Document eHealth, Inc. Announces Fourth Quarter and Fiscal Year 2022 Results

eHealth, Inc. Announces Fourth Quarter and Fiscal Year 2022 Results

SANTA CLARA, California - February 28, 2023 - eHealth, Inc. (Nasdaq EHTH), a leading private online health insurance marketplace, today announced its financial results for the fourth quarter and fiscal year ended December 31, 2022.

(1)See Non-GAAP Financial Information for definitions of our non-GAAP financial measures.

GAAP - Fourth Quarter of 2022 Results

Total commission revenue for the three months ended December 31, 2022 decreased 21% compared to the same period in 2021 due to a $49.6 million decrease in commission revenue from the Medicare segment, partially offset by a $3.1 million increase in commission revenue from the Individual, Family and Small Business segment.

The decrease in commission revenue for the three months ended December 31, 2022 from the Medicare segment was driven by a 33% decline in Medicare plan approved members across all Medicare products that we market, which in turn was driven by the decrease in our member acquisition spend. The decrease in commission revenue was partially offset by improved conversion rates and an increase in constrained lifetime value of commissions per approved Medicare Advantage member compared to the same period in 2021. Our intentionally reduced enrollment volumes, driven by lower variable acquisition spend, were in line with our cost reduction initiatives and drove increased profitability in the fourth quarter. Medicare segment profit for the three months ended December 31, 2022 increased by 56% compared to the same period last year, due to significantly lower Medicare operating expenses and improved unit economics.

The increase in commission revenue from the Individual, Family and Small Business segment was primarily driven by $4.3 million in net adjustment revenue from prior period enrollments for the three months ended December 31, 2022 compared to $1.0 million for the same period in 2021, an increase in constrained lifetime value of commissions per approved individual and family plan member compared to the same period in 2021, and a 2% increase in individual and family plan approved members, partially offset by a 26% decline in ancillary product approved members. Individual, Family and Small Business segment profit for the three months ended December 31, 2022 increased 27% compared to the same period last year.

Net income for the three months ended December 31, 2022 was $20.7 million compared to net loss of $32.2 million for the same period last year. This increase in net income was primarily related to the $46.3 million goodwill and intangible asset impairment charges incurred during the three months ended December 31, 2021. In addition, net income for the three months ended December 31, 2022 was positively impacted by our significant cost reductions, higher quality leads to our omni-channel consumer platform and higher conversion rates, partially offset by lower enrollment volume compared to the same period last year.

Net cash used in operating activities for the three months ended December 31, 2022 was $18.6 million compared to $102.3 million for the same period in 2021, an $83.7 million improvement year-over-year. This improvement represents the results of our cost transformation program and significant operational improvements implemented over the past year.

GAAP - Fiscal Year 2022 Results

Total commission revenue for the year ended December 31, 2022 decreased 27% compared to the same period in 2021 due to a $109.1 million decrease in Medicare segment commission revenue and a $22.7 million decrease in Individual, Family and Small Business segment commission revenue.

The decrease in commission revenue from the Medicare segment was due to a 28% decline in Medicare approved members across all products that we market, reflecting our decision to temporarily pause enrollment growth while implementing a number of operational initiatives aimed at increasing the effectiveness of our sales and marketing organizations.

The decrease in commission revenue from the Individual, Family and Small Business segment was primarily due to a 22% decrease in individual and family plan approved members, a 26% decline in ancillary product approved members and $8.7 million in net adjustment revenue from prior period enrollments for the year ended December 31, 2022 compared to $30.2 million of net adjustment revenue for the same period in 2021.

Net cash used in operating activities for the year ended December 31, 2022 was $26.9 million compared to $162.6 million for the same period in 2021, a $135.8 million improvement year-over-year. This improvement represents the results of our cost transformation initiatives and significant operational improvements implemented over the past year.

Non-GAAP(1) - Fourth Quarter of 2022 Results

(1)See Non-GAAP Financial Information for definitions of our non-GAAP financial measures.

Non-GAAP net income for the fourth quarter of 2022 was $31.4 million, or $1.14 non-GAAP net income per diluted share, compared to non-GAAP net income of $13.1 million, or $0.49 non-GAAP net income per diluted share, for the same period in 2021. The increase in non-GAAP net income was primarily attributable to a 31% decline in non-GAAP operating expense as a result of our transformation initiatives, partially offset by a 19% decrease in total revenue.

