Business & Finance
Business and Finance
Business and Finance
Wed, July 29, 2009
Tue, July 28, 2009 eHealth, Inc.: eHealth, Inc. Announces Second Quarter 2009 Results
MOUNTAIN VIEW, CA--(Marketwire - July 28, 2009) - eHealth, Inc. (
Gary Lauer, chief executive officer of eHealth, stated, "Our second quarter financial results illustrate the continued leverage and strength of our business model. During the second quarter, significant progress was made in many important areas of our growing business. We added several new carriers and products to our offerings, including an important addition in the state of Massachusetts, broadened the utilization of eApproval, launched our public eCommerce onDemand (eOD) business in Utah and continued to expand the presence of our commercial eOD platform."
Second Quarter Results
Revenue -- Revenue totaled $33.4 million for the second quarter of 2009, a 22% increase compared to revenue of $27.5 million for the second quarter of 2008.
Submitted Applications -- Submitted applications for individual and family products increased 17% in the second quarter of 2009 to 121,100 applications, compared to 103,800 applications in the second quarter of 2008.
Membership -- Estimated membership at June 30, 2009 totaled 707,100 members, a 22% increase over estimated membership of 579,600 at June 30, 2008.
Operating Income -- Operating income increased 7% to $6.9 million for the second quarter of 2009, compared to operating income of $6.4 million for the second quarter of 2008. Operating margins were 21% and 23% in the second quarters of 2009 and 2008, respectively. Non-GAAP operating income increased 9% to $8.1 million for the second quarter of 2009, compared to non-GAAP operating income of $7.4 million for the second quarter of 2008. Non-GAAP operating margins were 24% and 27% in the second quarters of 2009 and 2008, respectively. Non-GAAP operating income and margins in the second quarters of 2009 and 2008 exclude $1.2 million and $1.0 million of stock-based compensation expense, respectively.
Pre-tax Income -- Pre-tax income for the second quarter of 2009 was $7.1 million, a 3% decrease compared to pre-tax income of $7.3 million for the second quarter of 2008. Pre-tax income was unfavorably impacted in the second quarter of 2009 by a decrease in interest income of $0.7 million compared to the second quarter of 2008.
Net Income -- Net income for the second quarter of 2009 was $4.0 million, or $0.16 per diluted share. Net income for the second quarter of 2008 was $4.2 million, or $0.16 per diluted share. Non-GAAP net income for the second quarter of 2009 was $4.8 million, or $0.19 per diluted share, compared to non-GAAP net income for the second quarter of 2008 of $4.9 million, or $0.19 per diluted share. Non-GAAP net income and non-GAAP net income per diluted share in the second quarter of 2009 exclude $1.2 million of stock-based compensation expense, adjusted by $0.4 million for estimated net income tax benefit related to stock-based compensation expense. Non-GAAP net income and non-GAAP net income per diluted share in the second quarter of 2008 exclude $1.0 million of stock-based compensation expense, adjusted by $0.3 million for estimated income tax benefit related to stock-based compensation expense.
Cash Flow and Cash Balance -- Cash flow from operations for the second quarter of 2009 was $8.3 million, compared to $8.6 million for the second quarter of 2008, representing a decrease of 4%.
The second quarter 2008 cash flow statement includes a $3.1 million change in deferred taxes, primarily from the utilization of net operating loss carryforwards, all of which benefited operating cash flow. The second quarter 2009 cash flow statement includes a $3.0 million cash flow benefit from taxes, of which approximately $1.5 million of tax benefit, primarily from the utilization of net operating loss carryforwards, is included in cash flow from operations and $1.5 million of net operating loss carryforwards, from the utilization of excess tax benefits related to share-based payments, is included in cash flow from financing activities.
Cash, cash equivalents and short-term marketable securities as of June 30, 2009 totaled $159.8 million, compared to $150.6 million as of December 31, 2008.
