Document


 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): February 20, 2020
EHEALTH, INC.
(Exact Name of Registrant as Specified in its Charter)

 
 
 
Delaware
001-33071
56-2357876
(State or other jurisdiction of incorporation)
(Commission File Number)
(I.R.S. Employer Identification No.)

2625 AUGUSTINE DRIVE, SECOND FLOOR
SANTA CLARA, CALIFORNIA, 95054
(Address of principal executive offices)    (Zip Code)

(650) 584-2700
(Registrant’s telephone number, including area code)

Not applicable
(Former name or former address, if changed since last report.)
 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common Stock, par value $0.001 per share
 
EHTH
 
The Nasdaq Stock Market LLC
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company  ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
 
 





Item 2.02
 
Results of Operations and Financial Condition.

On February 20, 2020, eHealth, Inc. (the “Company”) issued a press release announcing its financial results for the fourth quarter and year ended December 31, 2019. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.

On February 20, 2020, the Company posted supplemental investor material on its investor relations webpage at http://ir.ehealthinsurance.com. The Company intends to use its investor relations webpage as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD.

The information in Item 2.02 of this Current Report on Form 8-K and the exhibits attached hereto are intended to be “furnished” and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. Except as shall be expressly set forth by specific reference in such filing, the information contained herein and in the accompanying exhibits shall not be incorporated by reference into any filing with the Securities and Exchange Commission made by the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

Item 9.01
 
 Financial Statements and Exhibits.

(d)    Exhibits

Exhibit No.
Description
99.1







SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
 
 
 
eHealth, Inc.
Date:
February 20, 2020
/s/ Derek N. Yung
 
 
Derek N. Yung
Chief Financial Officer
(Principal Financial Officer)






Exhibit

Exhibit 99.1
https://cdn.kscope.io/d6ffc96420074e3924e366f3838acefa-ehealthlogoa01a02a01a01a63.jpg
eHealth, Inc. Announces Fourth Quarter 2019 and Fiscal 2019 Results

Fourth Quarter 2019 Overview

Revenue for the fourth quarter of 2019 was $301.7 million, a 124% increase compared to $134.9 million for the fourth quarter of 2018.
GAAP net income for the fourth quarter of 2019 was $88.8 million compared to net income of $26.1 million for the fourth quarter of 2018.
Adjusted EBITDA was $142.6 million for the fourth quarter of 2019 compared to $51.9 million for the fourth quarter of 2018.
Fourth quarter 2019 revenue and adjusted EBITDA include the positive impact of $42.3 million in revenue resulting from a change in estimate for expected cash commission collections relating to existing Medicare Advantage plans enrolled in prior to the fourth quarter.
Fourth quarter 2019 approved members for all Medicare products grew 88% compared to the fourth quarter of 2018.

SANTA CLARA, California — February 20, 2020eHealth, Inc. (NASDAQ: EHTH), a leading private online health insurance exchange, announces today its financial results for the fourth quarter and fiscal year ended December 31, 2019.

Scott Flanders, chief executive officer of eHealth stated, "We ended the year on a strong note, delivering the best annual enrollment period in the company’s history and generating financial results that significantly exceeded our 2019 annual guidance across multiple metrics, including revenue, GAAP net income and adjusted EBITDA. We also significantly increased our Medicare enrollment volumes and the number of major medical Medicare applications submitted online through our platform compared to a year ago - a critical element of our Medicare growth strategy. I would like to emphasize that the high level of enrollment and revenue growth that we achieved in 2019 were accompanied by meaningful adjusted EBITDA and GAAP net income margin expansion compared to 2018. Looking ahead, we anticipate the momentum we have built over the past two years to continue into 2020, and we believe we are well-positioned to continue outpacing the overall Medicare market growth as a result of our strong consumer value proposition, the depth of our technology platform and our demand generation expertise."

During the fourth quarter of 2019, eHealth worked with an external corporate valuation consultant to enhance its approach to estimating the lifetime values of plans it sold and to incorporate statistical tools to increase the accuracy of these estimates with an emphasis on improving member retention forecasting.  Fourth quarter and full year 2019 financial results reflect the impact of the changes made to enhance eHealth's Medicare Advantage plan lifetime value forecasting model resulting from this project. Specifically, our fourth quarter and full year 2019 revenue each included a positive impact of $50.8 million from the change in estimate for expected cash commission collections relating to outstanding Medicare Advantage plans. Of this amount, $42.3 million is a change in estimate in expected cash commission collections for Medicare Advantage plans since we began selling such products through the third quarter of 2019.

Unless otherwise specifically indicated, the financial results discussed below include, where applicable, the $42.3 million impact (affected by tax for net income and net income per share) from the change in estimate of expected cash commission collections.



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GAAP — Fourth Quarter of 2019 Results

Revenue — Revenue for the fourth quarter of 2019 was $301.7 million, a 124% increase compared to $134.9 million for the fourth quarter of 2018. Commission revenue for the fourth quarter of 2019 was $282.1 million, a 131% increase compared to $122.2 million for the fourth quarter of 2018. Other revenue for the fourth quarter of 2019 was $19.7 million, a 55% increase compared to $12.7 million for the fourth quarter of 2018.

Excluding the impact of the $42.3 million change in estimate discussed above, our total revenue and commission revenue were $259.4 million and $239.8 million, respectively, for the fourth quarter of 2019.

Revenue from our Medicare segment was $282.6 million for the fourth quarter of 2019, a 132% increase compared to $121.6 million for the fourth quarter of 2018. Excluding the impact of the $42.3 million change in estimate discussed above, our Medicare segment revenue was $240.3 million for the fourth quarter of 2019. Revenue from our Individual, Family and Small Business segment was $19.1 million for the fourth quarter of 2019, a 44% increase compared to $13.3 million for the fourth quarter of 2018.

Income from Operations — Income from operations for the fourth quarter of 2019 was $123.1 million compared to income from operations of $41.6 million for the fourth quarter of 2018. Operating margin was 41% for the fourth quarter of 2019 compared to 31% for the fourth quarter of 2018.

Pre-tax Income — Pre-tax income for the fourth quarter of 2019 was $123.4 million compared to pre-tax income of $41.6 million for the fourth quarter of 2018.

Provision for Income Taxes — Provision for income taxes for the fourth quarter of 2019 was $34.6 million compared to provision for income taxes of $15.6 million for the fourth quarter of 2018.

