eHealthInsurance.com Investor Relations – News Release


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/C O R R E C T I O N -- eHealth, Inc./

eHealth, Inc. (NASDAQ: EHTH), the nation's leading private online health insurance exchange, is correcting misstatements regarding non-GAAP net income and non-GAAP net income per diluted share for the fourth quarter of 2018, and guidance for non-GAAP net income per diluted share for the full year ending December 31, 2019 in its earnings press release for the quarter and year ended December 31, 2018 that was issued on February 21, 2019. The misstatements did not impact eHealth's GAAP financial statements. The non-GAAP net income and non-GAAP net income per diluted share for the fourth quarter of 2018 in the section titled "Non-GAAP Fourth Quarter of 2018 Results" and the guidance for non-GAAP net income per diluted share for the full year ending December 31, 2019 in the section titled "2019 Guidance" of the February 21, 2019 press release are corrected as set forth below: Non-GAAP net income per diluted share for the fourth quarter of 2018 was $35.7 million, or $1.72 non-GAAP net income per diluted share. Non-GAAP net income per diluted share for the full year ending December 31, 2019 is expected to be in the range of $1.11 to $1.25 per share. The corrected release reads:

eHealth, Inc. Announces Fourth Quarter and Fiscal 2018 Results

SANTA CLARA, Calif., Feb. 21, 2019 /PRNewswire/ --

Fourth quarter 2018 Overview

  • Revenue for the fourth quarter of 2018 was $134.9 million, an increase of 62% compared to $83.1 million for the fourth quarter of 2017.
  • Net income for the fourth quarter of 2018 was $26.1 million compared to $28.0 million for the fourth quarter of 2017.
  • Adjusted EBITDA for the fourth quarter of 2018 was $51.9 million, an increase of 107% compared to $25.1 million for the fourth quarter of 2017.
  • Net cash used in operations for the fourth quarter of 2018 was $8.7 million compared to $10.1 million net cash used in operations for the fourth quarter of 2017.

eHealth, Inc. (NASDAQ: EHTH), a leading private online health insurance exchange, announced today its financial results for the fourth quarter and fiscal year ended December 31, 2018.

Scott Flanders, chief executive officer of eHealth stated, "2018 was a defining year for eHealth in validating our vision and growth strategy for the Medicare market.  We delivered the strongest Medicare Annual Enrollment Period in the company's history, achieved a number of important executional milestones and reported financial results which significantly exceeded our expectations.  I am proud of these accomplishments."

GAAP — Fourth Quarter of 2018 Results

Revenue — Revenue for the fourth quarter of 2018 totaled $134.9 million, a 62% increase compared to $83.1 million for the fourth quarter of 2017. Commission revenue for the fourth quarter of 2018 totaled $122.2 million, a 61% increase compared to $76.1 million for the fourth quarter of 2017. Other revenue for the fourth quarter of 2018 was $12.7 million, a 79% increase compared to $7.1 million for the fourth quarter of 2017.

Revenue from our Medicare segment was $121.6 million for the fourth quarter of 2018, a 74% increase compared to $69.9 million for the fourth quarter of 2017. Revenue from our Individual, Family and Small Business segment was $13.3 million for the fourth quarter of 2018, a 1% increase compared to $13.2 million for the fourth quarter of 2017.

Income from Operations — Income from operations for the fourth quarter of 2018 was $41.6 million compared to income from operations of $20.8 million for the fourth quarter of 2017. Operating margin was 31% for the fourth quarter of 2018 compared to 25% for the fourth quarter of 2017.

Pre-tax Income — Pre-tax income for the fourth quarter of 2018 was $41.6 million compared to pre-tax income of $21.1 million for the fourth quarter of 2017.

Provision (Benefit) for Income Taxes — Provision for income taxes for the fourth quarter of 2018 was $15.6 million compared to benefit for income taxes of $6.9 million for the fourth quarter of 2017.

Net Income — Net income for the fourth quarter of 2018 was $26.1 million, or $1.25 net income per diluted share, compared to net income of $28.0 million, or $1.47 net income per diluted share, for the fourth quarter of 2017. Net income for the fourth quarter of 2018 includes a non-cash charge of $6 million related to an increase in fair value of the earnout liability assumed in connection with eHealth's acquisition of GoMedigap. The increase is driven primarily by eHealth's share price appreciation since the transaction closed in January of 2018. The share price appreciation has increased the value of the equity-based portion of the earnout consideration owed to the former holders of GoMedigap equity interests.

Segment Profit Profit from our Medicare segment was $58.7 million for the fourth quarter of 2018, a 90% improvement compared to profit of $30.9 million for the fourth quarter of 2017. Profit from our Individual, Family and Small Business segment was $3.5 million for the fourth quarter of 2018, a 208% increase compared to $1.1 million for the fourth quarter of 2017.

Non-GAAP — Fourth Quarter of 2018 Results

Non-GAAP Operating Income & Non-GAAP Net Income — Non-GAAP operating income for the fourth quarter of 2018 was $51.3 million compared to non-GAAP operating income of $24.4 million for the fourth quarter of 2017. Non-GAAP operating margin for the fourth quarter of 2018 was 38% compared to 29% for the fourth quarter of 2017. Non-GAAP net income for the fourth quarter of 2018 was $35.7 million, or $1.72 non-GAAP net income per diluted share, compared to non-GAAP net income of $30.2 million, or $1.57 non-GAAP net income per diluted share, for the fourth quarter of 2017.

