eHealth, Inc. Announces Fourth Quarter and Fiscal 2018 Results
SANTA CLARA, Calif., Feb. 21, 2019 /PRNewswire/ --
Fourth quarter 2018 Overview
-- Revenue for the fourth quarter of 2018 was $134.9 million, an increase
of 62% compared to $83.1 million for the fourth quarter of 2017.
-- Net income for the fourth quarter of 2018 was $26.1 million compared to
$28.0 million for the fourth quarter of 2017.
-- Adjusted EBITDA for the fourth quarter of 2018 was $51.9 million, an
increase of 107% compared to $25.1 million for the fourth quarter of
2017.
-- Net cash used in operations for the fourth quarter of 2018 was $8.7
million compared to $10.1 million net cash used in operations for the
fourth quarter of 2017.
eHealth, Inc. (NASDAQ: EHTH), a leading private online health insurance exchange, announced today its financial results for the fourth quarter and fiscal year ended December 31, 2018.
Scott Flanders, chief executive officer of eHealth stated, "2018 was a defining year for eHealth in validating our vision and growth strategy for the Medicare market. We delivered the strongest Medicare Annual Enrollment Period in the company's history, achieved a number of important executional milestones and reported financial results which significantly exceeded our expectations. I am proud of these accomplishments."
GAAP -- Fourth Quarter of 2018 Results
Revenue -- Revenue for the fourth quarter of 2018 totaled $134.9 million, a 62% increase compared to $83.1 million for the fourth quarter of 2017. Commission revenue for the fourth quarter of 2018 totaled $122.2 million, a 61% increase compared to $76.1 million for the fourth quarter of 2017. Other revenue for the fourth quarter of 2018 was $12.7 million, a 79% increase compared to $7.1 million for the fourth quarter of 2017.
Revenue from our Medicare segment was $121.6 million for the fourth quarter of 2018, a 74% increase compared to $69.9 million for the fourth quarter of 2017. Revenue from our Individual, Family and Small Business segment was $13.3 million for the fourth quarter of 2018, a 1% increase compared to $13.2 million for the fourth quarter of 2017.
Income from Operations -- Income from operations for the fourth quarter of 2018 was $41.6 million compared to income from operations of $20.8 million for the fourth quarter of 2017. Operating margin was 31% for the fourth quarter of 2018 compared to 25% for the fourth quarter of 2017.
Pre-tax Income -- Pre-tax income for the fourth quarter of 2018 was $41.6 million compared to pre-tax income of $21.1 million for the fourth quarter of 2017.
Provision (Benefit) for Income Taxes -- Provision for income taxes for the fourth quarter of 2018 was $15.6 million compared to benefit for income taxes of $6.9 million for the fourth quarter of 2017.
Net Income -- Net income for the fourth quarter of 2018 was $26.1 million, or $1.25 net income per diluted share, compared to net income of $28.0 million, or $1.47 net income per diluted share, for the fourth quarter of 2017. Net income for the fourth quarter of 2018 includes a non-cash charge of $6 million related to an increase in fair value of the earnout liability assumed in connection with eHealth's acquisition of GoMedigap. The increase is driven primarily by eHealth's share price appreciation since the transaction closed in January of 2018. The share price appreciation has increased the value of the equity-based portion of the earnout consideration owed to the former holders of GoMedigap equity interests.
Segment Profit -- Profit from our Medicare segment was $58.7 million for the fourth quarter of 2018, a 90% improvement compared to profit of $30.9 million for the fourth quarter of 2017. Profit from our Individual, Family and Small Business segment was $3.5 million for the fourth quarter of 2018, a 208% increase compared to $1.1 million for the fourth quarter of 2017.
Non-GAAP -- Fourth Quarter of 2018 Results
Non-GAAP Operating Income & Non-GAAP Net Income -- Non-GAAP operating income for the fourth quarter of 2018 was $51.3 million compared to non-GAAP operating income of $24.4 million for the fourth quarter of 2017. Non-GAAP operating margin for the fourth quarter of 2018 was 38% compared to 29% for the fourth quarter of 2017. Non-GAAP net income for the fourth quarter of 2018 was $33.6 million, or $1.61 non-GAAP net income per diluted share, compared to non-GAAP net income of $30.2 million, or $1.57 non-GAAP net income per diluted share, for the fourth quarter of 2017.
Non-GAAP operating income, non-GAAP net income and non-GAAP net income per diluted share for the fourth quarter of 2018 exclude $3.1 million of stock-based compensation expense, a $6.0 million charge related to an increase in the fair value of our earnout liability, and $0.5 million of amortization of intangible assets. Non-GAAP operating net income, non-GAAP net income and non-GAAP net income per diluted share for the fourth quarter of 2017 exclude $2.7 million of stock-based compensation expense, $0.6 million of acquisition costs related to our acquisition of GoMedigap, and $0.3 million of amortization of intangible assets.
Adjusted EBITDA -- Adjusted EBITDA for the fourth quarter of 2018 was $51.9 million compared to $25.1 million for the fourth quarter of 2017. Adjusted EBITDA is calculated by adding stock-based compensation, depreciation and amortization expense, acquisition costs related to our acquisition of GoMedigap, restructuring charge, amortization of intangible assets, change in fair value of earnout liability, other income (expense), net, and provision (benefit) for income taxes to GAAP net income.
Membership, Submitted Applications & Approved Members
Membership -- Total estimated membership as of December 31, 2018 was 952,926 members, a 2% increase compared to 936,900 members we reported as of December 31, 2017. Estimated Medicare membership as of December 31, 2018 was 486,690, a 26% increase compared to 384,854 we reported as of December 31, 2017. Estimated individual and family plan membership as of December 31, 2018 was 151,904 members, a 32% decrease compared to 224,396 we reported as of December 31, 2017.
Submitted Applications -- Submitted applications for all Medicare products, which includes Medicare Advantage, Medicare Supplement and Prescription Drug Plans were 162,216 applications in the fourth quarter of 2018, a 64% increase compared to 98,826 applications in the fourth quarter of 2017. Submitted applications for individual and family plan products decreased 45% in the fourth quarter of 2018 to 19,120 applications compared to 34,865 applications in the fourth quarter of 2017.
Approved Members -- Approved members for all Medicare products, which includes Medicare Advantage, Medicare Supplement and Prescription Drug Plans were 145,689 members in the fourth quarter of 2018, a 63% increase compared to 89,247 members in the fourth quarter of 2017. Approved members for individual and family plan products decreased 41% in the fourth quarter of 2018 to 14,452 members compared to 24,384 members in the year ended December 31, 2017.
Cash -- Fourth Quarter of 2018
Cash Flows -- Net cash used in operating activities was $8.7 million for the fourth quarter of 2018 compared to net cash used in operating activities of $10.1 million for the fourth quarter of 2017.
GAAP -- Full Year Results
Revenue -- Revenue for the year ended December 31, 2018 totaled $251.4 million, a 32% increase compared to $190.7 million for the year ended December 31, 2017. Commission revenue for the year ended December 31, 2018 totaled $227.2 million, a 28% increase compared to $176.9 million for the year ended December 31, 2017. Other revenue for the year ended December 31, 2018 was $24.2 million, a 75% increase compared to $13.8 million for the year ended December 31, 2017.
Revenue from our Medicare segment was $210.6 million for the year ended December 31, 2018, a 48% increase compared to $142.4 million for the year ended December 31, 2017. Revenue from our Individual, Family and Small Business segment was $40.8 million for the year ended December 31, 2018, a 15% decrease compared to $48.3 million for the year ended December 31, 2017.
