eHealth, Inc. Announces First Quarter 2019 Results

SANTA CLARA, Calif., April 25, 2019 /PRNewswire/ --

First Quarter 2019 Overview

• Revenue for the first quarter of 2019 was $68.8 million, a 60% increase compared to $43.1 million for the first quarter of 2018.
• GAAP net loss for the first quarter of 2019 was $5.2 million compared to net loss of $4.8 million for the first quarter of 2018.
• Adjusted EBITDA was $8.6 million for the first quarter of 2019 compared to $(1.2) million for the first quarter of 2018.
• Net cash provided by operations for the first quarter of 2019 was $12.7 million compared to $10.7 million for the first quarter of 2018.

eHealth, Inc. (NASDAQ: EHTH), a leading private online health insurance exchange, announced today its financial results for the first quarter ended March 31, 2019.

Scott Flanders, chief executive officer of eHealth, stated, "We entered 2019 with great momentum, setting the stage for another year of strong execution and growth.  Our first quarter financial results were driven by strong performance of our Medicare business which exceeded our expectations, demonstrating both our unique value proposition for health care consumers and our ability to drive those consumers to our market-leading engagement and enrollment platform at scale. We continue to see significant potential to scale customer acquisition in the Medicare market while maintaining attractive costs and achieving operating leverage with our fixed costs. Based on our first quarter outperformance and our current investment plans for the year, we are increasing our 2019 annual revenue and adjusted EBITDA guidance.  At the mid-point of our revised annual guidance we now expect to generate revenue growth of approximately 29% and adjusted EBITDA growth of over 70%."

GAAP—First Quarter of 2019 Results

Revenue—Revenue for the first quarter of 2019 totaled $68.8 million, a 60% increase compared to $43.1 million for the first quarter of 2018. Commission revenue for the first quarter of 2019 totaled $64.2 million, a 58% increase compared to $40.7 million for the first quarter of 2018. Other revenue for the first quarter of 2019 was $4.5 million, a 92% increase compared to $2.4 million for the first quarter of 2018.

Revenue from our Medicare segment was $54.9 million for the first quarter of 2019, a 78% increase compared to $30.8 million for the first quarter of 2018. Revenue from our Individual, Family and Small Business segment was $13.9 million for the first quarter of 2019, a 13% increase compared to $12.3 million for the first quarter of 2018.

Loss from Operations—Loss from operations for the first quarter of 2019 was $9.2 million compared to loss from operations of $6.7 million for the first quarter of 2018. Operating margin was (13)% for the first quarter of 2019 compared to (16)% for the first quarter of 2018.

Pre-tax Loss—Pre-tax loss for the first quarter of 2019 was $8.6 million compared to pre-tax loss of $6.5 million for the first quarter of 2018.

Benefit from Income Taxes—Benefit from income taxes for the first quarter of 2019 was $3.5 million compared to benefit from income taxes of $1.7 million for the first quarter of 2018.

Net Loss—Net loss for the first quarter of 2019 was $5.2 million, or $0.24 net loss per diluted share, compared to net loss of $4.8 million, or $0.26 net loss per diluted share, for the first quarter of 2018. Net loss for the first quarter of 2019 includes a non-cash charge of $13.3 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. 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 $10.8 million for the first quarter of 2019, a 240% increase compared to profit of $3.2 million for the first quarter of 2018. Profit from our Individual, Family and Small Business segment was $6.0 million for the first quarter of 2019, a 73% increase compared to profit of $3.5 million for the first quarter of 2018.

Non-GAAP—First Quarter of 2019 Results

Non-GAAP Operating Income (Loss) & Non-GAAP Net Income (Loss)—Non-GAAP operating income for the first quarter of 2019 was $7.9 million compared to non-GAAP operating loss of $1.8 million for the first quarter of 2018. Non-GAAP operating margin was 11% for the first quarter of 2019, compared to (4)% for the first quarter of 2018. Non-GAAP net income for the first quarter of 2019 was $7.2 million, or $0.33 net income per diluted share, compared to non-GAAP net loss of $1.3 million, or $0.07 net loss per diluted share, for the first quarter of 2018.

