Sunday, 12 July 2020

eHealth, Inc. Announces Third Quarter 2019 Results



eHealth, Inc. Announces Third Quarter 2019 Results

SANTA CLARA, Calif., Oct. 24, 2019 /PRNewswire/ --
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 believe 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 save, 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 incontrast interests.
Segment Profit (Loss) — Loss from our Medicare segment was $11.0 million for the third quarter of 2019, compared to a safe 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 mopish 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 allotment 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 finish 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 mopish 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 allotment 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 finish 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 wait on 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 favorite 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 passe 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 way of $365.0 million to $385.0 million. Revenue from the Medicare segment is expected to be in the way 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 way 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 way 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 way of $1.86 to $2.06 per share.
(a)
Adjusted EBITDA is calculated by adding stock-based compensation, sulky 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 fragment is calculated by adding stock-based compensation expense per diluted fragment, change in fair value of earnout liability per diluted fragment, 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, resolve 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, first-rate 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 first-rate 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 bewitch any obligation to update the forward-looking statements provided to consider 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 fraction,
    • acquisition costs per diluted share,
    • restructuring charges per diluted share,
    • amortization of intangible assets per diluted fraction, 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 query 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 query 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 modern 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

[email protected] 
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 novel 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 fraction 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 Popular 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 Definite 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 tiny 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, temperamental 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 pleased 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 superior 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 assume 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 current 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 fetch 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 well-liked, 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 seek information from 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 seek information from 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, good 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 unique 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 well-liked 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 tranquil 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 still 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 well-liked member





IFP variable marketing cost per well-liked IFP-equivalent member (3)
$
80


$
77


4
%
IFP CC&E cost per approved IFP-equivalent member (4)
$
167


$
97


72
%
  Total IFP cost per well-liked 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 well-liked 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 well-liked IFP-equivalent member represents direct costs incurred in member acquisition for IFP plans from our train, marketing partners and online advertising channels divided by IFP-equivalent well-liked 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 enact 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 conclude 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 section 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 section 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 section 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 serve 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, testy 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 section is calculated by adding stock-based compensation expense per diluted section, 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, testy in fair value of earnout liability, other income, net and provision for income taxes to GAAP net income.
SOURCE eHealth, Inc.

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