eHealth, Inc. Announces Fourth Quarter and Fiscal 2012 Results

Fourth Quarter 2012 Overview -- Revenue of $45.3 Million, an Increase of 5% Compared to the Fourth Quarter of 2011 -- Submitted Applications for IFP Products Increased 10% From the Fourth Quarter of 2011 -- Total Estimated Members Increased 21% From the Fourth Quarter of 2011 -- Operating Income of $4.3 Million, Compared to Operating Income of $4.4 Million for the Fourth Quarter of 2011 -- GAAP Net Income of $2.4 Million, or $0.11 per Diluted Share. Fourth Quarter 2012 GAAP Net Income Includes a Negative Impact of $0.3 Million or $0.01 per Diluted Share From an Asset Impairment Charge -- Cash Flows From Operations Were $5.2 Million, an Increase of 106% Compared to the Fourth Quarter of 2011

Marketwired

MOUNTAIN VIEW, CA--(Marketwire - Feb 14, 2013) - eHealth, Inc. (NASDAQ: EHTH), America's first and largest private health insurance exchange, announced today its financial results for the fourth quarter and fiscal year ended December 31, 2012.

Gary Lauer, chief executive officer of eHealth, stated, "In 2012 we achieved good progress across the key areas of our business. We returned to annual revenue and GAAP earnings growth after a challenging 2011, completed the transition of our Medicare business to a direct fulfillment model ahead of schedule, and saw a significant improvement in our Individual and Family Plan business." 

Fourth Quarter 2012 Results

Revenue - Revenue for the fourth quarter of 2012 totaled $45.3 million, a 5% increase compared to revenue of $43.1 million for the fourth quarter of 2011. Commission revenue for the fourth quarter of 2012 totaled $37.3 million, a 19% increase compared to commission revenue of $31.3 million for the fourth quarter of 2011. Medicare revenue was $13.5 million for the fourth quarter of 2012, a 6% increase compared to Medicare revenue of $12.7 million for the fourth quarter of 2011.

Submitted Applications - Submitted applications for individual and family products increased 10% in the fourth quarter of 2012 to 113,600 applications, compared to 103,200 applications in the fourth quarter of 2011.

Membership - Total estimated membership at December 31, 2012 was 982,900 members, a 21% increase over estimated membership of 815,500 at December 31, 2011. Estimated individual and family plan membership was 709,700, a 5% increase over estimated membership of 675,000 at December 31, 2011. Estimated Medicare membership was 70,600, a 191% increase over estimated membership of 24,300 at December 31, 2011. Total approved members, including individual and family plan, Medicare plan and other product members, increased 34% to 186,700 members in the fourth quarter of 2012, compared to 139,600 in the fourth quarter of 2011.

Income from Operations - Operating income for the fourth quarter of 2012 was $4.3 million, compared to operating income of $4.4 million for the fourth quarter of 2011. Operating margins were 10% in both the fourth quarters of 2012 and 2011. Non-GAAP operating income for the fourth quarter of 2012 was $6.4 million, representing a decrease of 3% compared to non-GAAP operating income of $6.6 million for the fourth quarter of 2011. Non-GAAP operating margins were 14% and 15% in the fourth quarters of 2012 and 2011, respectively. Non-GAAP operating income and margins in the fourth quarter of 2012 exclude $0.4 million for an asset impairment charge, $1.3 million of stock-based compensation expense and $0.4 million of intangible asset amortization expense. Non-GAAP operating income and margins in the fourth quarter of 2011 exclude $1.5 million of stock-based compensation expense and $0.8 million of intangible asset amortization expense.

EBITDA - EBITDA for the fourth quarter of 2012 was $6.6 million, representing a decrease of 8% compared to EBITDA of $7.2 million for the fourth quarter of 2011.

Pre-tax Income - Pre-tax income for the fourth quarter of 2012 was $4.3 million, compared to pre-tax income of $4.4 million for the fourth quarter of 2011.

Net Income - Net income for the fourth quarter of 2012 was $2.4 million, or $0.11 per diluted share, compared to net income of $2.3 million, or $0.11 per diluted share for the fourth quarter of 2011. Non-GAAP net income for the fourth quarter of 2012 was $3.9 million, or $0.18 per diluted share, compared to non-GAAP net income of $3.7 million, or $0.18 per diluted share for the fourth quarter of 2011. Non-GAAP net income and non-GAAP net income per diluted share in the fourth quarter of 2012 exclude $0.4 million for an asset impairment charge, $1.3 million of stock-based compensation expense and $0.4 million of intangible asset amortization expense, less $0.7 million for related income tax benefit. Non-GAAP net income and non-GAAP net income per diluted share in the fourth quarter of 2011 exclude $1.5 million of stock-based compensation expense and $0.8 million of intangible asset amortization expense, less $0.8 million for related income tax benefit.