Income from Operations -- Income from operations for the year ended December 31, 2018 was $2.6 million compared to loss from operations of $9.5 million for the year ended December 31, 2017. Operating margin was 1% for the year ended December 31, 2018 compared to (5)% for the year ended December 31, 2017.
Pre-tax Income -- Pre-tax income for the year ended December 31, 2018 was $3.3 million compared to pre-tax loss of $8.3 million for the year ended December 31, 2017.
Provision for Income Taxes -- Provision for income taxes for the year ended December 31, 2018 was $3.1 million compared to $33.7 million benefit from income taxes for the year ended December 31, 2017. The change in tax provision year over year is due to the introduction of federal tax reform, the impact of ASC 606, and the expiration of net operating loss carryforwards.
Net Income -- Net income for the year ended December 31, 2018 was $0.2 million, or $0.01 earnings per diluted share, compared to net income of $25.4 million, or $1.33 earnings per diluted share, for the year ended December 31, 2017. Net income for the year ended December 31, 2018 includes a non-cash charge of $12.3 million related to an increase in fair value of the earnout liability assumed in connection with eHealth's acquisition of GoMedigap. The increase is driven primarily by eHealth's share price appreciation since the transaction closed in January of 2018. The share price appreciation has increased the value of the equity-based portion of the earnout consideration owed to the former holders of GoMedigap equity interests.
Segment Profit -- Profit from our Medicare segment was $60.8 million for the year ended December 31, 2018, a 175% improvement compared to $22.1 million profit from Medicare segment for the year ended December 31, 2017. Profit from our Individual, Family and Small Business segment was $5.8 million for the year ended December 31, 2018, a 39% decrease compared to $9.6 million for the year ended December 31, 2017.
Non-GAAP -- Full Year Results
Non-GAAP Operating Income & Non-GAAP Net Income -- Non-GAAP operating income for the year ended December 31, 2018 was $31.2 million compared to $1.9 million non-GAAP operating income for the year ended December 31, 2017. Non-GAAP operating margin for the year ended December 31, 2018 was 12% compared to 1% for the year ended December 31, 2017. Non-GAAP net income for the year ended December 31, 2018 was $22.6 million, or $1.11 net income per diluted share, compared to $32.2 million non-GAAP net income, or $1.69 non-GAAP net income per diluted share, for the year ended December 31, 2017.
Non-GAAP operating income, non-GAAP net income and non-GAAP net income per diluted share for the year ended December 31, 2018 exclude $12.3 million of stock-based compensation expense, a $1.9 million restructuring charge, $2.0 million of amortization of intangible assets, and a $12.3 million charge from the change in the fair value of the earnout liability related to the acquisition of GoMedigap, which was completed in January 2018. Non-GAAP operating income, non-GAAP net income and non-GAAP net income per diluted share for the year ended December 31, 2017 exclude $9.7 million of stock-based compensation expense, $0.6 million of acquisition costs related to our acquisition of GoMedigap, and $1.0 million of amortization of intangible assets.
Adjusted EBITDA -- Adjusted EBITDA for the year ended December 31, 2018 was $33.7 million compared to $4.7 million for the year ended December 31, 2017. Adjusted EBITDA is calculated by adding stock-based compensation, depreciation and amortization expense, acquisition costs related to our acquisition of GoMedigap, restructuring charge, amortization of intangible assets, change in the fair value of the earnout liability related to the acquisition of GoMedigap, other income, net and provision (benefit) for income taxes to GAAP net income.
Submitted Applications and Approved Members
Submitted Applications -- Submitted applications for all Medicare products, which includes Medicare Advantage, Medicare Supplement and Prescription Drug Plans were 264,903 applications in the year ended December 31, 2018, a 39% increase compared to 190,195 applications in the year ended December 31, 2017. Submitted applications for individual and family plan products decreased 56% in the year ended December 31, 2018 to 29,698 applications compared to 67,428 applications in the year ended December 31, 2017.
Approved Members -- Approved members for all Medicare products, which includes Medicare Advantage, Medicare Supplement and Prescription Drug Plans were 239,688 members in the year ended December 31, 2018, a 36% increase compared to 175,665 members in the year ended December 31, 2017. Approved members for individual and family plan products decreased 46% in the year ended December 31, 2018 to 42,650 members compared to 78,553 members in the year ended December 31, 2017.
2019 Guidance
eHealth's guidance for the full year ending December 31, 2019 is based on information available as of February 21, 2019. These expectations are forward-looking statements, and eHealth assumes no obligation to update these statements. Actual 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.
The following guidance is for the full year ending December 31, 2019.
-- Total revenue is expected to be in the range of $290 million to $310
million. Revenue from the Medicare segment is expected to be in the
range of $256 million to $272 million. Revenue from the Individual,
Family and Small Business segment is expected to be in the range of $34
million to $38 million.
-- GAAP net income per diluted share for 2019 is expected to be in the
range of $0.60 to $0.79 per share.
-- Non-GAAP net income per diluted share((a)) is expected to be in the
range of $1.22 to $1.33 per share.
-- GAAP net income is expected to be in the range of $16.3 million to $21.3
million.
-- Adjusted EBITDA((b)) is expected to be in the range of $45 million to
$50 million.
-- 2019 Medicare segment profit((c)) is expected to be in the range of $80
million to $84 million and Individual, Family and Small Business segment
profit is expected to be breakeven to $1 million.
-- Corporate((d)) shared service expenses, excluding stock-based
compensation and depreciation and amortization expense, is expected to
be approximately $35 million.
-- Cash used in operations is expected to be in the range of $17 million to
$20 million and cash used for capital expenditures is expected to be $13
million to $14 million.
(a) Non-GAAP net income per diluted
share is calculated by adding
stock-based compensation expense,
change in fair value of earnout
liability, acquisition costs,
restructuring charges, intangible
asset amortization expense and the
income tax effect of these
adjustments to GAAP net income.
(b) Adjusted EBITDA is calculated by
adding stock-based compensation,
depreciation and amortization
expense, restructuring charges,
acquisition costs, amortization of
intangible assets, other income
(expense), net and provision for
income taxes to GAAP net income.
(c) Segment profit is calculated as
revenue for the applicable segment
less Marketing and Advertising,
Customer Care and Enrollment,
Technology and Content and General
and Administrative operating
expenses, excluding stock-based
compensation, depreciation and
amortization expense and
amortization of intangible assets,
that are directly attributable to
the applicable segment and other
indirect Marketing and Advertising,
Customer Care and Enrollment and
Technology and Content operating
expenses, excluding stock-based
compensation, depreciation and
amortization expense and
amortization of intangible assets,
allocated to the applicable segment
based on usage.
(d) Corporate consists of other
indirect General and Administrative
operating expenses, excluding
stock-based compensation and
depreciation and amortization
expense, which are managed in a
corporate shared services
environment and, since they are not
the responsibility of segment
operating management, are not
allocated to the reportable
segments.
