On October 24, 2019 eHealth, Inc. reported Third Quarter 2019 Results (Press release, eHealthInsurance, OCT 24, 2019, View Source [SID1234542510]).
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Third Quarter 2019 Overview
Revenue for the third quarter of 2019 was $69.9 million, a 72% increase compared to $40.8 million for the third quarter of 2018.
GAAP net loss for the third quarter of 2019 was $11.0 million compared to net loss of $9.0 million for the third quarter of 2018.
Adjusted EBITDA was $(18.8) million for the third quarter of 2019 compared to $(6.9) million for the third quarter of 2018.
Net cash used in operating activities for the third quarter of 2019 was $15.9 million compared to $4.9 million for the third quarter of 2018.
eHealth, Inc. (NASDAQ: EHTH), a leading private online health insurance exchange, announces today its financial results for the third quarter ended September 30, 2019.
Scott Flanders, chief executive officer of eHealth stated, "Strong momentum in our business continued with another quarter of meaningful outperformance against our expectations. Our third quarter results reflect strong revenue and enrollment growth in our Medicare and Individual & Family Plan businesses and a significant investment in our telesales capacity ahead of the Medicare Annual Enrollment Period (AEP). We have entered this AEP from a position of strength, allowing us to recently guide up to the high end of our 2019 revenue and adjusted EBITDA forecast based on the quality and scale of call center resources in place, the acceleration of our online enrollments and strength of consumer demand."
GAAP — Third Quarter of 2019 Results
Revenue — Revenue for the third quarter of 2019 totaled $69.9 million, a 72% increase compared to $40.8 million for the third quarter of 2018. Commission revenue for the third quarter of 2019 totaled $59.8 million, a 78% increase compared to $33.6 million for the third quarter of 2018. Other revenue for the third quarter of 2019 was $10.2 million, a 42% increase compared to $7.1 million for the third quarter of 2018.
Revenue from our Medicare segment was $57.2 million for the third quarter of 2019, a 75% increase compared to $32.7 million for the third quarter of 2018. Revenue from our Individual, Family and Small Business segment was $12.7 million for the third quarter of 2019, a 59% increase compared to $8.0 million for the third quarter of 2018.
Loss from Operations — Loss from operations for the third quarter of 2019 was $20.2 million compared to loss from operations of $15.5 million for the third quarter of 2018. Operating margin was (29)% for the third quarter of 2019 compared to (38)% for the third quarter of 2018.
Pre-tax Loss — Pre-tax loss for the third quarter of 2019 was $19.7 million compared to pre-tax loss of $15.2 million for the third quarter of 2018.
Benefit from Income Taxes — Benefit from income taxes for the third quarter of 2019 was $8.6 million compared to benefit from income taxes of $6.2 million for the third quarter of 2018.
Net Loss — Net loss for the third quarter of 2019 was $11.0 million, or $0.47 net loss per diluted share, compared to net loss of $9.0 million, or $0.47 net loss per diluted share, for the third quarter of 2018. Net loss for the third quarter of 2019 included a non-cash gain of $5.4 million related to a decrease in fair value of the earnout liability assumed in connection with eHealth’s acquisition of GoMedigap. The decrease was driven primarily by eHealth’s share price decline during the quarter. The share price depreciation has decreased the value of the equity-based portion of the earnout consideration owed to the former holders of GoMedigap equity interests.
Segment Profit (Loss) — Loss from our Medicare segment was $11.0 million for the third quarter of 2019, compared to a profit of $0.5 million for the third quarter of 2018. Profit from our Individual, Family and Small Business segment was $3.8 million for the third quarter of 2019, compared to a loss of $0.6 million for the third quarter of 2018.
Non-GAAP — Third Quarter of 2019 Results
Non-GAAP Operating Loss & Non-GAAP Net Loss — Non-GAAP operating loss for the third quarter of 2019 was $19.6 million, compared to non-GAAP operating loss of $7.6 million for the third quarter of 2018. Non-GAAP operating margin was (28)% for the third quarter of 2019, compared to (19)% for the third quarter of 2018. Non-GAAP net loss for the third quarter of 2019 was $10.1 million, or $0.43 non-GAAP net loss per diluted share, compared to non-GAAP net loss of $4.2 million, or $0.22 non-GAAP net loss per diluted share, for the third quarter of 2018.
