SOURCE: eHealth, Inc.

eHealth, Inc.

October 25, 2012 16:15 ET

eHealth, Inc. Announces Third Quarter 2012 Results

Third Quarter 2012 Overview

-- Revenue of $37.6 Million, an Increase of 8% Compared to the Third Quarter of 2011

-- Submitted Applications for IFP Products Increased 5% From the Third Quarter of 2011

-- Total Approved Members Increased 24% From the Third Quarter of 2011

-- Operating Income of $1.1 Million, Compared to Operating Income of $43 Thousand for the Third Quarter of 2011

-- GAAP Net Income of $0.2 Million, or $0.01 per Diluted Share, and Non-Gaap Net Income of $1.8 Million, or $0.09 per Diluted Share, for the Third Quarter of 2012

-- Special Tax Expense Item of $0.6 Million, a Negative Impact of $0.03 per Diluted Share for the Third Quarter of 2012

-- Cash Flows From Operations Were $6.9 Million, an Increase of 28% Compared to the Third Quarter of 2011

MOUNTAIN VIEW, CA--(Marketwire - Oct 25, 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 third quarter ended September 30, 2012.

Gary Lauer, chief executive officer of eHealth stated, "We are very pleased with our third quarter results. During the quarter we saw further improvement in our Individual & Family business highlighted by both membership and submitted application growth, we continued to generate strong growth in Medicare product sales and, importantly, we invested in and prepared for the Medicare Annual Enrollment Period which started on October 15th." 

Third Quarter Results

Revenue - Revenue for the third quarter of 2012 totaled $37.6 million, an 8% increase compared to revenue of $34.8 million for the third quarter of 2011. Commission revenue for the third quarter of 2012 totaled $31.3 million, an 11% increase compared to commission revenue of $28.2 million for the third quarter of 2011. Third quarter Medicare revenue was $6.3 million, a 93% increase compared to Medicare revenue of $3.2 million for the third quarter of 2011.

Submitted Applications - Submitted applications for individual and family products increased 5% in the third quarter of 2012 to 120,100 applications, compared to 114,800 applications in the third quarter of 2011.

Membership - Estimated membership at September 30, 2012 totaled 926,600 members, a 14% increase over estimated membership of 810,400 at September 30, 2011. Total approved members, including individual and family plan, Medicare plan and other product members, increased 24% to 174,500 in the third quarter of 2012, compared to 140,300 in the third quarter of 2011.

Operating Income - Operating income for the third quarter of 2012 was $1.1 million, compared to operating income of $43 thousand for the third quarter of 2011. Operating margins were 3% and 0% in the third quarters of 2012 and 2011, respectively. Non-GAAP operating income for the third quarter of 2012 was $2.8 million, an increase of 21% compared to non-GAAP operating income of $2.3 million for the third quarter of 2011. Non-GAAP operating margins were 7% in both the third quarters of 2012 and 2011. Non-GAAP operating income and margins in the third quarter of 2012 exclude $1.3 million of stock-based compensation expense and $0.4 million of intangible asset amortization expense. Non-GAAP operating income and margins in the third quarter of 2011 exclude $1.8 million of stock-based compensation expense and $0.4 million of intangible asset amortization expense.

EBITDA - EBITDA for the third quarter of 2012 was $3.4 million, an increase of 20% compared to EBITDA of $2.8 million for the third quarter of 2011.

Pre-tax Income - Pre-tax income for the third quarter of 2012 was $1.1 million, compared to pre-tax income of $22 thousand for the third quarter of 2011.

Provision for Income Taxes - Income taxes for the third quarter of 2012 included a special tax expense item of $0.6 million, or $(0.03) per diluted share, related to tax shortfalls resulting from the cancellation of stock options previously issued pursuant to our equity incentive plans. Income taxes for the third quarter of 2011 included a special tax expense item of $0.2 million, or $(0.01) per diluted share, related to additional tax expense we recorded as a result of an increase in our estimated effective tax rate for the full year 2011 and tax shortfalls resulting from the cancellation of stock options previously issued pursuant to our equity incentive plans.

Net Income - Net income for the third quarter of 2012 was $0.2 million, or $0.01 per diluted share, compared to net loss of $0.2 million, or ($0.01) per diluted share for the third quarter of 2011. Non-GAAP net income for the third quarter of 2012 was $1.8 million, or $0.09 per diluted share, compared to non-GAAP net income of $1.2 million, or $0.06 per diluted share for the third quarter of 2011. Non-GAAP net income and non-GAAP net income per diluted share in the third quarter of 2012 exclude $1.3 million of stock-based compensation expense and $0.4 million of intangible asset amortization expense, less $0.1 million for related income tax benefit. Non-GAAP net income and non-GAAP net income per diluted share in the third quarter of 2011 exclude $1.8 million of stock-based compensation expense and $0.4 million of intangible asset amortization expense, less $0.8 million for related income tax expense.

