eHealth, Inc. Announces Third Quarter 2019 Results

SANTA CLARA, Calif.Oct. 24, 2019 -- 

Third Quarter 2019 Overview

  • Revenue for the third quarter of 2019 was $69.9 million, a 72% increase compared to $40.8 million for the third quarter of 2018.
  • GAAP net loss for the third quarter of 2019 was $11.0 million compared to net loss of $9.0 million for the third quarter of 2018.
  • Adjusted EBITDA was $(18.8) million for the third quarter of 2019 compared to $(6.9) million for the third quarter of 2018.
  • Net cash used in operating activities for the third quarter of 2019 was $15.9 million compared to $4.9 million for the third quarter of 2018.

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

Scott Flanders, chief executive officer of eHealth stated, "Strong momentum in our business continued with another quarter of meaningful outperformance against our expectations. Our third quarter results reflect strong revenue and enrollment growth in our Medicare and Individual & Family Plan businesses and a significant investment in our telesales capacity ahead of the Medicare Annual Enrollment Period (AEP).  We have entered this AEP from a position of strength, allowing us to recently guide up to the high end of our 2019 revenue and adjusted EBITDA forecast based on the quality and scale of call center resources in place, the acceleration of our online enrollments and strength of consumer demand."

GAAP — Third Quarter of 2019 Results

Revenue — Revenue for the third quarter of 2019 totaled $69.9 million, a 72% increase compared to $40.8 million for the third quarter of 2018. Commission revenue for the third quarter of 2019 totaled $59.8 million, a 78% increase compared to $33.6 million for the third quarter of 2018. Other revenue for the third quarter of 2019 was $10.2 million, a 42% increase compared to $7.1 million for the third quarter of 2018.

Revenue from our Medicare segment was $57.2 million for the third quarter of 2019, a 75% increase compared to $32.7 million for the third quarter of 2018. Revenue from our Individual, Family and Small Business segment was $12.7 million for the third quarter of 2019, a 59% increase compared to $8.0 million for the third quarter of 2018.

Loss from Operations — Loss from operations for the third quarter of 2019 was $20.2 million compared to loss from operations of $15.5 million for the third quarter of 2018. Operating margin was (29)% for the third quarter of 2019 compared to (38)% for the third quarter of 2018.

Pre-tax Loss — Pre-tax loss for the third quarter of 2019 was $19.7 million compared to pre-tax loss of $15.2 million for the third quarter of 2018.

Benefit from Income Taxes — Benefit from income taxes for the third quarter of 2019 was $8.6 million compared to benefit from income taxes of $6.2 million for the third quarter of 2018.

Net Loss — Net loss for the third quarter of 2019 was $11.0 million, or $0.47 net loss per diluted share, compared to net loss of $9.0 million, or $0.47 net loss per diluted share, for the third quarter of 2018. Net loss for the third quarter of 2019 included a non-cash gain of $5.4 million related to a decrease in fair value of the earnout liability assumed in connection with eHealth's acquisition of GoMedigap. The decrease was driven primarily by eHealth's share price decline during the quarter. The share price depreciation has decreased the value of the equity-based portion of the earnout consideration owed to the former holders of GoMedigap equity interests.

Segment Profit (Loss) — Loss from our Medicare segment was $11.0 million for the third quarter of 2019, compared to a profit of $0.5 million for the third quarter of 2018. Profit from our Individual, Family and Small Business segment was $3.8 million for the third quarter of 2019, compared to a loss of $0.6 million for the third quarter of 2018.

Non-GAAP — Third Quarter of 2019 Results

Non-GAAP Operating Loss & Non-GAAP Net Loss — Non-GAAP operating loss for the third quarter of 2019 was $19.6 million, compared to non-GAAP operating loss of $7.6 million for the third quarter of 2018. Non-GAAP operating margin was (28)% for the third quarter of 2019, compared to (19)% for the third quarter of 2018. Non-GAAP net loss for the third quarter of 2019 was $10.1 million, or $0.43 non-GAAP net loss per diluted share, compared to non-GAAP net loss of $4.2 million, or $0.22 non-GAAP net loss per diluted share, for the third quarter of 2018.

Non-GAAP operating loss and non-GAAP operating margin for the third quarter of 2019 are calculated by excluding $5.5 million of stock-based compensation expense, a $5.4 million gain 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 loss and GAAP operating margin. Non-GAAP net loss and non-GAAP net loss per diluted share for the third quarter of 2019 are calculated by excluding $5.5 million of stock-based compensation expense, $5.4 million of gain 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 $0.3 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 third quarter of 2018 are calculated by excluding $3.5 million of stock-based compensation expense, $3.8 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 third quarter of 2018 are calculated by excluding $3.5 million of stock-based compensation expense, $3.8 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 $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 $(18.8) million for the third quarter of 2019 compared to $(6.9) million for the third 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 Medicare products, which includes Medicare Advantage, Medicare Supplement and Medicare Part D Prescription Drug Plans, was 56,436 in the third quarter of 2019, a 66% increase compared to 33,902 in the third quarter of 2018. The percentage of applications for Medicare Advantage and Medicare Supplement products submitted online through our platform increased from 9% for the third quarter of 2018 to 21% for the third quarter of 2019. The number of submitted applications for major medical Individual and Family plan products increased by 163% in the third quarter of 2019 to 4,379 compared to 1,662 in the third 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 51,214 in the third quarter of 2019, a 70% increase compared to 30,160 in the third quarter of 2018. The number of approved members for major medical individual and family plan products increased by 76% in the third quarter of 2019 to 3,187 compared to 1,810 in the third quarter of 2018.