Non-GAAP operating income, non-GAAP net income and non-GAAP net income per diluted share for the fourth quarter of 2018 exclude $3.1 million of stock-based compensation expense, a $6.0 million charge related to an increase in the fair value of our earnout liability, and $0.5 million of amortization of intangible assets. Non-GAAP operating net income, non-GAAP net income and non-GAAP net income per diluted share for the fourth quarter of 2017 exclude $2.7 million of stock-based compensation expense, $0.6 million of acquisition costs related to our acquisition of GoMedigap, and $0.3 million of amortization of intangible assets.

Adjusted EBITDA — Adjusted EBITDA for the fourth quarter of 2018 was $51.9 million compared to $25.1 million for the fourth quarter of 2017. Adjusted EBITDA is calculated by adding stock-based compensation, depreciation and amortization expense, acquisition costs related to our acquisition of GoMedigap, restructuring charge, amortization of intangible assets, change in fair value of earnout liability, other income (expense), net, and provision (benefit) for income taxes to GAAP net income.

Membership, Submitted Applications & Approved Members

Membership — Total estimated membership as of December 31, 2018 was 952,926 members, a 2% increase compared to 936,900 members we reported as of December 31, 2017. Estimated Medicare membership as of December 31, 2018 was 486,690, a 26% increase compared to 384,854 we reported as of December 31, 2017. Estimated individual and family plan membership as of December 31, 2018 was 151,904 members, a 32% decrease compared to 224,396 we reported as of December 31, 2017.

Submitted Applications — Submitted applications for all Medicare products, which includes Medicare Advantage, Medicare Supplement and Prescription Drug Plans were 162,216 applications in the fourth quarter of 2018, a 64% increase compared to 98,826 applications in the fourth quarter of 2017. Submitted applications for individual and family plan products decreased 45% in the fourth quarter of 2018 to 19,120 applications compared to 34,865 applications in the fourth quarter of 2017.

Approved Members — Approved members for all Medicare products, which includes Medicare Advantage, Medicare Supplement and Prescription Drug Plans were 145,689 members in the fourth quarter of 2018, a 63% increase compared to 89,247 members in the fourth quarter of 2017. Approved members for individual and family plan products decreased 41% in the fourth quarter of 2018 to 14,452 members compared to 24,384 members in the year ended December 31, 2017.

Cash — Fourth Quarter of 2018

Cash Flows — Net cash used in operating activities was $8.7 million for the fourth quarter of 2018 compared to net cash used in operating activities of $10.1 million for the fourth quarter of 2017.

GAAP — Full Year Results

Revenue — Revenue for the year ended December 31, 2018 totaled $251.4 million, a 32% increase compared to $190.7 million for the year ended December 31, 2017. Commission revenue for the year ended December 31, 2018 totaled $227.2 million, a 28% increase compared to $176.9 million for the year ended December 31, 2017.  Other revenue for the year ended December 31, 2018 was $24.2 million, a 75% increase compared to $13.8 million for the year ended December 31, 2017.

Revenue from our Medicare segment was $210.6 million for the year ended December 31, 2018, a 48% increase compared to $142.4 million for the year ended December 31, 2017. Revenue from our Individual, Family and Small Business segment was $40.8 million for the year ended December 31, 2018, a 15% decrease compared to $48.3 million for the year ended December 31, 2017.

Income from Operations — Income from operations for the year ended December 31, 2018 was $2.6 million compared to loss from operations of $9.5 million for the year ended December 31, 2017. Operating margin was 1% for the year ended December 31, 2018 compared to (5)% for the year ended December 31, 2017.

Pre-tax Income — Pre-tax income for the year ended December 31, 2018 was $3.3 million compared to pre-tax loss of $8.3 million for the year ended December 31, 2017.

Provision for Income Taxes — Provision for income taxes for the year ended December 31, 2018 was $3.1 million compared to $33.7 million benefit from income taxes for the year ended December 31, 2017. The change in tax provision year over year is due to the introduction of federal tax reform, the impact of ASC 606, and the expiration of net operating loss carryforwards.

Net Income — Net income for the year ended December 31, 2018 was $0.2 million, or $0.01 earnings per diluted share, compared to net income of $25.4 million, or $1.33 earnings per diluted share, for the year ended December 31, 2017. Net income for the year ended December 31, 2018 includes a non-cash charge of $12.3 million related to an increase in fair value of the earnout liability assumed in connection with eHealth's acquisition of GoMedigap. The increase is driven primarily by eHealth's share price appreciation since the transaction closed in January of 2018. The share price appreciation has increased the value of the equity-based portion of the earnout consideration owed to the former holders of GoMedigap equity interests.

Segment Profit — Profit from our Medicare segment was $60.8 million for the year ended December 31, 2018, a 175% improvement compared to $22.1 million profit from Medicare segment for the year ended December 31, 2017. Profit from our Individual, Family and Small Business segment was $5.8 million for the year ended December 31, 2018, a 39% decrease compared to $9.6 million for the year ended December 31, 2017.

Non-GAAP — Full Year Results

Non-GAAP Operating Income & Non-GAAP Net Income — Non-GAAP operating income for the year ended December 31, 2018 was $31.2 million compared to $1.9 million non-GAAP operating income for the year ended December 31, 2017. Non-GAAP operating margin for the year ended December 31, 2018 was 12% compared to 1% for the year ended December 31, 2017. Non-GAAP net income for the year ended December 31, 2018 was $22.6 million, or $1.11 net income per diluted share, compared to $32.2 million non-GAAP net income, or $1.69 non-GAAP net income per diluted share, for the year ended December 31, 2017.               

