EXHIBIT 99.2
eHEALTH, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
TABLE OF CONTENTS
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| ITEM | PAGE |
| Unaudited Condensed Combined Financial Statements | |
| Unaudited Pro Forma Condensed Combined Balance Sheet | |
Unaudited Pro Forma Condensed Combined Statement Of Operations
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| Notes to Unaudited Pro Forma Condensed Combined Financial Statements | |
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial statements are presented to give effect to the acquisition of Wealth, Health and Life Advisors, LLC (d/b/a GoMedigap) by eHealth, Inc. (“eHealth”), which closed on January 22, 2018.
The Company has determined that the acquisition constitutes a business combination as defined by Accounting Standards Codification (“ASC”) 805, Business Combinations. Under ASC 805, the assets acquired and liabilities assumed are recorded at their acquisition date fair values as described in the accompanying Notes to the Statement of Assets Acquired and Liabilities Assumed of GoMedigap included elsewhere in this Form 8-K/A. Any excess of the purchase price over the fair value of assets acquired is recognized as goodwill. Fair values of assets acquired are determined based on the requirements of ASC 820, Fair Value Measurements and Disclosures. The fair values of assets acquired are based on the estimates of fair values as of the acquisition date included in Exhibit 99.1 to the Form 8-K/A.
The unaudited pro forma condensed combined financial statements are based upon and derived from the historical audited financial statements and related notes of eHealth for the year ended December 31, 2017 included in the Company's Annual Report on Form 10-K, the historical unaudited balance sheet of GoMedigap as of January 22, 2018 (which management believes approximate the related balances at December 31, 2017) and the historical unaudited statement of operations of GoMedigap for the year ended December 31, 2017, as adjusted for the pro forma impact of applying the acquisition method of accounting in accordance with Generally Accepted Accounting Principles in the United States (“U.S. GAAP”). The pro forma adjustments are based upon available information and assumptions that eHealth believes are reasonable. The allocation of purchase price reflected in these unaudited pro forma condensed combined financial statements has been based upon estimates of the fair value of assets acquired and liabilities assumed. The pro forma adjustments have been prepared to illustrate the estimated effect of the acquisition.
The unaudited pro forma condensed combined balance sheet has been prepared to reflect the transaction as if it had occurred on December 31, 2017. The unaudited pro forma condensed combined statement of operations combines the results of operations of eHealth and GoMedigap for the year ended December 31, 2017 as if the transaction had occurred on January 1, 2017.
The unaudited pro forma condensed combined financial statements were prepared using the acquisition method of accounting with eHealth treated as the acquiring entity. Accordingly, the aggregate value of the consideration paid by eHealth to complete the acquisition was allocated to the assets acquired and liabilities assumed from GoMedigap based upon their estimated fair values on the closing date of the acquisition. The acquisition consideration has been allocated to tangible and intangible assets acquired and liabilities assumed based on estimates of their fair value. The acquisition consideration allocation may result in an adjustment if additional information which existed as of the acquisition date, but was unknown to the Company at that time, becomes known to the Company during the remainder of the measurement period (up to one year from the acquisition date). While management believes that its estimates and assumptions underlying the valuations are reasonable, different estimates and assumptions could result in different valuations assigned to the individual assets acquired and liabilities assumed, and the resulting amount of goodwill.
eHEALTH, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF DECEMBER 31, 2017
(in thousands)
|
| | | | | | | | | | | | | | | |
| ASSETS | eHealth
Historical * | | GoMedigap
Historical** | | Pro Forma Acquisition Adjustments | | Pro Forma Combined |
| Current assets: | | | | | | | |
| Cash and cash equivalents |
| $40,293 |
| |
| $71 |
| |
| ($15,000 | ) | (1) |
| $25,364 |
|
| Accounts receivable | 1,475 |
| | — |
| | | | 1,475 |
|
| Commissions receivable, current | 8,419 |
| | — |
| | 4,371 |
| (2) | 12,790 |
|
| Prepaid expenses and other current assets | 4,845 |
| | 11 |
| | | | 4,856 |
|
| Total current assets | 55,032 |
| | 82 |
| |
|
| | 44,485 |
|
| Property and equipment, net | 4,705 |
| | 174 |
| | | | 4,879 |
|
| Other assets | 7,317 |
| | — |
| | | | 7,317 |
|
| Commissions receivable, noncurrent | — |
| | — |
| | 11,103 |
| (2) | 11,103 |
|
| Intangible assets, net | 7,540 |
| | — |
| | 6,800 |
| (3) | 14,340 |
|
| Goodwill | 14,096 |
| | — |
| | 26,138 |
| (4) | 40,234 |
|
| Total assets |
| $88,690 |
| |
