eHealth, Inc. Announces First Quarter 2020 Results
SANTA CLARA, Calif., April 23, 2020 /PRNewswire/ -- eHealth, Inc. (NASDAQ: EHTH), a leading private online health insurance marketplace, announces today its financial results for the first quarter ended March 31, 2020.
Scott Flanders, chief executive officer of eHealth stated, "In this challenging environment shaped by the COVID-19 pandemic, our company mission to connect every person with the highest quality, most affordable health insurance for their life circumstances is more relevant and important than ever. As social distancing measures remain in place around the country, we are glad to be able to continue to meet consumers wherever it is easiest, most convenient, and safest for them to engage - online and by speaking to a licensed insurance agent over the phone."
Mr. Flanders continued, "Building on our strong momentum of the past two years, and our record performance in 2019, we are pleased to deliver another quarter of outperformance. The fundamentals of our business are strong and we are achieving strong operating metrics across the business by executing on a clear strategy and making targeted investments to drive growth. Our updated 2020 annual guidance reflects our outperformance to-date, but does not include the additional investments we are contemplating and planning for this year's Annual Enrollment Period. These will be provided in conjunction with our second quarter results."
GAAP -- First Quarter of 2020 Results
Revenue -- Revenue for the first quarter of 2020 totaled $106.4 million, a 55% increase compared to $68.8 million for the first quarter of 2019. Commission revenue for the first quarter of 2020 totaled $99.7 million, a 55% increase compared to $64.2 million for the first quarter of 2019. Other revenue for the first quarter of 2020 was $6.7 million, a 48% increase compared to $4.5 million for the first quarter of 2019.
Revenue from our Medicare segment was $96.2 million for the first quarter of 2020, a 75% increase compared to $54.9 million for the first quarter of 2019. Revenue from our Individual, Family and Small Business segment was $10.3 million for the first quarter of 2020, a 26% decrease compared to $13.9 million for the first quarter of 2019.
Income (Loss) from Operations -- Income from operations for the first quarter of 2020 was $1.0 million compared to loss from operations of $9.2 million for the first quarter of 2019.
Pre-Tax Income (Loss) -- Pre-tax income for the first quarter of 2020 was $1.4 million compared to pre-tax loss of $8.6 million for the first quarter of 2019.
Benefit from Income Taxes -- Benefit from income taxes for the first quarter of 2020 was $2.0 million compared to $3.5 million for the first quarter of 2019.
Net Income (Loss) -- Net income for the first quarter of 2020 was $3.5 million, or $0.13 net income per diluted share, compared to net loss of $5.2 million, or $0.24 net loss per diluted share, for the first quarter of 2019.
Segment Profit -- Medicare segment profit was $22.0 million for the first quarter of 2020, a 103% increase compared to $10.8 million for the first quarter of 2019. Profit from our Individual, Family and Small Business segment was $2.6 million for the first quarter of 2020, a 57% decrease, compared to $6.0 million for the first quarter of 2019.
Non-GAAP -- First Quarter of 2020 Results
Non-GAAP Net Income -- Non-GAAP net income for the first quarter of 2020 was $10.3 million, or $0.39 non-GAAP net income per diluted share, compared to non-GAAP net income of $7.2 million, or $0.33 non-GAAP net income per diluted share, for the first quarter of 2019.
Non-GAAP net income and non-GAAP net income per diluted share for the first quarter of 2020 are calculated by excluding $8.7 million of stock-based compensation expense, $0.5 million of amortization of intangible assets and $2.4 million of the income tax effect of these non-GAAP adjustments from GAAP net income and GAAP net income per diluted share.
Non-GAAP net income and non-GAAP net income per diluted share for the first quarter of 2019 are calculated by excluding $3.2 million of stock-based compensation expense, $13.3 million of expense for the change in fair value of earnout liability related to our acquisition of GoMedigap, $0.5 million of amortization of intangible assets, and $4.7 million of the income tax effect of these non-GAAP adjustments from GAAP net loss and GAAP net loss per diluted share.
