SOURCE: eHealth, Inc.

eHealth, Inc.

February 16, 2011 16:15 ET

eHealth, Inc. Announces Fourth Quarter and Fiscal 2010 Results

Fourth Quarter 2010 Overview

-- Revenue of $50.7 million, up 47% over the fourth quarter of 2009, including $6.0 million one-time item

-- Operating income of $16.1 million, up 133% from the fourth quarter of 2009, including $5.9 million impact of one-time revenue item

-- Submitted applications for IFP products decreased 9% from the fourth quarter of 2009

-- GAAP operating margins of 32% and non-GAAP operating margins of 27% for the fourth quarter of 2010

-- GAAP net income of $8.6 million, or $0.38 per diluted share, and non-GAAP net income of $6.5 million, or $0.28 per diluted share, for the fourth quarter of 2010

-- Cash flow from operations of $3.6 million, down 61% from the fourth quarter of 2009

MOUNTAIN VIEW, CA--(Marketwire - February 16, 2011) - 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 and fiscal year ended December 31, 2010.

Gary Lauer, chief executive officer of eHealth, stated, "In the fourth quarter, we generated strong revenue and earnings growth, expanded our operating margins, and saw important contributions from our two new businesses, Medicare and Government systems. We are also pleased with our full year 2010 financial results, and particularly enthused about the emerging new business initiatives, which leverage our deep technology capabilities in the new world of healthcare reform."

Fourth Quarter Results

Revenue -- Revenue totaled $50.7 million for the fourth quarter of 2010, a 47% increase compared to revenue of $34.4 million for the fourth quarter of 2009. Revenue for the fourth quarter of 2010 includes a one-time revenue item of $6.0 million, reflecting a commission prepayment received from a health insurance carrier on a number of existing policies and members. Excluding this item, revenue for the quarter was $44.7 million, a 30% increase compared to the fourth quarter of 2009.

Submitted Applications -- Submitted applications for individual and family products decreased 9% in the fourth quarter of 2010 to 111,200 applications, compared to 122,300 applications in the fourth quarter of 2009.

Membership -- Estimated membership at December 31, 2010 totaled 778,300 members, a 7% increase over estimated membership of 728,000 at December 31, 2009.

Operating Income -- Operating income increased 133% to $16.1 million for the fourth quarter of 2010, compared to operating income of $6.9 million for the fourth quarter of 2009. Operating margins were 32% and 20% in the fourth quarters of 2010 and 2009, respectively. Non-GAAP operating income increased 47% to $12.2 million for the fourth quarter of 2010, compared to non-GAAP operating income of $8.3 million for the fourth quarter of 2009. Non-GAAP operating margins were 27% and 24% in the fourth quarters of 2010 and 2009, respectively. Non-GAAP operating income and margins in the fourth quarter of 2010 exclude the one-time commission revenue item of $6.0 million, $0.1 million of cost of revenue associated with the one-time item, $1.6 million of stock-based compensation expense and $0.4 million of intangible asset amortization expense associated with the acquisition of PlanPrescriber, Inc. Non-GAAP operating income and margins in the fourth quarter of 2009 excludes $1.4 million of stock-based compensation expense.

Pre-tax Income -- Pre-tax income for the fourth quarter of 2010 was $16.1 million, a 129% increase compared to pre-tax income of $7.0 million for the fourth quarter of 2009.

Net Income -- Net income for the fourth quarter of 2010 was $8.6 million, or $0.38 per diluted share. Net income for the fourth quarter of 2009 was $4.8 million, or $0.20 per diluted share. Non-GAAP net income for the fourth quarter of 2010 was $6.5 million, or $0.28 per diluted share, compared to non-GAAP net income for the fourth quarter of 2009 of $5.1 million, or $0.21 per diluted share. Non-GAAP net income and non-GAAP net income per diluted share in the fourth quarter of 2010 exclude the one-time commission revenue item of $6.0 million, $0.1 million of cost of revenue associated with the one-time item, $1.6 million of stock-based compensation expense and $0.4 million of intangible asset amortization expense associated with the acquisition of PlanPrescriber, Inc., less $1.8 million for related income tax expense. 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 and $1.1 million for related income tax benefit.

