eHealth, Inc. (NASDAQ: EHTH), the nation’s first and largest
private health insurance exchange, is providing expected GAAP net
loss per share and correcting a misstatement regarding expected
non-GAAP net loss per share in its earnings press release for the
quarter and year ended December 31, 2016. The earlier press release
dated February 24, 2017 mischaracterized information regarding the
expected GAAP net loss per share as expected non-GAAP net loss per
share in the guidance for the year ending December 31, 2017. The
misstatement error did not impact eHealth’s GAAP financial
statements or any of the other earnings release disclosures. The
guidance for GAAP net loss per share for the full year ending
December 31, 2017 is provided below and the non-GAAP net loss per
share for the full year ending December 31, 2017 in the
2017 Guidance section of the February
24, 2017 press release is replaced in its entirety as set forth
below:
- GAAP net loss per share is expected to
be in the range of $(1.49) to $(1.59) per share.
- Non-GAAP net loss per share(d) is
expected to be in the range of $(1.06) to $(1.17) per share.
The corrected release reads:
eHealth, Inc. Announces Fourth Quarter and
Fiscal 2016 Results
Fourth Quarter 2016
Overview
- Revenue for fourth quarter of 2016 was
$43.8 million, a decrease of 13% compared to $50.1 million for the
fourth quarter of 2015.
- Net loss for fourth quarter of 2016 was
$16.7 million compared to $12.1 million for the fourth quarter of
2015.
- Adjusted EBITDA for the fourth quarter
of 2016 was $(13.9) million compared to $(9.5) million for the
fourth quarter of 2015.
- Cash used in operations for the fourth
quarter of 2016 was $4.7 million compared to cash provided by
operations of $1.2 million for the fourth quarter of 2015.
eHealth, Inc. (NASDAQ: EHTH), the nation’s first and largest
private health insurance exchange, announced today its financial
results for the fourth quarter ended December 31, 2016.
Scott Flanders, chief executive officer of eHealth stated, “2016
was a dynamic year for the company. eHealth has undergone a broad
change in the leadership team and an extensive strategic review of
the business. The result is a newly focused strategy with a core
emphasis on growth and execution, diversification of revenue
streams and enhancement of member profitability.”
Continued Flanders, “2017 will be a year of transition for
eHealth. Our investments are aimed at driving meaningful expansion
in Medicare and Small Business membership to build a strong
foundation of recurring commission revenues. We are also investing
to make our sales and enrollment processes in these areas more
efficient which over time should further enhance lifetime
profitability of our members. We do expect to report a significant
EBITDA loss this year as reflected in our 2017 guidance. However,
the $62 million in cash on our balance sheet provides ability to
make these investments and position the company to return to
profitable growth. We currently plan to return to break-even in
2018, generate low double digit margins in 2019 and 20%+ margins in
2020 and thereafter - all on Adjusted EBITDA basis.”
Reportable Segments
During the fourth quarter of 2016, we began evaluating our
business performance and managing our operations as two distinct
reporting segments - Medicare and Individual, Family and Small
Business.
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.
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.
Marketing and Advertising, Customer Care and Enrollment,
Technology and Content and General and Administrative operating
expenses that are directly attributable to a segment are reported
within the applicable segment. Other indirect Marketing and
Advertising, Customer Care and Enrollment and Technology and
Content operating expenses are allocated to each segment based on
usage. Other indirect General and Administrative operating expenses
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 and instead reported
within Corporate.
GAAP — Fourth Quarter 2016
Results
Revenue — Revenue for the fourth quarter of 2016 totaled
$43.8 million, a 13% decrease compared to $50.1 million for the
fourth quarter of 2015. Commission revenue for the fourth quarter
of 2016 totaled $36.9 million, a 10% decrease compared to $41.1
million for the fourth quarter of 2015. Other revenue for the
fourth quarter of 2016 was $6.9 million, a 24% decrease compared to
$9.0 million for the fourth quarter of 2015.
Revenue from our Medicare segment was $19.7 million for the
fourth quarter of 2016, a 6% increase compared to $18.6 million in
the fourth quarter of 2015. Revenue from our Individual, Family and
Small Business segment was $24.0 million for the fourth quarter of
2016, a 24% decrease compared to $31.5 million for the fourth
quarter of 2015.