Adjusted EBITDA -- Adjusted EBITDA was $11.1 million for the first quarter of 2020 compared to $8.6 million for the first quarter of 2019. Adjusted EBITDA is calculated by adding stock-based compensation, change in fair value of earnout liability related to our acquisition of GoMedigap, depreciation and amortization expense, amortization of intangible assets, other income, net, and benefit from income taxes to GAAP net income (loss).
Approved Members, New Paying Members and Estimated Membership
Approved Members -- The number of approved members for all Medicare products, which includes Medicare Advantage, Medicare Supplement and Medicare Part D Prescription Drug Plans, was 84,702 in the first quarter of 2020, a 46% increase compared to 57,899 in the first quarter of 2019. The number of approved members for major medical individual and family plan products declined by 19% in the first quarter of 2020 to 9,365 compared to 11,598 in the first quarter of 2019.
New Paying Members -- The number of new paying members for all Medicare products was 161,564 in the first quarter of 2020, a 61% increase compared to 100,113 in the first quarter of 2019. The number of new paying members for major medical individual and family plan products was 15,510, a 28% decrease compared to 21,402 in the first quarter of 2019. New Paying Members consist of approved members from the period presented and any periods prior to the period presented from whom we have received an initial commission payment during the period presented.
Estimated Membership -- Total estimated membership as of March 31, 2020 was 1,136,954, a 19% increase compared to 952,239 estimated members we reported as of March 31, 2019. Estimated Medicare membership as of March 31, 2020 was 725,943, a 44% increase compared to 503,877 estimated members reported as of March 31, 2019. Estimated major medical individual and family plan membership as of March 31, 2020 was 113,483, a 13% decrease compared to 130,297 estimated members reported as of March 31, 2019.
Cash -- First Quarter of 2020
Cash Flows -- Net cash provided by operating activities was $8.9 million for the first quarter of 2019, compared to net cash provided by operating activities of $12.7 million for the first quarter of 2019.
2020 Guidance
Based on information available as of April 23, 2020, eHealth is updating its guidance for the full year ending December 31, 2020 previously provided on February 20, 2020. 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 press release and in eHealth's annual and quarterly filings with the Securities and Exchange Commission.
The following is the updated guidance for the full year ending December 31, 2020:
-- Total revenue is expected to be in the range of $600.0 million to $640.0
million, compared to the previous guidance of $580.0 million to $620.0
million. Revenue from the Medicare segment is expected to be in the
range of $553.0 million to $589.0 million, compared to the previous
guidance of $533.0 million to $569.0 million. Revenue from the
Individual, Family and Small Business segment is expected to be in the
range of $47.0 million to $51.0 million, consistent with the previous
guidance.
-- GAAP net income is expected to be in the range of $70.0 million to $85.0
million, compared to the previous guidance of $68.0 million to $83.0
million.
-- Adjusted EBITDA((a)) is expected to be in the range of $125.0 million to
$140.0 million, compared to the previous guidance of $120.0 million to
$135.0 million.
-- Medicare segment profit((b)) is expected to be in the range of $157.0
million to $174.0 million, compared to the previous guidance of $152.0
million to $169.0 million. Individual, Family and Small Business segment
profit is expected to be in the range of $17.0 million to $18.0 million,
consistent with the previous guidance.
-- Corporate((c)) shared service expenses, excluding stock-based
compensation and depreciation and amortization expense, is expected to
be in range of $49.0 million to $52.0 million, consistent with the
previous guidance.
-- Cash used in operations is expected to be in the range of $61.0 million
to $64.0 million, compared to the previous guidance of $52.0 million to
$55.0 million, and cash used for capital expenditures is expected to be
$18.0 million to $20.0 million, consistent with the previous guidance.
-- GAAP net income per diluted share is expected to be in the range of
$2.55 to $3.10, compared to the previous guidance of $2.64 to $3.23 per
share.
