UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): May 7, 2024
(Exact Name of Registrant as Specified in its Charter)
| (State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||||||
(Address of principal executive offices) (Zip Code)
(737 ) 248-2340
(Registrant’s telephone number, including area code)
Not applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
| Item 2.02 | Results of Operations and Financial Condition. | |||||||
On May 7, 2024, eHealth, Inc. (the “Company”) issued a press release announcing its financial results for the first quarter ended March 31, 2024 and its financial condition as of March 31, 2024. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.
On May 7, 2024, the Company posted supplemental investor material on its investor relations webpage at https://ir.ehealthinsurance.com. The Company intends to use its investor relations webpage as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD. A copy of the supplemental investor materials is also furnished as Exhibit 99.2 to this Current Report on Form 8-K and is incorporated herein by reference.
The information in Item 2.02 of this Current Report on Form 8-K and the exhibits attached hereto are intended to be “furnished” and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. Except as shall be expressly set forth by specific reference in such filing, the information contained herein and in the accompanying exhibits shall not be incorporated by reference into any filing with the Securities and Exchange Commission made by the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
| Item 9.01 | Financial Statements and Exhibits. | |||||||
(d) Exhibits
| Exhibit No. | Description | ||||
| 99.1 | |||||
| 99.2 | |||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | ||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| eHealth, Inc. | ||||||||
| Date: | May 7, 2024 | /s/ John Stelben | ||||||
John Stelben Chief Financial Officer (Principal Financial Officer) | ||||||||
eHealth, Inc. Announces First Quarter 2024 Results
Strong first quarter results with total revenue growth of 26% YoY
Significant YoY improvement in profitability metrics and operating cash flow
AUSTIN, Texas — May 7, 2024 — eHealth, Inc. (Nasdaq: EHTH), a leading private online health insurance marketplace, today announced its financial results for the first quarter ended March 31, 2024.
| CEO Comments | ||||||||
“eHealth delivered another quarter of strong execution in our Medicare business, building on momentum we achieved in the Annual Enrollment Period. Strong growth in Medicare revenue, combined with fixed cost reductions, allowed us to post a meaningful improvement in our first quarter GAAP earnings, adjusted EBITDA and operating cash flow compared to a year ago. Importantly, we achieved positive operating cash flow of $3.3 million for the trailing twelve-months ended March 31, 2024 – exceeding our target of break-even cash flow for this period. This is an important achievement for our organization and a true testament to the early success of our business transformation plan that we completed in 2023.” – Fran Soistman, Chief Executive Officer | ||||||||
| Results Overview | ||
■Q1 2024 total revenue of $93.0 million increased 26% compared to Q1 2023 total revenue of $73.7 million.
■Q1 2024 Medicare Advantage approved members increased 9% to 65,750 compared to Q1 2023 Medicare Advantage approved members of 60,451.
■Q1 2024 Medicare Advantage LTV increased 6% to $952 from $901 in Q1 2023, driven primarily by favorable carrier and contract mix.
■Q1 2024 GAAP net loss of $17.0 million, improved $2.9 million year-over-year compared to Q1 2023 GAAP net loss of $19.9 million; Q1 2024 adjusted net loss(1), which excludes pre-tax charges of $6.3 million related to lease exits and other cost-reduction efforts, improved $7.7 million year-over-year.
■Q1 2024 adjusted EBITDA(1) of $(1.7) million improved $11.0 million compared to Q1 2023 adjusted EBITDA(1) of $(12.7) million, driven primarily by Medicare approved member growth, improved Medicare LTVs and continued fixed cost reduction efforts.
■Operating cash flow of $70.8 million for the three months ended March 31, 2024 improved 16% compared to operating cash flow of $60.8 million for the three months ended March 31, 2023.
■Cash, cash equivalents and marketable securities of $188.9 million as of March 31, 2024.
■Commissions receivable balance of $845.3 million as of March 31, 2024.
__________
Note: See the tables at the end of this press release for a reconciliation of our GAAP financial measures to our non-GAAP financial measures for the relevant periods and footnote (1) on page 12 at the end of this press release for definitions of our non-GAAP financial measures.
1
2024 Guidance
Based on information available as of May 7, 2024, we are reiterating our guidance for the full year ending December 31, 2024. These expectations are forward-looking statements and we assume 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 reports filed with the Securities and Exchange Commission.
The following guidance is for the full year ending December 31, 2024:
•Total revenue is expected to be in the range of $450 million to $475 million.
•GAAP net income (loss) is expected to be in the range of $(40) million to $(20) million.
•Adjusted EBITDA(1) is expected to be in the range of $(5) million to $20 million.
•Operating cash flow is expected to be in the range of $(15) million to $(5) million.
The above guidance includes the expected impact of positive net adjustment revenue in the range of $0 to $15 million. Excluding the impact of positive net adjustment revenue in both years, the mid-point of our 2024 guidance reflects approximately 12% year-over-year total revenue growth and a substantial improvement in GAAP net income (loss) and adjusted EBITDA(1).
__________
Note: See accompanying footnotes on page 12.
Webcast and Conference Call Information
A webcast and conference call will be held today, Tuesday, May 7, 2024 at 8:30 a.m. Eastern Time / 7:30 a.m. Central Time. Individuals interested in listening to the conference call may do so by dialing (800) 267-6316. The participant passcode is 6194922. The live and archived webcast of the call will also be available under “News and Events” on the Investor Relations page of our website at https://ir.ehealthinsurance.com.
About eHealth, Inc.
We’re Matchmakers. For over 25 years, eHealth has helped millions of Americans find the healthcare coverage that fits their needs at a price they can afford. As a leading independent licensed insurance agency and advisor, eHealth offers access to over 180 health insurers, including national and regional companies.
For more information, visit eHealth.com or follow us on LinkedIn, Facebook, Instagram, and X. Open positions can be found on our career page.
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 expectations regarding our business, operations and strategy; our estimates regarding total membership, Medicare, individual and family plan, ancillary products and small business memberships; our estimates regarding constrained lifetime values of commissions per approved member by product category; our estimates regarding costs per approved member; our 2024 annual guidance for total revenue, GAAP net income (loss), adjusted EBITDA and operating cash flow; the expected impact of positive net adjustment revenue on our 2024 annual guidance; and other statements regarding our future operations, financial condition, prospects and business strategies.
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 Accounting Standards Codification 606 — Revenue from Contracts with Customers 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.