Cash Flows and Cash Balance - Cash flows from operations for the third quarter of 2012 were $6.9 million, a 28% increase compared to cash flows from operations of $5.4 million for the third quarter of 2011.

Year-to-Date Results

Revenue - Revenue totaled $110.2 million for the nine months ended September 30, 2012, a 2% increase compared to revenue of $108.5 million for the nine months ended September 30, 2011. Medicare revenue was approximately $17.7 million in the nine months ended September 30, 2012, a 130% increase compared to Medicare revenue of $7.7 million for the nine months ended September 30, 2011.

Operating Income - Operating income for the nine months ended September 30, 2012 was $9.1 million, compared to operating income of $8.9 million for the nine months ended September 30, 2011. Operating margins were 8% for both nine-month periods ended September 30, 2012 and 2011, respectively.

EBITDA - EBITDA for the nine months ended September 30, 2012 was $16.4 million, compared to EBITDA of $17.6 million for the nine months ended September 30, 2011.

Pre-tax Income - Pre-tax income for the nine months ended September 30, 2012 was $9.2 million, compared to pre-tax income of $8.8 million for the nine months ended September 30, 2011.

Net Income - Net income for the nine months ended September 30, 2012 was $4.6 million, or $0.23 per diluted share, compared to net income for the nine months ended September 30, 2011 of $4.5 million, or $0.20 per diluted share.

Cash Flows - Cash flows from operations for the nine months ended September 30, 2012 were $19.7 million, a 2% decrease compared to $20.0 million for the nine months ended September 30, 2011.

Cash and cash equivalents as of September 30, 2012 totaled $130.8 million, compared to $123.6 million as of December 31, 2011. The increase in cash and cash equivalents reflects $19.7 million of cash generated by operating activities in the nine months ended September 30, 2012. Partially offsetting this increase was $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, and $8.4 million used to repurchase 0.6 million shares of our common stock in the first nine months of 2012 as a part of a stock repurchase program. In the first nine months of 2012, eHealth completed a $30 million share repurchase program at an average per share price of $13.78.

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, October 25, 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 866-804-6923 for domestic callers and 857-350-1669 for international callers. The participant passcode is 68964431. 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 37691601. 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     September 30, 2012  
Assets   (1)     (unaudited)  
Current assets:                
  Cash and cash equivalents   $ 123,607     $ 130,800  
  Accounts receivable     8,055       3,256  
  Deferred income taxes     4,622       4,306  
  Prepaid expenses and other current assets     3,377       5,078  
Total current assets     139,661       143,440  
Property and equipment, net     4,631       6,131  
Deferred income taxes     3,390       3,735  
Other assets     5,641       8,848  
Intangible assets, net     10,526       9,265  
Goodwill     14,096       14,096  
Total assets   $ 177,945     $ 185,515  
                 
Liabilities and stockholders' equity                
Current liabilities:                
  Accounts payable   $ 2,391     $ 4,571  
  Accrued compensation and benefits     7,904       8,819  
  Accrued marketing expenses     6,195       3,864  
  Deferred revenue     314       704  
  Other current liabilities     1,547       1,864  
Total current liabilities     18,351       19,822  
Non-current liabilities     3,920       4,117  
                 
Stockholders' equity:                
  Common stock     26       27  
  Additional paid-in capital     215,364       225,070  
  Treasury stock, at cost     (81,557 )     (89,998 )
  Retained earnings     21,661       26,296  
  Accumulated other comprehensive income     180       181  
Total stockholders' equity     155,674       161,576  
Total liabilities and stockholders' equity   $ 177,945     $ 185,515  
                 
(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 (LOSS)
(In thousands, except per share amounts, unaudited)
 
    Three Months Ended September 30,   Nine Months Ended September 30,
    2011     2012   2011     2012
                             
