared to $12.9 million for the third quarter of 2017.

Effective January 1, 2018, eHealth adopted Accounting Standards Update 2014-09, Revenue from Contracts with Customers (ASC 606), using the full retrospective method. Prior period information presented has been adjusted to reflect the adoption of this new revenue recognition standard.

eHealth, Inc. (NASDAQ: EHTH), a leading private online health insurance exchange, announced today its financial results for the third quarter ended September 30, 2018.

Scott Flanders, chief executive officer of eHealth stated, "I am pleased with eHealth's solid third quarter performance and our increased momentum as we enter the important fourth quarter selling season. Third quarter year over year revenue growth was the strongest since 2015. We also achieved a significant improvement in our Adjusted EBITDA compared to the same quarter a year ago. We are confident in our operational readiness for this selling season, our ability to generate strong Medicare enrollment growth, and our ability to deliver on our full year financial guidance."

GAAP — Third Quarter of 2018 Results

Revenue — Revenue for the third quarter of 2018 totaled $40.8 million, a 30% increase compared to $31.5 million for the third quarter of 2017. Commission revenue for the third quarter of 2018 totaled $33.6 million, a 14% increase compared to $29.5 million for the third quarter of 2017. Other revenue for the third quarter of 2018 was $7.1 million, a 270% increase compared to $1.9 million for the third quarter of 2017.

Revenue from the Medicare segment was $32.7 million for the third quarter of 2018, a 42% increase compared to $23.0 million for the third quarter of 2017. Revenue from the Individual, Family and Small Business segment was $8.0 million for the third quarter of 2018, a 5% decrease compared to $8.5 million for the third quarter of 2017.

Loss from Operations — Loss from operations for the third quarter of 2018 was $15.5 million compared to loss from operations of $15.7 million for the third quarter of 2017.

Pre-tax Loss — Pre-tax loss for the third quarter of 2018 was $15.2 million compared to pre-tax loss of $15.4 million for the third quarter of 2017.

Benefit from Income Taxes — Benefit from income taxes for the third quarter of 2018 was $6.2 million compared to benefit from income taxes of $13.2 million for the third quarter of 2017.

Net Loss — Net loss for the third quarter of 2018 was $9.0 million, or $0.47 net loss per diluted share, compared to net loss of $2.2 million, or $0.12 net loss per diluted share, for the third quarter of 2017.

Segment Profit (Loss)— Profit from our Medicare segment was $0.5 million for the third quarter of 2018 compared to loss of $5.8 million for the third quarter of 2017. Loss from our Individual, Family and Small Business segment was $0.6 million for the third quarter of 2018 compared to loss of $0.4 million for the third quarter of 2017.

Non-GAAP — Third Quarter of 2018 Results

Non-GAAP Operating Loss & Non-GAAP Net Income (Loss) — Non-GAAP operating loss for the third quarter of 2018 was $7.6 million compared to non-GAAP operating loss of $13.2 million for the third quarter of 2017. Non-GAAP net loss for the third quarter of 2018 was $4.3 million, or $0.22 net loss per diluted share, compared to non-GAAP net loss of $0.7 million, or $0.04 net loss per diluted share, for the third quarter of 2017.

Non-GAAP operating loss, non-GAAP net loss and non-GAAP net loss per diluted share for the third quarter of 2018 excludes $3.5 million of stock-based compensation expense, $3.8 million of expense for change in fair value of earnout liability related to our acquisition of GoMedigap and $0.5 million of amortization of intangible assets. Non-GAAP net loss and non-GAAP net loss per diluted share for the third quarter of 2018 also exclude $3.2 million of benefit from income tax effect of these adjustments. Non-GAAP operating loss, non-GAAP net income and non-GAAP net income per diluted share for the third quarter of 2017 excludes $2.2 million of stock-based compensation expense and $0.3 million of amortization of intangible assets. Non-GAAP net income and non-GAAP net income per diluted share for the third quarter of 2017 also exclude $1.0 million of benefit from income tax effect of these adjustments.

Adjusted EBITDA — Adjusted EBITDA was $(6.9) million for the third quarter of 2018 compared to $(12.5) million for the third quarter of 2017. 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, net other income (expense), and benefit from income taxes to GAAP net loss.

