SOURCE: eHealth, Inc.

eHealth, Inc.

February 11, 2010 16:15 ET

eHealth, Inc. Announces Fourth Quarter and Fiscal 2009 Results

Fourth Quarter 2009 Overview

-- Revenue of $34.4 million, up 17% over the fourth quarter of 2008

-- Operating income of $6.9 million, up 22% over the fourth quarter of 2008

-- Growth in IFP submitted applications of 6% over the fourth quarter of 2008

-- GAAP operating margins of 20% and non-GAAP operating margins of 24% for the fourth quarter of 2009

MOUNTAIN VIEW, CA--(Marketwire - February 11, 2010) - eHealth, Inc. (NASDAQ: EHTH), the leading online source of health insurance for individuals, families, and small businesses, today announced its financial results for the fourth quarter ended December 31, 2009.

Gary Lauer, chief executive officer of eHealth, stated, "Fourth quarter results represented a nice ending to a year in which we grew our revenues by 21%, operating income by 22%, generated over $30 million in operating cash flow and completed a $30 million share repurchase program. That was all accomplished in the face of an uncertain economic environment and an unpredictable healthcare reform legislative process. During the fourth quarter, we grew revenue at a healthy rate, expanded operating margins, further diversified our business and announced our plans to launch into the seniors market."

Fourth Quarter Results

Revenue -- Revenue totaled $34.4 million for the fourth quarter of 2009, a 17% increase compared to revenue of $29.5 million for the fourth quarter of 2008.

Submitted Applications -- Submitted applications for individual and family products increased 6% in the fourth quarter of 2009 to 122,300 applications, compared to 115,600 applications in the fourth quarter of 2008.

Membership -- Estimated membership at December 31, 2009 totaled 728,000 members, a 17% increase over estimated membership of 621,100 at December 31, 2008.

Operating Income -- Operating income increased 22% to $6.9 million for the fourth quarter of 2009, compared to operating income of $5.7 million for the fourth quarter of 2008. Operating margins were 20% and 19% in the fourth quarters of 2009 and 2008, respectively. Non-GAAP operating income increased 27% to $8.3 million for the fourth quarter of 2009, compared to non-GAAP operating income of $6.5 million for the fourth quarter of 2008. Non-GAAP operating margins were 24% and 22% in the fourth quarters of 2009 and 2008, respectively. Non-GAAP operating income and margins in the fourth quarters of 2009 and 2008 exclude $1.4 million and $0.9 million of stock-based compensation expense, respectively.

Pre-tax Income -- Pre-tax income for the fourth quarter of 2009 was $7.0 million, a 12% increase compared to pre-tax income of $6.3 million for the fourth quarter of 2008. Pre-tax income was unfavorably impacted in the fourth quarter of 2009 by a decrease in interest income of $0.5 million compared to the fourth quarter of 2008.

Net Income -- Net income for the fourth quarter of 2009 was $4.8 million, or $0.20 per diluted share. Net income for the fourth quarter of 2008 was $3.6 million, or $0.14 per diluted share. Non-GAAP net income for the fourth quarter of 2009 was $5.1 million, or $0.21 per diluted share, compared to non-GAAP net income for the fourth quarter of 2008 of $4.2 million, or $0.16 per diluted share. Non-GAAP net income and non-GAAP net income per diluted share in the fourth quarter of 2009 exclude $1.4 million of stock-based compensation expense, less $0.5 million for related income tax benefit and $0.6 million of discrete income tax benefit related to an increase in deferred income tax assets resulting from a reduction in estimated limitations on both federal and California net operating loss carryforwards. Non-GAAP net income and non-GAAP net income per diluted share in the fourth quarter of 2008 exclude $0.9 million of stock-based compensation expense, less $0.4 million for related income tax benefit.

Cash Flow and Cash Balance -- Cash flow from operations for the fourth quarter of 2009 was $9.4 million, compared to $7.4 million for the fourth quarter of 2008, representing an increase of 26%.

The fourth quarter 2009 cash flow statement includes a $4.3 million cash flow benefit from deferred income taxes, of which $3.3 million primarily relates to the utilization of net operating loss carryforwards and $1.0 million relates to the utilization of excess tax benefits related to share-based payments. The fourth quarter 2008 cash flow statement included a $2.3 million cash flow benefit from deferred income taxes, of which $2.2 million primarily relates to the utilization of net operating loss carryforwards and $0.1 million relates to the utilization of excess tax benefits related to share-based payments. The utilization of excess tax benefits related to share-based payments is also shown in the cash flow statement for the fourth quarters of 2008 and 2009 as a decrease in cash flow from operating activities and an increase in cash flow from financing activities.

