eHealth, Inc. Announces Third Quarter 2015 Results
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MOUNTAIN VIEW, CA -- (Marketwired) -- 10/29/15 -- eHealth, Inc. (NASDAQ: EHTH)
Third Quarter 2015 Overview
- Revenue of $38.2 million, a decrease of 7% compared to the third quarter of 2014
- GAAP net income of $3.6 million, or $0.20 per diluted share, compared to GAAP net income of $1.5 million, or $0.08 per diluted share for the third quarter of 2014
- Non-GAAP net income of $5.5 million, or $0.30 per diluted share, compared to non-GAAP net income of $3.1 million, or $0.17 per diluted share for the third quarter of 2014
- EBITDA of $5.8 million compared to EBITDA of $7.5 million for the third quarter of 2014.
- Total estimated members decreased 5% compared to membership estimated at September 30, 2014.
- Submitted applications for Medicare Advantage increased 140% compared to the third quarter of 2014.
- Submitted applications for Individual & Family Plan products decreased 5% compared to the third quarter of 2014
eHealth, Inc. (NASDAQ: EHTH), the nation's first and largest private health insurance exchange, announced today its financial results for the third quarter ended September 30, 2015.
Gary Lauer, chief executive officer of eHealth stated, "We are pleased with our third quarter 2015 results which demonstrate strong execution just two quarters after implementing a cost rebalancing program. Third quarter revenue and earnings exceeded our expectations. We also generated $10.9 million in operating cash flow and remain debt free. In Medicare, an important investment area for us, we grew Medicare Advantage applications by 140% compared to the third quarter a year ago and grew our estimated Medicare Advantage membership by 64% compared to the estimated membership we reported for the third quarter of 2014."
GAAP -- Third Quarter 2015 Results
Revenue -- Revenue for the third quarter of 2015 totaled $38.2 million, a 7% decrease compared to revenue of $41.2 million for the third quarter of 2014. Commission revenue for the third quarter of 2015 totaled $34.9 million, a 3% decrease compared to commission revenue of $36.2 million for the third quarter of 2014. Medicare commission revenue was $6.7 million for the third quarter of 2015, an increase of 10% compared to Medicare commission revenue of $6.0 million for the third quarter of 2014.
Income from Operations -- Operating income for the third quarter of 2015 was $2.9 million, compared to operating income of $3.8 million for the third quarter of 2014. Operating margin for the third quarter of 2015 was 8% compared to 9% for the third quarter of 2014.
Pre-tax Income -- Pre-tax income for the third quarter of 2015 was $2.9 million compared to pre-tax income of $3.8 million for the third quarter of 2014.
Provision (Benefit) for Income Taxes -- Benefit for income taxes for the third quarter of 2015 was $0.7 million, compared to provision for income taxes of $2.2 million for the third quarter of 2014. Our provision (benefit) for income taxes in the third quarter of 2015 was impacted by a $0.8 million decrease in our liability for unrecognized tax benefits due to the expiration of the related statute of limitations on those previously unrecognized tax benefits.
Net Income -- Net income for the third quarter of 2015 was $3.6 million, or $0.20 per diluted share, compared to net income of $1.5 million, or $0.08 per diluted share for the third quarter of 2014.
Non-GAAP -- Third Quarter 2015 Results
Non-GAAP Income from Operations -- Non-GAAP operating income for the third quarter of 2015 was $4.8 million compared to non-GAAP operating income of $6.4 million for the third quarter of 2014. Non-GAAP operating margin for the third quarter of 2015 was 12% compared to non-GAAP operating margin of 16% for the third quarter of 2014. Non-GAAP operating income and margins in the third quarter of 2015 exclude $1.6 million of stock-based compensation expense and $0.3 million of intangible asset amortization expense. Non-GAAP operating income and margins in the third quarter of 2014 exclude $2.3 million of stock-based compensation expense and $0.4 million of intangible asset amortization expense.
Non-GAAP Net Income -- Non-GAAP net income for the third quarter of 2015 was $5.5 million, or $0.30 per diluted share, compared to non-GAAP net income of $3.1 million, or $0.17 per diluted share for the third quarter of 2014. Non-GAAP net income and non-GAAP net income per diluted share in the third quarter of 2015 exclude $1.6 million of stock-based compensation expense and $0.3 million of intangible asset amortization expense. Non-GAAP net income and non-GAAP net income per diluted share in the third quarter of 2014 exclude $2.3 million of stock-based compensation expense and $0.4 million of intangible asset amortization expense, less $1.1 million for related income tax benefit.