Cash Flow and Cash Balance -- Cash flow from operations for the fourth quarter of 2010 was $3.6 million, including $6.0 million from the one-time revenue item, compared to $9.4 million for the fourth quarter of 2009, representing a decrease of 61%. Stuart Huizinga, chief financial officer of eHealth, commented, "Fourth quarter 2010 operating cash flow was impacted by a $7.6 million increase in accounts receivable, related primarily to the seasonality of our new Medicare business. Given the annual open enrollment period for Medicare that took place in the fourth quarter, our Medicare-related marketing expenditures rose significantly; however, we did not collect the majority of the revenue associated with these expenditures in the fourth quarter, and expect to do so in the first quarter of 2011. A portion of the increase in accounts receivable was also related to timing of government contract collections."

During the fourth quarters of 2010 and 2009, we utilized $5.5 million and $1.0 million, respectively, of previously unrecognized excess tax benefits related to share-based payments to reduce our federal and state income taxes payable. These excess tax benefits are shown in the cash flow statement as an increase in cash flow from financing activities and a decrease in cash flow from operating activities. If you adjust cash flow in both periods to reflect the full benefit from deferred income taxes, including the portion that is reported in cash flows from financing activities, fourth quarter 2010 cash flow from operations would have been $9.1 million as compared to $10.4 million in the fourth quarter of 2009.

Cash, cash equivalents and short-term marketable securities as of December 31, 2010 totaled $128.1 million, compared to $153.5 million as of December 31, 2009. The change in cash, cash equivalents and short-term marketable securities for the year ended December 31, 2010 reflects $27.2 million of net cash used for the acquisition of PlanPrescriber, Inc. in April 2010 and $26.2 million used to repurchase 2,026,802 shares of our common stock during 2010. In January 2011, we completed our stock repurchase program, having repurchased in the aggregate 2,297,705 shares for $30 million at an average price of $13.06 per share.

Fiscal 2010 Results

Revenue -- Revenue totaled $160.4 million for the year ended December 31, 2010, a 19% increase compared to revenue of $134.9 million for the year ended December 31, 2009.

Operating Income -- Operating income increased 26% to $32.6 million for the year ended December 31, 2010, compared to operating income of $25.8 million for the year ended December 31, 2009. Operating margins were 20% and 19% in the years ended December 31, 2010 and 2009, respectively.

Pre-tax Income -- Pre-tax income for the year ended December 31, 2010 was $32.6 million, a 22% increase compared to pre-tax income of $26.8 million for the year ended December 31, 2009.

Net Income -- Net income for the year ended December 31, 2010 was $17.5 million, or $0.73 per diluted share, compared to net income for the year ended December 31, 2009 of $15.3 million, or $0.61 per diluted share.

Cash Flow -- Cash flow from operations for the year ended December 31, 2010 was $20.5 million, compared to $30.1 million for the year ended December 31, 2009, representing a decrease of 32%.

2011 Guidance

eHealth is providing guidance for the full year ending December 31, 2011 based on information currently available:

  • Total revenue is expected to be in the range of $141 million to $149 million
  • Stock-based compensation expense is expected to be in the range of $7 million to $8 million
  • EBITDA* is expected to be in the range of $23 million to $28 million
  • GAAP net income per diluted share is expected to be in the range of $0.31 to $0.40 per share

* EBITDA is calculated by adding stock-based compensation and depreciation and amortization expense, including the amortization of acquired intangibles, to GAAP operating income.

Stuart Huizinga, chief financial officer of eHealth, stated, "We have now heard from a majority of our health insurance carrier partners regarding adjustments to our individual and family health insurance commission rates as a result of the recently adopted medical loss ratio regulations that are a part of healthcare reform. Our 2011 guidance reflects the estimated impact of these rate changes. We will be providing more information related to these commission rate changes on our fourth quarter earnings conference call later today. I would also like to note that the one-time revenue item that we recognized in the fourth quarter accelerated an estimated $2.6 million in revenue and $0.07 in earnings per share into 2010 from 2011, which is also reflected in our guidance."