-- Non-GAAP net income per diluted share((d)) is expected to be in the
range of $3.41 to $3.90, compared to the previous guidance of $3.56 to
$4.09 per share.
(a) Adjusted EBITDA is calculated by
adding stock-based compensation,
change in fair value of earnout
liability, depreciation and
amortization expense, amortization
of intangible assets, other income,
net, and provision (benefit) for
income taxes to GAAP net income
(loss).
(b) 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, change in fair value
of earnout liability, 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.
(c) 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.
(d) Non-GAAP net income per diluted
share is calculated by adding
stock-based compensation expense
per diluted share, change in fair
value of earnout liability per
diluted share, intangible asset
amortization expense per diluted
share and the income tax effect of
these non-GAAP adjustments to GAAP
net income per diluted share.
Webcast and Conference Call Information
A Webcast and conference call will be held today, Thursday, April 23, 2020 at 5:00 p.m. Eastern / 2:00 p.m. Pacific Time. The live Webcast and supporting presentation slides will be available on the Investor Relations section of 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 8091632. 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 8091632. 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 a leading health insurance marketplace at eHealth.com and eHealthMedicare.com with a technology and service platform that provides consumer engagement, education and health insurance enrollment solutions. Our mission is to connect every person with the highest quality, most affordable health insurance and Medicare plans for their life circumstances. Our platform integrates proprietary and third-party developed educational content regarding health insurance plans with decision support tools to aid consumers in what has traditionally been a confusing and opaque health insurance purchasing process, and to help them obtain the health insurance products that meet their individual health and economic needs. Our omni-channel consumer engagement platform is designed to meet the consumer wherever they prefer to engage with us, and enables consumers to use our services online, through interactive chat, or by telephone with a licensed insurance agent. We have created a marketplace that offers consumers a broad choice of insurance products that include thousands of Medicare Advantage, Medicare Supplement, Medicare Part D prescription drug, individual and family, small business and other ancillary health insurance products from over 180 health insurance carriers across all fifty states and the District of Columbia.
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 our expected growth in 2020, our estimates regarding total membership, Medicare membership, Individual and Family plan membership and ancillary and small business membership, our estimates regarding constrained lifetime values of commissions per member and constraints on lifetime value by product category, our plans to invest in our Medicare business, and our guidance for the full year ending December 31, 2020, including our guidance for total revenue and revenue from our Medicare segment and our Individual, Family and Small Business segment, GAAP net income, Adjusted EBITDA, profit from our Medicare segment and our Individual, Family and Small Business segment, Corporate shared service expense, cash used in operations and cash used for capital expenditures, and GAAP net income per diluted share and non-GAAP net income per diluted share.
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 Accounting Standards Codification 606 -- Revenue from Contracts with Customers to make numerous assumptions that are based on historical trends and our management's 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 press release carefully.
The risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward-looking statements include our ability to retain existing members and enroll new members during the annual healthcare open enrollment period and Medicare annual enrollment period; changes in laws and regulations, including in connection with healthcare reform or with respect to the marketing and sale of Medicare plans; competition, including competition from government-run health insurance exchanges; the seasonality of our business and the fluctuation of our operating results; our ability to accurately estimate membership and lifetime value of commissions; changes in product offerings among carriers on our ecommerce platform and the resulting impact on our commission revenue; our ability to execute on our growth strategy in the Medicare market; the continued impact of the COVID-19 pandemic on our operations, business, financial condition and growth prospects, as well as on the general economy; exposure to security risks and our ability to safeguard the security and privacy of confidential data; 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; changes in the market for private health insurance; consumer satisfaction of our service; changes in member conversion rates; changes in commission rates; our ability to sell qualified health insurance plans to subsidy-eligible individuals and to enroll subsidy-eligible individuals through government-run health insurance exchanges; our ability to maintain and enhance our brand identity; our ability to derive desired benefits from investments in our business, including membership growth initiatives; 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; our ability to successfully make and integrate acquisitions; dependence on our operations in China; the restrictions in our debt obligations; compliance with insurance and other laws and regulations; 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 calculated in accordance with U.S. generally accepted accounting principles (GAAP). To supplement eHealth's condensed consolidated financial statements presented in accordance with GAAP, eHealth presents investors with non-GAAP financial measures, including non-GAAP net income (loss); non-GAAP net income (loss) per diluted share; and adjusted EBITDA.