Non-GAAP operating loss and non-GAAP operating margin for the third quarter of 2019 are calculated by excluding $5.5 million of stock-based compensation expense, a $5.4 million gain related to 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 loss and non-GAAP net loss per diluted share for the third quarter of 2019 are calculated by excluding $5.5 million of stock-based compensation expense, $5.4 million of gain related to the change in fair value of earnout liability related to our acquisition of GoMedigap, $0.5 million of amortization of intangible assets and $0.3 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 third quarter of 2018 are calculated by excluding $3.5 million of stock-based compensation expense, $3.8 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 third quarter of 2018 are calculated by excluding $3.5 million of stock-based compensation expense, $3.8 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 $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 $(18.8) million for the third quarter of 2019 compared to $(6.9) million for the third 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 56,436 in the third quarter of 2019, a 66% increase compared to 33,902 in the third quarter of 2018. The percentage of applications for Medicare Advantage and Medicare Supplement products submitted online through our platform increased from 9% for the third quarter of 2018 to 21% for the third quarter of 2019. The number of submitted applications for major medical Individual and Family plan products increased by 163% in the third quarter of 2019 to 4,379 compared to 1,662 in the third 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 51,214 in the third quarter of 2019, a 70% increase compared to 30,160 in the third quarter of 2018. The number of approved members for major medical individual and family plan products increased by 76% in the third quarter of 2019 to 3,187 compared to 1,810 in the third quarter of 2018.
Estimated Membership — Total estimated membership as of September 30, 2019 was 991,204, a 12% increase compared to the 887,808 estimated members we reported as of September 30, 2018. Estimated Medicare membership as of September 30, 2019 was 551,068, a 34% increase compared to the 409,888 estimated members we reported as of September 30, 2018. Estimated major medical individual and family plan membership as of September 30, 2019 was 131,058, a 19% decrease compared to the 161,371 estimated members we reported as of September 30, 2018.
Cash — Third Quarter of 2019
Cash Flows — Net cash used in operating activities was $15.9 million for the third quarter of 2019, compared to net cash used in operating activities of $4.9 million for the third quarter of 2018.
GAAP — Year-to-Date Results
Revenue — Revenue for the nine months ended September 30, 2019 totaled $204.5 million, a 76% increase compared to $116.5 million for the nine months ended September 30, 2018. Commission revenue for the nine months ended September 30, 2019 totaled $184.6 million, a 76% increase compared to $105.0 million for the nine months ended September 30, 2018. Other revenue for the nine months ended September 30, 2019 was $19.9 million, a 72% increase compared to $11.5 million for the nine months ended September 30, 2018.
Revenue from our Medicare segment was $164.4 million for the nine months ended September 30, 2019, an 85% increase compared to $89.0 million for the nine months ended September 30, 2018. Revenue from our Individual, Family and Small Business segment was $40.1 million for the nine months ended September 30, 2019, a 46% increase compared to $27.5 million for the nine months ended September 30, 2018.
Loss from Operations — Loss from operations for the nine months ended September 30, 2019 was $41.7 million compared to loss from operations of $39.1 million for the nine months ended September 30, 2018. Operating margin was (20)% for the nine months ended September 30, 2019 compared to (34)% for the nine months ended September 30, 2018.
Pre-tax Loss — Pre-tax loss for the nine months ended September 30, 2019 was $39.9 million compared to pre-tax loss of $38.3 million for the nine months ended September 30, 2018.
Benefit from Income Taxes — Benefit from income taxes for the nine months ended September 30, 2019 was $18.0 million compared to benefit from income taxes of $12.5 million for the nine months ended September 30, 2018.
Net Loss — Net loss for the nine months ended September 30, 2019 was $21.9 million, or $0.96 net loss per diluted share, compared to net loss of $25.8 million, or $1.36 net loss per diluted share, for the nine months ended September 30, 2018. Net loss for the nine months ended September 30, 2019 included a non-cash charge of $15.1 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 $5.9 million for the nine months ended September 30, 2019, a 172% increase compared to profit of $2.2 million for the nine months ended September 30, 2018. Profit from our Individual, Family and Small Business segment was $15.0 million for the nine months ended September 30, 2019, a 556% increase compared to profit of $2.3 million for the nine months ended September 30, 2018.
Non-GAAP — Year-to-Date Results
Non-GAAP Operating Loss & Non-GAAP Net Loss — Non-GAAP operating loss for the nine months ended September 30, 2019 was $11.6 million compared to non-GAAP operating loss of $20.1 million for the nine months ended September 30, 2018. Non-GAAP operating margin was (6)% for the nine months ended September 30, 2019, compared to (17)% for the nine months ended September 30, 2018. Non-GAAP net loss for the nine months ended September 30, 2019 was $0.6 million, or $0.02 non-GAAP net loss per diluted share, compared to non-GAAP net loss of $13.0 million, or $0.68 non-GAAP net loss per diluted share, for the nine months ended September 30, 2018.