Non-GAAP operating income, non-GAAP net income and non-GAAP net income per diluted share for the year ended December 31, 2018 exclude $12.3 million of stock-based compensation expense, a $1.9 million restructuring charge, $2.0 million of amortization of intangible assets, and a $12.3 million charge from the change in the fair value of the earnout liability related to the acquisition of GoMedigap, which was completed in January 2018. Non-GAAP operating income, non-GAAP net income and non-GAAP net income per diluted share for the year ended December 31, 2017 exclude $9.7 million of stock-based compensation expense, $0.6 million of acquisition costs related to our acquisition of GoMedigap, and $1.0 million of amortization of intangible assets.

Adjusted EBITDA — Adjusted EBITDA for the year ended December 31, 2018 was $33.7 million compared to $4.7 million for the year ended December 31, 2017. Adjusted EBITDA is calculated by adding stock-based compensation, depreciation and amortization expense, acquisition costs related to our acquisition of GoMedigap, restructuring charge, amortization of intangible assets, change in the fair value of the earnout liability related to the acquisition of GoMedigap, other income, net and provision (benefit) for income taxes to GAAP net income.

Submitted Applications and Approved Members

Submitted Applications — Submitted applications for all Medicare products, which includes Medicare Advantage, Medicare Supplement and Prescription Drug Plans were 264,903 applications in the year ended December 31, 2018, a 39% increase compared to 190,195 applications in the year ended December 31, 2017. Submitted applications for individual and family plan products decreased 56% in the year ended December 31, 2018 to 29,698 applications compared to 67,428 applications in the year ended December 31, 2017.

Approved Members — Approved members for all Medicare products, which includes Medicare Advantage, Medicare Supplement and Prescription Drug Plans were 239,688 members in the year ended December 31, 2018, a 36% increase compared to 175,665 members in the year ended December 31, 2017. Approved members for individual and family plan products decreased 46% in the year ended December 31, 2018 to 42,650 members compared to 78,553 members in the year ended December 31, 2017.

2019 Guidance

eHealth's guidance for the full year ending December 31, 2019 is based on information available as of February 21, 2019. These expectations are forward-looking statements, and eHealth assumes no obligation to update these statements. Actual results may be materially different and are affected by the risk factors and uncertainties identified in this release and in eHealth's annual and quarterly filings with the Securities and Exchange Commission.

The following guidance is for the full year ending December 31, 2019.

  • Total revenue is expected to be in the range of $290 million to $310 million. Revenue from the Medicare segment is expected to be in the range of $256 million to $272 million. Revenue from the Individual, Family and Small Business segment is expected to be in the range of $34 million to $38 million.
  • GAAP net income per diluted share for 2019 is expected to be in the range of $0.60 to $0.79 per share.
  • Non-GAAP net income per diluted share(a) is expected to be in the range of $1.11 to $1.25 per share.
  • GAAP net income is expected to be in the range of $16.3 million to $21.3 million.
  • Adjusted EBITDA(b) is expected to be in the range of $45 million to $50 million.
  • 2019 Medicare segment profit(c) is expected to be in the range of $80 million to $84 million and Individual, Family and Small Business segment profit is expected to be breakeven to $1 million.
  • Corporate(d) shared service expenses, excluding stock-based compensation and depreciation and amortization expense, is expected to be approximately $35 million.
  • Cash used in operations is expected to be in the range of $17 million to $20 million and cash used for capital expenditures is expected to be $13 million to $14 million.


(a) Non-GAAP net income per diluted share is calculated by adding stock-based compensation expense, change in fair value of earnout liability, acquisition costs, restructuring charges, intangible asset amortization expense and the income tax effect of these adjustments to GAAP net income.



(b) Adjusted EBITDA is calculated by adding stock-based compensation, depreciation and amortization expense, restructuring charges, acquisition costs, amortization of intangible assets, other income (expense), net and provision for income taxes to GAAP net income.



(c) 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, 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.



(d) 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.

Webcast and Conference Call Information

A Webcast and conference call will be held today, Thursday, February 21, 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 9573983. 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 1988118. The live and archived webcast of the call will also be available on eHealth's website at http://www.ehealthinsurance.com under the Investor Relations section.

About eHealth, Inc.

eHealth, Inc. (NASDAQ: EHTH) operates eHealth.com, a leading private online health insurance exchange where individuals, families and small businesses can compare health insurance products from leading insurers side by side and purchase and enroll in coverage online. eHealth offers thousands of individual, family and small business health plans underwritten by many of the nation's leading health insurance companies. eHealth (through its subsidiaries) is licensed to sell health insurance in all 50 states and the District of Columbia. eHealth also offers educational resources and powerful online and pharmacy-based tools to help Medicare beneficiaries navigate Medicare health insurance options, choose the right plan and enroll in select plans online through PlanPrescriber.com (www.PlanPrescriber.com), eHealthMedicare.com (www.eHealthMedicare.com) and Medicare.com (www.Medicare.com) and GoMedigap.com (www.GoMedigap.com).

Forward-Looking Statements

This press release contains statements that are forward-looking statements as defined within the Private Securities Litigation Reform Act of 1995. These include statement regarding our vision and growth strategy for the Medicare market, our estimates regarding total membership, Medicare membership, Individual and Family plan membership, 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 guidance for the full year ending December 31, 2019, including our guidance for total revenue, revenue from the Medicare segment, revenue from the Individual, Family and Small Business segment, GAAP net income, Adjusted EBITDA, profit from the Medicare segment, profit from the Individual, Family and Small Business segment, Corporate shared service expense, GAAP net income per share, Non-GAAP net income per share, 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 upon historical trends and management judgment.  These assumptions may change over time and have a material impact on our revenue recognition, guidance, and results of operations.  Please review the assumptions stated in this section carefully as well as the disclosures about our implementation of the revenue recognition standard in our Form 10-Q for the fiscal quarters ended March 31, 2018, June 30, 2018 and September 30, 2018, as well as the recast consolidated financial statements for each of the three years in the period ended December 31, 2017 reflecting the adoption of the new revenue recognition standard in our Form 8-K filed on December 17, 2018.

The risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward-looking statements include risks associated with the impact of healthcare reform; our ability to retain existing members and enroll a large number of new members during the annual healthcare reform open enrollment period and Medicare annual enrollment period; the impact of annual enrollment period for the purchase of individual and family health insurance and its timing on our recognition of revenue; our ability to sell qualified health insurance plans to subsidy-eligible individuals and to enroll subsidy eligible individuals through government-run health insurance exchanges; changes in laws and regulations, including in connection with healthcare reform; our ability to successfully make and integrate acquisitions; our health insurance benefits and packages' ability to meet individual customer's specific health insurance and price needs; the success of our sale of short-term health insurance and benefit packages; our ability to comply with CMS guidance and impact on conversion rates as a result of the federal exchange changes to enrollment; competition, including competition from government-run health insurance exchanges; seasonality of our business and the fluctuation of our operating results; our ability to retain existing members and limit member turnover; changes in consumer behaviors and their selection of individual and family health insurance products, including the selection of products for which we receive lower commissions; a reduction of product offerings among carriers and the resulting impact on our commission revenue; carriers exiting the market of selling individual and family health insurance and the resulting impact on our supply and commission revenue; our ability to execute on our growth strategy in the Medicare and small business health insurance markets; the impact of increased health insurance costs on demand; our ability to timely receive and accurately predict the amount of commission payments from health insurance carriers; timing of commission payments from health insurance carriers; medical loss ratio requirements; delays in our receipt of items required to recognize Medicare revenue; changes in member conversion rates; our ability to accurately estimate membership 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; lack of membership growth and retention rates; consumer satisfaction of our service; changes in competitive landscape; our ability to attract and to convert online visitors into paying members; changes in products offered on our ecommerce platform; changes and reductions in commission rates; our ability to maintain and enhance our brand identity; our ability to derive desired benefits from investments in our business, including membership growth initiatives; dependence on acceptance of the Internet as a marketplace for the purchase and sale of health insurance; reliance on marketing partners; the impact of our direct-to-consumer email, telephone and television 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; compliance with insurance and other laws and regulations; exposure to security risks and our ability to safeguard sensitive data; and the performance, reliability and availability of our ecommerce platform and underlying network infrastructure.  Other factors that could cause operating, financial and other results to differ are described in eHealth's most recent Quarterly Report on Form 10-Q or Annual Report on Form 10-K filed with the Securities and Exchange Commission and available on the investor relations page of eHealth's website at http://www.ehealthinsurance.com and on the Securities and Exchange Commission's website at www.sec.gov.

All forward-looking statements in this press release are based on information available to eHealth as of the date hereof, and eHealth does not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made, except as required by law.

Non-GAAP Financial Information

This press release includes financial measures that are not in accordance with generally accepted accounting principles in the United States (GAAP), including Adjusted EBITDA. Adjusted EBITDA is calculated by adding stock-based compensation expense, depreciation and amortization expense, acquisition costs, amortization/impairment 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 provide important supplemental information to management and investors regarding financial and business trends relating to eHealth's financial condition and results of operations. Management believes that the use of these non-GAAP financial measures provides consistency and comparability with eHealth's past financial reports. Management also believes that the items described above provides an additional measure of eHealth's operating results and facilitates comparisons of eHealth's core operating performance against prior periods and business model objectives. This information is provided to investors in order to facilitate additional analyses of past, present and future operating performance and as a supplemental means to evaluate eHealth's ongoing operations. eHealth believes that these non-GAAP financial measures are useful to investors in their assessment of eHealth's operating performance.

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

Investor Relations Contact:
Kate Sidorovich
Vice President Investor Relations
2625 Augustine Drive, Second Floor
Santa Clara, CA, 95054
(650) 584-2700
kate.sidorovich@ehealth.com
http://ir.ehealthinsurance.com

EHEALTH, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, unaudited)



December 31,
2018


December 31,
2017

Assets




Current assets:




Cash and cash equivalents

$

13,089



$

40,293


Accounts receivable

3,601



1,475


Commissions receivable - current

134,190



109,666


Prepaid expenses and other current assets

5,288



4,305


Total current assets

156,168



155,739


Commissions receivable - non-current

211,668



169,751


Property and equipment, net

7,684



4,705


Other assets

11,276



7,287


Intangible assets, net

12,249



7,540


Goodwill

40,233



14,096


Total assets

$

439,278



$

359,118


Liabilities and stockholders' equity




Current liabilities:




Accounts payable

$

5,688



$

3,246


Accrued compensation and benefits

20,763



15,498


Accrued marketing expenses

11,013



4,693


Earnout liability - current

20,730




Other current liabilities

2,425



2,008


Total current liabilities

60,619



25,445


Debt - non-current

5,000




Earnout liability - non-current

19,270




Deferred income taxes - non-current

47,901



45,089


Other non-current liabilities

3,339



1,920


Stockholders' equity:




Common stock

31



30


Additional paid-in capital

298,024



281,706


Treasury stock, at cost

(199,998)



(199,998)


Retained earnings

204,965



204,724


Accumulated other comprehensive income

127



202


Total stockholders' equity

303,149



286,664


Total liabilities and stockholders' equity

$

439,278



$

359,118


 

EHEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts, unaudited)



Three Months Ended
December 31,


Year Ended

December 31,


2018


2017


2018


2017

Revenue:








Commission

$

122,244



$

76,056



$

227,211



$

176,883


Other

12,673



7,062



24,184



13,823


Total revenue

134,917



83,118



251,395



190,706


Operating costs and expenses:








Cost of revenue

755



354



1,228



582


Marketing and advertising

37,184



23,196



82,939



65,874


Customer care and enrollment

26,818



19,264



70,547



59,183


Technology and content

8,600



8,531



31,970



32,889


General and administrative

13,367



10,090



45,828



39,969


Acquisition costs



621



76



621


Change in fair value of earnout liability

6,000





12,300




Restructuring charge





1,865




Amortization of intangible assets

547



260



2,091



1,040


Total operating costs and expenses

93,271



62,316



248,844



200,158


Income (loss) from operations

41,646



20,802



2,551



(9,452)


Other income (expense), net

(21)



307



755



1,182


Income (loss) before provision (benefit) for income taxes

41,625



21,109



3,306



(8,270)


Provision (benefit) for income taxes

15,554



(6,919)



3,065



(33,696)


Net income

$

26,071



$

28,028



$

241



$

25,426










Net income per share:








Basic

$

1.32



$

1.50



$

0.01



$

1.37


Diluted

$

1.25



$

1.47



$

0.01



$

1.33










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








Basic

19,680



18,632



19,294



18,512


Diluted

20,897



19,025



20,409



19,047










(1) Includes stock-based compensation as follows:








Marketing and advertising

$

496



$

314



$

1,974



$

1,033


Customer care and enrollment

251



151



816



418


Technology and content

560



432



1,675



1,410


General and administrative

1,757



1,849



7,824



6,833


Restructuring





251




Total stock-based compensation expense

$

3,064



$

2,746



$

12,540



$

9,694


 

EHEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)



Three Months Ended
December 31,


Year Ended

 December 31,


2018


2017


2018


2017

Operating activities








Net income

$

26,071



$

28,028



$

241



$

25,426


Adjustments to reconcile net income to net cash used in operating activities:








Depreciation and amortization

609



625



2,479



2,837


Amortization of internally developed software

618



409



2,201



1,464


Amortization of intangible assets

547



260



2,091



1,040


Stock-based compensation expense

3,064



2,746



12,540



9,694


Deferred income taxes

15,491



(5,004)



2,812



(30,341)


Change in fair value of earnout liability

6,000





12,300




Other non-cash items

289



(12)



675



(101)


Changes in operating assets and liabilities:








Accounts receivable

(1,462)



2,015



(2,127)



473


Commissions receivable

(80,123)



(44,224)



(50,967)



(21,640)


Prepaid expenses and other assets

8,441



1,071



232



(1,933)


Accounts payable

(99)



(314)



1,414



(1,866)


Accrued compensation and benefits

7,214



4,619



5,133



4,578


Accrued marketing expenses

7,955



1,886



6,320



(3,365)


Deferred revenue

(4,863)



(2,686)



491



(466)


Other current liabilities

1,530



453



935



(1,341)


Net cash used in operating activities

(8,718)



(10,128)



(3,230)



(15,541)


Investing activities








Capitalized internal-use software and website development costs

(1,950)



(705)



(6,294)



(3,210)


Purchases of property and equipment and other assets

(1,063)



(385)



(4,534)



(1,868)


Acquisition of business, net of cash acquired





(14,929)




Net cash used in investing activities

(3,013)



(1,090)



(25,757)



(5,078)


Financing activities








Net proceeds from exercise of common stock options

658



858



2,688



1,037


Cash used to net-share settle equity awards

(1,106)



(701)



(4,504)



(1,802)


Proceeds from line of credit

5,000





5,000




Debt issuance costs

(49)





(1,221)




Principal payments in connection with capital leases

(25)



(25)



(103)



(105)


Net cash provided by (used in) financing activities

4,478



132



1,860



(870)


Effect of exchange rate changes on cash and cash equivalents

(6)



2



(77)



1


Net decrease in cash and cash equivalents

(7,259)



(11,084)



(27,204)



(21,488)


Cash and cash equivalents at beginning of period

20,348



51,377



40,293



61,781


Cash and cash equivalents at end of period

$

13,089



$

40,293



$

13,089



$

40,293


 

EHEALTH, INC.

SEGMENT INFORMATION

(In thousands, unaudited)



Three Months Ended
December 31,


Year Ended

December 31, 2018


2018


2017


2018


2017

Revenue








Medicare (1)

$

121,606



$

69,877



$

210,570



$

142,448


Individual, Family and Small Business (2)

13,311



13,241



40,825



48,258


Total revenue

$

134,917



$

83,118



$

251,395



$

190,706










Segment profit








Medicare segment profit (3)

$

58,671



$

30,875



$

60,844



$

22,137


Individual, Family and Small Business segment profit (3)

3,512



1,141



5,803



9,573


Total segment profit

62,183



32,016



66,647



31,710


Corporate (4)

(10,317)



(6,962)



(32,996)



(26,970)


Stock-based compensation expense

(3,064)



(2,746)



(12,289)



(9,694)


Depreciation and amortization

(609)



(625)



(2,479)



(2,837)


Change in fair value of earnout liability

(6,000)





(12,300)




Restructuring charges





(1,865)




Acquisition costs



(621)



(76)



(621)


Amortization of intangible assets

(547)



(260)



(2,091)



(1,040)


Other income (expense), net

(21)



307



755



1,182


Income (loss) before provision (benefit) for income taxes

$

41,625



$

21,109



$

3,306



$

(8,270)


Note:
We evaluate our business performance and manage our operations as two distinct reporting segments:

  • Medicare and
  • Individual, Family and Small Business.