2
The risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward-looking statements include, but are not limited to, our ability to retain existing members and enroll new members during the annual healthcare open enrollment period, the Medicare annual enrollment period, the Medicare Advantage annual open enrollment period and other special enrollment periods; changes in laws, regulations and guidelines, including in connection with healthcare reform or with respect to the marketing and sale of Medicare plans; such as the Policy and Technical Changes to Medicare Advantage for Contract Year 2025 released by CMS on April 4, 2024; competition, including competition from government-run health insurance exchanges and other sources; the seasonality of our business and the fluctuation of our operating results; our ability to accurately estimate membership, lifetime value of commissions and commissions receivable; changes in product offerings among carriers on our ecommerce platform and changes in our estimated conversion rate of an approved member to a paying member and the resulting impact of each on our commission revenue; the concentration of our revenue with a small number of health insurance carriers; our ability to execute on our growth strategy and other business initiatives; changes in our management and key employees; our ability to hire, train, retain and ensure the productivity of licensed insurance agents, or benefit advisors, and other employees; exposure to security risks and our ability to safeguard the security and privacy of confidential data; our relationships with health insurance carriers; the success of our carrier advertising and sponsorship program; our success in marketing and selling health insurance plans and our unit cost of acquisition; our ability to effectively manage our operations as our business evolves and execute on our business transformation plan and other strategic initiatives; the need for health insurance carrier and regulatory approvals in connection with the marketing of Medicare-related insurance products; changes in the market for private health insurance; consumer satisfaction of our service and actions we take to improve the quality of enrollments; changes in member conversion rates; 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 derive desired benefits from investments in our business, including membership growth and retention initiatives; our reliance on marketing partners; the success and cost of our marketing efforts, including branding, online advertising, direct-to-consumer mail, email, social media, telephone, television, radio and other marketing efforts; timing of receipt and accuracy of commission reports; payment practices of health insurance carriers; dependence on our operations in China; the restrictions in our debt obligations; the restrictions in our investment agreement with our convertible preferred stock investor; our ability to raise additional capital; compliance with insurance, privacy, cybersecurity and other laws and regulations; the outcome of litigation in which we may from time to time be involved; the performance, reliability and availability of our information technology systems, ecommerce platform and underlying network infrastructure, including any new systems we may implement; public health crises, pandemics, natural disasters, changing climate conditions and other extreme events; general economic conditions, including inflation, recession, financial, banking and credit market disruptions; and our ability to effectively administer our self-insurance program. Other factors that could cause operating, financial and other results to differ are described in our 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 our website at https://ir.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 us as of the date hereof, and we do not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made, except as required by law.
Investor Relations Contact
Kate Sidorovich, CFA
Senior Vice President, Investor Relations & Strategy
investors@ehealth.com
https://ir.ehealthinsurance.com
3
EHEALTH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, unaudited)
| March 31, 2024 | December 31, 2023 | ||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 174,986 | $ | 115,722 | |||||||
| Short-term marketable securities | 13,946 | 5,930 | |||||||||
| Accounts receivable | 1,407 | 3,993 | |||||||||
| Contract assets – commissions receivable – current | 203,013 | 244,663 | |||||||||
| Prepaid expenses and other current assets | 11,006 | 12,044 | |||||||||
| Total current assets | 404,358 | 382,352 | |||||||||
| Contract assets – commissions receivable – non-current | 642,320 | 673,514 | |||||||||
| Property and equipment, net | 4,228 | 4,864 | |||||||||
| Operating lease right-of-use assets | 16,268 | 22,767 | |||||||||
| Restricted cash | 3,090 | 3,090 | |||||||||
| Other assets | 25,374 | 26,758 | |||||||||
| Total assets | $ | 1,095,638 | $ | 1,113,345 | |||||||
| Liabilities, convertible preferred stock and stockholders’ equity | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 6,287 | $ | 7,197 | |||||||
| Accrued compensation and benefits | 40,932 | 40,800 | |||||||||
| Accrued marketing expenses | 9,404 | 20,340 | |||||||||
| Short term debt | 68,196 | — | |||||||||
| Lease liabilities – current | 7,206 | 7,070 | |||||||||
| Other current liabilities | 14,019 | 3,131 | |||||||||
| Total current liabilities | 146,044 | 78,538 | |||||||||
| Long-term debt | — | 67,754 | |||||||||
| Deferred income taxes – non-current | 28,305 | 29,687 | |||||||||
| Lease liabilities – non-current | 26,285 | 28,333 | |||||||||
| Other non-current liabilities | 4,789 | 4,949 | |||||||||
| Total liabilities | 205,423 | 209,261 | |||||||||
| Convertible preferred stock | 307,410 | 298,053 | |||||||||
| Stockholders’ equity: | |||||||||||
| Common stock | 42 | 41 | |||||||||
| Additional paid-in capital | 803,248 | 798,786 | |||||||||
| Treasury stock, at cost | (199,998) | (199,998) | |||||||||
| Retained earnings (accumulated deficit) | (20,427) | 7,284 | |||||||||
| Accumulated other comprehensive loss | (60) | (82) | |||||||||
| Total stockholders’ equity | 582,805 | 606,031 | |||||||||
| Total liabilities, convertible preferred stock and stockholders’ equity | $ | 1,095,638 | $ | 1,113,345 | |||||||
4
EHEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts, unaudited)
| Three Months Ended March 31, | % Change | ||||||||||||||||
| 2024 | 2023 | ||||||||||||||||
| Revenue: | |||||||||||||||||
| Commission | $ | 80,927 | $ | 68,003 | 19 | % | |||||||||||
| Other | 12,037 | 5,720 | 110 | % | |||||||||||||
| Total revenue | 92,964 | 73,723 | 26 | % | |||||||||||||
Operating costs and expenses(a): | |||||||||||||||||
Marketing and advertising(8) | 38,737 | 32,869 | 18 | % | |||||||||||||
Customer care and enrollment(8) | 32,901 | 25,071 | 31 | % | |||||||||||||
Technology and content(8) | 13,305 | 14,353 | (7) | % | |||||||||||||
General and administrative(8) | 19,619 | 24,324 | (19) | % | |||||||||||||
| Impairment, restructuring and other charges | 6,313 | — | * | ||||||||||||||
| Total operating costs and expenses | 110,875 | 96,617 | 15 | % | |||||||||||||
| Loss from operations | (17,911) | (22,894) | 22 | % | |||||||||||||
| Interest expense | (2,809) | (2,580) | (9) | % | |||||||||||||
| Other income, net | 2,391 | 1,988 | 20 | % | |||||||||||||
| Loss before income taxes | (18,329) | (23,486) | 22 | % | |||||||||||||
| Benefit from income taxes | (1,345) | (3,608) | |||||||||||||||
| Net loss | (16,984) | (19,878) | 15 | % | |||||||||||||
| Preferred stock dividends | (5,480) | (5,101) | |||||||||||||||
| Change in preferred stock redemption value | (5,247) | (3,069) | |||||||||||||||
| Net loss attributable to common stockholders | $ | (27,711) | $ | (28,048) | 1 | % | |||||||||||
Net loss per share attributable to common stockholders: | |||||||||||||||||
Basic and diluted | $ | (0.96) | $ | (1.01) | 6 | % | |||||||||||
| Weighted-average number of shares used in per share: | |||||||||||||||||
Basic and diluted | 28,912 | 27,648 | 5 | % | |||||||||||||
_____________________________ (a) Includes stock-based compensation expense as follows: | |||||||||||||||||
| Marketing and advertising | $ | 644 | $ | 455 | |||||||||||||
| Customer care and enrollment | 524 | 605 | |||||||||||||||
| Technology and content | 974 | 905 | |||||||||||||||
| General and administrative | 3,398 | 3,029 | |||||||||||||||
| Total stock-based compensation expense | $ | 5,540 | $ | 4,994 | 11 | % | |||||||||||
Non-GAAP Results(1): | |||||||||||||||||
| Adjusted EBITDA | $ | (1,652) | $ | (12,655) | 87 | % | |||||||||||
| Adjusted EBITDA margin | (2) | % | (17) | % | 90 | % | |||||||||||
__________
* Percentage calculated is not meaningful.