During the fourth quarter of 2008, eHealth's board of directors authorized a stock repurchase program of up to $30 million, or ten percent of eHealth's outstanding common stock, whichever is less. Repurchases pursuant to the program began in December 2008. As of June 30, 2009, approximately 412,500 shares of common stock have been repurchased in connection with the stock repurchase program at an average price of $12.69 per share including commissions, for a total cost of $5.2 million, of which approximately 361,800 shares were repurchased during the six months ended June 30, 2009 for a total cost of $4.6 million.
Year-to-Date Results
Revenue -- Revenue totaled $65.4 million for the six months ended June 30, 2009, a 22% increase compared to revenue of $53.8 million for the six months ended June 30, 2008.
Operating Income -- Operating income increased 12% to $12.5 million for the six months ended June 30, 2009, compared to operating income of $11.1 million for the six months ended June 30, 2008. Operating margins were 19% and 21% in the six months ended June 30, 2009 and 2008, respectively.
Pre-tax Income -- Pre-tax income for the six months ended June 30, 2009 was $13.1 million, a 1% decrease compared to pre-tax income of $13.3 million for the six months ended June 30, 2008. Pre-tax income was unfavorably impacted in the six months ended June 30, 2009 by a decrease in interest income of $1.5 million compared to the six months ended June 30, 2008.
Net Income -- Net income for the six months ended June 30, 2009 was $7.1 million, or $0.28 per diluted share, compared to net income for the six months ended June 30, 2008 of $7.5 million, or $0.29 per diluted share.
Cash Flow -- Cash flow from operations for the six months ended June 30, 2009 was $13.0 million, compared to $14.5 million for the six months ended June 30, 2008, representing a decrease of 10%.
2009 Guidance
eHealth is reiterating the following guidance for the full year ending December 31, 2009 based on information currently available:
-- Total revenue is expected to be in the range of $131 million to $136 million -- Stock-based compensation expense is expected to be in the range of $5 million to $6 million -- GAAP income tax rate expected to be in the range of 43% to 45% -- GAAP net income per diluted share is expected to be in the range of $0.51 to $0.61 per share
Webcast and Conference Call Information
A Webcast and conference call will be held today, Tuesday, July 28, 2009 at 5:00 p.m. EDT / 2:00 p.m. PDT. The Webcast will be available live on the Investor Relations section on eHealth's website at [ http://ir.ehealthinsurance.com ]. Individuals interested in listening to the conference call may do so by dialing 866-730-5762 for domestic callers and 857-350-1586 for international callers. The participant passcode is #42217302. 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 #35408865. The live and archived webcast of the call will also be available on eHealth's website at [ http://www.ehealthinsurance.com ] under the Investor Relations section.
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 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. eHealth is headquartered in Mountain View, California. Additional information can be found on eHealth's website, [ http://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 eHealth's guidance for total revenue, stock-based compensation expense, GAAP income tax rate, and GAAP net income per diluted share for the year ending December 31, 2009. 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 changes and developments in the structure of the health insurance system in the United States and healthcare system reform, eHealth's rate of growth, changes in the economy, weak economic conditions, consumer awareness of the availability and accessibility of affordable health insurance, changes in member conversion rates and factors affecting conversion, eHealth's ability to continue to increase its membership base and retain its members, eHealth's ability to maintain or expand its relationships with health insurance carriers and marketing partners, negative publicity experienced by eHealth's carrier partners, changes in products offered on eHealth's ecommerce platform, changes in commission payments or carrier underwriting practices, maintaining and enhancing eHealth's brand identity and the effectiveness of eHealth's marketing and public relations efforts, system failures, capacity constraints or data loss, continued acceptance of the Internet as a medium for the purchase and sale of health insurance, dependence upon Internet search engines, reliance on marketing partners, the pursuit of new strategies and opportunities in the health insurance market, timing of receipt and accuracy of commission reports and related impact on estimating membership, payment practices of health insurance carriers, competition, eHealth's operations in