On July 25, 2019 eHealth, Inc reported that Second Quarter 2019 Overview (Press release, eHealthInsurance, JUL 25, 2019, View Source [SID1234537768])
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Revenue for the second quarter of 2019 was $65.8 million, a 101% increase compared to $32.7 million for the second quarter of 2018.
GAAP net loss for the second quarter of 2019 was $5.8 million compared to net loss of $12.0 million for the second quarter of 2018.
Adjusted EBITDA was $0.8 million for the second quarter of 2019 compared to $(10.1) million for the second quarter of 2018.
Net cash used in operating activities for the second quarter of 2019 was $11.5 million compared to $0.3 million for the second quarter of 2018.
eHealth, Inc. (NASDAQ: EHTH), a leading private online health insurance exchange, announced today its financial results for the second quarter ended June 30, 2019.
Scott Flanders, chief executive officer of eHealth stated, "We delivered another strong quarter once again exceeding our expectations and building momentum in our Medicare business that has continued to scale rapidly accompanied by EBITDA margin expansion. Approved Medicare members grew 78% year-over-year, driving a 105% increase in Medicare revenue year-over-year and a significant increase in Medicare segment profit. Based on our performance to-date, access to expanded telesales capacity and continued progress in gaining greater effectiveness across our operations, we are increasing our 2019 revenue and Adjusted EBITDA guidance for the second time this year."
GAAP—Second Quarter of 2019 Results
Revenue—Revenue for the second quarter of 2019 totaled $65.8 million, a 101% increase compared to $32.7 million for the second quarter of 2018. Commission revenue for the second quarter of 2019 totaled $60.6 million, a 98% increase compared to $30.6 million for the second quarter of 2018. Other revenue for the second quarter of 2019 was $5.2 million, a 157% increase compared to $2.0 million for the second quarter of 2018.
Revenue from our Medicare segment was $52.3 million for the second quarter of 2019, a 105% increase compared to $25.5 million for the second quarter of 2018. Revenue from our Individual, Family and Small Business segment was $13.5 million for the second quarter of 2019, an 88% increase compared to $7.2 million for the second quarter of 2018.
Loss from Operations—Loss from operations for the second quarter of 2019 was $12.3 million compared to loss from operations of $16.9 million for the second quarter of 2018. Operating margin was (18.7)% for the second quarter of 2019 compared to (51.8)% for the second quarter of 2018.
Pre-tax Loss—Pre-tax loss for the second quarter of 2019 was $11.6 million compared to pre-tax loss of $16.6 million for the second quarter of 2018.
Benefit from Income Taxes—Benefit from income taxes for the second quarter of 2019 was $5.9 million compared to benefit from income taxes of $4.6 million for the second quarter of 2018.
Net Loss—Net loss for the second quarter of 2019 was $5.8 million, or $0.25 net loss per diluted share, compared to net loss of $12.0 million, or $0.63 net loss per diluted share, for the second quarter of 2018. Net loss for the second quarter of 2019 included a non-cash charge of $7.2 million related to an increase in fair value of the earnout liability assumed in connection with eHealth’s acquisition of GoMedigap. The increase was driven primarily by eHealth’s share price appreciation. The share price appreciation has increased the value of the equity-based portion of the earnout consideration owed to the former holders of GoMedigap equity interests.
Segment Profit (Loss)—Profit from our Medicare segment was $6.1 million for the second quarter of 2019, compared to a loss of $1.5 million for the second quarter of 2018. Profit from our Individual, Family and Small Business segment was $5.3 million for the second quarter of 2019, compared to a loss of $0.6 million for the second quarter of 2018.
Non-GAAP—Second Quarter of 2019 Results
Non-GAAP Operating Income (Loss) & Non-GAAP Net Income (Loss)—Non-GAAP operating income for the second quarter of 2019 was $0.1 million compared to non-GAAP operating loss of $10.7 million for the second quarter of 2018. Non-GAAP operating margin was 0.2% for the second quarter of 2019, compared to (32.8)% for the second quarter of 2018. Non-GAAP net income for the second quarter of 2019 was $2.3 million, or $0.10 non-GAAP net income per diluted share, compared to non-GAAP net loss of $7.5 million, or $0.40 non-GAAP net loss per diluted share, for the second quarter of 2018.
