SOURCE: eHealth, Inc.

eHealth, Inc.

April 28, 2009 16:10 ET

eHealth, Inc. Announces First Quarter 2009 Results

First Quarter 2009 Overview

-- Revenue of $31.9 million, up 21% over the first quarter of 2008

-- Growth in IFP submitted applications of 23% over the first quarter of 2008

-- Operating income of $5.6 million, up 18% over the first quarter of 2008

-- GAAP operating margins of 18% and non-GAAP operating margins of 20% for the first quarter of 2009

-- GAAP net income of $3.1 million, or $0.12 per diluted share, and non-GAAP net income of $4.0 million, or $0.15 per diluted share, for the first quarter of 2009

-- Cash flow from operations of $4.7 million, down 19% from the first quarter of 2008

MOUNTAIN VIEW, CA--(Marketwire - April 28, 2009) - eHealth, Inc. (NASDAQ: EHTH), the leading online source of health insurance for individuals, families and small businesses, today announced its financial results for the first quarter ended March 31, 2009.

Gary Lauer, chief executive officer of eHealth, stated, "We are pleased with our first quarter performance and, especially, our submitted application growth. The economic environment during the first quarter continued to be challenging, yet we saw more individuals, families and businesses coming to eHealth to find affordable, quality health insurance."

First Quarter Results

Revenue -- Revenue totaled $31.9 million for the first quarter of 2009, a 21% increase compared to revenue of $26.3 million for the first quarter of 2008.

Submitted Applications -- Submitted applications for individual and family products increased 23% in the first quarter of 2009 to 141,200 applications, compared to 114,500 applications in the first quarter of 2008.

Membership -- Estimated membership at March 31, 2009 totaled 680,100 members, a 22% increase over estimated membership of 558,200 at March 31, 2008.

Operating Income -- Operating income increased 18% to $5.6 million for the first quarter of 2009, compared to operating income of $4.7 million for the first quarter of 2008. Operating margins were 18% in both the first quarters of 2009 and 2008. Non-GAAP operating income increased 21% to $6.5 million for the first quarter of 2009, compared to non-GAAP operating income of $5.4 million for the first quarter of 2008. Non-GAAP operating margins were 20% in both the first quarters of 2009 and 2008. Non-GAAP operating income and margins in the first quarters of 2009 and 2008 exclude $941,000 and $659,000 of stock-based compensation expense, respectively.

Pre-tax Income -- Pre-tax income for the first quarter of 2009 was $6.0 million, a 1% increase compared to pre-tax income of $5.9 million for the first quarter of 2008. Pre-tax income was unfavorably impacted in the first quarter of 2009 from a decrease in interest income of $0.8 million compared to the first quarter of 2008. Non-GAAP pre-tax income was $6.9 million for the first quarter of 2009, a 5% increase compared to non-GAAP pre-tax income of $6.6 million for the first quarter of 2008. Non-GAAP pre-tax income in the first quarters of 2009 and 2008 exclude $941,000 and $659,000 of stock-based compensation expense, respectively.

Net Income -- Net income for the first quarter of 2009 was $3.1 million, or $0.12 per diluted share. Net income for the first quarter of 2008 was $3.3 million, or $0.13 per diluted share. Non-GAAP net income for the first quarter of 2009 was $4.0 million, or $0.15 per diluted share, compared to non-GAAP net income for the first quarter of 2008 of $3.8 million, or $0.15 per diluted share. Non-GAAP net income and non-GAAP net income per diluted share in the first quarter of 2009 exclude $941,000 of stock-based compensation expense, adjusted by $131,000 for a net estimated income tax benefit related to stock-based compensation expense as well as additional tax expense recorded during the period in accordance with SFAS No. 123(R). Non-GAAP net income and non-GAAP net income per diluted share in the first quarter of 2008 exclude $659,000 of stock-based compensation expense, adjusted by $154,000 for estimated income tax benefit related to stock-based compensation expense.