Revenue                            
  Commission   $ 28,206     $ 31,291   $ 89,045     $ 93,358
  Other     6,581       6,295     19,483       16,810
Total revenue     34,787       37,586     108,528       110,168
Operating costs and expenses:                            
  Cost of revenue     1,781       1,099     6,987       3,538
  Marketing and advertising (1)     13,826       13,988     38,403       39,142
  Customer care and enrollment (1)     6,245       8,823     16,265       21,152
  Technology and content (1)     5,548       5,503     16,433       16,018
  General and administrative (1)     6,917       6,744     20,299       19,938
  Amortization of intangible assets     427       354     1,281       1,261
Total operating costs and expenses     34,744       36,511     99,668       101,049
Income from operations     43       1,075     8,860       9,119
Other income (expense), net     (21 )     4     (61 )     41
Income before provision for income taxes     22       1,079     8,799       9,160
Provision for income taxes     271       874     4,335       4,525
Net income (loss)   $ (249 )   $ 205   $ 4,464     $ 4,635
                             
Net income (loss) per share:                            
  Basic   $ (0.01 )   $ 0.01   $ 0.21     $ 0.24
  Diluted   $ (0.01 )   $ 0.01   $ 0.20     $ 0.23
                             
Weighted-average number of shares used in per share amounts:                            
  Basic     21,054       19,970     21,264       19,711
  Diluted     21,054       20,750     21,974       20,563
                             
(1) Includes stock-based compensation as follows:                            
  Marketing and advertising   $ 252     $ 330   $ 774     $ 932
  Customer care and enrollment     83       90     264       243
  Technology and conent     411       233     1,336       784
  General and administrative     1,078       686     3,248       2,367
  Total   $ 1,824     $ 1,339   $ 5,622     $ 4,326
                             
                             
   
EHEALTH, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(In thousands, unaudited)  
                                 
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2011     2012     2011     2012  
                         
Operating activities                                
Net income (loss)   $ (249 )   $ 205     $ 4,464     $ 4,635  
Adjustments to reconcile net income (loss) to net cash provided by operating activities:                                
  Deferred income taxes     32       1,328       3,696       2,373  
  Depreciation and amortization     533       626       1,799       1,740  
  Amortization of book-of-business consideration     104       572       366       1,990  
  Amortization of intangible assets     427       354       1,281       1,261  
  Stock-based compensation expense     1,824       1,339       5,622       4,326  
  Excess tax benefits from stock-based compensation     (181 )     (1,171 )     (2,734 )     (2,358 )
  Deferred rent     27       67       7       50  
  Loss on disposal of fixed assets     35       1       38       1  
    Changes in operating assets and liabilities:                                
    Accounts receivable     1,121       405       7,698       4,799  
    Prepaid expenses and other current assets     351       993       1,876       1,708  
    Other assets     (258 )     (507 )     (494 )     (2,364 )
    Accounts payable     (485 )     824       (1,654 )     2,180  
    Accrued compensation and benefits     1,134       2,485       455       913  
    Accrued marketing expenses     921       707       691       (2,332 )
    Deferred revenue     497       302       (1,632 )     390  
Other current liabilities     (420 )     (1,602 )     (1,475 )     341  
Net cash provided by operating activities     5,413       6,928       20,004       19,653  
                                 
Investing activities                                
Purchases of property and equipment     (693 )     (982 )     (1,932 )     (3,128 )
Book of business transfers     (137 )     -       (3,906 )     (6,243 )
Net cash used in investing activities     (830 )     (982 )     (5,838 )     (9,371 )
                                 
Financing activities                                
Net proceeds from exercise of common stock options     112       1,644       184       4,014  
Cash used to net-share settle equity awards     (4 )     (5 )     (548 )     (991 )
Excess tax benefits from stock-based compensation     181       1,171       2,734       2,358  
Repurchase of common stock     (14,237 )     -       (18,033 )     (8,441 )
Principle payments in connection with capital leases     (16 )     (13 )     (46 )     (31 )
Net cash (used in) provided by financing activities     (13,964 )     2,797       (15,709 )     (3,091 )
                                 
Effect of exchange rate changes on cash and cash equivalents     (11 )     2       (30 )     2  
                                 
Net increase (decrease) in cash and cash equivalents     (9,392 )     8,745       (1,573 )     7,193  
Cash and cash equivalents at beginning of period     135,893       122,055       128,074       123,607  
Cash and cash equivalents at end of period   $ 126,501     $ 130,800     $ 126,501     $ 130,800  
                                 
                                 
   
EHEALTH, INC.  
SUMMARY OF SELECTED METRICS  
(Unaudited)  
   
Key Metrics:   Three Months Ended September 30, 2011     Three Months Ended September 30, 2012  
                 
Operating cash flows (1)   $ 5,413,000     $ 6,928,000  
                 
IFP submitted applications (2)     114,800       120,100  
                 
IFP approved members (3)     95,400       99,500  
Total approved members (4)     140,300       174,500  
                 
Commission revenue (5)   $ 28,206,000     $ 31,291,000  
Commission revenue per estimated member for the period (6)   $ 34.94     $ 34.70  
                 