Cash, cash equivalents and short-term marketable securities as of December 31, 2009 totaled $153.5 million, compared to $150.6 million as of December 31, 2008.

During the fourth quarter of 2008, eHealth's board of directors authorized a stock repurchase program of up to $30 million, or ten percent of eHealth's outstanding common stock, whichever is less. Repurchases pursuant to the program began in December 2008 and were completed in the third quarter of 2009. As of December 31, 2009, 1.9 million shares of common stock had been repurchased in connection with the stock repurchase program at an average price of $15.97 per share, including commissions, for a total cost of $30 million, of which approximately 1.8 million shares were repurchased during 2009 for a total cost of $29.4 million.

Fiscal 2009 Results

Revenue -- Revenue totaled $134.9 million for the year ended December 31, 2009, a 21% increase compared to revenue of $111.7 million for the year ended December 31, 2008.

Operating Income -- Operating income increased 22% to $25.8 million for the year ended December 31, 2009, compared to operating income of $21.3 million for the year ended December 31, 2008. Operating margins were 19% in both years ended December 31, 2009 and 2008.

Pre-tax Income -- Pre-tax income for the year ended December 31, 2009 was $26.8 million, a 7% increase compared to pre-tax income of $25.0 million for the year ended December 31, 2008. Pre-tax income was unfavorably impacted in the year ended December 31, 2009 by a decrease in interest income of $2.8 million compared to the year ended December 31, 2008.

Net Income -- Net income for the year ended December 31, 2009 was $15.3 million, or $0.61 per diluted share, compared to net income for the year ended December 31, 2008 of $14.2 million, or $0.55 per diluted share.

Cash Flow -- Cash flow from operations for the year ended December 31, 2009 was $30.1 million, compared to $30.2 million for the year ended December 31, 2008.

2010 Guidance

eHealth is providing guidance for the full year ending December 31, 2010 based on information currently available:

  • Total revenue is expected to be in the range of $148 million to $155 million

  • Stock-based compensation expense is expected to be in the range of $6 million to $7.5 million

  • GAAP income tax rate is expected to be in the range of 43% to 45%

  • GAAP net income per diluted share is expected to be in the range of $0.55 to $0.65 per share

"I would like to provide some additional comments on our 2010 guidance," said Stuart Huizinga, chief financial officer of eHealth. "We expect to invest just over $3 million to support our Medicare initiative in 2010, which we expect will impact our GAAP net income per diluted share for 2010 by approximately $0.08."

Webcast and Conference Call Information
A Webcast and conference call will be held today, Thursday, February 11, 2010 at 5:00 p.m. EST / 2:00 p.m. PST. 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 866-730-5764 for domestic callers and 857-350-1588 for international callers. The participant passcode is #68051978. 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 #16823489. 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) is the parent company of eHealthInsurance, the nation's leading online source of health insurance for individuals, families and small businesses. Through the company's website, http://www.eHealthInsurance.com, consumers can get quotes from leading health insurance carriers, compare plans side by side, and apply for and purchase health insurance. eHealthInsurance offers thousands of health plans underwritten by more than 180 of the nation's leading health insurance companies. eHealthInsurance is an online marketplace that is licensed to sell health insurance in all 50 states and the District of Columbia, making it an excellent model for successful, high-functioning health insurance exchanges. Through its eCommerce On-Demand solution (eOD), www.ehealth.com/eOD, eHealth is also a leading provider of on-demand e-commerce software services. eHealth's eOD platform provides a suite of hosted solutions that enable health plan providers and resellers to market and distribute products online. eHealth's eCommerce On-Demand solution is currently available to health plan providers in all 50 states and the District of Columbia. eHealthInsurance and eHealth are registered trademarks of eHealthInsurance Services, Inc.