Membership & Submitted Applications

Submitted Applications — Submitted applications for all Medicare products, which includes Medicare Advantage, Medicare Supplement and Prescription Drug Plans were 33,902 applications in the third quarter of 2018, a 17% increase compared to 28,926 applications in the third quarter of 2017. Submitted applications for individual and family plan products decreased 68% in the third quarter of 2018 to 1,662 applications compared to 5,127 applications in the third quarter of 2017.

Approved Members — Approved members for all Medicare products, which includes Medicare Advantage, Medicare Supplement and Prescription Drug Plans were 30,160 in the third quarter of 2018, a 14% increase compared to 26,387 applications in the third quarter of 2017. Approved members for individual and family plan products decreased 65% in the third quarter of 2018 to 1,810 members compared to 5,119 members in the third quarter of 2017.

Membership — Total estimated membership as of September 30, 2018 was 887,808 members, a 2% increase from 874,103 estimated members we reported as of September 30, 2017. Estimated Medicare membership as of September 30, 2018 was 409,888, a 30% increase compared to 314,505 estimated members we reported as of September 30, 2017. Estimated individual and family plan membership as of September 30, 2018 was 161,371 members, a 29% decrease compared to 227,330 estimated members we reported as of September 30, 2017.

Cash — Third Quarter of 2018

Cash Flows — Net cash used in operating activities was $4.9 million for the third quarter of 2018 compared to net cash used in operating activities of $12.9 million for the third quarter of 2017.

GAAP — Year-to-Date Results

Revenue — Revenue for the nine months ended September 30, 2018 totaled $116.5 million, an 8% increase compared to $107.6 million for the nine months ended September 30, 2017. Commission revenue for the nine months ended September 30, 2018 totaled $105.0 million, a 4% increase compared to $100.8 million for the nine months ended September 30, 2017. Other revenue for the nine months ended September 30, 2018 was $11.5 million, a 70% increase compared to $6.8 million for the nine months ended September 30, 2017.

Revenue from the Medicare segment was $89.0 million for the nine months ended September 30, 2018, a 23% increase compared to $72.6 million for the nine months ended September 30, 2017. Revenue from the Individual, Family and Small Business segment was $27.5 million for the nine months ended September 30, 2018, a 21% decrease compared to $35.0 million for the nine months ended September 30, 2017.

Loss from Operations — Loss from operations for the nine months ended September 30, 2018 was $39.1 million compared to loss from operations of $30.3 millionfor the nine months ended September 30, 2017.

Pre-tax Loss — Pre-tax loss for the nine months ended September 30, 2018 was $38.3 million compared to pre-tax loss of $29.4 million for the nine months ended September 30, 2017.

Benefit from Income Taxes — Benefit from income taxes for the nine months ended September 30, 2018 was $12.5 million compared to benefit from income taxes of $26.8 million for the nine months ended September 30, 2017.

Net Loss — Net loss for the nine months ended September 30, 2018 was $25.8 million, or $1.36 net loss per diluted share, compared to net loss of $2.6 million, or $0.14 net loss per diluted share, for the nine months ended September 30, 2017.

Segment Profit (Loss)— Profit from our Medicare segment was $2.2 million for the nine months ended September 30, 2018 compared to loss of $8.7 million for the nine months ended September 30, 2017. Profit from our Individual, Family and Small Business segment was $2.3 million for the nine months ended September 30, 2018, compared to profit of $8.4 million for the nine months ended September 30, 2017.

Non-GAAP — Year-to-Date Results

Non-GAAP Operating Loss & Non-GAAP Net Income (Loss)— Non-GAAP operating loss for the nine months ended September 30, 2018 was $20.1 million compared to non-GAAP operating loss of $22.5 million for the nine months ended September 30, 2017. Non-GAAP net loss for the nine months ended September 30, 2018 was $13.0 million, or $0.68 net loss per diluted share, compared to non-GAAP net income of $2.0 million, or $0.11 net income per diluted share, for the nine months ended September 30, 2017.