China, success in the sale of sponsorship advertising and the licensing of the use of eHealth's ecommerce platform, success of the health savings account (HSA) platform, protection of intellectual property and intellectual property rights claims, legal liability, regulatory penalties and negative publicity, ability to attract and retain qualified personnel, management of future growth, seasonality, impact of future acquisitions, implementation of internal enterprise systems and maintenance of proper and effective internal controls, impact of employee stock-based compensation expense and provisions for income taxes, changes in laws and regulations, compliance with insurance and other laws and regulations, exposure to online commerce security risks, and the performance, reliability and availability of eHealth's ecommerce platform and underlying network infrastructure. Other factors that could cause operating, financial and other results to differ are described in eHealth's most recent Quarterly Report on Form 10-Q or Annual Report on Form 10-K filed with the Securities and Exchange Commission and available on the investor relations page of eHealth's website at [ http://www.ehealthinsurance.com ] and on the Securities and Exchange Commission's website at [ www.sec.gov ]. 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 financial measures that are not in accordance with generally accepted accounting principles in the United States ("GAAP"). To supplement eHealth's condensed consolidated financial statements presented in accordance with GAAP, eHealth presents investors with certain non-GAAP financial measures, including non-GAAP operating income, non-GAAP operating margins, non-GAAP pre-tax income, non-GAAP net income and non-GAAP net income per diluted share.
-- Non-GAAP operating income consists of GAAP operating income excluding the effects of expensing stock-based compensation related to stock options, restricted stock and restricted stock units in accordance with SFAS 123(R) beginning in 2006 and amortization of deferred stock-based compensation expense in accordance with APB 25 for grants made prior to 2006. -- Non-GAAP operating margins are calculated by dividing non-GAAP operating income by GAAP total revenue. -- Non-GAAP net income consists of GAAP net income excluding the effects of expensing stock-based compensation adjusted for estimated income tax benefit related to stock-based compensation expense as well as additional tax expense recorded during the period in accordance with SFAS 123(R). -- Non-GAAP net income per diluted share is calculated by dividing non- GAAP net income by GAAP weighted average diluted shares outstanding.
eHealth believes that the presentation of these non-GAAP financial measures provide important supplemental information to management and investors regarding financial and business trends relating to the company's financial condition and results of operations. Management believes that the use of these non-GAAP financial measures provides consistency and comparability with the company's past financial reports. Management also believes that the exclusion of the items described above provides an additional measure of the company's operating results and facilitates comparisons of the company's core operating performance against prior periods and business model objectives. This information is provided to investors in order to facilitate additional analyses of past, present and future operating performance and as a supplemental means to evaluate the company's ongoing operations. Externally, the company believes that these non-GAAP financial measures continue to be useful to investors in their assessment of the company's operating performance.
Non-GAAP operating income, non-GAAP operating margins, non-GAAP net income and non-GAAP net income per diluted share are not calculated in accordance with GAAP, and should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. Non-GAAP financial measures used in this press release have limitations in that they do not reflect all of the costs associated with the operations of the company's business and do not reflect all of the income tax as determined in accordance with GAAP. As a result, you should not consider these measures in isolation or as a substitute for analysis of eHealth's results as reported under GAAP. The company expects to continue to incur stock-based compensation costs described above, and exclusion of these costs, and their related income tax impact, from non-GAAP financial measures should not be construed as an inference that these costs are unusual or infrequent. The company compensates for these limitations by prominently disclosing GAAP operating income, GAAP net income and GAAP net income per diluted share and providing investors with reconciliations from the company's GAAP operating results to the non-GAAP financial measures for the relevant periods.