Net Income — Net income for the fourth quarter of 2019 was $88.8 million, or $3.58 net income per diluted share, compared to net income of $26.1 million, or $1.25 net income per diluted share, for the fourth quarter of 2018. Net income for the fourth quarter of 2019 included a non-cash charge of $9.0 million related to an increase in fair value of the earnout liability assumed in connection with eHealth’s acquisition of GoMedigap compared to $6.0 million in the fourth quarter of 2018. The increase was 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 $149.3 million for the fourth quarter of 2019, compared to a profit of $58.7 million for the fourth quarter of 2018. Excluding the impact of the $42.3 million change in estimate discussed above, our Medicare segment profit was $107.0 million for the fourth quarter of 2019. Profit from our Individual, Family and Small Business segment was $8.3 million for the fourth quarter of 2019, compared to $3.5 million for the fourth quarter of 2018.

Non-GAAP — Fourth Quarter of 2019 Results

Non-GAAP Operating Income and Non-GAAP Net Income — Non-GAAP operating income for the fourth quarter of 2019 was $141.8 million, compared to non-GAAP operating income of $51.3 million for the fourth quarter of 2018. Non-GAAP operating margin was 47% for the fourth quarter of 2019, compared to 38% for the fourth quarter of 2018. Non-GAAP net income for the fourth quarter of 2019 was $102.5 million, or $4.13 non-GAAP net income per diluted share, compared to non-GAAP net income of $35.7 million, or $1.72 non-GAAP net income per diluted share, for the fourth quarter of 2018.

Non-GAAP operating income and non-GAAP operating margin for the fourth quarter of 2019 are calculated by excluding $9.2 million of stock-based compensation expense, a $9.0 million expense related to the change in fair value of earnout liability related to our acquisition of GoMedigap, and $0.5 million of amortization of intangible assets from GAAP net operating income and GAAP operating margin. Non-GAAP net income and non-GAAP net income per diluted share for the fourth quarter of 2019 are calculated by excluding $9.2 million of stock-based compensation expense, $9.0 million expense related to the change in fair value of earnout liability related to our acquisition of GoMedigap, $0.5 million of amortization of intangible assets and $5.0 million of the income tax effect of these non-GAAP adjustments from GAAP net income and GAAP net income per diluted share.

Non-GAAP operating income and non-GAAP operating margin for the fourth quarter of 2018 are calculated by excluding $3.1 million of stock-based compensation expense, $6.0 million expense for change in fair value of earnout liability related to our acquisition of GoMedigap, and $0.5 million of amortization of intangible assets from GAAP net operating income and GAAP operating margin. Non-GAAP net income and non-GAAP net income per diluted share for the fourth quarter of 2018 are

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calculated by excluding $3.1 million of stock-based compensation expense, $6.0 million expense for change in fair value of earnout liability related to our acquisition of GoMedigap, and $0.5 million of amortization of intangible assets from GAAP net income and GAAP net income per diluted share.

Adjusted EBITDA — Adjusted EBITDA was $142.6 million for the fourth quarter of 2019 compared to $51.9 million for the fourth quarter of 2018. Excluding the impact of the $42.3 million change in estimate discussed above, our adjusted EBITDA was $100.3 million for the fourth quarter of 2019. 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 provision for income taxes to GAAP net income.

Submitted Applications, Approved Members and Estimated Membership

Submitted Applications — The number of submitted applications for all Medicare products, which includes Medicare Advantage, Medicare Supplement and Medicare Part D Prescription Drug Plans, was 294,808 in the fourth quarter of 2019, a 82% increase compared to 162,216 in the fourth quarter of 2018. The percentage of applications for Medicare Advantage and Medicare Supplement products submitted online through our platform, which is a combination of agent unassisted and partially agent assisted online applications, increased from 22% for the fourth quarter of 2018 to 36% for the fourth quarter of 2019. The number of submitted applications for major medical Individual and Family plan products decreased by 18% in the fourth quarter of 2019 to 15,758 compared to 19,120 in the fourth quarter of 2018.

Approved Members — The number of approved members for all Medicare products, which includes Medicare Advantage, Medicare Supplement and Medicare Part D Prescription Drug Plans, was 273,244 in the fourth quarter of 2019, an 88% increase compared to 145,689 in the fourth quarter of 2018. The number of approved members for major medical individual and family plan products increased by 1% in the fourth quarter of 2019 to 14,547 compared to 14,452 in the fourth quarter of 2018.

Estimated Membership — Total estimated membership as of December 31, 2019 was 1,146,115, a 20% increase compared to the 952,926 estimated members we reported as of December 31, 2018. Estimated Medicare membership as of December 31, 2019 was 710,649, a 46% increase compared to the 486,690 estimated members we reported as of December 31, 2018. Estimated major medical individual and family plan membership as of December 31, 2019 was 128,487, a 15% decrease compared to the 151,904 estimated members we reported as of December 31, 2018.

Cash — Fourth Quarter of 2019

Cash Flows — Net cash used in operating activities was $56.8 million for the fourth quarter of 2019, compared to net cash used in operating activities of $8.7 million for the fourth quarter of 2018.

GAAP — Full Year Results

Revenue — Revenue for the year ended December 31, 2019 was $506.2 million, a 101% increase compared to $251.4 million for the year ended December 31, 2018. Commission revenue for the year ended December 31, 2019 was $466.7 million, a 105% increase compared to $227.2 million for the year ended December 31, 2018. Other revenue for the year ended December 31, 2019 was $39.5 million, a 63% increase compared to $24.2 million for the year ended December 31, 2018.

Excluding the impact of the $42.3 million change in estimate discussed above, our total revenue and commission revenue were $463.9 million and $424.4 million, respectively, for the year ended December 31, 2019.

Revenue from our Medicare segment was $447.0 million for the year ended December 31, 2019, a 112% increase compared to $210.6 million for the year ended December 31, 2018. Excluding the impact from the change in estimate discussed above, our Medicare segment revenue was $404.7 million for the year ended December 31, 2019. Revenue from our Individual, Family and Small Business segment was $59.2 million for the year ended December 31, 2019, a 45% increase compared to $40.8 million for the year ended December 31, 2018.

Income from Operations — Income from operations for the year ended December 31, 2019 was $81.4 million compared to income from operations of $2.6 million for the year ended December 31, 2018. Operating margin was 16% for the year ended December 31, 2019 compared to 1% for the year ended December 31, 2018.


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Pre-tax Income — Pre-tax income for the year ended December 31, 2019 was $83.5 million compared to pre-tax income of $3.3 million for the year ended December 31, 2018.

Provision for Income Taxes — Provision for income taxes for the year ended December 31, 2019 was $16.6 million compared to provision for income taxes of $3.1 million for the year ended December 31, 2018.