Note: See accompanying footnotes on page 12.
5
EHEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Operating activities: | |||||||||||
| Net loss | $ | (16,984) | $ | (19,878) | |||||||
| Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | 533 | 656 | |||||||||
| Amortization of internally developed software | 3,873 | 4,589 | |||||||||
| Stock-based compensation expense | 5,540 | 4,994 | |||||||||
| Deferred income taxes | (1,382) | (3,611) | |||||||||
| Impairment charges | 5,492 | — | |||||||||
| Other non-cash items | (75) | 61 | |||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable | 2,586 | 1,605 | |||||||||
| Contract assets – commissions receivable | 73,095 | 82,507 | |||||||||
| Prepaid expenses and other assets | 460 | (125) | |||||||||
| Accounts payable | (937) | (1,493) | |||||||||
| Accrued compensation and benefits | 132 | 7,193 | |||||||||
| Accrued marketing expenses | (10,936) | (15,019) | |||||||||
| Deferred revenue | 8,080 | (372) | |||||||||
| Accrued expenses and other liabilities | 1,284 | (304) | |||||||||
| Net cash provided by operating activities | 70,761 | 60,803 | |||||||||
| Investing activities: | |||||||||||
| Capitalized internal-use software and website development costs | (2,286) | (2,164) | |||||||||
| Purchases of property and equipment and other assets | (204) | (67) | |||||||||
| Purchases of marketable securities | (13,797) | (22,009) | |||||||||
| Proceeds from redemption and maturities of marketable securities | 6,000 | — | |||||||||
| Net cash used in investing activities | (10,287) | (24,240) | |||||||||
| Financing activities: | |||||||||||
| Repurchase of shares to satisfy employee tax withholding obligations | (1,255) | (428) | |||||||||
| Principal payments in connection with leases | (4) | (11) | |||||||||
Net cash used in financing activities | (1,259) | (439) | |||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | 49 | 108 | |||||||||
Net increase in cash, cash equivalents and restricted cash | 59,264 | 36,232 | |||||||||
| Cash, cash equivalents and restricted cash at beginning of period | 118,812 | 147,640 | |||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 178,076 | $ | 183,872 | |||||||
6
EHEALTH, INC.
SEGMENT INFORMATION
(in thousands, unaudited)
We evaluate our business performance and manage our operations as two distinct reporting segments: Medicare and Employer and Individual (“E&I”). In the fourth quarter of 2023, the Individual, Family and Small Business segment was renamed “Employer and Individual”. The E&I segment name change was to the name only and had no impact on our historical financial position, results of operations, cash flow or segment level results previously reported. This identification of reportable segments is consistent with how the segments report to and are managed by our chief executive officer, who is our chief operating decision maker (“CODM”). 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 (collectively, the “Medicare Plans”), fees earned for the performance of administrative services, amounts earned from our non-broker of record arrangements, our performance of various post-enrollment services for members and to a lesser extent, amounts earned from our sale of ancillary products sold to our Medicare-eligible customers, including but not limited to, dental and vision plans, as well as amounts we are paid in connection with our advertising program for marketing and other services. The E&I segment consists primarily of amounts earned from our sale of individual, family and small business health insurance plans, including both qualified and non-qualified 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 E&I segment consists of amounts earned from our online sponsorship and advertising program that allows carriers to purchase advertising space in specific markets in a sponsorship area on our website and our technology licensing and lead referral activities.
Marketing and advertising, customer care and enrollment, technology and content and general and administrative operating expenses that are directly attributable to a segment are reported within the applicable segment. Indirect marketing and advertising, customer care and enrollment and technology and content operating expenses are allocated to each segment based on usage. Corporate consists of other general and administrative operating expenses, excluding stock-based compensation expense, depreciation and amortization, 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 and are instead reported within Corporate. Our results below reflect our updated methodology used in allocating certain expenses beginning in the first quarter of fiscal 2024, and results from the prior period presented have been recast to conform with the current period presentation. See accompanying footnotes on page 12 for further information.
The performance of each reportable segment is evaluated based on several factors, including revenue and segment profit (loss), which is calculated as total revenue for the applicable segment less direct and indirect allocated marketing and advertising, customer care and enrollment, technology and content and general and administrative operating expenses, excluding stock-based compensation expense, depreciation and amortization, impairment, restructuring and other charges, interest expense and other income (expense), net. Senior management uses segment profit (loss) to evaluate segment performance because they believe this measure is indicative of performance trends and the overall earnings potential of each segment.
| Three Months Ended March 31, | % Change | ||||||||||||||||
| 2024 | 2023 | ||||||||||||||||
| Revenue: | |||||||||||||||||
| Medicare | $ | 82,388 | $ | 61,834 | 33 | % | |||||||||||
Employer and Individual | 10,576 | 11,889 | (11) | % | |||||||||||||
| Total revenue | $ | 92,964 | $ | 73,723 | 26 | % | |||||||||||
Segment profit (loss)(8): | |||||||||||||||||
| Medicare | $ | 8,309 | $ | (586) | 1,518 | % | |||||||||||
Employer and Individual | 4,652 | 7,674 | (39) | % | |||||||||||||
Segment profit | 12,961 | 7,088 | 83 | % | |||||||||||||
Corporate(8) | (14,613) | (19,743) | 26 | % | |||||||||||||
| Stock-based compensation expense | (5,540) | (4,994) | (11) | % | |||||||||||||
| Depreciation and amortization | (4,406) | (5,245) | 16 | % | |||||||||||||
| Impairment, restructuring and other charges | (6,313) | — | * | ||||||||||||||
| Interest expense | (2,809) | (2,580) | (9) | % | |||||||||||||
| Other income, net | 2,391 | 1,988 | 20 | % | |||||||||||||
Loss before income taxes | $ | (18,329) | $ | (23,486) | 22 | % | |||||||||||
__________
* Percentage calculated is not meaningful.
Note: See accompanying footnotes on page 12.
7
EHEALTH, INC.