Non-GAAP operating income and operating margin for the first quarter of 2019 exclude $3.2 million of stock-based compensation expense, $13.3 million of expense for the change in fair value of earnout liability related to our acquisition of GoMedigap, and $0.5 million of amortization of intangible assets. Non-GAAP net income and non-GAAP net income per diluted share for the first quarter of 2019 exclude $3.2 million of stock-based compensation expense, $13.3 million of expense for the change in fair value of earnout liability related to our acquisition of GoMedigap, $0.5 million of amortization of intangible assets and $4.7 million of the income tax effect of these non-GAAP adjustments. Non-GAAP operating loss and operating margin for the first quarter of 2018 excludes $2.6 million of stock-based compensation expense, $1.9 million of restructuring charges, $0.5 million of amortization of intangible assets and $0.1 million of acquisition costs related to our acquisition of GoMedigap. Non-GAAP net loss and non-GAAP net loss per diluted share for the first quarter of 2018 exclude $2.6 million of stock-based compensation expense, $1.9 million of restructuring costs, $0.5 million of amortization of intangible assets, $0.1 million of acquisition costs related to our acquisition of GoMedigap, and $1.4 million of the income tax effect of these non-GAAP adjustments.

Adjusted EBITDA—Adjusted EBITDA was $8.6 million for the first quarter of 2019 compared to $(1.2) million for the first quarter of 2018. Adjusted EBITDA is calculated by adding stock-based compensation, change in fair value of earnout liability related to our acquisition of GoMedigap, depreciation and amortization expense, acquisition costs, restructuring charges, amortization of intangible assets, other income, net and benefit from income taxes to GAAP net loss.

Membership, Submitted Applications & Estimated Membership

Submitted Applications—Submitted applications for all Medicare products, which includes Medicare Advantage, Medicare Supplement and Prescription Drug Plans were 63,846 applications in the first quarter of 2019, an 82% increase compared to 35,029 applications in the first quarter of 2018. The percentage of applications for Medicare Advantage and Medicare Supplement products submitted online through our platform increased from 7% for the first quarter of 2018 to 12% for the first quarter of 2019. Submitted applications for individual and family plan products decreased 51% in the first quarter of 2019 to 3,227 applications compared to 6,570 applications in the first quarter of 2018.

Approved Members—Approved members for all Medicare products, which includes Medicare Advantage, Medicare Supplement and Prescription Drug Plans were 57,899 in the first quarter of 2019, a 69% increase compared to 34,338 applications in the first quarter of 2018. Approved members for individual and family plan products decreased in the first quarter of 2019 to 11,598 members compared to 23,899 members in the first quarter of 2018.

Membership—Total estimated membership as of March 31, 2019 was 952,239 members, a 7% increase compared to 893,319 estimated members we reported as of March 31, 2018. Estimated Medicare membership as of March 31, 2019 was 503,877, a 32% increase compared to 381,787 estimated members we reported as of March 31, 2018. Estimated individual and family plan membership as of March 31, 2019 was 130,297 members, a 29% decrease compared to 182,655 estimated members we reported as of March 31, 2018.

Cash—First Quarter of 2019

Cash Flows—Net cash provided by operating activities was $12.7 million for the first quarter of 2019 compared to net cash provided by operating activities of $10.7 million for the first quarter of 2018.

2019 Guidance

eHealth is revising its guidance for the full year ending December 31, 2019 based on information available as of April 25, 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 $315 million to $335 million, compared to previous guidance of $290 million to $310 million. Revenue from the Medicare segment is expected to be in the range of $281 million to $297 million, compared to previous guidance 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, consistent with previous guidance.
• Assuming the impact of the non-cash charge related to an increase in fair value of the earnout liability in connection with eHealth's acquisition of GoMedigap remains at $0.53 per diluted share, GAAP net income per diluted share for 2019 is expected to be in the range of $0.60 to $0.79 per share, consistent with previous guidance.
• Non-GAAP net income per diluted share^(a) is expected to be in the range of $1.54 to $1.73 per share, compared to previous guidance of $1.11 to $1.25 per share.
• Assuming the impact of the non-cash charge related to an increase in fair value of the earnout liability in connection with eHealth's acquisition of GoMedigap remains at $13.3 million, we expect GAAP net income for 2019 to be in the range of $15.0 million to $20.0 million, compared to previous guidance range of $16.3 million to $21.3 million.
• Adjusted EBITDA^(b) is expected to be in the range of $55 million to $60 million, compared to previous guidance of $45 million to $50 million.
• 2019 Medicare segment profit^(c) is expected to be in the range of $90 million to $94 million, compared to previous guidance of $80 million to $84 million and Individual, Family and Small Business segment profit is expected to be breakeven to $1 million, consistent with previous guidance.
• Corporate^(d) shared service expenses, excluding stock-based compensation and depreciation and amortization expense, is expected to be approximately $35 million, consistent with previous guidance.
• Cash used in operations is expected to be in the range of $20 million to $25 million, compared to previous guidance of $17 million to $20 million, and cash used for capital expenditures is expected to be $13 million to $14 million, consistent with previous guidance.