Webcast and Conference Call Information
A Webcast and conference call will be held today, Thursday, February 21, 2019 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 (877) 930-8066 for domestic callers and (253) 336-8042 for international callers. The participant passcode is 9573983. A telephone replay will be available two hours following the conclusion of the call for a period of seven days and can be accessed by dialing (855) 859-2056 for domestic callers and (404) 537-3406 for international callers. The call ID for the replay is 1988118. 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) operates eHealth.com, a leading private online 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. eHealth offers thousands of individual, family and small business health plans underwritten by many of the nation's leading health insurance companies. eHealth (through its subsidiaries) is licensed to sell health insurance in all 50 states and the District of Columbia. eHealth also offers educational resources and 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), eHealthMedicare.com (www.eHealthMedicare.com) and Medicare.com (www.Medicare.com) and GoMedigap.com (www.GoMedigap.com).
Forward-Looking Statements
This press release contains statements that are forward-looking statements as defined within the Private Securities Litigation Reform Act of 1995. These include statement regarding our vision and growth strategy for the Medicare market, our estimates regarding total membership, Medicare membership, Individual and Family plan membership, ancillary and small business membership, our estimates regarding constrained lifetime values of commissions per member and constraints on lifetime value by product category, and our guidance for the full year ending December 31, 2019, including our guidance for total revenue, revenue from the Medicare segment, revenue from the Individual, Family and Small Business segment, GAAP net income, Adjusted EBITDA, profit from the Medicare segment, profit from the Individual, Family and Small Business segment, Corporate shared service expense, GAAP net income per share, Non-GAAP net income per share, cash used in operations and cash used for capital expenditures.
These forward-looking statements are inherently subject to various risks and uncertainties that could cause actual results to differ materially from the statements made. In particular, we are required by the revenue recognition standard to make numerous assumptions that are based upon historical trends and management judgment. These assumptions may change over time and have a material impact on our revenue recognition, guidance, and results of operations. Please review the assumptions stated in this section carefully as well as the disclosures about our implementation of the revenue recognition standard in our Form 10-Q for the fiscal quarters ended March 31, 2018, June 30, 2018 and September 30, 2018, as well as the recast consolidated financial statements for each of the three years in the period ended December 31, 2017 reflecting the adoption of the new revenue recognition standard in our Form 8-K filed on December 17, 2018.
The risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward-looking statements include risks associated with the impact of healthcare reform; our ability to retain existing members and enroll a large number of new members during the annual healthcare reform open enrollment period and Medicare annual enrollment period; the impact of annual enrollment period for the purchase of individual and family health insurance and its timing on our recognition of revenue; our ability to sell qualified health insurance plans to subsidy-eligible individuals and to enroll subsidy eligible individuals through government-run health insurance exchanges; changes in laws and regulations, including in connection with healthcare reform; our ability to successfully make and integrate acquisitions; our health insurance benefits and packages' ability to meet individual customer's specific health insurance and price needs; the success of our sale of short-term health insurance and benefit packages; our ability to comply with CMS guidance and impact on conversion rates as a result of the federal exchange changes to enrollment; competition, including competition from government-run health insurance exchanges; seasonality of our business and the fluctuation of our operating results; our ability to retain existing members and limit member turnover; changes in consumer behaviors and their selection of individual and family health insurance products, including the selection of products for which we receive lower commissions; a reduction of product offerings among carriers and the resulting impact on our commission revenue; carriers exiting the market of selling individual and family health insurance and the resulting impact on our supply and commission revenue; our ability to execute on our growth strategy in the Medicare and small business health insurance markets; the impact of increased health insurance costs on demand; our ability to timely receive and accurately predict the amount of commission payments from health insurance carriers; timing of commission payments from health insurance carriers; medical loss ratio requirements; delays in our receipt of items required to recognize Medicare revenue; changes in member conversion rates; our ability to accurately estimate membership and lifetime value of commissions; our relationships with health insurance carriers; customer concentration and consolidation of the health insurance industry; our success in marketing and selling health insurance plans and our unit cost of acquisition; our ability to hire, train and retain licensed health insurance agents and other employees; the need for health insurance carrier and regulatory approvals in connection with the marketing of Medicare-related insurance products; costs of acquiring new members; scalability of the Medicare business; lack of membership growth and retention rates; consumer satisfaction of our service; changes in competitive landscape; our ability to attract and to convert online visitors into paying members; changes in products offered on our ecommerce platform; changes and reductions in commission rates; our ability to maintain and enhance our brand identity; our ability to derive desired benefits from investments in our business, including membership growth initiatives; dependence on acceptance of the Internet as a marketplace for the purchase and sale of health insurance; reliance on marketing partners; the impact of our direct-to-consumer email, telephone and television marketing efforts; timing of receipt and accuracy of commission reports; payment practices of health insurance carriers; dependence on our operations in China; the restrictions in our debt obligations; compliance with insurance and other laws and regulations; exposure to security risks and our ability to safeguard sensitive data; and the performance, reliability and availability of our 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.
All forward-looking statements in this press release are based on information available to eHealth as of the date hereof, and eHealth does not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made, except as required by law.
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), including Adjusted EBITDA. Adjusted EBITDA is calculated by adding stock-based compensation expense, depreciation and amortization expense, acquisition costs, amortization/impairment of intangible assets, other income (expense), net and provision (benefit) for income taxes to GAAP net income (loss).
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 eHealth's financial condition and results of operations. Management believes that the use of these non-GAAP financial measures provides consistency and comparability with eHealth's past financial reports. Management also believes that the items described above provides an additional measure of eHealth's operating results and facilitates comparisons of eHealth'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 eHealth's ongoing operations. eHealth believes that these non-GAAP financial measures are useful to investors in their assessment of eHealth's operating performance.
Adjusted EBITDA is 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 eHealth'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. eHealth 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. Finance to confirm this sentence. eHealth compensates for these limitations by prominently disclosing GAAP net income (loss) and providing investors with reconciliations from eHealth's GAAP operating results to the related non-GAAP financial measures for the relevant periods.