EBITDA -- EBITDA for the third quarter of 2015 was $5.8 million compared to EBITDA of $7.5 million for the third quarter of 2014. EBITDA is calculated by adding stock-based compensation, depreciation and amortization expense, including intangible asset amortization expense, other expense, net and provision (benefit) for income taxes to GAAP net income (loss).
Membership & Submitted Applications
Membership -- Total estimated membership at September 30, 2015 was 1,098,100 members, a 5% decrease over estimated membership of 1,158,100 at September 30, 2014. Estimated individual and family plan membership at September 30, 2015 was 518,000 members, a 21% decrease compared to estimated membership of 653,700 at September 30, 2014. Estimated Medicare membership at September 30, 2015 was 182,700, a 51% increase over estimated membership of 121,300 at September 30, 2014. The estimated number of members on Medicare Advantage plans at September 30, 2015 increased by 64% compared to membership estimated at September 30, 2014.
Submitted Applications -- Submitted applications for individual and family plan products decreased 5% in the third quarter of 2015 to 22,500 applications covering 32,600 individuals, compared to 23,800 applications covering 37,800 individuals in the third quarter of 2014. Submitted applications for Medicare Advantage products increased 140% in the third quarter of 2015 to 14,800 applications, compared to 6,200 applications in the third quarter of 2014. Submitted applications for all Medicare products, which include Medicare Supplement and Medicare Part D prescription drug products, increased 67% in the third quarter of 2015 to 19,200 applications, compared to 11,500 applications in the third quarter of 2014. Approved members for individual and family plan products decreased 16% in the third quarter of 2015 to 23,700 members, compared to 28,100 members in the third quarter of 2014. Total approved members, including individual and family plan, Medicare plan and other product members, decreased 14% to 111,400 members in the third quarter of 2015, compared to 130,000 in the third quarter of 2014.
Cash -- Third Quarter 2015
Cash Flows-Net cash provided by operating activities was $10.9 million for the third quarter of 2015 compared to net cash provided by operating activities of $11.0 million for the third quarter of 2014.
GAAP -- Year-to-Date Results
Revenue -- Revenue for the nine months ended September 30, 2015 totaled $139.4 million, a 3% increase compared to revenue of $134.7 million for the nine months ended September 30, 2014. Commission revenue for the nine months ended September 30, 2015 totaled $130.2 million, an 8% increase compared to commission revenue of $120.3 million for the nine months ended September 30, 2014. Medicare commission revenue was $42.9 million for the nine months ended September 30, 2015, a 76% increase compared to Medicare commission revenue of $24.4 million for the nine months ended September 30, 2014.
Restructuring Charges -- Restructuring charges for the nine months ended September 30, 2015 were $4.5 million compared to no restructuring charges for the nine months ended September 30, 2014. In March 2015, we implemented an organizational restructuring and cost reduction plan designed to rebalance our resources and help reduce our cost structure as a result of lower than expected individual and family health insurance plan membership and revenue. As part of the plan, we eliminated approximately 160 full-time positions in the United States, representing approximately 15% of our workforce primarily in our technology and content and customer care and enrollment groups, and to a lesser extent, in our marketing and advertising and general and administrative groups. We incurred pre-tax restructuring charges of approximately $3.9 million for employee termination benefits and related costs as well as $0.6 million in other pre-tax restructuring charges, primarily consisting of facility costs. The majority of the activities comprising the restructuring plan were substantially completed in the first quarter of 2015.
Income from Operations -- Operating income for the nine months ended September 30, 2015 was $6.7 million, compared to operating income of $7.0 million for the nine months ended September 30, 2014. Operating margins were 5% in both the nine months ended September 30, 2015 and the nine months ended September 30, 2014.
Pre-tax Income -- Pre-tax income for the nine months ended September 30, 2015 was $6.7 million, compared to $6.9 million for the nine months ended September 30, 2014.
Provision (Benefit) for Income Taxes -- Benefit for income taxes for the nine months ended September 30, 2015 was $0.6 million, compared to provision for income taxes of $3.9 million for the nine months ended September 30, 2014. Our provision (benefit) for income taxes in the nine months ended September 30, 2015 was impacted by a $0.8 million decrease in our liability for unrecognized tax benefits due to the expiration of the related statute of limitations on those previously unrecognized tax benefits.