Estimated Membership — Total estimated membership as of September 30, 2019 was 991,204, a 12% increase compared to the 887,808 estimated members we reported as of September 30, 2018. Estimated Medicare membership as of September 30, 2019 was 551,068, a 34% increase compared to the 409,888 estimated members we reported as of September 30, 2018. Estimated major medical individual and family plan membership as of September 30, 2019 was 131,058, a 19% decrease compared to the 161,371 estimated members we reported as of September 30, 2018.

Cash — Third Quarter of 2019

Cash Flows — Net cash used in operating activities was $15.9 million for the third quarter of 2019, compared to net cash used in operating activities of $4.9 million for the third quarter of 2018.

GAAP — Year-to-Date Results

Revenue — Revenue for the nine months ended September 30, 2019 totaled $204.5 million, a 76% increase compared to $116.5 million for the nine months ended September 30, 2018. Commission revenue for the nine months ended September 30, 2019 totaled $184.6 million, a 76% increase compared to $105.0 million for the nine months ended September 30, 2018. Other revenue for the nine months ended September 30, 2019 was $19.9 million, a 72% increase compared to $11.5 million for the nine months ended September 30, 2018.

Revenue from our Medicare segment was $164.4 million for the nine months ended September 30, 2019, an 85% increase compared to $89.0 million for the nine months ended September 30, 2018. Revenue from our Individual, Family and Small Business segment was $40.1 million for the nine months ended September 30, 2019, a 46% increase compared to $27.5 million for the nine months ended September 30, 2018.

Loss from Operations — Loss from operations for the nine months ended September 30, 2019 was $41.7 million compared to loss from operations of $39.1 million for the nine months ended September 30, 2018. Operating margin was (20)% for the nine months ended September 30, 2019 compared to (34)% for the nine months ended September 30, 2018.

Pre-tax Loss — Pre-tax loss for the nine months ended September 30, 2019 was $39.9 million compared to pre-tax loss of $38.3 million for the nine months ended September 30, 2018.

Benefit from Income Taxes — Benefit from income taxes for the nine months ended September 30, 2019 was $18.0 million compared to benefit from income taxes of $12.5 million for the nine months ended September 30, 2018.

Net Loss — Net loss for the nine months ended September 30, 2019 was $21.9 million, or $0.96 net loss per diluted share, compared to net loss of $25.8 million, or $1.36 net loss per diluted share, for the nine months ended September 30, 2018. Net loss for the nine months ended September 30, 2019 included a non-cash charge of $15.1 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 $5.9 million for the nine months ended September 30, 2019, a 172% increase compared to profit of $2.2 million for the nine months ended September 30, 2018. Profit from our Individual, Family and Small Business segment was $15.0 million for the nine months ended September 30, 2019, a 556% increase compared to profit of $2.3 million for the nine months ended September 30, 2018.

Non-GAAP — Year-to-Date Results

Non-GAAP Operating Loss & Non-GAAP Net Loss — Non-GAAP operating loss for the nine months ended September 30, 2019 was $11.6 million compared to non-GAAP operating loss of $20.1 million for the nine months ended September 30, 2018. Non-GAAP operating margin was (6)% for the nine months ended September 30, 2019, compared to (17)% for the nine months ended September 30, 2018. Non-GAAP net loss for the nine months ended September 30, 2019 was $0.6 million, or $0.02 non-GAAP net loss per diluted share, compared to non-GAAP net loss of $13.0 million, or $0.68 non-GAAP net loss per diluted share, for the nine months ended September 30, 2018.

Non-GAAP operating loss and non-GAAP operating margin for the nine months ended September 30, 2019 are calculated by excluding $13.4 million of stock-based compensation expense, $15.1 million of expense for the change in fair value of earnout liability related to our acquisition of GoMedigap, and $1.6 million of amortization of intangible assets from GAAP operating loss and GAAP operating margin. Non-GAAP net loss and non-GAAP net loss per diluted share for the nine months ended September 30, 2019 are calculated by excluding $13.4 million of stock-based compensation expense, $15.1 million of expense for the change in fair value of earnout liability related to our acquisition of GoMedigap, $1.6 million of amortization of intangible assets and $8.8 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 nine months ended September 30, 2018 are calculated by excluding $9.2 million of stock-based compensation expense, $6.3 million of expense for change in fair value of earnout liability, $1.9 million of restructuring charges, $1.5 million of amortization of intangible assets and $0.1 million of 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 nine months ended September 30, 2018 are calculated by excluding $9.2 million of stock-based compensation expense, $6.3 million of expense for change in fair value of earnout liability, $1.9 million of restructuring charges, $1.5 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 loss and GAAP net loss per diluted share.

Adjusted EBITDA — Adjusted EBITDA was $(9.4) million for the nine months ended September 30, 2019 compared to $(18.2) million for the nine months ended September 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 Medicare products, which includes Medicare Advantage, Medicare Supplement and Medicare Part D Prescription Drug Plans was 176,770 applications in the nine months ended September 30, 2019, a 72% increase compared to 102,687 in the nine months ended September 30, 2018. The percentage of applications for Medicare Advantage and Medicare Supplement products submitted online through our platform increased from 8% for the nine months ended September 30, 2018 to 15% for the nine months ended September 30, 2019. The number of submitted applications for major medical individual and family plan products increased by 12% in the nine months ended September 30, 2019 to 11,877 compared to 10,578 in the nine months ended September 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 161,682 in the nine months ended September 30, 2019, a 72% increase compared to 93,999 in the nine months ended September 30, 2018. The number of approved members for major medical individual and family plan products decreased by 37% in the nine months ended September 30, 2019 to 17,639 compared to 28,198 in the nine months ended September 30, 2018.