Investor Relations Contact:
Kate Sidorovich
Vice President Investor Relations
2625 Augustine Drive, Second Floor
Santa Clara, CA, 95054
(650) 584-2700
kate.sidorovich@ehealth.com
http://ir.ehealthinsurance.com
EHEALTH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, unaudited)
December 31, December 31,
2018 2017
---
Assets
Current assets:
Cash and cash equivalents $
13,089 $
40,293
Accounts receivable 3,601 1,475
Commissions receivable -
current 134,190 109,666
Prepaid expenses and other
current assets 5,288 4,305
Total current assets 156,168 155,739
Commissions receivable - non-
current 211,668 169,751
Property and equipment, net 7,684 4,705
Other assets 11,276 7,287
Intangible assets, net 12,249 7,540
Goodwill 40,233 14,096
Total assets $
439,278 $
359,118
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $
5,688 $
3,246
Accrued compensation and
benefits 20,763 15,498
Accrued marketing expenses 11,013 4,693
Earnout liability -current 20,730
Other current liabilities 2,425 2,008
Total current liabilities 60,619 25,445
Debt - non-current 5,000
Earnout liability - non-
current 19,270
Deferred income taxes - non-
current 47,901 45,089
Other non-current liabilities 3,339 1,920
Stockholders' equity:
Common stock 31 30
Additional paid-in capital 298,024 281,706
Treasury stock, at cost (199,998) (199,998)
Retained earnings 204,965 204,724
Accumulated other
comprehensive income 127 202
Total stockholders' equity 303,149 286,664
Total liabilities and
stockholders' equity $
439,278 $
359,118
EHEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts, unaudited)
Three Months Ended
Year Ended
December 31,
December 31,
2018 2017 2018 2017
---
Revenue:
Commission $
122,244 $
76,056 $
227,211 $
176,883
Other 12,673 7,062 24,184 13,823
Total revenue 134,917 83,118 251,395 190,706
Operating costs and expenses:
Cost of revenue 755 354 1,228 582
Marketing and advertising 37,184 23,196 82,939 65,874
Customer care and
enrollment 26,818 19,264 70,547 59,183
Technology and content 8,600 8,531 31,970 32,889
General and administrative 13,367 10,090 45,828 39,969
Acquisition costs - 621 76 621
Change in fair value of
earnout liability 6,000 12,300
Restructuring charge - 1,865
Amortization of intangible
assets 547 260 2,091 1,040
Total operating costs and
expenses 93,271 62,316 248,844 200,158
Income (loss) from
operations 41,646 20,802 2,551 (9,452)
Other income (expense), net (21) 307 755 1,182
Income (loss) before
provision (benefit) for
income taxes 41,625 21,109 3,306 (8,270)
Provision (benefit) for
income taxes 15,554 (6,919) 3,065 (33,696)
Net income $
26,071 $
28,028 $
241 $
25,426
Net income per share:
Basic $
1.32 $
1.50 $
0.01 $
1.37
Diluted $
1.25 $
1.47 $
0.01 $
1.33
Weighted-average number of shares used in
per share amounts:
Basic 19,680 18,632 19,294 18,512
Diluted 20,897 19,025 20,409 19,047
(1) Includes stock-based compensation as
follows:
Marketing and advertising $
496 $
314 $
1,974 $
1,033
Customer care and
enrollment 251 151 816 418
Technology and content 560 432 1,675 1,410
General and administrative 1,757 1,849 7,824 6,833
Restructuring - 251
Total stock-based
compensation expense $
3,064 $
2,746 $
12,540 $
9,694
EHEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
Three Months Ended
Year Ended
December 31,
December 31,
2018 2017 2018 2017
---
Operating activities
Net income $
26,071 $
28,028 $
241 $
25,426
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 609 625 2,479 2,837
Amortization of internally
developed software 618 409 2,201 1,464
Amortization of intangible
assets 547 260 2,091 1,040
Stock-based compensation
expense 3,064 2,746 12,540 9,694
Deferred income taxes 15,491 (5,004) 2,812 (30,341)
Change in fair value of earnout
liability 6,000 12,300
Other non-cash items 289 (12) 675 (101)
Changes in operating assets and liabilities:
Accounts receivable (1,462) 2,015 (2,127) 473
Commissions receivable (80,123) (44,224) (50,967) (21,640)
Prepaid expenses and other
assets 8,441 1,071 232 (1,933)
Accounts payable (99) (314) 1,414 (1,866)
Accrued compensation and
benefits 7,214 4,619 5,133 4,578
Accrued marketing expenses 7,955 1,886 6,320 (3,365)
Deferred revenue (4,863) (2,686) 491 (466)
Other current liabilities 1,530 453 935 (1,341)
Net cash used in operating
activities (8,718) (10,128) (3,230) (15,541)
Investing activities
Capitalized internal-use
software and website
development costs (1,950) (705) (6,294) (3,210)
Purchases of property and
equipment and other assets (1,063) (385) (4,534) (1,868)
Acquisition of business, net of
cash acquired - (14,929)
Net cash used in investing
activities (3,013) (1,090) (25,757) (5,078)
Financing activities
Net proceeds from exercise of
common stock options 658 858 2,688 1,037
Cash used to net-share settle
equity awards (1,106) (701) (4,504) (1,802)
Proceeds from line of credit 5,000 5,000
Debt issuance costs (49) (1,221)
Principal payments in connection
with capital leases (25) (25) (103) (105)
Net cash provided by (used in)
financing activities 4,478 132 1,860 (870)
Effect of exchange rate changes
on cash and cash equivalents (6) 2 (77) 1
Net decrease in cash and cash
equivalents (7,259) (11,084) (27,204) (21,488)
Cash and cash equivalents at
beginning of period 20,348 51,377 40,293 61,781
Cash and cash equivalents at end
of period $
13,089 $
40,293 $
13,089 $
40,293
EHEALTH, INC.
SEGMENT INFORMATION
(In thousands, unaudited)
Three Months Ended
Year Ended
December 31,
December 31, 2018
2018 2017 2018 2017
---
Revenue
---
Medicare (1) $
121,606 $
69,877 $
210,570 $
142,448
Individual, Family
and Small Business
(2) 13,311 13,241 40,825 48,258
Total revenue $
134,917 $
83,118 $
251,395 $
190,706
Segment profit
---
Medicare segment
profit (3) $
58,671 $
30,875 $
60,844 $
22,137
Individual, Family
and Small Business
segment profit (3) 3,512 1,141 5,803 9,573
Total segment profit 62,183 32,016 66,647 31,710
Corporate (4) (10,317) (6,962) (32,996) (26,970)
Stock-based
compensation
expense (3,064) (2,746) (12,289) (9,694)
Depreciation and
amortization (609) (625) (2,479) (2,837)
Change in fair value
of earnout
liability (6,000) (12,300)
Restructuring
charges - (1,865)
Acquisition costs - (621) (76) (621)
Amortization of
intangible assets (547) (260) (2,091) (1,040)
Other income
(expense), net (21) 307 755 1,182
Income (loss) before
provision (benefit)
for income taxes $
41,625 $
21,109 $
3,306 $
(8,270)
Note:
We evaluate our business performance and manage our operations as two distinct reporting segments:
-- Medicare and
-- Individual, Family and Small Business.
(1) The Medicare segment consists
primarily of amounts earned from
our sale of Medicare-related
health insurance plans, including
Medicare Advantage, Medicare
Supplement and Medicare Part D
prescription drug plans, and to a
lesser extent, ancillary products
sold to our Medicare-eligible
customers, including but not
limited to, dental, vision, life,
short term disability and long term
disability insurance, our
advertising program that allows
Medicare-related carriers to
purchase advertising on a separate
website developed, hosted and
maintained by us and our delivery
and sale to third parties of
Medicare-related health insurance
leads generated by our ecommerce
platforms and our marketing
activities.
(2) The Individual, Family and Small
Business segment consists primarily
of amounts earned from our sale of
individual and family and small
business health insurance plans and
ancillary products sold to our non-
Medicare-eligible customers,
including but not limited to,
dental, vision, life, short term
disability and long term disability
insurance. To a lesser extent, the
Individual, Family and Small
Business segment consists of
amounts earned from our online
sponsorship program that allows
carriers to purchase advertising
space in specific markets in a
sponsorship area on our website,
our licensing to third parties the
use of our health insurance
ecommerce technology and our
delivery and sale to third parties
of individual and family health
insurance leads generated by our
ecommerce platforms and our
marketing activities.
(3) Segment profit is calculated as
revenue for the applicable segment
less Marketing and Advertising,
Customer Care and Enrollment,
Technology and Content and General
and Administrative operating
expenses, excluding stock-based
compensation, depreciation and
amortization expense, restructuring
charges, change in fair value of
earnout liability, acquisition
costs, and amortization of
intangible assets, that are
directly attributable to the
applicable segment and other
indirect Marketing and Advertising,
Customer Care and Enrollment and
Technology and Content operating
expenses, excluding stock-based
compensation, depreciation and
amortization expense and
amortization of intangible assets,
allocated to the applicable segment
based on usage.
(4) Corporate consists of other indirect
General and Administrative
operating expenses, excluding
stock-based compensation,
depreciation and amortization
expense, which are managed in a
corporate shared services
environment and, because they are
not the responsibility of segment
operating management, are not
allocated to the reportable
segments.