Net Income -- Net income for the nine months ended September 30, 2015 was $7.3 million, or $0.40 per diluted share, compared to net income of $3.0 million, or $0.15 per diluted share for the nine months ended September 30, 2014.
Non-GAAP -- Year-to-Date
Non-GAAP Net Income -- Non-GAAP net income for the nine months ended September 30, 2015 was $18.1 million, or $1.00 per diluted share, compared to non-GAAP net income of $7.6 million, or $0.39 per diluted share for the nine months ended September 30, 2014. Non-GAAP net income and non-GAAP net income per diluted share in the nine months ended September 30, 2015 exclude $5.3 million of stock-based compensation expense, $4.5 million of restructuring expense and $0.9 million of intangible asset amortization expense. Non-GAAP net income and non-GAAP net income per diluted share in the nine months ended September 30, 2014 exclude $6.6 million of stock-based compensation expense and $1.1 million of intangible asset amortization expense, less $3.1 million for related income tax benefit.
Adjusted EBITDA -- Adjusted EBITDA for the nine months ended September 30, 2015 was $20.7 million compared to Adjusted EBITDA of $17.8 million for the nine months ended September 30, 2014. Adjusted EBITDA is calculated by adding stock-based compensation, depreciation and amortization expense, including intangible asset amortization expense, restructuring charges, other expense, net and provision (benefit) for income taxes to GAAP net income (loss).
Cash -- Year-to-Date
Cash Flows -- Cash flows from operations was an inflow of $12.5 million for the nine months ended September 30, 2015 compared to cash inflows of $5.9 million for the nine months ended September 30, 2014.
Cash Balance -- Cash and cash equivalents as of September 30, 2015 totaled $62.0 million, compared to $51.4 million as of December 31, 2014. The increase in cash and cash equivalents reflects $12.5 million provided by operating activities and $1.3 million of proceeds from the exercise of stock options, offset by $2.3 million used to purchase property and equipment and other assets and $0.8 million to net-share settle equity awards.
Webcast and Conference Call Information
A Webcast and conference call will be held today, Thursday, October 29, 2015 at 5:00 p.m. Eastern / 2:00 p.m. Pacific Time. The Webcast will be available live on the Investor Relations section on eHealth's website at http://ir.ehealthinsurance.com. Individuals interested in listening to the conference call may do so by dialing 877 930.8066 for domestic callers and 253 336.8042 for international callers. The participant passcode is 58828855. 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 58828855. 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).
For more health insurance news and information, visit the eHealth consumer blog: Get Smart -- Get Covered or visit eHealth's Consumer Resource Center.
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 membership and submitted application estimates; and the utility to our investors of the non-GAAP financial measures presented in this release. 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; 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; product offerings among carriers and the resulting impact on our commission revenue; 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 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; difficulties, delays, unexpected costs and an inability to achieve anticipated cost savings from our recently implemented cost reduction program; 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; earnings and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA and Adjusted EBITDA); non-GAAP net income (loss) and non-GAAP net income (loss) per diluted share.
- Non-GAAP operating income (loss) for the third quarter of 2015 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, and
- intangible asset amortization expense.
- Non-GAAP net income (loss) for the nine months ended September 30, 2015 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 in accordance with FASB ASC Topic 718,
- restructuring charges,
- intangible asset amortization expense, and
- the related income tax benefits of these excluded expenses.
- 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, including intangible asset amortization expense, restructuring charges, other expense, net and provision (benefit) for income taxes to GAAP net income (loss). The term EBITDA is used when there are no restructuring charges.
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 provide 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, EBITDA, 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, September 30,
2014 2015
--------------- ---------------
Assets (1) (unaudited)
Current assets:
Cash and cash equivalents $ 51,415 $ 62,016
Accounts receivable 8,200 8,832
Deferred income taxes 386 386
Prepaid expenses and other current assets 6,474 7,265
--------------- ---------------
Total current assets 66,475 78,499
Property and equipment, net 9,640 8,091
Other assets 5,679 4,419
Intangible assets, net 10,774 9,880
Goodwill 14,096 14,096
--------------- ---------------
Total assets $ 106,664 $ 114,985
=============== ===============
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 5,961 $ 2,069
Accrued compensation and benefits 8,204 11,243
Accrued marketing expenses 8,707 1,296
Deferred revenue 869 3,684
Accrued restructuring charges - 257
Other current liabilities 2,996 3,846
--------------- ---------------
Total current liabilities 26,737 22,395
Non-current liabilities 6,449 5,817
Stockholders' equity:
Common stock 29 29
Additional paid-in capital 259,007 264,984
Treasury stock, at cost (199,998) (199,998)
Retained earnings 14,261 21,564
Accumulated other comprehensive income 179 194
--------------- ---------------
Total stockholders' equity 73,478 86,773
--------------- ---------------
Total liabilities and stockholders' equity $ 106,664 $ 114,985
=============== ===============
(1) The condensed consolidated balance sheet at December 31, 2014 has been derived from the audited consolidated financial statements at that date.
EHEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts, unaudited)
Three months ended Nine months ended
September 30, September 30,
------------------- -------------------
2014 2015 2014 2015
--------- --------- --------- ---------
Revenue
Commission $ 36,164 $ 34,942 $120,267 $130,157
Other 5,004 3,282 14,435 9,248
--------- --------- --------- ---------
Total revenue 41,168 38,224 134,702 139,405
Operating costs and expenses:
Cost of revenue 745 443 3,750 3,527
Marketing and advertising (1) 9,228 9,349 41,946 44,086
Customer care and enrollment (1) 9,695 9,462 28,392 28,981
Technology and content (1) 10,303 8,036 30,320 27,400
General and administrative (1) 7,077 7,749 22,228 23,237
Restructuring charges (1) - - - 4,541
Amortization of intangible assets 354 260 1,062 893
--------- --------- --------- ---------
Total operating costs and expenses 37,402 35,299 127,698 132,665
--------- --------- --------- ---------
Income from operations 3,766 2,925 7,004 6,740
Other expense, net (13) (27) (81) (50)
--------- --------- --------- ---------
Income before provision (benefit)
for income taxes 3,753 2,898 6,923 6,690
Provision (benefit) for income taxes 2,229 (737) 3,929 (613)
--------- --------- --------- ---------
Net income $ 1,524 $ 3,635 $ 2,994 $ 7,303
========= ========= ========= =========
Net income per share:
Basic $ 0.09 $ 0.20 $ 0.16 $ 0.41
Diluted $ 0.08 $ 0.20 $ 0.15 $ 0.40
Weighted-average number of shares
used in per share amounts:
Basic 17,836 18,093 18,551 17,969
Diluted 18,394 18,240 19,341 18,079
(1) Includes stock-based
compensation as follows:
Marketing and advertising $ 721 $ 461 $ 1,957 $ 1,498
Customer care and enrollment 116 110 283 366
Technology and content 559 362 1,550 1,308
General and administrative 894 643 2,795 2,149
Restructuring charges - - - 113
--------- --------- --------- ---------
Total 2,290 1,576 6,585 5,434
========= ========= ========= =========
EHEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
2014 2015 2014 2015
--------- --------- --------- ---------
Operating activities
Net income $ 1,524 $ 3,635 $ 2,994 $ 7,303
Adjustments to reconcile net income
to net cash used in operating
activities:
Deferred income taxes 3,384 58 1,349 117
Depreciation and amortization 1,050 1,014 3,111 3,122
Amortization of internally
developed software 116 131 325 449
Amortization of book-of-business
consideration 104 7 1,909 1,998
Amortization of intangible assets 354 260 1,062 893
Stock-based compensation expense 2,290 1,576 6,585 5,434
Deferred rent and other 35 36 69 63
Changes in operating assets and
liabilities:
Accounts receivable 985 1,337 (1,292) (618)
Prepaid expenses and other
assets (115) (908) (1,397) (1,150)
Accounts payable (1,385) 3 (1,612) (3,892)
Accrued compensation and
benefits 896 2,878 (2,155) 3,037
Accrued marketing expenses 323 (415) (5,763) (7,411)
Deferred revenue 1,023 3,082 420 2,650
Accrued restructuring charges - (80) - 489
Other liabilities 377 (1,689) 254 (12)
--------- --------- --------- ---------
Net cash provided by operating
activities 10,961 10,925 5,859 12,472
--------- --------- --------- ---------
Investing activities
Purchases of property and equipment
and other assets (995) (903) (3,335) (2,335)
Purchase of intangible asset - - (4,500) -
--------- --------- --------- ---------
Net cash used in investing
activities (995) (903) (7,835) (2,335)
--------- --------- --------- ---------
Financing activities
Net proceeds from exercise of common
stock options 658 277 3,902 1,326
Cash used to net-share settle equity
awards (151) (88) (3,506) (824)
Excess tax benefits from stock-based
compensation (1,015) - 2,648 -
Repurchase of common stock (21,744) - (50,000) -
Principle payments in connection
with capital leases (17) (17) (57) (57)
--------- --------- --------- ---------
Net cash provided by (used in)
financing activities (22,269) 172 (47,013) 445
--------- --------- --------- ---------
Effect of exchange rate changes on
cash and cash equivalents 1 10 14 19
--------- --------- --------- ---------
Net increase (decrease) in cash and
cash equivalents (12,302) 10,204 (48,975) 10,601
Cash and cash equivalents at
beginning of period 70,382 51,812 107,055 51,415
--------- --------- --------- ---------
Cash and cash equivalents at end of
period $ 58,080 $ 62,016 $ 58,080 $ 62,016
========= ========= ========= =========
EHEALTH, INC.