Net Income — Net income for the year ended December 31, 2019 was $66.9 million, or $2.73 net income per diluted share, compared to net income of $0.2 million, or $0.01 net income per diluted share, for the year ended December 31, 2018. Net income for the year ended December 31, 2019 included a non-cash charge of $24.1 million related to an increase in fair value of the earnout liability assumed in connection with eHealth’s acquisition of GoMedigap compared to $12.3 million for the year ended December 31, 2018. The increase was 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 $155.2 million for the year ended December 31, 2019, a 155% increase compared to profit of $60.8 million for the year ended December 31, 2018. Excluding the impact of the $42.3 million change in estimate discussed above, our Medicare segment profit was $112.9 million for the year ended December 31, 2019. Profit from our Individual, Family and Small Business segment was $23.4 million for the year ended December 31, 2019, a 303% increase compared to profit of $5.8 million for the year ended December 31, 2018.

Non-GAAP — Full Year Results

Non-GAAP Operating Income and Non-GAAP Net Income — Non-GAAP operating income for the year ended December 31, 2019 was $130.2 million compared to non-GAAP operating income of $31.2 million for the year ended December 31, 2018. Non-GAAP operating margin was 26% for the year ended December 31, 2019, compared to 12% for the year ended December 31, 2018. Non-GAAP net income for the year ended December 31, 2019 was $102.0 million, or $4.16 non-GAAP net income per diluted share, compared to non-GAAP net income of $22.6 million, or $1.11 non-GAAP net income per diluted share, for the year ended December 31, 2018.

Non-GAAP operating income and non-GAAP operating margin for the year ended December 31, 2019 are calculated by excluding $22.6 million of stock-based compensation expense, $24.1 million expense for the change in fair value of earnout liability related to our acquisition of GoMedigap, and $2.2 million of amortization of intangible assets from GAAP operating income and GAAP operating margin. Non-GAAP net income and non-GAAP net income per diluted share for the year ended December 31, 2019 are calculated by excluding $22.6 million of stock-based compensation expense, $24.1 million of expense for the change in fair value of earnout liability related to our acquisition of GoMedigap, $2.2 million of amortization of intangible assets and $13.7 million of the income tax effect of these non-GAAP adjustments from GAAP net income and GAAP net income per share.

Non-GAAP operating income and non-GAAP operating margin for the year ended December 31, 2018 are calculated by excluding $12.3 million of stock-based compensation expense, $12.3 million of expense for change in fair value of earnout liability, $1.9 million of restructuring charges, $2.1 million of amortization of intangible assets and $0.1 million of acquisition costs related to our acquisition of GoMedigap from GAAP net operating income and GAAP operating margin. Non-GAAP net income and non-GAAP net income per diluted share for the year ended December 31, 2018 are calculated by excluding $12.3 million of stock-based compensation expense, $12.3 million of expense for change in fair value of earnout liability, $1.9 million of restructuring charges, $2.1 million of amortization of intangible assets, $0.1 million of acquisition costs related to our acquisition of GoMedigap, and $6.2 million of the income tax effect of these non-GAAP adjustments from GAAP net income and GAAP net income per diluted share.

Adjusted EBITDA — Adjusted EBITDA was $133.2 million for the year ended December 31, 2019 compared to $33.7 million for the year ended December 31, 2018. Excluding the impact of the $42.3 million change in estimate discussed above, our adjusted EBITDA was $90.9 million for the year ended December 31, 2019. 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 provision for income taxes to GAAP net income.

Submitted Applications and Approved Members

Submitted Applications — The number of submitted applications for all Medicare products, which includes Medicare Advantage, Medicare Supplement and Medicare Part D Prescription Drug Plans was 471,578 applications for the year ended

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December 31, 2019, a 78% increase compared to 264,903 for the year ended December 31, 2018. The percentage of applications for Medicare Advantage and Medicare Supplement products submitted online through our platform, which include a combination of agent unassisted and partially agent assisted applications, increased from 16% for the year ended December 31, 2018 to 27% for the year ended December 31, 2019. The number of submitted applications for major medical individual and family plan products decreased by 7% for the year ended December 31, 2019 to 27,635 compared to 29,698 for the year ended December 31, 2018.

Approved Members — The number of approved members for all Medicare products, which includes Medicare Advantage, Medicare Supplement and Medicare Part D Prescription Drug Plans, was 434,926 for the year ended December 31, 2019, an 81% increase compared to 239,688 for the year ended December 31, 2018. The number of approved members for major medical individual and family plan products declined by 25% for the year ended December 31, 2019 to 32,186 compared to 42,650 for the year ended December 31, 2018.

Cash — Full Year Results

Cash Flows — Net cash used in operating activities was $71.5 million for the year ended December 31, 2019 compared to net cash used in operating activities of $3.2 million for the year ended December 31, 2018.

2020 Guidance

Based on information available as of February 20, 2020, eHealth is providing its guidance for the full year ending December 31, 2020. 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 press 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, 2020:

Total revenue is expected to be in the range of $580.0 million to $620.0 million. Revenue from the Medicare segment is expected to be in the range of $533.0 million to $569.0 million. Revenue from the Individual, Family and Small Business segment is expected to be in the range of $47.0 million to $51.0 million.

Adjusted EBITDA(a) is expected to be in the range of $120.0 million to $135.0 million.

Medicare segment profit(b) is expected to be in the range of $152.0 million to $169.0 million, and Individual, Family and Small Business segment profit is expected to be in the range of $17.0 million to $18.0 million.

Corporate(c) shared service expenses, excluding stock-based compensation and depreciation and amortization expense, is expected to be in range of $49.0 million to $52.0 million

Cash used in operations is expected to be in the range of $52.0 million to $55.0 million, and cash used for capital expenditures is expected to be $18.0 million to $20.0 million.

GAAP net income is expected to be in the range of $68.0 million to $83.0 million.

GAAP net income per diluted share is expected to be in the range of $2.64 to $3.23 per share.

Non-GAAP net income per diluted share(d) is expected to be in the range of $3.56 to $4.09 per share.


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(a)
Adjusted EBITDA is calculated by adding stock-based compensation, change in fair value of earnout liability, depreciation and amortization expense, amortization of intangible assets, other income, net, and provision for income taxes to GAAP net income.
(b)
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, change in fair value of earnout liability, 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.
(c)
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.
(d)
Non-GAAP net income per diluted share is calculated by adding stock-based compensation expense per diluted share, change in fair value of earnout liability per diluted share, intangible asset amortization expense per diluted share and the income tax effect of these non-GAAP adjustments to GAAP net income per diluted share.