-- Non-GAAP net income (loss) consists of GAAP net income (loss) excluding
the following items:
-- the effects of expensing stock-based compensation related to stock
options and restricted stock units,
-- change in fair value of earnout liability,
-- amortization of intangible assets, and
-- the income tax impact of non-GAAP adjustments.
-- Non-GAAP net income (loss) per diluted share consists of GAAP net income
(loss) per diluted share excluding the following items:
-- the effects of expensing stock-based compensation related to stock
options and restricted stock units per diluted share,
-- change in fair value of earnout liability per diluted share,
-- amortization of intangible assets per diluted share, and
-- the income tax impact of non-GAAP adjustments per diluted share.
-- Adjusted EBITDA is calculated by adding stock-based compensation, change
in fair value of earnout liability, depreciation and amortization
expense, amortization of intangible assets, other income, net and
provision (benefit) for income taxes to GAAP net income (loss).
eHealth believes that the presentation of these non-GAAP financial measures provides 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.
Non-GAAP net income (loss), non-GAAP net income (loss) per diluted share and Adjusted EBITDA 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 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. eHealth compensates for these limitations by prominently disclosing GAAP net income (loss) and GAAP net income (loss) per diluted share and providing investors with reconciliations from eHealth'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.
Investor Relations Contact
Kate Sidorovich, CFA
Vice President, Investor Relations
2625 Augustine Drive, Second Floor
Santa Clara, CA, 95054
650-210-3111
kate.sidorovich@ehealth.com
http://ir.ehealthinsurance.com
EHEALTH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
March 31, 2020 December 31, 2019
Assets
Current assets:
Cash and cash equivalents $
184,167 $
23,466
Short-term marketable
securities 33,683
Accounts receivable 668 2,332
Commissions receivable -
current 125,252 174,526
Prepaid expenses and other
current assets 9,202 7,822
Total current assets 352,972 208,146
Commissions receivable - non-
current 435,465 414,696
Property and equipment, net 12,875 10,518
Long-term marketable
securities 24,409
Operating lease right-of-use
assets 43,396 36,621
Restricted cash 3,353 3,354
Other assets 19,300 18,004
Intangible assets, net 9,516 10,062
Goodwill 40,233 40,233
Total assets $
941,519 $
741,634
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $
8,906 $
24,554
Accrued compensation and
benefits 18,473 29,578
Accrued marketing expenses 4,711 12,041
Earnout liability -current - 37,273
Lease liabilities -current 4,174 4,759
Deferred revenue 2,683 2,570
Other current liabilities 3,736 2,210
Total current liabilities 42,683 112,985
Deferred income taxes - non-
current 61,623 64,130
Lease liabilities - non-
current 41,992 34,305
Other non-current liabilities 3,535 3,050
Stockholders' equity:
Common stock 37 35
Additional paid-in capital 717,380 455,159
Treasury stock, at cost (199,998) (199,998)
Retained earnings 274,157 271,852
Accumulated other
comprehensive income 110 116
Total stockholders' equity 791,686 527,164
Total liabilities and
stockholders' equity $
941,519 $
741,634
EHEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts, unaudited)
Three Months Ended March 31,
2020 2019
Revenue:
Commission $
99,669 $
64,227
Other 6,739 4,546
Total revenue 106,408 68,773
Operating costs and expenses:
Cost of revenue 1,138 (77)
Marketing and advertising 37,764 23,941
Customer care and
enrollment 30,535 19,944
Technology and content 15,740 9,017
General and administrative 19,653 11,278
Amortization of intangible
assets 547 547
Change in fair value of
earnout liability - 13,306
Total operating costs and