Webcast and Conference Call Information
A Webcast and conference call will be held today, Wednesday, February 16, 2011 at 5:00 p.m. Eastern Time / 2:00 p.m. Pacific Time. The Webcast will be available live on the Investor Relations section on eHealth's website at http://ir.ehealthinsurance.com. Individuals interested in listening to the conference call may do so by dialing 866-362-4832 for domestic callers and 617-597-5364 for international callers. The participant passcode is 43982878. 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 63221935. The live and archived webcast of the call will also be available on eHealth's website at http://www.ehealthinsurance.com under the Investor Relations section.

About eHealth, Inc.
eHealth, Inc. (NASDAQ: EHTH) 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 individual, family and small business health plans underwritten by more than 180 of the nation's leading health insurance companies. eHealthInsurance is licensed to sell health insurance in all 50 states and the District of Columbia, making it the ideal model of a successful, high-functioning health insurance exchange. Through the company's eHealth Technology solution (www.eHealthTechnology.com), eHealth is also a leading provider of health insurance exchange technology. eHealth Technology's exchange platform provides a suite of hosted e-commerce solutions that enable health plan providers, resellers and government entities to market and distribute products online. eHealth, Inc. also provides powerful online and pharmacy-based tools to help seniors navigate Medicare health insurance options, choose the right plan and enroll in select plans online through its wholly-owned subsidiary, PlanPrescriber.com (www.planprescriber.com) and through its Medicare website www.eHealthMedicare.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 the timing of our collection of Medicare-related revenue; guidance for total revenue, stock-based compensation expense, EBITDA, and GAAP net income per diluted share for the year ending December 31, 2011; and the impact of adjustments to commission rates. These forward-looking statements are inherently subject to various risks and uncertainties that could cause actual results to differ materially from the statements made, including risks associated with the impact of healthcare reform and medical loss ratio requirements; eHealth's ability to maintain or expand its relationships with health insurance carriers; negative publicity experienced by eHealth's carrier partners; eHealth's rate of growth; eHealth's success in marketing and selling Medicare-related health insurance products and leads for such products; eHealth's reliance upon a small number of purchasers for its sale of Medicare related insurance leads; the need for health insurance carrier and regulatory approvals in connection with the marketing of Medicare related insurance products; costs of acquiring new members; weak economic conditions and legislative reaction to economic conditions; consumer awareness of the availability and accessibility of affordable health insurance; changes in member conversion rates and factors affecting conversion; eHealth's ability to continue to increase its membership base and retain its members; changes in products offered on eHealth's ecommerce platform; changes in commission rates 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; dependence on acceptance of the Internet as a marketplace for the purchase and sale of health insurance; dependence upon Internet search engines; reliance on marketing partners; timing of receipt and accuracy of commission reports; payment practices of health insurance carriers; competition; eHealth's operations in China; 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 and diversification; seasonality; impact of acquisitions, including risks associated with not realizing anticipated synergies and opportunities with respect to PlanPrescriber, Inc.; underperformance by PlanPrescriber, Inc.; PlanPrescriber's maintenance of its relationships with its pharmacy and other partners that serve as a source of Medicare related leads; 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; the performance, reliability and availability of eHealth's ecommerce platform and underlying network infrastructure; and stock market conditions and the trading price of shares of eHealth's common stock. Other factors that could cause operating, financial and other results to differ are described in eHealth's most recent Quarterly Report on Form 10-Q or Annual Report on Form 10-K filed with the Securities and Exchange Commission and available on the investor relations page of eHealth's website at http://www.ehealthinsurance.com and on the Securities and Exchange Commission's website at www.sec.gov. eHealth does not undertake any obligation to update any forward-looking statement to conform the statement to actual results or changes in expectations.

Non-GAAP Financial Information
This press release includes financial measures that are not in accordance with generally accepted accounting principles in the United States ("GAAP"). To supplement eHealth's condensed consolidated financial statements presented in accordance with GAAP, eHealth presents investors with certain non-GAAP financial measures, including non-GAAP operating income; non-GAAP operating margins; earnings before interest, taxes, depreciation and amortization ("EBITDA"); non-GAAP net income and non-GAAP net income per diluted share.

  • Non-GAAP operating income for the three and twelve months ended December 31, 2010 consists of GAAP operating income excluding the following items:
    • a one-time revenue item and its associated cost of revenue that management considers non-recurring and extraordinary,
    • purchased intangible asset amortization expense and
    • 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.