Non-GAAP net income and non-GAAP net income per diluted share for the fourth quarter of 2022 were calculated by excluding $4.9 million of paid-in-kind dividends, $3.2 million change in preferred stock redemption value, $4.4 million of stock-based compensation expense, $8.9 million of impairment, restructuring and other charges consisting primarily of $8.4 million in lease impairment charges as a result of our shift to a remote-first work model and $2.6 million of income tax effect related to these non-GAAP adjustments from GAAP net income attributable to common stockholders and GAAP net income attributable to common stockholders per diluted share.

Non-GAAP net income and non-GAAP net income per diluted share for the fourth quarter of 2021 were calculated by excluding $4.6 million of paid-in-kind dividends, $2.6 million change in preferred stock redemption value, $8.0 million of stock-based compensation expense, $0.1 million of amortization of intangible assets, $48.2 million of impairment, restructuring and other charges primarily related to $46.3 million in goodwill and intangible asset impairment charges and $11.0 million of income tax effect of these non-GAAP adjustments from GAAP net loss attributable to common stockholders and GAAP net loss attributable to common stockholders per diluted share.

Adjusted EBITDA for the fourth quarter of 2022 increased 76% compared to the same period in 2021 primarily due to a decrease in operating expenses as a result of our transformation initiatives, partially offset by our intentionally reduced enrollment volumes and total revenue. Adjusted EBITDA margin for the fourth quarter of 2022 increased to 25% from 12% in the fourth quarter of 2021.

Non-GAAP(1) - Fiscal Year 2022 Results

(1)See Non-GAAP Financial Information for definitions of our non-GAAP financial measures.

Non-GAAP net loss for the year ended December 31, 2022 was $57.6 million, or $2.11 non-GAAP net loss per diluted share, compared to non-GAAP net loss of $37.3 million, or $1.40 non-GAAP net loss per diluted share, for the same period in 2021. The increase in non-GAAP net loss was primarily attributable to lower conversion rates in the first half of 2022 compared to the same period of 2021 and a decrease in total revenue, partially offset by a 19% decrease in non-GAAP operating expense driven by our transformation initiatives.

Non-GAAP net loss and non-GAAP net loss per diluted share for the year ended December 31, 2022 were calculated by excluding $19.4 million of paid-in-kind dividends, $11.3 million change in preferred stock redemption value, $20.3 million of stock-based compensation expense, $19.6 million of impairment, restructuring and other charges and $8.8 million of income tax effect related to these non-GAAP adjustments from GAAP net loss attributable to common stockholders and GAAP net loss attributable to common stockholders per diluted share.

Non-GAAP net loss and non-GAAP net loss per diluted share for the year ended December 31, 2021 were calculated by excluding $12.2 million of paid-in-kind dividends, $6.4 million change in preferred stock redemption value, $32.9 million of stock-based compensation expense, $51.2 million of impairment, restructuring and other charges, $0.5 million of amortization of intangible assets and $17.5 million of income tax effect related to these non-GAAP adjustments from GAAP net loss attributable to common stockholders and GAAP net loss attributable to common stockholders per diluted share.

Adjusted EBITDA for the year ended December 31, 2022 decreased compared to the same period in 2021 primarily due to unfavorable unit economics and profitability comparisons in the first half of 2022 and a decrease in total revenue, partially offset by a decrease in operating expenses as a result of our transformation initiatives.

Selected Metrics Highlights - Fourth Quarter of 2022 Results

(1)Online submission % represents a combination of unassisted and partially agent-assisted online applications.

(2)Major Medicare plans include Medicare Advantage and Medicare Supplement plans.

Medicare approved members decreased 33% in the fourth quarter of 2022 compared to the fourth quarter of 2021, due to a decline of 26%, 36% and 55% in Medicare Advantage, Medicare Supplement and Medicare Part D plan approved members, respectively. Approved members for individual and family plan products increased 2% in the fourth quarter of 2022 compared to the fourth quarter of 2021, due to a 12% increase in non-qualified health plan approved members, partially offset by a 12% decrease in qualified health plan approved members.

Selected Metrics Highlights - Fiscal Year 2022 Results

(1)As of December 31, 2022.

(2)As of December 31, 2021.

Medicare approved members decreased 28% during the year ended December 31, 2022 compared to the same period in 2021 due to a 24%, 34% and 45% decline in Medicare Advantage, Medicare Supplement and Medicare Part D plan approved members, respectively. Approved members for individual and family plan products decreased 22% during the year ended December 31, 2022 compared to the same period in 2021, driven by a 36% decrease in qualified health plan approved members and an 8% decrease in non-qualified health plan approved members.

