eHealth, Inc. Announces Second Quarter 2009 Results

Second Quarter 2009 Overview

MOUNTAIN VIEW, CA -- (Marketwire) -- 07/28/09 -- eHealth, Inc. (NASDAQ: EHTH), the leadingonline source of healthinsurance for individuals, families and small businesses, todayannounced its financial results for the second quarter ended June 30, 2009.

Gary Lauer, chief executive officer of eHealth, stated, "Our second quarterfinancial results illustrate the continued leverage and strength of ourbusiness model. During the second quarter, significant progress was made inmany important areas of our growing business. We added several new carriersand products to our offerings, including an important addition in the stateof Massachusetts, broadened the utilization of eApproval, launched ourpublic eCommerce onDemand (eOD) business in Utah and continued to expandthe presence of our commercial eOD platform."

Second Quarter Results

Revenue -- Revenue totaled $33.4 million for the second quarter of 2009, a22% increase compared to revenue of $27.5 million for the second quarter of2008.

Submitted Applications -- Submitted applications for individual and familyproducts increased 17% in the second quarter of 2009 to 121,100applications, compared to 103,800 applications in the second quarter of2008.

Membership -- Estimated membership at June 30, 2009 totaled 707,100members, a 22% increase over estimated membership of 579,600 at June 30,2008.

Operating Income -- Operating income increased 7% to $6.9 million for thesecond quarter of 2009, compared to operating income of $6.4 million forthe second quarter of 2008. Operating margins were 21% and 23% in thesecond quarters of 2009 and 2008, respectively. Non-GAAP operating incomeincreased 9% to $8.1 million for the second quarter of 2009, compared tonon-GAAP operating income of $7.4 million for the second quarter of 2008.Non-GAAP operating margins were 24% and 27% in the second quarters of 2009and 2008, respectively. Non-GAAP operating income and margins in the secondquarters of 2009 and 2008 exclude $1.2 million and $1.0 million ofstock-based compensation expense, respectively.

Pre-tax Income -- Pre-tax income for the second quarter of 2009 was $7.1million, a 3% decrease compared to pre-tax income of $7.3 million for thesecond quarter of 2008. Pre-tax income was unfavorably impacted in thesecond quarter of 2009 by a decrease in interest income of $0.7 millioncompared to the second quarter of 2008.

Net Income -- Net income for the second quarter of 2009 was $4.0 million,or $0.16 per diluted share. Net income for the second quarter of 2008 was$4.2 million, or $0.16 per diluted share. Non-GAAP net income for thesecond quarter of 2009 was $4.8 million, or $0.19 per diluted share,compared to non-GAAP net income for the second quarter of 2008 of $4.9million, or $0.19 per diluted share. Non-GAAP net income and non-GAAP netincome per diluted share in the second quarter of 2009 exclude $1.2 millionofstock-based compensation expense, adjusted by $0.4 million for estimatednet income tax benefit related tostock-based compensation expense.Non-GAAP net income and non-GAAP net income per diluted share in the secondquarter of 2008 exclude $1.0 million of stock-based compensation expense,adjusted by $0.3 million for estimated income tax benefit related tostock-based compensation expense.

Cash Flow and Cash Balance -- Cash flow from operations for the secondquarter of 2009 was $8.3 million, compared to $8.6 million for the secondquarter of 2008, representing a decrease of 4%.

The second quarter 2008 cash flow statement includes a $3.1 million changein deferred taxes, primarily from the utilization of net operating losscarryforwards, all of which benefited operating cash flow. The secondquarter 2009 cash flow statement includes a $3.0 million cash flow benefitfrom taxes, of which approximately $1.5 million of tax benefit, primarilyfrom the utilization of net operating loss carryforwards, is included incash flow from operations and $1.5 million of net operating losscarryforwards, from the utilization of excess tax benefits related toshare-based payments, is included in cash flow from financing activities.

