eHealth, Inc. Announces First Quarter 2007 Results
First Quarter Highlights
-- Revenue of $19.5 million, up 50% year-over-year
-- Growth in approved members of 50% year-over-year
-- Growth in estimated membership of 45% year-over-year
-- Pre-tax income of $3.9 million, up 243% year-over-year
-- Net income of $2.3 million, or $0.09 per share on a diluted
basis
-- Cash flow from operations of $3.4 million, up 571%
year-over-year
MOUNTAIN VIEW, Calif.--(BUSINESS WIRE)--May 3, 2007--eHealth, Inc. (NASDAQ:EHTH), the leading online source of health insurance for individuals, families and small businesses, today announced its financial results for the first quarter ended March 31, 2007.
"The first quarter of 2007 was successful for eHealth in many ways. We delivered strong financial performance, including accelerating growth in revenue and membership. Additionally, this was a quarter where we made significant progress in several strategic areas that we believe will favorably impact the remainder of 2007 and beyond." said Gary Lauer, chief executive officer of eHealth.
First Quarter Results
Revenue -- For the first quarter ended March 31, 2007, revenue totaled $19.5 million, compared to revenue of $13.0 million for the first quarter of 2006. This represents a growth rate of 50% compared to a growth rate of 49% for the fourth quarter of 2006 over the fourth quarter of 2005.
Membership -- New demand, as measured by the number of members approved during a quarter, was significant this quarter, growing 50% over members approved during the first quarter of 2006. This represents an increase over the approved member growth rate for the fourth quarter of 2006, when approved members grew 43% over members approved during the fourth quarter of 2005. Estimated membership at March 31, 2007 grew 45% over estimated membership at March 31, 2006, an increase over the 42% membership growth rate experienced from December 31, 2005 to December 31, 2006.
Operating Income -- Operating income increased to $2.7 million for the first quarter of 2007, compared to operating income of $1.0 million for the first quarter of 2006. Operating margins were 14% in the first quarter of 2007, up from 8% in the first quarter of 2006. Non-GAAP operating income increased to $3.0 million for the first quarter of 2007, compared to non-GAAP operating income of $1.1 million for the first quarter of 2006. Non-GAAP operating margins were 15% in the first quarter of 2007, up from 8% in the first quarter of 2006. Non-GAAP operating income and margins excludes $41,000 and $272,000 of stock-based compensation expense in the first quarters of 2006 and 2007, respectively.
Pre-tax Income -- Pre-tax income for the first quarter of 2007 was $3.9 million, a 243% increase compared to pre-tax income of $1.1 million for the first quarter of 2006. The provision for income taxes for the first quarter of 2007 was $1.6 million, representing an effective tax rate of 41%, compared to the provision for income taxes in the first quarter of 2006 of $23,000, representing an effective tax rate of 2%.
Net Income -- Net income for the first quarter of 2007 was $2.3 million, or $0.09 per share on a diluted basis, compared to net income of $1.1 million, or $0.06 per diluted share, for the first quarter of 2006. Non-GAAP net income for the first quarter of 2007 was $2.5 million, or $0.10 per share on a diluted basis, compared to non-GAAP net income of $1.1 million, or $0.06 per diluted share, for the first quarter of 2006. Non-GAAP net income excludes $40,000 and $251,000 of stock-based compensation expense, net of income tax effect, in the first quarters of 2006 and 2007, respectively.
Cash Flow -- During the first quarter of 2007, cash flow from operations increased to $3.4 million, compared to $0.5 million in the first quarter of 2006. Cash and cash equivalents as of March 31, 2007 was $93.5 million, compared to $90.3 million as of December 31, 2006.
Webcast and Conference Call Information
A Webcast and conference call will be held today, Thursday, May 3, 2007 at 5:00 p.m. EDT / 2:00 p.m. PDT. The Webcast will be available live on the Investor Relations section on our website at http://ir.ehealthinsurance.com. Individuals interested in listening to the conference call may do so by dialing 866-356-3377 for domestic callers and 617-597-5392 for international callers. The participant passcode is 95588059. A telephone replay will be available two hours following the conclusion of the call for a period of 30 days and can be accessed by dialing 888-286-8010 for domestic callers and 617-801-6888 for international callers. The call ID for the replay is 66477709. The archived Webcast will also be available on our website.
