eHealth, Inc. Announces Fourth Quarter and Fiscal 2013 Results

MOUNTAIN VIEW, CA -- (Marketwired) -- 02/20/14 -- eHealth, Inc. (NASDAQ: EHTH), the nation's first and largest private health insurance exchange, announced today its financial results for the fourth quarter and fiscal year ended December 31, 2013.

Gary Lauer, chief executive officer of eHealth stated, "Our quarterly and annual performance reflect strong membership and revenue growth across our key product areas including Individual & Family, Medicare and Ancillary products, as well as increased spend related to the Affordable Care Act implementation and other growth opportunities."

Fourth Quarter 2013 Results

Revenue -- Revenue for the fourth quarter of 2013 totaled $54.2 million, a 20% increase compared to revenue of $45.3 million for the fourth quarter of 2012. Commission revenue for the fourth quarter of 2013 totaled $44.2 million, an 18% increase compared to commission revenue of $37.3 million for the fourth quarter of 2012. Medicare revenue was $16.1 million for the fourth quarter of 2013, an 18% increase compared to Medicare revenue of $13.6 million for the fourth quarter of 2012.

Submitted Applications -- Submitted applications for Individual & Family Plan product increased 49.5% in the fourth quarter of 2013 to 169,800 applications, compared to 113,600 applications in the fourth quarter of 2012. Submitted applications for Medicare products increased 68% in the fourth quarter of 2013 to 53,000 applications, compared to 31,600 applications in the fourth quarter of 2012. Submitted applications for Medicare Advantage product increased 37% in the fourth quarter of 2013 to 30,100 applications, compared to 21,900 applications in the fourth quarter of 2012. Approved members for Individual & Family Plan product increased 34% in the fourth quarter of 2013 to 125,300 members, compared to 93,600 members in the fourth quarter of 2012. Total approved members, including individual and family plan, Medicare plan and other product members, increased 43% to 266,600 members in the fourth quarter of 2013, compared to 186,700 in the fourth quarter of 2012.

Membership -- Total estimated membership at December 31, 2013 was 1,244,900 members, a 27% increase over estimated membership of 982,900 at December 31, 2012. Estimated individual and family plan membership was 796,100, a 12% increase over estimated membership of 709,700 at December 31, 2012. Estimated Medicare membership was 118,200, a 67% increase over estimated membership of 70,600 at December 31, 2012.

Income (Loss) from Operations -- Operating loss for the fourth quarter of 2013 was $2.6 million, compared to operating income of $4.3 million for the fourth quarter of 2012. Operating margins were (5)% and 10% in the fourth quarters of 2013 and 2012, respectively. Non-GAAP operating income for the fourth quarter of 2013 was $0.2 million compared to non-GAAP operating income of $6.4 million for the fourth quarter of 2012. Non-GAAP operating margins were 0% and 14% in the fourth quarters of 2013 and 2012, respectively. Non-GAAP operating income and margins in the fourth quarter of 2013 exclude $2.4 million of stock-based compensation expense and $0.4 million of intangible asset amortization expense. Non-GAAP operating income and margins in the fourth quarter of 2012 exclude $0.4 million for an asset impairment charge, $1.3 million of stock-based compensation expense and $0.4 million of intangible asset amortization expense.

EBITDA -- EBITDA for the fourth quarter of 2013 was $1.1 million compared to EBITDA of $6.6 million for the fourth quarter of 2012. EBITDA is calculated by adding stock-based compensation, depreciation and amortization expense, including intangible asset amortization expense, other (income) expense, net and provision (benefit) for income taxes to GAAP net income.

Pre-tax Income (Loss) -- Pre-tax loss for the fourth quarter of 2013 was $2.7 million, compared to pre-tax income of $4.3 million for the fourth quarter of 2012.

Net Income (Loss) -- Net loss for the fourth quarter of 2013 was $2.0 million, or $(0.11) per diluted share, compared to net income of $2.4 million, or $0.11 per diluted share for the fourth quarter of 2012. Non-GAAP net loss for the fourth quarter of 2013 was $0.3 million, or $(0.01) per diluted share, compared to non-GAAP net income of $3.9 million, or $0.18 per diluted share for the fourth quarter of 2012. Non-GAAP net income and non-GAAP net income per diluted share in the fourth quarter of 2013 exclude $2.4 million of stock-based compensation expense and $0.4 million of intangible asset amortization expense, less $1.1 million for related income tax benefit. Non-GAAP net income and non-GAAP net income per diluted share in the fourth quarter of 2012 exclude $0.4 million for an asset impairment charge, $1.3 million of stock-based compensation expense and $0.4 million of intangible asset amortization expense, less $0.7 million for related income tax benefit.