 

(1)

The Medicare segment consists primarily of amounts earned from our sale of Medicare-related health insurance plans, including Medicare Advantage, Medicare Supplement and Medicare Part D prescription drug plans, and to a lesser extent, ancillary products sold to our Medicare-eligible customers, including but not limited to, dental, vision, life, short term disability and long term disability insurance, 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 and family and small business health insurance plans and ancillary products sold to our non-Medicare-eligible customers, including but not limited to, dental, vision, life, short term disability and long term disability 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 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, restructuring charges, change in fair value of earnout liability, acquisition costs, and amortization of intangible assets, that are directly attributable to the applicable segment and other indirect Marketing and Advertising, Customer Care and Enrollment and Technology and Content operating expenses, excluding stock-based compensation, depreciation and amortization expense and amortization of intangible assets, allocated to the applicable segment based on usage.

(4)

Corporate consists of other indirect General and Administrative operating expenses, excluding stock-based compensation, depreciation and amortization expense, which are managed in a corporate shared services environment and, because they are not the responsibility of segment operating management, are not allocated to the reportable segments.

 

EHEALTH, INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(In thousands, except per share amounts, unaudited)



Three Months Ended December 31,


2018


2017


Amount


Percent of
Total
Revenue


Amount


Percent of
Total
Revenue

GAAP marketing and advertising expense

$

37,184



28%


$

23,196



28%

Stock-based compensation expense (1)

(496)



—%


(314)



—%

Non-GAAP marketing and advertising expense

$

36,688



27%


$

22,882



28%









GAAP customer care and enrollment expense

$

26,818



20%


$

19,264



23%

Stock-based compensation expense (1)

(251)



—%


(151)



—%

Non-GAAP customer care and enrollment expense

$

26,567



20%


$

19,113



23%









GAAP technology and content expense

$

8,600



6%


$

8,531



10%

Stock-based compensation expense (1)

(560)



—%


(432)



(1)%

Non-GAAP technology and content expense

$

8,040



6%


$

8,099



10%









GAAP general and administrative expense

$

13,367



10%


$

10,090



12%

Stock-based compensation expense (1)

(1,757)



(1)%


(1,849)



(2)%

Non-GAAP general and administrative expense

$

11,610



9%


$

8,241



10%









GAAP income from operations

$

41,646



31%


$

20,802



25%

Stock-based compensation expense (1)

3,064



2%


2,746



3%

Acquisition costs (2)



—%


621



1%

Amortization of intangible assets (3)

547



—%


260



—%

  Change in fair value of earnout liability (4)

6,000



4%




—%

Non-GAAP income from operations

$

51,257



38%


$

24,429



29%

Explanation of adjustments

(1)

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

(2)

Non-GAAP income from operations excludes costs related to the acquisition of GoMedigap, which was completed in January 2018.

(3)

Non-GAAP income from operations excludes amortization of intangible assets.

(4)

Non-GAAP income from operations excludes the change in fair value of earnout liability related to the acquisition of GoMedigap, which was completed in January 2018.

 

EHEALTH, INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(In thousands, except per share amounts, unaudited)



Year Ended December 31,


2018


2017


Amount


Percent of Total Revenue


Amount


Percent of Total Revenue

GAAP marketing and advertising expense

$

82,939



33%


$

65,874



35%

Stock-based compensation expense (1)

(1,974)



(1)%


(1,033)



(1)%

Non-GAAP marketing and advertising expense

$

80,965



32%


$

64,841



34%









GAAP customer care and enrollment expense

$

70,547



28%


$

59,183



31%

Stock-based compensation expense (1)

(816)



—%


(418)



—%

Non-GAAP customer care and enrollment expense

$

69,731



28%


$

58,765



31%









GAAP technology and content expense

$

31,970



13%


$

32,889



17%

Stock-based compensation expense (1)

(1,675)



(1)%


(1,410)



(1)%

Non-GAAP technology and content expense

$

30,295



12%


$

31,479



17%









GAAP general and administrative expense

$

45,828



18%


$

39,969



21%

Stock-based compensation expense (1)

(7,824)



(3)%


(6,833)



(4)%

Non-GAAP general and administrative expense

$

38,004



15%


$

33,136



17%









GAAP income (loss) from operations

$

2,551



1%


$

(9,452)



(5)%

Stock-based compensation expense (1)

12,289



5%


9,694



5%

Acquisition costs (2)

76



—%


621



—%

Restructuring charge (3)

1,865



1%




—%

Amortization of intangible assets (4)

2,091



1%


1,040



1%

Change in fair value of earnout liability (5)

12,300



5%




—%

Non-GAAP income from operations

$

31,172



12%


$

1,903



1%

Explanation of adjustments

(1)

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

(2)

Non-GAAP income from operations excludes costs related to the acquisition of GoMedigap, which was completed in January 2018.

(3)

Non-GAAP income from operations excludes restructuring charge.

(4)

Non-GAAP income from operations excludes amortization of intangible assets.

(5)

Non-GAAP income from operations excludes the change in fair value of earnout liability related to the acquisition of GoMedigap, which was completed in January 2018.