  • Non-GAAP operating income for the three and twelve months ended December 31, 2009 consists of GAAP operating income excluding the following items:
    • 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 for the three and twelve months ended December 31, 2010 are calculated by dividing non-GAAP operating income by GAAP total revenue as adjusted for a one-time revenue item.


  • Non-GAAP operating margins for the three and twelve months ended December 31, 2009 are calculated by dividing non-GAAP operating income by GAAP total revenue.


  • EBITDA is calculated by adding stock-based compensation and depreciation and amortization expense, including the amortization of acquired intangibles, to GAAP operating income.


  • Non-GAAP net income for the three and twelve months ended December 31, 2010 consists of GAAP net income excluding the following items:
    • a one-time revenue item and its associated cost of revenue that management considers non-recurring and extraordinary,
    • purchased intangible asset amortization expense,
    • stock-based compensation expense recorded during the quarter and
    • the related income tax impact of these excluded items.

  • Non-GAAP net income for the three and twelve months ended December 31, 2009 consists of GAAP net income excluding the following items:
    • 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,
    • amortization of deferred stock-based compensation expense in accordance with APB 25 for grants made prior to 2006 and
    • the related income tax impact of these excluded items.

  • 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 are useful to investors in their assessment of the Company's operating performance.

Non-GAAP operating income, non-GAAP operating margins, EBITDA, non-GAAP net income 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 revenue and costs associated with the operations of the Company's business and do not reflect income tax as determined in accordance with GAAP. As a result, you should not consider these measures in isolation or as a substitute for analysis of eHealth's results as reported under GAAP. The Company expects to continue to incur the stock-based compensation costs and purchased intangible asset amortization costs described above, and exclusion of these costs, and their related income tax 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 operating margins, 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 described above and the related reconciliations between these financial measures.

(Tables to Follow)

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

                                                December 31,  December 31,
                                                    2009          2010
                                                ------------  ------------
                       Assets                        (1)
Current assets:
  Cash and cash equivalents                     $    131,339  $    128,074
  Marketable securities                               22,184            --
  Accounts receivable                                  2,295        10,810
  Deferred income taxes                                6,009         5,347
  Prepaid expenses and other current assets            2,324         4,361
                                                ------------  ------------
Total current assets                                 164,151       148,592
Property and equipment, net                            3,775         4,528
Deferred income taxes                                    919         3,119
Other assets                                             863         3,248
Goodwill                                                  --        14,096
Acquired intangible assets, net                           --        12,262
                                                ------------  ------------
Total assets                                    $    169,708  $    185,845
                                                ============  ============


         Liabilities and stockholders' equity

Current liabilities:
  Accounts payable                              $      3,252  $      3,573
  Accrued compensation and benefits                    5,051         7,523
  Accrued marketing expenses                           3,879         3,644
  Deferred revenue                                       401         2,785
  Other current liabilities                            2,677         2,672
                                                ------------  ------------
Total current liabilities                             15,260        20,197
Other non-current liabilities                          2,997         3,451

Stockholders' equity:
  Common stock                                            25            25
  Additional paid-in capital                         183,747       203,232
  Treasury stock, at cost                            (29,999)      (56,202)
  Retained earnings (accumulated deficit)             (2,545)       14,937
  Accumulated other comprehensive income                 223           205
                                                ------------  ------------
Total stockholders' equity                           151,451       162,197
                                                ------------  ------------
Total liabilities and stockholders' equity      $    169,708  $    185,845
                                                ============  ============

(1) The condensed consolidated balance sheet at December 31, 2009 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       Year Ended
                                     December 31,          December 31,
                                 --------------------  --------------------
                                   2009       2010       2009       2010
                                 ---------  ---------  ---------  ---------
                                                          (2)
Revenue:
  Commission                     $  30,030  $  39,681  $ 119,259  $ 135,366
  Other                              4,381     11,027     15,631     25,038
                                 ---------  ---------  ---------  ---------
Total revenue                       34,411     50,708    134,890    160,404
Operating costs and expenses:
  Cost of revenue                      993      2,740      4,581      5,499
  Marketing and advertising (1)     13,356     15,307     53,987     60,102
  Customer care and enrollment (1)   3,669      5,271     14,769     17,810
  Technology and content (1)         4,146      5,042     15,685     19,241
  General and administrative (1)     5,357      5,855     20,028     24,055
  Amortization of acquired
   intangible assets                    --        427         --      1,138
                                 ---------  ---------  ---------  ---------
Total operating costs and
 expenses                           27,521     34,642    109,050    127,845
                                 ---------  ---------  ---------  ---------
Income from operations               6,890     16,066     25,840     32,559
Interest and other income
 (loss), net                           138         (4)       938          9
                                 ---------  ---------  ---------  ---------
Income before income taxes           7,028     16,062     26,778     32,568
Provision for income taxes           2,270      7,452     11,431     15,086
                                 ---------  ---------  ---------  ---------
Net income                       $   4,758  $   8,610  $  15,347  $  17,482
                                 =========  =========  =========  =========

