On January 23, 2020 eHealth, Inc. (NASDAQ: EHTH), a leading private online health insurance exchange in the United States, reported preliminary, unaudited financial results and select operating metrics for the fourth quarter and fiscal year ended December 31, 2019 (Press release, eHealthInsurance, JAN 23, 2020, View Source [SID1234553473]).
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"I am proud of our achievements in 2019. After raising our guidance twice in the past year, we significantly exceeded our financial and operating targets driven by consistently strong execution throughout the year. 2019 culminated with an exceptional performance by our team during the fourth quarter Medicare annual enrollment period. Our marketing and business development organizations drove record consumer demand to the eHealth platform allowing us to grow fourth quarter approved Medicare members in excess of 85%," commented Scott Flanders, chief executive officer of eHealth. "We remain excited about the Medicare market opportunity and significant growth potential ahead of us and are looking forward to sharing our outlook for 2020 as part of our fourth quarter earnings release next month."
The preliminary, unaudited financial results and selected operating metrics included in this press release are based on information available as of January 23, 2020 and management’s initial review of operations for the fourth quarter and year ended December 31, 2019. They remain subject to change based on management’s ongoing review of the company’s fourth-quarter and full year results and are forward-looking statements. eHealth assumes no obligation to update these statements. The 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.
As part of the year-end closing process, the company is enhancing the manner in which it estimates residual or "tail" revenue from the company’s Medicare Advantage members approved in prior periods. Since the adoption of Accounting Standards Codification (ASC) 606, the company’s cash collections for Medicare Advantage policies have in general exceeded initial lifetime value estimates. This dynamic has contributed in past quarters to the recognition of increasing amounts of residual or "tail" revenue from Medicare members approved in prior periods. Our preliminary results exclude the positive impact of changes in estimates for expected collections for Medicare Advantage members approved since our adoption of ASC 606 through the third quarter of 2019. The company plans to include the results of any such changes in estimates as well as full financial and operating results as part of its fourth quarter and full year 2019 earnings release.
Fourth Quarter and Fiscal Year 2019 Preliminary Results
Excluding any positive impact from the changes in estimates to residual revenue for Medicare Advantage members approved since our adoption of ASC 606 through the third quarter of 2019, we expect the following fourth quarter and fiscal year 2019 results:
Revenue for the fourth quarter of 2019 is expected to be in the range of $257.5 to $259.5 million with expected fourth quarter revenue from the Medicare segment in the range of $239.0 to $240.5 million.
GAAP net income for the fourth quarter of 2019 is expected to be in the range of $53.0 to $55.0 million. Adjusted EBITDA(a) for the fourth quarter of 2019 is expected to be in the range of $98.5 to $100.5 million.
Revenue for the year ended December 31, 2019 is expected to be in the range of $462.0 to $464.0 million as compared to the company’s guidance of $365.0 to $385.0 million. Revenue from the Medicare segment for the full year 2019 is expected to be in the range of $403.5 to $405.0 million as compared to the company’s guidance of $318.0 to $333.0 million.
GAAP net income for the year ended December 31, 2019 is expected to be in the range of $31.0 to $33.0 million as compared to the company’s guidance of $20.9 to $25.9 million.
Adjusted EBITDA(a) for the year ended December 31, 2019 is expected to be in the range of $89.0 to $91.0 million as compared to the company’s guidance of $65.0 to $70.0 million.
Adjusted EBITDA is calculated by adding stock-based compensation expense, depreciation and amortization expense, change in fair value of earnout liability, amortization of intangible assets, other income, net of expenses and provision for income taxes to GAAP net income. See "Non-GAAP Financial Information Reconciliations."
Approved Members
The number of approved members for all Medicare products, which includes Medicare Advantage, Medicare Supplement and Medicare Part D Prescription Drug Plans, grew 88% during the fourth quarter of 2019 compared to the fourth quarter of 2018. The number of approved members for Medicare Advantage products grew 100% over the same time period. For the full year 2019, the number of approved members for all Medicare products grew 81% compared to the full year 2018 with approved members for Medicare Advantage products growing 88% over the same time period.
The number of approved members for major medical individual and family plan (IFP) products grew 1% during the fourth quarter of 2019 compared to the fourth quarter a year ago. For the full year 2019, the number of approved members for IFP products declined 25% compared to 2018. The decline in approved IFP members reflects weaker than expected enrollment activity in the overall individual and family health insurance market as well as our continuing emphasis on the Medicare business in allocating our marketing resources.