Based on information available as of February 28, 2023, we are providing guidance for the full year ending December 31, 2023. These expectations are forward-looking statements and we assume 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 reports filed with the Securities and Exchange Commission.

The following guidance is for the full year ending December 31, 2023

Total revenue is expected to be in the range of $420 million to $440 million.

GAAP net loss is expected to be in the range of $55 million to $35 million.

Adjusted EBITDA(1) is expected to be in the range of $(15) million to $5 million.

Operating cash flow is expected to be in the range of $(30) million to $(15) million.

Webcast and Conference Call Information

A webcast and conference call will be held today, Tuesday, February 28, 2023 at 8 30 a.m. Eastern 5 30 a.m. Pacific Time. Individuals interested in listening to the conference call may do so by dialing (888) 886-7786. The participant passcode is 91265669. 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.

For more than 25 years, eHealth, Inc. (Nasdaq EHTH) has served American consumers with innovative technology and licensed agent support to help them find health insurance solutions that fit their personal needs. Through its proprietary health insurance marketplace at eHealth.com and eHealthMedicare.com, eHealth has connected more than eight million members with quality, affordable coverage. eHealth offers Medicare Advantage, Medicare Supplement, Medicare Part D, individual, family, small business, and ancillary plans from approximately 200 health insurance companies nationwide.

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 our expectations for enrollment growth and quality, our expectations regarding our financial performance, our estimates regarding total membership, Medicare, individual and family plan, ancillary products, and small business memberships, our estimates regarding constrained lifetime values of commissions per approved member by product category, our estimates regarding costs per approved member, our expectations regarding the sufficiency of our liquidity to execute on our 2023 operating plan, and our 2023 annual guidance for total revenue, GAAP net loss, adjusted EBITDA and operating cash flow.

These forward-looking statements are inherently subject to various risks and uncertainties that could cause actual results to differ materially from the statements made. In particular, we are required by Accounting Standards Codification 606 - Revenue from Contracts with Customers to make numerous assumptions that are based on historical trends and our management's judgment. These assumptions may change over time and have a material impact on our revenue recognition, guidance, and results of operations. Please review the assumptions stated in this press release carefully.

The risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward-looking statements include our ability to retain existing members and enroll new members during the annual health care open enrollment period, the Medicare annual enrollment period and other special enrollment periods changes in laws, regulations and guidelines, including in connection with health care reform or with respect to the marketing and sale of Medicare plans competition, including competition from government-run health insurance exchanges and other sources the seasonality of our business and the fluctuation of our operating results our ability to accurately estimate membership, lifetime value of commissions and commissions receivable changes in product

offerings among carriers on our ecommerce platform and the resulting impact on our commission revenue our ability to execute on our growth strategy in the Medicare market changes in our management and key employees exposure to security risks and our ability to safeguard the security and privacy of confidential data our relationships with health insurance carriers and our reliance on a small number of health insurance carriers the success of our carrier advertising and sponsorship program our success in marketing and selling health insurance plans and our unit cost of acquisition our ability to hire, train, retain and ensure the productivity of licensed health insurance agents and other employees our ability to effectively manage our operations as our business evolves and execute on our transformation plan and other strategic initiatives the need for health insurance carrier and regulatory approvals in connection with the marketing of Medicare-related insurance products changes in the market for private health insurance consumer satisfaction of our service and actions we take to improve the quality of enrollments changes in member conversion rates changes in commission rates our ability to sell qualified health insurance plans to subsidy-eligible individuals and to enroll subsidy-eligible individuals through government-run health insurance exchanges our ability to maintain and enhance our brand identity our ability to derive desired benefits from investments in our business, including membership growth and retention initiatives reliance on marketing partners the impact of our direct-to-consumer mail, email, social media, telephone and television marketing efforts timing of receipt and accuracy of commission reports payment practices of health insurance carriers dependence on our operations in China the restrictions in our debt obligations the restrictions in our investment agreement with convertible preferred stock investors our ability to raise additional capital compliance with insurance, privacy and other laws and regulations the outcome of litigation in which we are and may from time to time be involved the performance, reliability and availability of our information technology systems, ecommerce platform and underlying network infrastructure. Other factors that could cause operating, financial and other results to differ are described in our 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 our website at http www.ehealthinsurance.com and on the Securities and Exchange Commission's website at www.sec.gov.

All forward-looking statements in this press release are based on information available to us as of the date hereof, and we do not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made, except as required by law.