Cash, cash equivalents and short-term marketable securities as of June 30,2009 totaled $159.8 million, compared to $150.6 million as of December 31,2008.

During the fourth quarter of 2008, eHealth's board of directors authorizeda stock repurchase program of up to $30 million, or ten percent ofeHealth's outstanding common stock, whichever is less. Repurchases pursuantto the program began in December 2008. As of June 30, 2009, approximately412,500 shares of common stock have been repurchased in connection with thestock repurchase program at an average price of $12.69 per share includingcommissions, for a total cost of $5.2 million, of which approximately361,800 shares were repurchased during the six months ended June 30, 2009for a total cost of $4.6 million.

Year-to-Date Results

Revenue -- Revenue totaled $65.4 million for the six months ended June 30,2009, a 22% increase compared to revenue of $53.8 million for the sixmonths ended June 30, 2008.

Operating Income -- Operating income increased 12% to $12.5 million for thesix months ended June 30, 2009, compared to operating income of $11.1million for the six months ended June 30, 2008. Operating margins were 19%and 21% in the six months ended June 30, 2009 and 2008, respectively.

Pre-tax Income -- Pre-tax income for the six months ended June 30, 2009 was$13.1 million, a 1% decrease compared to pre-tax income of $13.3 millionfor the six months ended June 30, 2008. Pre-tax income was unfavorablyimpacted in the six months ended June 30, 2009 by a decrease in interestincome of $1.5 million compared to the six months ended June 30, 2008.

Net Income -- Net income for the six months ended June 30, 2009 was $7.1million, or $0.28 per diluted share, compared to net income for the sixmonths ended June 30, 2008 of $7.5 million, or $0.29 per diluted share.

Cash Flow -- Cash flow from operations for the six months ended June 30,2009 was $13.0 million, compared to $14.5 million for the six months endedJune 30, 2008, representing a decrease of 10%.

2009 Guidance

eHealth is reiterating the following guidance for the full year endingDecember 31, 2009 based on information currently available:

--  Total revenue is expected to be in the range of $131 million to $136    million    --  Stock-based compensation expense is expected to be in the range of $5    million to $6 million    --  GAAP income tax rate expected to be in the range of 43% to 45%    --  GAAP net income per diluted share is expected to be in the range of    $0.51 to $0.61 per share    

Webcast and Conference Call Information

A Webcast and conference call will be held today, Tuesday, July 28, 2009 at5:00 p.m. EDT / 2:00 p.m. PDT. The Webcast will be available live on theInvestor Relations section on eHealth's website athttp://ir.ehealthinsurance.com. Individuals interested in listening to theconference call may do so by dialing 866-730-5762 for domestic callers and857-350-1586 for international callers. The participant passcode is#42217302. A telephone replay will be available two hours following theconclusion of the call for a period of 30 days and can be accessed bydialing 888-286-8010 for domestic callers and 617-801-6888 forinternational callers. The call ID for the replay is #35408865. The liveand archived webcast of the call will also be available on eHealth'swebsite at http://www.ehealthinsurance.com under the Investor Relationssection.

About eHealth, Inc.

eHealth, Inc. is the parent company of eHealthInsurance, the leading onlinesource of health insurance for individuals, families and small businesses.eHealthInsurance presents complex health insurance information in anobjective, user-friendly format, enabling the research, analysis,comparison and purchase of health insurance products that best meetconsumers' needs. eHealth and eHealthInsurance are registered trademarks ofeHealthInsurance Services, Inc.

eHealth, Inc. was founded in 1997 and its technology was responsible forthe nation's first Internet-based sale of a health insurance policy.eHealth is headquartered in Mountain View, California. Additionalinformation can be found on eHealth's website,http://www.ehealthinsurance.com.