Loss from Operations — Loss from operations for the
fourth quarter of 2016 was $16.8 million compared to $12.4 million
for the fourth quarter of 2015. Operating margin was (38)% for the
fourth quarter of 2016 compared to (25)% for the fourth quarter of
2015.
Pre-tax Loss — Pre-tax loss for the fourth quarter of
2016 was $16.7 million compared to $12.3 million for the fourth
quarter of 2015.
Provision (Benefit) for Income Taxes — Provision for
income taxes for the fourth quarter of 2016 was $18,000 compared to
a benefit of $0.2 million for the fourth quarter of 2015.
Net Loss — Net loss for the fourth quarter of 2016 was
$16.7 million, or $0.91 loss per share, compared to a loss of $12.1
million, or $0.67 loss per share, for the fourth quarter of
2015.
Segment Profit (Loss) — Loss from our Medicare
segment was $22.0 million for the fourth quarter of 2016, a 43%
increase compared to a loss of $15.4 million for the fourth quarter
of 2015. Profit from our Individual, Family and Small Business
segment was $14.2 million for the fourth quarter of 2016, a 17%
increase compared to a profit of $12.1 million for the fourth
quarter of 2015. Segment profit (loss) 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.
Non-GAAP — Fourth Quarter 2016
Results
Non-GAAP Loss from Operations & Non-GAAP Net Loss —
Non-GAAP operating loss for the fourth quarter of 2016 was $14.6
million compared to $10.6 million for the fourth quarter of 2015.
Non-GAAP operating margin for the fourth quarter of 2016 was (33)%
compared to (21)% for the fourth quarter of 2015. Non-GAAP net loss
for the fourth quarter of 2016 was $14.5 million, or $0.79 loss per
share, compared to $10.2 million, or $0.56 loss per share, for the
fourth quarter of 2015.
Non-GAAP net loss and non-GAAP net loss per share for the fourth
quarter of 2016 exclude $1.9 million of stock-based compensation
expense and $0.3 million of amortization of intangible assets.
Non-GAAP net loss and non-GAAP net loss per share for the fourth
quarter of 2015 exclude $1.6 million of stock-based compensation
expense and $0.3 million of amortization of intangible assets.
Adjusted EBITDA — Adjusted EBITDA for the fourth quarter
of 2016 was $(13.9) million compared to $(9.5) million for the
fourth quarter of 2015. Adjusted EBITDA is calculated by adding
stock-based compensation, depreciation and amortization expense,
amortization of intangible assets, restructuring charge (benefit),
other income (expense) and provision (benefit) for income taxes to
GAAP net income (loss).
Membership & Submitted
Applications
Membership — Total estimated membership as of
December 31, 2016 was 1,015,200 members, an 11% decrease
compared to 1,144,500 we reported as of December 31, 2015.
Estimated Medicare membership as of December 31, 2016 was
304,900, a 33% increase compared to 228,900 we reported as of
December 31, 2015. Estimated individual and family plan
membership as of December 31, 2016 was 360,600 members, a 28%
decrease compared to 503,300 we reported as of December 31,
2015.
Submitted Applications — Submitted applications for
Medicare Advantage products increased 6% in the fourth quarter of
2016 to 56,000 applications compared to 52,600 applications in the
fourth quarter of 2015. Submitted applications for all Medicare
products, which includes Medicare Advantage, Medicare Supplement
and Prescription Drug Plans, increased 15% in the fourth quarter of
2016 to 85,300 applications compared to 74,300 applications in the
fourth quarter of 2015. Submitted applications for individual and
family plan products decreased 61% in the fourth quarter of 2016 to
45,100 applications covering 66,900 individuals compared to 114,600
applications covering 164,600 individuals in the fourth quarter of
2015.
Cash — Fourth Quarter
2016
Cash Flows — Net cash used in operating activities was
$4.7 million for the fourth quarter of 2016 compared to net cash
provided by operating activities of $1.2 million for the fourth
quarter of 2015.
GAAP — Full Year Results
Revenue — Revenue for the year ended December 31,
2016 totaled $187.0 million, a 1% decrease compared to $189.5
million for the year ended December 31, 2015. Commission
revenue for the year ended December 31, 2016 totaled $170.9
million, relatively flat compared to $171.3 million for the year
ended December 31, 2015. Other revenue for the year ended
December 31, 2016 was $16.1 million, a 12% decrease compared
to $18.3 million for the year ended December 31, 2015.