Cash — Year-to-Date Results

Cash Flows — Net cash used in operating activities was $14.7 million for the nine months ended September 30, 2019 compared to net cash provided by operating activities of $5.5 million for the nine months ended September 30, 2018.

2019 Guidance

Based on information available as of October 24, 2019, eHealth is reaffirming its guidance for total revenue and adjusted EBITDA for the full year ending December 31, 2019, and updating its guidance for certain GAAP and non-GAAP measures for the full year ending December 31, 2019 due to the third quarter of 2019 reduction in fair value of the earnout liability assumed in connection with eHealth's acquisition of GoMedigap and a change in income tax rate. 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:

Consistent with our prior guidance,

  • Total revenue is expected to be in the range of $365.0 million to $385.0 million. Revenue from the Medicare segment is expected to be in the range of $318.0 million to $333.0 million. Revenue from the Individual, Family and Small Business segment is expected to be in the range of $47.0 million to $52.0 million.
  • Adjusted EBITDA(a) is expected to be in the range of $65.0 million to $70.0 million.
  • 2019 Medicare segment profit(b) is expected to be in the range of $96.0 million to $99.0 million, and Individual, Family and Small Business segment profit is expected to be in the range of $10.0 million to $12.0 million.
  • Corporate(c) shared service expenses, excluding stock-based compensation and depreciation and amortization expense, is expected to be approximately $41.0 million.
  • Cash used in operations is expected to be in the range of $50.0 million to $55.0 million, and cash used for capital expenditures is expected to be $15.0 million to $17.0 million.

Updated guidance for the full year ending December 31, 2019 due to the third quarter of 2019 reduction in fair value of the earnout liability assumed in connection with our acquisition of GoMedigap during the third quarter of 2019 and a change in income tax rate:

  • Assuming the impact of the non-cash charge related to the fair value of the earnout liability in connection with our acquisition of GoMedigap remains at $15.1 million, we expect GAAP net income for 2019 to be in the range of $20.9 million to $25.9 million.
  • Assuming the impact of the non-cash charge related to the fair value of the earnout liability in connection with our acquisition of GoMedigap remains at $0.60 per diluted share, GAAP net income per diluted share for 2019 is expected to be in the range of $0.83 to $1.03 per share.
  • Assuming the impact of the non-cash charge related to the fair value of the earnout liability in connection with our acquisition of GoMedigap remains at $0.60 per diluted share, non-GAAP net income per diluted share(d) is expected to be in the range of $1.86 to $2.06 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, October 24, 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 6089464. 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 6089464. 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 meet the high end of our 2019 revenue and adjusted EBITDA forecast, the quality and scale of our call center resources, the acceleration of our online enrollments, strength of consumer demand, 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 Medicare plans; 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 Medicare business; 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'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)

 
 

September 30, 2019

 

December 31, 2018

Assets

(Unaudited)

   

Current assets:

     

Cash and cash equivalents

$

88,070

   

$

13,089

 

Accounts receivable

682

   

3,601

 

Commissions receivable — current

127,414

   

134,190

 

Prepaid expenses and other current assets

18,180

   

5,288

 

Total current assets

234,346

   

156,168

 

Commissions receivable — non-current

230,322

   

211,668

 

Property and equipment, net

10,401

   

7,684

 

Operating lease right-of-use assets

36,551

   

 

Restricted cash

3,354

   

 

Other assets

15,424

   

11,276

 

Intangible assets, net

10,609

   

12,249

 

Goodwill

40,233

   

40,233

 

Total assets

$

581,240

   

$

439,278

 

Liabilities and stockholders' equity

     

Current liabilities:

     

Accounts payable

$

18,062

   

$

5,688

 

Accrued compensation and benefits

18,139

   

20,763

 

Accrued marketing expenses

4,086

   

11,013

 

Earnout liability — current

28,300

   

20,730

 

Lease liabilities — current

4,317

   

 

Deferred Revenue

9,083

   

876

 

Other current liabilities

1,671

   

1,549

 

Total current liabilities

83,658

   

60,619

 

Debt

   

5,000

 

Earnout liability — non-current

   

19,270

 

Deferred income taxes — non-current

29,735

   

47,901

 

Lease liabilities — non-current

34,181

   

 

Other non-current liabilities

2,095

   

3,339

 

Stockholders' equity:

     

Common stock

35

   

31

 

Additional paid-in capital

448,409

   

298,024

 

Treasury stock, at cost

(199,998)

   

(199,998)

 

Retained earnings

183,028

   

204,965

 

Accumulated other comprehensive income

97

   

127

 

Total stockholders' equity

431,571

   

303,149

 

Total liabilities and stockholders' equity

$

581,240

   

$

439,278

 

EHEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts, unaudited)

 
 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

2019

 

2018

 

2019

 

2018

Revenue:

             

Commission

$

59,762

   

$

33,613

   

$

184,595

   

$

104,966

 

Other

10,151

   

7,138

   

19,858

   

11,512

 

Total revenue

69,913

   

40,751

   

204,453

   

116,478

 

Operating costs and expenses (1):

             

Cost of revenue

410

   

170

   

782

   

473

 

Marketing and advertising

25,812

   

16,148

   

72,857

   

45,756

 

Customer care and enrollment

40,144

   

17,272

   

81,567

   

43,730

 

Technology and content

12,033

   

7,740

   

31,487

   

23,368

 

General and administrative

16,608

   

10,528

   

42,748

   

32,459

 

Acquisition costs

   

   

   

76

 