SUMMARY OF SELECTED METRICS
(Unaudited)
Three Months Ended
-------------------------
September September
Key Metrics: 30, 2014 30, 2015
-------------------------------------------------- ------------ ------------
Operating cash flows (1) $10,961,000 $10,925,000
IFP submitted applications (2) 23,800 22,500
IFP approved members (3) 28,100 23,700
Total approved members (4) 130,000 111,400
Commission revenue (5) $36,164,000 $34,942,000
Commission revenue per estimated member for the
period (6) $ 30.05 $ 31.15
As of As of
September September
30, 2014 30, 2015
------------ ------------
IFP estimated membership (7) 653,700 518,000
Medicare estimated membership (8) 121,300 182,700
Other estimated membership (9) 383,100 397,400
------------ ------------
Total estimated membership (10) 1,158,100 1,098,100
============ ============
Three Months Ended
-------------------------
September September
Other Metrics: 30, 2014 30, 2015
-------------------------------------------------- ------------ ------------
Source of IFP submitted applications (as a
percentage of total IFP applications for the
period):
Direct (11) 70% 56%
Marketing partners (12) 23% 40%
Online advertising (13) 7% 4%
------------ ------------
Total 100% 100%
============ ============
Notes:
(1) Net cash used in operating activities for the period from the
condensed consolidated statements of cash flows.
(2) Major medical Individual and Family plan ("IFP") health insurance
applications submitted on eHealth's website during the period.
Applications are counted as submitted when the applicant completes the
application, provides a method for payment and clicks the submit
button on our website and submits the application to us. The applicant
generally has additional actions to take before the application will
be reviewed by the insurance carrier, such as providing additional
information and providing an electronic signature. In addition, an
applicant may submit more than one application. We include
applications for IFP products for which we receive commissions as well
as other forms of payment. We define our "IFP" offerings as major
medical individual and family health insurance plans, which does not
include small business, short-term major medical, stand-alone dental,
life, student or Medicare-related health insurance plans.
(3) New IFP members reported to eHealth as approved during the period.
Some members that are approved by a carrier do not accept the approval
and therefore do not become paying members.
(4) New members for all products reported to eHealth as approved during
the period. Some members that are approved by a carrier do not accept
the approval and therefore do not become paying members.
(5) Commission revenue (from all sources) recognized during the period
from the condensed consolidated statements of income.
(6) Calculated as commission revenue recognized during the period (see
note (5) above) divided by average estimated membership for the period
(calculated as beginning and ending estimated membership for all
products for the period, divided by two). See the note below for
additional information regarding our calculation of IFP estimated
membership and our Form 10-K for the year ended December 31, 2014 -
Item 7 - Management's Discussion and Analysis of Financial Condition
and Results of Operations - Summary of Selected Metrics for additional
information regarding our calculation of Medicare and other estimated
membership.
(7) Estimated number of members active on IFP insurance policies 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 Medicare insurance policies as
of the date indicated. See our Form 10-K for the year ended December
31, 2014 - Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations - Summary of Selected Metrics for
additional information regarding our calculation of Medicare and other
estimated membership.
(9) Estimated number of members active on insurance policies other than
IFP and Medicare policies as of the date indicated. See our Form 10-K
for the year ended December 31, 2014 - Item 7 - Management's
Discussion and Analysis of Financial Condition and Results of
Operations - Summary of Selected Metrics for additional information
regarding our calculation of Medicare and other estimated membership.
(10) Estimated number of members active on all insurance policies as of the
date indicated. See the note below for additional information
regarding our calculation of IFP estimated membership and our Form 10-
K for the year ended December 31, 2014 - Item 7 - Management's
Discussion and Analysis of Financial Condition and Results of
Operations - Summary of Selected Metrics for additional information
regarding our calculation of Medicare and other estimated membership.