Total revenue (7)   $ 34,787,000     $ 37,586,000  
Total revenue per estimated member for the period (8)   $ 43.09     $ 41.68  
                 
 
 
 
 
As of
September 30, 2011
    As of
September 30, 2012
 
                 
IFP estimated membership (9)     683,400       698,600  
Total estimated membership (10)     810,400       926,600  
                 
    Three Months Ended September 30, 2011     Three Months Ended September 30, 2012  
                 
Marketing and advertising expenses (11)   $ 13,826,000     $ 13,988,000  
Marketing and advertising expenses as a percentage of total revenue (12)     40 %     37 %
                 
Other Metrics:                
                 
Source of IFP submitted applications (as a percentage of total IFP applications for the period):                
  Direct (13)     44 %     48 %
  Marketing partners (14)     33 %     32 %
  Online advertising (15)     23 %     20 %
    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 SEPTEMBER 30, 2012
(In thousands, except per share amounts, unaudited)
 
Statement of Income Reconciliation
                                 
    Three Months Ended September 30, 2012  
    GAAP Reported   GAAP Percent of Total Revenue     Adjustments     Non-GAAP Results   Non-GAAP Percent of Total Revenue  
                           
Revenue:                                
  Commission   $ 31,291   83 %   $ -     $ 31,291   83 %
  Sponsorship, licensing and other     6,295   17       -       6,295   17  
Total revenue     37,586   100       -       37,586   100  
  Operating costs and expenses:                                
  Cost of revenue-sharing     1,099   3       -       1,099   3  
  Marketing and advertising (1)     13,988   37       (330 )     13,658   36  
  Customer care and enrollment (1)     8,823   23       (90 )     8,733   23  
  Technology and content (1)     5,503   15       (233 )     5,270   14  
  General and administrative (1)     6,744   18       (686 )     6,058   16  
  Amortization of intangible assets (2)     354   1       (354 )     -   -  
Total operating costs and expenses     36,511   97       (1,693 )     34,818   93  
Income from operations     1,075   3       1,693       2,768   7  
Other income, net     4   0       -       4   0  
Income before provision for income taxes     1,079   3       1,693       2,772   7  
Provision for income taxes (3)     874   2       109       983   3  
Net income (4)   $ 205   1 %   $ 1,584     $ 1,789   5 %
                                 
Net income per share: (4)                                
  Basic - common stock   $ 0.01         $ 0.08     $ 0.09      
  Diluted - common stock   $ 0.01         $ 0.08     $ 0.09      
                                 
Weighted-average number of shares used in per share amounts:                                
  Basic - common stock     19,970           19,970       19,970      
  Diluted - common stock     20,750           20,750       20,750      
                                 

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 $0.1 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 SEPTEMBER 30, 2011
(In thousands, except per share amounts, unaudited)
 
Statement of Income (Loss) Reconciliation  
                                     
    Three Months Ended September 30, 2011  
    GAAP Reported     GAAP Percent of Total Revenue     Adjustments     Non-GAAP Results     Non-GAAP Percent of Total Revenue  
                               
Revenue:                                    
  Commission   $ 28,206     81 %   $ -     $ 28,206     81 %
  Sponsorship, licensing and other     6,581     19       -       6,581     19  
Total revenue     34,787     100       -       34,787     100  
  Operating costs and expenses:                                    
  Cost of revenue-sharing     1,781     5       -       1,781     5  
  Marketing and advertising (1)     13,826     40       (252 )     13,574     39  
  Customer care and enrollment (1)     6,245     18       (83 )     6,162     18  
  Technology and content (1)     5,548     16       (411 )     5,137     15  
  General and administrative (1)     6,917     20       (1,078 )     5,839     17  
  Amortization of intangible assets (2)     427     1       (427 )     -     -  
Total operating costs and expenses     34,744     100       (2,251 )     32,493     93  
Income from operations     43     0       2,251       2,294     7  
Other income (expense), net     (21 )   (0 )     -       (21 )   (0 )
Income before provision for income taxes     22     0       2,251       2,273     7  
Provision for income taxes (3)     271     1       781       1,052     3  
Net income (loss) (4)   $ (249 )   (1 )%   $ 1,470     $ 1,221     4 %
                                     
Net income (loss) per share: (4)                                    
  Basic - common stock   $ (0.01 )         $ 0.07     $ 0.06        
  Diluted - common stock   $ (0.01 )         $ 0.07     $ 0.06        
                                     
Weighted-average number of shares used in per share amounts:                                    
  Basic - common stock     21,054             21,054       21,054        
  Diluted - common stock     21,054             21,789       21,789        
                                     