Cash Flows -- Cash flows from operations for the fourth quarter of 2013 were $6.2 million, representing an 18% increase compared to cash flows from operations of $5.2 million for the fourth quarter of 2012.

Fiscal 2013 Results

Revenue -- Revenue totaled $179.2 million for the year ended December 31, 2013, a 15% increase compared to revenue of $155.5 million for the year ended December 31, 2012. Commission revenue totaled $153.4 million, a 17% increase compared to commission revenue of $130.7 million for the year ended December 31, 2012. Medicare revenue was approximately $38.8 million for the year ended December 31, 2013, a 24% increase compared to Medicare revenue of $31.3 million for the year ended December 31, 2012.

Income from Operations -- Operating income for the year ended December 31, 2013 was $3.7 million, compared to operating income of $13.4 million for the year ended December 31, 2012. Operating margins were 2% and 9%, for the years ended December 31, 2013 and 2012, respectively. Non-GAAP operating income for the year ended December 31, 2013 was $12.9 million compared to non-GAAP operating income of $21.1 million for the year ended December 31, 2012. Non-GAAP operating margins were 7% and 14% in the years ended December 31, of 2013 and 2012, respectively. Non-GAAP operating income and margins for the year ended December 31, 2013 exclude $7.8 million of stock-based compensation expense and $1.4 million of intangible asset amortization expense. Non-GAAP operating income and margins for the year ended December 31, 2012 exclude $0.4 million for an asset impairment charge, $5.6 million of stock-based compensation expense and $1.6 million of intangible asset amortization expense.

EBITDA -- EBITDA for the year ended December 31, 2013 was $16.2 million, compared to EBITDA of $23.1 million for the year ended December 31, 2012.

Pre-tax Income -- Pre-tax income for the year ended December 31, 2013 was $3.6 million, compared to pre-tax income of $13.5 million for the year ended December 31, 2012.

Net Income -- Net income for the year ended December 31, 2013 was $1.7 million, or $0.09 per diluted share, compared to net income for the year ended December 31, 2012 of $7.1 million, or $0.34 per diluted share. Non-GAAP net income for the year ended December 31, 2013 was $7.3 million, or $0.37 per diluted share, compared to non-GAAP net income of $12.6 million, or $0.61 per diluted share for the year ended December 31, 2012. Non-GAAP net income and non-GAAP net income per diluted share for the year ended December 31, 2013 exclude $7.8 million of stock-based compensation expense and $1.4 million of intangible asset amortization expense, less $3.7 million for related income tax benefit. Non-GAAP net income and non-GAAP net income per diluted share for the year ended December 31, 2012 exclude $0.4 million for an asset impairment charge, $5.6 million of stock-based compensation expense and $1.6 million of intangible asset amortization expense, less $2.2 million for related income tax benefit.

Cash Flows and Cash Balance -- Cash flows from operations for the year ended December 31, 2013 were $20.9 million, representing a 16% decrease compared to $24.9 million for the year ended December 31, 2012.

Cash and cash equivalents as of December 31, 2013 totaled $107.1 million, compared to $140.8 million as of December 31, 2012. The decrease in cash and cash equivalents reflects $59.0 million used to repurchase 2.9 million shares of common stock during 2013, partially offset by cash flows generated from operations.

2014 Guidance

eHealth is providing guidance for the full year ending December 31, 2014 based on information available as of February 20, 2014. These expectations are forward-looking statements and eHealth assumes no obligation to update these statements. 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.

• Total revenue is expected to be in the range of $206 million to $213 million
  
  
• Stock-based compensation expense is expected to be in the range of $8.5 million to $10.5 million
  
  
• EBITDA* is expected to be in the range of $18.0 million to $22.5 million
  
  
• Non-GAAP net income per diluted share** is expected to be in the range of $0.43 to $0.51 per share

Stuart Huizinga, chief financial officer of eHealth, said, "We expect that our revenue growth in 2014 will be supported by solid membership expansion and corresponding commission revenue growth across key areas of our business."

* EBITDA is calculated by adding stock-based compensation expense, depreciation and amortization expense, including intangible asset amortization expense, other (income) expense, net and provision for income taxes to GAAP net income.

** Non-GAAP net income per diluted share is calculated by excluding stock-based compensation expense, intangible asset amortization expense and the estimated tax benefit relating to these expenses.

Webcast and Conference Call Information
A Webcast and conference call will be held today, Thursday, February 20, 2014 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 866 578.5771 for domestic callers and 617 213.8055 for international callers. The participant passcode is 79627538. 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 25447293. 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
eHealth, Inc. (NASDAQ: EHTH) operates eHealthInsurance.com, the nation's first and largest private 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. eHealthInsurance offers thousands of individual, family and small business health plans underwritten by more than 180 of the nation's leading health insurance companies. eHealthInsurance is licensed to sell health insurance in all 50 states and the District of Columbia. eHealth, Inc. also provides 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) and eHealthMedicare.com (www.eHealthMedicare.com).