Cash Flow and Cash Balance -- Cash flow from operations for the first quarter of 2009 was $4.7 million, compared to $5.8 million for the first quarter of 2008, representing a decrease of 19%. In the first quarter of 2008, a tax benefit of $2.4 million, primarily from the utilization of net operating loss carryforwards, was included in cash flow from operations. In the first quarter of 2009, $1.7 million of tax benefit, primarily from the utilization of net operating loss carryforwards, is included in cash flow from operations and $1.2 million of net operating loss carryforwards, from the utilization of excess tax benefits related to share-based payments, is included in cash flows from financing activities. Cash, cash equivalents and short-term marketable securities as of March 31, 2009 totaled $150.3 million, compared to $150.6 million as of December 31, 2008. During the fourth quarter of 2008, our board of directors authorized a stock repurchase program of up to $30 million, or ten percent of our outstanding common stock, whichever is less. We established a 10b5-1 trading plan and began repurchasing our outstanding common stock in late December 2008. During the quarter ended March 31, 2009, we repurchased in connection with the stock repurchase program approximately 361,800 shares of our common stock at an average cost of $12.70 per share including commissions, for a total cost of $4.6 million.

2009 Guidance

eHealth is reiterating the following guidance for the full year ending December 31, 2009 based on information currently available:

--  Total revenue is expected to be in the range of $131 million to $136
    million
    
--  Stock-based compensation expense is expected to be in the range of $5
    million to $6 million
    
--  GAAP income tax rate expected to be in the range of 43% to 45%
    
--  GAAP net income per diluted share is expected to be in the range of
    $0.51 to $0.61 per share
    

Webcast and Conference Call Information

A Webcast and conference call will be held today, Tuesday, April 28, 2009 at 5:00 p.m. EDT / 2:00 p.m. PDT. 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 #22249058. 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 #62038405. The live and archived webcast of the call will also be available on eHealth's website at www.ehealthinsurance.com under the Investor Relations section.

About eHealth, Inc.

eHealth, Inc. is the parent company of eHealthInsurance, the leading online source of health insurance for individuals, families and small businesses. eHealthInsurance presents complex health insurance information in an objective, user-friendly format, enabling the research, analysis, comparison and purchase of health insurance products that best meet consumers' needs. eHealth and eHealthInsurance are registered trademarks of eHealthInsurance Services, Inc.

eHealth, Inc. was founded in 1997 and its technology was responsible for the nation's first Internet-based sale of a health insurance policy. eHealth is headquartered in Mountain View, California. Additional information can be found on eHealth's website, www.ehealthinsurance.com.

Forward-Looking Statements

This press release contains statements that are forward-looking statements as defined within the Private Securities Litigation Reform Act of 1995. These include statements regarding eHealth's 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, 2009. 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 eHealth's rate of growth, continued acceptance of the Internet as a medium for the purchase of health insurance, consumer awareness of the availability and accessibility of affordable health insurance, eHealth's ability to continue to increase its membership base and retain its members, and 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, changes in member conversion rates and factors affecting conversion, system failures, capacity constraints or data loss, the performance, reliability and availability of eHealth's ecommerce platform and underlying network infrastructure, exposure to online commerce security risks, dependence upon Internet search engines to attract consumers who visit eHealth's website, the effectiveness of eHealth's marketing and public relations efforts, reliance on marketing partners for the sale of health insurance, changes in the economy and weak economic conditions, pursuing new strategies and opportunities in new segments of the health insurance market, timing of receipt of commission reports and related impact on estimating membership, payment practices of health insurance carriers, competition, eHealth's operations in China and any foreign expansion, success in the sale of sponsorship advertising and the licensing of the use of eHealth's ecommerce platform, success of the health savings account (HSA) platform, protection of intellectual property and intellectual property rights claims, regulatory penalties and negative publicity, costs of obtaining insurance and the health of companies providing such insurance, 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 employee stock-based compensation expense and provisions for income taxes, compliance with insurance and other laws and regulations, changes in laws and regulations, changes in the structure of the health insurance system in the United States and healthcare system reform. 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 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 SFAS 123R
    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 pre-tax income consists of GAAP pre-tax income excluding the
    effects of expensing stock-based compensation.
    