Forward-Looking Statements

This press release contains statements that are forward-looking statementsas defined within the Private Securities Litigation Reform Act of 1995.These include statements regarding eHealth's guidance for total revenue,stock-based compensation expense, GAAP income tax rate, and GAAP net incomeper diluted share for the year ending December 31, 2009. Theseforward-looking statements are inherently subject to various risks anduncertainties that could cause actual results to differ materially from thestatements made, including risks associated with changes and developmentsin the structure of the health insurance system in the United States andhealthcare system reform, eHealth's rate of growth, changes in the economy,weak economic conditions, consumer awareness of the availability andaccessibility of affordable health insurance, changes in member conversionrates and factors affecting conversion, eHealth's ability to continue toincrease its membership base and retain its members, eHealth's ability tomaintain or expand its relationships with health insurance carriers andmarketing partners, negative publicity experienced by eHealth's carrierpartners, changes in products offered on eHealth's ecommerce platform,changes in commission payments or carrier underwriting practices,maintaining and enhancing eHealth's brand identity and the effectiveness ofeHealth's marketing and public relations efforts, system failures, capacityconstraints or data loss, continued acceptance of the Internet as a mediumfor the purchase and sale of health insurance, dependence upon Internetsearch engines, reliance on marketing partners, the pursuit of newstrategies and opportunities in the health insurance market, timing ofreceipt and accuracy of commission reports and related impact on estimatingmembership, payment practices of health insurance carriers, competition,eHealth's operations in China, success in the sale of sponsorshipadvertising and the licensing of the use of eHealth's ecommerce platform,success of the health savings account (HSA) platform, protection ofintellectual property and intellectual property rights claims, legalliability, regulatory penalties and negative publicity, ability to attractand retain qualified personnel, management of future growth, seasonality,impact of future acquisitions, implementation of internal enterprisesystems and maintenance of proper and effective internal controls, impactof employee stock-based compensation expense and provisions for incometaxes, changes in laws and regulations, compliance with insurance and otherlaws and regulations, exposure to online commerce security risks, and theperformance, reliability and availability of eHealth's ecommerce platformand underlying network infrastructure. Other factors that could causeoperating, financial and other results to differ are described in eHealth'smost recent Quarterly Report on Form 10-Q or Annual Report on Form 10-Kfiled with the Securities and Exchange Commission and available on theinvestor relations page of eHealth's website athttp://www.ehealthinsurance.com and on the Securities and ExchangeCommission's website at www.sec.gov. eHealth does not undertake anyobligation to update any forward-looking statement to conform the statementto actual results or changes in expectations.

Non-GAAP Financial Information

This press release includes financial measures that are not in accordancewith generally accepted accounting principles in the United States("GAAP"). To supplement eHealth's condensed consolidated financialstatements presented in accordance with GAAP, eHealth presents investorswith certain non-GAAP financial measures, including non-GAAP operatingincome, non-GAAP operating margins, non-GAAP pre-tax income, non-GAAP netincome and non-GAAP net income per diluted share.

--  Non-GAAP operating income consists of GAAP operating income excluding    the effects of expensing stock-based compensation related to stock options,    restricted stock and restricted stock units in accordance with SFAS 123(R)    beginning in 2006 and amortization of deferred stock-based compensation    expense in accordance with APB 25 for grants made prior to 2006.    --  Non-GAAP operating margins are calculated by dividing non-GAAP    operating income by GAAP total revenue.    --  Non-GAAP net income consists of GAAP net income excluding the effects    of expensing stock-based compensation adjusted for estimated income tax    benefit related to stock-based compensation expense as well as additional    tax expense recorded during the period in accordance with SFAS 123(R).    --  Non-GAAP net income per diluted share is calculated by dividing non-    GAAP net income by GAAP weighted average diluted shares outstanding.    

eHealth believes that the presentation of these non-GAAP financial measuresprovide important supplemental information to management and investorsregarding financial and business trends relating to the company's financialcondition and results of operations. Management believes that the use ofthese non-GAAP financial measures provides consistency and comparabilitywith the company's past financial reports. Management also believes thatthe exclusion of the items described above provides an additional measureof the company's operating results and facilitates comparisons of thecompany's core operating performance against prior periods and businessmodel objectives. This information is provided to investors in order tofacilitate additional analyses of past, present and future operatingperformance and as a supplemental means to evaluate the company's ongoingoperations. Externally, the company believes that these non-GAAP financialmeasures continue to be useful to investors in their assessment of thecompany's operating performance.