Non-GAAP operating loss, non-GAAP net loss and non-GAAP net loss per diluted share for the nine months ended September 30, 2018 exclude $9.2 million of stock-based compensation expense, $6.3 million change in fair value of earnout liability, $0.1 millionacquisition costs, $1.9 million restructuring charges and $1.5 million of amortization of intangible assets. Non-GAAP net loss and non-GAAP net loss per diluted share for the nine months ended September 30, 2018 also excludes $6.2 million of benefit from income tax effect of these adjustments. Non-GAAP operating loss, non-GAAP net income and non-GAAP net income per diluted share for the nine months ended September 30, 2017 exclude $6.9 million of stock-based compensation expense and $0.8 million of amortization of intangible assets.  Non-GAAP net income and non-GAAP net income per diluted share for the nine months ended September 30, 2017 also exclude $3.1 million of benefit from income tax effect of these adjustments.

Adjusted EBITDA— Adjusted EBITDA for the nine months ended September 30, 2018 was $(18.2) million compared to $(20.3) million for the nine months ended September 30, 2017. 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 (expense), net and benefit from income taxes to GAAP net loss.

Membership & Submitted Applications

Submitted Applications — Submitted applications for all Medicare products, which includes Medicare Advantage, Medicare Supplement and Prescription Drug Plans was 102,687 applications in the nine months ended September 30, 2018, a 12% increase compared to 91,369 applications in the nine months ended September 30, 2017. Submitted applications for individual and family plan products decreased 68% in the nine months ended September 30, 2018 to 10,578 applications compared to 32,563 applications in the nine months ended September 30, 2017.

Cash — Year-to-Date

Cash Flows — Net cash provided by operating activities was $5.5 million for the nine months ended September 30, 2018 compared to net cash used in operating activities of $5.4 million for the nine months ended September 30, 2017.

2018 Guidance

eHealth is reaffirming guidance for the full year ending December 31, 2018 based on information available as of October 25, 2018. 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 release and in eHealth's annual and quarterly filings with the Securities and Exchange Commission.

• Total revenue is expected to be in the range of $217.5 million to $227.5 million. Revenue from the Medicare segment is expected to be in the range of $178.5 million to $183.5 million. Revenue from the Individual, Family and Small Business segment is expected to be in the range of $39.0 million to $44.0 million.
• GAAP net income is expected to be in the range of $1.6 million to $6.6 million.
• GAAP net income per share is expected to be in the range of $0.08 to $0.34 per share.
• Non-GAAP net income per diluted share(a) is expected to be in the range of $0.69 to $0.95per share.
• Adjusted EBITDA(b) is expected to be in the range of $21.9 million to $26.9 million.
• Medicare segment profit(c) for the year ending December 31, 2018 is expected to be in the range of $45.5 million to $49.5 million. Individual, Family and Small Business segment profit(c) for the year ending December 31, 2018 is expected to be in the range of $6.0 million to $7.0 million. Corporate(d) shared service expenses, excluding stock-based compensation and depreciation and amortization expense, is expected to be approximately $29.5 million.
• Adjusted EBITDA per diluted share(e) is expected to be in the range of $1.13 to $1.39 per share.

Webcast and Conference Call Information

A Webcast and conference call will be held today, Thursday, October 25, 2018 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 2659338. 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 2659338. 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) and 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 operational readiness for the fourth quarter selling season, Medicareenrollment growth, our ability to deliver on our financial guidance, our estimates regarding constrained lifetime values of commissions per member and constraints on lifetime value by product category, total membership, Medicare membership, Individual and Family plan membership, ancillary and small business membership, and our guidance for the full year ending December 31, 2018, including our guidance for total revenue, revenue from the Medicare segment, revenue from the Individual, Family and Small Business segment, GAAP net income, Adjusted EBITDA, profit from the Medicaresegment, profit from the Individual, Family and Small Business segment, Corporate shared service expense, GAAP net income per share, Non-GAAP net income per share and Adjusted EBITDA per share.