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) December 31, June 30, 2008 2009 ------------ ------------ Assets (1) (unaudited) Current assets: Cash and cash equivalents $ 94,136 $ 101,621 Marketable securities 56,499 58,176 Accounts receivable 2,005 2,111 Deferred income taxes 7,580 4,360 Prepaid expenses and other current assets 1,874 3,310 ------------ ------------ Total current assets 162,094 169,578 Property and equipment, net 4,567 3,972 Deferred income taxes 1,314 1,927 Other assets 780 930 ------------ ------------ Total assets $ 168,755 $ 176,407 ============ ============ Liabilities and stockholders' equity Current liabilities: Accounts payable $ 2,190 $ 1,758 Accrued compensation and benefits 4,662 4,738 Accrued marketing expenses 3,162 3,972 Deferred revenue 427 478 Other current liabilities 2,707 1,624 ------------ ------------ Total current liabilities 13,148 12,570 Other non-current liabilities 628 1,248 Stockholders' equity: Common stock 25 25 Additional paid-in capital 173,095 178,216 Treasury stock shares, at cost (639) (5,232) Deferred stock-based compensation (22) (7) Accumulated deficit (17,892) (10,755) Accumulated other comprehensive income 412 342 ------------ ------------ Total stockholders' equity 154,979 162,589 ------------ ------------ Total liabilities and stockholders' equity $ 168,755 $ 176,407 ============ ============ (1) The condensed consolidated balance sheet at December 31, 2008 has been derived from the audited consolidated financial statements at that date. EHEALTH, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts, unaudited) Three Months Ended Six Months Ended June 30, June 30, ------------------ ----------------- 2008 2009 2008 2009 --------- -------- -------- -------- Revenue: Commission $ 24,756 $ 29,939 $ 48,875 $ 58,143 Sponsorship, licensing and other 2,745 3,500 4,906 7,213 -------- -------- -------- -------- Total revenue 27,501 33,439 53,781 65,356 Operating costs and expenses: Cost of revenue-sharing 432 1,318 869 2,118 Marketing and advertising (1) 9,482 12,945 19,131 26,365 Customer care and enrollment (1) 3,308 3,627 6,933 7,449 Technology and content (1) 3,504 3,828 6,983 7,413 General and administrative (1) 4,379 4,851 8,744 9,552 -------- -------- -------- -------- Total operating costs and expenses 21,105 26,569 42,660 52,897 -------- -------- -------- -------- Income from operations 6,396 6,870 11,121 12,459 Interest and other income, net 941 258 2,150 657 -------- -------- -------- -------- Income before income taxes 7,337 7,128 13,271 13,116 Provision for income taxes 3,136 3,134 5,773 5,979 -------- -------- -------- -------- Net income $ 4,201 $ 3,994 $ 7,498 $ 7,137 ======== ======== ======== ======== Net income per share: Basic $ 0.17 $ 0.16 $ 0.30 $ 0.29 Diluted $ 0.16 $ 0.16 $ 0.29 $ 0.28 Weighted-average number of shares used in per share amounts: Basic 24,949 24,755 24,857 24,823 Diluted 26,065 25,656 26,029 25,701 __________ (1) Includes stock-based compensation expense as follows: Marketing and advertising $ 186 $ 254 $ 333 $ 396 Customer care and enrollment 85 89 151 148 Technology and content 275 304 450 502 General and administrative 449 550 720 1,092 -------- -------- -------- -------- Total $ 995 $ 1,197 $ 1,654 $ 2,138 ======== ======== ======== ======== EHEALTH, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands, unaudited) Three Months Ended Six Months Ended June 30, June 30, -------------------- -------------------- 2008 2009 2008 2009 --------- --------- --------- --------- Operating activities Net income $ 4,201 $ 3,994 $ 7,498 $ 7,137 Adjustments to reconcile net income to net cash provided by operating activities: Deferred income taxes 3,076 1,565 5,517 3,237 Depreciation and amortization 375 572 804 1,119 Amortization and accretion on marketable securities, net -- 232 -- 401 Stock-based compensation expense 995 1,197 1,654 2,138 Excess tax benefits from stock-based compensation -- (1,462) -- (2,635) Deferred rent (14) (25) (35) (50) Loss on disposal of property and equipment 10 2 11 12 Changes in operating assets and liabilities: Accounts receivable 395 913 55 (106) Prepaid expenses and other current assets (204) (261) (278) (596) Other assets (39) 195 32 291 Accounts payable 169 (936) 370 (433) Accrued compensation