Net income per share:
  Basic                          $    0.20  $    0.39  $    0.63  $    0.76
  Diluted                        $    0.20  $    0.38  $    0.61  $    0.73

Weighted-average number of shares
 used in per share amounts:
  Basic                             23,380     22,061     24,309     23,118
  Diluted                           24,196     22,849     25,201     23,873
__________

(1) Includes stock-based
 compensation expense as
 follows:
   Marketing and advertising     $     223  $     201  $     803  $     808
   Customer care and enrollment         85        102        325        384
   Technology and content              380        383      1,194      1,622
   General and administrative          719        892      2,513      3,581
                                 ---------  ---------  ---------  ---------
     Total                       $   1,407  $   1,578  $   4,835  $   6,395
                                 =========  =========  =========  =========

(2) The condensed consolidated statement of income for the year ended
    December 31, 2009 has been derived from the audited consolidated
    financial statements for that year.




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

                                 Three Months Ended       Year Ended
                                    December 31,          December 31,
                                --------------------  --------------------
                                  2009       2010       2009       2010
                                ---------  ---------  ---------  ---------
                                                          (1)
Operating activities
Net income                      $   4,758  $   8,610  $  15,347  $  17,482
Adjustments to reconcile net
 income to net cash provided by
 operating activities:
    Deferred income taxes           4,278      7,464      9,352     14,274
    Depreciation and
     amortization                     538      1,056      2,211      3,347
    Amortization and accretion
     on marketable securities,
     net                              142         --        749         50
    Stock-based compensation
     expense                        1,407      1,578      4,835      6,395
    Excess tax benefits from
     stock-based compensation        (993)    (5,493)    (4,979)   (12,853)
    Deferred rent                      12         (6)       (45)       (11)
   Loss on disposal of property
    and equipment                      --         --         16          9
   Changes in operating assets
    and liabilities:
      Accounts receivable             (91)    (7,592)      (290)    (8,146)
      Prepaid expenses and other
       current assets                   3        783        389     (1,062)
      Other assets                   (115)        18        358         43
      Accounts payable              1,688     (3,322)     1,060       (459)
      Accrued compensation and
       benefits                        69        726        388      2,311
      Accrued marketing expenses     (360)      (600)       717       (235)
      Deferred revenue                 70      2,266        (26)     2,356
      Other current liabilities    (2,002)    (1,847)         4     (2,992)
                                ---------  ---------  ---------  ---------
Net cash provided by operating
 activities                         9,404      3,641     30,086     20,509
                                ---------  ---------  ---------  ---------

Investing activities
Purchases of property and
 equipment                           (311)      (465)    (1,433)    (2,948)
Acquisition of PlanPrescriber,
 net of cash acquired                  --         --         --    (27,203)
Purchase of other assets               --     (2,550)    (1,280)    (2,550)
Purchases of marketable
 securities                            --         --    (40,550)        --
Sales of marketable securities      1,000         --      5,006         --
Maturities of marketable
 securities                        20,032         --     68,932     22,100
                                ---------  ---------  ---------  ---------
Net cash provided by (used in)
 investing activities              20,721     (3,015)    30,675    (10,601)
                                ---------  ---------  ---------  ---------

Financing activities
Net proceeds from exercise of
 common stock options                 256        346      1,031        814
Cash used to net-share settle
 equity awards                        (41)       (11)      (171)      (586)
Excess tax benefits from
 stock-based compensation             993      5,493      4,979     12,853
Repurchase of common stock             --    (17,479)   (29,360)   (26,203)
Principal payments in connection
 with capital lease                   (11)       (11)       (41)       (44)
                                ---------  ---------  ---------  ---------
Net cash provided by (used in)
 financing activities               1,197    (11,662)   (23,562)   (13,166)
                                ---------  ---------  ---------  ---------