expenses 105,377 77,956
Income (loss) from
operations 1,031 (9,183)
Other income, net 373 557
Income (loss) before
benefit from income taxes 1,404 (8,626)
Benefit from income taxes (2,048) (3,467)
Net income (loss) $
3,452 $
(5,159)
Net income (loss) per share:
Basic $
0.14 $
(0.24)
Diluted $
0.13 $
(0.24)
Weighted-average number of shares used in
per share amounts:
Basic 24,719 21,831
Diluted 26,179 21,831
(1)
Includes
stock-based compensation as follows:
Marketing and advertising $
1,730 $
629
Customer care and
enrollment 662 273
Technology and content 1,617 549
General and administrative 4,705 1,778
Total stock-based
compensation expense $
8,714 $
3,229
EHEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
Three Months Ended March 31,
2020 2019
Operating activities:
Net income (loss) $
3,452 $
(5,159)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 823 655
Amortization of internally
developed software 1,501 719
Amortization of intangible assets 547 547
Stock-based compensation expense 8,714 3,229
Deferred income taxes (2,141) (3,543)
Change in fair value of earnout
liability - 13,306
Other non-cash items 223 (1,194)
Changes in operating assets and liabilities:
Accounts receivable 1,664 221
Commissions receivable 26,873 17,648
Prepaid expenses and other assets (159) 1,111
Accounts payable (16,279) (768)
Accrued compensation and benefits (11,104) (9,390)
Accrued marketing expenses (7,329) (7,147)
Deferred revenue 113 2,897
Accrued expenses and other
liabilities 2,009 (383)
Net cash provided by operating
activities 8,907 12,749
Investing activities:
Capitalized internal-use software
and website development costs (3,564) (1,487)
Purchases of property and
equipment and other assets (2,508) (1,509)
Purchases of marketable securities (58,064)
Cash used in investing activities (64,136) (2,996)
Financing activities:
Proceeds from issuance of common
stock, net of issuance costs 228,024 126,051
Net proceeds from exercise of
common stock options 1,091 2,367
Repurchase of shares to satisfy
employee tax withholding
obligations (4,375) (1,280)
Repayment of debt - (5,000)
Acquisition-related contingent
payments (8,751) (9,542)
Principal payments in connection
with leases (58) (25)
Net cash provided by financing
activities 215,931 112,571
Effect of exchange rate changes on
cash, cash equivalents and
restricted cash (2) 62
Net increase in cash, cash
equivalents and restricted cash 160,700 122,386
Cash, cash equivalents and
restricted cash at beginning of
period 26,820 13,089
Cash, cash equivalents and
restricted cash at end of period $
187,520 $
135,475
EHEALTH, INC.
SEGMENT INFORMATION
(In thousands, unaudited)
Three Months Ended March 31,
2020 2019 % Change
Revenue:
Medicare (1) $
96,151 $
54,901 75
%
Individual, Family
and Small Business %
(2) 10,257 13,872 (26)
Total revenue $
106,408 $
68,773 55
%
Segment profit:
Medicare segment $
21,960 $
10,826 103
profit (3) %
Individual, Family
and Small Business %
segment profit (3) 2,603 6,024 (57)
Total segment profit 24,563 16,850 46
%
Corporate (4) (13,448) (8,296) 62
%
Stock-based
compensation %
expense (8,714) (3,229) 170
Change in fair value - (13,306) (100)
of earnout
liability %
Depreciation and (823) (655) 26
amortization %
Amortization of
intangible assets (547) (547) %
Other income, net 373 557 (33)
%
Income (loss) before $
1,404 $
(8,626) (116)
benefit from income
taxes %
Segment Information
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
and vision
plans, as
well as 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,
family and
small
business
health
insurance
plans and
ancillary
products sold
to our non-
Medicare-
eligible
customers,
including but
not limited
to, dental,
vision, and
short-term
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,
acquisition
costs, change
in fair value
of earnout
liability,
restructuring
charges 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.