Non-GAAP operating income and non-GAAP operating margin for the second quarter of 2019 are calculated by excluding $4.7 million of stock-based compensation expense, $7.2 million of expense for the change in fair value of earnout liability related to our acquisition of GoMedigap, and $0.5 million of amortization of intangible assets from GAAP net operating loss and GAAP operating margin. Non-GAAP net income and non-GAAP net income per diluted share for the second quarter of 2019 are calculated by excluding $4.7 million of stock-based compensation expense, $7.2 million of expense for the change in fair value of earnout liability related to our acquisition of GoMedigap, $0.5 million of amortization of intangible assets and $4.4 million of the income tax effect of these non-GAAP adjustments from GAAP net loss and GAAP net loss per diluted share. Non-GAAP operating loss and non-GAAP operating margin for the second quarter of 2018 are calculated by excluding $3.1 million of stock-based compensation expense, $2.5 million expense for change in fair value of earnout liability related to our acquisition of GoMedigap, and $0.5 million of amortization of intangible assets from GAAP net operating loss and GAAP operating margin. Non-GAAP net loss and non-GAAP net loss per diluted share for the second quarter of 2018 are calculated by excluding $3.1 million of stock-based compensation expense, $2.5 million expense for change in fair value of earnout liability related to our acquisition of GoMedigap, $0.5 million of amortization of intangible assets, and $1.7 million of the income tax effect of these non-GAAP adjustments from GAAP net loss and GAAP net loss per diluted share.
Adjusted EBITDA—Adjusted EBITDA was $0.8 million for the second quarter of 2019 compared to $(10.1) million for the second quarter of 2018. Adjusted EBITDA is calculated by adding stock-based compensation, change in fair value of earnout liability related to our acquisition of GoMedigap, depreciation and amortization expense, acquisition costs, restructuring charges, amortization of intangible assets, other income, net and benefit from income taxes to GAAP net loss.
Submitted Applications, Approved Members and Estimated Membership
Submitted Applications—The number of submitted applications for all Medicare products, which includes Medicare Advantage, Medicare Supplement and Medicare Part D Prescription Drug Plans, was 56,488 in the second quarter of 2019, a 67% increase compared to 33,756 in the second quarter of 2018. The percentage of applications for Medicare Advantage and Medicare Supplement products submitted online through our platform increased from 9% for the second quarter of 2018 to 11% for the second quarter of 2019. The number of submitted applications for major medical Individual and Family plan products increased by 82% in the second quarter of 2019 to 4,271 compared to 2,346 in the second quarter of 2018.
Approved Members—The number of approved members for all Medicare products, which includes Medicare Advantage, Medicare Supplement and Medicare Part D Prescription Drug Plans, was 52,569 in the second quarter of 2019, a 78% increase compared to 29,502 in the second quarter of 2018. The number of approved members for major medical individual and family plan products increased by 15% in the second quarter of 2019 to 2,854 compared to 2,489 in the second quarter of 2018.
Estimated Membership—Total estimated membership as of June 30, 2019 was 967,697, a 10% increase compared to the 877,716 estimated members we reported as of June 30, 2018. Estimated Medicare membership as of June 30, 2019 was 521,262, a 32% increase compared to the 393,937 estimated members we reported as of June 30, 2018. Estimated major medical individual and family plan membership as of June 30, 2019 was 133,543, a 21% decrease compared to the 168,278 estimated members we reported as of June 30, 2018.
Cash—Second Quarter of 2019
Cash Flows—Net cash used in operating activities was $11.5 million for the second quarter of 2019 compared to net cash used in operating activities of $0.3 million for the second quarter of 2018.
GAAP—Year-to-Date Results
Revenue—Revenue for the six months ended June 30, 2019 totaled $134.5 million, a 78% increase compared to $75.7 million for the six months ended June 30, 2018. Commission revenue for the six months ended June 30, 2019 totaled $124.8 million, a 75% increase compared to $71.4 million for the six months ended June 30, 2018. Other revenue for the second quarter of 2019 was $9.7 million, a 122% increase compared to $4.4 million for the six months ended June 30, 2018.
Revenue from our Medicare segment was $107.2 million for the six months ended June 30, 2019, a 91% increase compared to $56.2 million for the six months ended June 30, 2018. Revenue from our Individual, Family and Small Business segment was $27.4 million for the six months ended June 30, 2019, a 40% increase compared to $19.5 million for the six months ended June 30, 2018.
Loss from Operations—Loss from operations for the six months ended June 30, 2019 was $21.5 million compared to loss from operations of $23.6 million for the six months ended June 30, 2018. Operating margin was (16.0)% for the second quarter of 2019 compared to (31.2)% for the six months ended June 30, 2018.
Pre-tax Loss—Pre-tax loss for the six months ended June 30, 2019 was $20.2 million compared to pre-tax loss of $23.2 million for the six months ended June 30, 2018.
Benefit from Income Taxes—Benefit from income taxes for the six months ended June 30, 2019 was $9.3 million compared to benefit from income taxes of $6.3 million for the six months ended June 30, 2018.
