MOUNTAIN VIEW, Calif., Nov 09, 2006 (BUSINESS WIRE) -- eHealth, Inc. (NASDAQ:EHTH):
Third Quarter Highlights
-- Revenue of $16.7 million, up 54% year over year
-- Operating income of $2.7 million, or 16% of revenue for the
quarter
-- Net income of $2.7 million, or $0.14 per share on a fully
diluted basis
-- Operating cash flows of $2.8 million, up 462% year over year
-- Completed initial public offering during October 2006,
resulting in net proceeds before offering expenses of
approximately $74.8 million
eHealth, Inc. (NASDAQ:EHTH), the leading online source of health
insurance for individuals, families and small businesses, today
announced its financial results for the third quarter of 2006.
"Today marks our first earnings report as a public company, and I
feel that our third quarter results are solid and balanced," said Gary
Lauer, chief executive officer of eHealth. "Both revenue and
profitability have increased, and demand through all our marketing
channels was significant. More importantly, we see increasing
visibility and recognition of the individual health insurance
category, which eHealth is uniquely positioned to address."
Third Quarter Results
For the third quarter ended September 30, 2006, revenue totaled
$16.7 million, representing a 54% increase over revenue of $10.8
million for the third quarter of 2005. Revenue for the third quarter
of 2006 included the recognition of $0.7 million of revenue that had
accumulated over the prior six quarters through June 30, 2006 and was
previously deferred. Excluding this amount, non-GAAP revenue for the
third quarter of 2006 was $15.9 million, which represented a 47%
increase over revenue for the third quarter of 2005. The increase in
revenue was driven primarily by growth in commission revenue received
from health insurance carriers.
Operating income for the third quarter of 2006 was $2.7 million,
compared to an operating loss of $0.5 million for the same quarter of
2005. Excluding the $0.7 million of previously deferred revenue,
non-GAAP operating income was $2.0 million for the third quarter of
2006.
Net income for the third quarter of 2006 was $2.7 million, or
$0.14 per share on a fully diluted basis. Excluding the $0.7 million
of previously deferred revenue, non-GAAP net income was $2.0 million,
or $0.11 per fully diluted share. This compares to a net loss of $0.4
million, or ($0.09) per fully diluted share, for the third quarter of
2005.
During the third quarter of 2006, cash flow from operations
increased to $2.8 million, compared to $0.5 million for the same
period in 2005. The Company ended the third quarter with $12.6 million
of cash and cash equivalents, compared with $9.4 million as of
December 31, 2005.
Year-To-Date Results
For the nine months ended September 30, 2006, revenue totaled
$43.9 million, including the recognition of $0.7 million of revenue
that had accumulated over the prior six quarters through June 30, 2006
and was previously deferred. Excluding this amount, non-GAAP revenue
totaled $43.2 million, up 44% from revenue of $30.0 million for the
first nine months of 2005.
Operating income increased to $5.2 million during the first nine
months of 2006. Excluding the $0.7 million of previously deferred
revenue, non-GAAP operating income was $4.5 million, compared to an
operating loss of $0.8 million during the same period of 2005.
Net income for the first nine months of 2006 was $5.4 million, or
$0.28 per share on a fully diluted basis. Excluding the $0.7 million
of previously deferred revenue, non-GAAP net income for this period
was $4.7 million, or $0.25 per fully diluted share, compared with a
net loss of $0.6 million, or $(0.14) per fully diluted share, for the
same period in 2005.
During the first nine months of 2006, cash flow from operations
totaled $6.5 million, representing a 329% increase compared to
operating cash flow of $1.5 million for the same period in 2005.
Initial Public Offering
In October 2006, the Company completed an initial public offering
of 5,750,000 shares of common stock at a price of $14 per share,
resulting in cash proceeds of approximately $74.8 million before
offering expenses and net of underwriters' discounts and commissions.
The Company anticipates that it will use the proceeds for working
capital and other general corporate purposes.
Guidance
The Company expects revenue for the three-month period ending
December 31, 2006 to range between $15.9 million and $16.6 million.
The Company plans on providing detail regarding its outlook for 2007
at its next earnings call.