Webcast and Conference Call Information

A Webcast and conference call will be held today, Thursday, February 20, 2020 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 1180328. 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 1180328. 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), 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 statements regarding our expected growth in 2020, the acceleration of our online enrollments, our ability to outpace overall Medicare market growth, our estimates regarding total membership, Medicare membership, Individual and Family plan membership and 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, 2020, including our guidance for total revenue and revenue from our Medicare segment and our Individual, Family and Small Business segment, GAAP net income per diluted share and Non-GAAP net income per diluted share, GAAP net income, Adjusted EBITDA, profit from our Medicare segment and our Individual, Family and Small Business segment, Corporate shared service expense, 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 on historical trends and our management’s judgment. These assumptions may change over time and have a material impact on our revenue recognition, guidance, and results of operations. Please review the assumptions stated in this press release carefully.

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 new members during the annual healthcare open enrollment period and Medicare annual enrollment period; changes in laws and regulations, including in connection with healthcare reform or with respect to the marketing and sale of Medicare plans; competition, including competition from

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government-run health insurance exchanges; the seasonality of our business and the fluctuation of our operating results; our ability to accurately estimate membership and lifetime value of commissions; changes in product offerings among carriers on our ecommerce platform and the resulting impact on our commission revenue; our ability to execute on our growth strategy in the Medicare market; exposure to security risks and our ability to safeguard the security and privacy of confidential data; 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; consumer satisfaction of our service; changes in member conversion rates; changes in commission rates; our ability to sell qualified health insurance plans to subsidy-eligible individuals and to enroll subsidy-eligible individuals through government-run health insurance exchanges; our ability to maintain and enhance our brand identity; our ability to derive desired benefits from investments in our business, including membership growth initiatives; 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 calculated in accordance with U.S. generally accepted accounting principles (GAAP). To supplement eHealth’s condensed consolidated financial statements presented in accordance with GAAP, eHealth presents investors with certain non-GAAP financial measures, including non-GAAP operating income (loss); non-GAAP operating margins; non-GAAP net income (loss); non-GAAP net income (loss) per diluted share; and adjusted EBITDA.

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.


7




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 provides important supplemental information to management and investors regarding financial and business trends relating to eHealth’s financial condition and results of operations. Management believes that the use of these non-GAAP financial measures provides consistency and comparability with eHealth’s past financial reports. Management also believes that the items described above 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, non-GAAP net income (loss), non-GAAP net income (loss) per diluted share and Adjusted EBITDA 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
650-210-3111
kate.sidorovich@ehealth.com
http://ir.ehealthinsurance.com

(Tables to Follow)


8





EHEALTH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

 
December 31, 2019
 
December 31, 2018
Assets
(Unaudited)
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
23,466

 
$
13,089

Accounts receivable
2,332

 
3,601

Commissions receivable — current
174,526

 
134,190

Prepaid expenses and other current assets
7,822

 
5,288

Total current assets
208,146

 
156,168

Commissions receivable — non-current
414,696

 
211,668

Property and equipment, net
10,518

 
7,684

Operating lease right-of-use assets
36,621

 

Restricted cash
3,354

 

Other assets
18,004

 
11,276

Intangible assets, net
10,062

 
12,249

Goodwill
40,233

 
40,233

Total assets
$
741,634

 
$
439,278

Liabilities and stockholders’ equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
24,554

 
$
5,688

Accrued compensation and benefits
29,578

 
20,763

Accrued marketing expenses
12,041

 
11,013

Earnout liability — current
37,273

 
20,730

Lease liabilities — current
4,759

 

Deferred revenue
2,570

 
876

Other current liabilities
2,210

 
1,549

Total current liabilities
112,985

 
60,619

Debt

 
5,000

Earnout liability — non-current

 
19,270

Deferred income taxes — non-current
64,130

 
47,901

Lease liabilities — non-current
34,305

 

Other non-current liabilities
3,050

 
3,339

Stockholders’ equity:
 
 
 
Preferred stock

 

Common stock
35

 
31

Additional paid-in capital
455,159

 
298,024

Treasury stock, at cost
(199,998
)
 
(199,998
)
Retained earnings
271,852

 
204,965

Accumulated other comprehensive income
116

 
127

Total stockholders’ equity
$
527,164

 
$
303,149

Total liabilities and stockholders’ equity
$
741,634

 
$
439,278



9




EHEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts, unaudited)

 
Three Months Ended December 31,
 
Year ended December 31,
 
2019
 
2018
 
2019
 
2018
Revenue
 
 
 
 
 
 
 
Commission
$
282,081

 
$
122,244

 
$
466,676

 
$
227,211

Other
19,667

 
12,673

 
39,525

 
24,184

Total revenue
301,748

 
134,917

 
506,201

 
251,395

Operating costs and expenses*
 
 
 
 
 
 
 
Cost of revenue
1,956

 
755

 
2,738

 
1,228

Marketing and advertising
77,392

 
37,184

 
150,249

 
82,939

Customer care and enrollment
52,737

 
26,818

 
134,304

 
70,547

Technology and content
15,598

 
8,600

 
47,085

 
31,970

General and administrative
21,402

 
13,367

 
64,150

 
45,828

Change in fair value of earnout liability
8,973

 
6,000

 
24,079

 
12,300

Amortization of intangible assets
546

 
547

 
2,187

 
2,091

Restructuring charges

 

 

 
1,865

Acquisition costs

 

 

 
76

Total operating costs and expenses
178,604

 
93,271

 
424,792

 
248,844

Income from operations
123,144

 
41,646

 
81,409

 
2,551

Other income, net
266

 
(21
)
 
2,090

 
755

Income before income taxes
123,410

 
41,625

 
83,499

 
3,306

Provision for income taxes
34,586

 
15,554

 
16,612

 
3,065

Net income
$
88,824

 
$
26,071

 
$
66,887

 
$
241

 
 
 
 
 
 
 
 
Net income per share:
 
 
 
 
 
 
 

Basic
$
3.74

 
$
1.32

 
$
2.90

 
$
0.01

Diluted
$
3.58

 
$
1.25

 
$
2.73

 
$
0.01

Weighted-average number of shares used in per share:
 
 
 
 
 
 
 

Basic
23,772

 
19,680

 
23,075

 
19,294

Diluted
24,836

 
20,897

 
24,539

 
20,409

(1) Includes stock-based compensation as follows:
 
 
 
 
 
 
 
Marketing and advertising
$
2,018

 
$
496

 
$
4,230

 
$
1,974

Customer care and enrollment
524

 
251

 
1,451

 
816

Technology and content
1,665

 
560

 
3,611

 
1,675

General and administrative
4,946

 
1,757

 
13,278

 
7,824

Restructuring charges

 

 

