Exhibit 99.1
eHealth, Inc. Announces Fourth Quarter and Fiscal 2007 Results
Fourth Quarter Highlights
| • | Revenue of $24.2 million, up 39% on a year-over-year basis |
| • | Growth in submitted applications of 28% year-over-year |
| • | Operating income of $4.3 million, up 56% year-over-year |
| • | Net income of $22.4 million, or $0.86 per diluted share, including a $18.9 million income tax benefit due to the reversal of the valuation allowance against deferred tax assets |
| • | Cash flow from operations of $7.9 million, up 61% year-over-year |
MOUNTAIN VIEW, Calif.—February 14, 2008— eHealth, Inc. (NASDAQ: EHTH), the leading online source of health insurance for individuals, families and small businesses, today announced its financial results for the fourth quarter and fiscal year ended December 31, 2007.
“eHealth’s performance during the fourth quarter of 2007 illustrates progress, execution, and momentum across all important areas of our business. Among many highlights of the quarter are increased application growth and the highest operating cash flow in our company’s history,” said Gary Lauer, chief executive officer of eHealth.
Fourth Quarter Results
Revenue—Revenue totaled $24.2 million for the fourth quarter of 2007, a 39% increase compared to revenue of $17.4 million for the fourth quarter of 2006.
Membership—Estimated membership at December 31, 2007 totaled 518,400 members, a 32% increase over estimated membership at December 31, 2006.
Submitted Applications—Submitted applications for individual and family products increased 28% in the fourth quarter of 2007 to 97,900 applications, compared to 76,300 applications in the fourth quarter of 2006.
Operating Income—Operating income increased 56% to $4.3 million for the fourth quarter of 2007, compared to operating income of $2.8 million for the fourth quarter of 2006. Operating margins were 18% in the fourth quarter of 2007, up from 16% in the fourth quarter of 2006. Non-GAAP operating income increased 66% to $4.9 million for the fourth quarter of 2007, compared to non-GAAP operating income of $2.9 million for the fourth quarter of 2006. Non-GAAP operating margins were 20% in the fourth quarter of 2007, up from 17% in the fourth quarter of 2006. Non-GAAP operating income and margins in the fourth quarter of 2007 exclude $544,000 of stock-based compensation expense and non-GAAP operating income and margins in the fourth quarter of 2006 exclude $158,000 of stock-based compensation expense.
Pre-tax Income—Pre-tax income for the fourth quarter of 2007 was $5.7 million, a 54% increase compared to pre-tax income of $3.7 million for the fourth quarter of 2006. Non-GAAP pre-tax income increased to $6.3 million for the fourth quarter of 2007, compared to non-GAAP pre-tax income of $3.9 million for the fourth quarter of 2006, an increase of 62%. Non-GAAP pre-tax income in the fourth quarters of 2007 and 2006 exclude $544,000 and $158,000 of stock-based compensation expense, respectively.
Net Income—Net income for the fourth quarter of 2007, which included a benefit for income taxes of $18.9 million due to the reduction of the valuation allowance against deferred tax assets, was $22.4 million, or $0.86 per diluted share. Net income for the fourth quarter of 2006, which included a benefit for income taxes of $7.4 million due to the partial reduction of the valuation allowance against deferred tax assets, was $11.0 million, or $0.45 per share on a diluted basis. Non-GAAP net income for the fourth quarter of 2007 was $3.7 million, or
$0.14 per diluted share, compared to non-GAAP net income of $3.8 million, or $0.15 per diluted share, for the fourth quarter of 2006. Non-GAAP net income and non-GAAP net income per diluted share in the fourth quarter of 2007 exclude $544,000 of stock-based compensation expense, net of income tax effect of $262,000, and an $18.9 million income tax benefit from the reduction of the valuation allowance against deferred tax assets. Non-GAAP net income and non-GAAP net income per diluted share in the fourth quarter of 2006 exclude $158,000 of stock-based compensation expense, net of income tax effect of $2,000, and $7.4 million of income tax benefit from the reduction of the valuation allowance against deferred tax assets.
Cash Flow and Cash Balance—Cash flow from operations for the fourth quarter of 2007 was $7.9 million, compared to $4.9 million for the fourth quarter of 2006, representing an increase of 61%. Cash, cash equivalents and short-term marketable securities as of December 31, 2007 totaled $121.5 million, compared to $90.5 million as of December 31, 2006.
Fiscal 2007 Results
Revenue—Revenue totaled $87.8 million for the year ended December 31, 2007, a 43% increase compared to revenue of $61.3 million for the year ended December 31, 2006.