(11) Percentage of IFP submitted applications from applicants who came
directly to the eHealth website through algorithmic search engine
results or otherwise. See note (2) above for further information as to
what constitutes a submitted application.
(12) Percentage of IFP submitted applications from applicants sourced
through eHealth's network of marketing partners. See note (2) above
for further information as to what constitutes a submitted
application.
(13) Percentage of IFP submitted applications from applicants sourced
through paid search and other online advertising activities. See note
(2) above for further information as to what constitutes a submitted
application.
Note: To calculate the estimated number of members active on individual and family plan insurance policies, we have taken the sum of (i) the number of IFP members for whom we have received or applied a commission payment for the month that is six months prior to the date of estimation after reducing that number using historical experience (for which the experience for the period from April 1, 2014 to September 30, 2014 was used for the calculation of membership as of September 30, 2015) for assumed member cancellations over the six-month period; and (ii) the number of approved members over the six-month period prior to the date of estimation 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. For the purpose of estimating the number of members active on individual and family plan insurance policies as of September 30, 2015, we have applied the percentage of members who do not accept their approved policy from the same month of the previous year for each of the six months prior to the date of estimation. This reflects the seasonality of the open enrollment period and our business.
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 such as health care reform implementation on our membership retention. Health care reform and 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.
GAAP TO NON-GAAP RECONCILIATION
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2015
(In thousands, except per share amounts, unaudited)
Statement of Income Reconciliation
Three Months Ended September 30, 2015
-------------------------------------------------
GAAP Non-GAAP
Percent Percent
GAAP of Total Non-GAAP of Total
Reported Revenue Adjustments Results Revenue
--------- -------- ----------- --------- --------
Revenue:
Commission $ 34,942 91% $ - $ 34,942 91%
Other 3,282 9 - 3,282 9
--------- -------- ----------- --------- --------
Total revenue 38,224 100 - 38,224 100
Operating costs and
expenses:
Cost of revenue 443 1 - 443 1
Marketing and
advertising (1) 9,349 24 (461) 8,888 23
Customer care and
enrollment (1) 9,462 25 (110) 9,352 24
Technology and content
(1) 8,036 21 (362) 7,674 20
General and
administrative (1) 7,749 20 (643) 7,106 19
Restructuring charges - - - - -
Amortization of
intangible assets (2) 260 1 (260) - -
--------- -------- ----------- --------- --------
Total operating costs and
expenses 35,299 92 (1,836) 33,463 88
--------- -------- ----------- --------- --------
Income from operations 2,925 8 1,836 4,761 12
Other expense, net (27) - - (27) -
--------- -------- ----------- --------- --------
Income before benefit for
income taxes 2,898 8 1,836 4,734 12
Benefit for income taxes (737) (2) - (737) (2)
--------- -------- ----------- --------- --------
Net income (3) $ 3,635 10% $ 1,836 $ 5,471 14%
========= ======== =========== ========= ========
Net income per share: (3)
Basic - common stock $ 0.20 $ 0.10 $ 0.30
Diluted - common stock $ 0.20 $ 0.10 $ 0.30
Weighted-average number of
shares used in per share
amounts:
Basic - common stock 18,093 18,093 18,093
Diluted - common stock 18,240 18,240 18,240
Explanation of adjustments (1) Non-GAAP results exclude the effect of expensing stock-based compensation related to stock options and restricted stock units in accordance with FASB ASC Topic 718. (2) Non-GAAP results exclude intangible asset amortization expense. (3) Non-GAAP net income (loss) and non-GAAP net income (loss) per share excludes stock-based compensation expense listed in note (1) above, restructuring charges listed in Note (2) above and the intangible asset amortization expense listed in note (3) above.
EHEALTH, INC.
