SOURCE: eHealth, Inc.

eHealth, Inc.

July 26, 2012 16:15 ET

eHealth, Inc. Announces Second Quarter 2012 Results

Second Quarter 2012 Overview

-- Revenue of $35.5 million, compared to revenue of $36.2 million for the second quarter of 2011

-- Submitted applications for IFP products increased 2% from the second quarter of 2011

-- Total approved members increased 19% from the second quarter of 2011

-- Operating income of $4.1 million, compared to operating income of $4.9 million for the second quarter of 2011

-- EBITDA of $6.5 million, compared to EBITDA of $7.8 million for the second quarter of 2011

-- GAAP operating margins of 12% and non-GAAP operating margins of 17% for the second quarter of 2012

-- GAAP net income of $2.3 million, or $0.11 per diluted share, and non-GAAP net income of $3.5 million, or $0.17 per diluted share, for the second quarter of 2012

-- Cash flows from operations were $7.6 million, compared to cash flows from operations of $7.8 million for the second quarter of 2011

MOUNTAIN VIEW, CA--(Marketwire - Jul 26, 2012) -  eHealth, Inc. (NASDAQ: EHTH), the leading online source of health insurance for individuals, families and small businesses, today announced its financial results for the second quarter ended June 30, 2012.

Gary Lauer, chief executive officer of eHealth stated, "I am very pleased with the strong results across the key areas of our business. Our second quarter results are a reflection of our great employees focusing on and delivering on the company's strategic objectives in the new world of healthcare." 

Second Quarter Results

Revenue -- Revenue for the second quarter of 2012 totaled $35.5 million, a 2% decrease compared to revenue of $36.2 million for the second quarter of 2011. Commission revenue for the second quarter of 2012 totaled $30.6 million, a 2% increase compared to commission revenue of $30.1 million for the second quarter of 2011. Second quarter Medicare revenue was $5.0 million, a 130% increase compared to the second quarter of 2011.

Submitted Applications -- Submitted applications for individual and family products increased 2% in the second quarter of 2012 to 103,400 applications, compared to 101,600 applications in the second quarter of 2011. Stuart Huizinga, chief financial officer of eHealth said, "We are pleased to return to submitted applications growth in our Individual and Family Product business, after two challenging years. We were able to resume growth at a favorable level of acquisition costs per submitted individual and family plan member. In fact, we posted a year-over-year improvement in this metric for eight consecutive quarters."

Membership -- Estimated membership at June 30, 2012 totaled 876,900 members, a 9% increase over estimated membership of 804,100 at June 30, 2011. Total approved members, including individual and family plan, Medicare plan and other product members, increased 19% to 148,500 in the second quarter of 2012, compared to 124,400 in the second quarter of 2011.

Operating Income -- Operating income for the second quarter of 2012 was $4.1 million, compared to operating income of $4.9 million for the second quarter of 2011. Operating margins were 12% and 13% in the second quarters of 2012 and 2011, respectively.

Non-GAAP operating income for the second quarter of 2012 was $6.0 million, compared to non-GAAP operating income of $7.2 million for the second quarter of 2011. Non-GAAP operating margins were 17% and 20% in the second quarters of 2012 and 2011, respectively. Non-GAAP operating income and margins in the second quarter of 2012 exclude $1.4 million of stock-based compensation expense and $0.5 million of intangible asset amortization expense. Non-GAAP operating income and margins in the second quarter of 2011 exclude $1.9 million of stock-based compensation expense and $0.4 million of intangible asset amortization expense.

EBITDA -- EBITDA for the second quarter of 2012 was $6.5 million, compared to EBITDA of $7.8 million for the second quarter of 2011.

Pre-tax Income -- Pre-tax income for the second quarter of 2012 was $4.2 million, compared to pre-tax income of $4.8 million for the second quarter of 2011.

Net Income -- Net income for the second quarter of 2012 was $2.3 million, or $0.11 per diluted share, compared to net income of $2.7 million, or $0.12 per diluted share for the second quarter of 2011. Non-GAAP net income for the second quarter of 2012 was $3.5 million, or $0.17 per diluted share, compared to non-GAAP net income of $4.2 million, or $0.19 per diluted share for the second quarter of 2011. Non-GAAP net income and non-GAAP net income per diluted share in the second quarter of 2012 exclude $1.4 million of stock-based compensation expense and $0.5 million of intangible asset amortization expense, less $0.7 million for related income tax benefit. Non-GAAP net income and non-GAAP net income per diluted share in the second quarter of 2011 exclude $1.9 million of stock-based compensation expense and $0.4 million of intangible asset amortization expense, less $0.9 million for related income tax expense.