Operating Income—Operating income increased to $16.0 million for the year ended December 31, 2007, compared to operating income of $8.0 million for the year ended December 31, 2006. Operating margins were 18% for the year ended December 31, 2007, up from 13% for the year ended December 31, 2006.
Pre-tax Income—Pre-tax income for the year ended December 31, 2007 was $21.3 million, a 129% increase compared to pre-tax income of $9.3 million for the year ended December 31, 2006. The benefit for income taxes for the year ended December 31, 2007 was $10.3 million and the benefit for income taxes for the year ended December 31, 2006 was $7.2 million primarily due to reductions of the valuation allowance against deferred tax assets of $7.4 million and $18.9 million in the fourth quarters of 2006 and 2007, respectively.
Net Income—Net income for the year ended December 31, 2007, which included $18.9 million of income tax benefit recorded in the fourth quarter of 2007, was $31.6 million, or $1.22 per diluted share. Net income for the year ended December 31, 2006, which included $7.4 million of income tax benefit recorded in the fourth quarter of 2006, was $16.5 million, or $0.80 per share on a diluted basis.
Cash Flow—Cash flow from operations increased to $26.2 million for the year ended December 31, 2007, compared to $11.4 million for the year ended December 31, 2006, representing an increase of 130%.
Guidance
eHealth is providing guidance for the full year ending December 31, 2008 based on information currently available:
| • | Total revenue is expected to be in the range of $114 million to $117 million |
| • | Stock-based compensation expense is expected to be in the range of $4.0 million to $5.5 million |
| • | GAAP income tax rate expected to be approximately 42% |
| • | GAAP net earnings per diluted share is expected to be in the range of $0.58 to $0.63 per share |
| • | Cash flow from operations is expected to be in the range of $33.5 million to $36.0 million |
Webcast and Conference Call Information
A Webcast and conference call will be held today, Thursday, February 14, 2008 at 5:00 p.m. EST / 2:00 p.m. PST. The Webcast will be available live on the Investor Relations section on eHealth’s website athttp://ir.ehealthinsurance.com. Individuals interested in listening to the conference call may do so by dialing 888-396-2298 for domestic callers and 617-847-8708 for international callers. The participant passcode is 95522387. 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 15882627. The archived Webcast will also be available on the company’s website.
About eHealth, Inc.
eHealth, Inc. is the parent company of eHealthInsurance, the leading online source of health insurance for individuals, families and small businesses. eHealthInsurance presents complex health insurance information in an objective, user-friendly format, enabling the research, analysis, comparison and purchase of health insurance products that best meet consumers’ needs. eHealth and eHealthInsurance are registered trademarks of eHealthInsurance Services, Inc.
eHealth, Inc. was founded in 1997 and its technology was responsible for the nation’s first Internet-based sale of a health insurance policy. eHealth is headquartered in Mountain View, California. Additional information can be found on eHealth’s website,www.ehealthinsurance.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 estimated membership and eHealth’s guidance for total revenue, stock-based compensation expense, GAAP income tax rate, GAAP net earnings per diluted share and cash flow from operations for the year ending December 31, 2008. 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 continued acceptance of the Internet as a medium for the purchase of health insurance, eHealth’s ability to continue to increase its membership base and expand its relationships with health insurance carriers and marketing partners, the effectiveness of increased marketing spending, retention of eHealth’s members, increased rates of member turnover, changes in eHealth’s relationships with insurance carriers, system failures or capacity constraints, dependence upon Internet search engines to attract consumers who visit eHealth’s website, the performance, reliability and availability of eHealth’s ecommerce platform and underlying network infrastructure, the effectiveness of eHealth’s marketing and public relations efforts, exposure to online commerce security risks, reliance on marketing partners for the sale of health insurance, competition, protection of intellectual property and intellectual property rights claims, regulatory penalties and negative publicity, changes in the economy, compliance with insurance and other laws and regulations, and changes in laws and regulations. Other factors that could cause operating, financial and other results to differ are described in eHealth’s most recent Periodic 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 atwww.ehealthinsurance.com and on the Securities and Exchange Commission’s website atwww.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 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, non-GAAP pre-tax income, non-GAAP net income and non-GAAP net income per diluted share.
| • | Non-GAAP operating income consists of GAAP operating income excluding the effects of expensing stock-based compensation related to stock options, restricted stock and restricted stock units in accordance with SFAS 123R beginning in 2006 and amortization of deferred stock-based compensation expense in accordance with APB 25 for grants made prior to 2006. |
| • | Non-GAAP operating margins are calculated by dividing non-GAAP operating income by GAAP total revenue. |
| • | Non-GAAP pre-tax income consists of GAAP pre-tax income excluding the effects of expensing stock-based compensation. |
| • | Non-GAAP net income consists of GAAP net income excluding the effects of expensing stock-based compensation including the related income tax impact and excluding non-cash benefits for income taxes. |
| • | 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 continue to be useful to investors in their assessment of the company’s operating performance and valuation.