GAAP TO NON-GAAP RECONCILIATION
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2014
(In thousands, except per share amounts, unaudited)
Statement of Income Reconciliation
Three Months Ended September 30, 2014
-------------------------------------------------
GAAP Non-GAAP
Percent Percent
GAAP of Total Non-GAAP of Total
Reported Revenue Adjustments Results Revenue
--------- -------- ----------- --------- --------
Revenue:
Commission $ 36,164 88% $ - $ 36,164 88%
Other 5,004 12 - 5,004 12
--------- -------- ----------- --------- --------
Total revenue 41,168 100 - 41,168 100
Operating costs and
expenses:
Cost of revenue 745 2 - 745 2
Marketing and
advertising (1) 9,228 22 $ (721) 8,507 21
Customer care and
enrollment (1) 9,695 24 (116) 9,579 23
Technology and content
(1) 10,303 25 (559) 9,744 24
General and
administrative (1) 7,077 17 (894) 6,183 15
Amortization of
intangible assets (2) 354 1 (354) - -
--------- -------- ----------- --------- --------
Total operating costs and
expenses 37,402 91 (2,644) 34,758 84
--------- -------- ----------- --------- --------
Income from operations 3,766 9 2,644 6,410 16
Other expense, net (13) - - (13) -
--------- -------- ----------- --------- --------
Income before provision
for income taxes 3,753 9 2,644 6,397 16
Provision for income taxes
(3) 2,229 5 1,060 3,289 8
--------- -------- ----------- --------- --------
Net income (4) $ 1,524 4% $ 1,584 $ 3,108 8%
========= ======== =========== ========= ========
Net income per share: (4)
Basic - common stock $ 0.09 $ 0.09 $ 0.17
Diluted - common stock $ 0.08 $ 0.09 $ 0.17
Weighted-average number of
shares used in per share
amounts:
Basic - common stock 17,836 17,836 17,836
Diluted - common stock 18,394 18,394 18,394
Explanation of adjustments (1) Non-GAAP results exclude the effect of expensing stock-based compensation related to stock options and restricted stock units in accordance with FASB ASC Topic 718. (2) Non-GAAP results exclude intangible asset amortization expense. (3) Non-GAAP provision (benefit) for income taxes excludes the estimated income tax benefits related to stock-based compensation expense listed in note (1) above and intangible asset amortization expense listed in note (2) above. (4) Non-GAAP net income and non-GAAP net income per share exclude stock- based compensation expense listed in note (1) above, intangible asset amortization expense listed in note (2) above, less the estimated income tax benefit listed in note (3) above.
EHEALTH, INC.
GAAP TO NON-GAAP RECONCILIATION
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015
(In thousands, except per share amounts, unaudited)
Statement of Income Reconciliation
Nine Months Ended September 30, 2015
-------------------------------------------------
GAAP Non-GAAP
Percent Percent
GAAP of Total Non-GAAP of Total
Reported Revenue Adjustments Results Revenue
--------- -------- ----------- --------- --------
Revenue:
Commission $130,157 93% $ - $130,157 93%
Other 9,248 7 - 9,248 7
--------- -------- ----------- --------- --------
Total revenue 139,405 100 - 139,405 100
Operating costs and
expenses:
Cost of revenue 3,527 3 - 3,527 3
Marketing and
advertising (1) 44,086 32 (1,498) 42,588 31
Customer care and
enrollment (1) 28,981 21 (366) 28,615 21
Technology and content
(1) 27,400 20 (1,308) 26,092 19
General and
administrative (1) 23,237 17 (2,149) 21,088 15
Restructuring charges
(2) 4,541 3 (4,541) - -
Amortization of
intangible assets (3) 893 1 (893) - -
--------- -------- ----------- --------- --------
Total operating costs and
expenses 132,665 95 (10,755) 121,910 87
--------- -------- ----------- --------- --------
Income from operations 6,740 5 10,755 17,495 13
Other expense, net (50) - - (50) -
--------- -------- ----------- --------- --------
Income before benefit for
income taxes 6,690 5 10,755 17,445 13
Benefit for income taxes (613) - - (613) -
--------- -------- ----------- --------- --------
Net income (4) $ 7,303 5% $ 10,755 $ 18,058 13%
========= ======== =========== ========= ========
Net income per share: (4)
Basic - common stock $ 0.41 $ 0.60 $ 1.00
Diluted - common stock $ 0.40 $ 0.59 $ 1.00
Weighted-average number of
shares used in per share
amounts:
Basic - common stock 17,969 17,969 17,969
Diluted - common stock 18,079 18,079 18,079
Explanation of adjustments (1) Non-GAAP results exclude the effect of expensing stock-based compensation related to stock options and restricted stock units in accordance with FASB ASC Topic 718. (2) Non-GAAP results exclude restructuring charges. (3) Non-GAAP results exclude intangible asset amortization expense. (4) Non-GAAP net income (loss) and non-GAAP net income (loss) per share excludes stock-based compensation expense listed in note (1) above, restructuring charges listed in Note (2) above and the intangible asset amortization expense listed in note (3) above.
EHEALTH, INC.
