SOURCE: eHealth, Inc.

eHealth, Inc.

February 20, 2014 16:05 ET

eHealth, Inc. Announces Fourth Quarter and Fiscal 2013 Results

Fourth Quarter 2013 Overview

-- Revenue of $54.2 million, an increase of 20% compared to the fourth quarter of 2012

-- Submitted applications for IFP products increased 49.5% from the fourth quarter of 2012

-- Total estimated members increased 27% from the fourth quarter of 2012

-- GAAP operating loss of $2.6 million compared to GAAP operating income of $4.3 million for the fourth quarter of 2012

-- GAAP net loss of $2.0 million, or $(0.11) per diluted share compared to GAAP net income of $2.4 million, or $0.11 per diluted share for the fourth quarter of 2012

-- Non-GAAP net loss of $0.3 million, or $(0.01) per diluted share, compared to non-GAAP net income of $3.9 million, or $0.18 per diluted share for the fourth quarter of 2012

-- Cash flows from operations were $6.2 million, an increase of 18% compared to the fourth quarter of 2012

MOUNTAIN VIEW, CA--(Marketwired - Feb 20, 2014) -  eHealth, Inc. (NASDAQ: EHTH), the nation's first and largest private health insurance exchange, announced today its financial results for the fourth quarter and fiscal year ended December 31, 2013.

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

Fourth Quarter 2013 Results

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

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

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

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

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

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

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

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

Fiscal 2013 Results

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

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

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

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

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

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

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

2014 Guidance

eHealth is providing guidance for the full year ending December 31, 2014 based on information available as of February 20, 2014. These expectations are forward-looking statements and eHealth assumes no obligation to update these statements. Results may be materially different and are affected by the risk factors and uncertainties identified in this release and in eHealth's annual and quarterly filings with the Securities and Exchange Commission.

  • Total revenue is expected to be in the range of $206 million to $213 million

  • Stock-based compensation expense is expected to be in the range of $8.5 million to $10.5 million

  • EBITDA* is expected to be in the range of $18.0 million to $22.5 million

  • Non-GAAP net income per diluted share** is expected to be in the range of $0.43 to $0.51 per share

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

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

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

Webcast and Conference Call Information
A Webcast and conference call will be held today, Thursday, February 20, 2014 at 5:00 p.m. Eastern / 2:00 p.m. Pacific Time. The Webcast will be available live on the Investor Relations section on eHealth's website at http://ir.ehealthinsurance.com. Individuals interested in listening to the conference call may do so by dialing 866 578.5771 for domestic callers and 617 213.8055 for international callers. The participant passcode is 79627538. A telephone replay will be available two hours following the conclusion of the call for a period of 30 days and can be accessed by dialing 888 286.8010 for domestic callers and 617 801.6888 for international callers. The call ID for the replay is 25447293. The live and archived webcast of the call will also be available on eHealth's website at http://www.ehealthinsurance.com under the Investor Relations section.

About eHealth
eHealth, Inc. (NASDAQ: EHTH) operates eHealthInsurance.com, the nation's first and largest private health insurance exchange where individuals, families and small businesses can compare health insurance products from leading insurers side by side and purchase and enroll in coverage online. eHealthInsurance offers thousands of individual, family and small business health plans underwritten by more than 180 of the nation's leading health insurance companies. eHealthInsurance is licensed to sell health insurance in all 50 states and the District of Columbia. eHealth, Inc. also provides powerful online and pharmacy-based tools to help Medicare beneficiaries navigate Medicare health insurance options, choose the right plan and enroll in select plans online through PlanPrescriber.com (www.planprescriber.com) and eHealthMedicare.com (www.eHealthMedicare.com).