Non-GAAP operating income, non-GAAP operating margins, non-GAAP pre-tax income, 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 costs associated with the operations of the company’s business and do not reflect all of the 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 operating costs similar to the non-GAAP adjustments described above, and exclusion of these costs, and their related income tax impact, 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 pre-tax income, 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 and the related reconciliations between these financial measures.
Investor Relations Contact:
Dede Sheel
FD Ashton Partners
(415) 293-4412
dede.sheel@fdashtonpartners.com
www.fdashtonpartners.com
Media Contact:
Stuart Huizinga
Senior Vice President and Chief Financial Officer
(650) 210-3180
stuart.huizinga@ehealth.com
www.ehealthinsurance.com
(Tables to Follow)
# # #
EHEALTH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
| December 31, 2006 | December 31, 2007 | |||||||
| (1) | (unaudited) | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 90,316 | $ | 81,395 | ||||
Short-term marketable securities | 158 | 40,119 | ||||||
Accounts receivable | 717 | 1,300 | ||||||
Deferred income taxes | 2,257 | 13,240 | ||||||
Prepaid expenses and other current assets | 1,926 | 2,098 | ||||||
Total current assets | 95,374 | 138,152 | ||||||
Property and equipment, net | 3,936 | 3,791 | ||||||
Deferred income taxes | 5,165 | 4,535 | ||||||
Other assets | 453 | 975 | ||||||
Total assets | $ | 104,928 | $ | 147,453 | ||||
Liabilities and stockholders’ equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 1,440 | $ | 1,495 | ||||
Accrued compensation and benefits | 3,743 | 4,849 | ||||||
Accrued marketing expenses | 1,647 | 2,454 | ||||||
Deferred revenue | 62 | 436 | ||||||
Other current liabilities | 1,979 | 2,073 | ||||||
Total current liabilities | 8,871 | 11,307 | ||||||
Other non-current liabilities | 317 | 252 | ||||||
Stockholders’ equity: | ||||||||
Common stock | 22 | 25 | ||||||
Additional paid-in capital | 159,576 | 167,847 | ||||||
Deferred stock-based compensation | (254 | ) | (104 | ) | ||||
Accumulated deficit | (63,655 | ) | (32,060 | ) | ||||
Accumulated other comprehensive income | 51 | 186 | ||||||
Total stockholders’ equity | 95,740 | 135,894 | ||||||
Total liabilities and stockholders’ equity | $ | 104,928 | $ | 147,453 | ||||
| (1) | The condensed consolidated balance sheet at December 31, 2006 has been derived from the audited consolidated financial statements at that date. |
EHEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
| Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
| 2006 | 2007 | 2006 | 2007 | |||||||||||||
| (unaudited) | (unaudited) | (2) | (unaudited) | |||||||||||||
Revenue: | ||||||||||||||||
Commission | $ | 16,520 | $ | 22,016 | $ | 58,943 | $ | 81,502 | ||||||||
Sponsorship, licensing and other | 896 | 2,217 | 2,367 | 6,289 | ||||||||||||
Total revenue | 17,416 | 24,233 | 61,310 | 87,791 | ||||||||||||
Operating costs and expenses: | ||||||||||||||||
Cost of revenue-sharing | 411 | 457 | 1,305 | 1,702 | ||||||||||||
Marketing and advertising (1) | 5,601 | 8,476 | 21,405 | 29,497 | ||||||||||||
Customer care and enrollment (1) | 2,947 | 3,278 | 10,991 | 12,137 | ||||||||||||
Technology and content (1) | 2,816 | 3,368 | 10,137 | 12,393 | ||||||||||||
General and administrative (1) | 2,880 | 4,348 | 9,482 | 16,046 | ||||||||||||
Total operating costs and expenses | 14,655 | 19,927 | 53,320 | 71,775 | ||||||||||||
Income from operations | 2,761 | 4,306 | 7,990 | 16,016 | ||||||||||||
Other income, net | 969 | 1,438 | 1,326 | 5,287 | ||||||||||||
Income before income taxes | 3,730 | 5,744 | 9,316 | 21,303 | ||||||||||||
Benefit for income taxes | (7,315 | ) | (16,616 | ) | (7,161 | ) | (10,292 | ) | ||||||||
Net income | $ | 11,045 | $ | 22,360 | $ | 16,477 | $ | 31,595 | ||||||||
Net income per share: | ||||||||||||||||
Basic – common stock | $ | 0.57 | $ | 0.92 | $ | 1.91 | $ | 1.37 | ||||||||
Basic – Class A nonvoting common stock | $ | 0.57 | — | $ | 1.91 | — | ||||||||||
Diluted – common stock | $ | 0.45 | $ | 0.86 | $ | 0.80 | $ | 1.22 | ||||||||
Diluted – Class A nonvoting common stock | $ | 0.45 | — | $ | 0.80 | — | ||||||||||
Net income: | ||||||||||||||||
Allocated to common stock | $ | 11,039 | $ | 22,360 | $ | 16,391 | $ | 31,595 | ||||||||
Allocated to Class A nonvoting common stock | 6 | — | 86 | — | ||||||||||||