COMMISSION REVENUE
(in thousands, unaudited)
Our commission revenue results from approval of an application from health insurance carriers, which we define as our customers under Accounting Standards Codification 606 — Revenue from Contracts with Customers (“ASC 606”). Our commission revenue is primarily comprised of commissions from health insurance carriers which is computed using the estimated constrained lifetime values as the “constrained LTVs” of commission payments that we expect to receive. Our commissions may include certain bonus payments, which are generally based on our attaining predetermined target sales levels or other objectives, as determined by the health insurance carriers. For Medicare Advantage and Medicare Part D prescription drug plans, our commissions also include regular payments related to administrative services we perform.
The following table presents commission revenue by product for the periods indicated:
| Three Months Ended March 31, | % Change | ||||||||||||||||
| 2024 | 2023 | ||||||||||||||||
| Medicare | |||||||||||||||||
| Medicare Advantage | $ | 61,996 | $ | 54,121 | 15 | % | |||||||||||
| Medicare Supplement | 5,478 | 4,065 | 35 | % | |||||||||||||
| Medicare Part D | 2,685 | 777 | 246 | % | |||||||||||||
| Total Medicare | 70,159 | 58,963 | 19 | % | |||||||||||||
Individual and Family | |||||||||||||||||
| Non-Qualified Health Plans | 1,645 | 2,355 | (30) | % | |||||||||||||
| Qualified Health Plans | 2,046 | 1,651 | 24 | % | |||||||||||||
Total Individual and Family | 3,691 | 4,006 | (8) | % | |||||||||||||
| Ancillary | 2,688 | 2,422 | 11 | % | |||||||||||||
| Small Business | 3,616 | 4,873 | (26) | % | |||||||||||||
| Commission Bonus and Other | 773 | (2,261) | 134 | % | |||||||||||||
| Total Commission Revenue | $ | 80,927 | $ | 68,003 | 19 | % | |||||||||||
The following table presents a summary of commission revenue by segment for the periods indicated:
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Medicare | |||||||||||
Commission revenue from members approved during the period | $ | 69,752 | $ | 56,617 | |||||||
Net commission revenue from members approved in prior periods(a) | 1,002 | 52 | |||||||||
Total Medicare segment commission revenue | 70,754 | 56,669 | |||||||||
Employer and Individual | |||||||||||
Commission revenue from members approved during the period | 5,677 | 6,708 | |||||||||
Commission revenue from renewals of small business members during the period | 3,028 | 3,113 | |||||||||
Net commission revenue from members approved in prior periods(a) | 1,468 | 1,513 | |||||||||
Total employer and individual segment commission revenue | 10,173 | 11,334 | |||||||||
Total commission revenue | $ | 80,927 | $ | 68,003 | |||||||
_____________
(a) These amounts reflect our revised estimates of cash collections for certain members approved prior to the relevant reporting period that are recognized as adjustments to revenue within the relevant reporting period. The net adjustment revenue includes both increases in revenue for certain prior period cohorts as well as reductions in revenue for certain prior period cohorts. The total reductions to revenue from members approved in prior periods were $0.5 million for the three months ended March 31, 2024. These reductions to revenue primarily relate to the Employer and Individual segment. There were no reductions to revenue from members approved in prior periods for the three months ended March 31, 2023.
8
EHEALTH, INC.
SUMMARY OF SELECTED METRICS
(in thousands, except member and per member data, unaudited)
Selected Metrics — First Quarter of 2024
| Three Months Ended March 31, | % Change | ||||||||||||||||
| 2024 | 2023 | ||||||||||||||||
Approved Members(2) | |||||||||||||||||
| Medicare | |||||||||||||||||
| Medicare Advantage | 65,750 | 60,451 | 9 | % | |||||||||||||
| Medicare Supplement | 6,182 | 4,585 | 35 | % | |||||||||||||
| Medicare Part D | 3,575 | 3,846 | (7) | % | |||||||||||||
| Total Medicare | 75,507 | 68,882 | 10 | % | |||||||||||||
| Individual and Family | 7,160 | 10,099 | (29) | % | |||||||||||||
| Ancillary | 13,950 | 16,656 | (16) | % | |||||||||||||
| Small Business | 1,642 | 1,939 | (15) | % | |||||||||||||
| Total Approved Members | 98,259 | 97,576 | 1 | % | |||||||||||||
Constrained Lifetime Value of Commissions per Approved Member(3) | |||||||||||||||||
Medicare(a) | |||||||||||||||||
| Medicare Advantage | $ | 952 | $ | 901 | 6 | % | |||||||||||
| Medicare Supplement | 957 | 880 | 9 | % | |||||||||||||
| Medicare Part D | 237 | 202 | 17 | % | |||||||||||||
| Individual and Family | |||||||||||||||||
| Non-Qualified Health Plans | 385 | 400 | (4) | % | |||||||||||||
| Qualified Health Plans | 402 | 387 | 4 | % | |||||||||||||
| Ancillary | |||||||||||||||||
| Short-term | 184 | 187 | (2) | % | |||||||||||||
| Dental | 124 | 110 | 13 | % | |||||||||||||
| Vision | 84 | 70 | 20 | % | |||||||||||||
| Small Business | 215 | 233 | (8) | % | |||||||||||||
(a) Constraints for all Medicare products remained the same for the periods presented. | |||||||||||||||||
Expense Metrics per Approved Member(4) | |||||||||||||||||
| Medicare | |||||||||||||||||
Customer care and enrollment cost per Medicare Advantage (“MA”)-equivalent approved member(8) | $ | 419 | $ | 349 | 20 | % | |||||||||||
| Variable marketing cost per MA-equivalent approved member | 415 | 396 | 5 | % | |||||||||||||
| Total acquisition cost per MA-equivalent approved member | $ | 834 | $ | 745 | 12 | % | |||||||||||
Individual and Family Plan (“IFP”) | |||||||||||||||||
Customer care and enrollment cost per IFP-equivalent approved member(8) | $ | 161 | $ | 112 | 44 | % | |||||||||||
| Variable marketing cost per IFP-equivalent approved member | 58 | 40 | 45 | % | |||||||||||||
| Total acquisition cost per IFP-equivalent approved member | $ | 219 | $ | 153 | 43 | % | |||||||||||
Note: See accompanying footnotes on page 12.
9
EHEALTH, INC.