Non-GAAP Financial Information

This press release includes financial measures that are not calculated in accordance with U.S. generally accepted accounting principles (GAAP). To supplement eHealth's condensed consolidated financial statements presented in accordance with GAAP, eHealth presents investors with non-GAAP financial measures, including non-GAAP net income (loss) non-GAAP net income (loss) per diluted share adjusted EBITDA and adjusted EBITDA margin.

Non-GAAP net income (loss) consists of GAAP net income (loss) attributable to common stockholders excluding the following items

paid-in-kind dividends for preferred stock and change in preferred stock redemption value (together impact from preferred stock ),

the effects of expensing stock-based compensation related to stock options and restricted stock units,

impairment, restructuring and other charges,

amortization of intangible assets,

other non-recurring charges (as noted below), and

the income tax impact of non-GAAP adjustments.

Non-GAAP net income (loss) per diluted share consists of GAAP net income (loss) attributable to common stockholder per diluted share excluding the following items

impact from preferred stock per diluted share,

the effects of expensing stock-based compensation related to stock options and restricted stock units per diluted share,

impairment, restructuring and other charges per diluted share,

amortization of intangible assets per diluted share,

other non-recurring charges (as noted below) per diluted share, and

the income tax impact of non-GAAP adjustments per diluted share.

Adjusted EBITDA is calculated by excluding the impact from preferred stock, income tax expense (benefit), depreciation and amortization, stock-based compensation expense, impairment charges, restructuring charges, amortization of intangible assets, other income (expense), net, and other non-recurring charges from GAAP net income (loss) attributable to common stockholders. Other non-recurring charges to GAAP net income (loss) attributable to common stockholders may include transaction expenses in connection with capital raising transactions (whether debt, equity or equity-linked) and acquisitions, whether or not consummated, purchase price adjustments and the cumulative effect of a change in accounting principles.

Adjusted EBITDA margin is calculated as adjusted EBITDA divided by revenue.

eHealth believes that the presentation of these non-GAAP financial measures provides important supplemental information to management and investors regarding financial and business trends relating to eHealth's financial condition and results of operations. Management believes that the use of these non-GAAP financial measures provides consistency and comparability with eHealth's past financial reports. Management also believes that the items described above provide an additional measure of eHealth's operating results and facilitates comparisons of eHealth'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 eHealth's ongoing operations. eHealth believes that these non-GAAP financial measures are useful to investors in their assessment of eHealth's operating performance.

Non-GAAP net income (loss), non-GAAP net income (loss) per diluted share, adjusted EBITDA and adjusted EBITDA margin 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 revenue and costs associated with the operations of eHealth's business and do not reflect 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. eHealth expects to continue to incur the stock-based compensation costs and depreciation and amortization described above, and exclusion of these costs, and their related income tax benefits, from non-GAAP financial measures should not be construed as an inference that these costs are unusual or infrequent. eHealth compensates for these limitations by prominently disclosing GAAP net income (loss), GAAP net income (loss) attributable to common stockholders and GAAP net income (loss) attributable to common stockholders per diluted share and GAAP net income (loss) margin and providing investors with reconciliations from eHealth'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 described above and the related reconciliations between these financial measures.

Investor Relations Contact

Kate Sidorovich, CFA

Senior Vice President, Investor Relations Strategy

2625 Augustine Drive, Suite 150

Santa Clara, CA, 95054

kate.sidorovich ehealth.com

http ir.ehealthinsurance.com

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, unaudited)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts, unaudited)

(2) We apply the two-class method in calculating income (loss) per common stock as our Series A convertible preferred stock is considered a participating security. Accordingly, such securities are included in the earnings allocation in calculating income per share. Diluted income (loss) per common share is calculated using the more dilutive of the two-class method or as-converted method. The two-class method uses net income (loss) available to common stockholders and assumes conversion of all potential shares other than participating securities. The as-converted method uses net income (loss) available to common stockholders and assumes conversion of all potential shares including participating securities to the extent they are not anti-dilutive. Net loss attributable to common stockholders is not allocated to the convertible preferred stock as the holder of the Series A preferred stock does not have a contractual obligation to share in losses. For the three months ended December 31, 2022, net income allocated to common stockholders (basic) was $11,265 and net income allocated to participating securities (basic) was $1,307. For the three months ended December 31, 2022, net income allocated to common stockholders (diluted) was $11,267 and net income allocated to participating securities (diluted) was $1,305.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, unaudited)

(in thousands, unaudited)

We evaluate our business performance and manage our operations as two distinct reporting segments

Individual, Family and Small Business.