Net income | $ | 11,045 | $ | 22,360 | $ | 16,477 | $ | 31,595 | ||||||||
Weighted-average number of shares used in per share amounts: | ||||||||||||||||
Basic – common stock | 19,535 | 24,424 | 8,590 | 23,092 | ||||||||||||
Basic – Class A nonvoting common stock | 10 | — | 45 | — | ||||||||||||
Diluted – common stock | 24,771 | 25,929 | 20,572 | 25,797 | ||||||||||||
Diluted – Class A nonvoting common stock | 10 | — | 45 | — | ||||||||||||
(1) Includes stock-based compensation as follows: | ||||||||||||||||
Marketing and advertising | $ | 15 | $ | 105 | $ | 47 | $ | 218 | ||||||||
Customer care and enrollment | 16 | 52 | 42 | 138 | ||||||||||||
Technology and content | 77 | 195 | 226 | 611 | ||||||||||||
General and administrative | 50 | 192 | 139 | 539 | ||||||||||||
Total | $ | 158 | $ | 544 | $ | 454 | $ | 1,506 | ||||||||
| (2) | The condensed consolidated statement of operations for the year ended December 31, 2006 has been derived from the audited consolidated financial statements for that year. |
EHEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
| Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
| 2006 | 2007 | 2006 | 2007 | |||||||||||||
| (unaudited) | (unaudited) | (1) | (unaudited) | |||||||||||||
Operating activities | ||||||||||||||||
Net income | $ | 11,045 | $ | 22,360 | $ | 16,477 | $ | 31,595 | ||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||
Deferred income taxes | (7,422 | ) | (16,412 | ) | (7,422 | ) | (10,303 | ) | ||||||||
Depreciation and amortization | 409 | 434 | 1,526 | 1,709 | ||||||||||||
Stock-based compensation expense | 158 | 544 | 454 | 1,506 | ||||||||||||
Excess tax benefits from stock-based compensation expense | — | (50 | ) | — | (50 | ) | ||||||||||
Deferred rent | 82 | (18 | ) | 122 | (40 | ) | ||||||||||
Loss on disposal of property and equipment | — | 12 | — | 30 | ||||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||
Accounts receivable | 84 | (252 | ) | (589 | ) | (583 | ) | |||||||||
Prepaid expenses and other current assets | (730 | ) | (195 | ) | (954 | ) | (11 | ) | ||||||||
Other assets | (15 | ) | (1 | ) | (44 | ) | (524 | ) | ||||||||
Accounts payable | 11 | 610 | 209 | 308 | ||||||||||||
Accrued compensation and benefits | 932 | 1,025 | 740 | 958 | ||||||||||||
Accrued marketing expenses | (81 | ) | 31 | 620 | 807 | |||||||||||
Deferred revenue | 3 | 159 | (461 | ) | 374 | |||||||||||
Other current liabilities | 442 | (337 | ) | 734 | 416 | |||||||||||
Net cash provided by operating activities | 4,918 | 7,910 | 11,412 | 26,192 | ||||||||||||
Investing activities | ||||||||||||||||
Purchases of property and equipment | (509 | ) | (724 | ) | (2,248 | ) | (1,777 | ) | ||||||||
Proceeds from the sale of property and equipment | — | — | — | 14 | ||||||||||||
Changes in restricted investments | (2 | ) | — | (5 | ) | — | ||||||||||
Purchases of short-term marketable securities | — | (17,823 | ) | — | (54,343 | ) | ||||||||||
Sales of short-term marketable securities | — | 6,796 | — | 8,952 | ||||||||||||
Maturities of short-term marketable securities | — | 4,895 | — | 5,483 | ||||||||||||
Net cash used in investing activities | (511 | ) | (6,856 | ) | (2,253 | ) | (41,671 | ) | ||||||||
Financing activities | ||||||||||||||||
Proceeds from initial public offering | 74,752 | — | 74,752 | — | ||||||||||||
Costs incurred in connection with initial public offering | (1,400 | ) | — | (3,309 | ) | (252 | ) | |||||||||
Net proceeds from exercise of common stock options | 37 | 1,525 | 476 | 6,868 | ||||||||||||
Excess tax benefits from stock-based compensation expense | — | 50 | — | 50 | ||||||||||||
Principal payments in connection with capital leases | (134 | ) | (2 | ) | (206 | ) | (214 | ) | ||||||||
Net cash provided by financing activities | 73,255 | 1,573 | 71,713 | 6,452 | ||||||||||||
Effect of exchange rate changes on cash and cash equivalents | 13 | 42 | 29 | 106 | ||||||||||||
Net increase (decrease) in cash and cash equivalents | 77,675 | 2,669 | 80,901 | (8,921 | ) | |||||||||||
Cash and cash equivalents at beginning of period | 12,641 | 78,726 | 9,415 | 90,316 | ||||||||||||
Cash and cash equivalents at end of period | $ | 90,316 | $ | 81,395 | $ | 90,316 | $ | 81,395 | ||||||||
| (1) | The condensed consolidated statement of cash flows for the year ended December 31, 2006 has been derived from the audited consolidated financial statements for that year. |
EHEALTH, INC.