SUMMARY OF SELECTED METRICS
(in thousands, except member and per member data, unaudited)
| As of March 31, | % Change | ||||||||||||||||
| 2024 | 2023 | ||||||||||||||||
Estimated Membership(5) | |||||||||||||||||
Medicare(6) | |||||||||||||||||
| Medicare Advantage | 594,457 | 577,500 | 3 | % | |||||||||||||
| Medicare Supplement | 92,799 | 94,813 | (2) | % | |||||||||||||
| Medicare Part D | 187,534 | 212,183 | (12) | % | |||||||||||||
| Total Medicare | 874,790 | 884,496 | (1) | % | |||||||||||||
Individual and Family(6) | 80,928 | 98,983 | (18) | % | |||||||||||||
Ancillary(6) | 179,224 | 206,610 | (13) | % | |||||||||||||
Small Business(7) | 45,084 | 47,531 | (5) | % | |||||||||||||
| Total Estimated Membership | 1,180,026 | 1,237,620 | (5) | % | |||||||||||||
EHEALTH, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(unaudited)
Reconciliation of GAAP Operating Costs and Expenses to Non-GAAP Operating Costs and Expenses(1) (in thousands):
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
GAAP marketing and advertising expense(8) | $ | 38,737 | $ | 32,869 | |||||||
Stock-based compensation expense | (644) | (455) | |||||||||
Non-GAAP marketing and advertising expense(1) | $ | 38,093 | $ | 32,414 | |||||||
GAAP customer care and enrollment expense(8) | $ | 32,901 | $ | 25,071 | |||||||
| Stock-based compensation expense | (524) | (605) | |||||||||
Non-GAAP customer care and enrollment expense(1) | $ | 32,377 | $ | 24,466 | |||||||
GAAP technology and content expense(8) | $ | 13,305 | $ | 14,353 | |||||||
| Stock-based compensation expense | (974) | (905) | |||||||||
Non-GAAP technology and content expense(1) | $ | 12,331 | $ | 13,448 | |||||||
GAAP general and administrative expense(8) | $ | 19,619 | $ | 24,324 | |||||||
| Stock-based compensation expense | (3,398) | (3,029) | |||||||||
Non-GAAP general and administrative expense(1) | $ | 16,221 | $ | 21,295 | |||||||
| GAAP operating costs and expenses | $ | 110,875 | $ | 96,617 | |||||||
| Stock-based compensation expense | (5,540) | (4,994) | |||||||||
| Impairment, restructuring and other charges | (6,313) | — | |||||||||
Non-GAAP operating costs and expenses(1) | $ | 99,022 | $ | 91,623 | |||||||
__________
Note: See accompanying footnotes on page 12.
10
Reconciliation of GAAP Net Loss Attributable to Common Stockholders to Adjusted EBITDA(1) and Adjusted EBITDA Margin(1) (in thousands):
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
GAAP net loss attributable to common stockholders | $ | (27,711) | $ | (28,048) | |||||||
| Preferred stock dividends | 5,480 | 5,101 | |||||||||
| Change in preferred stock redemption value | 5,247 | 3,069 | |||||||||
| GAAP net loss | (16,984) | (19,878) | |||||||||
| Stock-based compensation expense | 5,540 | 4,994 | |||||||||
| Depreciation and amortization | 4,406 | 5,245 | |||||||||
| Impairment, restructuring and other charges | 6,313 | — | |||||||||
| Interest expense | 2,809 | 2,580 | |||||||||
| Other income, net | (2,391) | (1,988) | |||||||||
Benefit from income taxes | (1,345) | (3,608) | |||||||||
| Adjusted EBITDA | $ | (1,652) | $ | (12,655) | |||||||
Net loss margin | (18) | % | (27) | % | |||||||
| Adjusted EBITDA margin | (2) | % | (17) | % | |||||||
Reconciliation of GAAP Net Loss to Adjusted Net Loss(1) (in thousands):
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| GAAP net loss | $ | (16,984) | $ | (19,878) | |||||||
| Impairment, restructuring and other charges | 6,313 | — | |||||||||
Adjustment to benefit from income taxes | (1,525) | — | |||||||||
Adjusted net loss | $ | (12,196) | $ | (19,878) | |||||||
Reconciliation of Guidance GAAP Net Loss Attributable to Common Stockholders to Adjusted EBITDA(1) (in millions):
Full Year 2024 Guidance | |||||||||||
| Low | High | ||||||||||
| GAAP net loss attributable to common stockholders | $ | (85.0) | $ | (65.0) | |||||||
| Impact from preferred stock | 45.0 | 45.0 | |||||||||
| GAAP net loss | (40.0) | (20.0) | |||||||||
| Stock-based compensation expense | 20.0 | 17.0 | |||||||||
| Depreciation and amortization | 19.0 | 18.0 | |||||||||
| Impairment, restructuring and other charges | 1.0 | 1.0 | |||||||||
| Interest expense | 11.0 | 10.0 | |||||||||
| Other income, net | (8.0) | (9.0) | |||||||||
| Provision for (benefit from) income taxes | (8.0) | 3.0 | |||||||||
| Adjusted EBITDA | $ | (5.0) | $ | 20.0 | |||||||
__________
Note: See accompanying footnotes on page 12.
11
EHEALTH, INC.
Footnotes to Preceding Financial Statements and Metrics
(1)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 non-GAAP financial measures, including non-GAAP operating costs and expenses, adjusted EBITDA and adjusted EBITDA margin.
•Non-GAAP operating costs and expenses are calculated by excluding the effect of expensing stock-based compensation related to stock options, restricted stock awards, performance-based and market-based awards and employee stock purchase plan. Total non-GAAP operating costs and expenses is calculated by excluding the effect of expensing stock-based compensation related to stock options, restricted stock awards, performance-based and market-based awards and employee stock purchase plan and impairment, restructuring and other charges.
•Adjusted EBITDA is calculated by excluding dividends for preferred stock and change in preferred stock redemption value (together the “impact from preferred stock”), provision for (benefit from) income taxes, depreciation and amortization, stock-based compensation expense, impairment, restructuring and other charges, interest expense, other income (expense), net, and other non-recurring charges from GAAP net income (loss) attributable to common stockholders. Other non-recurring charges to GAAP net income (loss) attributable to common stockholders may include transaction expenses in connection with capital raising transactions (whether debt, equity or equity-linked) and acquisitions, whether or not consummated, purchase price adjustments and the cumulative effect of a change in accounting principles.
•Adjusted EBITDA margin is calculated as adjusted EBITDA divided by revenue.
•Adjusted net income (loss) is calculated by excluding impairment, restructuring and other charges and other non-recurring charges, net of tax from GAAP net income (loss).
eHealth believes that the presentation of these non-GAAP financial measures provides important supplemental information to management and investors regarding financial and business trends relating to eHealth’s financial condition and results of operations. Management believes that the use of these non-GAAP financial measures provides consistency and comparability with eHealth’s past financial reports. Management also believes that the items described above provide an additional measure of eHealth’s operating results and facilitates comparisons of eHealth’s core operating performance against prior periods and business model objectives. This information is provided to investors in order to facilitate additional analyses of past, present and future operating performance and as a supplemental means to evaluate eHealth’s ongoing operations. eHealth believes that these non-GAAP financial measures are useful to investors in their assessment of eHealth’s operating performance.