--  Non-GAAP net income consists of GAAP net income excluding the effects
    of expensing stock-based compensation adjusted for estimated income tax
    benefit related to stock-based compensation expense as well as additional
    tax expense recorded during the period in accordance with SFAS No. 123(R).
    
--  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 pre-tax income, 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 pre-tax 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.


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

                                                   December 31, March 31,
                                                       2008       2009
                                                   ----------- -----------
                  Assets                               (1)     (unaudited)
Current assets:
 Cash and cash equivalents                         $    94,136 $    94,321
 Marketable securities                                  56,499      55,944
 Accounts receivable                                     2,005       3,024
 Deferred income taxes                                   7,580       6,251
 Prepaid expenses and other current assets               1,874       3,048
                                                   ----------- -----------
Total current assets                                   162,094     162,588
Property and equipment, net                              4,567       4,253
Deferred income taxes                                    1,314       1,616
Other assets                                               780       1,125
                                                   ----------- -----------
Total assets                                       $   168,755 $   169,582
                                                   =========== ===========


        Liabilities and stockholders' equity

Current liabilities:
  Accounts payable                                 $     2,190 $     2,694
  Accrued compensation and benefits                      4,662       3,737
  Accrued marketing expenses                             3,162       3,958
  Deferred revenue                                         427         517
  Other current liabilities                              2,707       2,053
                                                   ----------- -----------
Total current liabilities                               13,148      12,959
Other non-current liabilities                              628         953

Stockholders' equity:
  Common stock                                              25          25
  Additional paid-in capital                           173,095     175,346
  Treasury stock shares, at cost                          (639)     (5,232)
  Deferred stock-based compensation                        (22)        (13)
  Accumulated deficit                                  (17,892)    (14,749)
  Accumulated other comprehensive income                   412         293
                                                   ----------- -----------
Total stockholders' equity                             154,979     155,670
                                                   ----------- -----------
Total liabilities and stockholders' equity         $   168,755 $   169,582
                                                   =========== ===========


(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, unaudited)

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

Revenue:
  Commission                                          $   24,119 $   28,204
  Sponsorship, licensing and other                         2,161      3,713
                                                      ---------- ----------
Total revenue                                             26,280     31,917
Operating costs and expenses:
  Cost of revenue-sharing                                    437        800
  Marketing and advertising (1)                            9,649     13,420
  Customer care and enrollment (1)                         3,625      3,822
  Technology and content (1)                               3,479      3,585
  General and administrative (1)                           4,365      4,701
                                                      ---------- ----------
Total operating costs and expenses                        21,555     26,328
                                                      ---------- ----------
Income from operations                                     4,725      5,589
Interest and other income, net                             1,209        399
                                                      ---------- ----------
Income before income taxes                                 5,934      5,988
Provision for income taxes                                 2,637      2,845
                                                      ---------- ----------
Net income                                            $    3,297 $    3,143
                                                      ========== ==========

Net income per share:
  Basic                                               $     0.13 $     0.13
  Diluted                                             $     0.13 $     0.12

Weighted-average number of shares used in per share
 amounts:
  Basic                                                   24,766     24,892
  Diluted                                                 25,974     25,720


(1) Includes stock-based compensation expense as
    follows:
     Marketing and advertising                        $      147 $      142
     Customer care and enrollment                             66         59
     Technology and content                                  175        198
     General and administrative                              271        542
                                                      ---------- ----------
       Total                                          $      659 $      941
                                                      ========== ==========



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

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

Operating activities
Net income                                         $     3,297 $     3,143
Adjustments to reconcile net income to net cash
 provided by operating activities:
  Deferred income taxes                                  2,441       1,672
  Depreciation and amortization                            430         547
  Amortization and accretion on marketable
   securities, net                                          --         169
  Stock-based compensation expense                         659         941
  Excess tax benefits from stock-based compensation         --      (1,173)
  Deferred rent                                            (21)        (25)
  Loss on disposal of property and equipment                --          10
  Changes in operating assets and liabilities:
   Accounts receivable                                    (340)     (1,019)
   Prepaid expenses and other current assets               (74)       (335)
   Other assets                                             71          96
   Accounts payable                                        201         503
   Accrued compensation and benefits                    (1,461)       (926)
   Accrued marketing expenses                              349         796
   Deferred revenue                                         89          90
   Other current liabilities                               205         233
                                                   ----------- -----------
Net cash provided by operating activities                5,846       4,722
                                                   ----------- -----------