Cash Flows - Cash flows from operations for the fourth quarter of 2012 were $5.2 million, representing a 106% increase compared to cash flows from operations of $2.5 million for the fourth quarter of 2011.

Fiscal 2012 Results

Revenue - Revenue totaled $155.5 million for the year ended December 31, 2012, a 3% increase compared to revenue of $151.6 million for the year ended December 31, 2011. Medicare revenue was approximately $31.3 million for the year ended December 31, 2012, a 53% increase compared to Medicare revenue of $20.4 million for the year ended December 31, 2011.

Income from Operations - Operating income for the year ended December 31, 2012 was $13.4 million, compared to operating income of $13.2 million for the year ended December 31, 2011. Operating margins were 9% for both years ended December 31, 2012 and 2011, respectively. Non-GAAP operating income for the year ended December 31, 2012 was $21.1 million, representing a decrease of 6% compared to non-GAAP operating income of $22.4 million for the year ended December 31, 2011. Non-GAAP operating margins were 14% and 15% in the years ended December 31, of 2012 and 2011, respectively. Non-GAAP operating income and margins for the year ended December 31, 2012 exclude $0.4 million for an asset impairment charge, $5.6 million of stock-based compensation expense and $1.6 million of intangible asset amortization expense. Non-GAAP operating income and margins for the year ended December 31, 2011 exclude $7.1 million of stock-based compensation expense and $2.0 million of intangible asset amortization expense.

EBITDA - EBITDA for the year ended December 31, 2012 was $23.1 million, compared to EBITDA of $24.7 million for the year ended December 31, 2011.

Pre-tax Income - Pre-tax income for the year ended December 31, 2012 was $13.5 million, compared to pre-tax income of $13.2 million for the year ended December 31, 2011.

Net Income - Net income for the year ended December 31, 2012 was $7.1 million, or $0.34 per diluted share, compared to net income for the year ended December 31, 2011 of $6.7 million, or $0.31 per diluted share. Non-GAAP net income for the year ended December 31, 2012 was $12.6 million, or $0.61 per diluted share, compared to non-GAAP net income of $12.8 million, or $0.59 per diluted share for the year ended December 31, 2011. Non-GAAP net income and non-GAAP net income per diluted share for the year ended December 31, 2012 exclude $0.4 million for an asset impairment charge, $5.6 million of stock-based compensation expense and $1.6 million of intangible asset amortization expense, less $2.2 million for related income tax benefit. Non-GAAP net income and non-GAAP net income per diluted share for the year ended December 31, 2011 exclude $7.1 million of stock-based compensation expense and $2.0 million of intangible asset amortization expense, less $3.0 million for related income tax benefit.

Cash Flows and Cash Balance - Cash flows from operations for the year ended December 31, 2012 were $24.9 million, representing a 10% increase compared to $22.5 million for the year ended December 31, 2011.

Cash and cash equivalents as of December 31, 2012 totaled $140.8 million, compared to $123.6 million as of December 31, 2011. The increase in cash and cash equivalents reflects $24.9 million of cash generated by operating activities in the year ended December 31, 2012. Partially offsetting this increase was $6.2 million of cash consideration paid to a partner, whereby the partner transferred certain of its existing Medicare plan members to us as the broker of record on the underlying policies, and $9.4 million used to repurchase 0.6 million shares of our common stock in 2012 as part of our stock repurchase programs. In 2012, eHealth completed a $30 million share repurchase program at an average per share price of $13.78 and announced and started an additional $30 million share repurchase program.

2013 Guidance

eHealth is providing guidance for the full year ending December 31, 2013 based on information available as of February 14, 2013. 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 $168 million to $174 million

  • Stock-based compensation expense is expected to be in the range of $6.0 million to $7.5 million

  • EBITDA* is expected to be in the range of $23 million to $29 million

  • Non-GAAP net income per diluted share** is expected to be in the range of $0.61 to $0.71 per share

* EBITDA is calculated by adding stock-based compensation expense, depreciation and amortization expense, including intangible asset amortization expense, other (income) expense, net and provision for income taxes to GAAP net income.

** Non-GAAP net income per diluted share is calculated by excluding stock-based compensation expense, intangible asset amortization expense and the estimated tax benefit relating to these expenses.