Non-GAAP operating loss and non-GAAP operating margin for the nine months ended September 30, 2019 are calculated by excluding $13.4 million of stock-based compensation expense, $15.1 million of expense for the change in fair value of earnout liability related to our acquisition of GoMedigap, and $1.6 million of amortization of intangible assets from GAAP operating loss and GAAP operating margin. Non-GAAP net loss and non-GAAP net loss per diluted share for the nine months ended September 30, 2019 are calculated by excluding $13.4 million of stock-based compensation expense, $15.1 million of expense for the change in fair value of earnout liability related to our acquisition of GoMedigap, $1.6 million of amortization of intangible assets and $8.8 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 nine months ended September 30, 2018 are calculated by excluding $9.2 million of stock-based compensation expense, $6.3 million of expense for change in fair value of earnout liability, $1.9 million of restructuring charges, $1.5 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 nine months ended September 30, 2018 are calculated by excluding $9.2 million of stock-based compensation expense, $6.3 million of expense for change in fair value of earnout liability, $1.9 million of restructuring charges, $1.5 million of amortization of intangible assets, $0.1 million of acquisition costs related to our acquisition of GoMedigap, and $6.2 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 nine months ended September 30, 2019 compared to $(18.2) million for the nine months ended September 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 176,770 applications in the nine months ended September 30, 2019, a 72% increase compared to 102,687 in the nine months ended September 30, 2018. The percentage of applications for Medicare Advantage and Medicare Supplement products submitted online through our platform increased from 8% for the nine months ended September 30, 2018 to 15% for the nine months ended September 30, 2019. The number of submitted applications for major medical individual and family plan products increased by 12% in the nine months ended September 30, 2019 to 11,877 compared to 10,578 in the nine months ended September 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 161,682 in the nine months ended September 30, 2019, a 72% increase compared to 93,999 in the nine months ended September 30, 2018. The number of approved members for major medical individual and family plan products decreased by 37% in the nine months ended September 30, 2019 to 17,639 compared to 28,198 in the nine months ended September 30, 2018.
Cash — Year-to-Date Results
Cash Flows — Net cash used in operating activities was $14.7 million for the nine months ended September 30, 2019 compared to net cash provided by operating activities of $5.5 million for the nine months ended September 30, 2018.
2019 Guidance
Based on information available as of October 24, 2019, eHealth is reaffirming its guidance for total revenue and adjusted EBITDA for the full year ending December 31, 2019, and updating its guidance for certain GAAP and non-GAAP measures for the full year ending December 31, 2019 due to the third quarter of 2019 reduction in fair value of the earnout liability assumed in connection with eHealth’s acquisition of GoMedigap and a change in income tax rate. 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:
Consistent with our prior guidance,
Total revenue is expected to be in the range of $365.0 million to $385.0 million. Revenue from the Medicare segment is expected to be in the range of $318.0 million to $333.0 million. Revenue from the Individual, Family and Small Business segment is expected to be in the range of $47.0 million to $52.0 million.
Adjusted EBITDA(a) is expected to be in the range of $65.0 million to $70.0 million.
2019 Medicare segment profit(b) is expected to be in the range of $96.0 million to $99.0 million, and Individual, Family and Small Business segment profit is expected to be in the range of $10.0 million to $12.0 million.
Corporate(c) shared service expenses, excluding stock-based compensation and depreciation and amortization expense, is expected to be approximately $41.0 million.
Cash used in operations is expected to be in the range of $50.0 million to $55.0 million, and cash used for capital expenditures is expected to be $15.0 million to $17.0 million.
Updated guidance for the full year ending December 31, 2019 due to the third quarter of 2019 reduction in fair value of the earnout liability assumed in connection with our acquisition of GoMedigap during the third quarter of 2019 and a change in income tax rate:
Assuming the impact of the non-cash charge related to the fair value of the earnout liability in connection with our acquisition of GoMedigap remains at $15.1 million, we expect GAAP net income for 2019 to be in the range of $20.9 million to $25.9 million.
Assuming the impact of the non-cash charge related to the fair value of the earnout liability in connection with our acquisition of GoMedigap remains at $0.60 per diluted share, GAAP net income per diluted share for 2019 is expected to be in the range of $0.83 to $1.03 per share.
Assuming the impact of the non-cash charge related to the fair value of the earnout liability in connection with our acquisition of GoMedigap remains at $0.60 per diluted share, non-GAAP net income per diluted share(d) is expected to be in the range of $1.86 to $2.06 per share.
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.
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.
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.
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.
Webcast and Conference Call Information
A Webcast and conference call will be held today, Thursday, October 24, 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 6089464. 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 6089464. The live and archived webcast of the call will also be available on eHealth’s website at View Source under the Investor Relations section.