Forward-Looking Statements
This press release contains statements that are forward-looking statements as defined within the Private Securities Litigation Reform Act of 1995. These include statements regarding eHealth's plans with respect to Medicare and the seniors market; investment in eHealth's Medicare initiative in 2010 and related net income per diluted share impact; and eHealth's guidance for total revenue, stock-based compensation expense, GAAP income tax rate, and GAAP net income per diluted share for the year ending December 31, 2010. 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 changes and developments in the structure of the health insurance system in the United States and healthcare system reform, eHealth's rate of growth, changes in the economy, weak economic conditions, consumer awareness of the availability and accessibility of affordable health insurance, eHealth's success in marketing Medicare-related health insurance products, changes in member conversion rates and factors affecting conversion, eHealth's ability to continue to increase its membership base and retain its members, eHealth's ability to maintain or expand its relationships with health insurance carriers and marketing partners, negative publicity experienced by eHealth's carrier partners, changes in products offered on eHealth's ecommerce platform, changes in commission payments or carrier underwriting practices, maintaining and enhancing eHealth's brand identity and the effectiveness of eHealth's marketing and public relations efforts, system failures, capacity constraints, data loss or online commerce security risks, continued acceptance of the Internet as a medium for the purchase and sale of health insurance, dependence upon Internet search engines, reliance on marketing partners and factors affecting submitted applications from the marketing partner channel, the pursuit of new strategies and opportunities in the health insurance market, timing of receipt and accuracy of commission reports and related impact on estimating membership, payment practices of health insurance carriers, competition, eHealth's operations in China and any expansion into foreign countries, success in the sale of sponsorship advertising and the licensing of the use of eHealth's ecommerce platform, protection of intellectual property and defense of intellectual property rights claims, legal liability, regulatory penalties and negative publicity, ability to attract and retain qualified personnel, management of future growth, seasonality, impact of future acquisitions, implementation of internal enterprise systems and maintenance of proper and effective internal controls, impact of provisions for income taxes, changes in laws and regulations, compliance with insurance and other laws and regulations, exposure to online commerce 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, non-GAAP pre-tax income, non-GAAP net income and non-GAAP net income per diluted share.

  • Non-GAAP operating income consists of GAAP operating income excluding the effects of expensing stock-based compensation related to stock options, restricted stock and restricted stock units in accordance with FASB ASC Topic 718 beginning in 2006 and amortization of deferred stock-based compensation expense in accordance with APB 25 for grants made prior to 2006.

  • Non-GAAP operating margins are calculated by dividing non-GAAP operating income by GAAP total revenue.

  • Non-GAAP net income for the three months and year ended December 31, 2009 consists of GAAP net income excluding stock-based compensation expense recorded during the period (less related income tax benefit) and discrete income tax benefit recorded during the period related to an increase in our deferred income tax assets resulting from a reduction in estimated limitations on both our federal and California net operating loss carryforwards. Non-GAAP net income for the three months and year ended December 31, 2008 consists of GAAP net income excluding stock-based compensation expense recorded during the period (less related income tax benefit).

  • Non-GAAP net income per diluted share is calculated by dividing non-GAAP net income 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 continue to be useful to investors in their assessment of the company's operating performance.

Non-GAAP operating income, non-GAAP operating margins, non-GAAP net income and non-GAAP net income 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 costs associated with the operations of the company's business and do not reflect all of the 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 stock-based compensation costs described above, and exclusion of these costs, and their related income tax impact, 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, GAAP net income and GAAP net income 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 and the related reconciliations between these financial measures.

(Tables to Follow)

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



                                                   December     December
                                                   31, 2008      31,2009
                                                  -----------  -----------
                           Assets                     (1)      (unaudited)
Current assets:
  Cash and cash equivalents                       $    94,136  $   131,339
  Marketable securities                                56,499       22,184
  Accounts receivable                                   2,005        2,295
  Deferred income taxes                                 7,580        6,009
  Prepaid expenses and other current assets             1,874        2,324
                                                  -----------  -----------
Total current assets                                  162,094      164,151
Property and equipment, net                             4,567        3,775
Deferred income taxes                                   1,314          919
Other assets                                              780          863
                                                  -----------  -----------
Total assets                                      $   168,755  $   169,708
                                                  ===========  ===========


            Liabilities and stockholders' equity

Current liabilities:
  Accounts payable                                $     2,190  $     3,252
  Accrued compensation and benefits                     4,662        5,051
  Accrued marketing expenses                            3,162        3,879
  Deferred revenue                                        427          401
  Other current liabilities                             2,707        2,677
                                                  -----------  -----------
Total current liabilities                              13,148       15,260
Other non-current liabilities                             628        2,997

Stockholders' equity:
  Common stock                                             25           25
  Additional paid-in capital                          173,095      183,747
  Treasury stock shares, at cost                         (639)     (29,999)
  Deferred stock-based compensation                       (22)          --
  Accumulated deficit                                 (17,892)      (2,545)
  Accumulated other comprehensive income                  412          223
                                                  -----------  -----------
Total stockholders' equity                            154,979      151,451
                                                  -----------  -----------
Total liabilities and stockholders' equity        $   168,755  $   169,708
                                                  ===========  ===========


(1) The condensed consolidated balance sheet at December 31, 2008
    has been derived from the audited consolidated financial statements
    at that date.