Webcast and Conference Call Information
A conference call will be held today, Thursday, November 9, 2006
at 5:00 p.m. (EST) / 2:00 p.m. (PST). Individuals interested in
listening to the conference call may do so by dialing 866-831-5605 for
domestic callers and 617-213-8851 for international callers. The
participant passcode is 88914388. 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
93712371.
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.com 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. The Company is headquartered in Mountain View,
California. Additional information can be found at the Company'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 the increasing
visibility and recognition of the individual health insurance
category, the Company's position to address this market, the
anticipated use of proceeds from the Company's initial public
offering, expectations regarding financial results, including revenue
and net income for the three-month period ending December 31, 2006,
and estimated membership. 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 acceptance of the internet as a medium
for the purchase of health insurance, the Company's ability to
increase its membership base and expand its relationships with health
insurance carriers and marketing partners, retention of the Company's
members, increased rates of member turnover, changes in the Company's
relationships with insurance carriers, system failures or capacity
constraints, dependence upon Internet search engines to attract
consumers who visit the Company's website, the performance,
reliability and availability of the Company's ecommerce platform and
underlying network infrastructure, the effectiveness of the Company'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, 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 the
Company's Registration Statement on Form S-1 as filed with the
Securities and Exchange Commission, including the "Risk Factors"
section in our final prospectus dated October 13, 2006 and available
on the investor relations page of the Company's website at
www.ehealthinsurance.com and on the Securities and Exchange
Commission's website at www.sec.com. Other risks may be detailed from
time to time in reports to be filed with the Securities and Exchange
Commission. 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 non-GAAP revenue, non-GAAP operating
income, non-GAAP net income and non-GAAP diluted earnings per share
for the three and nine months ended September 30, 2006.
These non-GAAP measures are not in accordance with, or an
alternative for, generally accepted accounting principles in the
United States and may be different from non-GAAP measures used by
other companies. In addition, these non-GAAP measures are not based on
any comprehensive set of accounting rules or principles. eHealth
believes that non-GAAP measures have limitations in that they do not
reflect all of the amounts associated with eHealth's results of
operations as determined in accordance with GAAP and that these
measures should only be used to evaluate eHealth's results of
operations in conjunction with the corresponding GAAP measures.
For internal budgeting and resource allocation, eHealth's
management uses non-GAAP financial information that excludes certain
revenue recognized in the three and nine month periods ended September
30, 2006 that management considers non-recurring and extraordinary.
eHealth's management uses these non-GAAP financial measures in making
operating decisions, because it believes the measures provide
meaningful supplemental information regarding eHealth's operational
performance and useful insight into how its business should be
managed. Management uses these non-GAAP financial measures to
facilitate internal comparisons to historical operating results.
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.
EHEALTH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
Assets December 31, 2005 September 30, 2006
-------------------------------------------------- ------------------
(unaudited)
Current assets:
Cash and cash equivalents $ 9,415 $ 12,641
Accounts receivable 128 801
Prepaid expenses and other
current assets 908 1,197
----------------- ------------------
Total current assets 10,451 14,639
Restricted investments 153 156
Property and equipment, net 2,761 3,842
Deferred initial public offering
costs 1,391 3,875
Other non-current assets 409 438
----------------- ------------------
Total assets $ 15,165 $ 22,950
================= ==================
Liabilities, convertible
preferred stock and
stockholders' deficit
---------------------------------
Current liabilities:
Accounts payable $ 1,077 $ 1,186
Accrued compensation and
benefits 3,009 2,813
Accrued marketing expenses 1,027 1,728
Deferred revenue 523 59
Other current liabilities 1,179 2,598
----------------- ------------------