Cash Flows and Cash Balance -- Cash flows from operations for the second quarter of 2012 were $7.6 million, a 2% decrease compared to cash flows from operations of $7.8 million for the second quarter of 2011.

Year-to-Date Results

Revenue -- Revenue totaled $72.6 million for the six months ended June 30, 2012, a 2% decrease compared to revenue of $73.7 million for the six months ended June 30, 2011. Medicare revenue was approximately $11.4 million in the six months ended June 30, 2012, a 156% increase compared to the six months ended June 30, 2011.

Operating Income -- Operating income for the six months ended June 30, 2012 was $8.0 million, compared to operating income of $8.8 million for the six months ended June 30, 2011. Operating margins were 11% and 12% for the six-month periods ended June 30, 2012 and 2011, respectively.

EBITDA -- EBITDA for the six months ended June 30, 2012 was $13.1 million, compared to EBITDA of $14.7 million for the six months ended June 30, 2011.

Pre-tax Income -- Pre-tax income for the six months ended June 30, 2012 was $8.1 million, compared to pre-tax income of $8.8 million for the six months ended June 30, 2011.

Net Income -- Net income for the six months ended June 30, 2012 was $4.4 million, or $0.22 per diluted share, compared to net income for the six months ended June 30, 2011 of $4.7 million, or $0.21 per diluted share.

Cash Flows -- Cash flows from operations for the six months ended June 30, 2012 were $12.7 million, a 13% decrease compared to $14.6 million for the six months ended June 30, 2011.

Cash and cash equivalents as of June 30, 2012 totaled $122.1 million, compared to $123.6 million as of December 31, 2011. The change in cash and cash equivalents reflects $8.4 million used to repurchase 0.6 million shares of our common stock in the first six months of 2012 as a part of a stock repurchase program. In the first six months of 2012, eHealth completed a $30 million share repurchase program at an average per share price of $13.78. The change in cash and cash equivalents also reflects $6.2 million of cash consideration paid to a partner, whereby the partner transferred certain of its existing Medicare plan members to us as the broker of record on the underlying policies. Partially offsetting these uses of cash was $12.7 million of cash generated by operating activities in the six months ended June 30, 2012.

2012 Guidance

eHealth is reaffirming its guidance for the full year ending December 31, 2012 provided on its last earnings call as follows:

  • Total revenue is expected to be in the range of $152 million to $158 million
  • Stock-based compensation expense is expected to be in the range of $6.5 million to $8 million
  • EBITDA* is expected to be in the range of $21 million to $26 million
  • Non-GAAP net income per diluted share** is expected to be in the range of $0.56 to $0.66 per share

* 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, July 26, 2012 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 866-788-0545 for domestic callers and 857-350-1683 for international callers. The participant passcode is 59480323. 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 32134779. 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. For more health insurance news and information, visit the eHealthInsurance consumer blog: Get Smart -- Get Covered.

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 guidance for total revenue, stock-based compensation expense, EBITDA, and non-GAAP net income per diluted share for the year ending December 31, 2012. 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 its relationship with health insurance carriers; eHealth's success in marketing and selling Medicare-related 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; government disapproval of our use of marketing material, including call center scripts and our websites, to sell Medicare-related health insurance products; costs of acquiring new members; weak economic conditions; consumer awareness of the availability and accessibility of affordable health insurance; 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 or carrier underwriting practices; 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; our operations in China; success of eHealth's sponsorship and advertising business; the licensing of the use of eHealth's technology or our performance of services pursuant to government contracts; protection of intellectual property and defense of intellectual property rights claims; legal liability, regulatory penalties and negative publicity;changes in our management and key employees; management of business expansion 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; government approval of marketing material, including websites relating to PlanPrescriber partner Medicare product lead referrals; maintenance of proper and effective internal controls; impact of provisions for income taxes; changes in laws and regulations, including 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 and non-GAAP net income 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 for income taxes to GAAP net income.
  • Non-GAAP net income consists of GAAP net 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,
    • intangible asset amortization expense, and
    • the related income tax benefit 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 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, 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.