Effect of exchange rate changes
 on cash and cash equivalents           2         (3)         4         (7)
                                ---------  ---------  ---------  ---------

Net increase (decrease) in cash
 and cash equivalents              31,324    (11,039)    37,203     (3,265)
Cash and cash equivalents at
 beginning of period              100,015    139,113     94,136    131,339
                                ---------  ---------  ---------  ---------
Cash and cash equivalents at
 end of period                  $ 131,339  $ 128,074  $ 131,339  $ 128,074
                                =========  =========  =========  =========

(1) The condensed consolidated statement of cash flows for the year ended
    December 31, 2009 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:                                        2009          2010
                                                ------------  ------------

Operating cash flows (1)                        $  9,404,000  $  3,641,000

IFP submitted applications (2)                       122,300       111,200

IFP approved members (3)                              96,100        94,200
Total approved members (4)                           124,400       128,300

Commission revenue (excluding one-time revenue
 item in 2010) (5)                              $ 30,030,000  $ 33,681,000
Commission revenue per estimated member for the
 period (excluding one-time revenue item in
 2010) (6)                                      $      41.29  $      43.26

Total revenue (7)                               $ 34,411,000  $ 50,708,000
Total revenue per estimated member for the
 period (8)                                     $      47.31  $      65.13

                                                    As of         As of
                                                December 31,  December 31,
                                                    2009          2010
                                                ------------  ------------

IFP estimated membership (9)                         636,200       680,900
Total estimated membership (10)                      728,000       778,300

                                                Three Months  Three Months
                                                   Ended         Ended
                                                December 31,  December 31,
                                                    2009          2010
                                                ------------  ------------

Marketing and advertising expenses (11)         $ 13,356,000  $ 15,307,000
Marketing and advertising expenses as a
 percentage of total revenue (12)                         39%           30%

Marketing and advertising expenses excluding
 stock-based compensation (13)                  $ 13,133,000  $ 15,106,000
Marketing and advertising expenses excluding
 stock based compensation as a percentage of
 total revenue (14)                                       38%           30%

Other Metrics:

Source of IFP submitted applications (as a
 percentage of total IFP applications for the
 period):
  Direct (15)                                             44%           45%
  Marketing partners (16)                                 29%           29%
  Online advertising (17)                                 27%           26%
                                                ------------  ------------
    Total                                                100%          100%
                                                ============  ============

Acquisition cost per individual on IFP
 submitted applications (18)                    $      73.38  $      88.79
Acquisition cost (excluding stock-based
 compensation) per individual on IFP submitted
 applications (19)                              $      72.16  $      87.62


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 during 2009.
 (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
     during 2009.
 (5) Commission revenue (from all sources) recognized during the period
     from the condensed consolidated statements of income excluding a
     one-time revenue item of $6.0 million in 2010.
 (6) Calculated as commission revenue recognized during the period
     excluding a one-time revenue item of $6.0 million in 2010 (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 as of
     December 31, 2009 and 2010 include an estimated 20,000 and 10,000
     members, respectively, transferred from Health Benefits Direct
     Corporation as of each date, net of estimated cancelations since their
     transfer. See our Form 10-K for the year ended December 31, 2009 -
     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) Total revenue (from all sources) recognized during the period from the
     condensed consolidated statements of income.
 (8) Calculated as total revenue recognized during the period (see note (7)
     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 as of
     December 31, 2009 and 2010 include an estimated 20,000 and 10,000
     members, respectively, transferred from Health Benefits Direct
     Corporation as of each date, net of estimated cancelations since their
     transfer. See our Form 10-K for the year ended December 31, 2009 -
     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) Estimated number of members active on IFP insurance policies as of the
     date indicated. Amounts as of December 31, 2009 and 2010 include an
     estimated 20,000 and  10,000 members, respectively, transferred from
     Health Benefits Direct Corporation as of each date, net of estimated
     cancelations since their transfer. See our Form 10-K for the year
     ended December 31, 2009 - 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.
(10) Estimated number of members active on all insurance policies as of the
     date indicated. Amounts as of December 31, 2009 and 2010 include an
     estimated 20,000 and 10,000 members, respectively, transferred from
     Health Benefits Direct Corporation as of each date, net of estimated
     cancelations since their transfer. See our Form 10-K for the year
     ended December 31, 2009 - 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.
(11) Marketing and advertising expenses for the period from the condensed
     consolidated statements of income.
(12) Calculated as marketing and advertising expenses for the period (see
     note (11) above) divided by total revenue for the period (see note (7)
     above).
(13) 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.
(14) Calculated as non-GAAP marketing and advertising expenses for the
     period (see note (13) above) divided by total revenue for the period
     (see note (7) above). See Non-GAAP Financial Information above and the
     reconciliation of GAAP to Non-GAAP marketing and advertising expenses
     below.
(15) 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.
(16) 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.
(17) 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.
(18) Calculated as 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.
(19) Calculated as non-GAAP marketing and advertising expenses for the
     period (see note (13) 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, 2010
          (In thousands, except per share amounts, unaudited)