and benefits 580 1,001 (881) 75 Accrued marketing expenses (29) 14 320 810 Deferred revenue (248) (39) (159) 51 Other current liabilities (620) 1,328 (415) 1,561 Other non-current liabilities -- 21 -- 21 --------- --------- --------- --------- Net cash provided by operating activities 8,647 8,311 14,493 13,033 --------- --------- --------- --------- Investing activities Purchases of property and equipment (975) (293) (1,309) (534) Purchase of other assets -- -- -- (1,280) Purchases of marketable securities (31,107) (24,085) (50,422) (38,524) Sales of marketable securities 4,020 -- 8,067 1,006 Maturities of marketable securities 13,131 21,700 31,593 35,400 --------- --------- --------- --------- Net cash used in investing activities (14,931) (2,678) (12,071) (3,932) --------- --------- --------- --------- Financing activities Net proceeds from exercise of common stock options 595 214 1,341 360 Excess tax benefits from stock-based compensation -- 1,462 -- 2,635 Repurchase of common stock -- -- -- (4,593) Principal payments in connection with capital lease -- (10) -- (19) --------- --------- --------- --------- Net cash provided by (used in) financing activities 595 1,666 1,341 (1,617) --------- --------- --------- --------- Effect of exchange rate changes on cash and cash equivalents 10 1 43 1 --------- --------- --------- --------- Net increase (decrease) in cash and cash equivalents (5,679) 7,300 3,806 7,485 Cash and cash equivalents at beginning of period 90,880 94,321 81,395 94,136 --------- --------- --------- --------- Cash and cash equivalents at end of period $ 85,201 $ 101,621 $ 85,201 $ 101,621 ========= ========= ========= ========= EHEALTH, INC. SUMMARY OF SELECTED METRICS (Unaudited) Three Months Ended Three Months Ended Key Metrics: June 30, 2008 June 30, 2009 ------------------ ------------------ Operating cash flows (1) $ 8,647,000 $ 8,311,000 IFP submitted applications (2) 103,800 121,100 IFP approved members (3) 94,300 103,400 Total approved members (4) 132,600 135,800 Total revenue (5) $ 27,501,000 $ 33,439,000 Total revenue per estimated member for the period (6) $ 48.34 $ 48.21 As of As of June 30, 2008 June 30, 2009 ------------------ ------------------ IFP estimated membership (7) 488,300 614,800 Total estimated membership (8) 579,600 707,100 Three Months Ended Three Months Ended June 30, 2008 June 30, 2009 ------------------ ------------------ Marketing and advertising expenses (9) $ 9,482,000 $ 12,945,000 Marketing and advertising expenses as a percentage of total revenue (10) 34% 39% Marketing and advertising expenses excluding stock-based compensation (11) $ 9,296,000 $ 12,691,000 Marketing and advertising expenses excluding stock-based compensation as a percentage of total revenue (12) 34% 38% Other Metrics: Source of IFP submitted applications (as a percentage of total IFP applications for the period): Direct (13) 40% 43% Marketing partners (14) 32% 33% Online advertising (15) 28% 24% ------------------ ------------------ Total 100% 100% ================== ================== Acquisition cost per individual on IFP submitted applications (16) $ 60.39 $ 73.45 Acquisition cost (excluding stock-based compensation) per individual on IFP submitted applications (17) $ 59.21 $ 72.01 Notes: (1) Net cash provided by operating activities for the period from the condensed consolidated statements of cash flows. (2) IFP applications submitted on eHealth's website during the period. Applications are counted as submitted when the applicant completes the application, provides a method for payment and clicks the submit button on our website and submits the application to us. The applicant generally has additional actions to take before the application will be reviewed by the insurance carrier, such as providing additional information and providing an electronic signature. In addition, an applicant may submit more than one application. We include applications for IFP products for which we receive commissions as well as other forms of payment. We define our "IFP" offerings as major medical individual and family health insurance plans, which does not include small business, short-term major medical, stand-alone dental, life or student health insurance product offerings. (3) 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. Does