   
   
EHEALTH, INC.  
CONDENSED CONSOLIDATED BALANCE SHEETS  
(In thousands, unaudited)  
   
             
    December 31, 2011     June 30,
 2012
 
Assets    (1)          
Current assets:                
  Cash and cash equivalents   $ 123,607     $ 122,055  
  Accounts receivable     8,055       3,661  
  Deferred income taxes     4,622       4,259  
  Prepaid expenses and other current assets     3,377       5,891  
Total current assets     139,661       135,866  
Property and equipment, net     4,631       5,760  
Deferred income taxes     3,390       3,954  
Other assets     5,641       9,094  
Intangible assets, net     10,526       9,619  
Goodwill     14,096       14,096  
Total assets   $ 177,945     $ 178,389  
                 
                 
Liabilities and stockholders' equity                
                 
Current liabilities:                
  Accounts payable   $ 2,391     $ 3,748  
  Accrued compensation and benefits     7,904       6,335  
  Accrued marketing expenses     6,195       3,156  
  Deferred revenue     314       402  
  Other current liabilities     1,547       3,482  
Total current liabilities     18,351       17,123  
Non-current liabilities     3,920       4,047  
                 
Stockholders' equity:                
  Common stock     26       26  
  Additional paid-in capital     215,364       220,922  
  Treasury stock, at cost     (81,557 )     (89,998 )
  Retained earnings     21,661       26,091  
  Accumulated other comprehensive income     180       178  
Total stockholders' equity     155,674       157,219  
Total liabilities and stockholders' equity   $ 177,945     $ 178,389  
                 
(1)  The condensed consolidated balance sheet at December 31, 2011 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
June 30,
  Six Months Ended
June 30,
    2011     2012   2011     2012
                             
Revenue:                            
  Commission   $ 30,079     $ 30,603   $ 60,839     $ 62,067
  Other     6,107       4,904     12,902       10,515
Total revenue     36,186       35,507     73,741       72,582
Operating costs and expenses:                            
  Cost of revenue     2,555       764     5,206       2,439
  Marketing and advertising (1)     11,668       12,167     24,577       25,154
  Customer care and enrollment (1)     4,610       6,358     10,020       12,329
  Technology and content (1)     5,415       5,033     10,885       10,515
  General and administrative (1)     6,661       6,590     13,382       13,194
  Amortization of intangible assets     427       460     854       907
Total operating costs and expenses     31,336       31,372     64,924       64,538
Income from operations     4,850       4,135     8,817       8,044
Other income (expense), net     (21 )     16     (40 )     37
Income before provision for income taxes     4,829       4,151     8,777       8,081
Provision for income taxes     2,097       1,846     4,064       3,651
Net income   $ 2,732     $ 2,305   $ 4,713     $ 4,430
                             
Net income per share:                            
  Basic   $ 0.13     $ 0.12   $ 0.22     $ 0.23
  Diluted   $ 0.12     $ 0.11   $ 0.21     $ 0.22
                             
Weighted-average number of shares used in per share amounts:                            
  Basic     21,390       19,624     21,371       19,580
  Diluted     22,119       20,497     22,079       20,471
                             
(1) Includes stock-based compensation expense as follows:                            
    Marketing and advertising   $ 276     $ 362   $ 522     $ 602
    Customer care and enrollment     74       74     181       153
    Technology and content     470       217     925       550
    General and administrative     1,117       709     2,170       1,682
      Total   $ 1,937     $ 1,362   $ 3,798     $ 2,987
                                   
                                   
                             
EHEALTH, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(In thousands, unaudited)  
   