  Statement of Income Reconciliation

                            Three Months Ended December 31, 2010
                  --------------------------------------------------------
                                 GAAP                             Non-GAAP
                              Percent of                         Percent of
                     GAAP       Total                 Non-GAAP     Total
                   Reported    Revenue   Adjustments  Results     Revenue
                  ----------  ---------  ----------  ----------  ---------

Revenue:
  Commission (1)  $   39,681         78% $   (6,000) $   33,681         75%
  Other               11,027         22          --      11,027         25
                  ----------  ---------  ----------  ----------  ---------
Total revenue         50,708        100      (6,000)     44,708        100
Operating costs
 and expenses:
  Cost of
   revenue (1)         2,740          5        (100)      2,640          6
  Marketing and
   advertising (2)    15,307         30        (201)     15,106         34
  Customer care
   and enrollment
   (2)                 5,271         10        (102)      5,169         12
  Technology and
   content (2)         5,042         10        (383)      4,659         10
  General and
   administra-
   tive (2)            5,855         12        (892)      4,963         11
  Amortization
   of acquired
   intangible
   assets (3)            427          1        (427)         --         --
                  ----------  ---------  ----------  ----------  ---------
Total operating
 costs and expenses   34,642         68      (2,105)     32,537         73
                  ----------  ---------  ----------  ----------  ---------
Income from
 operations           16,066         32      (3,895)     12,171         27
Interest and
 other income
 (loss), net              (4)        (0)         --          (4)        (0)
                  ----------  ---------  ----------  ----------  ---------
Income before
 income taxes         16,062         32      (3,895)     12,167         27
Provision for
 income taxes (4)      7,452         15      (1,770)      5,682         13
                  ----------  ---------  ----------  ----------  ---------
Net income (5)    $    8,610         17% $   (2,125) $    6,485         15%
                  ==========  =========  ==========  ==========  =========

Net income per
 share: (5)
   Basic          $     0.39             $    (0.10) $     0.29
   Diluted        $     0.38             $    (0.10) $     0.28

Weighted-average
 number of shares
 used in per
 share amounts:
   Basic              22,061                 22,061      22,061
   Diluted            22,849                 22,849      22,849


Explanation of adjustments
 (1) Non-GAAP results exclude a one-time commission revenue item received
     from a carrier partner and associated cost of revenue.
 (2) 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.
 (3) Non-GAAP results exclude amortization expense related to acquired
     intangible assets.
 (4) Non-GAAP provision for income taxes excludes estimated income tax
     expense of $2.4 million related to a one-time commission revenue item
     and its associated cost of revenue listed in note (1) above, and
     estimated income tax benefit of $0.6 million related to stock-based
     compensation expense listed in note (2) above and amortization of
     purchased intangible assets listed in note (3) above.
 (5) Non-GAAP net income and non-GAAP net income per share exclude a
     one-time commission revenue item and its associated cost of revenue
     listed in note (1) above, stock-based compensation expense listed in
     note (2) above and amortization of purchased intangible assets listed
     in note (3) above, less the related income tax impact of these
     excluded items listed in note (4) above.