Revenue from our Medicare segment was $80.3 million for the year
ended December 31, 2016, a 27% increase compared to $63.2
million for the year ended December 31, 2015. Revenue from our
Individual, Family and Small Business segment was $106.7 million
for the year ended December 31, 2016, a 16% decrease compared
to $126.4 million for the year ended December 31, 2015.
Loss from Operations — Loss from operations for the year
ended December 31, 2016 was $5.9 million compared to $5.7
million for the year ended December 31, 2015. Operating margin
was (3)% for the years ended December 31, 2016 and 2015.
Pre-tax Loss — Pre-tax loss for the year ended
December 31, 2016 was $5.8 million compared to $5.6 million
for the year ended December 31, 2015.
Benefit for Income Taxes — Benefit for income taxes was
$0.9 million and $0.8 million for the years ended December 31,
2016 and 2015, respectively. The benefit for income taxes for the
years ended December 31, 2015 and 2016 was a result of the partial
release of unrecognized tax benefits, partially offset by a
provision for income taxes related to alternative minimum tax and a
foreign tax rate differential.
Net Loss — Net loss for the year ended December 31,
2016 was $4.9 million, or $0.27 per share, compared to net loss of
$4.8 million, or $0.26 per share, for the year ended
December 31, 2015.
Segment Profit (Loss) — Loss from our Medicare
segment was $33.1 million for the year ended December 31,
2016, a 42% increase compared to a loss of $23.3 million for the
year ended December 31, 2015. Profit from our Individual,
Family and Small Business segment was $67.9 million for the year
ended December 31, 2016, a 14% increase compared to profit of
$59.5 million from the Individual, Family and Small Business for
the year ended December 31, 2015. Segment profit (loss) 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.
Non-GAAP — Full Year
Non-GAAP Income from Operations & Non-GAAP Net Income
— Non-GAAP operating income for the year ended
December 31, 2016 was $2.2 million compared to $6.9 million
for the year ended December 31, 2015. Non-GAAP operating
margin for the year ended December 31, 2016 was 1% compared to
4% for the year ended December 31, 2015. Non-GAAP net income
for the year ended December 31, 2016 was $3.1 million, or
$0.17 per diluted share, compared to $7.8 million, or $0.43 per
diluted share, for the year ended December 31, 2015.
Non-GAAP net income and non-GAAP net income per diluted share in
the year ended December 31, 2016 exclude $7.3 million of
stock-based compensation expense and $1.0 million of amortization
of intangible assets and includes a restructuring benefit of $0.3
million. Non-GAAP net income and non-GAAP net income per diluted
share in the year ended December 31, 2015 exclude $6.9 million
of stock-based compensation expense, $4.5 million of restructuring
charges and $1.2 million of amortization of intangible assets.
Adjusted EBITDA — Adjusted EBITDA for the year ended
December 31, 2016 was $5.7 million compared to $11.1 million
for the year ended December 31, 2015. Adjusted EBITDA is
calculated by adding stock-based compensation, depreciation and
amortization expense, amortization of intangible assets,
restructuring charge (benefit), other (income) expense, net, and
provision (benefit) for income taxes to GAAP net income (loss).
Cash — Full Year
Cash Flows — Net cash provided by operating activities
was $4.1 million for the year ended December 31, 2016 compared
to $13.7 million for the year ended December 31, 2015.
Cash Balance — Cash and cash equivalents as of
December 31, 2016 totaled $61.8 million compared to $62.7
million as of December 31, 2015. The decrease in cash and cash
equivalents reflects $4.1 million provided by operating activities,
$3.7 million used to purchase property and equipment and other
assets, and $1.3 million used to net-share settle equity
awards.
2017 Guidance
eHealth’s guidance for the full year ending December 31, 2017 is
based on information available as of February 24, 2017. These
expectations are forward-looking statements and eHealth assumes no
obligation to update these statements. Results may be materially
different and are affected by the risk factors and uncertainties
identified in this release and in eHealth’s annual and quarterly
filings with the Securities and Exchange Commission.