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



                              Three Months Ended         Year Ended
                                 December 31,            December 31,
                            ----------------------- -----------------------
                               2008        2009        2008        2009
                            ----------- ----------- ----------- -----------
                            (unaudited) (unaudited)     (2)     (unaudited)
Revenue:
  Commission                $    26,176 $    30,030 $   100,839 $   119,259
  Sponsorship, licensing
  and other                       3,279       4,381      10,872      15,631
                            ----------- ----------- ----------- -----------
Total revenue                    29,455      34,411     111,711     134,890
Operating costs and
 expenses:
  Cost of revenue-sharing           408         993       1,746       4,581
  Marketing and advertising
   (1)                           11,528      13,356      42,161      53,987
  Customer care and
   enrollment (1)                 3,724       3,669      14,379      14,769
  Technology and content (1)      3,634       4,146      14,182      15,685
  General and administrative
  (1)                             4,508       5,357      17,983      20,028
                            ----------- ----------- ----------- -----------
Total operating costs and
 expenses                        23,802      27,521      90,451     109,050
                            ----------- ----------- ----------- -----------
Income from operations            5,653       6,890      21,260      25,840
Interest and other income,
 net                                629         138       3,714         938
                            ----------- ----------- ----------- -----------
Income before income taxes        6,282       7,028      24,974      26,778
Provision for income taxes        2,633       2,270      10,806      11,431
                            ----------- ----------- ----------- -----------
Net income                  $     3,649 $     4,758 $    14,168 $    15,347
                            =========== =========== =========== ===========

Net income per share:
  Basic                     $      0.15 $      0.20 $      0.57 $      0.63
  Diluted                   $      0.14 $      0.20 $      0.55 $      0.61

Weighted-average number of
 shares used in per share
 amounts:
   Basic                         25,076      23,380      24,963      24,309
   Diluted                       25,826      24,196      25,954      25,201

(1)Includes stock-based
    compensation expense as
    follows:
     Marketing and
      advertising           $       160 $       223 $       644 $       803
     Customer care and
      enrollment                     66          85         266         325
     Technology and content         245         380         898       1,194
     General and
      administrative                414         719       1,686       2,513
                            ----------- ----------- ----------- -----------
       Total                $       885 $     1,407 $     3,494 $     4,835
                            =========== =========== =========== ===========


(2) The condensed consolidated statement of operations for the year ended
    December 31, 2008 has been derived from the audited consolidated
    financial statements for that year.





                              EHEALTH, INC.
              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (In thousands)

                            Three Months Ended           Year Ended
                               December 31,             December 31,
                        ------------------------  ------------------------
                            2008         2009       2008           2009
                        -----------  -----------  -----------  -----------
                        (unaudited)  (unaudited)      (1)      (unaudited)
Operating activities
Net income              $     3,649  $     4,758  $    14,168  $    15,347
Adjustments to
 reconcile net income
 to net cash provided
 by operating
 activities:
    Deferred income
     taxes                    2,305        4,278        9,451        9,352
    Depreciation and
     amortization               591          538        1,863        2,211
    Amortization and
     accretion on
     marketable
     securities, net             --          142           --          749
    Stock-based
     compensation
     expense                    885        1,407        3,494        4,835
    Excess tax benefits
     from stock-based
     compensation               (82)        (993)        (298)      (4,979)
    Deferred rent                (8)          12          (51)         (45)
    Loss on disposal of
     property and
     equipment                    7           --           45           16
    Changes in operating
     assets and
     liabilities:
      Accounts receivable      (445)         (91)        (705)        (290)
      Prepaid expenses
       and other current
       assets                  (392)           3           64          389
      Other assets              175         (115)         196          358
      Accounts payable          336        1,688          693        1,060
      Accrued compensation
       and benefits             659           69          (41)         388
      Accrued marketing
       expenses                (780)        (360)         708          717
      Deferred revenue           76           70           (9)         (26)
      Other current
       liabilities              468       (2,002)         616            4
                        -----------  -----------  -----------  -----------
Net cash provided by
 operating activities         7,444        9,404       30,194       30,086
                        -----------  -----------  -----------  -----------

Investing activities
Purchases of property
 and equipment                 (240)        (311)      (2,482)      (1,433)
Purchase of other
 assets                          --           --           --       (1,280)
Purchases of marketable
 securities                 (24,088)          --      (85,653)     (40,550)
Sales of marketable
 securities                      --        1,000       10,120        5,006
Maturities of
 marketable securities       20,930       20,032       59,309       68,932
                        -----------  -----------  -----------  -----------
Net cash provided by
 (used in) investing
 activities                  (3,398)      20,721      (18,706)      30,675
                        -----------  -----------  -----------  -----------

Financing activities
Net proceeds from
 exercise of common
 stock options                  121          215        1,547          860
Excess tax benefits
 from stock-based
 compensation                    82          993          298        4,979
Repurchase of common
 stock                         (639)          --         (639)     (29,360)
Principal payments in
 connection with
 capital lease                   --          (11)          --          (41)
                        -----------  -----------  -----------  -----------
Net cash provided by
 (used in) financing
 activities                    (436)       1,197        1,206      (23,562)
                        -----------  -----------  -----------  -----------