not include members transferred from Health Benefits Direct Corporation. (4) 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. Does not include members transferred from Health Benefits Direct Corporation. (5) Total revenue (from all sources) recognized during the period from the condensed consolidated statements of income. (6) Calculated as total revenue recognized during the period (see note (5) above) divided by average estimated membership for the period (calculated as beginning and ending estimated membership for all products for the period, divided by two). Ending membership includes an estimated number of members transferred from Health Benefits Direct Corporation during 2009, net of estimated cancelations since their transfer, of approximately 30,000 members. See our 2008 Annual Report on Form 10-K - Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Summary of Selected Metrics for additional information regarding our calculation of estimated membership. (7) Estimated number of members active on IFP insurance policies as of the date indicated. Amounts as of June 30, 2009 include the estimated number of members transferred from Health Benefits Direct Corporation during 2009, net of estimated cancelations since their transfer, of approximately 30,000 members. See our 2008 Annual Report on Form 10-K - Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Summary of Selected Metrics for additional information regarding our calculation of estimated membership. (8) Estimated number of members active on all insurance policies as of the date indicated. Amounts as of June 30, 2009 include the estimated number of members transferred from Health Benefits Direct Corporation during 2009, net of estimated cancelations since their transfer, of approximately 30,000 members. See our 2008 Annual Report on Form 10-K - Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Summary of Selected Metrics for additional information regarding our calculation of estimated membership. (9) Marketing and advertising expenses for the period from the condensed consolidated statements of income. (10) Calculated as marketing and advertising expenses for the period (see note (9) above) divided by total revenue for the period (see note (5) above). (11) Non-GAAP marketing and advertising expenses excluding stock-based compensation for the period. See Non-GAAP Financial Information above and the reconciliation of GAAP to Non-GAAP marketing and advertising expenses below. (12) Calculated as non-GAAP marketing and advertising expenses for the period (see note (11) above) divided by total revenue for the period (see note (5) above). See Non-GAAP Financial Information above and the reconciliation of GAAP to Non-GAAP marketing and advertising expenses below. (13) Percentage of IFP submitted applications from applicants who came directly to the eHealth website through algorithmic search engine results or otherwise. See note (2) above for further information as to what constitutes a submitted application. (14) Percentage of IFP submitted applications from applicants sourced through eHealth's network of marketing partners. See note (2) above for further information as to what constitutes a submitted application. (15) Percentage of IFP submitted applications from applicants sourced through paid search and other online advertising activities. See note (2) above for further information as to what constitutes a submitted application. (16) Calculated as marketing and advertising expenses for the period (see note (9) above) divided by the number of individuals on IFP applications submitted on eHealth's website during the period. This metric may not reflect the true acquisition cost. (17) Calculated as non-GAAP marketing and advertising expenses for the period (see note (11) above) divided by the number of individuals on IFP applications submitted on eHealth's website during the period. This metric may not reflect the true acquisition cost exclusive of the impact of stock-based compensation allocated to marketing and advertising expenses. EHEALTH, INC. GAAP TO NON-GAAP RECONCILIATION FOR THE THREE MONTHS ENDED JUNE 30, 2009 (In thousands, except per share amounts, unaudited) Statement of Income Reconciliation Three Months Ended