About eHealth, Inc.
eHealth, Inc. is the parent company of eHealthInsurance, the leading online source of health insurance for individuals, families and small businesses. eHealthInsurance presents complex health insurance information in an objective, user-friendly format, enabling the research, analysis, comparison and purchase of health insurance products that best meet consumers' needs. eHealth and eHealthInsurance are registered trademarks of eHealthInsurance Services, Inc.
eHealth, Inc. was founded in 1997 and its technology was responsible for the nation's first Internet-based sale of a health insurance policy. eHealth is headquartered in Mountain View, California. Additional information can be found on eHealth's website, www.ehealthinsurance.com.
Forward-Looking Statements
This press release contains statements that are forward-looking statements as defined within the Private Securities Litigation Reform Act of 1995. These include statements regarding eHealth's project area progress favorably impacting the remainder of 2007 and beyond. These forward-looking statements are inherently subject to various risks and uncertainties that could cause actual results to differ materially from the statements made, including risks associated with acceptance of the internet as a medium for the purchase of health insurance, eHealth's ability to continue to increase its membership base and expand its relationships with health insurance carriers and marketing partners, retention of eHealth's members, increased rates of member turnover, changes in eHealth's relationships with insurance carriers, system failures or capacity constraints, dependence upon Internet search engines to attract consumers who visit eHealth's website, the performance, reliability and availability of eHealth's ecommerce platform and underlying network infrastructure, the effectiveness of eHealth's marketing and public relations efforts, exposure to online commerce security risks, reliance on marketing partners for the sale of health insurance, competition, protection of intellectual property and intellectual property rights claims, regulatory penalties and negative publicity, compliance with insurance and other laws and regulations, and changes in laws and regulations. Other factors that could cause operating, financial and other results to differ are described in eHealth's most recent Annual Report on Form 10-K as filed with the Securities and Exchange Commission and available on the investor relations page of eHealth's website at www.ehealthinsurance.com and on the Securities and Exchange Commission's website at www.sec.gov. Other risks may be detailed from time to time in reports to be filed with the Securities and Exchange Commission. eHealth does not undertake any obligation to update any forward-looking statement to conform the statement to actual results or changes in expectations.
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 non-GAAP operating income, non-GAAP operating margins, non-GAAP net income and non-GAAP diluted earnings per share, to supplement the consolidated financial statements, which are presented in accordance with GAAP. These non-GAAP measures are not in accordance with, or an alternative for, U.S. GAAP and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. eHealth believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with eHealth's results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate eHealth's results of operations in conjunction with the corresponding GAAP measures.
For internal budgeting and resource allocation, eHealth's management uses non-GAAP financial information that excludes the effect of expensing stock-based compensation related to stock options, restricted stock and restricted stock units in accordance with SFAS 123R beginning in 2006, in addition to the amortization of deferred stock-based compensation expense in accordance with APB 25 for grants made prior to 2006. eHealth's management uses these non-GAAP financial measures in making operating decisions because it believes the measures provide meaningful supplemental information regarding eHealth's operational performance and useful insight into how its business should be managed. Management also uses these non-GAAP financial measures to facilitate internal comparisons to historical operating results.
The accompanying tables provide more details on the GAAP financial measures that are most directly comparable to the non-GAAP financial measures and the related reconciliations between these financial measures.