Investing activities
Purchases of property and equipment                       (334)       (241)
Purchase of other assets                                    --      (1,280)
Purchases of marketable securities                     (19,315)    (14,439)
Sales of marketable securities                           4,047       1,006
Maturities of marketable securities                     18,462      13,700
                                                   ----------- -----------
Net cash provided by (used in) investing
 activities                                              2,860      (1,254)
                                                   ----------- -----------

Financing activities
Net proceeds from exercise of common stock options         746         146
Excess tax benefits from stock-based compensation           --       1,173
Repurchase of common stock                                  --      (4,593)
Principal payments in connection with capital
 lease                                                      --          (9)
                                                   ----------- -----------
Net cash provided by (used in) financing
 activities                                                746      (3,283)
                                                   ----------- -----------

Effect of exchange rate changes on cash and cash
 equivalents                                                33          --
                                                   ----------- -----------

Net increase in cash and cash equivalents                9,485         185
Cash and cash equivalents at beginning of period        81,395      94,136
                                                   ----------- -----------
Cash and cash equivalents at end of period         $    90,880 $    94,321
                                                   =========== ===========



                              EHEALTH, INC.
                        SUMMARY OF SELECTED METRICS
                                (Unaudited)

                                                Three Months  Three Months
                                                    Ended        Ended
Key Metrics:                                      March 31,    March 31,
                                                    2008         2009
                                                ------------  ------------
Operating cash flows (1)                        $  5,846,000  $  4,722,000

IFP submitted applications (2)                       114,500       141,200

IFP approved members (3)                             102,500       120,900
Total approved members (4)                           143,400       157,700

Total revenue (5)                               $ 26,280,000  $ 31,917,000
Total revenue per estimated member for the
 period (6)                                     $      48.82  $      49.24



                                                    As of         As of
                                                  March 31,     March 31,
                                                    2008          2009
                                                ------------  ------------
IFP estimated membership (7)                         471,200       585,100
Total estimated membership (8)                       558,200       680,100



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

Marketing and advertising expenses (9)          $  9,649,000  $ 13,420,000
Marketing and advertising expenses as a
 percentage of total revenue (10)                         37%           42%

Marketing and advertising expenses excluding
 stock-based compensation (11)                  $  9,502,000  $ 13,278,000
Marketing and advertising expenses excluding
 stock based compensation as a percentage of
 total revenue (12)                                       36%           42%

Other Metrics:

Source of IFP submitted applications (as a
 percentage of total IFP applications for the
 period):
  Direct (13)                                             38%           41%
  Marketing partners (14)                                 34%           34%
  Online advertising (15)                                 28%           25%
                                                ------------  ------------
    Total                                                100%          100%
                                                ============  ============

Acquisition cost per individual on IFP
 submitted applications (16)                    $      55.41  $      62.95
Acquisition cost (excluding stock-based
 compensation) per individual on IFP submitted
 applications (17)                              $      54.57  $      62.28


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.
(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.
(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 number of members transferred from Health Benefits
     Direct in March of 2009 of approximately 20,000 members for whom
     commission had been reported to eHealth and the criteria for revenue
     recognition had been satisfied with respect to the quarter ended
     March 31, 2009. See our  2008 Annual Report on Form 10-K - Item 7 -
     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 March 31, 2009 include the
     estimated number of members transferred from Health Benefits Direct
     in March 2009 of approximately 20,000 members for whom commission
     had been reported to eHealth and the criteria for revenue
     recognition had been satisfied with respect to the quarter ended
     March 31, 2009. See our  2008 Annual Report on Form 10-K - Item 7 -
     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 March 31, 2009 include the
     estimated number of members transferred from Health Benefits
     Direct in March 2009 of approximately 20,000 members for whom
     commission had been reported to eHealth and the criteria for
     revenue recognition had been satisfied with respect to the
     quarter ended March 31, 2009. See our  2008 Annual Report on
     Form 10-K - Item 7 - 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 MARCH 31, 2009
            (In thousands, except per share amounts, unaudited)