Change in fair value of earnout liability

(5,400)

   

3,800

   

15,106

   

6,300

 

Restructuring charges

   

   

   

1,865

 

Amortization of intangible assets

547

   

547

   

1,641

   

1,545

 

Total operating costs and expenses

90,154

   

56,205

   

246,188

   

155,572

 

Loss from operations

(20,241)

   

(15,454)

   

(41,735)

   

(39,094)

 

Other income, net

568

   

296

   

1,824

   

776

 

Loss before benefit from income taxes

(19,673)

   

(15,158)

   

(39,911)

   

(38,318)

 

Benefit from income taxes

(8,649)

   

(6,186)

   

(17,974)

   

(12,487)

 

Net loss

$

(11,024)

   

$

(8,972)

   

$

(21,937)

   

$

(25,831)

 
               

Net loss per share:

             

Basic and diluted

$

(0.47)

   

$

(0.47)

   

$

(0.96)

   

$

(1.36)

 
               

Weighted-average number of shares used in per share amounts:

             

Basic and diluted

23,493

   

19,236

   

22,840

   

19,059

 
               

(1) Includes stock-based compensation as follows:

             

Marketing and advertising

$

872

   

$

545

   

$

2,212

   

$

1,477

 

Customer care and enrollment

369

   

194

   

927

   

565

 

Technology and content

729

   

388

   

1,946

   

1,115

 

General and administrative

3,540

   

2,416

   

8,332

   

6,067

 

Restructuring charges

   

   

   

251

 

Total stock-based compensation expense

$

5,510

   

$

3,543

   

$

13,417

   

$

9,475

 

EHEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)

 
 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

2019

 

2018

 

2019

 

2018

Operating activities

             

Net loss

$

(11,024)

   

$

(8,972)

   

$

(21,937)

   

$

(25,831)

 

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

             

Deferred income taxes

(8,631)

   

(6,197)

   

(18,166)

   

(12,679)

 

Depreciation and amortization

765

   

620

   

2,153

   

1,870

 

Amortization of internally developed software

930

   

572

   

2,443

   

1,583

 

Amortization of intangible assets

547

   

547

   

1,641

   

1,545

 

Stock-based compensation expense

5,510

   

3,543

   

13,417

   

9,475

 

Change in fair value of earnout liability

(5,400)

   

3,800

   

15,106

   

6,300

 

Change in deferred rent

   

12

   

(1,272)

   

326

 

Other non-cash items

112

   

(1)

   

336

   

61

 

Changes in operating assets and liabilities:

             

Accounts receivable

377

   

(1,294)

   

2,920

   

(665)

 

Commissions receivable

(16,321)

   

1,661

   

(11,878)

   

29,156

 

Prepaid expenses and other assets

(6,650)

   

(7,089)

   

(9,346)

   

(8,209)

 

Accounts payable

13,008

   

2,715

   

13,155

   

1,513

 

Accrued compensation and benefits

2,874

   

1,517

   

(2,624)

   

(2,081)

 

Accrued marketing expenses

415

   

316

   

(6,927)

   

(1,635)

 

Deferred revenue

8,325

   

4,978

   

8,207

   

5,354

 

Accrued expenses and other liabilities

(776)

   

(1,676)

   

(1,942)

   

(595)

 

Net cash (used in) provided by operating activities

(15,939)

   

(4,948)

   

(14,714)

   

5,488

 

Investing activities

             

Capitalized internal-use software and website development costs

(2,923)

   

(1,581)

   

(6,356)

   

(4,344)

 

Purchases of property and equipment and other assets

(1,830)

   

(2,349)

   

(5,616)

   

(3,471)

 

Payments for security deposits

824

   

   

(72)

   

 

Acquisition of business, net of cash acquired

   

   

   

(14,929)

 

Cash used in investing activities

(3,929)

   

(3,930)

   

(12,044)

   

(22,744)

 

Financing activities

             

Proceeds from issuance of common stock, net of issuance costs

   

   

126,051

   

 

Net proceeds from exercise of common stock options

1,913

   

1,362

   

5,168

   

2,030

 

Cash used to net-share settle equity awards

(8,059)

   

(1,656)

   

(11,511)

   

(3,398)

 

Debt issuance cost payments

   

(1,172)

   

   

(1,172)

 

Repayment of debt

   

   

(5,000)

   

 

Acquisition-related contingent payments

   

   

(9,542)

   

 

Principal payments in connection with finance leases

(31)

   

(26)

   

(81)

   

(78)

 

Net cash (used in) provided by financing activities

(6,177)

   

(1,492)

   

105,085

   

(2,618)

 

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

(21)

   

(56)

   

8

   

(71)

 

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

(26,066)

   

(10,426)

   

78,335

   

(19,945)

 

Cash, cash equivalents and restricted cash at beginning of period

117,490

   

30,774

   

13,089

   

40,293

 

Cash, cash equivalents and restricted cash at end of period (1)

$

91,424

   

$

20,348

   

$

91,424

   

$

20,348

 
 

(1) The ending balance of cash, cash equivalents and restricted cash included $3.4 million of restricted cash as of September 30, 2019. There was no restricted cash as of December 31, 2018.

EHEALTH, INC.