Non-GAAP operating income, non-GAAP operating margins, non-GAAP net incomeand non-GAAP net income per diluted share are not calculated in accordancewith GAAP, and should be considered supplemental to, and not as asubstitute for, or superior to, financial measures calculated in accordancewith GAAP. Non-GAAP financial measures used in this press release havelimitations in that they do not reflect all of the costs associated withthe operations of the company's business and do not reflect all of theincome tax as determined in accordance with GAAP. As a result, you shouldnot consider these measures in isolation or as a substitute for analysis ofeHealth's results as reported under GAAP. The company expects to continueto incur stock-based compensation costs described above, and exclusion ofthese costs, and their related income tax impact, from non-GAAP financialmeasures should not be construed as an inference that these costs areunusual or infrequent. The company compensates for these limitations byprominently disclosing GAAP operating income, GAAP net income and GAAP netincome per diluted share and providing investors with reconciliations fromthe company's GAAP operating results to the non-GAAP financial measures forthe relevant periods.

The accompanying tables provide more details on the GAAP financial measuresthat are most directly comparable to the non-GAAP financial measures andthe related reconciliations between these financial measures.

                             EHEALTH, INC.                 CONDENSED CONSOLIDATED BALANCE SHEETS                            (In thousands)                                                December 31,    June 30,                                                    2008          2009                                                ------------  ------------                    Assets                           (1)       (unaudited)Current assets:   Cash and cash equivalents                    $     94,136  $    101,621   Marketable securities                              56,499        58,176   Accounts receivable                                 2,005         2,111   Deferred income taxes                               7,580         4,360   Prepaid expenses and other current assets           1,874         3,310                                                ------------  ------------Total current assets                                 162,094       169,578Property and equipment, net                            4,567         3,972Deferred income taxes                                  1,314         1,927Other assets                                             780           930                                                ------------  ------------Total assets                                    $    168,755  $    176,407                                                ============  ============     Liabilities and stockholders' equityCurrent liabilities:   Accounts payable                             $      2,190  $      1,758   Accrued compensation and benefits                   4,662         4,738   Accrued marketing expenses                          3,162         3,972   Deferred revenue                                      427           478   Other current liabilities                           2,707         1,624                                                ------------  ------------Total current liabilities                             13,148        12,570Other non-current liabilities                            628         1,248Stockholders' equity:   Common stock                                           25            25   Additional paid-in capital                        173,095       178,216   Treasury stock shares, at cost                       (639)       (5,232)   Deferred stock-based compensation                     (22)           (7)   Accumulated deficit                               (17,892)      (10,755)   Accumulated other comprehensive income                412           342                                                ------------  ------------Total stockholders' equity                           154,979       162,589                                                ------------  ------------Total liabilities and stockholders' equity      $    168,755  $    176,407                                                ============  ============(1) The condensed consolidated balance sheet at December 31, 2008 has been    derived from the audited consolidated financial statements at that    date.                               EHEALTH, INC.                CONDENSED CONSOLIDATED STATEMENTS OF INCOME            (In thousands, except per share amounts, unaudited)                                       Three Months Ended  Six Months Ended                                             June 30,         June 30,                                       ------------------ -----------------                                          2008     2009     2008     2009                                       --------- -------- -------- --------Revenue:  Commission                            $ 24,756 $ 29,939 $ 48,875 $ 58,143  Sponsorship, licensing and other         2,745    3,500    4,906    7,213                                        -------- -------- -------- --------Total revenue                             27,501   33,439   53,781   65,356Operating costs and expenses:  Cost of revenue-sharing                    432    1,318      869    2,118  Marketing and