Webcast and Conference Call Information
A Webcast and conference call will be held today, Thursday, February 14, 2013 at 5:00 p.m. Eastern Time / 2:00 p.m. Pacific Time. The Webcast will be available live on the Investor Relations section on eHealth's website at http://ir.ehealthinsurance.com. Individuals interested in listening to the conference call may do so by dialing 866-783-2137 for domestic callers and 857-350-1596 for international callers. The participant passcode is 76455009. A telephone replay will be available two hours following the conclusion of the call for a period of 30 days and can be accessed by dialing 888-286-8010 for domestic callers and 617-801-6888 for international callers. The call ID for the replay is 52162037. The live and archived webcast of the call will also be available on eHealth's website at http://www.ehealthinsurance.com under the Investor Relations section.

About eHealth, Inc.
eHealth, Inc. (NASDAQ: EHTH) is the parent company of eHealthInsurance, America'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. eHealthInsurance offers thousands of individual, family and small business health plans underwritten by more than 180 of the nation's leading health insurance companies. eHealthInsurance is licensed to sell health insurance in all 50 states and the District of Columbia. Through the company's eHealthTechnology solution (www.eHealthTechnology.com), eHealth is also a leading provider of health insurance exchange technology. eHealthTechnology's exchange platform provides a suite of hosted e-commerce solutions that enable health plan providers, resellers and government entities to market and distribute products online. eHealth, Inc. also provides powerful online and pharmacy-based tools to help seniors navigate Medicare health insurance options, choose the right plan and enroll in select plans online through its wholly-owned subsidiary, PlanPrescriber.com (www.planprescriber.com) and through its Medicare website www.eHealthMedicare.com.

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 future events, our future performance, guidance for total revenue, stock-based compensation expense, EBITDA, non-GAAP net income per diluted share for the year ending December 31, 2012, the utility to our investors of the non-GAAP financial measures presented is this release, our expectations regarding our future stock-based compensation costs and purchased intangible asset amoritization costs, and our estimates regarding income tax benefits. These forward-looking statements are inherently subject to various risks and uncertainties that could cause actual results to differ materially from the statements made, including risks associated with the impact of healthcare reform and medical loss ratio requirements; eHealth's ability to maintain its relationship with health insurance carriers; eHealth's success in marketing and selling Medicare-related health insurance plans; eHealth's ability to hire, train and retain licensed health insurance agents for its Medicare business; the need for health insurance carrier and regulatory approvals in connection with the marketing of Medicare-related insurance products; government disapproval of our use of marketing material, including call center scripts and our websites, to sell Medicare-related health insurance products; costs of acquiring new members; weak economic conditions; consumer awareness of the availability and accessibility of affordable health insurance; changes in member conversion rates; lack of membership growth and retention rates; changes in products offered on eHealth's ecommerce platform; changes in commission rates or carrier underwriting practices; maintaining and enhancing eHealth's brand identity; system failures, capacity constraints, data loss or online commerce security risks; dependence on acceptance of the Internet as a marketplace for the purchase and sale of health insurance; dependence upon Internet search engines; reliance on marketing partners; timing of receipt and accuracy of commission reports; payment practices of health insurance carriers; competition; our operations in China; success of eHealth's sponsorship and advertising business; the licensing of the use of eHealth's technology or our performance of services pursuant to government contracts; protection of intellectual property and defense of intellectual property rights claims; legal liability, regulatory penalties and negative publicity;changes in our management and key employees; management of business expansion and diversification; seasonality; impact of acquisitions, including risks associated with not realizing anticipated synergies and opportunities with respect to PlanPrescriber, Inc.; underperformance by PlanPrescriber, Inc.; PlanPrescriber's maintenance of its relationships with its pharmacy and other partners that serve as a source of Medicare-related leads; government approval of marketing material, including websites relating to PlanPrescriber partner Medicare product lead referrals; maintenance of proper and effective internal controls; impact of provisions for income taxes; changes in laws and regulations, including with respect to the marketing and sale of Medicare plans; compliance with insurance and other laws and regulations; exposure to security risks; and the performance, reliability and availability of eHealth's ecommerce platform and underlying network infrastructure. Other factors that could cause operating, financial and other results to differ are described in eHealth's most recent Quarterly Report on Form 10-Q or Annual Report on Form 10-K filed with the Securities and Exchange Commission and available on the investor relations page of eHealth's website at http://www.ehealthinsurance.com and on the Securities and Exchange Commission's website at www.sec.gov. eHealth does not undertake any obligation to update any forward-looking statement to conform the statement to actual results or changes in expectations.

Non-GAAP Financial Information
This press release includes financial measures that are not in accordance with generally accepted accounting principles in the United States (GAAP). To supplement eHealth's condensed consolidated financial statements presented in accordance with GAAP, eHealth presents investors with certain non-GAAP financial measures, including non-GAAP operating income; non-GAAP operating margins; earnings before interest, taxes, depreciation and amortization (EBITDA); non-GAAP net income and non-GAAP net income per diluted share.