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

Forward-Looking Statements
This press release contains statements that are forward-looking statements as defined within the Private Securities Litigation Reform Act of 1995. These include statements regarding future events; future performance; the utility to our investors of the non-GAAP financial measures presented in this release; expected 2014 revenue growth; membership expansion; commission revenue growth and our guidance for total revenue, stock-based compensation expense, EBITDA and non-GAAP net income per diluted share for the year-ending December 31, 2014. These forward-looking statements are inherently subject to various risks and uncertainties that could cause actual results to differ materially from the statements made, including risks associated with the impact of healthcare reform and medical loss ratio requirements; the impact of increased health insurance costs on demand; eHealth's ability to retain existing members and limit member turnover; eHealth's ability to attract new members and to convert online visitors into members; eHealth's ability to sell qualified health insurance plans to subsidy-eligible individuals; the impact of annual enrollment periods for the purchase of individual and family health insurance and its timing on eHealth's recognition of revenue; eHealth's ability to accurately estimate membership; the evolving nature of Affordable Care Act implementation and associated deadlines; eHealth's ability to enter into and maintain relationships with health insurance carriers; eHealth's success in marketing and selling health insurance plans; eHealth's ability to hire, train and retain licensed health insurance agents for its Medicare business; the need for health insurance carrier and regulatory approvals in connection with the marketing of Medicare-related insurance products; proposed regulations impacting Medicare product agent compensation; costs of acquiring new members; changes in member conversion rates; lack of membership growth and retention rates; changes in products offered on eHealth's ecommerce platform; changes in commission rates; maintaining and enhancing eHealth's brand identity; system failures, capacity constraints, data loss or online commerce security risks; dependence on acceptance of the Internet as a marketplace for the purchase and sale of health insurance; dependence upon Internet search engines; reliance on marketing partners; timing of receipt and accuracy of commission reports; payment practices of health insurance carriers; competition; dependence on our operations in China; success of eHealth's sponsorship and advertising business; protection of intellectual property and defense against intellectual property rights claims; legal liability and regulatory penalties; changes in our management and key employees; seasonality; maintenance of relationships with business development partners; maintenance of proper and effective internal controls; impact of provisions for income taxes; changes in laws and regulations, including in connection with healthcare reform and/or with respect to the marketing and sale of Medicare plans; compliance with insurance and other laws and regulations; exposure to security risks; and the performance, reliability and availability of eHealth's ecommerce platform and underlying network infrastructure. Other factors that could cause operating, financial and other results to differ are described in eHealth's most recent Quarterly Report on Form 10-Q or Annual Report on Form 10-K filed with the Securities and Exchange Commission and available on the investor relations page of eHealth's website at http://www.ehealthinsurance.com and on the Securities and Exchange Commission's website at www.sec.gov. eHealth does not undertake any obligation to update any forward-looking statement to conform the statement to actual results or changes in expectations.

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

  • Non-GAAP operating income consists of GAAP operating income excluding the following items:
    • the effects of expensing stock-based compensation related to stock options and restricted stock units in accordance with FASB ASC Topic 718, and
    • intangible asset amortization expense.

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

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

  • Non-GAAP net income (loss) consists of GAAP net income (loss) excluding the following items:
    • the effects of expensing stock-based compensation related to stock options and restricted stock units in accordance with FASB ASC Topic 718,
    • intangible asset amortization expense, and
    • the related income tax benefits of these excluded expenses. 

  • Non-GAAP net income (loss) per diluted share is calculated by dividing non-GAAP net income (loss) by GAAP weighted average diluted shares outstanding.

eHealth believes that the presentation of these non-GAAP financial measures provide important supplemental information to management and investors regarding financial and business trends relating to the Company's financial condition and results of operations. Management believes that the use of these non-GAAP financial measures provides consistency and comparability with the Company's past financial reports. Management also believes that the exclusion of the items described above provides an additional measure of the Company's operating results and facilitates comparisons of the Company's core operating performance against prior periods and business model objectives. This information is provided to investors in order to facilitate additional analyses of past, present and future operating performance and as a supplemental means to evaluate the Company's ongoing operations. Externally, the Company believes that these non-GAAP financial measures are useful to investors in their assessment of the Company's operating performance.

Non-GAAP operating income, non-GAAP operating margins, EBITDA, non-GAAP net income (loss) and non-GAAP net income (loss) per diluted share are not calculated in accordance with GAAP, and should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. Non-GAAP financial measures used in this press release have limitations in that they do not reflect all of the revenue and costs associated with the operations of the Company's business and do not reflect income tax as determined in accordance with GAAP. As a result, you should not consider these measures in isolation or as a substitute for analysis of eHealth's results as reported under GAAP. The Company expects to continue to incur the stock-based compensation costs and purchased intangible asset amortization costs described above, and exclusion of these costs, and their related income tax benefits, from non-GAAP financial measures should not be construed as an inference that these costs are unusual or infrequent. The Company compensates for these limitations by prominently disclosing GAAP operating income (loss), GAAP operating margins, GAAP net income (loss) and GAAP net income (loss) per diluted share and providing investors with reconciliations from the Company's GAAP operating results to the non-GAAP financial measures for the relevant periods.