- Total revenue is expected to be in the
range of $165 million to $175 million. Revenue from the Medicare
segment is expected to be in the range of $91.5 million to $96.5
million. Revenue from the Individual, Family and Small Business
segment is expected to be in the range of $73.5 million to $78.5
million.
- Adjusted EBITDA(a) is expected to be in
the range of $(14.1) million to $(16.1) million.
- Medicare segment loss(b) is expected to
be in the range of $(16.9) million to $(17.9) million. Individual,
Family and Small Business segment profit(c) is expected to be in
the range of $29.0 million to $30.0 million. Corporate(d)
shared service expenses, excluding stock-based compensation and
depreciation and amortization expense, is expected to be
approximately $27.2 million.
- GAAP net loss per share is expected to
be in the range of $(1.49) to $(1.59) per share.
- Non-GAAP net loss per share(d) is
expected to be in the range of $(1.06) to $(1.17) per share.(a)
Adjusted EBITDA is calculated by adding stock-based compensation,
depreciation and amortization expense, amortization of intangible
assets, restructuring charge (benefit), other income (expense) and
provision (benefit) for income taxes to GAAP net income (loss).(b)
Segment profit (loss) 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.(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 loss per share is calculated by excluding stock-based
compensation expense, intangible asset amortization expense,
restructuring (charge) benefit and the estimated tax benefit
relating to these expenses to GAAP net income (loss).
Webcast and Conference Call Information
A Webcast and conference call will be held today, Friday,
February 24, 2017 at 8:00 a.m. Eastern / 5:00 a.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 66659054. 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 66659054. 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, the nation’s
first and largest private health insurance exchange where
individuals, families and small businesses can compare health
insurance products from leading insurers side by side and purchase
and enroll in coverage online. 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).
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 strategy
and core emphasis, meaningful expansion in Medicare and Small
Business membership, investments in sales and enrollment processes,
lifetime profitability of our members, margins on an adjusted
EBITDA basis in 2018, 2019, 2020 and thereafter, future events and
our guidance for the full year ending December 31, 2017, including
our guidance for total revenue, revenue from the Medicare segment,
revenue from the Individual, Family and Small Business segment,
Adjusted EBITDA, profit (loss) from the Medicare segment, profit
(loss) from the Individual, Family and Small Business segment,
Corporate shared service expense and Non-GAAP net loss per 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, including 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; decreased conversion rates for health
insurance exchange enrollments 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; 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; consumers 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; maintaining and enhancing 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; timing of
receipt and accuracy of commission reports; payment practices of
health insurance carriers; dependence on our operations in China;
changes in laws and regulations, including in connection with
healthcare reform and/or with respect to the marketing and sale of
Medicare plans; compliance with insurance and other laws and
regulations; exposure to security risks; and the performance,
reliability and availability of 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. eHealth does not undertake any
obligation to update any forward-looking statement to conform the
statement to actual results or changes in expectations.
Non-GAAP Financial Information
This press release includes financial measures that are not in
accordance with generally accepted accounting principles in the
United States (GAAP). To supplement eHealth’s condensed
consolidated financial statements presented in accordance with
GAAP, eHealth presents investors with certain non-GAAP financial
measures, including non-GAAP operating income (loss); non-GAAP
operating margins; adjusted earnings before interest, taxes,
depreciation and amortization (Adjusted EBITDA); non-GAAP net
income (loss) and non-GAAP net income (loss) per diluted share.
- Non-GAAP operating income (loss)
consists of GAAP operating income (loss) excluding the following
items:
- the effects of expensing stock-based
compensation related to stock options and restricted stock units in
accordance with FASB ASC Topic 718,
- amortization of intangible assets,
and
- restructuring charge (benefit).
- Non-GAAP operating margins are
calculated by dividing non-GAAP operating income (loss) by GAAP
total revenue.
- Adjusted EBITDA is calculated by adding
stock-based compensation, depreciation and amortization expense,
amortization of intangible assets, restructuring charge (benefit),
other income (expense) 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.
Non-GAAP operating income (loss), non-GAAP operating margins,
Adjusted EBITDA, non-GAAP net income (loss) and non-GAAP net income
(loss) per diluted share are not calculated in accordance with
GAAP, and should be considered supplemental to, and not as a
substitute for, or superior to, financial measures calculated in
accordance with GAAP. Non-GAAP financial measures used in this
press release have limitations in that they do not reflect all of
the revenue and costs associated with the operations of 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 operating income (loss),
GAAP operating margins, 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.