                         
    Three Months Ended June 30,     Six Months Ended
June 30,
 
    2011     2012     2011     2012  
Operating activities                                
Net income   $ 2,732     $ 2,305     $ 4,713     $ 4,430  
Adjustments to reconcile net income to net cash provided by operating activities:                                
  Deferred income taxes     1,887       678       3,664       1,045  
  Depreciation and amortization     597       538       1,266       1,114  
  Amortization of intangible assets     427       460       854       907  
  Stock-based compensation expense     1,937       1,362       3,798       2,987  
  Excess tax benefits from stock-based compensation     (1,464 )     (636 )     (2,553 )     (1,187 )
  Deferred rent     (11 )     (7 )     (20 )     (17 )
  Loss on disposal of property and equipment     --       --       3       --  
  Changes in operating assets and liabilities:                                
    Accounts receivable     1,100       2,579       6,577       4,394  
    Prepaid expenses and other current assets     1,218       310       1,525       715  
    Other assets     56       (300 )     26       (439 )
    Accounts payable     211       514       (1,169 )     1,356  
    Accrued compensation and benefits     1,504       860       (679 )     (1,572 )
    Accrued marketing expenses     (335 )     (508 )     (230 )     (3,039 )
    Deferred revenue     (1,245 )     (1,187 )     (2,129 )     88  
    Other current liabilities     (798 )     664       (1,055 )     1,943  
Net cash provided by operating activities     7,816       7,632       14,591       12,725  
                                 
Investing activities                                
Purchases of property and equipment     (734 )     (1,943 )     (1,239 )     (2,146 )
Books of business transfers     (3,004 )     (1,870 )     (3,769 )     (6,243 )
Net cash used in investing activities     (3,738 )     (3,813 )     (5,008 )     (8,389 )
                                 
Financing activities                                
Proceeds from exercise of common stock options     46       1,376       72       2,370  
Cash used to net-share settle equity awards     (2 )     (6 )     (544 )     (986 )
Excess tax benefits from stock-based compensation     1,464       636       2,553       1,187  
Repurchases of common stock     --       --       (3,796 )     (8,441 )
Principal payments in connection with capital lease     (16 )     (12 )     (30 )     (18 )
Net cash provided by (used in) financing activities     1,492       1,994       (1,745 )     (5,888 )
                                 
Effect of exchange rate changes on cash and cash equivalents     (11 )     1       (19 )     --  
                                 
Net increase (decrease) in cash and cash equivalents     5,559       5,814       7,819       (1,552 )
Cash and cash equivalents at beginning of period     130,334       116,241       128,074       123,607  
Cash and cash equivalents at end of period   $ 135,893     $ 122,055     $ 135,893     $ 122,055  
                                 
                                 
                                 
EHEALTH, INC.  
SUMMARY OF SELECTED METRICS  
(Unaudited)  
   
             
Key Metrics:   Three Months Ended June 30, 2011     Three Months Ended June 30, 2012  
             
Operating cash flows (1)   $ 7,816,000     $ 7,632,000  
                 
IFP submitted applications (2)     101,600       103,400  
                 
IFP approved members (3)     87,600       87,900  
Total approved members (4)     124,400       148,500  
                 
Commission revenue (5)   $ 30,079,000     $ 30,603,000  
Commission revenue per estimated member for the period (6)   $ 37.47     $ 35.47  
                 
Total revenue (7)   $ 36,186,000     $ 35,507,000  
Total revenue per estimated member for the period (8)   $ 45.08     $ 41.16  
                 
    As of
June 30, 2011
    As of
June 30, 2012
 
             
IFP estimated membership (9)     688,100       684,000  
Total estimated membership (10)     804,100       876,900  
                 
    Three Months Ended June 30, 2011     Three Months Ended June 30, 2012  
                 
Marketing and advertising expenses (11)   $ 11,668,000     $ 12,167,000  
Marketing and advertising expenses as a percentage of total revenue (12)     32 %     34 %
                 
Other Metrics:                
                 
Source of IFP submitted applications (as a percentage of total IFP applications for the period):                
  Direct (13)     45 %     47 %
  Marketing partners (14)     32 %     31 %
  Online advertising (15)     23 %     22 %
    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.
(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, 2011 - 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). See our Form 10-K for the year ended December 31, 2011 - 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. See our Form 10-K for the year ended December 31, 2011 - 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, 2011 - 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) Percentage of IFP submitted applications from applicants who came directly to the eHealth website through algorithmic search engine results or otherwise. See note (2) above for further information as to what constitutes a submitted application.
(14) Percentage of IFP submitted applications from applicants sourced through eHealth's network of marketing partners. See note (2) above for further information as to what constitutes a submitted application.
(15) Percentage of IFP submitted applications from applicants sourced through paid search and other online advertising activities. See note (2) above for further information as to what constitutes a submitted application.
   