Statement of Income Reconciliation

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

Revenue:
 Commission                 $ 28,204      88% $        -- $ 28,204      88%
 Sponsorship, licensing and
  other                        3,713      12           --    3,713      12
                            -------- -------  ----------- -------- -------
Total revenue                 31,917     100           --   31,917     100
Operating costs and
 expenses:
  Cost of revenue-sharing        800       2           --      800       2
  Marketing and advertising
   (1)                        13,420      42         (142)  13,278      42
  Customer care and
   enrollment (1)              3,822      12          (59)    3,763     12
  Technology and content (1)   3,585      11         (198)    3,387     11
  General and administrative
  (1)                          4,701      15         (542)    4,159     13
                            -------- -------  ----------- -------- -------
Total operating costs and
 expenses                     26,328      82         (941)   25,387     80
                            -------- -------  ----------- -------- -------
Income from operations         5,589      18          941    6,530      20
Interest and other income,
 net                             399       1           --      399       1
                            -------- -------  ----------- -------- -------
Income before income taxes     5,988      19          941    6,929      21
Provision for income
 taxes (2)                     2,845       9          131    2,976       9
                            -------- -------  ----------- -------- -------
Net income                  $  3,143      10% $       810 $  3,953      12%
                            ======== =======  =========== ======== =======

Net income per share:
  Basic                     $   0.13          $      0.03 $   0.16
  Diluted                   $   0.12          $      0.03 $   0.15

Weighted-average number of
 shares used in per share
 amounts:
   Basic                      24,892               24,892   24,892
   Diluted                    25,720               25,720   25,720



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 SFAS 123R beginning
    in 2006, in addition to the amortization of deferred stock-based
    compensation expense in accordance with APB 25 for grants made
    prior to 2006.
(2) Non-GAAP net income and non-GAAP net income per share exclude
    stock-based compensation expense listed in note (1) above,
    adjusted for estimated income tax benefit related to stock-based
    compensation expense as well as additional tax expense recorded
    during the period in accordance with SFAS No. 123(R).



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

Statement of Income Reconciliation

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

Revenue:
  Commission                $ 24,119      92% $        -- $ 24,119      92%
  Sponsorship, licensing and
   other                       2,161       8           --    2,161       8
                            -------- -------  ----------- -------- -------
Total revenue                 26,280     100           --   26,280     100
Operating costs and
 expenses:
  Cost of revenue-sharing        437       2           --      437       2
  Marketing and advertising
   (1)                         9,649      37         (147)    9,502     36
  Customer care and
   enrollment (1)              3,625      14          (66)    3,559     13
  Technology and content (1)   3,479      13         (175)    3,304     13
  General and administrative
   (1)                         4,365      16         (271)    4,094     16
                            -------- -------  ----------- -------- -------
Total operating costs and
 expenses                     21,555      82         (659)   20,896     80
                            -------- -------  ----------- -------- -------
Income from operations         4,725      18          659    5,384      20
Interest and other income,
 net                           1,209       5           --    1,209       5
                            -------- -------  ----------- -------- -------
Income before income taxes     5,934      23          659    6,593      25
Provision for income
 taxes (2)                     2,637      10          154    2,791      11
                            -------- -------  ----------- -------- -------
Net income                  $  3,297      13% $       505 $  3,802      14%
                            ======== =======  =========== ======== =======

Net income per share:
   Basic                    $   0.13          $      0.02 $   0.15
   Diluted                  $   0.13          $      0.02 $   0.15

Weighted-average number of
 shares used in per share
 amounts:
   Basic                      24,766               24,766   24,766
   Diluted                    25,974               25,974   25,974


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 SFAS 123R beginning
    in 2006, in addition to the amortization of deferred stock-based
    compensation expense in accordance with APB 25 for grants made
    prior to 2006.
(2) Non-GAAP net income and non-GAAP net income per share exclude
    stock-based compensation expense listed in note (1) above,
    adjusted for estimated income tax benefit related to stock-based
    compensation expense.

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