EHEALTH, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands, except per share amounts, unaudited)
Three Months Ended December 31,
2018 2017
Amount Percent of Amount Percent of
Total Total
Revenue Revenue
---
GAAP marketing and
advertising expense $
37,184 28% $
23,196 28%
Stock-based compensation
expense (1) (496) -% (314) -%
Non-GAAP marketing and
advertising expense $
36,688 27% $
22,882 28%
GAAP customer care and
enrollment expense $
26,818 20% $
19,264 23%
Stock-based compensation
expense (1) (251) -% (151) -%
Non-GAAP customer care
and enrollment expense $
26,567 20% $
19,113 23%
GAAP technology and
content expense $
8,600 6% $
8,531 10%
Stock-based compensation
expense (1) (560) -% (432) (1)%
Non-GAAP technology and
content expense $
8,040 6% $
8,099 10%
GAAP general and
administrative expense $
13,367 10% $
10,090 12%
Stock-based compensation
expense (1) (1,757) (1)% (1,849) (2)%
Non-GAAP general and
administrative expense $
11,610 9% $
8,241 10%
GAAP income from
operations $
41,646 31% $
20,802 25%
Stock-based compensation
expense (1) 3,064 2% 2,746 3%
Acquisition costs (2) - -% 621 1%
Amortization of
intangible assets (3) 547 -% 260 -%
Change in fair value of
earnout liability (4) 6,000 4% -%
Non-GAAP income from
operations $
51,257 38% $
24,429 29%
Explanation of adjustments
(1) Non-GAAP income from operations
and non-GAAP expenses exclude the
effect of expensing stock-based
compensation related to stock
options and restricted stock
units.
(2) Non-GAAP income from operations
excludes costs related to the
acquisition of GoMedigap, which
was completed in January 2018.
(3) Non-GAAP income from operations
excludes amortization of
intangible assets.
(4) Non-GAAP income from operations
excludes the change in fair value
of earnout liability related to
the acquisition of GoMedigap,
which was completed in January
2018.
EHEALTH, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands, except per share amounts, unaudited)
Year Ended December 31,
2018 2017
Amount Percent of Total Revenue Amount Percent of Total Revenue
---
GAAP marketing and
advertising expense $
82,939 33% $
65,874 35%
Stock-based compensation
expense (1) (1,974) (1)% (1,033) (1)%
Non-GAAP marketing and
advertising expense $
80,965 32% $
64,841 34%
GAAP customer care and
enrollment expense $
70,547 28% $
59,183 31%
Stock-based compensation
expense (1) (816) -% (418) -%
Non-GAAP customer care
and enrollment expense $
69,731 28% $
58,765 31%
GAAP technology and
content expense $
31,970 13% $
32,889 17%
Stock-based compensation
expense (1) (1,675) (1)% (1,410) (1)%
Non-GAAP technology and
content expense $
30,295 12% $
31,479 17%
GAAP general and
administrative expense $
45,828 18% $
39,969 21%
Stock-based compensation
expense (1) (7,824) (3)% (6,833) (4)%
Non-GAAP general and
administrative expense $
38,004 15% $
33,136 17%
GAAP income (loss) from
operations $
2,551 1% $
(9,452) (5)%
Stock-based compensation
expense (1) 12,289 5% 9,694 5%
Acquisition costs (2) 76 -% 621 -%
Restructuring charge (3) 1,865 1% -%
Amortization of
intangible assets (4) 2,091 1% 1,040 1%
Change in fair value of
earnout liability (5) 12,300 5% -%
Non-GAAP income from
operations $
31,172 12% $
1,903 1%
Explanation of adjustments
(1) Non-GAAP income from operations
and non-GAAP expenses exclude the
effect of expensing stock-based
compensation related to stock
options and restricted stock
units.
(2) Non-GAAP income from operations
excludes costs related to the
acquisition of GoMedigap, which
was completed in January 2018.
(3) Non-GAAP income from operations
excludes restructuring charge.
(4) Non-GAAP income from operations
excludes amortization of
intangible assets.
(5) Non-GAAP income from operations
excludes the change in fair value
of earnout liability related to
the acquisition of GoMedigap,
which was completed in January
2018.
EHEALTH, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands, except per share amounts, unaudited)
Three Months Ended
December 31,
2018 2017
---
GAAP net income $
26,071 $
28,028
Stock-based compensation
expense (1) 3,064 2,746
Acquisition costs (2) - 621
Restructuring charge (3) -
Amortization of
intangible assets (4) 547 260
Change in fair value of
earnout liability (5) 6,000
Provision (benefit) for
income taxes (6) (2,089) (1,478)
Non-GAAP net income $
33,593 $
30,177
GAAP net income per
diluted share $
1.25 $
1.47
Stock-based compensation
expense (1) 0.15 0.14
Acquisition costs (2) - 0.03
Restructuring charge (3) -
Amortization of
intangible assets (4) 0.03 0.01
Change in fair value of
earnout liability (5) 0.29
Provision (benefit) for
income taxes (6) (0.11) (0.08)
Non-GAAP net income per
diluted share $
1.61 $
1.57
GAAP net income $
26,071 $
28,028
Stock-based compensation
expense (1) 3,064 2,746
Depreciation and
amortization (8) 609 625
Acquisition costs (2) - 621
Restructuring charge (3) -
Amortization of
intangible assets (4) 547 260
Change in fair value of
earnout liability (5) 6,000
Other (income) expense,
net (7) 21 (307)
Provision (benefit) for
income taxes (6) 15,554 (6,919)
Adjusted EBITDA $
51,866 $
25,054
Year Ended
December 31,
2018 2017
---
GAAP net income $
241 $
25,426
Stock-based compensation
expense (1) 12,289 9,694
Acquisition costs (2) 76 621
Restructuring charge (3) 1,865
Amortization of
intangible assets (4) 2,091 1,040
Change in fair value of
earnout liability (5) 12,300
Provision (benefit) for
income taxes (6) (6,220) (4,628)
Non-GAAP net income $
22,642 $
32,153
GAAP net income per
diluted share $
0.01 $
1.33
Stock-based compensation
expense (1) 0.60 0.51
Acquisition costs (2) - 0.03
Restructuring benefit (3) 0.09
Amortization of
intangible assets (4) 0.10 0.05
Change in fair value of
earnout liability (5) 0.60
Provision for income
taxes (6) (0.29) (0.24)
Non-GAAP net income per
diluted share $
1.11 $
1.69
GAAP net income $
241 $
25,426
Stock-based compensation
expense (1) 12,289 9,694
Depreciation and
amortization (8) 2,479 2,837
Acquisition costs (2) 76 621
Restructuring charge (3) 1,865
Amortization of
intangible assets (4) 2,091 1,040
Change in fair value of
earnout liability (5) 12,300
Other income, net (7) (755) (1,182)
Provision (benefit) for
income taxes (6) 3,065 (33,696)
Adjusted EBITDA $
33,651 $
4,740
Explanation of adjustments
(1) Non-GAAP net income, Non-GAAP net
income per diluted share and
Adjusted EBITDA exclude the effect
of expensing stock-based
compensation related to stock
options and restricted stock
units.
(2) Non-GAAP net income, Non-GAAP net
income per diluted share and
Adjusted EBITDA exclude costs
related to the acquisition of
GoMedigap, which was completed in
January 2018.