| $256 |
| |
|
| |
| $122,358 |
|
| LIABILITIES AND EQUITY | | | | | | | |
| Current liabilities: | | | | | | | |
| Accounts payable |
| $3,246 |
| |
| $110 |
| | | |
| $3,356 |
|
| Accrued compensation and benefits | 15,498 |
| | 132 |
| | | | 15,630 |
|
| Accrued marketing expenses | 4,088 |
| | — |
| | | | 4,088 |
|
| Deferred revenue | 385 |
| | — |
| | | | 385 |
|
| Other current liabilities | 3,430 |
| | 131 |
| | | | 3,561 |
|
| Earn-out liability, current | — |
| | — |
| | 14,580 |
| (5) | 14,580 |
|
| Total current liabilities | 26,647 |
| | 373 |
| |
|
| | 41,600 |
|
| Earn-out liability, non-current | — |
| | — |
| | 13,120 |
| (5) | 13,120 |
|
| Non-current liabilities | 900 |
| | — |
| | | | 900 |
|
| Stockholders’ equity: | | | | | | | |
| Common stock | 30 |
| | — |
| | | | 30 |
|
| Additional paid-in capital | 281,706 |
| | — |
| | 5,595 |
| (6) | 287,301 |
|
| Treasury stock | (199,998) |
| | — |
| | | | (199,998) |
|
| Accumulated other comprehensive income | 201 |
| | — |
| | | | 201 |
|
| Accumulated deficit | (20,796) |
| | (117) |
| | 117 |
| (6) | (20,796) |
|
| Total stockholders' equity | 61,143 |
| | (117) |
| |
|
| | 66,738 |
|
| Total liabilities and equity |
| $88,690 |
| |
| $256 |
| |
|
| |
| $122,358 |
|
See accompanying Notes to the Unaudited Pro Forma Condensed Combined Financial Information
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| * | | As presented in eHealth's annual report on Form 10-K for the year ended December 31, 2017. |
| ** | | Per GoMedigap’s unaudited historical balance sheet as of January 22, 2018.
|
| | | |
| Adjustments to the Unaudited Pro Forma Condensed Combined Balance Sheet: |
| (1) | | To recognize the $15.0 million cash portion of purchase consideration. |
| (2) | | To recognize the estimated fair value of commissions we expect to collect from Medicare Supplement health insurance plan members, and to a lesser extent dental, vision and hearing plan members, acquired from GoMedigap. The receivable was based on a number assumptions including, but not limited to, estimating member churn rates, estimating expected future commission amounts to be received per member based on product type, carrier and the effective date of the policy and applying an appropriate discount rate. |
| (3) | | To recognize the estimated fair value of acquired intangible assets. |
| (4) | | To recognize goodwill. |
| (5) | | To recognize the fair value of the Earn-out Liability. |
| (6) | | To eliminate the historical additional paid-in capital and retained earnings of GoMediGap and to recognize the fair value of the 294,637 shares of eHealth common stock (par value of $0.001) issued as part of the purchase consideration. The fair value of the eHealth common stock was based on its closing price of $18.99 as reported on the NASDAQ on January 22, 2018. |
eHEALTH, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2017
(in thousands, except per share amounts)
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| | | | | | | | | | | | | | | |
| | eHealth
Historical* | | GoMedigap
Historical** | | Pro Forma Adjustments | | Pro Forma Combined |
| Revenue: | | | | | | | |
| Commission | $ | 158,424 |
| | $ | 7,512 |
| | $ | (22 | ) | (8) | $ | 165,914 |
|
| Other | 13,931 |
| | — |
| | — |
| | 13,931 |
|
| Total revenue | 172,355 |
| | 7,512 |
| | (22 | ) | | 179,845 |
|
| Operating costs and expenses: | | | | | | | |
| Cost of revenue | 2,273 |
| | — |
| | (22 | ) | (8) | 2,251 |
|
| Marketing and advertising | 65,874 |
| | 2,018 |
| | — |
| | 67,892 |
|
| Customer care and enrollment | 59,183 |
| | 3,091 |
| | 1,073 |
| (9) | 63,347 |
|
| Technology and content | 32,889 |
| | 280 |
| | — |
| | 33,169 |
|
| General and administrative | 39,969 |
| | 562 |
| | — |
| | 40,531 |
|
| Acquisition costs | 621 |
| | — |
| | (621 | ) | (10) | — |
|
| Amortization of intangible assets | 1,040 |
| | — |
| | 1,203 |
| (11) | 2,243 |
|
| Total operating costs and expenses | 201,849 |
| | 5,951 |
| | 1,633 |
| | 209,433 |
|
| Income (loss) from operations | (29,494 | ) | | 1,561 |
| | (1,655 | ) | | (29,588 | ) |
| Other income (expense), net | 327 |
| | 6 |
| | — |
| | 333 |
|
| Income (loss) before (benefit) provision from income taxes | (29,167 | ) | | 1,567 |
| | (1,655 | ) | | (29,255 | ) |
| Provision (benefit) for income taxes | (3,755 | ) | | 29 |
| | — |
| | (3,726 | ) |
| Net income (loss) | $ | (25,412 | ) | | $ | 1,538 |
| | $ | (1,655 | ) | | $ | (25,529 | ) |
| | | | | | | | |
| Net loss per share: | | | | | | | |
| Basic | $ | (1.37 | ) | | | | | | $ | (1.36 | ) |
| Diluted | $ | (1.37 | ) | | | | | | $ | (1.36 | ) |
| | | | | | | | |
| Weighted-average number of shares used in per share amounts: | | | | | | | |
| Basic | 18,512 |
| | | | 295 |
| (12) | 18,807 |
|
| Diluted | 18,512 |
| | | | 295 |
| (12) | 18,807 |
|
See accompanying Notes to the Unaudited Pro Forma Condensed Combined Financial Information
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| | |
| * | | As presented in eHealth's annual report on Form 10-K for the year ended December 31, 2017. |
| ** | | Per GoMedigap’s unaudited historical statement of operations for the year ended December 31, 2017.