EHEALTH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31, March 31,
2006 2007
------------ -----------
Assets (1) (unaudited)
Current assets:
Cash and cash equivalents $ 90,316 $ 93,511
Short-term investments 158 159
Accounts receivable 717 888
Deferred income taxes 2,257 1,806
Prepaid expenses and other current assets 1,926 2,276
------------ -----------
Total current assets 95,374 98,640
Property and equipment, net 3,936 3,728
Deferred income taxes 5,165 4,123
Other assets 453 496
------------ -----------
Total assets $ 104,928 $ 106,987
============ ===========
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 1,440 $ 1,548
Accrued compensation and benefits 3,743 2,626
Accrued marketing expenses 1,647 2,133
Deferred revenue 62 201
Other current liabilities 1,979 1,732
------------ -----------
Total current liabilities 8,871 8,240
Other non-current liabilities 317 345
Stockholders' equity:
Common stock 22 22
Additional paid-in capital 159,576 159,909
Deferred stock-based compensation (254 ) (214 )
Accumulated deficit (63,655 ) (61,378 )
Accumulated other comprehensive income 51 63
------------ -----------
Total stockholders' equity 95,740 98,402
------------ -----------
Total liabilities and stockholders' equity $ 104,928 $ 106,987
============ ===========
(1) The condensed consolidated balance sheet at December 31, 2006 has
been derived from the audited consolidated financial statements at
that date.
EHEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts, unaudited)
Three Months Ended
March 31,
------------------
2006 2007
--------- --------
Revenue:
Commission $12,719 $18,374
Sponsorship, licensing and other 316 1,115
--------- --------
Total revenue 13,035 19,489
Operating costs and expenses:
Cost of revenue-sharing 204 417
Marketing and advertising (1) 4,860 6,930
Customer care and enrollment (1) 2,596 2,999
Technology and content (1) 2,256 2,995
General and administrative (1) 2,085 3,455
--------- --------
Total operating costs and expenses 12,001 16,796
--------- --------
Income from operations 1,034 2,693
Other income, net 91 1,167
--------- --------
Income before income taxes 1,125 3,860
Provision for income taxes 23 1,583
--------- --------
Net income $ 1,102 $ 2,277
========= ========
Net income per share:
Basic - common stock $ 0.23 $ 0.10
Basic - Class A nonvoting common stock $ 0.23 --
Diluted - common stock $ 0.06 $ 0.09
Diluted - Class A nonvoting common stock $ 0.06 --
Net income:
Allocated to common stock $ 1,092 $ 2,277
Allocated to Class A nonvoting common stock 10 --
--------- --------
Net income $ 1,102 $ 2,277
========= ========
Weighted-average number of shares used in per share
amounts:
Basic - common stock 4,820 21,739
Basic - Class A nonvoting common stock 44 --
Diluted - common stock 18,927 25,428
Diluted - Class A nonvoting common stock 44 --
__________
(1) Includes stock-based compensation as follows:
Marketing and advertising $ -- $ 30
Customer care and enrollment 4 19
Technology and content 30 134
General and administrative 7 89
--------- --------
Total $ 41 $ 272
========= ========
EHEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
Three Months Ended
March 31,
------------------
2006 2007
--------- --------
Operating activities
Net income $ 1,102 $ 2,277
Adjustments to reconcile net income to net cash
provided by operating activities:
Deferred income taxes -- 1,493
Depreciation and amortization 324 426
Stock-based compensation expense 41 272
Deferred rent -- 27
Changes in operating assets and liabilities:
Accounts receivable (91) (171)
Prepaid expenses and other current assets (188) (350)
Other assets (1) (43)
Accounts payable (249) 108
Accrued compensation and benefits (1,044) (1,115)
Accrued marketing expenses 430 486
Deferred revenue 177 139
Other current liabilities 7 (142)
--------- --------
Net cash provided by operating activities 508 3,407
--------- --------
Investing activities
Purchases of property and equipment (190) (224)
Changes in restricted cash -- (1)
Changes in restricted investments (1 --
--------- --------
Net cash used in investing activities (191) (225)
--------- --------
Financing activities
Net proceeds from exercise of common stock options 218 101
Costs incurred in connection with initial public
offering (596) --
Principal payments in connection with capital
leases (2) (104)
--------- --------
Net cash used in financing activities (380) (3)
--------- --------
Effect of exchange rate changes on cash and cash
equivalents 4 16
--------- --------
Net increase (decrease) in cash and cash
equivalents (59) 3,195
Cash and cash equivalents at beginning of period 9,415 90,316
--------- --------
Cash and cash equivalents at end of period $ 9,356 $93,511
========= ========
EHEALTH, INC.