   
   
EHEALTH, INC.  
GAAP TO NON-GAAP RECONCILIATION  
FOR THE THREE MONTHS ENDED JUNE 30, 2012  
(In thousands, except per share amounts, unaudited)  
   
Statement of Income Reconciliation  
   
    Three Months Ended June 30, 2012  
    GAAP Reported   GAAP
Percent of Total Revenue
    Adjustments     Non-GAAP Results   Non-GAAP
Percent of Total Revenue
 
                                 
Revenue:                                
  Commission   $ 30,603   86 %   $ --     $ 30,603   86 %
  Other     4,904   14       --       4,904   14  
Total revenue     35,507   100       --       35,507   100  
Operating costs and expenses:                                
  Cost of revenue     764   2       --       764   2  
  Marketing and advertising (1)     12,167   34       (362 )     11,805   33  
  Customer care and enrollment (1)     6,358   18       (74 )     6,284   18  
  Technology and content (1)     5,033   14       (217 )     4,816   14  
  General and administrative (1)     6,590   19       (709 )     5,881   17  
  Amortization of intangible assets (2)     460   1       (460 )     --   --  
Total operating costs and expenses     31,372   88       (1,822 )     29,550   83  
Income from operations     4,135   12       1,822       5,957   17  
Other income, net     16   0       --       16   0  
Income before provision for income taxes     4,151   12       1,822       5,973   17  
Provision for income taxes (3)     1,846   5       656       2,502   7  
Net income (4)   $ 2,305   6 %   $ 1,166     $ 3,471   10 %
                                 
Net income per share: (4)                                
    Basic   $ 0.12         $ 0.06     $ 0.18      
    Diluted   $ 0.11         $ 0.06     $ 0.17      
                                 
Weighted-average number of shares used in per share amounts:                                
    Basic     19,624           19,624       19,624      
    Diluted     20,497           20,497       20,497      
                                   

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 estimated income tax benefit of $0.7 million 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 and non-GAAP net income per share exclude 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 JUNE 30, 2011  
(In thousands, except per share amounts, unaudited)  
   
Statement of Income Reconciliation  
   
    Three Months Ended June 30, 2011  
    GAAP Reported     GAAP
Percent of Total Revenue
    Adjustments     Non-GAAP Results     Non-GAAP
Percent of Total Revenue
 
                                     
Revenue:                                    
  Commission   $ 30,079     83 %   $ --     $ 30,079     83 %
  Other     6,107     17       --       6,107     17  
Total revenue     36,186     100       --       36,186     100  
Operating costs and expenses:                                    
  Cost of revenue     2,555     7       --       2,555     7  
  Marketing and advertising (1)     11,668     32       (276 )     11,392     31  
  Customer care and enrollment (1)     4,610     13       (74 )     4,536     13  
  Technology and content (1)     5,415     15       (470 )     4,945     14  
  General and administrative (1)     6,661     18       (1,117 )     5,544     15  
  Amortization of intangible assets (2)     427     1       (427 )     --     --  
Total operating costs and expenses     31,336     87       (2,364 )     28,972     80  
Income from operations     4,850     13       2,364       7,214     20  
Other income (expense), net     (21 )   (0 )     --       (21 )   (0 )
Income before provision for income taxes     4,829     13       2,364       7,193     20  
Provision for income taxes (3)     2,097     6       895       2,992     8  
Net income (4)   $ 2,732     8 %   $ 1,469     $ 4,201     12 %
                                     
Net income per share: (4)                                    
    Basic   $ 0.13           $ 0.07     $ 0.20        
    Diluted   $ 0.12           $ 0.07     $ 0.19        
                                     
Weighted-average number of shares used in per share amounts:                                    
    Basic     21,390             21,390       21,390        
    Diluted     22,119             22,119       22,119        
                                     

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 estimated income tax benefit of $0.9 million 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 and non-GAAP net income per share exclude 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 SIX MONTHS ENDED JUNE 30, 2012  
(In thousands, except per share amounts, unaudited)  
   
Statement of Income Reconciliation              
                           
    Six Months Ended June 30, 2012  
    GAAP Reported   GAAP
Percent of Total Revenue
    Adjustments     Non-GAAP Results   Non-GAAP
Percent of Total Revenue
 