(3) Non-GAAP net income, Non-GAAP net
income per diluted share and
Adjusted EBITDA exclude
restructuring charge.
(4) Non-GAAP net income, Non-GAAP net
income per diluted share and
Adjusted EBITDA exclude
amortization of intangible assets.
(5) Non-GAAP net income, Non-GAAP net
income per diluted share and
Adjusted EBITDA exclude the change
in fair value of earnout liability
related to the acquisition of
GoMedigap, which was completed in
January 2018.
(6) Non-GAAP net income, Non-GAAP net
income per diluted share and
Adjusted EBITDA exclude provision
(benefit) for income taxes.
(7) Adjusted EBITDA excludes other
income, net.
(8) Adjusted EBITDA excludes
depreciation and amortization
expense.
EHEALTH, INC.
SUMMARY OF SELECTED METRICS
COMMISSION REVENUE BY PRODUCT
(In thousands, unaudited)
Three Months Ended
Year Ended
December 31,
December 31,
2018 2017 Percent 2018 2017 Percent
Change Change
---
Medicare
Medicare Advantage $
85,797 $
52,143 65 $
143,445 $
107,567 33
% %
Medicare Supplement 12,860 5,193 148 31,166 15,436 102
% %
Medicare Part D 11,730 7,527 56 14,609 11,085 32
% %
Total Medicare 110,387 64,863 70 189,220 134,088 41
% %
Individual and Family (1)
Non-Qualified Health 3,084 2,598 19 6,470 10,024 (35)
Plans %
%
Qualified Health Plans 783 966 (19) 5,789 7,055 (18)
% %
Total Individual and 3,867 3,564 9 12,259 17,079 (28)
Family %
%
Ancillary
Short-term 1,340 1,223 10 5,583 5,503 1
% %
Dental 1,106 1,254 (12) 2,717 5,062 (46)
% %
Vision 610 470 30 1,467 1,607 (9)
%
%
Other 1,282 1,307 (2)
%
% 4,941 3,877 27
Total Ancillary 4,338 4,254 2 14,708 16,049 (8)
%
%
Small Business 2,768 2,539 9 8,595 7,501 15
% %
Commission Bonus 884 836 6 2,429 2,166 12
% %
Total Commission $
122,244 $
76,056 61 $
227,211 $
176,883 28
Revenue % %
(1) We define our Individual and
Family Plan offerings as major
medical individual and family
health insurance plans, which
does not include Medicare-
related, small business or
ancillary plans. Individual and
family health insurance plans
include both Qualified and Non-
Qualified plans. Qualified
health plans are individual and
family health insurance plans
that meet the requirements of
the Affordable Care Act and are
offered through the government-
run health insurance exchange in
the relevant jurisdiction. Non-
Qualified health plans are
individual and family health
insurance plans that meet the
requirements of the Affordable
Care Act and are not offered
through the exchange in the
relevant jurisdiction.
Individuals who purchase Non-
Qualified health plans cannot
receive a subsidy in connection
with the purchase of those
plans.
EHEALTH, INC.
SUMMARY OF SELECTED METRICS
SUBMITTED APPLICATIONS
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
2018 2017 Percent 2018 2017 Percent
Change Change
---
Medicare (1)
Medicare Advantage 90,693 60,109 51 159,753 125,989 27
% %
Medicare Supplement 18,072 8,126 122
%
% 40,252 21,401 88
Medicare Part D 53,451 30,591 75 64,898 42,805 52
% %
Total Medicare 162,216 98,826 64 264,903 190,195 39
% %
Individual and Family (2)
Non-Qualified Health 12,161 17,871 (32) 18,580 40,274 (54)
Plans
% %
Qualified Health 6,959 16,994 (59) 11,118 27,154 (59)
Plans
% %
Total Individual and 19,120 34,865 (45) 29,698 67,428 (56)
Family
% %
Ancillary (3)
Short-term 26,969 20,219 33 102,608 93,445 10
% %
Dental 14,645 15,817 (7) 46,073 70,452 (35)
% %
Vision 8,288 7,470 11 22,399 29,468 (24)
%
%
Other 9,656 15,531 (38)
%
% 42,415 34,788 22
Total Ancillary 59,558 59,037 1 213,495 228,153 (6)
%
%
Small Business (4) 3,458 2,777 25 8,693 6,458 35
% %
Total Submitted 244,352 195,505 25 516,789 492,234 5
Applications % %
Submitted Applications
Applications are counted as submitted when the applicant completes the application and either clicks the submit button on our website or provides verbal authorization to submit the application. The applicant may have additional actions to take before the application will be reviewed by the insurance carrier, such as providing additional information. In addition, an applicant may submit more than one application.
(1) Medicare-related health
insurance applications
submitted on our website or
through our customer care
center during the period,
including Medicare Advantage,
Medicare Part D prescription
drug and Medicare Supplement
plans.
(2) Major medical Individual and
Family plan ("IFP") health
insurance applications
submitted on our website during
the period. An applicant may
submit more than one
application. We define our IFP
offerings as major medical
individual and family health
insurance plans, which does not
include Medicare-related,
small business or ancillary
plans.
(3) Ancillary Plans consists
primarily of short-term,
dental and vision insurance
plans submitted on our website
during the period.
(4) Applications for small business
health insurance applications
are counted as submitted when
the applicant completes the
application, the employees
complete their applications,
the applicant submits the
application to us and we submit
the application to the carrier.
EHEALTH, INC.
SUMMARY OF SELECTED METRICS
APPROVED MEMBERS
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
2018 2017 Percent 2018 2017 Percent
Change Change
---
Medicare
Medicare Advantage 83,376 55,125 51 148,478 118,055 26
% %
Medicare Supplement 12,170 5,064 140
%
% 29,837 15,992 87
Medicare Part D 50,143 29,058 73 61,373 41,618 47
% %
Total Medicare 145,689 89,247 63 239,688 175,665 36
% %
Individual and Family
Non-Qualified Health 11,360 17,398 (35) 23,075 50,111 (54)
Plans
% %
Qualified Health 3,092 6,986 (56) 19,575 28,442 (31)
Plans
% %
Total Individual and 14,452 24,384 (41) 42,650 78,553 (46)
Family
% %
Ancillary
Short-term 28,163 21,269 32 107,846 85,106 27
% %
Dental 14,623 13,871 5 47,343 67,924 (30)
%
%
Vision 9,060 7,820 16 24,638 31,360 (21)
%
%
Other 8,053 8,980 (10)
%
% 33,500 26,485 26
Total Ancillaries 59,899 51,940 15 213,327 210,875 1
% %
Small Business 7,537 6,502 16 19,550 15,302 28
% %
Total Approved 227,577 172,073 32 515,215 480,395 7
Members % %
Approved Members
Approved Members represents the number of individuals on submitted applications that were approved by the relevant insurance carrier for the identified product during the relevant period. Approved members may not pay for their plan and become paying members.
EHEALTH, INC.
SUMMARY OF SELECTED METRICS
ESTIMATED MEMBERSHIP
(Unaudited)
As of
December 31,
2018 2017 Percent
Change
---
Medicare (1)
Medicare 276,357 236,857 17
Advantage
%
Medicare 70,426 33,635 109
Supplement
%
Medicare Part D 139,907 114,362 22
%
Total Medicare 486,690 384,854 26
%
Individual and 151,904 224,396 (32)
Family (2)
%
Ancillary (3)
Short-term 24,192 16,771 44
%
Dental 138,916 170,078 (18)
%
Vision 73,987 80,738 (8)
%
Other 38,136 28,356 34
%
Total 275,231 295,943 (7)
Ancillaries
%
Small Business 39,101 31,702 23
(4)
%
Total Estimated 952,926 936,895 2
Membership
%
Estimated Membership
Estimated membership represents the estimated number of members active as of the date indicated based on the number of members for whom we have received or applied a commission payment during the month of estimation.