                               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 of                         Percent of
                     GAAP       Total                 Non-GAAP     Total
                   Reported    Revenue   Adjustments  Results     Revenue
                  ----------  ---------  ----------  ----------  ---------

Revenue:
  Commission      $   30,030         87% $       --  $   30,030         87%
  Other                4,381         13          --       4,381         13
                  ----------  ---------  ----------  ----------  ---------
Total revenue         34,411        100          --      34,411        100
Operating costs
 and expenses:
  Cost of revenue        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
   administra-
   tive (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
     $0.5 million related to stock-based compensation expense listed in
     note (1) above, as well as income tax benefit of $0.6 million 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 benefit listed in note (2) above.




                             EHEALTH, INC.
                  GAAP TO NON-GAAP RECONCILIATION
           FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2010
        (In thousands, except per share amounts, unaudited)

  Statement of Income Reconciliation

                           Twelve Months Ended December 31, 2010
                  --------------------------------------------------------
                                 GAAP                             Non-GAAP
                              Percent of                         Percent of
                     GAAP       Total                 Non-GAAP     Total
                   Reported    Revenue   Adjustments  Results     Revenue
                  ----------  ---------  ----------  ----------  ---------

Revenue:
  Commission (1)  $  135,366         84% $   (6,000) $  129,366         84%
  Other               25,038         16          --      25,038         16
                  ----------  ---------  ----------  ----------  ---------
Total revenue        160,404        100      (6,000)    154,404        100
Operating costs
 and expenses:
  Cost of
   revenue (1)         5,499          3        (100)      5,399          3
  Marketing and
   advertising (2)    60,102         37        (808)     59,294         38
  Customer care
   and enrollment
   (2)                17,810         11        (384)     17,426         11
  Technology and
   content (2)        19,241         12      (1,622)     17,619         11
  General and
   administra-
   tive (2)           24,055         15      (3,581)     20,474         13
  Amortization
   of acquired
   intangible
   assets (3)          1,138          1      (1,138)         --         --
                  ----------  ---------  ----------  ----------  ---------
Total operating
 costs and expenses  127,845         80      (7,633)    120,212         78
                  ----------  ---------  ----------  ----------  ---------
Income from
 operations           32,559         20       1,633      34,192         22
Interest and other
 income, net               9          0          --           9          0
                  ----------  ---------  ----------  ----------  ---------
Income before
 income taxes         32,568         20       1,633      34,201         22
Provision for
 income taxes (4)     15,086          9         193      15,279         10
                  ----------  ---------  ----------  ----------  ---------
Net income (5)    $   17,482         11% $    1,440  $   18,922         12%
                  ==========  =========  ==========  ==========  =========

Net income per
 share: (5)
   Basic          $     0.76             $     0.06  $     0.82
   Diluted        $     0.73             $     0.06  $     0.79

Weighted-average
 number of shares
 used in per
 share amounts:
   Basic              23,118                 23,118      23,118
   Diluted            23,873                 23,873      23,873


Explanation of adjustments
 (1) Non-GAAP results exclude a one-time commission revenue item received
     from a carrier partner and associated cost of revenue.
 (2) 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.
 (3) Non-GAAP results exclude amortization expense related to acquired
     intangible assets.
 (4) Non-GAAP provision for income taxes excludes estimated income tax
     expense of $2.4 million related to a one-time commission revenue item
     and its associated cost of revenue listed in note (1) above, and
     estimated income tax benefit of $2.6 million related to stock-based
     compensation expense listed in note (2) above and amortization of
     purchased intangible assets listed in note (3) above.
 (5) Non-GAAP net income and non-GAAP net income per share exclude a
     one-time commission revenue item and its associated cost of revenue
     listed in note (1) above, stock-based compensation expense listed in
     note (2) above and amortization of purchased intangible assets listed
     in note (3) above, less the related income tax impact of these
     excluded items listed in note (4) above.




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

  Statement of Income Reconciliation

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

Revenue:
  Commission      $  119,259         88% $       --  $  119,259         88%
  Other               15,631         12          --      15,631         12
                  ----------  ---------  ----------  ----------  ---------
Total revenue        134,890        100          --     134,890        100
Operating costs
 and expenses:
  Cost of revenue      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
   administra-
   tive (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
     $1.4 million related to stock-based compensation expense listed in
     note (1) above, as well as income tax benefit of $0.6 million 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.

Contact Information