                                 
Revenue:                                
  Commission   $ 62,067   86 %   $ --     $ 62,067   86 %
  Other     10,515   14       --       10,515   14  
Total revenue     72,582   100               72,582   100  
Operating costs and expenses:                                
  Cost of revenue     2,439   3       --       2,439   3  
  Marketing and advertising (1)     25,154   35       (602 )     24,552   34  
  Customer care and enrollment (1)     12,329   17       (153 )     12,176   17  
  Technology and content (1)     10,515   14       (550 )     9,965   14  
  General and administrative (1)     13,194   18       (1,682 )     11,512   16  
  Amortization of intangible assets (2)     907   1       (907 )     --   --  
Total operating costs and expenses     64,538   89       (3,894 )     60,644   84  
Income from operations     8,044   11       3,894       11,938   16  
Other income, net     37   0       --       37   0  
Income before income taxes     8,081   11       3,894       11,975   16  
Provision for income taxes (3)     3,651   5       1,390       5,041   7  
Net income (4)   $ 4,430   6 %   $ 2,504     $ 6,934   10 %
                                 
Net income per share: (4)                                
    Basic   $ 0.23         $ 0.12     $ 0.35      
    Diluted   $ 0.22         $ 0.12     $ 0.34      
                                 
Weighted-average number of shares used in per share amounts:                                
    Basic     19,580           19,580       19,580      
    Diluted     20,471           20,471       20,471      
                                   

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 estimated income tax benefit of $1.4 million 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 and non-GAAP net income per share exclude 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 SIX MONTHS ENDED JUNE 30, 2011  
(In thousands, except per share amounts, unaudited)  
   
Statement of Income Reconciliation  
   
                               
    Six Months Ended June 30, 2011  
    GAAP Reported     GAAP
Percent of Total Revenue
    Adjustments     Non-GAAP Results     Non-GAAP
Percent of Total Revenue
 
                                     
Revenue:                                    
  Commission   $ 60,839     83 %   $ --     $ 60,839     83 %
  Other     12,902     17       --       12,902     17  
Total revenue     73,741     100       --       73,741     100  
Operating costs and expenses:                                    
  Cost of revenue     5,206     7       --       5,206     7  
  Marketing and advertising (1)     24,577     33       (522 )     24,055     33  
  Customer care and enrollment (1)     10,020     14       (181 )     9,839     13  
  Technology and content (1)     10,885     15       (925 )     9,960     14  
  General and administrative (1)     13,382     18       (2,170 )     11,212     15  
  Amortization of intangible assets (2)     854     1       (854 )     --     --  
Total operating costs and expenses     64,924     88       (4,652 )     60,272     82  
Income from operations     8,817     12       4,652       13,469     18  
Other income (expense), net     (40 )   (0 )     --       (40 )   (0 )
Income before income taxes     8,777     12       4,652       13,429     18  
Provision for income taxes (3)     4,064     6       1,490       5,554     8  
Net income (4)   $ 4,713     6 %   $ 3,162     $ 7,875     11 %
                                     
Net income per share: (4)                                    
    Basic   $ 0.22           $ 0.15     $ 0.37        
    Diluted   $ 0.21           $ 0.15     $ 0.36        
                                     
Weighted-average number of shares used in per share amounts:                                    
    Basic     21,371             21,371       21,371        
    Diluted     22,079             22,079       22,079        
                                       

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 estimated income tax benefit of $1.5 million 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 and non-GAAP net income per share exclude 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 NET INCOME TO NON-GAAP EBITDA RECONCILIATION  
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011 AND 2012  
(In thousands, unaudited)  
   
EBITDA Reconciliation  
   
                     
    Three Months Ended
June 30,
    Six Months Ended
June 30,
 
    2011   2012     2011   2012  
                             
Net income   $ 2,732   $ 2,305     $ 4,713   $ 4,430  
Stock-based compensation expense (1)     1,937     1,362       3,798     2,987  
Depreciation and amortization (2)     597     538       1,266     1,114  
Amortization of intangible assets (2)     427     460       854     907  
Other (income) expense, net (3)     21     (16 )     40     (37 )
Provision for income taxes (4)     2,097     1,846       4,064     3,651  
EBITDA   $ 7,811   $ 6,495     $ 14,735   $ 13,052  
                             

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.

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