advertising (1)            9,482   12,945   19,131   26,365  Customer care and enrollment (1)         3,308    3,627    6,933    7,449  Technology and content (1)               3,504    3,828    6,983    7,413  General and administrative (1)           4,379    4,851    8,744    9,552                                        -------- -------- -------- --------Total operating costs and expenses        21,105   26,569   42,660   52,897                                        -------- -------- -------- --------Income from operations                     6,396    6,870   11,121   12,459Interest and other income, net               941      258    2,150      657                                        -------- -------- -------- --------Income before income taxes                 7,337    7,128   13,271   13,116Provision for income taxes                 3,136    3,134    5,773    5,979                                        -------- -------- -------- --------Net income                              $  4,201 $  3,994 $  7,498 $  7,137                                        ======== ======== ======== ========Net income per share:  Basic                                 $   0.17 $   0.16 $   0.30 $   0.29  Diluted                               $   0.16 $   0.16 $   0.29 $   0.28Weighted-average number of shares used in per share amounts:  Basic                                   24,949   24,755   24,857   24,823  Diluted                                 26,065   25,656   26,029   25,701__________(1) Includes stock-based compensation expense as follows:     Marketing and advertising          $    186 $    254 $    333 $    396     Customer care and enrollment             85       89      151      148     Technology and content                  275      304      450      502     General and administrative              449      550      720    1,092                                        -------- -------- -------- --------       Total                            $    995 $  1,197 $  1,654 $  2,138                                        ======== ======== ======== ========                               EHEALTH, INC.              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                         (In thousands, unaudited)                                 Three Months Ended     Six Months Ended                                      June 30,              June 30,                                --------------------  --------------------                                  2008       2009       2008       2009                                ---------  ---------  ---------  ---------Operating activitiesNet income                      $   4,201  $   3,994  $   7,498  $   7,137Adjustments to reconcile net income to net cash provided by operating activities:   Deferred income taxes            3,076      1,565      5,517      3,237   Depreciation and    amortization                      375        572        804      1,119   Amortization and accretion    on marketable securities,    net                                --        232         --        401   Stock-based compensation    expense                           995      1,197      1,654      2,138   Excess tax benefits from    stock-based compensation           --     (1,462)        --     (2,635)   Deferred rent                      (14)       (25)       (35)       (50)  Loss on disposal of property   and equipment                       10          2         11         12  Changes in operating assets   and liabilities:    Accounts receivable               395        913         55       (106)    Prepaid expenses and other     current assets                  (204)      (261)      (278)      (596)    Other assets                      (39)       195         32        291    Accounts payable                  169       (936)       370       (433)    Accrued compensation and     benefits                         580      1,001       (881)        75    Accrued marketing expenses        (29)        14        320        810    Deferred revenue                 (248)       (39)      (159)        51    Other current liabilities        (620)     1,328       (415)     1,561    Other non-current     liabilities                       --         21         --         21                                ---------  ---------  ---------  ---------Net cash provided by operating activities                         8,647      8,311     14,493     13,033                                ---------  ---------  ---------  ---------Investing activitiesPurchases of property and equipment                           (975)      (293)    (1,309)      (534)Purchase of other assets               --         --         --     (1,280)Purchases of marketable securities                       (31,107)   (24,085)   (50,422)   (38,524)Sales of marketable securities      4,020         --      8,067      1,006Maturities of marketable securities                        13,131     21,700     31,593     35,400                                ---------  ---------  ---------  ---------Net cash used in investing activities                       (14,931)    (2,678)   (12,071)    (3,932)                                ---------  ---------  ---------  ---------Financing activitiesNet proceeds from exercise of common stock options                 595        214      1,341        360Excess tax benefits from stock-based compensation              --      1,462         --      2,635Repurchase of common stock             --         --         --     (4,593)Principal payments in connection with capital lease         --        (10)        --        (19)                                ---------  ---------  ---------  ---------Net cash provided by (used in) financing activities                 595      1,666      1,341     (1,617)                                ---------  ---------  ---------  ---------Effect of exchange rate changes on cash and cash equivalents          10          1         43          1                                ---------  ---------  ---------  ---------Net increase (decrease) in cash and cash equivalents         (5,679)     7,300      3,806      7,485Cash and cash equivalents at beginning of period               90,880     94,321     81,395     94,136                                ---------  ---------  ---------  ---------Cash and cash equivalents at end of period                  $  85,201  $ 101,621  $  85,201  $ 101,621                                =========  =========  =========  =========                              EHEALTH, INC.                       SUMMARY OF SELECTED METRICS                               (Unaudited)                                    Three Months Ended  Three Months EndedKey Metrics:                          June 30, 2008       June 30, 2009                                    ------------------  ------------------Operating cash flows (1)            $        8,647,000  $        8,311,000IFP submitted applications (2)                 103,800             121,100IFP approved members (3)                        94,300             103,400Total approved members (4)                     132,600             135,800Total revenue (5)                   $       27,501,000  $       33,439,000Total revenue per estimated member for the period (6)                 $            48.34  $            48.21                                           As of              As of                                       June 30, 2008      June 30, 2009                                    ------------------  ------------------IFP estimated membership (7)                   488,300             614,800Total estimated membership (8)                 579,600             707,100                                    Three Months Ended  Three Months Ended                                       June 30, 2008      June 30, 2009                                    ------------------  ------------------Marketing and advertising expenses (9)                                $        9,482,000  $       12,945,000Marketing and advertising expenses as a percentage of total revenue (10)                                               34%                 39%Marketing and advertising expenses excluding stock-based compensation (11)                               $        9,296,000  $       12,691,000Marketing and advertising expenses excluding stock-based compensation as a percentage of total revenue (12)                                               34%                 38%Other Metrics:Source of IFP submitted applications (as a percentage of total IFP applications for the period):  Direct (13)                                       40%                 43%  Marketing partners (14)                           32%                 33%  Online advertising (15)                           28%                 24%                                    ------------------  ------------------    Total                                          100%                100%                                    ==================  ==================Acquisition cost per individual on IFP submitted applications (16)    $            60.39  $            73.45Acquisition cost (excluding stock-based compensation) per individual on IFP submitted applications (17)                  $            59.21  $            72.01Notes:(1)  Net cash provided by operating activities for the period from the     condensed consolidated statements of cash flows.(2)  IFP applications submitted on eHealth's website during the period.     Applications are counted as submitted when the applicant completes     the application, provides a method for payment and clicks the submit     button on our website and submits the application to us. The     applicant generally has additional actions to take before the     application will be reviewed by the insurance carrier, such as     providing additional information and providing an electronic     signature. In addition, an applicant may submit more than one     application. We include applications for IFP products for which we     receive commissions as well as other forms of payment. We define     our "IFP" offerings as major medical individual and family health     insurance plans, which does not include small business, short-term     major medical, stand-alone dental, life or student health     insurance product offerings.(3)  New IFP members reported to eHealth as approved during the period.     Some members that are approved by a carrier do not accept the     approval and therefore do not become paying members. Does not     include members transferred from Health Benefits Direct     Corporation.(4)  New members for all products reported to eHealth as approved     during the period. Some members that are approved by a carrier     do not accept the approval and therefore do not become paying     members. Does not include members transferred from Health Benefits     Direct Corporation.