  • Non-GAAP operating income consists of GAAP operating income excluding the following items:
    • an asset impairment charge recorded in the fourth quarter of 2012,
    • the effects of expensing stock-based compensation related to stock options and restricted stock units in accordance with FASB ASC Topic 718, and
    • intangible asset amortization expense.

  • Non-GAAP operating margins are calculated by dividing non-GAAP operating income by GAAP total revenue.

  • EBITDA is calculated by adding stock-based compensation, depreciation and amortization expense, including intangible asset amortization expense, other (income) expense, net and provision for income taxes to GAAP net income.

  • Non-GAAP net income consists of GAAP net income excluding the following items:
    • an asset impairment charge recorded in the fourth quarter of 2012,
    • the effects of expensing stock-based compensation related to stock options and restricted stock units in accordance with FASB ASC Topic 718,
    • intangible asset amortization expense, and
    • the related income tax benefits of these excluded expenses.  
  • Non-GAAP net income per diluted share is calculated by dividing non-GAAP net income by GAAP weighted average diluted shares outstanding.

eHealth believes that the presentation of these non-GAAP financial measures provide important supplemental information to management and investors regarding financial and business trends relating to the Company's financial condition and results of operations. Management believes that the use of these non-GAAP financial measures provides consistency and comparability with the Company's past financial reports. Management also believes that the exclusion of the items described above provides an additional measure of the Company's operating results and facilitates comparisons of the Company's core operating performance against prior periods and business model objectives. This information is provided to investors in order to facilitate additional analyses of past, present and future operating performance and as a supplemental means to evaluate the Company's ongoing operations. Externally, the Company believes that these non-GAAP financial measures are useful to investors in their assessment of the Company's operating performance.

Non-GAAP operating income, non-GAAP operating margins, EBITDA, non-GAAP net income and non-GAAP net income per diluted share are not calculated in accordance with GAAP, and should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. Non-GAAP financial measures used in this press release have limitations in that they do not reflect all of the revenue and costs associated with the operations of the Company's business and do not reflect income tax as determined in accordance with GAAP. As a result, you should not consider these measures in isolation or as a substitute for analysis of eHealth's results as reported under GAAP. The Company expects to continue to incur the stock-based compensation costs and purchased intangible asset amortization costs described above, and exclusion of these costs, and their related income tax benefits, from non-GAAP financial measures should not be construed as an inference that these costs are unusual or infrequent. The Company compensates for these limitations by prominently disclosing GAAP operating income, GAAP operating margins, GAAP net income and GAAP net income per diluted share and providing investors with reconciliations from the Company's GAAP operating results to the non-GAAP financial measures for the relevant periods.

The accompanying tables provide more details on the GAAP financial measures that are most directly comparable to the non-GAAP financial measures described above and the related reconciliations between these financial measures.

   
   
EHEALTH, INC.  
CONDENSED CONSOLIDATED BALANCE SHEETS  
(In thousands, unaudited)  
   
    December 31, 2011     December 31, 2012  
Assets   (1)     (unaudited)  
Current assets:                
  Cash and cash equivalents   $ 123,607     $ 140,849  
  Accounts receivable     8,055       4,468  
  Deferred income taxes     4,622       4,098  
  Prepaid expenses and other current assets     3,377       6,643  
Total current assets     139,661       156,058  
Property and equipment, net     4,631       6,185  
Deferred income taxes     3,390       2,928  
Other assets     5,641       8,123  
Intangible assets, net     10,526       8,911  
Goodwill     14,096       14,096  
Total assets   $ 177,945     $ 196,301  
                 
                 
Liabilities and stockholders' equity                
Current liabilities:                
  Accounts payable   $ 2,391     $ 6,123  
  Accrued compensation and benefits     7,904       8,244  
  Accrued marketing expenses     6,195       3,941  
  Deferred revenue     314       926  
  Other current liabilities     1,547       1,575  
Total current liabilities     18,351       20,809  
Non-current liabilities     3,920       4,625  
                 
Stockholders' equity:                
  Common stock     26       27  
  Additional paid-in capital     215,364       232,903  
  Treasury stock, at cost     (81,557 )     (90,991 )
  Retained earnings     21,661       28,743  
  Accumulated other comprehensive income     180       185  
Total stockholders' equity     155,674       170,867  
Total liabilities and stockholders' equity   $ 177,945     $ 196,301  
                 
(1) The condensed consolidated balance sheet at December 31, 2011 has been derived from the audited consolidated financial statements at that date.
   