The accompanying tables provide more details on the GAAP financial measures that are most directly comparable to the non-GAAP financial measures described above and the related reconciliations between these financial measures.

   
   
EHEALTH, INC.  
CONDENSED CONSOLIDATED BALANCE SHEETS  
(In thousands, unaudited)  
   
             
    December 31, 2012     December 31, 2013  
Assets   (1)     (unaudited)  
Current assets:                
  Cash and cash equivalents   $ 140,849     $ 107,055  
  Accounts receivable     4,468       4,586  
  Deferred income taxes     4,098       4,459  
  Prepaid expenses and other current assets     6,643       8,364  
Total current assets     156,058       124,464  
Property and equipment, net     6,185       10,283  
Deferred income taxes     2,928       4,569  
Other assets     8,123       5,518  
Intangible assets, net     8,911       7,496  
Goodwill     14,096       14,096  
Total assets   $ 196,301     $ 166,426  
                 
                 
Liabilities and stockholders' equity                
Current liabilities:                
  Accounts payable   $ 6,123     $ 4,381  
  Accrued compensation and benefits     8,244       10,291  
  Accrued marketing expenses     3,941       8,227  
  Deferred revenue     926       1,784  
  Other current liabilities     1,575       2,561  
Total current liabilities     20,809       27,244  
Non-current liabilities     4,625       6,165  
                 
Stockholders' equity:                
  Common stock     27       28  
  Additional paid-in capital     232,903       252,361  
  Treasury stock, at cost     (90,991 )     (149,998 )
  Retained earnings     28,743       30,466  
  Accumulated other comprehensive income     185       160  
Total stockholders' equity     170,867       133,017  
Total liabilities and stockholders' equity   $ 196,301     $ 166,426  
                 
(1) The condensed consolidated balance sheet at December 31, 2012 has been derived from the audited consolidated financial statements at that date.
   
   
   
EHEALTH, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)  
(In thousands, except per share amounts, unaudited)  
   
    Three Months Ended
December 31,
    Fiscal Year Ended
December 31,
 
    2012     2013     2012   2013  
                               
Revenue                              
  Commission   $ 37,305     $ 44,190     $ 130,663   $ 153,383  
  Other     8,000       9,975       24,810     25,797  
Total revenue     45,305       54,165       155,473     179,180  
Operating costs and expenses:                              
  Cost of revenue     1,245       1,020       4,783     5,461  
  Marketing and advertising (1)     18,647       28,212       57,789     71,660  
  Customer care and enrollment (1)     9,130       11,186       30,282     35,099  
  Technology and content (1)     5,388       8,994       21,406     32,579  
  General and administrative (1)     6,231       7,044       26,169     29,235  
  Amortization of intangible assets     354       353       1,615     1,414  
Total operating costs and expenses     40,995       56,809       142,044     175,448  
Income (loss) from operations     4,310       (2,644 )     13,429     3,732  
Other income (expense), net     (18 )     (24 )     23     (92 )
Income (loss) before provision (benefit) for income taxes     4,292       (2,668 )     13,452     3,640  
Provision (benefit) for income taxes     1,845       (708 )     6,370     1,917  
Net income (loss)   $ 2,447     $ (1,960 )   $ 7,082   $ 1,723  
                               
Net income (loss) per share:                              
  Basic   $ 0.12     $ (0.11 )   $ 0.36   $ 0.09  
  Diluted   $ 0.11     $ (0.11 )   $ 0.34   $ 0.09  
                               
Weighted-average number of shares used in per share amounts:                              
  Basic     20,331       18,656       19,867     19,145  
  Diluted     21,319       18,656       20,753     19,846  
                               
(1) Includes stock-based compensation as follows:                              
  Marketing and advertising   $ 283     $ 666     $ 1,215   $ 2,112  
  Customer care and enrollment     78       81       321     342  
  Technology and conent     238       512       1,021     1,641  
  General and administrative     697       1,182       3,065     3,707  
    Total   $ 1,296     $ 2,441     $ 5,622   $ 7,802  
                               