Effect of exchange rate
 changes on cash and
 cash equivalents                 1            2           47            4
                        -----------  -----------  -----------  -----------

Net increase in cash
 and cash equivalents         3,611       31,324       12,741       37,203
Cash and cash
 equivalents at
 beginning of period         90,525      100,015       81,395       94,136
                        -----------  -----------  -----------  -----------
Cash and cash
 equivalents at end of
 period                 $    94,136  $   131,339  $    94,136  $   131,339
                        ===========  ===========  ===========  ===========


(1) The condensed consolidated statement of cash flows for the year ended
    December 31, 2008 has been derived from the audited consolidated
    financial statements for that year.



                               EHEALTH, INC.
                        SUMMARY OF SELECTED METRICS
                               (Unaudited)


                                                Three Months  Three Months
                                                    Ended         Ended
                                                December 31,  December 31,
Key Metrics:                                        2008          2009
                                                ------------  ------------
Operating cash flows (1)                        $  7,444,000  $  9,404,000

IFP submitted applications (2)                       115,600       122,300

IFP approved members (3)                              97,700        96,100
Total approved members (4)                           131,200       124,400

Total revenue (5)                               $ 29,455,000  $ 34,411,000
Total revenue per estimated member for the
 period (6)                                     $      48.16  $      47.31


                                                     As of       As of
                                                 December 31,  December 31,
                                                     2008         2009
                                                ------------  ------------

IFP estimated membership (7)                         528,500       636,200
Total estimated membership (8)                       621,100       728,000

                                               Three Months   Three Months
                                                   Ended         Ended
                                                December 31,   December 31,
                                                    2008           2009
                                                ------------  ------------

Marketing and advertising expenses (9)          $ 11,528,000  $ 13,356,000
Marketing and advertising expenses as a
 percentage of total revenue (10)                         39%           39%

Marketing and advertising expenses excluding
 stock-based compensation (11)                  $ 11,368,000  $ 13,133,000
Marketing and advertising expenses excluding
 stock based compensation as a percentage of
 total revenue (12)                                       39%           38%

Other Metrics:

Source of IFP submitted applications (as a
 percentage of total IFP applications for the
 period):
  Direct (13)                                             40%           44%
  Marketing partners (14)                                 32%           29%
  Online advertising (15)                                 28%           27%
                                                ------------  ------------
   Total                                                 100%          100%
                                                ============  ============

Acquisition cost per individual on IFP
 submitted applications (16)                    $      65.35  $      73.38
Acquisition cost (excluding stock-based
 compensation) per individual on IFP submitted
 applications (17)                              $      64.44  $      72.16