SUMMARY OF SELECTED METRICS
(Unaudited)
Three Months Ended Three Months Ended
Metric March 31, 2006 March 31, 2007
------------------ -------------------
IFP submitted applications (1) 74,500 91,800
Source of IFP submitted
applications (as a percentage
of total IFP applications for
the period):
Direct (2) 40% 40%
Marketing partners (3) 39% 31%
Online advertising (4) 21% 29%
------------------ -------------------
Total 100% 100%
================== ===================
IFP approved members (5) 57,800 82,300
Total approved members (6) 79,600 119,600
Total revenue (7) $13,035,000 $19,489,000
Total revenue per estimated
member for the period (8) $ 45 $ 47
Marketing and advertising
expenses (9) $ 4,860,000 $ 6,930,000
Acquisition cost per individual
on IFP submitted applications
(10) $ 42 $ 49
As of As of
March 31, 2006 March 31, 2007
------------------ -------------------
IFP estimated membership (11) 248,700 362,300
Total estimated membership (12) 305,300 443,200
(1)Individual and Family Product ("IFP") applications completed on
eHealth's website during the period.
(2)Percentage of IFP submitted applications from applicants who came
directly to the eHealth website through unpaid search engine results
or otherwise.
(3)Percentage of IFP submitted applications from applicants sourced
through eHealth's network of marketing partners.
(4)Percentage of IFP submitted applications from applicants sourced
through paid search, portals and related sites.
(5)New IFP members reported to eHealth as approved during the period.
Some members that are approved by a carrier do not accept the
approval and therefore do not become paying members.
(6)New members for all products reported to eHealth as approved
during the period. Some members that are approved by a carrier do
not accept the approval and therefore do not become paying members.
(7)Total revenue recognized during the period (all sources) from the
condensed consolidated statements of operations.
(8)Calculated as total revenue recognized during the period (see note
(7)) divided by average estimated membership for the period
(calculated as beginning and ending estimated membership for all
products for the period, divided by two).
(9)Marketing and advertising expenses for the period from the
condensed consolidated statements of operations.
(10)Calculated as marketing and advertising expenses for the period
(see note (9)) divided by the number of individuals on IFP
applications completed on eHealth's website during the period.
(11)Estimated number of members active on IFP insurance policies as
of the date indicated.
(12)Estimated number of members active on all insurance policies as
of the date indicated.
EHEALTH, INC.
GAAP TO NON-GAAP RECONCILIATION
FOR THE THREE MONTHS ENDED MARCH 31, 2007
(In thousands, except per share amounts, unaudited)
Statement of Operations Reconciliation
----------------------------------------------------------------------
Three Months Ended March 31, 2007
-----------------------------------------
Percent of
GAAP Non-GAAP Total
Reported Adjustments Results Revenue
--------- ----------- -------- ----------
Revenue:
Commission $18,374 $ -- $18,374 94%
Sponsorship, licensing and
other 1,115 -- 1,115 6
--------- ----------- -------- ----------
Total revenue 19,489 -- 19,489 100
Operating costs and expenses:
Cost of revenue-sharing 417 -- 417 2
Marketing and advertising
(1) 6,930 (30) 6,900 36
Customer care and enrollment
(1) 2,999 (19) 2,980 15
Technology and content (1) 2,995 (134) 2,861 15
General and administrative
(1) 3,455 (89) 3,366 17
--------- ----------- -------- ----------
Total operating costs and
expenses 16,796 (272) 16,524 85
--------- ----------- -------- ----------
Income from operations 2,693 272 2,965 15
Other income, net 1,167 -- 1,167 6
--------- ----------- -------- ----------
Income before income taxes 3,860 272 4,132 21
Provision for income taxes
(2) 1,583 21 1,604 8
--------- ----------- -------- ----------
Net income $ 2,277 $ 251 $ 2,528 13%
========= =========== ======== ==========
Net income per share:
Basic - common stock $ 0.10 $ 0.02 $ 0.12
Diluted - common stock $ 0.09 $ 0.01 $ 0.10
Weighted-average number of
shares used in per share
amounts:
Basic - common stock 21,739 21,739 21,739
Diluted - common stock 25,428 25,428 25,428
(1)Non-GAAP results exclude the effect of expensing stock-based
compensation related to stock options, restricted stock and
restricted stock units in accordance with SFAS 123R beginning in
2006, in addition to the amortization of deferred stock-based
compensation expense in accordance with APB 25 for grants made prior
to 2006.