GAAP TO NON-GAAP RECONCILIATION
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014
(In thousands, except per share amounts, unaudited)
Statement of Income Reconciliation
Nine Months Ended September 30, 2014
-------------------------------------------------
GAAP Non-GAAP
Percent Percent
GAAP of Total Non-GAAP of Total
Reported Revenue Adjustments Results Revenue
--------- -------- ----------- --------- --------
Revenue:
Commission $120,267 89% $ - $120,267 89%
Other 14,435 11 - 14,435 11
--------- -------- ----------- --------- --------
Total revenue 134,702 100 - 134,702 100
Operating costs and
expenses:
Cost of revenue 3,750 3 - 3,750 3
Marketing and advertising
(1) 41,946 31 (1,957) 39,989 30
Customer care and
enrollment (1) 28,392 21 (283) 28,109 21
Technology and content
(1) 30,320 23 (1,550) 28,770 21
General and
administrative (1) 22,228 17 (2,795) 19,433 14
Amortization of
intangible assets (2) 1,062 1 (1,062) - -
--------- -------- ----------- --------- --------
Total operating costs and
expenses 127,698 95 (7,647) 120,051 89
--------- -------- ----------- --------- --------
Income from operations 7,004 5 7,647 14,651 11
Other expense, net (81) - - (81) -
--------- -------- ----------- --------- --------
Income before provision
for income taxes 6,923 5 7,647 14,570 11
Provision for income taxes
(3) 3,929 3 3,072 7,001 5
--------- -------- ----------- --------- --------
Net income (4) $ 2,994 2% $ 4,575 $ 7,569 6%
========= ======== =========== ========= ========
Net income per share: (4)
Basic - common stock $ 0.16 $ 0.25 $ 0.41
Diluted - common stock $ 0.15 $ 0.24 $ 0.39
Weighted-average number of
shares used in per share
amounts:
Basic - common stock 18,551 18,551 18,551
Diluted - common stock 19,341 19,341 19,341
Explanation of adjustments (1) Non-GAAP results exclude the effect of expensing stock-based compensation related to stock options and restricted stock units in accordance with FASB ASC Topic 718. (2) Non-GAAP results exclude intangible asset amortization expense. (3) Non-GAAP provision for income taxes excludes the estimated income tax benefits related to stock-based compensation expense listed in note (1) above and intangible asset amortization expense listed in note (2) above. (4) Non-GAAP net income and non-GAAP net income per share exclude stock- based compensation expense listed in note (1) above, intangible asset amortization expense listed in note (2) above, less the estimated income tax benefit listed in note (3) above.
EHEALTH, INC.
GAAP NET INCOME TO NON-GAAP EBITDA AND ADJUSTED EBITDA RECONCILIATION
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2015
(In thousands, unaudited)
EBITDA Reconciliation for the Three Months Ended September 30, 2014 and 2015
& Adjusted EBITDA Reconciliation for the Nine Months Ended September 30,
2014 and 2015
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
2014 2015 2014 2015
-------- --------- -------- ---------
Net income $ 1,524 $ 3,635 $ 2,994 $ 7,303
Stock-based compensation expense (1) 2,290 1,576 6,585 5,434
Depreciation and amortization (2) 1,050 1,014 3,111 3,122
Amortization of intangible assets (2) 354 260 1,062 893
Restructuring charges (3) - - - 4,541
Other expense, net (4) 13 27 81 50
Provision (benefit) for income taxes
(5) 2,229 (737) 3,929 (613)
-------- --------- -------- ---------
EBITDA / Adjusted EBITDA $ 7,460 $ 5,775 $ 17,762 $ 20,730
======== ========= ======== =========
Explanation of adjustments (1) Non-GAAP EBITDA 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, excluding for Adjusted EBITDA $113,000 included in restructuring charges for the nine months ended September 30, 2015. (2) Non-GAAP EBITDA and Adjusted EBITDA exclude depreciation and amortization expense, including intangible asset amortization expense. (3) Non-GAAP Adjusted EBITDA excludes restructuring charges, including $113,000 of stock based compensation expense included in restructuring for the nine months ended September 30, 2015. (4) Non-GAAP EBITDA and Adjusted EBITDA exclude other expense, net. (5) Non-GAAP EBITDA and Adjusted EBITDA exclude income tax expense (benefit).
Investor Relations Contact:Kate Sidorovich CFAVice President, Investor Relations440 East Middlefield RoadMountain View, CA 94043(650) [email protected]://ir.ehealthinsurance.com
Source: eHealth, Inc.
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