SUMMARY OF SELECTED METRICS
(Unaudited)
| Three Months Ended December 31, 2006 | Three Months Ended December 31, 2007 | |||||||
Key Metrics: | ||||||||
Operating cash flows (1) | $ | 4,918,000 | $ | 7,910,000 | ||||
IFP submitted applications (2) | 76,300 | 97,900 | ||||||
IFP approved members (3) | 68,300 | 83,800 | ||||||
Total approved members (4) | 97,200 | 118,800 | ||||||
Total revenue (5) | $ | 17,416,000 | $ | 24,233,000 | ||||
Total revenue per estimated member for the period (6) | $ | 46.02 | $ | 48.00 | ||||
| As of December 31, 2006 | As of December 31, 2007 | |||||||
IFP estimated membership (7) | 319,000 | 432,700 | ||||||
Total estimated membership (8) | 393,900 | 518,400 | ||||||
| Three Months Ended December 31, 2006 | Three Months Ended December 31, 2007 | |||||||
Marketing and advertising expenses (9) | $ | 5,601,000 | $ | 8,476,000 | ||||
Marketing and advertising expenses as a percentage of total revenue (10) | 32 | % | 35 | % | ||||
Marketing and advertising expenses excluding stock-based compensation (11) | 5,586,000 | 8,371,000 | ||||||
Other Metrics: | ||||||||
Source of IFP submitted applications (as a percentage of total IFP applications for the period): | ||||||||
Direct (12) | 40 | % | 38 | % | ||||
Marketing partners (13) | 33 | % | 34 | % | ||||
Online advertising (14) | 27 | % | 28 | % | ||||
Total | 100 | % | 100 | % | ||||
Acquisition cost per individual on IFP submitted applications (15) | $ | 47.48 | $ | 56.73 | ||||
Acquisition cost (excluding stock-based compensation) per individual on IFP submitted applications (16) | $ | 47.36 | $ | 56.03 | ||||
Notes:
| (1) | Net cash provided by operating activities for the period from the condensed consolidated statements of cash flows. |
| (2) | Individual and Family Product (“IFP”) applications submitted on eHealth’s website during the period. |
| (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) | Total revenue recognized during the period (all sources) from the condensed consolidated statements of operations. |
| (6) | Calculated as total revenue recognized during the period (see note (5)) divided by average estimated membership for the period (calculated as beginning and ending estimated membership for all products for the period, divided by two). |
| (7) | Estimated number of members active on IFP insurance policies as of the date indicated. |
| (8) | Estimated number of members active on all insurance policies as of the date indicated. |
| (9) | Marketing and advertising expenses for the period from the condensed consolidated statements of operations. |
| (10) | Calculated as marketing and advertising expenses for the period (see note (9)) divided by total revenue for the period (see note (5)). |
| (11) | Marketing and advertising expenses excluding stock-based compensation for the period. |
| (12) | Percentage of IFP submitted applications from applicants who came directly to the eHealth website through algorithmic search engine results or otherwise. |
| (13) | Percentage of IFP submitted applications from applicants sourced through eHealth’s network of marketing partners. |
| (14) | Percentage of IFP submitted applications from applicants sourced through paid search and other online advertising activities. |
| (15) | Calculated as marketing and advertising expenses for the period (see note (9)) divided by the number of individuals on IFP applications completed on eHealth’s website during the period. |
| (16) | Calculated as marketing and advertising expenses excluding stock-based compensation for the period (see note (11)) divided by the number of individuals on IFP applications completed on eHealth’s website during the period. |
EHEALTH, INC.