                               
                               
EHEALTH, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(In thousands, unaudited)  
   
    Three Months Ended December 31,     Fiscal Year Ended
December 31,
 
    2012     2013     2012     2013  
                                 
Operating activities                                
Net income (loss)   $ 2,447     $ (1,960 )   $ 7,082     $ 1,723  
Adjustments to reconcile net income to net cash provided by operating activities:                                
  Deferred income taxes     1,056       2,583       1,071       (1,368 )
  Depreciation and amortization     671       976       2,411       3,266  
  Amortization of book-of-business consideration     734       325       2,724       3,147  
  Amortization of intangible assets     354       353       1,615       1,414  
  Stock-based compensation expense     1,296       2,441       5,622       7,802  
  Deferred rent and other     125       12       176       927  
  Changes in operating assets and liabilities:                                
    Accounts receivable     (1,212 )     2,013       3,587       (118 )
    Prepaid expenses and other assets     (441 )     (1,405 )     (1,097 )     (2,257 )
    Accounts payable     1,552       153       3,732       (1,742 )
    Accrued compensation and benefits     (577 )     (478 )     336       2,026  
    Accrued marketing expenses     78       4,481       (2,254 )     4,285  
    Deferred revenue     589       (2,909 )     979       885  
    Other current liabilities     (1,434 )     (413 )     (1,093 )     957  
Net cash provided by operating activities     5,238       6,172       24,891       20,947  
                                 
                                 
Investing activities                                
Purchases of property and equipment     (725 )     (591 )     (3,853 )     (7,326 )
Book of business transfers     -       -       (6,243 )     -  
Net cash used in investing activities     (725 )     (591 )     (10,096 )     (7,326 )
                                 
Financing activities                                
Net proceeds from exercise of common stock options     4,431       4,567       8,445       9,217  
Cash used to net-share settle equity awards     (2 )     (3 )     (993 )     (943 )
Excess tax benefits from stock-based compensation     2,108       (834 )     4,466       3,383  
Repurchase of common stock     (993 )     -       (9,434 )     (59,007 )
Principle payments in connection with capital leases     (13 )     (12 )     (44 )     (53 )
Net cash (used in) provided by financing activities     5,531       3,718       2,440       (47,403 )
                                 
Effect of exchange rate changes on cash and cash equivalents     5       5       7       (12 )
                                 
Net increase (decrease) in cash and cash equivalents     10,049       9,304       17,242       (33,794 )
Cash and cash equivalents at beginning of period     130,800       97,751       123,607       140,849  
Cash and cash equivalents at end of period   $ 140,849     $ 107,055     $ 140,849     $ 107,055  
                                 
                                 
                                 
EHEALTH, INC.  
SUMMARY OF SELECTED METRICS  
(Unaudited)  
   
Key Metrics:   Three Months Ended December 31, 2012     Three Months Ended December 31, 2013  
                 
Operating cash flows (1)   $ 5,238,000     $ 6,172,000  
                 
IFP submitted applications (2)     113,600       169,800  
                 
IFP approved members (3)     93,600       125,300  
Total approved members (4)     186,700       266,600  
                 
Commission revenue (5)   $ 37,305,000     $ 44,190,000  
Commission revenue per estimated member for the period (6)   $ 39.07     $ 36.95  
                 
                 
    As of December 31, 2012     As of December 31, 2013  
                 
IFP estimated membership (7)     709,700       796,100  
Medicare estimated membership (8)     70,600       118,200  
Other estimated membership (9)     202,600       330,600  
Total estimated membership (10)     982,900       1,244,900  
                 
                 
Other Metrics:   Three Months Ended December 31, 2012     Three Months Ended December 31, 2013  
                 
Source of IFP submitted applications (as a percentage of total IFP applications for the period):                
  Direct (11)     49 %     41 %
  Marketing partners (12)     33 %     42 %
  Online advertising (13)     18 %     17 %
    Total     100 %     100 %
                 

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, student or Medicare-related health insurance plans.
(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) Commission revenue (from all sources) recognized during the period from the condensed consolidated statements of income (loss).
(6) Calculated as commission 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). See our Form 10-K for the year ended December 31, 2012 - 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. See our Form 10-K for the year ended December 31, 2012 - 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 Medicare insurance policies as of the date indicated. See our Form 10-K for the year ended December 31, 2012- 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 insurance policies other than IFP and Medicare policies as of the date indicated. See our Form 10-K for the year ended December 31, 2012 - 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. See our Form 10-K for the year ended December 31, 2012 - 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) 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.
(12) 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.
(13) 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.
   