 
251

Total stock-based compensation expense
$
9,153

 
$
3,064

 
$
22,570

 
$
12,540


10




EHEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
 
Three Months Ended December 31,
 
Year ended December 31,
 
2019
 
2018
 
2019
 
2018
Operating activities
 
 
 
 
 
 
 
Net Income
$
88,824

 
$
26,071

 
$
66,887

 
$
241

Adjustments to reconcile net income to net cash used in operating activities:
 
 
 
 
 
 
 
Depreciation and amortization
830

 
609

 
2,983

 
2,479

Amortization of internally developed software
1,378

 
618

 
3,821

 
2,201

Amortization of intangible assets
546

 
547

 
2,187

 
2,091

Stock-based compensation expense
9,153

 
3,064

 
22,570

 
12,540

Deferred income taxes
34,363

 
15,491

 
16,197

 
2,812

Change in fair value of earnout liability
8,973

 
6,000

 
24,079

 
12,300

Other non-cash items
181

 
289

 
(755
)
 
675

Changes in operating assets and liabilities:
 
 
 
 
 
 
 
Accounts receivable
(1,650
)
 
(1,462
)
 
1,270

 
(2,127
)
Commissions receivable
(231,486
)
 
(80,123
)
 
(243,364
)
 
(50,967
)
Prepaid expenses and other assets
8,880

 
8,441

 
(466
)
 
232

Accounts payable
6,539

 
(99
)
 
19,694

 
1,414

Accrued compensation and benefits
11,438

 
7,214

 
8,814

 
5,133

Accrued marketing expenses
7,955

 
7,955

 
1,028

 
6,320

Deferred revenue
(6,513
)
 
(4,863
)
 
1,694

 
491

Accrued expenses and other liabilities
3,811

 
1,530

 
1,869

 
935

Net cash used in operating activities
(56,778
)
 
(8,718
)
 
(71,492
)
 
(3,230
)
Investing activities
 
 
 
 
 
 
 
Capitalized internal-use software and website development costs
(3,875
)
 
(1,950
)
 
(10,231
)
 
(6,294
)
Purchases of property and equipment and other assets
(1,025
)
 
(1,063
)
 
(6,641
)
 
(4,534
)
Payments for security deposits

 

 
(72
)
 

Acquisition of business, net of cash acquired

 

 

 
(14,929
)
Cash used in investing activities
(4,900
)
 
(3,013
)
 
(16,944
)
 
(25,757
)
Financing activities
 
 
 
 
 
 
 
Proceeds from issuance of common stock, net of issuance costs

 

 
126,051

 

Net proceeds from exercise of common stock options
367

 
658

 
5,535

 
2,688

Repurchase of shares to satisfy employee tax withholding obligations
(2,770
)
 
(1,106
)
 
(14,281
)
 
(4,504
)
Proceeds from line of credit

 
5,000

 

 
5,000

Debt issuance costs
(517
)
 
(49
)
 
(517
)
 
(1,221
)
Repayment of debt

 

 
(5,000
)
 

Acquisition-related contingent payments

 

 
(9,542
)
 

Principal payments in connection with leases
(24
)
 
(25
)
 
(105
)
 
(103
)
Net cash provided by (used in) financing activities
(2,944
)
 
4,478

 
102,141

 
1,860

Effect of exchange rate changes on cash, cash equivalents and restricted cash
18

 
(6
)
 
26

 
(77
)
Net increase (decrease) in cash, cash equivalents and restricted cash
$
(64,604
)
 
$
(7,259
)
 
$
13,731

 
$
(27,204
)
Cash, cash equivalents and restricted cash at beginning of period
91,424

 
20,348

 
13,089

 
40,293

Cash, cash equivalents and restricted cash at end of period
$
26,820

 
$
13,089

 
$
26,820

 
$
13,089


(1) The ending balance of cash, cash equivalents and restricted cash included $3.4 million of restricted cash as of December 31, 2019. There was no restricted cash as of December 31, 2018.

11




EHEALTH, INC.
SEGMENT INFORMATION
(In thousands, unaudited)

 
Three Months Ended December 31,
 
% Change
 
Year ended December 31,
 
% Change
 
2019
 
2018
 
 
2019
 
2018
 
Revenue
 
 
 
 
 
 
 
 
 
 
 
Medicare (1)
$
282,604

 
$
121,606

 
132
 %
 
$
446,961

 
$
210,570

 
112
 %
Individual, Family and Small Business (2)
19,144

 
13,311

 
44
 %
 
59,240

 
40,825

 
45
 %
Total revenue
$
301,748

 
$
134,917

 
124
 %
 
$
506,201

 
$
251,395

 
101
 %
Segment profit
 
 
 
 
 
 
 
 
 
 
 
Medicare segment profit (3)
$
149,317

 
$
58,671

 
154
 %
 
$
155,234

 
$
60,844

 
155
 %
Individual, Family and Small Business segment profit (3)
8,323

 
3,512

 
137
 %
 
23,368

 
5,803

 
303
 %
Total segment profit
157,640

 
62,183

 
154
 %
 
178,602

 
66,647

 
168
 %
Corporate (4)
(14,994
)
 
(10,317
)
 
45
 %
 
(45,374
)
 
(32,996
)
 
38
 %
Stock-based compensation expense
(9,153
)
 
(3,064
)
 
199
 %
 
(22,570
)
 
(12,289
)
 
84
 %
Change in fair value of earnout liability
(8,973
)
 
(6,000
)
 
50
 %
 
(24,079
)
 
(12,300
)
 
96
 %
Depreciation and amortization
(830
)
 
(609
)
 
36
 %
 
(2,983
)
 
(2,479
)
 
20
 %
Amortization of intangible assets
(546
)
 
(547
)
 
 %
 
(2,187
)
 
(2,091
)
 
5
 %
Acquisition costs

 

 
*

 

 
(76
)
 
(100
)%
Restructuring charges

 

 
*

 

 
(1,865
)
 
(100
)%
Other income, net
266

 
(21
)
 
*

 
2,090

 
755

 
177
 %
Income before income taxes
$
123,410

 
$
41,625

 
196
 %
 
$
83,499

 
$
3,306

 
2,426
 %
* Percentage not meaningful.

Segment Information
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 and vision, 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, family and small business health insurance plans and ancillary products sold to our non-Medicare-eligible customers, including but not limited to, dental, vision, and short-term insurance. To a lesser extent, the 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, acquisition costs, change in fair value of earnout liability, restructuring charges 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.