EHEALTH, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands, unaudited)
December 31,2015
December 31,2016
(1)
Assets Current assets:
Cash and cash equivalents
$ 62,710 $ 61,781 Accounts receivable 9,647 9,213 Prepaid expenses
and other current assets 5,185 5,148 Total current
assets 77,542 76,142 Property and equipment, net 7,364 5,608 Other
assets 4,697 4,473 Intangible assets, net 9,620 8,580 Goodwill
14,096 14,096 Total assets $ 113,319 $ 108,899
Liabilities and stockholders’ equity Current
liabilities: Accounts payable $ 3,012 $ 5,112 Accrued compensation
and benefits 14,386 10,920 Accrued marketing expenses 10,698 7,158
Deferred revenue 392 959
Other current liabilities
3,448 3,775 Total current liabilities 31,936 27,924
Non-current liabilities 4,962 3,374 Stockholders’ equity: Common
stock 29 29 Additional paid-in capital 266,699 272,778 Treasury
stock, at cost (199,998 ) (199,998 ) Retained earnings 9,498 4,616
Accumulated other comprehensive income 193 176 Total
stockholders’ equity 76,421 77,601 Total liabilities
and stockholders’ equity $ 113,319 $ 108,899
(1) The condensed consolidated balance sheet at December 31,
2015 has been derived from the audited consolidated financial
statements at that date.
EHEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(In thousands, except per share
amounts, unaudited)
Three Months EndedDecember
31,
Year EndedDecember 31,
2015 2016 2015 2016
Revenue
Commission
$ 41,100 36,873 $ 171,257 $ 170,850
Other
9,035 6,887 18,284 16,110 Total revenue
50,135 43,760 189,541 186,960 Operating costs and expenses: Cost of
revenue 651 429 4,178 3,176 Marketing and advertising (1) 31,486
28,189 75,571 72,213 Customer care and enrollment (1) 13,559 16,061
42,540 47,930 Technology and content (1) 8,951 7,696 36,351 32,749
General and administrative (1) 7,620 7,938 30,858 36,004
Restructuring charge (benefit) (1) — — 4,541 (297 ) Amortization of
intangible assets 260 260 1,153 1,040
Total operating costs and expenses 62,527 60,573
195,192 192,815 Loss from operations (12,392 )
(16,813 ) (5,651 ) (5,855 ) Other income (expense), net 95
127 45 102 Loss before provision (benefit) for
income taxes (12,297 ) (16,686 ) (5,606 ) (5,753 ) Provision
(benefit) for income taxes (231 ) 18 (843 ) (871 ) Net loss
$ (12,066 ) $ (16,704 ) $ (4,763 ) $ (4,882 ) Net loss per
share: Basic $ (0.67 ) $ (0.91 ) $ (0.26 ) $ (0.27 ) Diluted $
(0.67 ) $ (0.91 ) $ (0.26 ) $ (0.27 ) Weighted-average
number of shares used in per share amounts: Basic 18,124 18,345
18,008 18,272 Diluted 18,124 18,345 18,008 18,272 (1)
Includes stock-based compensation as follows: Marketing and
advertising $ 452 $ 246 $ 1,950 $ 1,237 Customer care and
enrollment 111 137 477 497 Technology and content 420 544 1,728
1,836 General and administrative 585 983 2,734 3,696 Restructuring
charge — — 113 — Total $ 1,568 $
1,910 $ 7,002 $ 7,266
EHEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In thousands, unaudited)
Three Months EndedDecember
31,
Year EndedDecember 31,
2015 2016 2015 2016
Operating activities Net loss $ (12,066 ) $ (16,704 ) $
(4,763 ) $ (4,882 ) Adjustments to reconcile net loss to net cash
provided by (used in) operating activities: Depreciation and
amortization 1,026 790 4,148 3,539 Amortization of
internally-developed software 178 277 627 936 Amortization of
book-of-business consideration 8 41 2,006 1,649 Amortization of
intangible assets 260 260 1,153 1,040 Stock-based compensation
expense 1,568 1,910 7,002 7,266 Other non-cash items 85 (27 ) 207
(119 ) Changes in operating assets and liabilities: Accounts
receivable (815 ) (1,600 ) (1,447 ) 434 Prepaid expenses and other