Non-GAAP operating costs and expenses, adjusted EBITDA and adjusted EBITDA margin 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 depreciation and amortization described above, and exclusion of these costs, and their related income tax benefits, from non-GAAP financial measures should not be construed as an inference that these costs are unusual or infrequent. eHealth compensates for these limitations by prominently disclosing GAAP net income (loss), GAAP net income (loss) attributable to common stockholders and GAAP net income (loss) margin and providing investors with reconciliations from eHealth’s GAAP operating results to the non-GAAP financial measures for the relevant periods.
The tables above 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.
(2)Approved members represent the number of individuals on submitted applications that were approved by the relevant insurance carrier for the identified product during the current period. The applications may be submitted in either the current period or prior periods. Not all approved members ultimately become paying members.
(3)Constrained lifetime value (“LTV”) of commissions per approved member for Medicare, individual and family and ancillary plans represents commissions estimated to be collected over the estimated life of an approved member’s plan after applying constraints in accordance with our revenue recognition policy. Constrained LTV of commissions per approved member for small business represents the estimated commissions we expect to collect from the plan over the following twelve months. The estimate is driven by multiple factors, including but not limited to, contracted commission rates, carrier mix, estimated average plan duration, the regulatory environment, and cancellations of insurance plans offered by health insurance carriers
12
EHEALTH, INC.
Footnotes to Preceding Financial Statements and Metrics
with which we have a relationship and applied constraints. The constraints are applied to help ensure that commissions estimated to be collected over the estimated life of an approved member’s plan are recognized as revenue only to the extent that it is 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. These factors may result in varying values from period to period.
(4)Expense Metrics per Approved Member: Marketing initiatives are an important component of our strategy to increase revenue and are primarily designed to encourage consumers to complete an application for health insurance. We calculate and evaluate the customer care and enrollment (“CC&E”) expense per approved member and the variable marketing cost per approved member. We incur CC&E expenses in assisting applicants during the enrollment process. Variable marketing costs represent costs incurred in member acquisition from our direct marketing and marketing partner channels. Variable marketing costs exclude fixed overhead costs, such as personnel related costs, consulting expenses and other operating costs allocated to the marketing and advertising department.
The numerator used to calculate each member acquisition metric discussed above is the portion of the respective operating expenses for CC&E and marketing and advertising that is directly related to member acquisition for our sale of Medicare Advantage, Medicare Supplement and Medicare Part D prescription drug plans (collectively, the “Medicare Plans”) and for all individual and family major medical plans and short-term health insurance plans (collectively, “IFP Plans”), respectively. The denominator used to calculate each metric is based on a derived metric that represents the relative value of the new members acquired. For Medicare Plans, we call this derived metric Medicare Advantage (“MA”)-equivalent approved members, and for IFP Plans, we call this derived metric IFP-equivalent approved members. MA-equivalent approved members is a derived metric with a Medicare Part D approved member being weighted at 25% of a Medicare Advantage member and a Medicare Supplement member based on their relative LTVs at the time of our adoption of ASC 606. We calculate the number of MA-equivalent approved members by adding the total number of approved Medicare Advantage and Medicare Supplement members and 25% of the total number of approved Medicare Part D members during the periods presented. IFP-equivalent approved members is a derived metric with a short-term approved member being weighted at 33% of a major medical individual and family health insurance plan member based on their relative LTVs at the time of our adoption of ASC 606. We calculate the number of IFP-equivalent approved members by adding the total number of approved qualified and non-qualified health plan members and 33% of the total number of short-term approved members during the period presented.
(5)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 period of estimation. There is generally up to a few months lag between newly approved plans and the receipt of commission payments from the health insurance carrier. A member who purchases and is active on multiple standalone insurance plans will be counted as a member more than once.
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 or notifying the carrier directly and do not inform us of the cancellation. Also, some of our members pay their premiums less frequently than monthly. Given the number of months required to observe non-payment of commissions in order to confirm cancellations, we estimate the number of members who are active on insurance policies as of a specified date.
After we have estimated membership for a period, we may receive information from health insurance carriers that would have impacted the estimate if we had received the information prior to the date of estimation. We may receive commission payments or other information that indicates that a member who was not included in our estimates for a prior period was in fact an active member at that time, or that a member who was included in our estimates was in fact not an active member of ours. For instance, we reconcile information carriers provide to us and may determine that we were not historically paid commissions owed to us, which would cause us to have underestimated membership. Conversely, carriers may require us to return commission payments paid in a prior period due to policy cancellations for members we previously estimated as being active. We do not update our estimated membership numbers reported in previous periods. Instead, we reflect updated information regarding our historical membership in the membership estimate for the current period. If we experience a significant variance in historical membership as compared to our initial estimates, while we keep the prior period data consistent with previously reported amounts, we may provide the updated information in other communications or disclosures. As a result of the delay in our receipt of information from insurance carriers, actual trends in our membership are most discernible over periods longer than from one quarter to the next, making it difficult for us to determine with any certainty the impact of current conditions on our membership retention. Various circumstances 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.
(6)To estimate the number of members on Medicare-related, individual and family, and ancillary health insurance plans, we take the respective sum of (i) the number of members for whom we have received or applied a commission payment for a month
13
EHEALTH, INC.
Footnotes to Preceding Financial Statements and Metrics
that may be up to three months prior to the date of estimation (after reducing that number using historical experience for assumed member cancellations over the period being estimated); and (ii) the number of approved members over that period (after reducing that number using historical experience for an assumed number of members who do not accept their approved policy and for estimated member cancellations through the date of the estimate). To the extent we determine through confirmations from a health insurance carrier that a commission payment is delayed or is inaccurate as of the date of estimation, we adjust the estimated membership to also reflect the number of members for whom we expect to receive or to refund a commission payment. Further, to the extent 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 ancillary health insurance plans, 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.
(7)To estimate the number of members on small business health insurance plans, we use the number of initial members at the time the group was approved, and we update this number for changes in membership if such changes are reported to us by the group or carrier. 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.
(8)Beginning in the first quarter of 2024, primarily as a result of vacating excess office space, we modified our methodology used in allocating certain expenses for the purpose of evaluating financial and segment performance and resource allocation. Specifically, we no longer allocate our facilities-related expenses, and as a result, these costs are now reported within the “General and administrative” line in our Condensed Consolidated Statements of Comprehensive Loss and within Corporate for our segment profit (loss). We have recast the Condensed Consolidated Statements of Comprehensive Loss and our segment profit (loss) for the prior period presented to conform to our current methodology. This resulted in a classification change of expenses from marketing and advertising, customer care and enrollment, and technology and content into general and administrative. Additionally, our segment profit (loss) no longer includes our facilities allocation to each of our segments and instead, these costs are included within Corporate. There was no impact to total operating costs and expenses, loss from operations, net loss or net loss per share attributable to common stockholders on our Condensed Consolidated Statements of Comprehensive Loss.