 

EHEALTH, INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(In thousands, except per share amounts, unaudited)



Three Months Ended

 December 31,


2018


2017

GAAP net income

$

26,071



$

28,028


Stock-based compensation expense (1)

3,064



2,746


Acquisition costs (2)



621


Restructuring charge (3)




Amortization of intangible assets (4)

547



260


   Change in fair value of earnout liability (5)

6,000




   Provision (benefit) for income taxes (6)

(23)



(1,478)


Non-GAAP net income

$

35,659



$

30,177






GAAP net income per diluted share

$

1.25



$

1.47


Stock-based compensation expense (1)

0.15



0.14


Acquisition costs (2)



0.03


Restructuring charge (3)




Amortization of intangible assets (4)

0.03



0.01


Change in fair value of earnout liability (5)

0.29




   Provision (benefit) for income taxes (6)



(0.08)


Non-GAAP net income per diluted share

$

1.72



$

1.57






GAAP net income

$

26,071



$

28,028


Stock-based compensation expense (1)

3,064



2,746


Depreciation and amortization (8)

609



625


Acquisition costs (2)



621


Restructuring charge (3)




Amortization of intangible assets (4)

547



260


Change in fair value of earnout liability (5)

6,000




Other (income) expense, net (7)

21



(307)


Provision (benefit) for income taxes (6)

15,554



(6,919)


Adjusted EBITDA

$

51,866



$

25,054




Year Ended

 December 31,


2018


2017

GAAP net income

$

241



$

25,426


Stock-based compensation expense (1)

12,289



9,694


Acquisition costs (2)

76



621


Restructuring charge (3)

1,865




Amortization of intangible assets (4)

2,091



1,040


   Change in fair value of earnout liability (5)

12,300




   Provision (benefit) for income taxes (6)

(6,220)



(4,628)


Non-GAAP net income

$

22,642



$

32,153






GAAP net income per diluted share

$

0.01



$

1.33


Stock-based compensation expense (1)

0.60



0.51


Acquisition costs (2)



0.03


Restructuring charge (3)

0.09




Amortization of intangible assets (4)

0.10



0.05


Change in fair value of earnout liability (5)

0.60




   Provision for income taxes (6)

(0.29)



(0.24)


Non-GAAP net income per diluted share

$

1.11



$

1.69






GAAP net income

$

241



$

25,426


Stock-based compensation expense (1)

12,289



9,694


Depreciation and amortization (8)

2,479



2,837


Acquisition costs (2)

76



621


Restructuring charge (3)

1,865




Amortization of intangible assets (4)

2,091



1,040


Change in fair value of earnout liability (5)

12,300




Other income, net (7)

(755)



(1,182)


Provision (benefit) for income taxes (6)

3,065



(33,696)


Adjusted EBITDA

$

33,651



$

4,740


Explanation of adjustments

(1)

Non-GAAP net income, Non-GAAP net income per diluted share and Adjusted EBITDA exclude the effect of expensing stock-based compensation related to stock options and restricted stock units.

(2)

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

(3)

Non-GAAP net income, Non-GAAP net income per diluted share and Adjusted EBITDA exclude restructuring charge.

(4)

Non-GAAP net income, Non-GAAP net income per diluted share and Adjusted EBITDA exclude amortization of intangible assets.

(5)

Non-GAAP net income, Non-GAAP net income 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.

(6)

Non-GAAP net income, Non-GAAP net income per diluted share and Adjusted EBITDA exclude provision (benefit) for income taxes.

(7)

Adjusted EBITDA excludes other income, net.

(8)

Adjusted EBITDA excludes depreciation and amortization expense.

 

EHEALTH, INC.

SUMMARY OF SELECTED METRICS

COMMISSION REVENUE BY PRODUCT

(In thousands, unaudited)



Three Months Ended




Year Ended




December 31,




December 31,




2018


2017


Percent Change


2018


2017


Percent Change

Medicare












Medicare Advantage

$

85,797



$

52,143



65

%


$

143,445



$

107,567



33

%

Medicare Supplement

12,860



5,193



148

%


31,166



15,436



102

%

Medicare Part D

11,730



7,527



56

%


14,609



11,085



32

%

Total Medicare

110,387



64,863



70

%


189,220



134,088



41

%













Individual and Family (1)












Non-Qualified Health Plans

3,084



2,598



19

%


6,470



10,024



(35)

%

Qualified Health Plans

783



966



(19)

%


5,789



7,055



(18)

%

Total Individual and Family

3,867



3,564



9

%


12,259



17,079



(28)

%













Ancillary












Short-term

1,340



1,223



10

%


5,583



5,503



1

%

Dental

1,106



1,254



(12)

%


2,717



5,062



(46)

%

Vision

610



470



30

%


1,467



1,607



(9)

%

Other

1,282



1,307



(2)

%


4,941



3,877



27

%

Total Ancillary

4,338



4,254



2

%


14,708



16,049



(8)

%













Small Business

2,768



2,539



9

%


8,595



7,501



15

%













Commission Bonus

884



836



6

%


2,429



2,166



12

%













Total Commission Revenue

$

122,244



$

76,056



61

%


$

227,211



$

176,883



28

%



(1)

We define our Individual and Family Plan offerings as major medical individual and family health insurance plans, which does not include Medicare-related, small business or ancillary plans. Individual and family health insurance plans include both Qualified and Non-Qualified plans. Qualified health plans are individual and family health insurance plans that meet the requirements of the Affordable Care Act and are offered through the government-run health insurance exchange in the relevant jurisdiction. Non-Qualified health plans are individual and family health insurance plans that meet the requirements of the Affordable Care Act and are not offered through the exchange in the relevant jurisdiction. Individuals who purchase Non-Qualified health plans cannot receive a subsidy in connection with the purchase of those plans.