assets 2,134 750 997 (486 ) Accounts payable 943 2,683 (2,949 )
2,227 Accrued compensation and benefits 3,143 1,890 6,180 (3,466 )
Accrued marketing expenses 9,402 5,502 1,991 (3,540 ) Deferred
revenue (3,292 ) (457 ) (642 ) 567 Accrued restructuring charge (56
) — 433 (433 ) Other liabilities (1,294 ) (13 ) (1,247 ) (649 ) Net
cash provided by (used in) operating activities 1,224 (4,698
) 13,696 4,083
Investing activities
Purchases of property and equipment and other assets (661 ) (563 )
(2,996 ) (3,726 ) Net cash used in investing activities (661 ) (563
) (2,996 ) (3,726 )
Financing activities Net proceeds
from exercise of common stock options 246 2 1,572 62 Cash used to
net-share settle equity awards (98 ) (204 ) (922 ) (1,248 )
Principal payments in connection with
capital leases
(16 ) (19 ) (73 ) (83 ) Net cash provided by (used in) financing
activities 132 (221 ) 577 (1,269 ) Effect of
exchange rate changes on cash and cash equivalents (1 ) (5 ) 18
(17 ) Net increase (decrease) in cash and cash
equivalents 694 (5,487 ) 11,295 (929 ) Cash and cash equivalents at
beginning of period 62,016 67,268 51,415
62,710 Cash and cash equivalents at end of period $ 62,710
$ 61,781 $ 62,710 $ 61,781
EHEALTH, INC.
SEGMENT INFORMATION
(In thousands, unaudited)
Three Months EndedDecember
31,
Year EndedDecember 31,
2015 2016 2015 2016
Revenue
Medicare (1) $ 18,607 $ 19,728 $ 63,163 $ 80,269 Individual, Family
and Small Business (2) 31,528 24,032 126,378
106,691 Total revenue $ 50,135 $ 43,760 $
189,541 $ 186,960
Segment profit
(loss)
Medicare segment loss (3) $ (15,420 ) $ (22,005 ) $ (23,284 ) $
(33,141 )
Individual, Family and Small Business
segment profit (3)
12,133 14,215 59,499 67,905 Total
segment profit (loss) (3,287 ) (7,790 ) 36,215 34,764 Corporate (4)
(6,251 ) (6,063 ) (25,135 ) (29,071 ) Stock-based compensation
expense (1,568 ) (1,910 ) (6,889 ) (7,266 ) Depreciation and
amortization (1,026 ) (790 ) (4,148 ) (3,539 ) Restructuring
(charge) benefit — — (4,541 ) 297 Amortization of intangible assets
(260 ) (260 ) (1,153 ) (1,040 ) Other income (expense), net 95
127 45 102 Loss before provision
(benefit) for income taxes $ (12,297 ) $ (16,686 ) $ (5,606 ) $
(5,753 )
Note:During the fourth quarter of
2016, we began evaluating our business performance and managing 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 (loss) 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.
(4)
Corporate consists of other indirect
General and Administrative operating expenses, excluding
stock-based compensation, depreciation, amortization expense and
restructuring change (benefit), 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.
EHEALTH, INC.
SUMMARY OF SELECTED METRICS
(Unaudited)
Three Months EndedDecember
31,
Year EndedDecember 31,
2015 2016
PercentageChange
2015 2016
PercentageChange
Submitted applications: Medicare products (1) 74,300 85,300
15 %
132,300 173,000
31 %
IFP products (2) 114,600 45,100 (61)% 301,000 138,100 (54)% Other
products (3) 107,900 62,100 (42)% 346,000
276,500 (20)% Total submitted applications (4) 296,800
192,500 (35)% 779,300 587,600 (25)%
Medicare Advantage submitted applications (5) 52,600 56,000
6 %
96,200 121,100
26 %
As of December 31,
2015 2016
PercentageChange
Estimated membership:
Medicare products (6)
228,900 304,900
33 %
IFP products (7) 503,300 360,600 (28)% Other products (8) 412,300
349,700 (15)% Total estimated membership (9)
1,144,500 1,015,200 (11)%
Notes:
(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. 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. (2)
Major medical Individual and Family plan ("IFP") health insurance
applications submitted on our website during the period.