(2)Non-GAAP results exclude the related income tax impact of the
stock-based compensation expense listed in item (1) above.
EHEALTH, INC.
GAAP TO NON-GAAP RECONCILIATION
FOR THE THREE MONTHS ENDED MARCH 31, 2006
(In thousands, except per share amounts, unaudited)
Statement of Operations Reconciliation
----------------------------------------------------------------------
Three Months Ended March 31, 2006
------------------------------------------
Percent of
GAAP Non-GAAP Total
Reported Adjustments Results Revenue
--------- ----------- -------- -----------
Revenue:
Commission $12,719 $ -- $12,719 98%
Sponsorship, licensing and
other 316 -- 316 2
--------- ----------- -------- -----------
Total revenue 13,035 -- 13,035 100
Operating costs and
expenses:
Cost of revenue-sharing 204 -- 204 2
Marketing and advertising 4,860 -- 4,860 37
Customer care and
enrollment (1) 2,596 (4) 2,592 20
Technology and content (1) 2,256 (30) 2,226 17
General and administrative
(1) 2,085 (7) 2,078 16
--------- ----------- -------- -----------
Total operating costs and
expenses 12,001 (41) 11,960 92
--------- ----------- -------- -----------
Income from operations 1,034 41 1,075 8
Other income, net 91 -- 91 1
--------- ----------- -------- -----------
Income before income taxes 1,125 41 1,166 9
Provision for income taxes
(2) 23 1 24 0
--------- ----------- -------- -----------
Net income $ 1,102 $ 40 $ 1,142 9%
========= =========== ======== ===========
Net income per share:
Basic - common stock $ 0.23 $ -- $ 0.23
Basic - Class A nonvoting
common stock $ 0.23 $ -- $ 0.23
Diluted - common stock $ 0.06 $ -- $ 0.06
Diluted - Class A nonvoting
common stock $ 0.06 $ -- $ 0.06
Net income:
Allocated to common stock $ 1,092 $ 40 $ 1,132
Allocated to Class A
nonvoting common stock 10 -- 10
--------- ----------- --------
Net income $ 1,102 $ 40 $ 1,142
========= =========== ========
Weighted-average number of
shares used in per share
amounts:
Basic - common stock 4,820 4,820 4,820
Basic - Class A nonvoting
common stock 44 44 44
Diluted - common stock 18,927 18,927 18,927
Diluted - Class A
nonvoting common stock 44 44 44
(1)Non-GAAP results exclude the effect of expensing stock-based
compensation related to stock options, restricted stock and
restricted stock units in accordance with SFAS 123R beginning in
2006, in addition to the amortization of deferred stock-based
compensation expense in accordance with APB 25 for grants made prior
to 2006.
(2)Non-GAAP results exclude the related income tax impact of the
stock-based compensation expense listed in item (1) above.
CONTACT: eHealth, Inc.
Robert Hurley, 1-916-608-6101 (Media)
Vice President, Strategic Initiatives
robert.hurley@ehealth.com
www.ehealthinsurance.com
or
Ashton Partners
Trisha Dill, 1-415-869-5757 (Investors)
tdill@ashtonpartners.com
www.ashtonpartners.com
SOURCE: eHealth, Inc.