GAAP TO NON-GAAP RECONCILIATION
FOR THE THREE MONTHS ENDED DECEMBER 31, 2007
(In thousands, except per share amounts, unaudited)
Statement of Operations Reconciliation
| Three Months Ended December 31, 2007 | ||||||||||||||
| GAAP Reported | Adjustments | Non-GAAP Results | Percent of Total Revenue | |||||||||||
Revenue: | ||||||||||||||
Commission | $ | 22,016 | $ | — | $ | 22,016 | 91 | % | ||||||
Sponsorship, licensing and other | 2,217 | — | 2,217 | 9 | ||||||||||
Total revenue | 24,233 | — | 24,233 | 100 | ||||||||||
Operating costs and expenses: | ||||||||||||||
Cost of revenue-sharing | 457 | — | 457 | 2 | ||||||||||
Marketing and advertising (1) | 8,476 | (105 | ) | 8,371 | 35 | |||||||||
Customer care and enrollment (1) | 3,278 | (52 | ) | 3,226 | 13 | |||||||||
Technology and content (1) | 3,368 | (195 | ) | 3,173 | 13 | |||||||||
General and administrative (1) | 4,348 | (192 | ) | 4,156 | 17 | |||||||||
Total operating costs and expenses | 19,927 | (544 | ) | 19,383 | 80 | |||||||||
Income from operations | 4,306 | 544 | 4,850 | 20 | ||||||||||
Other income, net | 1,438 | — | 1,438 | 6 | ||||||||||
Income before income taxes | 5,744 | 544 | 6,288 | 26 | ||||||||||
Provision (benefit) for income taxes (2) | (16,616 | ) | 19,194 | 2,578 | 11 | |||||||||
Net income | $ | 22,360 | $ | (18,650 | ) | $ | 3,710 | 15 | % | |||||
Net income per share: | ||||||||||||||
Basic – common stock | $ | 0.92 | $ | (0.77 | ) | $ | 0.15 | |||||||
Diluted – common stock | $ | 0.86 | $ | (0.72 | ) | $ | 0.14 | |||||||
Weighted-average number of shares used in per share amounts: | ||||||||||||||
Basic – common stock | 24,424 | 24,424 | 24,424 | |||||||||||
Diluted – common stock | 25,929 | 25,929 | 25,929 | |||||||||||
Explanation of adjustments
| (1) | Non-GAAP results exclude the effect of expensing stock-based compensation related to stock options, restricted stock and restricted stock units in accordance with SFAS 123R beginning in 2006, in addition to the amortization of deferred stock-based compensation expense in accordance with APB 25 for grants made prior to 2006. |
| (2) | In the fourth quarter of 2007, management concluded that it is more likely than not that eHealth will realize sufficient future earnings to utilize its remaining deferred tax assets. Accordingly, eHealth reduced the valuation allowance by $18.9 million against deferred tax assets resulting in a tax benefit in the fourth quarter of 2007. Additionally, non-GAAP results exclude the income tax impact of $262,000 from the stock-based compensation expense listed in item (1) above. |
EHEALTH, INC.