   
   
EHEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts, unaudited)
 
    Three Months Ended
December 31,
    Fiscal Year Ended
December 31,
    2011   2012     2011     2012
                             
Revenue                            
  Commission   $ 31,276   $ 37,305     $ 120,321     $ 130,663
  Other     11,844     8,000       31,327       24,810
Total revenue     43,120     45,305       151,648       155,473
Operating costs and expenses:                            
  Cost of revenue     1,353     1,245       8,340       4,783
  Marketing and advertising (1)     18,474     18,647       56,877       57,789
  Customer care and enrollment (1)     6,633     9,130       22,898       30,282
  Technology and content (1)     5,224     5,388       21,657       21,406
  General and administrative (1)     6,294     6,231       26,593       26,169
  Amortization of intangible assets     765     354       2,046       1,615
Total operating costs and expenses     38,743     40,995       138,411       142,044
Income from operations     4,377     4,310       13,237       13,429
Other income (expense), net     8     (18 )     (53 )     23
Income before provision for income taxes     4,385     4,292       13,184       13,452
Provision for income taxes     2,125     1,845       6,460       6,370
Net income   $ 2,260   $ 2,447     $ 6,724     $ 7,082
                             
Net income per share:                            
  Basic   $ 0.11   $ 0.12     $ 0.32     $ 0.36
  Diluted   $ 0.11   $ 0.11     $ 0.31     $ 0.34
                             
Weighted-average number of shares used in per share amounts:                            
  Basic     20,006     20,331       20,947       19,867
  Diluted     20,889     21,319       21,703       20,753
                             
(1) Includes stock-based compensation as follows:                            
  Marketing and advertising   $ 188   $ 283     $ 962     $ 1,215
  Customer care and enrollment     80     78       344       321
  Technology and conent     333     238       1,669       1,021
  General and administrative     873     697       4,121       3,065
    Total   $ 1,474   $ 1,296     $ 7,096     $ 5,622
                                 
                                 
                                 
EHEALTH, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(In thousands, unaudited)  
   
    Three Months Ended December 31,     Fiscal Year Ended
December 31,
 
    2011     2012     2011     2012  
                                 
Operating activities                                
Net income   $ 2,260     $ 2,447     $ 6,724     $ 7,082  
Adjustments to reconcile net income to net cash provided by operating activities:                                
  Deferred income taxes     (48 )     1,056       914       1,071  
  Depreciation and amortization     559       671       2,358       2,411  
  Amortization of book-of-business consideration     477       734       843       2,724  
  Amortization of intangible assets     765       354       2,046       1,615  
  Stock-based compensation expense     1,474       1,296       7,096       5,622  
  Deferred rent     (10 )     125       (3 )     175  
  Loss on disposal of fixed assets     -       -       38       1  
  Changes in operating assets and liabilities:                                
    Accounts receivable     (4,315 )     (1,212 )     3,383       3,587  
    Prepaid expenses and other assets     387       (441 )     1,769       (1,097 )
    Accounts payable     (294 )     1,552       (1,948 )     3,732  
    Accrued compensation and benefits     (92 )     (577 )     363       336  
    Accrued marketing expenses     1,860       78       2,551       (2,254 )
    Deferred revenue     (839 )     589       (2,471 )     979  
    Other current liabilities     353       (1,434 )     (1,122 )     (1,093 )
Net cash provided by operating activities     2,537       5,238       22,541       24,891  
                                 
Investing activities                                
Purchases of property and equipment     (475 )     (725 )     (2,407 )     (3,853 )
Book of business transfers     (284 )     -       (4,190 )     (6,243 )
Net cash used in investing activities     (759 )     (725 )     (6,597 )     (10,096 )
                                 
Financing activities                                
Net proceeds from exercise of common stock options     715       4,431       899       8,445  
Cash used to net-share settle equity awards     (4 )     (2 )     (552 )     (993 )
Excess tax benefits from stock-based compensation     1,956       2,108       4,690       4,466  
Repurchase of common stock     (7,322 )     (993 )     (25,355 )     (9,434 )
Principle payments in connection with capital leases     (17 )     (13 )     (63 )     (44 )
Net cash (used in) provided by financing activities     (4,672 )     5,531       (20,381 )     2,440  
                                 
Effect of exchange rate changes on cash and cash equivalents     -       5       (30 )     7  
                                 
Net increase (decrease) in cash and cash equivalents     (2,894 )     10,049       (4,467 )     17,242  
Cash and cash equivalents at beginning of period     126,501       130,800       128,074       123,607  
Cash and cash equivalents at end of period   $ 123,607     $ 140,849     $ 123,607     $ 140,849  
                                 
                                 
                                 
EHEALTH, INC.  
SUMMARY OF SELECTED METRICS  
(Unaudited)  
   
Key Metrics:   Three Months Ended
December 31, 2011
    Three Months Ended
December 31, 2012
 