Notes:
(1)  Net cash provided by operating activities for the period from the
     condensed consolidated statements of cash flows.
(2)  IFP applications submitted on eHealth's website during the period.
     Applications are counted as submitted when the applicant completes the
     application, provides a method for payment and clicks the submit
     button on our website and submits the application to us. The applicant
     generally has additional actions to take before the application will
     be reviewed by the insurance carrier, such as providing additional
     information and providing an electronic signature. In addition, an
     applicant may submit more than one application. We include
     applications for IFP products for which we receive commissions as well
     as other forms of payment. We define our "IFP" offerings as major
     medical individual and family health insurance plans, which does not
     include small business, short-term major medical, stand-alone dental,
     life or student health insurance product offerings.
(3)  New IFP members reported to eHealth as approved during the period.
     Some members that are approved by a carrier do not accept the approval
     and therefore do not become paying members. Does not include members
     transferred from Health Benefits Direct Corporation.
(4)  New members for all products reported to eHealth as approved during
     the period. Some members that are approved by a carrier do not accept
     the approval and therefore do not become paying members. Does not
     include members transferred from Health Benefits Direct Corporation.
(5)  Total revenue (from all sources) recognized during the period from the
     condensed consolidated statements of income.
(6)  Calculated as total revenue recognized during the period (see note (5)
     above) divided by average estimated membership for the period
     (calculated as beginning and ending estimated membership for all
     products for the period, divided by two). Ending membership includes
     an estimated 20,000 of members transferred from Health Benefits Direct
     Corporation during 2009, net of estimated cancelations since their
     transfer. See our Form 10-Q for the quarterly period ended
     September 30, 2009 - Item 2 - Management's Discussion and Analysis of
     Financial Condition and Results of Operations - Summary of Selected
     Metrics for additional information regarding our calculation of
     estimated membership.
(7)  Estimated number of members active on IFP insurance policies as of the
     date indicated. Amounts as of December 31, 2009 include an estimated
     20,000 members transferred from Health Benefits Direct Corporation
     during 2009, net of estimated cancelations since their transfer. See
     our Form 10-Q for the quarterly period ended September 30, 2009 -
     Item 2 - Management's Discussion and Analysis of Financial Condition
     and Results of Operations - Summary of Selected Metrics for additional
     information regarding our calculation of estimated membership.
(8)  Estimated number of members active on all insurance policies as of the
     date indicated. Amounts as of December 31, 2009 include an estimated
     20,000 of members transferred from Health Benefits Direct Corporation
     during 2009, net of estimated cancelations since their transfer. See
     our Form 10-Q for the quarterly period ended September 30, 2009 -
     Item 2 - Management's Discussion and Analysis of Financial Condition
     and Results of Operations - Summary of Selected Metrics for additional
     information regarding our calculation of estimated membership.
(9)  Marketing and advertising expenses for the period from the condensed
     consolidated statements of income.
(10) Calculated as marketing and advertising expenses for the period (see
     note (9) above) divided by total revenue for the period (see note (5)
     above).
(11) Non-GAAP marketing and advertising expenses excluding stock-based
     compensation for the period. See Non-GAAP Financial Information above
     and the reconciliation of GAAP to Non-GAAP marketing and advertising
     expenses below.
(12) Calculated as non-GAAP marketing and advertising expenses for the
     period (see note (11) above) divided by total revenue for the period
     (see note (5) above). See Non-GAAP Financial Information above and the
     reconciliation of GAAP to Non-GAAP marketing and advertising expenses
     below.
(13) Percentage of IFP submitted applications from applicants who came
     directly to the eHealth website through algorithmic search engine
     results or otherwise. See note (2) above for further information as to
     what constitutes a submitted application.
(14) Percentage of IFP submitted applications from applicants sourced
     through eHealth's network of marketing partners. See note (2) above
     for further information as to what constitutes a submitted
     application.
(15) Percentage of IFP submitted applications from applicants sourced
     through paid search and other online advertising activities. See note
     (2) above for further information as to what constitutes a submitted
     application.
(16) Calculated as marketing and advertising expenses for the period (see
     note (9) above) divided by the number of individuals on IFP
     applications submitted on eHealth's website during the period. This
     metric may not reflect the true acquisition cost.
(17) Calculated as non-GAAP marketing and advertising expenses for the
     period (see note (11) above) divided by the number of individuals on
     IFP applications submitted on eHealth's website during the period.
     This metric may not reflect the true acquisition cost exclusive of the
     impact of stock-based compensation allocated to marketing and
     advertising expenses.





                                EHEALTH, INC.
                       GAAP TO NON-GAAP RECONCILIATION
                FOR THE THREE MONTHS ENDED DECEMBER 31, 2009
            (In thousands, except per share amounts, unaudited)

Statement of Income Reconciliation


                                 Three Months Ended December 31, 2009
                            ----------------------------------------------
                                       GAAP                        Non-GAAP
                                     Percent                       Percent
                                       of                            of
                              GAAP    Total               Non-GAAP  Total
                            Reported Revenue  Adjustments Results  Revenue
                            -------- -------  ----------  -------- -------

Revenue:
  Commission                $ 30,030      87% $       --  $ 30,030      87%
  Sponsorship, licensing
   and other                   4,381      13          --     4,381      13
                            -------- -------  ----------  -------- -------
Total revenue                 34,411     100          --    34,411     100
Operating costs and
 expenses:
  Cost of revenue-sharing        993       3          --       993       3
  Marketing and advertising
   (1)                        13,356      39        (223)   13,133      38
  Customer care and
   enrollment (1)              3,669      11         (85)    3,584      10
  Technology and content
   (1)                         4,146      12        (380)    3,766      11
  General and
   administrative (1)          5,357      16        (719)    4,638      13
                            -------- -------  ----------  -------- -------
Total operating costs and
 expenses                     27,521      80      (1,407)   26,114      76
                            -------- -------  ----------  -------- -------
Income from operations         6,890      20       1,407     8,297      24
Interest and other income,
 net                             138       0          --       138       0
                            -------- -------  ----------  -------- -------
Income before income taxes     7,028      20       1,407     8,435      25
Provision for income taxes
 (2)                           2,270       7       1,064     3,334      10
                            -------- -------  ----------  -------- -------
Net income (3)              $  4,758      14% $      343  $  5,101      15%
                            ======== =======  ==========  ======== =======

Net income per share: (3)
   Basic                    $   0.20          $     0.02  $   0.22
   Diluted                  $   0.20          $     0.01  $   0.21

Weighted-average number of
 shares used in per share
 amounts:
   Basic                      23,380              23,380    23,380
   Diluted                    24,196              24,196    24,196