GAAP TO NON-GAAP RECONCILIATION
FOR THE THREE MONTHS ENDED DECEMBER 31, 2006
(In thousands, except per share amounts, unaudited)
Statement of Operations Reconciliation
| Three Months Ended December 31, 2006 | ||||||||||||||
| GAAP Reported | Adjustments | Non-GAAP Results | Percent of Total Revenue | |||||||||||
Revenue: | ||||||||||||||
Commission | $ | 16,520 | $ | — | $ | 16,520 | 95 | % | ||||||
Sponsorship, licensing and other | 896 | — | 896 | 5 | ||||||||||
Total revenue | 17,416 | — | 17,416 | 100 | ||||||||||
Operating costs and expenses: | ||||||||||||||
Cost of revenue-sharing | 411 | — | 411 | 2 | ||||||||||
Marketing and advertising (1) | 5,601 | (15 | ) | 5,586 | 32 | |||||||||
Customer care and enrollment (1) | 2,947 | (16 | ) | 2,931 | 17 | |||||||||
Technology and content (1) | 2,816 | (77 | ) | 2,739 | 16 | |||||||||
General and administrative (1) | 2,880 | (50 | ) | 2,830 | 16 | |||||||||
Total operating costs and expenses | 14,655 | (158 | ) | 14,497 | 83 | |||||||||
Income from operations | 2,761 | 158 | 2,919 | 17 | ||||||||||
Other income, net | 969 | — | 969 | 5 | ||||||||||
Income before income taxes | 3,730 | 158 | 3,888 | 22 | ||||||||||
Provision (benefit) for income taxes (2) | (7,315 | ) | 7,424 | 109 | 0 | |||||||||
Net income | $ | 11,045 | $ | (7,266 | ) | $ | 3,779 | 22 | % | |||||
Net income per share: | ||||||||||||||
Basic – common stock | $ | 0.57 | $ | (0.38 | ) | $ | 0.19 | |||||||
Basic – Class A nonvoting common stock | $ | 0.57 | $ | (0.38 | ) | $ | 0.19 | |||||||
Diluted – common stock | $ | 0.45 | $ | (0.30 | ) | $ | 0.15 | |||||||
Diluted – Class A nonvoting common stock | $ | 0.45 | $ | (0.30 | ) | $ | 0.15 | |||||||
Net income: | ||||||||||||||
Allocated to common stock | $ | 11,039 | $ | (7,262 | ) | $ | 3,777 | |||||||
Allocated to Class A nonvoting common stock | 6 | (4 | ) | 2 | ||||||||||
Net income | $ | 11,045 | $ | (7,266 | ) | $ | 3,779 | |||||||
Weighted-average number of shares used in per share amounts: | ||||||||||||||
Basic – common stock | 19,535 | 19,535 | 19,535 | |||||||||||
Basic – Class A nonvoting common stock | 10 | 10 | 10 | |||||||||||
Diluted – common stock | 24,771 | 24,771 | 24,771 | |||||||||||
Diluted – Class A nonvoting common stock | 10 | 10 | 10 | |||||||||||
Explanation of adjustments
| (1) | Non-GAAP results exclude the effect of expensing stock-based compensation related to stock options, restricted stock and restricted stock units in accordance with SFAS 123R beginning in 2006, in addition to the amortization of deferred stock-based compensation expense in accordance with APB 25 for grants made prior to 2006. |
| (2) | In the fourth quarter of 2006, management concluded that it was more likely than not that eHealth would realize sufficient future earnings to utilize a portion of its deferred tax assets. Accordingly, eHealth reduced the valuation allowance by $7.4 million against deferred tax assets resulting in a tax benefit in the fourth quarter of 2006. Additionally, non-GAAP results exclude the income tax impact of $2,000 from the stock-based compensation expense listed in item (1) above. |
EHEALTH, INC.
GAAP TO NON-GAAP RECONCILIATION
FOR THE YEAR ENDED DECEMBER 31, 2007
(In thousands, except per share amounts, unaudited)
Statement of Operations Reconciliation
| Year Ended December 31, 2007 | ||||||||||||||
| GAAP Reported | Adjustments | Non-GAAP Results | Percent of Total Revenue | |||||||||||
Revenue: | ||||||||||||||
Commission | $ | 81,502 | $ | — | $ | 81,502 | 93 | % | ||||||
Sponsorship, licensing and other | 6,289 | — | 6,289 | 7 | ||||||||||
Total revenue | 87,791 | — | 87,791 | 100 | ||||||||||
Operating costs and expenses: | ||||||||||||||
Cost of revenue-sharing | 1,702 | — | 1,702 | 2 | ||||||||||
Marketing and advertising (1) | 29,497 | (218 | ) | 29,279 | 33 | |||||||||
Customer care and enrollment (1) | 12,137 | (138 | ) | 11,999 | 14 | |||||||||
Technology and content (1) | 12,393 | (611 | ) | 11,782 | 13 | |||||||||
General and administrative (1) | 16,046 | (539 | ) | 15,507 | 18 | |||||||||
Total operating costs and expenses | 71,775 | (1,506 | ) | 70,269 | 80 | |||||||||
Income from operations | 16,016 | 1,506 | 17,522 | 20 | ||||||||||
Other income, net | 5,287 | — | 5,287 | 6 | ||||||||||
Income before income taxes | 21,303 | 1,506 | 22,809 | 26 | ||||||||||
Provision (benefit) for income taxes (2) | (10,292 | ) | 19,256 | 8,964 | 10 | |||||||||
Net income | $ | 31,595 | $ | (17,750 | ) | $ | 13,845 | 16 | % | |||||
Net income per share: | ||||||||||||||
Basic – common stock | $ | 1.37 | $ | (0.77 | ) | $ | 0.60 | |||||||
Diluted – common stock | $ | 1.22 | $ | (0.68 | ) | $ | 0.54 | |||||||
Weighted-average number of shares used in per share amounts: | ||||||||||||||
Basic – common stock | 23,092 | 23,092 | 23,092 | |||||||||||
Diluted – common stock | 25,797 | 25,797 | 25,797 | |||||||||||
Explanation of adjustments
| (1) | Non-GAAP results exclude the effect of expensing stock-based compensation related to stock options, restricted stock and restricted stock units in accordance with SFAS 123R beginning in 2006, in addition to the amortization of deferred stock-based compensation expense in accordance with APB 25 for grants made prior to 2006. |
| (2) | In the fourth quarter of 2007, management concluded that it is more likely than not that eHealth will realize sufficient future earnings to utilize its remaining deferred tax assets. Accordingly, eHealth reduced the valuation allowance by $18.9 million against deferred tax assets resulting in a tax benefit for 2007. Additionally, non-GAAP results exclude the income tax impact of $324,000 from the stock-based compensation expense listed in item (1) above. |
EHEALTH, INC.