12




EHEALTH, INC.
SUMMARY OF SELECTED METRICS
COMMISSION REVENUE BY PRODUCT
(In thousands, unaudited)

 
Three Months Ended December 31,
 
% Change
 
Year ended December 31,
 
% Change
 
2019
 
2018
 
 
2019
 
2018
 
Medicare
 
 
 
 
 
 
 
 
 
 
 
Medicare Advantage
$
226,625

 
$
85,797

 
164
 %
 
$
339,810

 
$
143,445

 
137
 %
Medicare Supplement
15,263

 
12,860

 
19
 %
 
40,345

 
31,166

 
29
 %
Medicare Part D
20,918

 
11,730

 
78
 %
 
26,824

 
14,609

 
84
 %
Total Medicare
262,806

 
110,387

 
138
 %
 
406,979

 
189,220

 
115
 %
Individual and Family (1)
 
 
 
 
 
 
 
 
 
 
 
Non-Qualified Health Plans
5,967

 
3,084

 
93
 %
 
17,559

 
6,470

 
171
 %
Qualified Health Plans
1,966

 
783

 
151
 %
 
6,866

 
5,789

 
19
 %
Total Individual and Family
7,933

 
3,867

 
105
 %
 
24,425

 
12,259

 
99
 %
Ancillaries
 
 
 
 
 
 
 
 
 
 
 
Short-term
3,362

 
1,340

 
151
 %
 
10,524

 
5,583

 
89
 %
Dental
2,100

 
1,106

 
90
 %
 
5,238

 
2,717

 
93
 %
Vision
708

 
610

 
16
 %
 
2,002

 
1,467

 
36
 %
Other
1,207

 
1,282

 
(6
)%
 
3,985

 
4,941

 
(19
)%
Total Ancillaries
7,377

 
4,338

 
70
 %
 
21,749

 
14,708

 
48
 %
Small Business
3,346

 
2,768

 
21
 %
 
9,922

 
8,595

 
15
 %
Commission Bonus
619

 
884

 
(30
)%
 
3,601

 
2,429

 
48
 %
Total Commission Revenue
$
282,081

 
$
122,244

 
131
 %
 
$
466,676

 
$
227,211

 
105
 %

_______
(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 that purchase non-qualified health plans cannot receive a subsidy in connection with the purchase of those plans.


13




EHEALTH, INC.
SUMMARY OF SELECTED METRICS
COMMISSION REVENUE SUMMARY
(Unaudited)

 
Three Months Ended December 31,
 
Year ended December 31,
 
2019
 
2018
 
2019
 
2018
Medicare
 
 
 
 
 
 
 
Commission Revenue from Members Approved During the Period (1)
$
214,018

 
$
111,781

 
$
355,916

 
$
192,382

Net Commission Revenue from Members Approved in Prior Periods (2) (3)
50,066

 
(62
)
 
55,292

 
(124
)
Total Medicare Segment Commission Revenue
264,084

 
111,719

 
411,208

 
192,258

Individual, Family and Small Business
 
 
 
 
 
 
 
Commission Revenue from Members Approved During the Period (1)
8,211

 
7,746

 
22,614

 
24,079

Net Commission Revenue from Members Approved in Prior Periods (3)
9,786

 
2,779

 
32,854

 
10,874

Total Individual, Family and Small Business Segment Commission Revenue
17,997

 
10,525

 
55,468

 
34,953

Total Commission revenue
$
282,081

 
$
122,244

 
$
466,676

 
$
227,211

________

(1)
These amounts include commission bonus revenue.
(2)
For the fourth quarter and full year 2019, net commission revenue for Medicare members approved in prior periods were $50.1 million and $55.3 million, respectively, each included a positive impact of $50.8 million from the change in estimate for expected cash commission collections relating to outstanding Medicare Advantage plans. Of this amount, $42.3 million is a change in estimate in expected cash commission collections for Medicare Advantage plans since we began selling such products through the third quarter of 2019.
(3)
These amounts reflect our revised estimates of cash collections for certain members approved prior to the relevant reporting period that are recognized as adjustments to revenue within the relevant reporting period.  These amounts include revenue associated with renewing small business health insurance members.


14




EHEALTH, INC.
SUMMARY OF SELECTED METRICS
SUBMITTED APPLICATIONS
(Unaudited)

 
Three Months Ended December 31,
 
% Change
 
Year ended December 31,
 
% Change
 
2019
 
2018
 
 
2019
 
2018
 
Medicare (1)
 
 
 
 
 
 
 
 
 
 
 
Medicare Advantage (2)
178,560

 
90,693

 
97
 %
 
299,415

 
159,753

 
87
 %
Medicare Supplement (2)
22,392

 
18,072

 
24
 %
 
54,328

 
40,252

 
35
 %
Medicare Part D
93,856

 
53,451

 
76
 %
 
117,835

 
64,898

 
82
 %
Total Medicare
294,808

 
162,216

 
82
 %
 
471,578

 
264,903

 
78
 %
Individual and Family (3)
 
 
 
 
 
 
 
 
 
 
 
Non-Qualified Health Plans
9,982

 
12,161

 
(18
)%
 
18,325

 
18,580

 
(1
)%
Qualified Health Plans
5,776

 
6,959

 
(17
)%
 
9,310

 
11,118

 
(16
)%
Total Individual and Family
15,758

 
19,120

 
(18
)%
 
27,635

 
29,698

 
(7
)%
Ancillaries (4)
 
 
 
 
 
 
 
 
 
 
 
Short-term
12,635

 
26,969

 
(53
)%
 
55,077

 
102,608

 
(46
)%
Dental
9,678

 
14,645

 
(34
)%
 
38,650

 
46,073

 
(16
)%
Vision
5,056

 
8,288

 
(39
)%
 
18,301

 
22,399

 
(18
)%
Other
4,856

 
9,656

 
(50
)%
 
23,468

 
42,415

 
(45
)%
Total Ancillaries
32,225

 
59,558

 
(46
)%
 
135,496

 
213,495

 
(37
)%
Small Business (5)
2,747

 
3,458

 
(21
)%
 
8,095

 
8,693

 
(7
)%
Total Submitted Applications
345,538

 
244,352

 
41
 %
 
642,804

 
516,789

 
24
 %

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 Supplement and Medicare Part D prescription drug plans.
(2)
The percentage of applications for Medicare Advantage and Medicare Supplement products submitted online through our platform, which is a combination of agent unassisted and partially agent assisted online applications, increased from 22% for the three months ended December 31, 2018 to 36% for the three months ended December 31, 2019. The percentage of applications for Medicare Advantage and Medicare Supplement products submitted online through our platform, which is a combination of agent unassisted and partially agent assisted online applications, increased from 16% for the twelve months ended December 31, 2018 to 27% for the twelve months ended December 31, 2019.
(3)
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.
(4)
Ancillaries consists primarily of short-term, dental and vision insurance plans submitted on our website during the period.
(5)
Applications for small business health insurance 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.