SEGMENT INFORMATION

(In thousands, unaudited)

 
 

Three Months Ended
September 30,

     

Nine Months Ended
September 30,

   
 

2019

 

2018

 

Percent
Change

 

2019

 

2018

 

Percent
Change

Revenue

                     

Medicare (1)

$

57,189

   

$

32,733

   

75

%

 

$

164,357

   

$

88,964

   

85

%

Individual, Family and Small Business (2)

12,724

   

8,018

   

59

%

 

40,096

   

27,514

   

46

%

Total revenue

$

69,913

   

$

40,751

   

72

%

 

$

204,453

   

$

116,478

   

76

%

                       

Segment profit (loss)

                     

Medicare segment profit (loss) (3)

$

(11,004)

   

$

467

   

(2,456)

%

 

$

5,917

   

$

2,174

   

172

%

Individual, Family and Small Business segment profit (loss) (3)

3,753

   

(579)

   

748

%

 

15,045

   

2,292

   

556

%

Total segment profit (loss)

(7,251)

   

(112)

   

(6,374)

%

 

20,962

   

4,466

   

369

%

Corporate (4)

(11,568)

   

(6,832)

   

69

%

 

(30,380)

   

(22,680)

   

34

%

Stock-based compensation expense

(5,510)

   

(3,543)

   

56

%

 

(13,417)

   

(9,224)

   

45

%

Depreciation and amortization

(765)

   

(620)

   

23

%

 

(2,153)

   

(1,870)

   

15

%

Acquisition costs

   

   

%

 

   

(76)

   

(100)

%

Change in fair value of earnout liability

5,400

   

(3,800)

   

(242)

%

 

(15,106)

   

(6,300)

   

140

%

Restructuring charges

   

   

%

 

   

(1,865)

   

(100)

%

Amortization of intangible assets

(547)

   

(547)

   

%

 

(1,641)

   

(1,545)

   

6

%

Other income, net

568

   

296

   

92

%

 

1,824

   

776

   

135

%

Loss before benefit from income taxes

$

(19,673)

   

$

(15,158)

   

30

%

 

$

(39,911)

   

$

(38,318)

   

4

%

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 (loss) is calculated as revenue for the applicable segment less marketing and advertising, customer care and enrollment, technology and content and general and administrative operating expenses, excluding stock-based compensation, depreciation and amortization expense, 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
September 30,

     

Nine Months Ended
September 30,

   
   

2019

 

2018

 

Percent
Change

 

2019

 

2018

 

Percent
Change

Medicare

                       

Medicare Advantage

 

$

36,735

   

$

17,976

   

104

%

 

$

113,185

   

$

57,649

   

96

%

Medicare Supplement

 

8,229

   

7,358

   

12

%

 

25,082

   

18,305

   

37

%

Medicare Part D

 

1,805

   

1,005

   

80

%

 

5,906

   

2,879

   

105

%

Total Medicare

 

46,769

   

26,339

   

78

%

 

144,173

   

78,833

   

83

%

                         

Individual and Family (1)

                       

Non-Qualified Health Plans

 

3,146

   

876

   

259

%

 

11,592

   

3,386

   

242

%

Qualified Health Plans

 

839

   

1,169

   

(28)

%

 

4,900

   

5,006

   

(2)

%

Total Individual and Family

 

3,985

   

2,045

   

95

%

 

16,492

   

8,392

   

97

%

                         

Ancillaries

                       

Short-term

 

3,151

   

1,699

   

85

%

 

7,162

   

4,242

   

69

%

Dental

 

1,420

   

245

   

480

%

 

3,138

   

1,611

   

95

%

Vision

 

537

   

126

   

326

%

 

1,294

   

857

   

51

%

Other

 

1,104

   

1,006

   

10

%

 

2,778

   

3,659

   

(24)

%

Total Ancillaries

 

6,212

   

3,076

   

102

%

 

14,372

   

10,369

   

39

%

                         

Small Business

 

1,938

   

1,697

   

14

%

 

6,576

   

5,828

   

13

%

                         

Commission Bonus

 

858

   

456

   

88

%

 

2,982

   

1,544

   

93

%

                         

Total Commission Revenue

 

$

59,762

   

$

33,613

   

78

%

 

$

184,595

   

$

104,966

   

76

%

   

(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

SUBMITTED APPLICATIONS

(Unaudited)

 
   

Three Months Ended
September 30,

     

Nine Months Ended
September 30,

   
   

2019

 

2018

 

Percent
Change

 

2019

 

2018

 

Percent
Change

Medicare (1)

                       

Medicare Advantage (2)

 

37,915

   

21,115

   

80

%

 

120,855

   

69,060

   

75

%

Medicare Supplement (2)

 

11,099

   

8,924

   

24

%

 

31,936

   

22,180

   

44

%

Medicare Part D

 

7,422

   

3,863

   

92

%

 

23,979

   

11,447

   

109

%

Total Medicare

 

56,436

   

33,902

   

66

%

 

176,770

   

102,687

   

72

%

                         

Individual and Family (3)

                       

Non-Qualified Health Plans

 

3,131

   

1,224

   

156

%

 

8,343

   

6,419

   

30

%

Qualified Health Plans

 

1,248

   

438

   

185

%

 

3,534

   

4,159

   

(15)

%

Total Individual and Family

 

4,379

   

1,662

   

163

%

 

11,877

   

10,578

   

12

%

                         

Ancillaries (4)

                       

Short-term

 

13,977

   

30,365

   

(54)

%

 

42,442

   

75,639

   

(44)

%

Dental

 

8,609

   

9,111

   

(6)

%

 

28,972

   

31,428

   

(8)

%

Vision

 

3,654

   

4,318

   

(15)

%

 

13,245

   

14,111

   

(6)

%

Other

 

5,871

   

10,641

   

(45)

%

 

18,612

   

32,759

   

(43)

%

Total Ancillaries

 

32,111

   

54,435

   

(41)

%

 

103,271

   

153,937

   

(33)

%

                         

Small Business (5)

 

1,566

   

1,843

   