(5)  Total revenue (from all sources) recognized during the period     from the condensed consolidated statements of income.(6)  Calculated as total revenue recognized during the period (see note     (5) above) divided by average estimated membership for the period     (calculated as beginning and ending estimated membership for all     products for the period, divided by two). Ending membership     includes an estimated number of members transferred from Health     Benefits Direct Corporation during 2009, net of estimated cancelations     since their transfer, of approximately 30,000 members. See our 2008     Annual Report on Form 10-K - Item 7 - Management's Discussion and     Analysis of Financial Condition and Results of Operations - Summary     of Selected Metrics for additional information regarding our     calculation of estimated membership.(7)  Estimated number of members active on IFP insurance policies as of     the date indicated. Amounts as of June 30, 2009 include the estimated     number of members transferred from Health Benefits Direct Corporation     during 2009, net of estimated cancelations since their transfer, of     approximately 30,000 members. See our  2008 Annual Report on Form     10-K - Item 7 - Management's Discussion and Analysis of Financial     Condition and Results of Operations - Summary of Selected Metrics     for additional information regarding our calculation of estimated     membership.(8)  Estimated number of members active on all insurance policies as of     the date indicated. Amounts as of June 30, 2009 include the     estimated number of members transferred from Health Benefits     Direct Corporation during 2009, net of estimated cancelations     since their transfer, of approximately 30,000 members. See our     2008 Annual Report on Form 10-K - Item 7 - Management's Discussion     and Analysis of Financial Condition and Results of Operations -     Summary of Selected Metrics for additional information     regarding our calculation of estimated membership.(9)  Marketing and advertising expenses for the period from the condensed     consolidated statements of income.(10) Calculated as marketing and advertising expenses for the period     (see note (9) above) divided by total revenue for the period     (see note (5) above).(11) Non-GAAP marketing and advertising expenses excluding stock-based     compensation for the period. See Non-GAAP Financial Information     above and the reconciliation of GAAP to Non-GAAP marketing and     advertising expenses below.(12) Calculated as non-GAAP marketing and advertising expenses for the     period (see note (11) above) divided by total revenue for the     period (see note (5) above). See Non-GAAP Financial Information     above and the reconciliation of GAAP to Non-GAAP marketing and     advertising expenses below.(13) Percentage of IFP submitted applications from applicants who came     directly to the eHealth website through algorithmic search engine     results or otherwise. See note (2) above for further information as     to what constitutes a submitted application.(14) Percentage of IFP submitted applications from applicants sourced     through eHealth's network of marketing partners. See note (2) above     for further information as to what constitutes a submitted     application.(15) Percentage of IFP submitted applications from applicants sourced     through paid search and other online advertising activities. See note     (2) above for further information as to what constitutes a     submitted application.(16) Calculated as marketing and advertising expenses for the period     (see note (9) above) divided by the number of individuals on IFP     applications submitted on eHealth's website during the period.     This metric may not reflect the true acquisition cost.(17) Calculated as non-GAAP marketing and advertising expenses for the     period (see note (11) above) divided by the number of individuals     on IFP applications submitted on eHealth's website during the     period. This metric may not reflect the true acquisition cost     exclusive of the impact of stock-based compensation allocated to     marketing and advertising expenses.                              EHEALTH, INC.                    GAAP TO NON-GAAP RECONCILIATION                FOR THE THREE MONTHS ENDED JUNE 30, 2009           (In thousands, except per share amounts, unaudited)Statement of Income Reconciliation                             Three Months Ended June 30, 2009                   --------------------------------------------------------                                GAAP                             Non-GAAP                               Percent                            Percent                     GAAP     of Total                Non-GAAP   of Total                   Reported    Revenue   Adjustments   Results    Revenue                   ---------- ---------  -----------  ---------- ---------Revenue:  Commission       $   29,939        90% $        --  $   29,939        90%  Sponsorship,   licensing and   other                3,500        10           --       3,500        10                   ---------- ---------  -----------  ---------- ---------Total revenue          33,439       100           --      33,439       100Operating costs and expenses:  Cost of   revenue-sharing      1,318         4           --       1,318         4  Marketing and   advertising (1)     12,945        39         (254)     12,691        38  Customer care and   