 

EHEALTH, INC.

SUMMARY OF SELECTED METRICS

SUBMITTED APPLICATIONS

(Unaudited)



Three Months Ended




Year Ended




December 31,




December 31,




2018


2017


Percent Change


2018


2017


Percent Change

Medicare (1)












Medicare Advantage

90,693



60,109



51

%


159,753



125,989



27

%

Medicare Supplement

18,072



8,126



122

%


40,252



21,401



88

%

Medicare Part D

53,451



30,591



75

%


64,898



42,805



52

%

Total Medicare

162,216



98,826



64

%


264,903



190,195



39

%













Individual and Family (2)












Non-Qualified Health Plans

12,161



17,871



(32)

%


18,580



40,274



(54)

%

Qualified Health Plans

6,959



16,994



(59)

%


11,118



27,154



(59)

%

Total Individual and Family

19,120



34,865



(45)

%


29,698



67,428



(56)

%













Ancillary (3)












Short-term

26,969



20,219



33

%


102,608



93,445



10

%

Dental

14,645



15,817



(7)

%


46,073



70,452



(35)

%

Vision

8,288



7,470



11

%


22,399



29,468



(24)

%

Other

9,656



15,531



(38)

%


42,415



34,788



22

%

Total Ancillary

59,558



59,037



1

%


213,495



228,153



(6)

%













Small Business (4)

3,458



2,777



25

%


8,693



6,458



35

%













Total Submitted Applications

244,352



195,505



25

%


516,789



492,234



5

%

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 Part D prescription drug and Medicare Supplement plans.

(2)

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.

(3)

Ancillary Plans consists primarily of short-term, dental and vision insurance plans submitted on our website during the period.

(4)

Applications for small business health insurance applications 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




Year Ended




December 31,




December 31,




2018


2017


Percent Change


2018


2017


Percent Change

Medicare












Medicare Advantage

83,376



55,125



51

%


148,478



118,055



26

%

Medicare Supplement

12,170



5,064



140

%


29,837



15,992



87

%

Medicare Part D

50,143



29,058



73

%


61,373



41,618



47

%

Total Medicare

145,689



89,247



63

%


239,688



175,665



36

%













Individual and Family












Non-Qualified Health Plans

11,360



17,398



(35)

%


23,075



50,111



(54)

%

Qualified Health Plans

3,092



6,986



(56)

%


19,575



28,442



(31)

%

Total Individual and Family

14,452



24,384



(41)

%


42,650



78,553



(46)

%













Ancillary












Short-term

28,163



21,269



32

%


107,846



85,106



27

%

Dental

14,623



13,871



5

%


47,343



67,924



(30)

%

Vision

9,060



7,820



16

%


24,638



31,360



(21)

%

Other

8,053



8,980



(10)

%


33,500



26,485



26

%

Total Ancillaries

59,899



51,940



15

%


213,327



210,875



1

%













Small Business

7,537



6,502



16

%


19,550



15,302



28

%













Total Approved Members

227,577



172,073



32

%


515,215



480,395



7

%

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




December 31,




2018


2017


Percent
Change

Medicare (1)






Medicare Advantage

276,357



236,857



17

%

Medicare Supplement

70,426



33,635



109

%

Medicare Part D

139,907



114,362



22

%

Total Medicare

486,690



384,854



26

%







Individual and Family (2)

151,904



224,396



(32)

%







Ancillary (3)






Short-term

24,192



16,771



44

%

Dental

138,916



170,078



(18)

%

Vision

73,987



80,738



(8)

%

Other

38,136



28,356



34

%

Total Ancillaries

275,231



295,943



(7)

%







Small Business (4)

39,101



31,702



23

%







Total Estimated Membership

952,926



936,895



2

%

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. Estimated number of members active on Medicare-related health insurance 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.

(2)

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

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

(3)

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

(4)

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

Health insurance carriers bill and collect insurance premiums paid by our members. The carriers do not report to us the number of members that we have as of a given date. The majority of our members who terminate their policies do so by discontinuing their premium payments to the carrier and do not inform us of the cancellation. Also, some of our members pay their premiums less frequently than monthly. Given the number of months required to observe non-payment of commissions in order to confirm cancellations, we estimate the number of members who are active on insurance policies as of a specified date.

After we have estimated membership for a period, we may receive information from health insurance carriers that would have impacted the estimate if we had received the information prior to the date of estimation. We may receive commission payments or other information that indicates that a member who was not included in our estimates for a prior period was in fact an active member at that time, or that a member who was included in our estimates was in fact not an active member of ours. For instance, we reconcile information carriers provide to us and may determine that we were not historically paid commissions owed to us, which would cause us to have underestimated membership. Conversely, carriers may require us to return commission payments paid in a prior period due to policy cancellations for members we previously estimated as being active. We do not update our estimated membership numbers reported in previous periods. Instead, we reflect updated information regarding our historical membership in the membership estimate for the current period. As a result of the delay in our receipt of information from insurance carriers, actual trends in our membership are most discernible over periods longer than from one quarter to the next. As a result of the delay we experience in receiving information about our membership, it is difficult for us to determine with any certainty the impact of current conditions on our membership retention. Health care reform and its impacts as well as other factors could cause the assumptions and estimates that we make in connection with estimating our membership to be inaccurate, which would cause our membership estimates to be inaccurate.

EHEALTH, INC.

SUMMARY OF SELECTED METRICS

CONSTRAINED LIFETIME VALUE OF

COMMISSIONS PER APPROVED MEMBER

(Unaudited)



Three Months
Ended




Year Ended




December 31,




December 31,




2018


2017