15




EHEALTH, INC.
SUMMARY OF SELECTED METRICS
APPROVED MEMBERS
(Unaudited)

 
Three Months Ended December 31,
 
% Change
 
Year ended December 31,
 
% Change
 
2019
 
2018
 
 
2019
 
2018
 
Medicare
 
 
 
 
 
 
 
 
 
 
 
Medicare Advantage
167,073

 
83,376

 
100
 %
 
279,561

 
148,478

 
88
 %
Medicare Supplement
16,178

 
12,170

 
33
 %
 
42,688

 
29,837

 
43
 %
Medicare Part D
89,993

 
50,143

 
79
 %
 
112,677

 
61,373

 
84
 %
Total Medicare
273,244

 
145,689

 
88
 %
 
434,926

 
239,688

 
81
 %
Individual and Family
 
 
 
 
 
 
 
 
 
 
 
Non-Qualified Health Plans
9,937

 
11,360

 
(13
)%
 
20,187

 
23,075

 
(13
)%
Qualified Health Plans
4,610

 
3,092

 
49
 %
 
11,999

 
19,575

 
(39
)%
Total Individual and Family
14,547

 
14,452

 
1
 %
 
32,186

 
42,650

 
(25
)%
Ancillaries
 
 
 
 
 
 
 
 
 
 
 
Short-term
13,996

 
28,163

 
(50
)%
 
58,687

 
107,846

 
(46
)%
Dental
11,619

 
14,623

 
(21
)%
 
43,640

 
47,343

 
(8
)%
Vision
6,283

 
9,060

 
(31
)%
 
21,391

 
24,638

 
(13
)%
Other
5,326

 
8,053

 
(34
)%
 
22,980

 
33,500

 
(31
)%
   Total Ancillaries
37,224

 
59,899

 
(38
)%
 
146,698

 
213,327

 
(31
)%
Small Business
6,317

 
7,537

 
(16
)%
 
16,685

 
19,550

 
(15
)%
Total Approved Members
331,332

 
227,577

 
46
 %
 
630,495

 
515,215

 
22
 %

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.

16




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

 
As of December 31,
 
% Change
 
2019
 
2018
 
Medicare (1)
 
 
 
 
 
Medicare Advantage
404,694

 
276,357

 
46
 %
Medicare Supplement
93,477

 
70,426

 
33
 %
Medicare Part D
212,478

 
139,907

 
52
 %
Total Medicare
710,649

 
486,690

 
46
 %
Individual and Family (2)
128,487

 
151,904

 
(15
)%
Ancillaries (3)
 
 
 
 
 
Short-term
27,862

 
24,192

 
15
 %
Dental
127,083

 
138,916

 
(9
)%
Vision
71,277

 
73,987

 
(4
)%
Other
38,119

 
38,136

 
 %
Total Ancillaries
264,341

 
275,231

 
(4
)%
Small Business (4)
42,638

 
39,101

 
9
 %
Total Estimated Membership
1,146,115

 
952,926

 
20
 %
_________
(1)
To estimate the number of members on 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 may be up to three months prior to the date of estimation (after reducing that number using historical experience for assumed member cancellations over the period being estimated); and (ii) the number of approved members over that period (after reducing that number using historical experience for an assumed number of members who do not accept their approved policy and for estimated member cancellations through the date of the estimate). To the extent we determine 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.
(2)
To estimate the number of members on Individual and Family health insurance plans ("IFP"), 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 may be up to three months prior to the date of estimation after reducing that number using historical experience for assumed member cancellations over the period being estimated; and (ii) the number of approved members over that period (after reducing that number using historical experience for an assumed number of members who do not accept their approved policy and for estimated member cancellations through the date of the estimate). To the extent we determine 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.
(3)
To estimate the number of members on 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 may be up to three months prior to the date of estimation (after reducing that number using historical experience for assumed member cancellations over the period being estimated); and (ii) the number of approved members over that period (after reducing that number using historical experience for an assumed number of members who do not accept their approved policy and for estimated member cancellations through the date of the estimate). To the extent we determine 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 payment and related reporting from the related carriers.
(4)
To estimate the number of members on small business health insurance plans, we use the number of initial members at the time the group was approved, and we update this number for changes in membership if such changes are reported to us by the group or carrier. However, groups generally notify the carrier directly of policy cancellations and increases or decreases in group size without informing us. Health insurance carriers often do not communicate policy cancellation information or group size changes to us. We often are made aware of policy cancellations and group size changes at the time of annual renewal and update our membership statistics accordingly in the period they are reported.

17




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

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 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. Healthcare 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.


18




EHEALTH, INC.
SUMMARY OF SELECTED METRICS
CONSTRAINED LIFETIME VALUE OF
COMMISSIONS PER APPROVED MEMBER
(Unaudited)

 
Three Months Ended December 31,
 
% Change
 
Year ended December 31,
 
% Change
 
2019
 
2018
 
 
2019
 
2018
 
Medicare
 
 
 
 
 
 
 
 
 
 
 
Medicare Advantage (1)
$
1,052

 
$
1,029

 
2
 %
 
$
1,013

 
$
964

 
5
 %
Medicare Supplement (1)
$
990

 
$
1,058

 
(6
)%
 
$
979

 
$
1,047

 
(6
)%
Medicare Part D (1)
$
233

 
$
235

 
(1
)%
 
$
238

 
$
243

 
(2
)%
Individual and Family
 
 
 
 
 
 
 
 
 
 
 
Non-Qualified Health Plans (1)
$
252

 
$
167

 
51
 %
 
$
213

 
$
151

 
41
 %
Qualified Health Plans (1)
$
267

 
$
198

 
35
 %
 
$
217

 
$
141

 
54
 %
Ancillaries
 
 
 
 
 
 
 
 
 
 
 
Short-term (1)
$
135

 
$
52

 
160
 %
 
$
101

 
$
56

 
80
 %
Dental (1)
$
77

 
$
72

 
7
 %
 
$
70

 
$
77

 
(9
)%
Vision (1)
$
63

 
$
66

 
(5
)%
 
$
56

 
$
55

 
2
 %
Small Business (2)
$
158

 
$
165

 
(4
)%
 
$
159

 
$
168

 
(5
)%

Constrained Lifetime Value of Commissions Per Approved Member
(1)
Constrained lifetime value (“LTV”) of commissions per approved member represents commissions estimated to be collected over the estimated life of an approved member’s policy after applying constraints in accordance with our revenue recognition policy. The estimate is driven by multiple factors, including but not limited to, contracted commission rates, carrier mix, estimated average plan duration, the regulatory environment, and cancellations of insurance plans offered by health insurance carriers with which we have a relationship. These factors may result in varying values from period to period.
(2)
For small business, the amount represents the estimated commissions we expect to collect from the plan over the following twelve months. The estimate is driven by multiple factors, including but not limited to, contracted commission rates, carrier mix, estimated average plan duration, the regulatory environment, and cancellations of insurance plans offered by health insurance carriers with which we have a relationship and applied constraints. These factors may result in varying values from period to period.