enrollment (1)       3,627        11          (89)      3,538        11  Technology and   content (1)          3,828        11         (304)      3,524        11  General and   administrative   (1)                  4,851        15         (550)      4,301        13                   ---------- ---------  -----------  ---------- ---------Total operating costs and expenses              26,569        79       (1,197)     25,372        76                   ---------- ---------  -----------  ---------- ---------Income from operations             6,870        21        1,197       8,067        24Interest and other income, net              258         1           --         258         1                   ---------- ---------  -----------  ---------- ---------Income before income taxes           7,128        21        1,197       8,325        25Provision for income taxes (2)       3,134         9          424       3,558        11                   ---------- ---------  -----------  ---------- ---------Net income         $    3,994        12% $       773  $    4,767        14%                   ========== =========  ===========  ========== =========Net income per share:  Basic            $     0.16            $      0.03  $     0.19  Diluted          $     0.16            $      0.03  $     0.19Weighted-average number of shares used in per share amounts:  Basic                24,755                 24,755      24,755  Diluted              25,656                 25,656      25,656Explanation of adjustments(1) Non-GAAP results exclude the effect of expensing stock-based    compensation related to stock options, restricted stock and    restricted stock units in accordance with SFAS 123(R)    beginning in 2006, in addition to the amortization of    deferred stock-based compensation expense in accordance    with APB 25 for grants made prior to 2006.(2) Non-GAAP net income and non-GAAP net income per share exclude    stock-based compensation expense listed in note (1) above,    adjusted for estimated income tax benefit related to    stock-based compensation expense.                              EHEALTH, INC.                    GAAP TO NON-GAAP RECONCILIATION                FOR THE THREE MONTHS ENDED JUNE 30, 2008           (In thousands, except per share amounts, unaudited)Statement of Income Reconciliation                            Three Months Ended June 30, 2008                   --------------------------------------------------------                                GAAP                             Non-GAAP                               Percent                            Percent                     GAAP     of Total                Non-GAAP   of Total                   Reported    Revenue   Adjustments   Results    Revenue                   ---------- ---------  -----------  ---------- ---------Revenue:  Commission       $   24,756        90% $        --  $   24,756        90%  Sponsorship,   licensing and   other                2,745        10           --       2,745        10                   ---------- ---------  -----------  ---------- ---------Total revenue          27,501       100           --      27,501       100Operating costs and expenses:  Cost of   revenue-sharing        432         2           --         432         2  Marketing and   advertising (1)      9,482        34         (186)      9,296        34  Customer care and   enrollment (1)       3,308        12          (85)      3,223        12  Technology and   content (1)          3,504        13         (275)      3,229        12  General and   administrative   (1)                  4,379        16         (449)      3,930        14                   ---------- ---------  -----------  ---------- ---------Total operating costs and expenses              21,105        77         (995)     20,110        73                   ---------- ---------  -----------  ---------- ---------Income from operations             6,396        23          995       7,391        27Interest and other income, net              941         3           --         941         3                   ---------- ---------  -----------  ---------- ---------Income before income taxes           7,337        27          995       8,332        30Provision for income taxes (2)       3,136        11          333       3,469        13                   ---------- ---------  -----------  ---------- ---------Net income         $    4,201        15% $       662  $    4,863        18%                   ========== =========  ===========  ========== =========Net income per share:  Basic            $     0.17            $      0.02  $     0.19  Diluted          $     0.16            $      0.03  $     0.19Weighted-average number of shares used in per share amounts:  Basic                24,949                 24,949      24,949  Diluted              26,065                 26,065      26,065Explanation of adjustments(1) Non-GAAP results exclude the effect of expensing stock-based    compensation related to stock options, restricted stock and    restricted stock units in accordance with SFAS 123(R) beginning    in 2006, in addition to the amortization of deferred stock-based    compensation expense in accordance with APB 25 for grants made    prior to 2006.(2) Non-GAAP net income and non-GAAP net income per share exclude    stock-based compensation expense listed in note (1) above,    adjusted for estimated income tax benefit related to    stock-based compensation expense.