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 $0.8 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 NINE MONTHS ENDED SEPTEMBER 30, 2012
(In thousands, except per share amounts, unaudited)
 
Statement of Income Reconciliation  
                                 
    Nine Months Ended September 30, 2012  
    GAAP Reported   GAAP Percent of Total Revenue     Adjustments     Non-GAAP Results   Non-GAAP Percent of Total Revenue  
                           
Revenue:                                
  Commission   $ 93,358   85 %   $ -     $ 93,358   85 %
  Sponsorship, licensing and other     16,810   15       -       16,810   15  
Total revenue     110,168   100       -       110,168   100  
  Operating costs and expenses:                                
  Cost of revenue-sharing     3,538   3       -       3,538   3  
  Marketing and advertising (1)     39,142   36       (932 )     38,210   35  
  Customer care and enrollment (1)     21,152   19       (243 )     20,909   19  
  Technology and content (1)     16,018   15       (784 )     15,234   14  
  General and administrative (1)     19,938   18       (2,367 )     17,571   16  
  Amortization of intangible assets (2)     1,261   1       (1,261 )     -   -  
Total operating costs and expenses     101,049   92       (5,587 )     95,462   87  
Income from operations     9,119   8       5,587       14,706   13  
Other income, net     41   0       -       41   0  
Income before provision for income taxes     9,160   8       5,587       14,747   13  
Provision for income taxes (3)     4,525   4       1,499       6,024   5  
Net income (4)   $ 4,635   4 %   $ 4,088     $ 8,723   8 %
                                 
Net income per share: (4)                                
  Basic - common stock   $ 0.24         $ 0.20     $ 0.44      
  Diluted - common stock   $ 0.23         $ 0.19     $ 0.42      
                                 
Weighted-average number of shares used in per share amounts:                                
  Basic - common stock     19,711           19,711       19,711      
  Diluted - common stock     20,563           20,563       20,563      
                                 

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 TO NON-GAAP RECONCILIATION
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011
(In thousands, except per share amounts, unaudited)
 
Statement of Income Reconciliation
                                     
    Nine Months Ended September 30, 2011  
    GAAP Reported     GAAP Percent of Total Revenue     Adjustments     Non-GAAP Results     Non-GAAP Percent of Total Revenue  
                               
Revenue:                                    
  Commission   $ 89,045     82 %   $ -     $ 89,045     82 %
  Sponsorship, licensing and other     19,483     18       -       19,483     18  
Total revenue     108,528     100       -       108,528     100  
  Operating costs and expenses:                                    
  Cost of revenue-sharing     6,987     6       -       6,987     6  
  Marketing and advertising (1)     38,403     35       (774 )     37,629     35  
  Customer care and enrollment (1)     16,265     15       (264 )     16,001     15  
  Technology and content (1)     16,433     15       (1,336 )     15,097     14  
  General and administrative (1)     20,299     19       (3,248 )     17,051     16  
  Amortization of intangible assets (2)     1,281     1       (1,281 )     -     -  
Total operating costs and expenses     99,668     92       (6,903 )     92,765     85  
Income from operations     8,860     8       6,903       15,763     15  
Other income (expense), net     (61 )   (0 )     -       (61 )   (0 )
Income before provision for income taxes     8,799     8       6,903       15,702     14  
Provision for income taxes (3)     4,335     4       2,271       6,606     6  
Net income (4)   $ 4,464     4 %   $ 4,632     $ 9,096     8 %
                                     
Net income per share: (4)                                    
  Basic - common stock   $ 0.21           $ 0.22     $ 0.43        
  Diluted - common stock   $ 0.20           $ 0.21     $ 0.41        
                                     
Weighted-average number of shares used in per share amounts:                                    
  Basic - common stock     21,264             21,264       21,264        
  Diluted - common stock     21,974             21,974       21,974        
                                     

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 $2.3 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 NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2012  
(In thousands, unaudited)  
   
EBITDA Reconciliation  
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2011     2012     2011   2012  
                               
Net (loss) income   $ (249 )   $ 205     $ 4,464   $ 4,635  
Stock-based compensation expense (1)     1,824       1,339       5,622     4,326  
Depreciation and amortization (2)     533       626       1,799     1,740  
Amortization of intangible assets (2)     427       354       1,281     1,261  
Other (income) expense, net (3)     21       (4 )     61     (41 )
Provision for income taxes (4)     271       874       4,335     4,525  
EBITDA   $ 2,827     $ 3,394     $ 17,562   $ 16,446  
                               

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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