(1) For Medicare-related health
insurance plans, we take the sum
of (i) the number of members for
whom we have received or applied
a commission payment for a month
that is up to two months prior
to the date of estimation (after
reducing that number using
historical experience for
assumed member cancellations
over the period being
estimated); and (ii) the number
of approved members over that
period (after reducing that
number using historical
experience for an assumed number
of members who do not accept
their approved policy from the
same month of the previous year
and for estimated member
cancellations through the date
of the estimate). To the extent
we determine we have received
substantially all of the
commission payments related to a
given month during the period
being estimated, we will take
the number of members for whom
we have received or applied a
commission payment during the
month of estimation. Estimated
number of members active on
Medicare-related health
insurance as of the date
indicated based on the number of
members for whom we have
received or applied a commission
payment during the month of
estimation.
(2) To estimate the number of members
on Individual and Family health
insurance plans, we take the sum
of (i) the number of IFP members
for whom we have received or
applied a commission payment for
a month that is up to six months
prior to the date of estimation
after reducing that number using
historical experience for
assumed member cancellations
over the period being estimated;
and (ii) the number of approved
members over that period (after
reducing that number by the
percentage of members who do not
accept their approved policy
from the same month of the
previous year for estimated
member cancellations through the
date of the estimate). To the
extent we determine we have
received substantially all of
the commission payments related
to a given month during the
period being estimated, we will
take the number of members for
whom we have received or applied
a commission payment during the
month of estimation. For IFP
health insurance plans, a member
who purchases and is active on
multiple standalone insurance
plans will be counted as a
member more than once. For
example, a member who is active
on both an individual and family
health insurance plan and a
standalone dental plan will be
counted as two continuing
members.
EHEALTH, INC.
SUMMARY OF SELECTED METRICS
ESTIMATED MEMBERSHIP (Continued)
(Unaudited)
(3) For ancillary health insurance
plans (such as short-term,
dental and vision insurance), we
take the sum of (i) the number of
members for whom we have received
or applied a commission payment
for a month that is up to three
months prior to the date of
estimation (after reducing that
number using historical
experience for assumed member
cancellations over the period
being estimated); and (ii) the
number of approved members over
that period (after reducing that
number using historical
experience for an assumed number
of members who do not accept
their approved policy from the
same month of the previous year
and for estimated member
cancellations through the date of
the estimate). To the extent we
determine we have received
substantially all of the
commission payments related to a
given month during the period
being estimated, we will take the
number of members for whom we
have received or applied a
commission payment during the
month of estimation. The one to
three-month period varies by
insurance product and is largely
dependent upon the timeliness of
commission payments and related
reporting from the related
carriers.
(4) For small business health
insurance plans, we estimate the
number of members using the
number of initial members at the
time the group is approved, and
we update this number for changes
in membership if such changes are
reported to us by the group or
carrier in the period it is
reported. However, groups
generally notify the carrier
directly of policy cancellations
and increases or decreases in
group size without informing us.
Health insurance carriers often
do not communicate policy
cancellation information or group
size changes to us. We often are
made aware of policy
cancellations and group size
changes at the time of annual
renewal and update our membership
statistics accordingly in the
period they are reported.
Health insurance carriers bill and collect insurance premiums paid by our members. The carriers do not report to us the number of members that we have as of a given date. The majority of our members who terminate their policies do so by discontinuing their premium payments to the carrier and do not inform us of the cancellation. Also, some of our members pay their premiums less frequently than monthly. Given the number of months required to observe non-payment of commissions in order to confirm cancellations, we estimate the number of members who are active on insurance policies as of a specified date.
After we have estimated membership for a period, we may receive information from health insurance carriers that would have impacted the estimate if we had received the information prior to the date of estimation. We may receive commission payments or other information that indicates that a member who was not included in our estimates for a prior period was in fact an active member at that time, or that a member who was included in our estimates was in fact not an active member of ours. For instance, we reconcile information carriers provide to us and may determine that we were not historically paid commissions owed to us, which would cause us to have underestimated membership. Conversely, carriers may require us to return commission payments paid in a prior period due to policy cancellations for members we previously estimated as being active. We do not update our estimated membership numbers reported in previous periods. Instead, we reflect updated information regarding our historical membership in the membership estimate for the current period. As a result of the delay in our receipt of information from insurance carriers, actual trends in our membership are most discernible over periods longer than from one quarter to the next. As a result of the delay we experience in receiving information about our membership, it is difficult for us to determine with any certainty the impact of current conditions on our membership retention. Health care reform and its impacts as well as other factors could cause the assumptions and estimates that we make in connection with estimating our membership to be inaccurate, which would cause our membership estimates to be inaccurate.
EHEALTH, INC.
SUMMARY OF SELECTED METRICS
CONSTRAINED LIFETIME VALUE OF
COMMISSIONS PER APPROVED MEMBER
(Unaudited)
Three Months Year Ended
Ended
December 31, December 31,
2018 2017 Percentage 2018 2017 Percentage
Change Change
---
Medicare
Medicare Advantage $
1,029 $
932 10 $
964 $
903 7
(1) % %
Medicare Supplement $
1,058 $
1,024 3 $
1,047 $
965 8
(1) % %
Medicare Part D (1) $
235 $
259 (9) $
243 $
266 (9)
% %
Individual and Family
Non-Qualified Health $
167 $
139 20 $
151 $
136 11
Plans (1) % %
Qualified Health $
198 $
133 49 $
141 $
131 8
Plans (1) % %
Ancillary
Short-term (1) $
52 $
58 (10) $
56 $
65 (14)
% %
Dental (1) $
72 $
82 (12) $
77 $
68 13
% %
Vision (1) $
66 $
60 10 $
55 $
51 8
% %
Small Business (2) $
165 $
173 (5) $
168 $
169 (1)
% %
Constrained Lifetime Value of Commissions Per Approved Member
(1) Constrained lifetime value
("LTV") of commissions per
approved member represents
commissions estimated to be
collected over the estimated
life of an approved member's
policy after applying
constraints in accordance with
our revenue recognition policy.
The estimate is driven by
multiple factors, including but
not limited to, contracted
commission rates, carrier mix,
expected policy churn and
applied constraints. These
factors may result in varying
values from period to period.
(2) For Small Business, the amount
represents the estimated
commissions we expect to collect
from the plan over the following
12-months. The estimate is
driven by multiple factors,
including but not limited to,
contracted commission rates,
carrier mix, expected policy
churn and applied constraints.
These factors may result in
varying values from period to
period.
EHEALTH, INC.