GAAP TO NON-GAAP RECONCILIATION
FOR THE YEAR ENDED DECEMBER 31, 2006
(In thousands, except per share amounts, unaudited)
Statement of Operations Reconciliation
| Year Ended December 31, 2006 | ||||||||||||||
| GAAP Reported | Adjustments | Non-GAAP Results | Percent of Total Revenue | |||||||||||
Revenue: | ||||||||||||||
Commission | $ | 58,943 | $ | — | $ | 58,943 | 96 | % | ||||||
Sponsorship, licensing and other | 2,367 | — | 2,367 | 4 | ||||||||||
Total revenue | 61,310 | — | 61,310 | 100 | ||||||||||
Operating costs and expenses: | ||||||||||||||
Cost of revenue-sharing | 1,305 | — | 1,305 | 2 | ||||||||||
Marketing and advertising (1) | 21,405 | (47 | ) | 21,357 | 35 | |||||||||
Customer care and enrollment (1) | 10,991 | (42 | ) | 10,949 | 18 | |||||||||
Technology and content (1) | 10,137 | (226 | ) | 9,912 | 16 | |||||||||
General and administrative (1) | 9,482 | (139 | ) | 9,343 | 15 | |||||||||
Total operating costs and expenses | 53,320 | (454 | ) | 52,866 | 86 | |||||||||
Income from operations | 7,990 | 454 | 8,444 | 14 | ||||||||||
Other income, net | 1,326 | — | 1,326 | 2 | ||||||||||
Income before income taxes | 9,316 | 454 | 9,770 | 16 | ||||||||||
Provision (benefit) for income taxes (2) | (7,161 | ) | 7,432 | 271 | 1 | |||||||||
Net income | $ | 16,477 | $ | (6,978 | ) | $ | 9,499 | 15 | % | |||||
Net income per share: | ||||||||||||||
Basic – common stock | $ | 1.91 | $ | (0.81 | ) | $ | 1.10 | |||||||
Basic – Class A nonvoting common stock | $ | 1.91 | $ | (0.81 | ) | $ | 1.10 | |||||||
Diluted – common stock | $ | 0.80 | $ | (0.34 | ) | $ | 0.46 | |||||||
Diluted – Class A nonvoting common stock | $ | 0.80 | $ | (0.34 | ) | $ | 0.46 | |||||||
Net income: | ||||||||||||||
Allocated to common stock | $ | 16,391 | $ | (6,942 | ) | $ | 9,449 | |||||||
Allocated to Class A nonvoting common stock | 86 | (36 | ) | 50 | ||||||||||
Net income | $ | 16,477 | $ | (6,978 | ) | $ | 9,499 | |||||||
Weighted-average number of shares used in per share amounts: | ||||||||||||||
Basic – common stock | 8,590 | 8,590 | 8,590 | |||||||||||
Basic – Class A nonvoting common stock | 45 | 45 | 45 | |||||||||||
Diluted – common stock | 20,572 | 20,572 | 20,572 | |||||||||||
Diluted – Class A nonvoting common stock | 45 | 45 | 45 | |||||||||||
Explanation of adjustments
| (1) | Non-GAAP results exclude the effect of expensing stock-based compensation related to stock options, restricted stock and restricted stock units in accordance with SFAS 123R beginning in 2006, in addition to the amortization of deferred stock-based compensation expense in accordance with APB 25 for grants made prior to 2006. |
| (2) | In the fourth quarter of 2006, management concluded that it was more likely than not that eHealth would realize sufficient future earnings to utilize a portion of its deferred tax assets. Accordingly, eHealth reduced the valuation allowance by $7.4 million against deferred tax assets resulting in a tax benefit for 2006. Additionally, non-GAAP results exclude the income tax impact of $10,000 from the stock-based compensation expense listed in item (1) above. |