                 
Operating cash flows (1)   $ 2,537,000     $ 5,238,000  
                 
IFP submitted applications (2)     103,200       113,600  
                 
IFP approved members (3)     85,500       93,600  
Total approved members (4)     139,600       186,700  
                 
Commission revenue (5)   $ 31,276,000     $ 37,305,000  
Commission revenue per estimated member for the period (6)   $ 38.47     $ 39.07  
                 
                 
    As of
December 31, 2011
    As of
December 31, 2012
 
                 
IFP estimated membership (7)     675,000       709,700  
Medicare estimated membership (8)     24,300       70,600  
Other estimated membership (9)     116,200       202,600  
Total estimated membership (10)     815,500       982,900  
                 
                 
Other Metrics:   Three Months Ended
December 31, 2011
    Three Months Ended
December 31, 2012
 
                 
Source of IFP submitted applications (as a percentage of total IFP applications for the period):                
  Direct (11)     43 %     49 %
  Marketing partners (12)     33 %     33 %
  Online advertising (13)     24 %     18 %
    Total     100 %     100 %
                     
Notes:
   
(1) Net cash provided by operating activities for the period from the condensed consolidated statements of cash flows.
(2) IFP applications submitted on eHealth's website during the period. Applications are counted as submitted when the applicant completes the application, provides a method for payment and clicks the submit button on our website and submits the application to us. The applicant generally has additional actions to take before the application will be reviewed by the insurance carrier, such as providing additional information and providing an electronic signature. In addition, an applicant may submit more than one application. We include applications for IFP products for which we receive commissions as well as other forms of payment. We define our "IFP" offerings as major medical individual and family health insurance plans, which does not include small business, short-term major medical, stand-alone dental, life, student or Medicare-related health insurance plans.
(3) New IFP members reported to eHealth as approved during the period. Some members that are approved by a carrier do not accept the approval and therefore do not become paying members.
(4) New members for all products reported to eHealth as approved during the period. Some members that are approved by a carrier do not accept the approval and therefore do not become paying members.
(5) Commission revenue (from all sources) recognized during the period from the condensed consolidated statements of income.
(6) Calculated as commission revenue recognized during the period (see note (5) above) divided by average estimated membership for the period (calculated as beginning and ending estimated membership for all products for the period, divided by two). See our Form 10-K for the year ended December 31, 2011 - Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Summary of Selected Metrics for additional information regarding our calculation of estimated membership.
(7) Estimated number of members active on IFP insurance policies as of the date indicated. See our Form 10-K for the year ended December 31, 2011 - Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Summary of Selected Metrics for additional information regarding our calculation of estimated membership.
(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, 2011 - Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Summary of Selected Metrics for additional information regarding our calculation of estimated membership.
(9) Estimated number of members active on insurance policies other than IFP and Medicare policies as of the date indicated. See our Form 10-K for the year ended December 31, 2011 - Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Summary of Selected Metrics for additional information regarding our calculation of estimated membership.
(10) Estimated number of members active on all insurance policies as of the date indicated. See our Form 10-K for the year ended December 31, 2011 - Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Summary of Selected Metrics for additional information regarding our calculation of estimated membership.
(11) 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.
   
   
   
EHEALTH, INC.  
GAAP TO NON-GAAP RECONCILIATION  
FOR THE THREE MONTHS ENDED DECEMBER 31, 2012  
(In thousands, except per share amounts, unaudited)  
   
Statement of Income Reconciliation  
                               
    Three Months Ended December 31, 2012  
    GAAP Reported     GAAP Percent of Total Revenue     Adjustments     Non-GAAP Results     Non-GAAP Percent of Total Revenue  
                                     
Revenue:                                    
  Commission   $ 37,305     82 %   $ -     $ 37,305     82 %
  Sponsorship, licensing and other     8,000     18       -       8,000     18  
Total revenue     45,305     100       -       45,305     100  
  Operating costs and expenses:                                    
  Cost of revenue-sharing (1)     1,245     3       (435 )     810     2  
  Marketing and advertising (2)     18,647     41       (283 )     18,364     41  
  Customer care and enrollment (2)     9,130     20       (78 )     9,052     20  
  Technology and content (2)     5,388     12       (238 )     5,150     11  
  General and administrative (2)     6,231     14       (697 )     5,534     12  
  Amortization of intangible assets (3)     354     1       (354 )     -     -  
Total operating costs and expenses     40,995     90       (2,085 )     38,910     86  
Income from operations     4,310     10       2,085       6,395     14  
Other income, net     (18 )   (0 )     -       (18 )   (0 )
Income before provision for income taxes     4,292     9       2,085       6,377     14  
Provision for income taxes (4)     1,845     4       662       2,507     6  
Net income (5)   $ 2,447     5 %   $ 1,423     $ 3,870     9 %
                                     