14
©2024 eHealthInsurance Services, Inc. Q1 2024 Financial Results 1
©2024 eHealthInsurance Services, Inc. 2 Safe Harbor Statement Forward-Looking Statements This presentation includes forward-looking statements within the meaning of the federal securities laws. Forward-looking statements generally relate to future events or our future financial or operating performance. Forward-looking statements in this presentation include, but are not limited to, the following: Medicare broker industry trends, our estimates regarding Medicare enrollment growth; our estimates regarding commissions receivable collection; our estimates of constrained lifetime value of commissions per approved member; our 2024 operational priorities, including our business and growth strategy, local market strategy, branding, and member loyalty and retention strategy; our 2024 annual guidance for total revenue, GAAP net loss, adjusted EBITDA and operating cash flow; the expected impact of positive net adjustment revenue on our 2024 annual guidance; our operational initiatives, including our Agency and Amplify fulfillment models and new platform features, and the expected impact of these initiatives on our business and financial results; our investments in technology and operational initiatives and expected impact of these investments on our business; and other statements regarding our future operations, financial condition, prospects and business strategies. Our expectations and beliefs regarding these matters may not materialize, and actual results in future periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks include those set forth in our filings with the Securities and Exchange Commission, including our latest Form 10-Q and 10-K. The forward-looking statements in this presentation are based on information available to us as of today, and we disclaim any obligation to update any forward-looking statements, except as required by law. Non-GAAP Information This presentation includes both GAAP and non-GAAP financial measures. The presentation of non-GAAP financial information is not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. A reconciliation of the non-GAAP financial measures included in this presentation to the most directly comparable GAAP financial measures is available in the Appendix to this presentation. Management uses both GAAP and non-GAAP information in evaluating and operating its business internally and as such has determined that it is important to provide this information to investors.
©2024 eHealthInsurance Services, Inc. (1) Adjusted EBITDA is calculated by excluding dividends for preferred stock and change in preferred stock redemption value (together the “impact from preferred stock”), provision for (benefit from) income taxes, depreciation and amortization, stock- based compensation expense, amortization of intangible assets, impairment, restructuring and other charges, interest expense, other income (expense), net, and other non-recurring charges from GAAP net income (loss) attributable to common stockholders. Other non-recurring charges to GAAP net income (loss) attributable to common stockholders may include transaction expenses in connection with capital raising transactions (whether debt, equity or equity-linked) and acquisitions, whether or not consummated, purchase price adjustments and the cumulative effect of a change in accounting principles. 3 Q1 2024 Earnings Highlights Q1 2024 total revenue of $93.0 million increased 26% compared to Q1 2023 total revenue of $73.7 million. Q1 2024 Medicare Advantage approved members increased 9% to 65,750 compared to Q1 2023 Medicare Advantage approved members of 60,451. Q1 2024 GAAP net loss of $17.0 million improved $2.9 million year-over-year. Q1 2024 adjusted EBITDA(1) of $(1.7) million improved $11.0 million compared to $(12.7) million in Q1 2023. Q1 2024 Medicare Advantage LTV increased 6% to $952 from $901 in Q1 2023, driven primarily by favorable carrier and contract mix. Operating cash flow for the trailing twelve months ended March 31, 2024, was $3.3 million. eHealth delivered strong first quarter performance underpinned by revenue growth and growth in approved members. We are on track to reach our financial goals for FY 2024.
©2024 eHealthInsurance Services, Inc. Medicare Broker Industry Trends New Model Industry consolidation underway Emphasis on profitability Rationalization of marketing spend across all key channels Focus on cash generation through diversification, alternative monetization models, etc. Old Model Proliferation of distribution platforms, many unprofitable Emphasis on volume production Large marketing budgets deployed each AEP Negative cash flow profile of Medicare Advantage distributors eHealth was ahead of the curve as we launched our Business Transformation Plan in 2022 to enhance enrollment quality, rebuild marketing strategies, launch re-brand, and substantially improve cash flow profile of our business. 4
©2024 eHealthInsurance Services, Inc. Enhanced profitability metrics reflect strong topline growth accompanied by fixed cost reductions. Q1 2024 GAAP net loss includes one- time expenses including $6.3 million of impairment and restructuring charges related to lease exits and other cost- reduction efforts. 5 Q1 2024 Total Revenue Grew Year-over-Year with Improved Profitability Total Revenue ($MM) $ 73.7 $ 93.0 Q1-FY23 Q1-FY24 26% ($12.7) ($1.7) Q1-FY23 Q1-FY24 Adjusted EBITDA ($MM) ($19.9) ($17.0) Q1-FY23 Q1-FY24 GAAP Net Loss ($MM) (1) Adjusted EBITDA is calculated by excluding the impact from preferred stock, provision for (benefit from) income taxes, depreciation and amortization, stock-based compensation expense, amortization of intangible assets, impairment, restructuring and other charges, interest expense, other income (expense), net, and other non-recurring charges from GAAP net income (loss) attributable to common stockholders. Other non-recurring charges to GAAP net income (loss) attributable to common stockholders may include transaction expenses in connection with capital raising transactions (whether debt, equity or equity-linked) and acquisitions, whether or not consummated, purchase price adjustments and the cumulative effect of a change in accounting principles. (1)
©2024 eHealthInsurance Services, Inc. Q1 ‘24 Medicare approved members increased 10% YoY reflecting strong execution in both fulfillment models, core Agency and Amplify. Q1 ‘24 Medicare non- commission revenue was $11.6 million – YoY growth of more than 100%. 6 Q1 2024 Medicare Segment Performance (1) Segment profit is calculated as total revenue for the applicable segment less direct and indirect allocated marketing and advertising, customer care and enrollment, technology and content and general and administrative operating expenses, excluding stock-based compensation expense, depreciation and amortization, impairment, restructuring and other charges, and other income (expense), net. $61.8 $82.4 Q1-FY23 Q1-FY24 Medicare Segment Revenue ($MM) 33% ($0.6) $8.3 Q1-FY23 Q1-FY24 Medicare Segment Profit (Loss) ($MM) 60.5 65.8 Q1-FY23 Q1-FY24 Medicare Advantage Approved Members (000s) 9% 68.9 75.5 Q1-FY23 Q1-FY24 Total Medicare Approved Members (000s) 10% (1) (1) Seg ent profit (loss) is calculated as total revenue for the applicable segment less direct and indirect allocated marketing and advertising, customer care and enrollment, technology and content and general and administrative operating expenses, excluding stock-based compensation expense, depreciation and amortization, impairment, restructuring and other charges, interest expense and other income (expense), net.