Applications are counted as submitted when the applicant completes
the application, clicks the submit button on our website and
submits the application to us. 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. 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 (primarily consisting of
short-term, dental, life, vision, and accident insurance plans).
(3) Applications for health insurance plans other than Medicare and
IFP submitted on our website during the period. Applications for
ancillary plans are counted as submitted when the applicant
completes the application, clicks the submit button on our website
and submits the application to us. Applications for small business
plans 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. 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. (4)
Applications for all health insurance plans submitted on our
website or through our customer care center during the period. See
notes (1), (2) and (3) above for more information as to what
constitutes a submitted application.
(5)
Medicare Advantage plan health insurance
applications submitted on our website or through our customer care
center during the period. 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. Medicare Advantage
submitted applications are included in Medicare submitted
applications - See Note1 above for more detail.
(6)
Estimated number of members active on
Medicare-related health insurance as of the date indicated. See the
note below for additional information regarding our calculation of
Medicare estimated membership.
(7)
Estimated number of members active on IFP
health insurance plans as of the date indicated. See the note below
for additional information regarding our calculation of IFP
estimated membership.
(8)
Estimated number of members active on
insurance plans other than Medicare-related health insurance and
IFP health insurance plans as of the date indicated. See the note
below for additional information regarding our calculation of other
estimated membership.
(9)
Estimated number of members active on all
insurance plans as of the date indicated. See the note below for
additional information regarding our calculation of total estimated
membership.
Note:Health insurance carriers bill and collect insurance
premiums paid by our members. Health insurance 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 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. We estimate the number
of continuing members on all policies as of a specific date as
follows:
- For Medicare-related health insurance
plans, we 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, 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 ancillary health insurance plans
(such as short-term, dental, vision, accident and student), 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 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
payment and related reporting from the related carriers. 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.
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.
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. In addition, and 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.
RECONCILIATION OF GAAP TO NON-GAAP
FINANCIAL MEASURES
(In thousands, except per share
amounts, unaudited)
Three Months Ended December 31, 2015
2016 Amount
Percent
ofTotalRevenue
Amount
Percent
ofTotalRevenue
GAAP marketing and advertising expense $ 31,486 63% $ 28,189 64%
Stock-based compensation expense (1) (452 ) (1)% (246 ) (1)%
Non-GAAP marketing and advertising expense $ 31,034 62% $
27,943 64% GAAP customer care and enrollment expense
$ 13,559 27% $ 16,061 37% Stock-based compensation expense (1) (111
) —% (137 ) —% Non-GAAP customer care and enrollment expense $
13,448 27% $ 15,924 36% GAAP technology and
content expense $ 8,951 18% $ 7,696 18% Stock-based compensation
expense (1) (420 ) (1)% (544 ) (1)% Non-GAAP technology and content
expense $ 8,531 17% $ 7,152 16% GAAP general
and administrative expense $ 7,620 15% 7,938 18% Stock-based
compensation expense (1) (585 ) (1)% (983 ) (2)% Non-GAAP general
and administrative expense $ 7,035 14% $ 6,955 16%
GAAP loss from operations $ (12,392 ) (25)% (16,813 ) (38)%
Stock-based compensation expense (1) 1,568 3% 1,910 4% Amortization
of intangible assets (2) 260 1% 260 1% Non-GAAP loss
from operations $ (10,564 ) (21)% $ (14,643 ) (33)%
Explanation of
adjustments
(1) Non-GAAP loss from operations and non-GAAP expenses
exclude the effect of expensing stock-based compensation related to
stock options and restricted stock units in accordance with FASB
ASC Topic 718. (2) Non-GAAP loss from operations excludes
amortization of intangible assets.
EHEALTH, INC.