SUMMARY OF SELECTED METRICS
COMMISSION REVENUE BY PRODUCT
(In thousands, unaudited)
Three Months Ended March 31,
2020 2019 % Change
Medicare:
Medicare Advantage $
68,347 $
39,843 72
%
Medicare Supplement 15,170 8,597 76
%
Medicare Part D 5,661 2,336 142
%
Total Medicare 89,178 50,776 76
%
Individual and Family: (1)
Non-Qualified Health 1,446 2,629 (45)
Plans
%
Qualified Health Plans 1,210 3,508 (66)
%
Total Individual and 2,656 6,137 (57)
Family
%
Ancillaries:
Short-term 2,216 1,316 68
%
Dental 743 790 (6)
%
Vision 243 462 (47)
%
Other 1,049 951 10
%
Total Ancillaries 4,251 3,519 21
%
Small Business 2,971 2,640 13
%
Commission Bonus 613 1,155 (47)
%
Total Commission $
99,669 $
64,227 55
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 that purchase non-
qualified health plans cannot
receive a subsidy in connection
with the purchase of those
plans.
EHEALTH, INC.
SUMMARY OF SELECTED METRICS
COMMISSION REVENUE SUMMARY
(Unaudited)
Three Months Ended March 31,
2020 2019
Medicare:
Commission Revenue
from Members
Approved During
the Period (1) $
81,125 $
50,582
Net Commission
Revenue from
Members Approved
in Prior Periods
(2) 8,979 1,067
Total Medicare
Segment Commission
Revenue $
90,104 $
51,649
Individual, Family and Small
Business:
Commission Revenue
from Members
Approved During
the Period (1) $
5,796 $
6,225
Net Commission
Revenue from
Members Approved
in Prior Periods
(2) 3,769 6,353
Total Individual,
Family and Small
Business Segment
Commission Revenue $
9,565 $
12,578
Total Commission
Revenue $
99,669 $
64,227
(1) These amounts
include
commission
bonus
revenue.
(2) These amounts
reflect our
revised
estimates of
cash
collections
for certain
members
approved
prior to the
relevant
reporting
period that
are
recognized as
adjustments
to revenue
within the
relevant
reporting
period. These
amounts
include
revenue
associated
with renewing
small
business
health
insurance
members.
EHEALTH, INC.
SUMMARY OF SELECTED METRICS
APPROVED MEMBERS
(Unaudited)
Three Months Ended March 31,
2020 2019 % Change
Medicare:
Medicare Advantage 64,898 40,741 59
%
Medicare Supplement 10,838 8,631 26
%
Medicare Part D 8,966 8,527 5
%
Total Medicare 84,702 57,899 46
%
Individual and Family:
Non-Qualified Health 4,820 6,071 (21)
Plans
%
Qualified Health Plans 4,545 5,527 (18)
%
Total Individual and 9,365 11,598 (19)
Family
%
Ancillaries:
Short-term 12,138 14,932 (19)
%
Dental 9,710 13,056 (26)
%
Vision 4,501 6,415 (30)
%
Other 4,325 5,212 (17)
%
Total Ancillaries 30,674 39,615 (23)
%
Small Business 3,603 4,252 (15)
%
Total Approved Members 128,344 113,364 13
%
Approved Members
Approved members consist of the number of individuals on submitted applications that were approved by the relevant insurance carrier for the identified product during the period presented. Approved members may not pay for their plan and become paying members.
EHEALTH, INC.
SUMMARY OF SELECTED METRICS
NEW PAYING MEMBERS
(Unaudited)
Three Months Ended March 31,
2020 2019 % Change
Medicare:
Medicare Advantage 86,299 49,531 74
%
Medicare Supplement 11,560 9,786 18
%
Medicare Part D 63,705 40,796 56
%
Total Medicare 161,564 100,113 61
%
Individual and Family:
Non-Qualified Health 9,553 14,012 (32)
Plans
%
Qualified Health Plans 5,957 7,390 (19)
%
Total Individual and 15,510 21,402 (28)
Family
%
Ancillaries:
Short-term 12,260 20,119 (39)
%
Dental 10,413 14,384 (28)
%
Vision 5,571 8,848 (37)
%
Other 4,313 5,891 (27)
%
Total Ancillaries 32,557 49,242 (34)
%
Small Business 5,156 6,992 (26)
%
Total New Paying 214,787 177,749 21
Members %
New Paying Members
New Paying Members consist of approved members from the period presented and any periods prior to the period presented from whom we have received an initial commission payment during the period presented.