Webcast and Conference Call Information

A Webcast and conference call will be held today, Thursday, April 25, 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 7238438. 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 7238438. 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 expected growth in 2019, our ability to scale customer acquisition in the Medicare market and related costs, 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 revised 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 press release carefully.

The risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward-looking statements include our ability to retain existing members and enroll a large number of new members during the annual healthcare 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; changes in laws and regulations, including in connection with healthcare reform and/or with respect to the marketing and sale of Medicare plans; the success of our sale of short-term health insurance; our ability to comply with CMS guidance and 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; 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; risks associated with the impact of healthcare reform; exposure to security risks and our ability to safeguard the security and privacy of confidential data; the impact of increased health insurance costs on demand; our ability to timely receive and accurately predict the amount of commission payments from health insurance carriers; medical loss ratio requirements; 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; our ability to attract and to convert online visitors into paying members; changes in products offered on our ecommerce platform; changes in commission rates; our ability to sell qualified health insurance plans to subsidy-eligible individuals and to enroll subsidy eligible individuals through government-run health insurance exchanges; our ability to maintain and enhance our brand identity; our ability to derive desired benefits from investments in our business, including membership growth initiatives; 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; our ability to successfully make and integrate acquisitions; dependence on our operations in China; the restrictions in our debt obligations; compliance with insurance and other laws and regulations; and the performance, reliability and availability of our ecommerce platform and underlying network infrastructure.  Other factors that could cause operating, financial and other results to differ are described in eHealth's most recent Quarterly Report on Form 10-Q or Annual Report on Form 10-K filed with the Securities and Exchange Commission and available on the investor relations page of eHealth's website at http://www.ehealthinsurance.com and on the Securities and Exchange Commission's website at www.sec.gov.

All forward-looking statements in this press release are based on information available to eHealth as of the date hereof, and eHealth does not 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 U.S. generally accepted accounting principles (GAAP). To supplement eHealth's condensed consolidated financial statements presented in accordance with GAAP, eHealth presents investors with certain non-GAAP financial measures, including non-GAAP operating income (loss); non-GAAP operating margins; adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA); non-GAAP net income (loss), and non-GAAP net income (loss) per diluted share.

• Non-GAAP operating income (loss) consists of GAAP operating income (loss) excluding the following items:
• the effects of expensing stock-based compensation related to stock options and restricted stock units,
• change in fair value of earnout liability,
• acquisition costs,
• restructuring charges, and
• amortization of intangible assets.
  
  
• Non-GAAP operating margins are calculated by dividing non-GAAP operating income (loss) by GAAP total revenue.
  
  
• Non-GAAP net income (loss) consists of GAAP net income (loss) excluding the following items:
• the effects of expensing stock-based compensation related to stock options and restricted stock units,
• change in fair value of earnout liability,
• acquisition costs,
• restructuring charges,
• amortization of intangible assets, and
• the income tax impact of non-GAAP adjustments.

Non-GAAP net income (loss) per diluted share consists of GAAP net income (loss) per diluted share excluding the following items:

• the effects of expensing stock-based compensation related to stock options and restricted stock units per diluted share,
• change in fair value of earnout liability per diluted share,
• acquisition costs per diluted share,
• restructuring charges per diluted share,
• amortization of intangible assets per diluted share, and
• the income tax impact of non-GAAP adjustments per diluted share.
  
  
• Adjusted EBITDA is calculated by adding stock-based compensation, change in fair value of earnout liability, depreciation and amortization expense, acquisition costs, restructuring charges, amortization of intangible assets, other income (expense), net and provision (benefit) for income taxes to GAAP net income (loss).

eHealth believes that the presentation of these non-GAAP financial measures 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.

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

The accompanying tables provide more details on the GAAP financial measures that are most directly comparable to the non-GAAP financial measures described above and the related reconciliations between these financial measures.

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

 

 

 

 

Segment Information

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

• Medicare and
• Individual, Family and Small Business.

 

 

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.

 

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.

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.

Health insurance carrier's 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.

Constrained Lifetime Value of Commissions Per Approved Member

 

Constraints on Lifetime Value of Commissions Per Approved Member

Constraints are applied to derive the constrained lifetime value ("LTV") of commissions per approved member for revenue recognition in accordance with our revenue recognition policy. The constraints are applied to help ensure that commissions estimated to be collected over the estimated life of an approved member's plan are recognized as revenue only to the extent that is it probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with future commissions receivable from the plan is subsequently resolved. We evaluate constraints on an annual basis for factors affecting our estimate of LTV of commissions per approved member and apply management judgment to determine the constraints based on current trends impacting our business.

Expense Metrics Per Approved Member

 

Explanation of Adjustments

 

Explanation of Adjustments

 

Explanation of Adjustments:

 

 

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SOURCE eHealth, Inc.