(15)

%

 

5,348

   

5,235

   

2

%

                         

Total Submitted Applications

 

94,492

   

91,842

   

3

%

 

297,266

   

272,437

   

9

%

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 increased from 9% for the three months ended September 30, 2018 to 21% for the three months ended September 30, 2019. The percentage of applications for Medicare Advantage and Medicare Supplement products submitted online through our platform increased from 8% for the nine months ended September 30, 2018 to 15% for the nine months ended September 30, 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
September 30,

     

Nine Months Ended
September 30,

   
   

2019

 

2018

 

Percent
Change

 

2019

 

2018

 

Percent
Change

Medicare

                       

Medicare Advantage

 

35,171

   

19,664

   

79

%

 

112,488

   

65,102

   

73

%

Medicare Supplement

 

9,110

   

6,985

   

30

%

 

26,510

   

17,667

   

50

%

Medicare Part D

 

6,933

   

3,511

   

97

%

 

22,684

   

11,230

   

102

%

Total Medicare

 

51,214

   

30,160

   

70

%

 

161,682

   

93,999

   

72

%

                         

Individual and Family

                       

Non-Qualified Health Plans

 

2,245

   

1,227

   

83

%

 

10,250

   

11,715

   

(13)

%

Qualified Health Plans

 

942

   

583

   

62

%

 

7,389

   

16,483

   

(55)

%

Total Individual and Family

 

3,187

   

1,810

   

76

%

 

17,639

   

28,198

   

(37)

%

                         

Ancillaries

                       

Short-term

 

15,630

   

32,723

   

(52)

%

 

44,691

   

79,683

   

(44)

%

Dental

 

9,487

   

9,256

   

2

%

 

32,021

   

32,720

   

(2)

%

Vision

 

4,265

   

4,539

   

(6)

%

 

15,108

   

15,578

   

(3)

%

Other

 

6,296

   

8,716

   

(28)

%

 

17,654

   

25,447

   

(31)

%

   Total Ancillaries

 

35,678

   

55,234

   

(35)

%

 

109,474

   

153,428

   

(29)

%

                         

Small Business

 

2,871

   

3,255

   

(12)

%

 

10,368

   

12,013

   

(14)

%

                         

Total Approved Members

 

92,950

   

90,459

   

3

%

 

299,163

   

287,638

   

4

%

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 September 30,

   
 

2019

 

2018

 

Percent
Change

Medicare (1)

         

Medicare Advantage

309,180

   

235,269

   

31

%

Medicare Supplement

85,821

   

64,632

   

33

%

Medicare Part D

156,067

   

109,987

   

42

%

Total Medicare

551,068

   

409,888

   

34

%

           

Individual and Family (2)

131,058

   

161,371

   

(19)

%

           

Ancillaries (3)

         

Short-term

24,167

   

25,008

   

(3)

%

Dental

131,409

   

142,990

   

(8)

%

Vision

72,765

   

71,875

   

1

%

Other

36,014

   

38,380

   

(6)

%

Total Ancillaries

264,355

   

278,253

   

(5)

%

           

Small Business (4)

44,723

   

38,296

   

17

%

           

Total Estimated Membership

991,204

   

887,808

   

12

%

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.

(1)

For 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 is up to two months prior to the date of estimation (after reducing that number using historical experience for assumed member cancellations over the period being estimated); and (ii) the number of approved members over that period (after reducing that number using historical experience for an assumed number of members who do not accept their approved policy from the same month of the previous year and for estimated member cancellations through the date of the estimate). To the extent we determine we have received substantially all of the commission payments related to a given month during the period being estimated, we will take the number of members for whom we have received or applied a commission payment during the month of estimation. The estimated number of members active on Medicare-related health insurance as of the date indicated is based on 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, we take the sum of (i) the number of IFP members for whom we have received or applied a commission payment for a month that is up to six months prior to the date of estimation (after reducing that number using historical experience for assumed member cancellations over the period being estimated); and (ii) the number of approved members over that period (after reducing that number by the percentage of members who do not accept their approved policy from the same month of the previous year for estimated member cancellations through the date of the estimate). To the extent we determine we have received substantially all of the commission payments related to a given month during the period being estimated, we will take the number of members for whom we have received or applied a commission payment during the month of estimation.  For IFP health insurance plans, a member who purchases and is active on multiple standalone insurance plans will be counted as a member more than once. For example, a member who is active on both an individual and family health insurance plan and a standalone dental plan will be counted as two continuing members.

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

(3)

For 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 is up to three months prior to the date of estimation (after reducing that number using historical experience for assumed member cancellations over the period being estimated); and (ii) the number of approved members over that period (after reducing that number using historical experience for an assumed number of members who do not accept their approved policy from the same month of the previous year and for estimated member cancellations through the date of the estimate). To the extent we determine we have received substantially all of the commission payments related to a given month during the period being estimated, we will take the number of members for whom we have received or applied a commission payment during the month of estimation. The one to three-month period varies by insurance product and is largely dependent upon the timeliness of commission payment and related reporting from the related carriers.

   

(4)

For small business health insurance plans, we estimate the number of members using the number of initial members at the time the group is approved, and we update this number for changes in membership if such changes are reported to us by the group or carrier in the period it is reported. However, groups generally notify the carrier directly of policy cancellations and increases or decreases in group size without informing us. Health insurance carriers often do not communicate policy cancellation information or group size changes to us. We often are made aware of policy cancellations and group size changes at the time of annual renewal and update our membership statistics accordingly in the period they are reported.