EHEALTH, INC.
SUMMARY OF SELECTED METRICS
ESTIMATED MEMBERSHIP
(Unaudited)
As of March 31,
2020 2019 % Change
Medicare: (1)
Medicare Advantage 404,262 280,763 44
%
Medicare Supplement 97,527 76,875 27
%
Medicare Part D 224,154 146,239 53
%
Total Medicare 725,943 503,877 44
%
Individual and Family 113,483 130,297 (13)
(2)
%
Ancillaries: (3)
Short-term 23,553 23,626
%
Dental 123,260 137,179 (10)
%
Vision 70,590 76,303 (7)
%
Other 36,012 37,985 (5)
%
Total Ancillaries 253,415 275,093 (8)
%
Small Business (4) 44,113 42,972 3
%
Total Estimated 1,136,954 952,239 19
Membership %
(1) To estimate
the number of
members on
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
may be 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 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.
(2) To estimate
the number of
members on
Individual
and Family
health
insurance
plans
("IFP"), 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
may be 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 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.
(3) To estimate
the number of
members on
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
may be 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 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
payment and
related
reporting
from the
related
carriers.
(4) To estimate
the number of
members on
small
business
health
insurance
plans, we use
the number of
initial
members at
the time the
group was
approved, and
we update
this number
for changes
in membership
if such
changes are
reported to
us by the
group or
carrier.
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.
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.
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. Healthcare 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 Ended March 31,
2020 2019 % Change
Medicare:
Medicare Advantage (1) $
1,006 $
954 5
%
Medicare Supplement $
1,158 $
999 16
(1) %
Medicare Part D (1) $
260 $
258 1
%
Individual and Family:
Non-Qualified Health $
199 $
178 12
Plans (1) %
Qualified Health Plans $
240 $
194 24
(1) %
Ancillaries:
Short-term (1) $
150 $
65 131
%
Dental (1) $
67 $
71 (6)
%
Vision (1) $
52 $
63 (17)
%
Small Business (2) $
160 $
155 3
%
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,
estimated average plan duration,
the regulatory environment, and
cancellations of insurance plans
offered by health insurance
carriers with which we have a
relationship. 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
twelve months. The estimate is
driven by multiple factors,
including but not limited to,
contracted commission rates,
carrier mix, estimated average
plan duration, the regulatory
environment, and cancellations
of insurance plans offered by
health insurance carriers with
which we have a relationship 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 Ended March 31,
2020 2019
Medicare:
Medicare Advantage 7 7
% %
Medicare Supplement 5 5
% %
Medicare Part D 5 5
% %
Individual and Family:
Non-Qualified 15 15
Health Plans % %
Qualified Health 4 20
Plans % %
Ancillaries 10 10
% %
Small Business -
%
%
Constraints on Lifetime Value of Commissions Per Approved Member
Constraints are applied to derive 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 it is 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 a quarterly 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 March 31,
2020 2019 % Change
Medicare variable cost per
approved member:
Medicare
variable %
marketing
cost per
approved
Medicare
Advantage
("MA")-equivalent
member (1) $
349 $
334 5
Medicare
customer %
care and
enrollment
("CC&E")
cost per
approved MA-
equivalent
member (2) 364 344 6
Total
Medicare %
cost per
approved
member $
713 $
678 5
Individual and Family Plan
("IFP") variable cost per
approved member:
IFP variable
marketing %
cost per
approved
IFP-
equivalent
member (3) $
36 $
24 50
IFP CC&E cost
per approved %
IFP-
equivalent
member (4) 79 66 20
Total IFP
cost per %
approved
member $
115 $
90 28
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 partners 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) Medicare CC&E cost per approved
MA-equivalent member is equal
to the CC&E expense of our
Medicare business included in
our operating costs 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.