These forward-looking statements are inherently subject to various risks and uncertainties that could cause actual results to differ materially from the statements made. In particular, we are required by the new revenue recognition standard to make numerous assumptions that are based upon historical trends and management 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 section carefully as well as the disclosures about our implementation of the new revenue recognition standard in our Form 10-Q for the fiscal quarters ended March 31, 2018 and June 30, 2018.

The risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward-looking statements include risks associated with the impact of healthcare reform; our ability to retain existing members and enroll a large number of new members during the annual healthcare reform open enrollment period and Medicare annual enrollment period; the impact of annual enrollment period for the purchase of individual and family health insurance and its timing on our recognition of revenue; our ability to sell qualified health insurance plans to subsidy-eligible individuals and to enroll subsidy eligible individuals through government-run health insurance exchanges; changes in laws and regulations, including in connection with healthcare reform; our ability to successfully make and integrate acquisitions; our health insurance benefit packages' ability to meet individual customer's specific health insurance and price needs; our ability to comply with CMS guidance and impact on conversion rates as a result of the federal exchange changes to enrollment; competition, including competition from government-run health insurance exchanges; seasonality of our business and the fluctuation of our operating results; our ability to retain existing members and limit member turnover; changes in consumer behaviors and their selection of individual and family health insurance products, including the selection of products for which we receive lower commissions; a reduction of product offerings among carriers and the resulting impact on our commission revenue; carriers exiting the market of selling individual and family health insurance and the resulting impact on our supply and commission revenue; our ability to execute on our growth strategy in the Medicare and small business health insurance markets; the impact of increased health insurance costs on demand; our ability to timely receive and accurately predict the amount of commission payments from health insurance carriers; timing of commission payments from health insurance carriers; medical loss ratio requirements; delays in our receipt of items required to recognize Medicare revenue; changes in member conversion rates; our ability to accurately estimate membership; our relationships with health insurance carriers; customer concentration and consolidation of the health insurance industry; our success in marketing and selling health insurance plans and our unit cost of acquisition; our ability to hire, train and retain licensed health insurance agents and other employees; the need for health insurance carrier and regulatory approvals in connection with the marketing of Medicare-related insurance products; costs of acquiring new members; scalability of the Medicare business; lack of membership growth and retention rates; consumers satisfaction of our service; changes in competitive landscape; our ability to attract and to convert online visitors into paying members; changes in products offered on our ecommerce platform; changes and reductions in commission rates; maintaining and enhancing our brand identity; our ability to derive desired benefits from investments in our business, including membership growth initiatives; dependence on acceptance of the Internet as a marketplace for the purchase and sale of health insurance; reliance on marketing partners; the impact of our digital marketing efforts; timing of receipt and accuracy of commission reports; payment practices of health insurance carriers; dependence on our operations in China; compliance with insurance and other laws and regulations; exposure to security risks; and the performance, reliability and availability of our ecommerce platform and underlying network infrastructure.  Other factors that could cause operating, financial and other results to differ are described in eHealth's most recent Quarterly Report on Form 10-Q or Annual Report on Form 10-K filed with the Securities and Exchange Commission and available on the investor relations page of eHealth's website at http://www.ehealthinsurance.com and on the Securities and Exchange Commission'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 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; adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA); non-GAAP net income (loss), non-GAAP net income (loss) per diluted share and Adjusted EBITDA per share.

• Non-GAAP operating income (loss) consists of GAAP operating income (loss) excluding the following items:
  • the effects of expensing stock-based compensation related to stock options and restricted stock units,
  • 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 excluded items.
• 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) and provision (benefit) for income taxes to GAAP net income (loss).

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

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

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

Investor Relations Contact:
Kate Sidorovich, CFA
Vice President Investor Relations
440 East Middlefield Road
Mountain View, CA 94043
(650) 210-3111
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.

 

 

Explanation of Adjustments

 

Explanation of Adjustments

 

Explanation of Adjustments

 

 

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. Health care reform and its impacts as well as other factors could cause the assumptions and estimates that we make in connection with estimating our membership to be inaccurate, which would cause our membership estimates to be inaccurate.

Constrained Lifetime Value of Commissions Per Approved Member

 

Constraints on Lifetime Value of Commissions Per Approved Member

Constraints are applied to derive the constrained lifetime value ("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