Explanation of adjustments
(1) Non-GAAP results exclude the effect of expensing stock-based
    compensation related to stock options, restricted stock and restricted
    stock units in accordance with FASB ASC Topic 718 beginning in 2006,
    in addition to the amortization of deferred stock-based compensation
    expense in accordance with APB 25 for grants made prior to 2006.
(2) Provision for income taxes excludes estimated income tax benefit of
    $479,000 related to stock-based compensation expense listed in note
    (1) above, as well as income tax benefit of $585,000 related to an
    increase in deferred income tax assets resulting from a reduction in
    estimated limitations on both federal and California net operating
    loss carryforwards.
(3) Non-GAAP net income and non-GAAP net income per share exclude
    stock-based compensation expense listed in note (1) above and
    estimated income tax benefits listed in note (2) above.




                                EHEALTH, INC.
                       GAAP TO NON-GAAP RECONCILIATION
                FOR THE THREE MONTHS ENDED DECEMBER 31, 2008
             (In thousands, except per share amounts, unaudited)

Statement of Income Reconciliation



                                 Three Months Ended December 31, 2008
                            ----------------------------------------------
                                       GAAP                        Non-GAAP
                                     Percent                       Percent
                                       of                            of
                              GAAP    Total               Non-GAAP  Total
                            Reported Revenue  Adjustments Results  Revenue
                            -------- -------  ----------  -------- -------

Revenue:
  Commission                $ 26,176      89% $       --  $ 26,176      89%
  Sponsorship, licensing
   and other                   3,279      11          --     3,279      11
                            -------- -------  ----------  -------- -------
Total revenue                 29,455     100          --    29,455     100
Operating costs and
 expenses:
  Cost of revenue-sharing        408       1          --       408       1
  Marketing and advertising
   (1)                        11,528      39        (160)   11,368      39
  Customer care and
   enrollment (1)              3,724      13         (66)    3,658      12
  Technology and content
   (1)                         3,634      12        (245)    3,389      12
  General and
   administrative (1)          4,508      15        (414)    4,094      14
                            -------- -------  ----------  -------- -------
Total operating costs and
 expenses                     23,802      81        (885)   22,917      78
                            -------- -------  ----------  -------- -------
Income from operations         5,653      19         885     6,538      22
Interest and other income,
 net                             629       2          --       629       2
                            -------- -------  ----------  -------- -------
Income before income taxes     6,282      21         885     7,167      24
Provision for income taxes
 (2)                           2,633       9         355     2,988      10
                            -------- -------  ----------  -------- -------
Net income (3)              $  3,649      12% $      530  $  4,179      14%
                            ======== =======  ==========  ======== =======

Net income per share: (3)
   Basic                    $   0.15          $     0.02  $   0.17
   Diluted                  $   0.14          $     0.02  $   0.16

Weighted-average number of
 shares used in per share
 amounts:
   Basic                      25,076              25,076    25,076
   Diluted                    25,826              25,826    25,826


Explanation of adjustments
(1) Non-GAAP results exclude the effect of expensing stock-based
    compensation related to stock options, restricted stock and restricted
    stock units in accordance with FASB ASC Topic 718 beginning in 2006,
    in addition to the amortization of deferred stock-based compensation
    expense in accordance with APB 25 for grants made prior to 2006.
(2) Provision for income taxes excludes estimated income tax benefit of
    $355,000 related to stock-based compensation expense listed in
    note (1) above.
(3) Non-GAAP net income and non-GAAP net income per share exclude
    stock-based compensation expense listed in note (1) above and
    estimated income tax benefit listed in note (2) above.




                                EHEALTH, INC.
                       GAAP TO NON-GAAP RECONCILIATION
                    FOR THE YEAR ENDED DECEMBER 31, 2009
            (In thousands, except per share amounts, unaudited)

Statement of Income Reconciliation


                                   Year Ended December 31, 2009
                        --------------------------------------------------
                                    GAAP                          Non-GAAP
                                  Percent                         Percent
                          GAAP    of Total              Non-GAAP  of Total
                        Reported  Revenue   Adjustments Results   Revenue
                        --------- --------  ----------  --------- --------