Net income per share: (5)                                    
  Basic - common stock   $ 0.12           $ 0.07     $ 0.19        
  Diluted - common stock   $ 0.11           $ 0.07     $ 0.18        
                                     
Weighted-average number of shares used in per share amounts:                                    
  Basic - common stock     20,331             20,331       20,331        
  Diluted - common stock     21,319             21,319       21,319        
                                     
Explanation of adjustments
(1) Non-GAAP results exclude an asset impairment charge.
(2) 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.
(3) Non-GAAP results exclude intangible asset amortization expense.
(4) Non-GAAP provision for income taxes excludes the estimated income tax benefits related to the asset impairment charge listed in note (1) above, stock-based compensation expense listed in note (2) above and intangible asset amortization expense listed in note (3) above.
(5) Non-GAAP net income and non-GAAP net income per share exclude the asset impairment charge listed in note (1) above, stock-based compensation expense listed in note (2) above, intangible asset amortization expense listed in note (3) above, less the estimated income tax benefit listed in note (4) above.
   
   
   
EHEALTH, INC.  
GAAP TO NON-GAAP RECONCILIATION  
FOR THE THREE MONTHS ENDED DECEMBER 31, 2011  
(In thousands, except per share amounts, unaudited)  
   
Statement of Income Reconciliation  
                           
    Three Months Ended December 31, 2011  
    GAAP Reported   GAAP Percent of Total Revenue     Adjustments     Non-GAAP Results   Non-GAAP Percent of Total Revenue  
                                 
Revenue:                                
  Commission   $ 31,276   73 %   $ --     $ 31,276   73 %
  Sponsorship, licensing and other     11,844   27       --       11,844   27  
Total revenue     43,120   100       --       43,120   100  
  Operating costs and expenses:                                
  Cost of revenue-sharing     1,353   3       --       1,353   3  
  Marketing and advertising (1)     18,474   43       (188 )     18,286   42  
  Customer care and enrollment (1)     6,633   15       (80 )     6,553   15  
  Technology and content (1)     5,224   12       (333 )     4,891   11  
  General and administrative (1)     6,294   15       (873 )     5,421   13  
  Amortization of intangible assets (2)     765   2       (765 )     --   --  
Total operating costs and expenses     38,743   90       (2,239 )     36,504   85  
Income from operations     4,377   10       2,239       6,616   15  
Other income, net     8   0       --       8   0  
Income before provision for income taxes     4,385   10       2,239       6,624   15  
Provision for income taxes (3)     2,125   5       773       2,898   7  
Net income (4)   $ 2,260   5 %   $ 1,466     $ 3,726   9 %
                                 
Net income per share: (4)                                
  Basic - common stock   $ 0.11         $ 0.08     $ 0.19      
  Diluted - common stock   $ 0.11         $ 0.07     $ 0.18      
                                 
Weighted-average number of shares used in per share amounts:                                
  Basic - common stock     20,006           20,006       20,006      
  Diluted - common stock     20,889           20,889       20,889      
                                 
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 TO NON-GAAP RECONCILIATION  
FOR THE YEAR FISCAL ENDED DECEMBER 31, 2012  
(In thousands, except per share amounts, unaudited)  
   
Statement of Income Reconciliation  
                           
    Fiscal Year Ended December 31, 2012  
    GAAP Reported   GAAP Percent of Total Revenue     Adjustments     Non-GAAP Results   Non-GAAP Percent of Total Revenue  
                                 
Revenue:                                
  Commission   $ 130,663   84 %   $ -     $ 130,663   84 %
  Sponsorship, licensing and other     24,810   16       -       24,810   16  
Total revenue     155,473   100       -       155,473   100  
  Operating costs and expenses:                                
  Cost of revenue-sharing (1)     4,783   3       (435 )     4,348   3  
  Marketing and advertising (2)     57,789   37       (1,215 )     56,574   36  
  Customer care and enrollment (2)     30,282   19       (321 )     29,961   19  
  Technology and content (2)     21,406   14       (1,021 )     20,385   13  
  General and administrative (2)     26,169   17       (3,065 )     23,104   15  
  Amortization of intangible assets (3)     1,615   1       (1,615 )     -   -  
Total operating costs and expenses     142,044   91       (7,672 )     134,372   86  
Income from operations     13,429   9       7,672       21,101   14  
Other income, net     23   0       -       23   0  
Income before provision for income taxes     13,452   9       7,672       21,124   14  
Provision for income taxes (4)     6,370   4       2,161       8,531   5  
Net income (5)   $ 7,082   5 %   $ 5,511     $ 12,593   8 %
                                 