Net Loss—Net loss for the six months ended June 30, 2019 was $10.9 million, or $0.48 net loss per diluted share, compared to net loss of $16.9 million, or $0.89 net loss per diluted share, for the six months ended June 30, 2018. Net loss for the six months ended June 30, 2019 included a non-cash charge of $20.5 million related to an increase in fair value of the earnout liability assumed in connection with eHealth’s acquisition of GoMedigap. The increase was driven primarily by eHealth’s share price appreciation. The share price appreciation has increased the value of the equity-based portion of the earnout consideration owed to the former holders of GoMedigap equity interests.
Segment Profit—Profit from our Medicare segment was $16.9 million for the six months ended June 30, 2019, an 891% increase compared to profit of $1.7 million for the six months ended June 30, 2018. Profit from our Individual, Family and Small Business segment was $11.3 million for the six months ended June 30, 2019, a 293% increase compared to profit of $2.9 million for the six months ended June 30, 2018.
Non-GAAP—Year-to-Date Results
Non-GAAP Operating Income (Loss) & Non-GAAP Net Income (Loss)—Non-GAAP operating income for the six months ended June 30, 2019 was $8.0 million compared to non-GAAP operating loss of $12.5 million for the six months ended June 30, 2018. Non-GAAP operating margin was 6.0% for the six months ended June 30, 2019, compared to (16.5)% for the six months ended June 30, 2018. Non-GAAP net income for the six months ended June 30, 2019 was $9.5 million, or $0.42 non-GAAP net income per diluted share, compared to non-GAAP net loss of $8.9 million, or $0.47 non-GAAP net loss per diluted share, for the six months ended June 30, 2018.
Non-GAAP operating income and non-GAAP operating margin for the six months ended June 30, 2019 are calculated by excluding $7.9 million of stock-based compensation expense, $20.5 million of expense for the change in fair value of earnout liability related to our acquisition of GoMedigap, and $1.1 million of amortization of intangible assets from GAAP operating income and GAAP operating margin. Non-GAAP net income and non-GAAP net income per diluted share for the six months ended June 30, 2019 are calculated by excluding $7.9 million of stock-based compensation expense, $20.5 million of expense for the change in fair value of earnout liability related to our acquisition of GoMedigap, $1.1 million of amortization of intangible assets and $9.1 million of the income tax effect of these non-GAAP adjustments from GAAP net loss and GAAP net loss per share. Non-GAAP operating loss and non-GAAP operating margin for the six months ended June 30, 2018 are calculated by excluding $5.7 million of stock-based compensation expense, $2.5 million change in fair value of earnout liability, $1.9 million of restructuring charges, $1.0 million of amortization of intangible assets and $0.1 million of acquisition costs related to our acquisition of GoMedigap from GAAP net operating loss and GAAP operating margin. Non-GAAP net loss and non-GAAP net loss per diluted share for the six months ended June 30, 2018 are calculated by excluding $5.7 million of stock-based compensation expense, $2.5 million change in fair value of earnout liability, $1.9 million of restructuring charges, $1.0 million of amortization of intangible assets, $0.1 million of acquisition costs related to our acquisition of GoMedigap, and $3.1 million of the income tax effect of these non-GAAP adjustments from GAAP net loss and GAAP net loss per diluted share.
Adjusted EBITDA—Adjusted EBITDA was $9.4 million for the six months ended June 30, 2019 compared to $(11.3) million for the six months ended June 30, 2018. Adjusted EBITDA is calculated by adding stock-based compensation, change in fair value of earnout liability related to our acquisition of GoMedigap, depreciation and amortization expense, acquisition costs, restructuring charges, amortization of intangible assets, other income, net and benefit from income taxes to GAAP net loss.
Submitted Applications and Approved Members
Submitted Applications—The number of submitted applications for all Medicare products, which includes Medicare Advantage, Medicare Supplement and Medicare Part D Prescription Drug Plans was 120,334 applications in the six months ended June 30, 2019, a 75% increase compared to 68,785 in the six months ended June 30, 2018. The percentage of applications for Medicare Advantage and Medicare Supplement products submitted online through our platform increased from 8% for the six months ended June 30, 2018 to 12% for the six months ended June 30, 2019. The number of submitted applications for major medical individual and family plan products decreased by 16% in the six months ended June 30, 2019 to 7,498 compared to 8,916 in the six months ended June 30, 2018.
Approved Members—The number of approved members for all Medicare products, which includes Medicare Advantage, Medicare Supplement and Medicare Part D Prescription Drug Plans, was 110,468 in the six months ended June 30, 2019, a 73% increase compared to 63,840 in the six months ended June 30, 2018. The number of approved members for major medical individual and family plan products decreased by 45% in the second quarter of 2019 to 14,452 compared to 26,388 in the six months ended June 30, 2018.