For more health insurance news and information, visit the eHealthInsurance consumer blog: Get Smart - Get Covered or visit eHealth's Affordable Care Act Resource Center at www.eHealth.com/affordable-care-act.

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 future events; future performance; the utility to our investors of the non-GAAP financial measures presented in this release; expected 2014 revenue growth; membership expansion; commission revenue growth and our guidance for total revenue, stock-based compensation expense, EBITDA and non-GAAP net income per diluted share for the year-ending December 31, 2014. 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 the impact of healthcare reform and medical loss ratio requirements; the impact of increased health insurance costs on demand; eHealth's ability to retain existing members and limit member turnover; eHealth's ability to attract new members and to convert online visitors into members; eHealth's ability to sell qualified health insurance plans to subsidy-eligible individuals; the impact of annual enrollment periods for the purchase of individual and family health insurance and its timing on eHealth's recognition of revenue; eHealth's ability to accurately estimate membership; the evolving nature of Affordable Care Act implementation and associated deadlines; eHealth's ability to enter into and maintain relationships with health insurance carriers; eHealth's success in marketing and selling health insurance plans; eHealth's ability to hire, train and retain licensed health insurance agents for its Medicare business; the need for health insurance carrier and regulatory approvals in connection with the marketing of Medicare-related insurance products; proposed regulations impacting Medicare product agent compensation; costs of acquiring new members; changes in member conversion rates; lack of membership growth and retention rates; changes in products offered on eHealth's ecommerce platform; changes in commission rates; maintaining and enhancing eHealth's brand identity; system failures, capacity constraints, data loss or online commerce security risks; dependence on acceptance of the Internet as a marketplace for the purchase and sale of health insurance; dependence upon Internet search engines; reliance on marketing partners; timing of receipt and accuracy of commission reports; payment practices of health insurance carriers; competition; dependence on our operations in China; success of eHealth's sponsorship and advertising business; protection of intellectual property and defense against intellectual property rights claims; legal liability and regulatory penalties; changes in our management and key employees; seasonality; maintenance of relationships with business development partners; maintenance of proper and effective internal controls; impact of provisions for income taxes; changes in laws and regulations, including in connection with healthcare reform and/or with respect to the marketing and sale of Medicare plans; compliance with insurance and other laws and regulations; exposure to security risks; and the performance, reliability and availability of eHealth's 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. 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). 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; non-GAAP operating margins; earnings before interest, taxes, depreciation and amortization (EBITDA); non-GAAP net income (loss) and non-GAAP net income (loss) per diluted share.

• Non-GAAP operating income consists of GAAP operating income excluding the following items:
  • the effects of expensing stock-based compensation related to stock options and restricted stock units in accordance with FASB ASC Topic 718, and
  • intangible asset amortization expense.
    
    
• Non-GAAP operating margins are calculated by dividing non-GAAP operating income by GAAP total revenue.
  
  
• EBITDA is calculated by adding stock-based compensation, depreciation and amortization expense, including intangible asset amortization expense, other (income) expense, net and provision (benefit) for income taxes to GAAP net income.
  
  
• 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 in accordance with FASB ASC Topic 718,
  • intangible asset amortization expense, and
  • the related income tax benefits of these excluded expenses.
    
    
• Non-GAAP net income (loss) per diluted share is calculated by dividing non-GAAP net income (loss) by GAAP weighted average diluted shares outstanding.

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 the Company's financial condition and results of operations. Management believes that the use of these non-GAAP financial measures provides consistency and comparability with the Company's past financial reports. Management also believes that the exclusion of the items described above provides an additional measure of the Company's operating results and facilitates comparisons of the Company'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 the Company's ongoing operations. Externally, the Company believes that these non-GAAP financial measures are useful to investors in their assessment of the Company's operating performance.

Non-GAAP operating income, non-GAAP operating margins, 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 the Company'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. The Company 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. The Company 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 the Company'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.

Notes:

Explanation of adjustments

Explanation of adjustments

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Explanation of adjustments

Investor Relations Contact:
Kate Sidorovich CFA
Vice President, Investor Relations
440 East Middlefield Road
Mountain View, CA 94043
(650) 210-3111
kate.sidorovich@ehealth.com
http://ir.ehealthinsurance.com

Media Contact:
Brian Mast
Vice President Communications
440 East Middlefield Road
Mountain View, CA 94043
(650) 210-3149
brian.mast@ehealth.com
http://www.ehealthinsurance.com

Source: eHealth, Inc.