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
September 30,

   
 

2019

 

2018

 

Percent
Change

Medicare

         

Medicare Advantage (1)

$

923

   

$

914

   

1

%

Medicare Supplement (1)

$

951

   

$

1,058

   

(10)

%

Medicare Part D (1)

$

265

   

$

286

   

(7)

%

           

Individual and Family

         

Non-Qualified Health Plans (1)

$

173

   

$

119

   

45

%

Qualified Health Plans (1)

$

165

   

$

115

   

43

%

           

Ancillaries

         

Short-term (1)

$

112

   

$

55

   

104

%

Dental (1)

$

65

   

$

62

   

5

%

Vision (1)

$

45

   

$

47

   

(4)

%

           

Small Business (2)

$

168

   

$

163

   

3

%

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, expected plan duration and applied constraints. 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, expected plan duration 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 and Nine Months Ended
September 30,

 

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 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.

EHEALTH, INC.

SUMMARY OF SELECTED METRICS

EXPENSE METRICS PER APPROVED MEMBER

(Unaudited)

 
 

Three Months Ended
September 30,

   
 

2019

 

2018

 

Percent
Change

Medicare variable cost per approved member

         

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

$

381

   

$

356

   

7

%

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

$

819

   

$

538

   

52

%

  Total Medicare cost per approved member

$

1,200

   

$

894

   

34

%

           

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

         

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

$

80

   

$

77

   

4

%

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

$

167

   

$

97

   

72

%

  Total IFP cost per approved member

$

247

   

$

174

   

42

%

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 September 30,

 

2019

 

2018

 

Amount

 

Percent of Total
Revenue

 

Amount

 

Percent of Total
Revenue

GAAP marketing and advertising expense

$

25,812

   

37%

 

$

16,148

   

40%

Stock-based compensation expense (1)

(872)

   

(1)%

 

(545)

   

(1)%

Non-GAAP marketing and advertising expense

$

24,940

   

36%

 

$

15,603

   

38%

               

GAAP customer care and enrollment expense

$

40,144

   

57%

 

$

17,272

   

42%

Stock-based compensation expense (1)

(369)

   

(1)%

 

(194)

   

—%

Non-GAAP customer care and enrollment expense

$

39,775

   

57%

 

$

17,078

   

42%

               

GAAP technology and content expense

$

12,033

   

17%

 

$

7,740

   

19%

Stock-based compensation expense (1)

(729)

   

(1)%

 

(388)

   

(1)%

Non-GAAP technology and content expense

$

11,304

   

16%

 

$

7,352

   

18%

               

GAAP general and administrative expense

$

16,608

   

24%

 

$

10,528

   

26%

Stock-based compensation expense (1)

(3,540)

   

(5)%

 

(2,416)

   

(6)%

Non-GAAP general and administrative expense

$

13,068

   

19%

 

$

8,112

   

20%

               

GAAP operating costs and expenses

$

90,154

   

129%

 

$

56,205

   

138%

Stock-based compensation expense (1)

(5,510)

   

(8)%

 

(3,543)

   

(9)%

Change in fair value of earnout liability (2)

5,400

   

8%

 

(3,800)

   

(9)%

Amortization of intangible assets (3)

(547)

   

(1)%

 

(547)

   

(1)%

Non-GAAP operating costs and expenses

$

89,497

   

128%

 

$

48,315

   

119%

               

GAAP loss from operations

$

(20,241)

   

(29)%

 

$

(15,454)

   

(38)%

Stock-based compensation expense (1)

5,510

   

8%

 

3,543

   

9%

Change in fair value of earnout liability (2)

(5,400)

   

(8)%

 

3,800

   

9%

Amortization of intangible assets (3)

547

   

1%

 

547

   

1%

Non-GAAP loss from operations

$

(19,584)

   

(28)%

 

$

(7,564)

   

(19)%

Explanation of Adjustments

(1)

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

   

(2)

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

   

(3)

Non-GAAP operating costs and expenses and non-GAAP loss from operations exclude amortization of intangible assets.

EHEALTH, INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(In thousands, except per share amounts, unaudited)

 
 

Nine Months Ended September 30,

 

2019

 

2018

 

Amount

 

Percent of Total
Revenue

 

Amount

 

Percent of Total
Revenue

GAAP marketing and advertising expense

$

72,857

   

36%

 

$

45,756

   

39%

Stock-based compensation expense (1)

(2,212)

   

(1)%

 

(1,477)

   

(1)%

Non-GAAP marketing and advertising expense

$

70,645

   

35%

 

$

44,279

   

38%

               

GAAP customer care and enrollment expense

$

81,567

   

40%

 

$

43,730

   

38%

Stock-based compensation expense (1)

(927)

   

—%

 

(565)

   

—%

Non-GAAP customer care and enrollment expense

$

80,640

   

39%

 

$

43,165

   

37%

               

GAAP technology and content expense

$

31,487

   

15%

 

$

23,368

   

20%

Stock-based compensation expense (1)

(1,946)

   

(1)%

 

(1,115)

   

(1)%

Non-GAAP technology and content expense

$

29,541

   

14%

 

$

22,253

   

19%

               

GAAP general and administrative expense

$

42,748

   

21%

 

$

32,459

   

28%

Stock-based compensation expense (1)

(8,332)

   

(4)%

 

(6,067)

   

(5)%

Non-GAAP general and administrative expense

$

34,416

   

17%

 

$

26,392

   

23%

               

GAAP operating costs and expenses

$

246,188

   

120%

 

$

155,572

   

134%

Stock-based compensation expense (1)

(13,417)

   

(7)%

 

(9,224)

   

(8)%

Change in fair value of earnout liability (2)

(15,106)

   

(7)%

 