Cash—Year-to-Date Results
Cash Flows—Net cash provided by operating activities was $1.2 million for the six months ended June 30, 2019 compared to net cash provided by operating activities of $10.4 million for the six months ended June 30, 2018.
2019 Guidance
eHealth is revising its guidance for the full year ending December 31, 2019 based on information available as of July 25, 2019. These expectations are forward-looking statements and eHealth assumes no obligation to update these statements. Actual results may be materially different and are affected by the risk factors and uncertainties identified in this press release and in eHealth’s annual and quarterly filings with the Securities and Exchange Commission.
The following guidance is for the full year ending December 31, 2019:
Total revenue is expected to be in the range of $365 million to $385 million, compared with previous guidance of $315 million to $335 million. Revenue from the Medicare segment is expected to be in the range of $318 million to $333 million, compared with previous guidance of $281 million to $297 million. Revenue from the Individual, Family and Small Business segment is expected to be in the range of $47 million to $52 million, compared with previous guidance of $34 million to $38 million.
Assuming the impact of the non-cash charge related to an increase in fair value of the earnout liability in connection with eHealth’s acquisition of GoMedigap remains at $0.82 per diluted share, GAAP net income per diluted share for 2019 is expected to be in the range of $0.62 to $0.82 per share, compared with previous guidance of $0.60 to $0.79 per share.
Non-GAAP net income per diluted share(a) is expected to be in the range of $1.77 to $1.97 per share, compared with previous guidance of $1.54 to $1.73 per share.
Assuming the impact of the non-cash charge related to an increase in fair value of the earnout liability in connection with eHealth’s acquisition of GoMedigap remains at $20.5 million, we expect GAAP net income for 2019 to be in the range of $15.5 million to $20.5 million, compared with previous guidance of $15.0 million to $20.0 million.
Adjusted EBITDA(b) is expected to be in the range of $65 million to $70 million, compared with previous guidance of $55 million to $60 million.
2019 Medicare segment profit(c) is expected to be in the range of $96 million to $99 million, compared with previous guidance of $90 million to $94 million, and Individual, Family and Small Business segment profit is expected to be in the range of $10 million to $12 million, compared with previous guidance of breakeven to $1 million.
Corporate(d) shared service expenses, excluding stock-based compensation and depreciation and amortization expense, is expected to be approximately $41 million, compared with previous guidance of $35 million.
Cash used in operations is expected to be in the range of $50 million to $55 million, compared with previous guidance of $20 million to $25 million, and cash used for capital expenditures is expected to be $15 million to $17 million, compared with previous guidance of $13 million to $14 million.
(a) Non-GAAP net income per diluted share is calculated by adding stock-based compensation expense per diluted share, change in fair value of earnout liability per diluted share, intangible asset amortization expense per diluted share and the income tax effect of these non-GAAP adjustments to GAAP net income per diluted share.
(b) Adjusted EBITDA is calculated by adding stock-based compensation, change in fair value of earnout liability, depreciation and amortization expense, amortization of intangible assets, other income, net and provision for income taxes to GAAP net income.
(c) Segment profit is calculated as revenue for the applicable segment less Marketing and Advertising, Customer Care and Enrollment, Technology and Content and General and Administrative operating expenses, excluding stock-based compensation, change in fair value of earnout liability, depreciation and amortization expense and amortization of intangible assets, that are directly attributable to the applicable segment and other indirect Marketing and Advertising, Customer Care and Enrollment and Technology and Content operating expenses, excluding stock-based compensation, depreciation and amortization expense and amortization of intangible assets, allocated to the applicable segment based on usage.
(d) Corporate consists of other indirect General and Administrative operating expenses, excluding stock-based compensation and depreciation and amortization expense, which are managed in a corporate shared services environment and, since they are not the responsibility of segment operating management, are not allocated to the reportable segments.
Webcast and Conference Call Information
A Webcast and conference call will be held today, Thursday, July 25, 2019 at 5:00 p.m. Eastern / 2:00 p.m. Pacific Time. The Webcast will be available live on the Investor Relations section on eHealth’s website at View Source Individuals interested in listening to the conference call may do so by dialing (877) 930-8066 for domestic callers and (253) 336-8042 for international callers. The participant passcode is 6597788. A telephone replay will be available two hours following the conclusion of the call for a period of seven days and can be accessed by dialing (855) 859-2056 for domestic callers and (404) 537-3406 for international callers. The call ID for the replay is 6597788. The live and archived webcast of the call will also be available on eHealth’s website at View Source under the Investor Relations section.