Revenue:
  Commission            $ 119,259       88% $       --  $ 119,259       88%
  Sponsorship,
   licensing and other     15,631       12          --     15,631       12
                        --------- --------  ----------  --------- --------
Total revenue             134,890      100          --    134,890      100
Operating costs and
 expenses:
  Cost of
   revenue-sharing          4,581        3          --      4,581        2
  Marketing and
   advertising (1)         53,987       40        (803)    53,184       39
  Customer care and
   enrollment (1)          14,769       11        (325)    14,444       11
  Technology and
   content (1)             15,685       12      (1,194)    14,491       11
  General and
   administrative (1)      20,028       15      (2,513)    17,515       13
                        --------- --------  ----------  --------- --------
Total operating costs
 and expenses             109,050       81      (4,835)   104,215       77
                        --------- --------  ----------  --------- --------
Income from operations     25,840       19       4,835     30,675       23
Interest and other
 income, net                  938        1          --        938        1
                        --------- --------  ----------  --------- --------
Income before income
 taxes                     26,778       20       4,835     31,613       23
Provision for income
 taxes (2)                 11,431        8       2,017     13,448       10
                        --------- --------  ----------  --------- --------
Net income (3)          $  15,347       11% $    2,818  $  18,165       13%
                        ========= ========  ==========  ========= ========

Net income per share:
 (3)
    Basic               $    0.63           $     0.12  $    0.75
    Diluted             $    0.61           $     0.11  $    0.72

Weighted-average number
 of shares used in per
 share amounts:
    Basic                  24,309               24,309     24,309
    Diluted                25,201               25,201     25,201


Explanation of adjustments
(1) Non-GAAP results exclude the effect of expensing stock-based
    compensation related to stock options, restricted stock and restricted
    stock units in accordance with FASB ASC Topic 718 beginning in 2006,
    in addition to the amortization of deferred stock-based compensation
    expense in accordance with APB 25 for grants made prior to 2006.
(2) Provision for income taxes excludes estimated income tax benefit of
    $1,432,000 related to stock-based compensation expense listed in note
    (1) above, as well as income tax benefit of $585,000 related to an
    increase in deferred income tax assets resulting from a reduction in
    estimated limitations on both federal and California net operating
    loss carryforwards.
(3) Non-GAAP net income and non-GAAP net income per share exclude
    stock-based compensation expense listed in note (1) above and
    estimated income tax benefits listed in note (2) above.




                                EHEALTH, INC.
                       GAAP TO NON-GAAP RECONCILIATION
                    FOR THE YEAR ENDED DECEMBER 31, 2008
           (In thousands, except per share amounts, unaudited)

Statement of Income Reconciliation



                                   Year Ended December 31, 2008
                        --------------------------------------------------
                                    GAAP                          Non-GAAP
                                  Percent                         Percent
                          GAAP    of Total              Non-GAAP  of Total
                        Reported  Revenue   Adjustments Results   Revenue
                        --------- --------  ----------  --------- --------

Revenue:
  Commission            $ 100,839       90% $       --  $ 100,839       90%
  Sponsorship,
   licensing and other     10,872       10          --     10,872       10
                        --------- --------  ----------  --------- --------
Total revenue             111,711      100          --    111,711      100
Operating costs and
 expenses:
  Cost of
   revenue-sharing          1,746        2          --      1,746        2
  Marketing and
   advertising (1)         42,161       38        (644)    41,517       37
  Customer care and
   enrollment (1)          14,379       13        (266)    14,113       13
  Technology and
   content (1)             14,182       13        (898)    13,284       12
  General and
   administrative (1)      17,983       16      (1,686)    16,297       15
                        --------- --------  ----------  --------- --------
Total operating costs
 and expenses              90,451       81      (3,494)    86,957       78
                        --------- --------  ----------  --------- --------
Income from operations     21,260       19       3,494     24,754       22
Interest and other
 income, net                3,714        3          --      3,714        3
                        --------- --------  ----------  --------- --------
Income before income
 taxes                     24,974       22       3,494     28,468       25
Provision for income
 taxes (2)                 10,806        9       1,142     11,948       10
                        --------- --------  ----------  --------- --------
Net income (3)          $  14,168       13% $    2,352  $  16,520       15%
                        ========= ========  ==========  ========= ========

Net income per share:
 (3)
    Basic               $    0.57           $     0.09  $    0.66
    Diluted             $    0.55           $     0.09  $    0.64

Weighted-average number
 of shares used in per
 share amounts:
    Basic                  24,963               24,963     24,963
    Diluted                25,954               25,954     25,954



Explanation of adjustments
(1) Non-GAAP results exclude the effect of expensing stock-based
    compensation related to stock options, restricted stock and restricted
    stock units in accordance with FASB ASC Topic 718 beginning in 2006,
    in addition to the amortization of deferred stock-based compensation
    expense in accordance with APB 25 for grants made prior to 2006.
(2) Provision for income taxes excludes estimated income tax benefit of
    $1,142,000 related to stock-based compensation expense listed in
    note (1) above.
(3) Non-GAAP net income and non-GAAP net income per share exclude
    stock-based compensation expense listed in note (1) above and estimated
    income tax benefit listed in note (2) above.

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