Total current liabilities 6,815 8,384
Other non-current liabilities 212 245
Commitments and contingencies
Convertible preferred stock 86,319 86,319
Stockholders' deficit:
Common stock 5 5
Class A nonvoting common stock -- --
Additional paid-in capital 1,983 2,689
Deferred stock-based
compensation (62) (33)
Accumulated deficit (80,132) (74,700)
Accumulated other comprehensive
income 25 41
----------------- ------------------
Total stockholders' deficit (78,181) (71,998)
----------------- ------------------
Total liabilities, convertible
preferred stock and
stockholders' deficit $ 15,165 $ 22,950
================= ==================
EHEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts, unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2005 2006 2005 2006
--------- -------- -------- --------
Revenue:
Commission $10,726 $15,867 $29,766 $42,423
License and other 118 795 279 1,471
--------- -------- -------- --------
Total revenue 10,844 16,662 30,045 43,894
Operating costs and expenses:
Cost of revenue-sharing 163 411 441 894
Marketing and advertising (1) 4,967 5,798 12,978 15,804
Customer care and enrollment (1) 2,229 2,740 6,401 8,044
Technology and content (1) 2,091 2,668 5,916 7,321
General and administrative (1) 1,871 2,370 5,088 6,602
--------- -------- -------- --------
Total operating costs and expenses 11,321 13,987 30,824 38,665
--------- -------- -------- --------
Income (loss) from operations (477) 2,675 (779) 5,229
Other income, net 49 145 142 357
--------- -------- -------- --------
Income (loss) before provision for
income taxes (428) 2,820 (637) 5,586
Provision for income taxes -- 82 -- 154
--------- -------- -------- --------
Net income (loss) $ (428) $ 2,738 $ (637) $ 5,432
========= ======== ======== ========
Net income (loss) per share:
Basic - common stock $ (0.09) $ 0.54 $ (0.14) $ 1.10
Basic - Class A nonvoting common
stock -- $ 0.54 -- $ 1.10
Diluted - common stock $ (0.09) $ 0.14 $ (0.14) $ 0.28
Diluted - Class A nonvoting
common stock -- $ 0.14 -- $ 0.28
Net income (loss):
Allocated to common stock $ (428) $ 2,705 $ (637) $ 5,376
Allocated to Class A nonvoting
common stock -- 33 -- 56
--------- -------- -------- --------
Net income (loss) $ (428) $ 2,738 $ (637) $ 5,432
========= ======== ======== ========
Weighted-average number of shares
used in per share amounts:
Basic - common stock 4,669 4,974 4,620 4,903
Basic - Class A nonvoting
common stock -- 61 -- 51
Diluted - common stock 4,669 19,334 4,620 19,158
Diluted - Class A nonvoting
common stock -- 61 -- 51
__________
(1) Includes stock-based
compensation as follows:
Marketing and advertising $ 3 $ 21 $ 95 $ 32
Customer care and enrollment 1 13 4 27
Technology and content 18 60 44 148
General and administrative 8 50 18 89
--------- -------- -------- --------
Total $ 30 $ 144 $ 161 $ 296
========= ======== ======== ========
EHEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2005 2006 2005 2006
------------------ -----------------
Operating activities
Net income (loss) $ (428)$ 2,738 $(637)$ 5,432
Adjustments to reconcile net
income (loss) to net cash
provided by operating activities:
Depreciation and amortization 305 422 877 1,116
Stock-based compensation
expense 30 144 161 296
Deferred rent (3) 46 171 40
Changes in operating assets and
liabilities:
Accounts receivable (45) (496) (40) (673)
Prepaid expenses and other
current assets 43 90 (81) (224)
Other assets (1) (27) 15 (29)
Accounts payable (17) 291 (52) 198
Accrued compensation and
benefits 174 170 3 (192)
Accrued marketing expenses 540 124 698 701
Deferred revenue 37 (747) 218 (464)
Other current liabilities (136) 47 179 292
------------------ -----------------
Net cash provided by operating
activities 499 2,802 1,512 6,493
------------------ -----------------
Investing activities
Purchases of property and
equipment (467) (1,321) (1,078) (1,738)
Changes in restricted cash -- -- 101 --
Changes in restricted investments (1) (1) (2) (3)
------------------ -----------------
Net cash used in investing
activities (468) (1,322) (979) (1,741)
------------------ -----------------
Financing activities
Net proceeds from exercise of
common stock options 281 61 337 439
Costs incurred in connection with
initial public offering (335) (538) (366) (1,909)
Principal payments in connection
with capital leases (6) (68) (17) (72)
------------------ -----------------
Net cash used in financing
activities (60) (545) (46) (1,542)
------------------ -----------------
Effect of exchange rate changes on
cash and cash equivalents 17 13 17 16
------------------ -----------------
Net increase (decrease) in cash
and cash equivalents (12) 948 504 3,226
Cash and cash equivalents at
beginning of period 9,223 11,693 8,707 9,415
------------------ -----------------
Cash and cash equivalents at end
of period $9,211 $12,641 $9,211 $12,641
================== =================
EHEALTH, INC.