(6,300)

   

(5)%

Acquisition costs (3)

   

—%

 

(76)

   

—%

Restructuring charges (4)

   

—%

 

(1,865)

   

(2)%

Amortization of intangible assets (5)

(1,641)

   

(1)%

 

(1,545)

   

(1)%

Non-GAAP operating costs and expenses

$

216,024

   

106%

 

$

136,562

   

117%

               

GAAP loss from operations

$

(41,735)

   

(20)%

 

$

(39,094)

   

(34)%

Stock-based compensation expense (1)

13,417

   

7%

 

9,224

   

8%

Change in fair value of earnout liability (2)

15,106

   

7%

 

6,300

   

5%

Acquisition costs (3)

   

—%

 

76

   

—%

Restructuring charges (4)

   

—%

 

1,865

   

2%

Amortization of intangible assets (5)

1,641

   

1%

 

1,545

   

1%

Non-GAAP loss from operations

$

(11,571)

   

(6)%

 

$

(20,084)

   

(17)%

Explanation of Adjustments

(1)

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

   

(2)

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

   

(3)

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

   

(4)

Non-GAAP loss from operations and non-GAAP operating costs and expenses exclude restructuring charges.

   

(5)

Non-GAAP loss from operations and non-GAAP operating costs and expenses exclude amortization of intangible assets.

EHEALTH, INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(In thousands, except per share amounts, unaudited)

 
 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

2019

 

2018

 

2019

 

2018

GAAP net loss

$

(11,024)

   

$

(8,972)

   

$

(21,937)

   

$

(25,831)

 

Stock-based compensation expense (1)

5,510

   

3,543

   

13,417

   

9,224

 

Change in fair value of earnout liability (2)

(5,400)

   

3,800

   

15,106

   

6,300

 

Acquisition costs (3)

   

   

   

76

 

Restructuring charges (4)

   

   

   

1,865

 

Amortization of intangible assets (5)

547

   

547

   

1,641

   

1,545

 

Tax effect of non-GAAP adjustments (6)

312

   

(3,083)

   

(8,782)

   

(6,197)

 

Non-GAAP net loss

$

(10,055)

   

$

(4,165)

   

$

(555)

   

$

(13,018)

 
               

GAAP net loss per diluted share

$

(0.47)

   

$

(0.47)

   

$

(0.96)

   

$

(1.36)

 

Stock-based compensation expense (1)

0.23

   

0.18

   

0.59

   

0.49

 

Change in fair value of earnout liability (2)

(0.23)

   

0.20

   

0.66

   

0.33

 

Acquisition costs (3)

   

   

   

 

Restructuring charges (4)

   

   

   

0.10

 

Amortization of intangible assets (5)

0.02

   

0.03

   

0.07

   

0.08

 

Tax effect of non-GAAP adjustments (6)

0.02

   

(0.16)

   

(0.38)

   

(0.32)

 

Non-GAAP net loss per diluted share

$

(0.43)

   

$

(0.22)

   

$

(0.02)

   

$

(0.68)

 
               

GAAP net loss

$

(11,024)

   

$

(8,972)

   

$

(21,937)

   

$

(25,831)

 

Stock-based compensation expense (1)

5,510

   

3,543

   

13,417

   

9,224

 

Change in fair value of earnout liability (2)

(5,400)

   

3,800

   

15,106

   

6,300

 

Depreciation and amortization (7)

765

   

620

   

2,153

   

1,870

 

Acquisition costs (3)

   

   

   

76

 

Restructuring charges (4)

   

   

   

1,865

 

Amortization of intangible assets (5)

547

   

547

   

1,641

   

1,545

 

Other income, net (8)

(568)

   

(296)

   

(1,824)

   

(776)

 

Benefit from income taxes (9)

(8,649)

   

(6,186)

   

(17,974)

   

(12,487)

 

Adjusted EBITDA

$

(18,819)

   

$

(6,944)

   

$

(9,418)

   

$

(18,214)

 

Explanation of Adjustments

(1)

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

   

(4)

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

   

(5)

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

   

(6)

Non-GAAP net loss and non-GAAP net loss 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 benefit from income taxes.

EHEALTH, INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GUIDANCE

(In millions, except per share amounts, unaudited)

 
 

Year Ending December 31, 2019

 

Low

 

High

GAAP net income

$

20.9

   

$

25.9

 

Stock-based compensation expense

19.0

   

19.0

 

Amortization of intangible assets

2.2

   

2.2

 

Change in fair value of earnout liability

15.1

   

15.1

 

Tax effect of non-GAAP adjustments

(10.6)

   

(10.6)

 

Non-GAAP net income (1)

$

46.6

   

$

51.6

 
       

GAAP net income per diluted share

$

0.83

   

$

1.03

 

Stock-based compensation expense

0.76

   

0.76

 

Amortization of intangible assets

0.09

   

0.09

 

Change in fair value of earnout liability

0.60

   

0.60

 

Tax effect of non-GAAP adjustments

(0.42)

   

(0.42)

 

Non-GAAP net income per diluted share (2)

$

1.86

   

$

2.06

 
       

GAAP net income

$

20.9

   

$

25.9

 

Stock-based compensation expense

19.0

   

19.0

 

Depreciation and amortization

3.5

   

3.5

 

Amortization of intangible assets

2.2

   

2.2

 

Change in fair value of earnout liability

15.1

   

15.1

 

Other income, net

(1.2)

   

(3.2)

 

Provision for income taxes

5.5

   

7.5

 

Adjusted EBITDA (3)

$

65.0

   

$

70.0

 

Explanation of Adjustments

(1)

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

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