   
EHEALTH, INC.  
GAAP TO NON-GAAP RECONCILIATION  
FOR THE THREE MONTHS ENDED DECEMBER 31, 2013  
(In thousands, except per share amounts, unaudited)  
   
Statement of Income Reconciliation                               
                               
    Three Months Ended December 31, 2013  
    GAAP Reported     GAAP Percent of Total Revenue     Adjustments     Non-GAAP Results     Non-GAAP Percent of Total Revenue  
                                     
Revenue:                                    
  Commission   $ 44,190     82 %   $ -     $ 44,190     82 %
  Other     9,975     18       -       9,975     18  
Total revenue     54,165     100       -       54,165     100  
  Operating costs and expenses:                                    
  Cost of revenue-sharing     1,020     2       -       1,020     2  
  Marketing and advertising (1)     28,212     52       (666 )     27,546     51  
  Customer care and enrollment (1)     11,186     21       (81 )     11,105     21  
  Technology and content (1)     8,994     17       (512 )     8,482     16  
  General and administrative (1)     7,044     13       (1,182 )     5,862     11  
  Amortization of intangible assets (2)     353     1       (353 )     -     -  
Total operating costs and expenses     56,809     105       (2,794 )     54,015     100  
Income (loss) from operations     (2,644 )   (5 )     2,794       150     0  
Other expense, net     (24 )   (0 )     -       (24 )   (0 )
Income before provision (benefit) for income taxes     (2,668 )   (5 )     2,794       126     0  
Provision (benefit) for income taxes (3)     (708 )   (1 )     1,107       399     1  
Net income (loss) (4)   $ (1,960 )   (4 )%   $ 1,687     $ (273 )   (1 )%
                                     
Net income (loss) per share: (4)                                    
  Basic - common stock   $ (0.11 )         $ 0.09     $ (0.01 )      
  Diluted - common stock   $ (0.11 )         $ 0.09     $ (0.01 )      
                                     
Weighted-average number of shares used in per share amounts:                                    
  Basic - common stock     18,656             18,656       18,656        
  Diluted - common stock     18,656             18,656       18,656        
                                     

Explanation of adjustments

(1) Non-GAAP results exclude the effect of expensing stock-based compensation related to stock options and restricted stock units in accordance with FASB ASC Topic 718.
(2) Non-GAAP results exclude intangible asset amortization expense.
(3) Non-GAAP provision for income taxes excludes the estimated income tax benefits related to stock-based compensation expense listed in note (1) above and intangible asset amortization expense listed in note (2) above.
(4) Non-GAAP net income (loss) and non-GAAP net income (loss) per share excludes stock-based compensation expense listed in note (1) above, intangible asset amortization expense listed in note (2) above, less the estimated income tax benefit listed in note (3) above.
   
   
EHEALTH, INC.  
GAAP TO NON-GAAP RECONCILIATION  
FOR THE THREE MONTHS ENDED DECEMBER 31, 2012  
(In thousands, except per share amounts, unaudited)  
   
Statement of Income Reconciliation                              
                               
    Three Months Ended December 31, 2012  
    GAAP Reported     GAAP Percent of Total Revenue     Adjustments     Non-GAAP Results     Non-GAAP Percent of Total Revenue  
                                     
Revenue:                                    
  Commission   $ 37,305     82 %   $ -     $ 37,305     82 %
  Other     8,000     18       -       8,000     18  
Total revenue     45,305     100       -       45,305     100  
  Operating costs and expenses:                                    
  Cost of revenue-sharing (1)     1,245     3       (435 )     810     2  
  Marketing and advertising (2)     18,647     41       (283 )     18,364     41  
  Customer care and enrollment (2)     9,130     20       (78 )     9,052     20  
  Technology and content (2)     5,388     12       (238 )     5,150     11  
  General and administrative (2)     6,231     14       (697 )     5,534     12  
  Amortization of intangible assets (3)     354     1       (354 )     -     -  
Total operating costs and expenses     40,995     90       (2,085 )     38,910     86  
Income from operations     4,310     10       2,085       6,395     14  
Other expense, net     (18 )   (0 )     -       (18 )   (0 )
Income before provision for income taxes     4,292     9       2,085       6,377     14  
Provision for income taxes (4)     1,845     4       662       2,507     6  
Net income (5)   $ 2,447     5 %   $ 1,423     $ 3,870     9 %
                                     