June 30, 2009 -------------------------------------------------------- GAAP Non-GAAP Percent Percent GAAP of Total Non-GAAP of Total Reported Revenue Adjustments Results Revenue ---------- --------- ----------- ---------- --------- Revenue: Commission $ 29,939 90% $ -- $ 29,939 90% Sponsorship, licensing and other 3,500 10 -- 3,500 10 ---------- --------- ----------- ---------- --------- Total revenue 33,439 100 -- 33,439 100 Operating costs and expenses: Cost of revenue-sharing 1,318 4 -- 1,318 4 Marketing and advertising (1) 12,945 39 (254) 12,691 38 Customer care and enrollment (1) 3,627 11 (89) 3,538 11 Technology and content (1) 3,828 11 (304) 3,524 11 General and administrative (1) 4,851 15 (550) 4,301 13 ---------- --------- ----------- ---------- --------- Total operating costs and expenses 26,569 79 (1,197) 25,372 76 ---------- --------- ----------- ---------- --------- Income from operations 6,870 21 1,197 8,067 24 Interest and other income, net 258 1 -- 258 1 ---------- --------- ----------- ---------- --------- Income before income taxes 7,128 21 1,197 8,325 25 Provision for income taxes (2) 3,134 9 424 3,558 11 ---------- --------- ----------- ---------- --------- Net income $ 3,994 12% $ 773 $ 4,767 14% ========== ========= =========== ========== ========= Net income per share: Basic $ 0.16 $ 0.03 $ 0.19 Diluted $ 0.16 $ 0.03 $ 0.19 Weighted-average number of shares used in per share amounts: Basic 24,755 24,755 24,755 Diluted 25,656 25,656 25,656 Explanation of adjustments (1) Non-GAAP results exclude the effect of expensing stock-based compensation related to stock options, restricted stock and restricted stock units in accordance with SFAS 123(R) beginning in 2006, in addition to the amortization of deferred stock-based compensation expense in accordance with APB 25 for grants made prior to 2006. (2) Non-GAAP net income and non-GAAP net income per share exclude stock-based compensation expense listed in note (1) above, adjusted for estimated income tax benefit related to stock-based compensation expense. EHEALTH, INC. GAAP TO NON-GAAP RECONCILIATION FOR THE THREE MONTHS ENDED JUNE 30, 2008 (In thousands, except per share amounts, unaudited) Statement of Income Reconciliation Three Months Ended June 30, 2008 -------------------------------------------------------- GAAP Non-GAAP Percent Percent GAAP of Total Non-GAAP of Total Reported Revenue Adjustments Results Revenue ---------- --------- ----------- ---------- --------- Revenue: Commission $ 24,756 90% $ -- $ 24,756 90% Sponsorship, licensing and other 2,745 10 -- 2,745 10 ---------- --------- ----------- ---------- --------- Total revenue 27,501 100 -- 27,501 100 Operating costs and expenses: Cost of revenue-sharing 432 2 -- 432 2 Marketing and advertising (1) 9,482 34 (186) 9,296 34 Customer care and enrollment (1) 3,308 12 (85) 3,223 12 Technology and content (1) 3,504 13 (275) 3,229 12 General and administrative (1) 4,379 16 (449) 3,930 14 ---------- --------- ----------- ---------- --------- Total operating costs and expenses 21,105 77 (995) 20,110 73 ---------- --------- ----------- ---------- --------- Income from operations 6,396 23 995 7,391 27 Interest and other income, net 941 3 -- 941 3 ---------- --------- ----------- ---------- --------- Income before income taxes 7,337 27 995 8,332 30 Provision for income taxes (2) 3,136 11 333 3,469 13 ---------- --------- ----------- ---------- --------- Net income $ 4,201 15% $ 662 $ 4,863 18% ========== ========= =========== ========== ========= Net income per share: Basic $ 0.17 $ 0.02 $ 0.19 Diluted $ 0.16 $ 0.03 $ 0.19 Weighted-average number of shares used in per share amounts: Basic 24,949 24,949 24,949 Diluted 26,065 26,065 26,065 Explanation of adjustments (1) Non-GAAP results exclude the effect of expensing stock-based compensation related to stock options, restricted stock and restricted stock units in accordance with SFAS 123(R) beginning in 2006, in addition to the amortization of deferred stock-based compensation expense in accordance with APB 25 for grants made prior to 2006. (2) Non-GAAP net income and non-GAAP net income per share exclude stock-based compensation expense listed in note (1) above, adjusted for estimated income tax benefit related to stock-based compensation expense.