SUMMARY OF KEY METRICS
(Unaudited)
Three Months Three Months
Ended Ended
September September
Metric 30, 2005 30, 2006
-------------------------------------------------------- ------------
IFP submitted applications (1) 59,000 78,200
Source of IFP submitted applications (as a
percentage of total IFP applications for
the period):
Direct (2) 39 % 39 %
Marketing partners (3) 35 % 34 %
Online advertising (4) 26 % 27 %
------------ ------------
Total 100 % 100 %
============ ============
IFP new members (5) 44,800 68,000
Total new members (6) 68,800 102,400
Total revenue (7) $10,844,000 $16,662,000
Total revenue per estimated member for the
period (8) $ 43 $ 48
Marketing and advertising expenses (9) $ 4,967,000 $ 5,798,000
Acquisition cost per individual on IFP
submitted applications (10) $ 53 $ 49
As of As of
September September
30, 2005 30, 2006
------------ ------------
IFP estimated membership (11) 206,500 297,400
Total estimated membership (12) 258,300 363,000
(1) Individual and Family Product ("IFP") applications completed on
eHealth's website during the period.
(2) Percentage of submitted applications from applicants who came
directly to the eHealth website.
(3) Percentage of submitted applications from applicants sourced
through eHealth's network of marketing partners.
(4) Percentage of submitted applications from applicants sourced
through paid search, portals and related sites.
(5) 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.
(6) 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.
(7) Total revenue recognized during the period (all sources) from the
condensed consolidated statements of operations.
(8) Calculated as total revenue recognized during the period (see note
(7)) divided by average estimated membership for the period
(calculated as beginning and ending estimated membership for all
products for the period, divided by two).
(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 the number of individuals on IFP
applications completed on eHealth's website during the period.
(11) Estimated number of members active on IFP insurance policies as
of the date indicated.
(12) Estimated number of members active on all insurance policies as
of the date indicated.
EHEALTH, INC.
GAAP TO NON-GAAP RECONCILIATION
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006
(In thousands, except per share amounts, unaudited)
Statement of Operations
Reconciliation
-----------------------
Three Months Ended September 30, 2006
-----------------------------------------------
GAAP Reported Adjustments Non-GAAP Results
----------------- ----------- -----------------
Percent Percent
of of
Total Total
$ Revenue $ $ Revenue
-------- -------- ----------- -------- --------
Revenue:
Commission (1) $15,867 95 % $ (720) $15,147 95 %
License and other 795 5 -- 795 5
-------- ------- ----------- -------- -------
Total revenue 16,662 100 (720) 15,942 100
Operating costs and
expenses:
Cost of revenue-
sharing 411 3 -- 411 3
Marketing and
advertising 5,798 35 -- 5,798 36
Customer care and
enrollment 2,740 16 -- 2,740 17
Technology and content 2,668 16 -- 2,668 17
General and
administrative 2,370 14 -- 2,370 15
-------- ------- ----------- -------- -------
Total operating costs
and expenses 13,987 84 -- 13,987 88
-------- ------- ----------- -------- -------
Income (loss) from
operations 2,675 16 (720) 1,955 12
Other income, net 145 1 -- 145 1
-------- ------- ----------- -------- -------
Income (loss) before
provision for income
taxes 2,820 17 (720) 2,100 13
Provision for (benefit
from) income taxes (2) 82 1 (19) 63 --
-------- ------- ----------- -------- -------
Net income (loss) $ 2,738 16 % $ (701) $ 2,037 13 %
======== ======= =========== ======== =======
Net income (loss) per
share:
Basic - common stock $ 0.54 $ (0.14) $ 0.40
Basic - Class A
nonvoting common
stock $ 0.54 $ (0.14) $ 0.40
Diluted - common stock$ 0.14 $ (0.03) $ 0.11
Diluted - Class A
nonvoting common
stock $ 0.14 $ (0.03) $ 0.11
Net income (loss):
Allocated to common
stock $ 2,705 $ (693) $ 2,012
Allocated to Class A
nonvoting common
stock 33 (8) 25
-------- ----------- --------
Net income (loss) $ 2,738 $ (701) $ 2,037
======== =========== ========
Weighted-average number
of shares used in per
share amounts:
Basic - common stock 4,974 4,974 4,974
Basic - Class A
nonvoting common
stock 61 61 61
Diluted - common
stock 19,334 19,334 19,334
Diluted - Class A
nonvoting common
stock 61 61 61
EHEALTH, INC.