Net income per share: (5)                                    
  Basic - common stock   $ 0.12           $ 0.07     $ 0.19        
  Diluted - common stock   $ 0.11           $ 0.07     $ 0.18        
                                     
Weighted-average number of shares used in per share amounts:                                    
  Basic - common stock     20,331             20,331       20,331        
  Diluted - common stock     21,319             21,319       21,319        
                                     

Explanation of adjustments

   
(1) Non-GAAP results exclude an asset impairment charge.
(2) Non-GAAP results exclude the effect of expensing stock-based compensation related to stock options and restricted stock units in accordance with FASB ASC Topic 718.
(3) Non-GAAP results exclude intangible asset amortization expense.
(4) Non-GAAP provision for income taxes excludes the estimated income tax benefits related to the asset impairment charge listed in note (1) above, stock-based compensation expense listed in note (2) above and intangible asset amortization expense listed in note (3) above.
(5) Non-GAAP net income and non-GAAP net income per share exclude the asset impairment charge listed in note (1) above, stock-based compensation expense listed in note (2) above, intangible asset amortization expense listed in note (3) above, less the estimated income tax benefit listed in note (4) above.
   
   
EHEALTH, INC.  
GAAP TO NON-GAAP RECONCILIATION  
FOR THE YEAR FISCAL ENDED DECEMBER 31, 2013  
(In thousands, except per share amounts, unaudited)  
   
Statement of Income Reconciliation                               
                               
    Fiscal Year Ended December 31, 2013  
    GAAP Reported     GAAP Percent of Total Revenue     Adjustments     Non-GAAP Results     Non-GAAP Percent of Total Revenue  
                                     
Revenue:                                    
  Commission   $ 153,383     86 %   $ -     $ 153,383     86 %
  Other     25,797     14       -       25,797     14  
Total revenue     179,180     100       -       179,180     100  
  Operating costs and expenses:                                    
  Cost of revenue-sharing     5,461     3       -       5,461     3  
  Marketing and advertising (1)     71,660     40       (2,112 )     69,548     39  
  Customer care and enrollment (1)     35,099     20       (342 )     34,757     19  
  Technology and content (1)     32,579     18       (1,641 )     30,938     17  
  General and administrative (1)     29,235     16       (3,707 )     25,528     14  
  Amortization of intangible assets (2)     1,414     1       (1,414 )     -     -  
Total operating costs and expenses     175,448     98       (9,216 )     166,232     93  
Income from operations     3,732     2       9,216       12,948     7  
Other expense, net     (92 )   (0 )     -       (92 )   (0 )
Income before provision for income taxes     3,640     2       9,216       12,856     7  
Provision for income taxes (3)     1,917     1       3,684       5,601     3  
Net income (4)   $ 1,723     1 %   $ 5,532     $ 7,255     4 %
                                     
Net income per share: (4)                                    
  Basic - common stock   $ 0.09           $ 0.29     $ 0.38        
  Diluted - common stock   $ 0.09           $ 0.28     $ 0.37        
                                     
Weighted-average number of shares used in per share amounts:                                    
  Basic - common stock     19,145             19,145       19,145        
  Diluted - common stock     19,846             19,846       19,846        
                                       

Explanation of adjustments

(1) Non-GAAP results exclude the effect of expensing stock-based compensation related to stock options and restricted stock units in accordance with FASB ASC Topic 718.
(2) Non-GAAP results exclude intangible asset amortization expense.
(3) Non-GAAP provision for income taxes excludes the estimated income tax benefits related stock-based compensation expense listed in note (1) above and intangible asset amortization expense listed in note (2) above.
(4) Non-GAAP net income and non-GAAP net income per share excludes stock-based compensation expense listed in note (1) above, intangible asset amortization expense listed in note (2) above, less the estimated income tax benefit listed in note (3) above.
   