19




EHEALTH, INC.
SUMMARY OF SELECTED METRICS
CONSTRAINTS ON LIFETIME VALUE
OF COMMISSIONS PER APPROVED MEMBER
(Unaudited)

 
Three Months and Year ended December 31,
 
2019
 
2018
Medicare
 
 
 
Medicare Advantage
7
%
 
7
%
Medicare Supplement
5
%
 
5
%
Medicare Part D
5
%
 
5
%
Individual and Family
 
 
 
Non-Qualified Health Plans
15
%
 
15
%
Qualified Health Plans
20
%
 
20
%
Ancillaries
10
%
 
10
%
Small Business
%
 
%

Constraints on Lifetime Value of Commissions Per Approved Member
Constraints are applied to derive 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 a quarterly 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.

20




EHEALTH, INC.
SUMMARY OF SELECTED METRICS
EXPENSE METRICS PER APPROVED MEMBER
(Unaudited)

 
Three Months Ended December 31,
 
% Change
 
Year ended December 31,
 
% Change
 
2019
 
2018
 
 
2019
 
2018
 
Medicare variable cost per approved member
 
 
 
 
 
 
 
 
 
 
 
Medicare variable marketing cost per approved Medicare Advantage ("MA")-equivalent member (1)
$
317

 
$
275

 
15
%
 
$
330

 
$
297

 
11
%
Medicare customer care and enrollment ("CC&E") cost per approved MA-equivalent member (2)
$
242

 
$
226

 
7
%
 
$
355

 
$
315

 
13
%
Total Medicare cost per approved member
$
559

 
$
501

 
12
%
 
$
685

 
$
612

 
12
%
 
 
 
 
 
 
 
 
 
 
 
 
Individual and Family Plan ("IFP") variable cost per approved member
 
 
 
 
 
 
 
 
 
 
 
IFP variable marketing cost per approved IFP-equivalent member (3)
$
104

 
$
77

 
35
%
 
$
67

 
$
59

 
14
%
IFP CC&E cost per approved IFP-equivalent member (4)
$
80

 
$
46

 
74
%
 
$
102

 
$
61

 
67
%
Total IFP cost per approved member
$
184

 
$
123

 
50
%
 
$
169

 
$
120

 
41
%

Expense Metrics Per Approved Member
(1)
Variable marketing cost per approved MA-equivalent member represents direct costs incurred in member acquisition for Medicare Advantage, Medicare Supplement and Medicare Part D plans from our direct marketing partners and online advertising channels divided by MA-equivalent approved members in a given period. MA-equivalent members is a derived metric and is equal to the sum of Medicare Part D approved members divided by 4, the number of Medicare Advantage approved members and the number of Medicare Supplement approved members in the given period.
(2)
Medicare CC&E cost per approved MA-equivalent member is equal to the CC&E expense of our Medicare business included in our operating costs divided by MA-equivalent approved members in a given period. MA-equivalent approved members is a derived metric and is equal to the sum of Medicare Part D approved members divided by 4, the number of Medicare Advantage approved members and the number of Medicare Supplement approved members in the given period.
(3)
Variable marketing cost per approved IFP-equivalent member represents direct costs incurred in member acquisition for IFP plans from our direct, marketing partners and online advertising channels divided by IFP-equivalent approved members in a given period. IFP-equivalent approved members is a derived metric and is equal to the sum of the number of short-term approved members divided by 3 and the IFP approved members in the given period.
(4)
IFP CC&E cost per approved IFP-equivalent member is equal to the CC&E expense of our IFP business included in our operating costs divided by IFP-equivalent approved members in a given period. IFP-equivalent approved members is a derived metric and is equal to the sum of the number of short-term approved members divided by 3 and the IFP approved members in the given period.



21




EHEALTH, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands, except per share amounts, unaudited)

 
Three Months Ended December 31,
 
Year ended December 31,
 
2019
 
2018
 
2019
 
2018
 
Amount
 
% of Revenue
 
Amount
 
% of Revenue
 
Amount
 
% of Revenue
 
Amount
 
% of Revenue
GAAP marketing and advertising expense
$
77,392

 
26%
 
$
37,184

 
28%
 
$
150,249

 
30%
 
$
82,939

 
33%
Stock-based compensation expense (1)
(2,018
)
 
(1)%
 
(496
)
 
—%
 
(4,230
)
 
(1)%
 
(1,974
)
 
(1)%
Non-GAAP marketing and advertising expense
$
75,374

 
25%
 
$
36,688

 
27%
 
$
146,019

 
29%
 
$
80,965

 
32%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP customer care and enrollment expense
$
52,737

 
17%
 
$
26,818

 
20%
 
$
134,304

 
27%
 
$
70,547

 
28%
Stock-based compensation expense (1)
(524
)
 
—%
 
(251
)
 
—%
 
(1,451
)
 
—%
 
(816
)
 
—%
Non-GAAP customer care and enrollment expense
$
52,213

 
17%
 
$
26,567

 
20%
 
$
132,853

 
26%
 
$
69,731

 
28%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP technology and content expense
$
15,598

 
5%
 
$
8,600

 
6%
 
$
47,085

 
9%
 
$
31,970

 
13%
Stock-based compensation expense (1)
(1,665
)
 
(1)%
 
(560
)
 
—%
 
(3,611
)
 
(1)%
 
(1,675
)
 
(1)%
Non-GAAP technology and content expense
$
13,933

 
5%
 
$
8,040

 
6%
 
$
43,474

 
9%
 
$
30,295

 
12%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP general and administrative expense
$
21,402

 
7%
 
$
13,367

 
10%
 
$
64,150

 
13%
 
$
45,828

 
18%
Stock-based compensation expense (1)
(4,946
)
 
(2)%
 
(1,757
)
 
(1)%
 
(13,278
)
 
(3)%
 
(7,824
)
 
(3)%
Non-GAAP general and administrative expense
$
16,456

 
5%
 
$
11,610

 
9%
 
$
50,872

 
10%
 
$
38,004

 
15%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP income from operations
$
123,144

 
41%