Net income per share: (5)                                
  Basic - common stock   $ 0.36         $ 0.27     $ 0.63      
  Diluted - common stock   $ 0.34         $ 0.27     $ 0.61      
                                 
Weighted-average number of shares used in per share amounts:                                
  Basic - common stock     19,867           19,867       19,867      
  Diluted - common stock     20,753           20,753       20,753      
                                   
                                   
                                   
Explanation of adjustments
   
(1) Non-GAAP results exclude an asset impairment charge.
(2) 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.
(3) Non-GAAP results exclude intangible asset amortization expense.
(4) Non-GAAP provision for income taxes excludes the estimated income tax benefits related to the asset impairment charge listed in note (1) above, stock-based compensation expense listed in note (2) above and intangible asset amortization expense listed in note (3) above.
(5) Non-GAAP net income and non-GAAP net income per share exclude the asset impairment charge listed in note (1) above, stock-based compensation expense listed in note (2) above, intangible asset amortization expense listed in note (3) above, less the estimated income tax benefit listed in note (4) above.
   
   
   
EHEALTH, INC.  
GAAP TO NON-GAAP RECONCILIATION  
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2011  
(In thousands, except per share amounts, unaudited)  
   
Statement of Income Reconciliation  
                               
    Fiscal Year Ended December 31, 2011  
    GAAP Reported     GAAP Percent of Total Revenue     Adjustments     Non-GAAP Results     Non-GAAP Percent of Total Revenue  
                                     
Revenue:                                    
  Commission   $ 120,321     79 %   $ --     $ 120,321     79 %
  Sponsorship, licensing and other     31,327     21       --       31,327     21  
Total revenue     151,648     100               151,648     100  
  Operating costs and expenses:                                    
  Cost of revenue-sharing     8,340     5       --       8,340     6  
  Marketing and advertising (1)     56,877     38       (962 )     55,915     37  
  Customer care and enrollment (1)     22,898     15       (344 )     22,554     15  
  Technology and content (1)     21,657     14       (1,669 )     19,988     13  
  General and administrative (1)     26,593     18       (4,121 )     22,472     15  
  Amortization of intangible assets (2)     2,046     1       (2,046 )     --     --  
Total operating costs and expenses     138,411     91       (9,142 )     129,269     85  
Income from operations     13,237     9       9,142       22,379     15  
Other income (expense), net     (53 )   (0 )     --       (53 )   (0 )
Income before provision for income taxes     13,184     9       9,142       22,326     15  
Provision for income taxes (3)     6,460     4       3,044       9,504     6  
Net income (4)   $ 6,724     4 %   $ 6,098     $ 12,822     8 %
                                     
Net income per share: (4)                                    
  Basic - common stock   $ 0.32           $ 0.29     $ 0.61        
  Diluted - common stock   $ 0.31           $ 0.28     $ 0.59        
                                     
Weighted-average number of shares used in per share amounts:                                    
  Basic - common stock     20,947             20,947       20,947        
  Diluted - common stock     21,703             21,703       21,703        
                                     
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 RECONCILIATION  
FOR THE THREE MONTHS AND FISCAL YEARS ENDED DECEMBER 31, 2011 AND 2012  
(In thousands, unaudited)  
   
EBITDA Reconciliation  
    Three Months Ended
December 31,
  Fiscal Year Ended
December 31,
 
    2011     2012   2011   2012  
                             
Net income   $ 2,260     $ 2,447   $ 6,724   $ 7,082  
Stock-based compensation expense (1)     1,474       1,296     7,096     5,622  
Depreciation and amortization (2)     559       671     2,358     2,411  
Amortization of intangible assets (2)     765       354     2,046     1,615  
Other (income) expense, net (3)     (8 )     18     53     (23 )
Provision for income taxes (4)     2,125       1,845     6,460     6,370  
EBITDA   $ 7,175     $ 6,631   $ 24,737   $ 23,077  
                             
Explanation of adjustments
(1) Non-GAAP EBITDA excludes the effect of expensing stock-based compensation related to stock options and restricted stock units in accordance with FASB ASC Topic 718.
(2) Non-GAAP EBITDA excludes depreciation and amortization expense, including intangible asset amortization expense.
(3) Non-GAAP EBITDA excludes other income (expense), net.
(4) Non-GAAP EBITDA excludes income tax expense.
Contact:
Investor Relations
Kate Sidorovich CFA
Vice President, Investor Relations
440 East Middlefield Road
Mountain View, CA 94043
(650) 210-3111
kate.sidorovich@ehealth.com
http://ir.ehealthinsurance.com

Media
Brian Mast
Vice President Communications
440 East Middlefield Road
Mountain View, CA 94043
(650) 210-3149
brian.mast@ehealth.com
http://www.ehealthinsurance.com

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