(3) Variable marketing cost per
approved IFP-equivalent
member represents direct costs
incurred in member acquisition
for IFP plans from our direct,
marketing partners 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.
(4) IFP CC&E cost per approved IFP-
equivalent member is equal to
the CC&E expense of our IFP
business included in our
operating costs 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 GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands, except per share amounts, unaudited)
Three Months Ended March 31,
2020 2019
GAAP net income (loss) $
3,452 $
(5,159)
Stock-based compensation
expense (1) 8,714 3,229
Change in fair value of
earnout liability (2) - 13,306
Amortization of intangible
assets (3) 547 547
Tax effect of non-GAAP
adjustments (4) (2,396) (4,687)
Non-GAAP net income $
10,317 $
7,236
GAAP net income (loss) per
diluted share $
0.13 $
(0.24)
Stock-based compensation
expense (1) 0.33 0.15
Change in fair value of
earnout liability (2) - 0.61
Amortization of intangible
assets (3) 0.02 0.03
Tax effect of non-GAAP
adjustments (4) (0.09) (0.22)
Non-GAAP net income per
diluted share $
0.39 $
0.33
GAAP net income (loss) $
3,452 $
(5,159)
Stock-based compensation
expense (1) 8,714 3,229
Change in fair value of
earnout liability (2) - 13,306
Depreciation and
amortization (5) 823 655
Amortization of intangible
assets (3) 547 547
Other income, net (6) (373) (557)
Benefit from income taxes
(7) (2,048) (3,467)
Adjusted EBITDA $
11,115 $
8,554
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 the change
in fair value of earnout liability
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
amortization of intangible assets.
(4) Non-GAAP net income, non-GAAP net
income per diluted share exclude
the tax effect of non-GAAP
adjustments.
(5) Adjusted EBITDA excludes
depreciation and amortization.
(6) Adjusted EBITDA excludes other
income, net.
(7) Adjusted EBITDA excludes benefit
from income taxes.
EHEALTH, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GUIDANCE
(In millions, except per share amounts, unaudited)
Year Ending December 31, 2020
Low High
GAAP net income $
70.0 $
85.0
Stock-based compensation
expense 29.0 27.0
Amortization of intangible
assets 1.5 1.5
Tax effect of non-GAAP
adjustments (7.0) (6.6)
Non-GAAP net income (1) $
93.5 $
106.9
GAAP net income per
diluted share $
2.55 $
3.10
Stock-based compensation
expense 1.06 0.98
Amortization of intangible
assets 0.05 0.05
Tax effect of non-GAAP
adjustments (0.25) (0.23)
Non-GAAP net income per
diluted share (2) $
3.41 $
3.90
GAAP net income $
70.0 $
85.0
Stock-based compensation
expense 29.0 27.0
Depreciation and
amortization 5.0 4.0
Amortization of intangible
assets 1.5 1.5
Other income, net (1.5) (2.5)
Provision for income taxes 21.0 25.0
Adjusted EBITDA (3) $
125.0 $
140.0
Explanation of Adjustments
(1) Non-GAAP net income is calculated
by adding stock-based
compensation, amortization of
intangible assets, and the income
tax effect of non-GAAP adjustments
to GAAP net income.
(2) Non-GAAP net income per diluted
share is calculated by adding
stock-based compensation expense
per diluted share, amortization of
intangible assets per diluted share
per diluted share, and the income
tax effect of non-GAAP adjustments
to GAAP net income per diluted
share.
(3) Adjusted EBITDA is calculated by
adding stock-based compensation,
depreciation and amortization
expense, amortization of intangible
assets, other income, net, and
provision for income taxes to GAAP
net income.
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SOURCE eHealth, Inc.