   
EHEALTH, INC.  
GAAP TO NON-GAAP RECONCILIATION  
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2012  
(In thousands, except per share amounts, unaudited)  
   
Statement of Income Reconciliation                           
                           
    Fiscal Year Ended December 31, 2012  
    GAAP Reported   GAAP Percent of Total Revenue     Adjustments     Non-GAAP Results   Non-GAAP Percent of Total Revenue  
                                 
Revenue:                                
  Commission   $ 130,663   84 %   $ -     $ 130,663   84 %
  Other     24,810   16       -       24,810   16  
Total revenue     155,473   100       -       155,473   100  
  Operating costs and expenses:                                
  Cost of revenue-sharing (1)     4,783   3       (435 )     4,348   3  
  Marketing and advertising (2)     57,789   37       (1,215 )     56,574   36  
  Customer care and enrollment (2)     30,282   19       (321 )     29,961   19  
  Technology and content (2)     21,406   14       (1,021 )     20,385   13  
  General and administrative (2)     26,169   17       (3,065 )     23,104   15  
  Amortization of intangible assets (3)     1,615   1       (1,615 )     -   -  
Total operating costs and expenses     142,044   91       (7,672 )     134,372   86  
Income from operations     13,429   9       7,672       21,101   14  
Other income, net     23   0       -       23   0  
Income before provision for income taxes     13,452   9       7,672       21,124   14  
Provision for income taxes (4)     6,370   4       2,161       8,531   5  
Net income (5)   $ 7,082   5 %   $ 5,511     $ 12,593   8 %
                                 
Net income per share: (5)                                
  Basic - common stock   $ 0.36         $ 0.27     $ 0.63      
  Diluted - common stock   $ 0.34         $ 0.27     $ 0.61      
                                 
Weighted-average number of shares used in per share amounts:                                
  Basic - common stock     19,867           19,867       19,867      
  Diluted - common stock     20,753           20,753       20,753      
                                 

Explanation of adjustments

(1) Non-GAAP results exclude an asset impairment charge.
(2) Non-GAAP results exclude the effect of expensing stock-based compensation related to stock options and restricted stock units in accordance with FASB ASC Topic 718.
(3) Non-GAAP results exclude intangible asset amortization expense.
(4) Non-GAAP provision for income taxes excludes the estimated income tax benefits related to the asset impairment charge listed in note (1) above, stock-based compensation expense listed in note (2) above and intangible asset amortization expense listed in note (3) above.
(5) Non-GAAP net income and non-GAAP net income per share exclude the asset impairment charge listed in note (1) above, stock-based compensation expense listed in note (2) above, intangible asset amortization expense listed in note (3) above, less the estimated income tax benefit listed in note (4) above.
   
   
   
EHEALTH, INC.
GAAP NET INCOME (LOSS) TO NON-GAAP EBITDA RECONCILIATION
FOR THE THREE MONTHS AND FISCAL YEARS ENDED DECEMBER 31, 2012 AND 2013
(In thousands, unaudited)
                     
EBITDA Reconciliation                    
    Three Months Ended
December 31,
    Fiscal Year Ended
December 31,
    2012   2013     2012     2013
                             
Net income (loss)   $ 2,447   $ (1,960 )   $ 7,082     $ 1,723
Stock-based compensation expense (1)     1,296     2,441       5,622       7,802
Depreciation and amortization (2)     671     976       2,411       3,266
Amortization of intangible assets (2)     354     353       1,615       1,414
Other (income) expense, net (3)     18     24       (23 )     92
Provision (benefit) for income taxes (4)     1,845     (708 )     6,370       1,917
EBITDA   $ 6,631   $ 1,126     $ 23,077     $ 16,214
                             

Explanation of adjustments

(1) Non-GAAP EBITDA excludes the effect of expensing stock-based compensation related to stock options and restricted stock units in accordance with FASB ASC Topic 718.
(2) Non-GAAP EBITDA excludes depreciation and amortization expense, including intangible asset amortization expense.
(3) Non-GAAP EBITDA excludes other income (expense), net.
(4) Non-GAAP EBITDA excludes income tax expense (benefit).

Contact Information