|
| | | |
Adjustments to the Unaudited Pro Forma Condensed Combined Statement of Operations:
|
| (8) | | To eliminate intercompany revenue and expenses between eHealth and GoMedigap recognized during the year ended December 31, 2017. |
| (9) | | To recognize bonus expense for eligible GoMedigap employees, contingent upon continued employment, that will be paid out over two consecutive years (aggregate amount of $0.5 million and $1.6 million, respectively) following the close of the acquisition. |
| (10) | | To eliminate acquisition-related transaction costs incurred by eHealth during the year ended December 31, 2017.
|
| (11) | | To recognize the amortization of acquired intangible assets, assuming the acquisition occurred on January 1, 2017. |
| (12) | | To recognize the issuance of 294,637 eHealth common shares as part of the purchase consideration as if the acquisition had occurred on January 1, 2017 and such shares were outstanding during the year ended December 31, 2017.
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eHEALTH, INC.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRO FORMA PRESENTATION
The unaudited pro forma condensed combined balance sheet was prepared to reflect the transaction as of December 31, 2017. The unaudited pro forma condensed combined statement of operations combines the results of operations of eHealth and GoMedigap for the year ended December 31, 2017 as if the transaction had occurred on January 1, 2017. The unaudited pro forma condensed combined balance sheet was prepared utilizing GoMedigap’s historical balance sheet as of January 22, 2018. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2017 was prepared utilizing GoMedigap’s historical statement of operations for the year ended December 31, 2017.
The unaudited pro forma condensed combined financial statements have been prepared for illustrative purposes only and are not necessarily indicative of the consolidated financial position or results of operations in future periods or the results that actually would have been achieved had eHealth and GoMedigap been a combined company during the respective periods presented. These unaudited pro forma condensed combined financial statements should be read in conjunction with eHealth's historical consolidated financial statements and related notes included in its Annual Report on Form 10-K for the year ended December 31, 2017 filed with the Securities and Exchange Commission (the "SEC") on March 19, 2017.
eHealth expects to incur costs and realize benefits associated with integrating the operations of eHealth and GoMedigap. The unaudited pro forma combined financial statements do not reflect the costs of any integration activities or any benefits that may result from operating efficiencies or revenue synergies. Pro forma adjustments have been made to ensure the unaudited pro forma condensed combined statement of operations does not reflect any non-recurring charges directly related to the acquisition that the combined company may incur upon completion of the transaction.
NOTE 2 - ALLOCATION OF ACQUISITION CONSIDERATION
Estimated Purchase Consideration
The table below represents the total estimated purchase price consideration (in thousands):
|
| | | |
| Cash consideration, net of cash acquired |
| $15,000 |
|
Fair value of common stock issued 1 | 5,595 |
|
| Estimated fair value of earn-out liability | 27,700 |
|
| |
| $48,295 |
|
(1) The fair value of eHealth’s shares issued is based on its January 22, 2018 closing price per share of $18.99 as reported on the NASDAQ.
Allocation of Acquisition Consideration
The table below represents the preliminary allocation of purchase price to the identifiable assets acquired based on their estimated fair values, with the excess recognized as goodwill (in thousands):
eHEALTH, INC.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
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| | | |
| | Preliminary Allocation as of January 22, 2018 |
| Cash | $ | 71 |
|
| Commissions receivable, current | 4,371 |
|
| Prepaid expenses and other current assets | 11 |
|
| Commissions receivable, non-current | 11,103 |
|
| Property and equipment, net | 174 |
|
| Accounts payable | (110 | ) |
| Accrued compensation and benefits | (132 | ) |
| Other current liabilities | (131 | ) |
| Net tangible assets acquired | 15,357 |
|
| Intangible assets | 6,800 |
|
| Goodwill | 26,138 |
|
| Total intangible assets acquired | 32,938 |
|
| Total net assets acquired | $ | 48,295 |
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