RECONCILIATION OF GAAP TO NON-GAAP
FINANCIAL MEASURES
(In thousands, except per share
amounts, unaudited)
Year EndedDecember 31,
2015 2016 Amount
Percent
ofTotalRevenue
Amount
Percent
ofTotalRevenue
GAAP marketing and advertising expense $ 75,571 40% $ 72,213 39%
Stock-based compensation expense (1) (1,950 ) (1)% (1,237 ) (1)%
Non-GAAP marketing and advertising expense $ 73,621 39% $
70,976 38% GAAP customer care and enrollment expense
$ 42,540 22% $ 47,930 26% Stock-based compensation expense (1) (477
) —% (497 ) —% Non-GAAP customer care and enrollment expense $
42,063 22% $ 47,433 25% GAAP technology and
content expense $ 36,351 19% $ 32,749 18% Stock-based compensation
expense (1) (1,728 ) (1)% (1,836 ) (1)% Non-GAAP technology and
content expense $ 34,623 18% $ 30,913 17% GAAP
general and administrative expense $ 30,858 16% 36,004 19%
Stock-based compensation expense (1) (2,734 ) (1)% (3,696 ) (2)%
Non-GAAP general and administrative expense $ 28,124 15% $
32,308 17% GAAP loss from operations $ (5,651 ) (3)%
(5,855 ) (3)% Stock-based compensation expense (1) 6,889 4% 7,266
4% Restructuring charge (benefit) (2) 4,541 2% (297 ) —%
Amortization of intangible assets (3) 1,153 1% 1,040
1% Non-GAAP income from operations $ 6,932 4% $ 2,154
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 in accordance with FASB
ASC Topic 718. (2) Non-GAAP income from operations excludes
restructuring charge (benefit). (3) Non-GAAP income from operations
excludes amortization of intangible assets.
EHEALTH, INC.
RECONCILIATION OF GAAP TO NON-GAAP
FINANCIAL MEASURES
(In thousands, except per share
amounts, unaudited)
Three Months EndedDecember
31,
Year EndedDecember 31,
2015 2016 2015 2016 GAAP
net loss $ (12,066 ) $ (16,704 ) $ (4,763 ) $ (4,882 ) Stock-based
compensation expense (1) 1,568 1,910 6,889 7,266 Restructuring
charge (benefit) (3) — — 4,541 (297 ) Amortization of intangible
assets (4) 260 260 1,153 1,040 Non-GAAP
net income (loss) $ (10,238 ) $ (14,534 ) $ 7,820 $ 3,127
GAAP net loss per share $ (0.67 ) $ (0.91 ) $ (0.26 )
$ (0.27 ) Stock-based compensation expense (1) 0.10 0.10 0.38 0.40
Restructuring charge (benefit) (3) — — 0.25 (0.02 ) Amortization of
intangible assets (4) 0.01 0.01 0.06 0.06
Non-GAAP net income (loss) per share $ (0.56 ) $ (0.79 ) $
0.43 $ 0.17 GAAP net loss $ (12,066 ) $
(16,704 ) $ (4,763 ) $ (4,882 ) Stock-based compensation expense
(1) 1,568 1,910 6,889 7,266 Depreciation and amortization (2) 1,026
790 4,148 3,539 Restructuring charge (benefit) (3) — — 4,541 (297 )
Amortization of intangible assets (4) 260 260 1,153 1,040 Other
income (expense), net (5) (95 ) (127 ) (45 ) (102 ) Provision
(benefit) for income taxes (6) (231 ) 18 (843 ) (871 )
Adjusted EBITDA $ (9,538 ) $ (13,853 ) $ 11,080 $ 5,693
Explanation of
adjustments
(1) Non-GAAP net income (loss), Non-GAAP income (loss) per
share and Adjusted EBITDA exclude the effect of expensing
stock-based compensation related to stock options and restricted
stock units in accordance with FASB ASC Topic 718. (2) Adjusted
EBITDA excludes depreciation and amortization. (3) Non-GAAP net
income (loss), Non-GAAP income (loss) per share and Adjusted EBITDA
exclude restructuring charge (benefit). (4) Non-GAAP net income
(loss), Non-GAAP income (loss) per share and Adjusted EBITDA
exclude amortization of intangible assets. (5) Adjusted EBITDA
excludes other income (expense), net. (6) Adjusted EBITDA excludes
provision (benefit) for income taxes.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170224005184/en/
Investor Relations Contact:eHealth, Inc.Kate Sidorovich,
CFA, 650-210-3111Vice President Investor
Relationskate.sidorovich@ehealth.comhttp://ir.ehealthinsurance.com
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