©2024 eHealthInsurance Services, Inc. 7 Recently Launched New Features ePerks and Live Advise Live Advise • Launched in early Q2 2024 • Loyalty program that offers our members a seamless start to access their plan benefits and services, a plan check-up, and offers & discounts on partner services • Since its April launch, we have already enrolled more than 200,000 existing eHealth Medicare customers • Expected to impact retention and customer affinity • Limited launch in early Q2 2024 • Offers secure one-way video chat capability • Allows customers to see their benefit advisor during the enrollment process, fostering additional connection • Expected to impact enrollment quality and sales efficiency
©2024 eHealthInsurance Services, Inc. Operating cash flow for Q1 ‘24 was $70.8 million, relative to $60.8 million in Q1 ’23. Importantly, our operating cash flow for TTM ended 3/31/24 was positive $3.3 million – up from negative $13.2 million a year ago – and exceeded our goal of breakeven operating cash flow for this period. Our next milestone is free cash flow generation. 8 Cash Flow & Balance Sheet Highlights ($13.2) $3.3 TTM Mar 31, 2023 TTM Mar 31, 2024 Operating Cash Flow ($MM) $202.7 $188.9 Mar 31, 2023 Mar 31, 2024 Ending Cash, Cash Equivalents & Marketable Securities ($MM) $802.0 $845.3 Mar 31, 2023 Mar 31, 2024 Ending Commissions Receivable (Current & Non-Current) ($MM)
©2024 eHealthInsurance Services, Inc. Total Cash Collected by Revenue Type ($, MM) Q1 2024 total cash collections of $180.5 million grew 13% on a year-over-year basis, driven by an increase in non-commission revenue as well as increased commission payments generated by our existing book of business. 9 $154.4 $73.9 $67.9 $83.8 $160.7 $6.0 $7.1 $8.1 $24.4 $19.8 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Commission Non-Commission & Others (1) We distinguish between commission and non-commission based cash collections using the same methodology we use to distinguish between commission revenue and revenue from non-commission sources, which can be found in our Annual Report on Form 10-K filed with the SEC on February 29, 2024. (1)
©2024 eHealthInsurance Services, Inc. Trailing 12-Month Profitability and Cash Flows 10 Following the implementation of our Business Transformation, we have seen steady improvement in profitability and cash flow performance on a TTM basis. Apr ’22: Business Transformation initiated (1) Adjusted EBITDA is calculated by excluding the impact from preferred stock, provision for (benefit from) income taxes, depreciation and amortization, stock-based compensation expense, amortization of intangible assets, impairment, restructuring and other charges, interest expense, other income (expense), net, and other non-recurring charges from GAAP net income (loss) attributable to common stockholders. Other non-recurring charges to GAAP net income (loss) attributable to common stockholders may include transaction expenses in connection with capital raising transactions (whether debt, equity or equity-linked) and acquisitions, whether or not consummated, purchase price adjustments and the cumulative effect of a change in accounting principles. (2) Free cash flow is calculated as net cash provided by (used in) operating activities reduced by capitalized internal-use software and website development costs and purchases of property and equipment and other assets. (2) $(200) $(150) $(100) $(50) $- $50 Q3'21 Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q1'23 Q2'23 Q3'23 Q4'23 Q1'24 Adjusted EBITDA - TTM Cash From Operations - TTM Free Cash Flow - TTM ($, MM) (1)
©2024 eHealthInsurance Services, Inc. 11 FY24 Operational Priorities Grow revenue year- over-year while producing positive adjusted EBITDA 1 Advance our local market focused, omni-channel enrollment engine to drive higher conversions and greater margins 2 Launch the next phase of our member loyalty & retention strategy 3 Drive our B2B strategy and fortify the organizational foundation that supports our strategic partners and direct-to- employer opportunities 4 Enhance eHealth’s comprehensive product portfolio beyond Medicare Advantage agency business to drive year- round growth 5
©2024 eHealthInsurance Services, Inc. Fi na nc ia l I m pa ct • Both models capitalize on strong and growing Medicare Advantage market • Can be expanded to other eHealth products O pe ra ti on al M od el • Primarily a Broker of Record model • LTV-based revenue • Recurring cash commission payments • Commissions receivable created • Flows through reported approval/membership metrics • Variable cost: marketing and agent • Evolving from LTV-based in FY23 and Q1 ’24 into primarily fee-based revenue model in Q2 (with some broker-of-record) • Fee-based revenue • Upfront cash payment • No commissions receivable created • Does not impact enrollment or membership metrics • Variable cost: primarily agent (partially offset by carrier fees) Two Distinct Fulfillment Models Agency (Choice) eHealth Marketing Engine Online Marketplace Proprietary Plan Recommendation Algorithm National & Local Market Advisors Products: MA, MS, PDP, IFP, SMB, Ancillary Amplify (Carrier Dedicated) Carrier Demand Generation Efforts Expert Match with Best Plan from that Carrier Dedicated Benefit Advisors Products: MA, MS, PDP 12
©2024 eHealthInsurance Services, Inc. Amplify vs Agency Financial View Agency Revenue $85.8 Amplify Revenue $7.2 Est. Medicare Membership Minimal Impact Medicare Volume Processed Positive Contributor Medicare Revenue Positive Contributor Medicare Approved Members Minimal Impact eHealth Cash Profile Positive Contributor Adj. EBITDA Positive Contributor Q1 ’24 Revenue Breakdown ($, MM) Amplify annual gross margin target of 30%-35% in line with our margin target for Medicare Agency Expected FY 2024 Contribution as Amplify Scales and Transitions to BPO Model Q4 ’23 & Q1 ’24 Amplify Compensation Model: Majority Broker-of-Record Q2 ‘24 & Beyond Amplify Compensation Model: Largest contracts Fee-Based BPO shifting to 13
©2024 eHealthInsurance Services, Inc. 14 FY24 Guidance 2024 Full Year Guidance Range (in millions) Total Revenue $450 – $475 GAAP Net Income (Loss) ($40) – ($20) Adjusted EBITDA(1) ($5) – $20 Operating Cash Flow ($15) – ($5) (1) Adjusted EBITDA is calculated by excluding the impact from preferred stock, provision for (benefit from) income taxes, depreciation and amortization, stock-based compensation expense, amortization of intangible assets, impairment, restructuring and other charges, interest expense, other income (expense), net, and other non-recurring charges from GAAP net income (loss) attributable to common stockholders. Other non-recurring charges to GAAP net income (loss) attributable to common stockholders may include transaction expenses in connection with capital raising transactions (whether debt, equity or equity-linked) and acquisitions, whether or not consummated, purchase price adjustments and the cumulative effect of a change in accounting principles. We are reiterating our previously issued guidance ranges for FY 2024. Guidance includes an estimate for positive net adjustment revenue in the range of $0 to $15 million reflective of potential tail revenue that was previously constrained.
©2024 eHealthInsurance Services, Inc. Appendix 15
©2024 eHealthInsurance Services, Inc. 16 Reconciliation of GAAP to Non-GAAP Financial Measures
©2024 eHealthInsurance Services, Inc. 17 Guidance GAAP Net Loss Attributable to Common Stockholders to Adjusted EBITDA