GAAP TO NON-GAAP RECONCILIATION
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006
(In thousands, except per share amounts, unaudited)
Statement of Operations
Reconciliation
-----------------------
Nine Months Ended September 30, 2006
-----------------------------------------------
GAAP Reported Adjustments Non-GAAP Results
----------------- ----------- -----------------
Percent Percent
of of
Total Total
$ Revenue $ $ Revenue
-------- -------- ----------- -------- --------
Revenue:
Commission (1) $42,423 97% $ (720) $41,703 97%
License and other 1,471 3 -- 1,471 3
-------- -------- ----------- -------- --------
Total revenue 43,894 100 (720) 43,174 100
Operating costs and
expenses:
Cost of revenue-
sharing 894 2 -- 894 2
Marketing and
advertising 15,804 36 -- 15,804 37
Customer care and
enrollment 8,044 18 -- 8,044 19
Technology and content 7,321 17 -- 7,321 17
General and
administrative 6,602 15 -- 6,602 15
-------- -------- ----------- -------- --------
Total operating costs
and expenses 38,665 88 -- 38,665 90
-------- -------- ----------- -------- --------
Income (loss) from
operations 5,229 12 (720) 4,509 10
Other income, net 357 1 -- 357 1
-------- -------- ----------- -------- --------
Income (loss) before
provision for income
taxes 5,586 13 (720) 4,866 11
Provision for (benefit
from) income taxes (2) 154 1 (19) 135 --
-------- -------- ----------- -------- --------
Net income (loss) $ 5,432 12% $ (701) $ 4,731 11%
======== ======== =========== ======== ========
Net income (loss) per
share:
Basic - common stock $ 1.10 $ (0.15) $ 0.95
Basic - Class A
nonvoting common
stock $ 1.10 $ (0.15) $ 0.95
Diluted - common stock$ 0.28 $ (0.03) $ 0.25
Diluted - Class A
nonvoting common
stock $ 0.28 $ (0.03) $ 0.25
Net income (loss):
Allocated to common
stock $ 5,376 $ (694) $ 4,682
Allocated to Class A
nonvoting common
stock 56 (7) 49
-------- ----------- --------
Net income (loss) $ 5,432 $ (701) $ 4,731
======== =========== ========
Weighted-average number
of shares used in per
share amounts:
Basic - common stock 4,903 4,903 4,903
Basic - Class A
nonvoting common
stock 51 51 51
Diluted - common
stock 19,158 19,158 19,158
Diluted - Class A
nonvoting common
stock 51 51 51
Explanation of adjustments
----------------------------------------------------------------------
(1) Included in deferred revenue at June 30, 2006 were commission
amounts reported and paid by a single health insurance carrier
that, effective January 2005, changed its basis for calculating
and reporting commission amounts from a percentage of the premium
it collected to a percentage of the premium it billed. Since this
was the first carrier to calculate and report commission amounts
on this basis, eHealth initially did not have sufficient
historical forfeiture experience to estimate and record an
appropriate allowance for forfeitures as commission amounts were
reported by the carrier. Accordingly, all commission amounts
reported by the carrier in 2005 and through the first six months
of 2006 were deferred.
During the three months ended September 30, 2006, eHealth
determined that it had sufficient experience to estimate an
allowance for forfeitures for this health insurance carrier.
Accordingly, during the three and nine months ended September 30,
2006, eHealth recognized $720,000 of commission revenue, which
had been previously deferred.
(2) The income tax impact of reducing income before provision for
income taxes by $720,000 in the three and nine months ended
September 30, 2006.
SOURCE: eHealth, Inc.
Ashton Partners
Investor Relations:
Trisha Dill, 1-415-869-5757
tdill@ashtonpartners.com
www.ashtonpartners.com
or
eHealth, Inc.
Media:
Robert Hurley, 1-916-608-6101
VP Corporate Communications
robert.hurley@ehealth.com
www.ehealthinsurance.com
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