SUMMARY OF SELECTED METRICS
CONSTRAINTS ON LIFETIME VALUE
OF COMMISSIONS PER APPROVED MEMBER
(Unaudited)
Three Months and Year
Ended
December 31,
2018 2017
---
Medicare
Medicare Advantage 7 7
% %
Medicare Supplement 5 5
% %
Medicare Part D 5 5
% %
Individual and Family
Non-Qualified Health 15 15
Plans
% %
Qualified Health Plans 20 20
% %
Ancillary 10 10
% %
Small Business -
%
%
Constraints on Lifetime Value of Commissions Per Approved Member
Constraints are applied to derive the constrained lifetime value ("LTV") of commissions per approved member for revenue recognition in accordance with our revenue recognition policy. The constraints are applied to help ensure that commissions estimated to be collected over the estimated life of an approved member's plan are recognized as revenue only to the extent that is it probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with future commissions receivable from the plan is subsequently resolved. We evaluate constraints on an annual basis for factors affecting our estimate of LTV of commissions per approved member and apply management judgment to determine the constraints based on current trends impacting our business.
EHEALTH, INC.
SUMMARY OF SELECTED METRICS
EXPENSE METRICS PER APPROVED MEMBER
(Unaudited)
Three Months Ended
December 31,
2018 2017 Percent
Change
---
Variable marketing cost per
approved member
Medicare variable
marketing cost
per approved %
Medicare
Advantage
("MA")-equivalent
member (1) $
275 $
254 8
Individual and
Family Plan
("IFP") variable %
marketing cost
per approved IFP-
equivalent member
(2) $
77 $
94 (18)
Customer care and enrollment
("CC&E") expense per approved
member
Medicare CC&E
expense per
approved MA- %
equivalent member
(3) $
226 $
242 (7)
IFP CC&E expense
per approved IFP-
equivalent member %
(4) $
46 $
66 (30)
Expense Metrics Per Approved Member
(1) Variable marketing cost per
approved MA-equivalent member
represents direct costs
incurred in member acquisition
for Medicare Advantage,
Medicare Supplement and
Medicare Part D plans from our
direct, marketing partner and
online advertising channels
divided by MA-equivalent
approved members in a given
period. MA-equivalent members
is a derived metric and is
equal to the sum of Medicare
Part D approved members divided
by 4, the number of Medicare
Advantage approved members and
the number of Medicare
Supplement approved members in
the given period.
(2) Variable marketing cost per
approved IFP-equivalent member
represents direct costs
incurred in member acquisition
for IFP plans from our direct,
marketing partner and online
advertising channels divided by
IFP-equivalent approved
members in a given period. IFP-
equivalent approved members is
a derived metric and is equal
to the sum of the number of
short-term approved members
divided by 3 and the IFP
approved members in the given
period.
(3) Medicare CC&E expense per
approved MA-equivalent member
is equal to the CC&E expense of
our Medicare business included
in our operating costs and
reported in our condensed
consolidated statements of
operations divided by MA-
equivalent approved members in
a given period. MA-equivalent
approved members is a derived
metric and is equal to the sum
of Medicare Part D approved
members divided by 4, the
number of Medicare Advantage
approved members and the number
of Medicare Supplement approved
members in the given period.
(4) IFP CC&E expense per approved
IFP-equivalent member is equal
to the CC&E expense of our IFP
business included in our
operating costs and reported in
our condensed consolidated
statement of operations divided
by IFP-equivalent approved
members in a given period. IFP-
equivalent approved members is
a derived metric and is equal
to the sum of the number of
short-term approved members
divided by 3 and the IFP
approved members in the given
period.
Year Ended
December 31,
2018 2017 Percent
Change
Variable marketing
cost per approved
member
Medicare variable
marketing cost per
approved Medicare %
Advantage
("MA")-equivalent
member (1) $
297 $
337 (12)
Individual and Family
Plan ("IFP") variable
marketing cost per %
approved IFP-
equivalent member (2) $
59 $
50 18
Customer care and
enrollment ("CC&E")
expense per approved
member
Medicare CC&E expense $
315 $
330 (5)
per approved MA-
equivalent member (3) %
IFP CC&E expense per $
61 $
74 (18)
approved IFP-
equivalent member (4) %
Expense Metrics Per Approved Member
(1) Variable marketing cost per
approved MA-equivalent member
represents direct costs
incurred in member acquisition
for Medicare Advantage,
Medicare Supplement and
Medicare Part D plans from our
direct, marketing partner and
online advertising channels
divided by MA-equivalent
approved members in a given
period. MA-equivalent members
is a derived metric and is
equal to the sum of Medicare
Part D approved members divided
by 4, the number of Medicare
Advantage approved members and
the number of Medicare
Supplement approved members in
the given period.
(2) Variable marketing cost per
approved IFP-equivalent member
represents direct costs
incurred in member acquisition
for IFP plans from our direct,
marketing partner and online
advertising channels divided by
IFP-equivalent approved
members in a given period. IFP-
equivalent approved members is
a derived metric and is equal
to the sum of the number of
short-term approved members
divided by 3 and the IFP
approved members in the given
period.
(3) Medicare CC&E expense per
approved MA-equivalent member
is equal to the CC&E expense of
our Medicare business included
in our operating costs and
reported in our condensed
consolidated statements of
operations divided by MA-
equivalent approved members in
a given period. MA-equivalent
approved members is a derived
metric and is equal to the sum
of Medicare Part D approved
members divided by 4, the
number of Medicare Advantage
approved members and the number
of Medicare Supplement approved
members in the given period.
(4) IFP CC&E expense per approved
IFP-equivalent member is equal
to the CC&E expense of our IFP
business included in our
operating costs and reported in
our condensed consolidated
statement of operations divided
by IFP-equivalent approved
members in a given period. IFP-
equivalent approved members is
a derived metric and is equal
to the sum of the number of
short-term approved members
divided by 3 and the IFP
approved members in the given
period.
EHEALTH, INC. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GUIDANCE
(In millions, except per share amounts, unaudited)
Year Ending December 31,
2019
Low High
---
GAAP net income $
16.3 $
21.3
Stock-based compensation
expense 14.9 13.4
Depreciation and
amortization 3.5 3.0
Restructuring charge -
Amortization /impairment
of intangible assets 3.1 2.1
Change in fair value of
earnout liability -
Provision (benefit) for
income taxes (4.7) (4.0)
Non-GAAP net income (1) $
33.1 $
35.8
GAAP net income per
diluted share $
0.60 $
0.79
Stock-based compensation
expense 0.55 0.50
Depreciation and
amortization 0.13 0.11
Restructuring charge -
Amortization /impairment
of intangible assets 0.11 0.08
Change in fair value of
earnout liability -
Provision for income
taxes (0.17) (0.15)
Non-GAAP net income per
diluted share (2) $
1.22 $
1.33
GAAP net income $
16.3 $
21.3
Stock-based compensation
expense 14.9 13.4
Depreciation and
amortization 3.5 3.0
Restructuring charge -
Amortization /impairment
of intangible assets 3.1 2.1
Change in fair value of
earnout liability -
Other income, net 1.2 1.2
Provision (benefit) for
income taxes 6.0 9.0
Adjusted EBITDA (3) $
45.0 $
50.0
Explanation of Adjustments:
(1) Non-GAAP net income per share is
calculated by adding stock-based
compensation, depreciation and
amortization expense, restructuring
charges, amortization of intangible
assets, other income (expense) and
provision for income taxes to GAAP
net income.
(2) Non-GAAP net income per share is
calculated by excluding stock-
based compensation expense,
restructuring charges and
intangible asset amortization
expense to GAAP net income.
(3) Adjusted EBITDA is calculated by
adding stock-based compensation,
depreciation and amortization
expense, restructuring charges,
amortization of intangible assets,
change in fair value of earnout
liability, other income (expense)
and provision for income taxes to
GAAP net income.
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SOURCE eHealth, Inc.
