Document eHealth, Inc. Announces Third Quarter 2021 Results

eHealth, Inc. Announces Third Quarter 2021 Results

SANTA CLARA, California - November 8, 2021 - eHealth, Inc. (Nasdaq EHTH), a leading private online health insurance marketplace, today announced its financial results for the third quarter ended September 30, 2021.

(1)See the Non-GAAP Financial Information section for definitions of our non-GAAP financial measures. We revised the definition of Non-GAAP net income, non-GAAP net income per diluted share and adjusted EBITDA in the second quarter of 2021 to exclude the impact from the convertible preferred stock issued on April 30, 2021.

(2)Effective with the first quarter of 2021, we modified our calculation of adjusted EBITDA to exclude the amortization of capitalized software development costs. The amortization of capitalized software development costs were $3.4 million and $2.1 million for the third quarter 2021 and 2020, respectively, and $9.1 million and $5.3 million for the nine months ended September 30, 2021 and 2020, respectively. The modified calculation is intended to more closely align with how our peer companies calculate this non-GAAP financial measure. See Revised Adjusted EBITDA Reconciliation for additional information.

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

GAAP - Third Quarter of 2021 Results

(1)During the first quarter of 2021, we modified the calculation of segment profit (loss) to exclude the amortization of capitalized software development cost. The amortization of capitalized software development costs were $3.4 million and $2.1 million for the third quarter 2021 and 2020, respectively, and $9.1 million and $5.3 million for the nine months ended September 30, 2021 and 2020, respectively. See Revised Segment Profit Summary for additional information.

Total commission revenue for the third quarter of 2021 decreased 20% compared to the same period in 2020 due to an $8.8 million decrease in Medicare segment commission revenue and a $5.5 million decrease in Individual, Family and Small Business segment commission revenue. The decrease in the Medicare segment commission revenue was primarily due to a 22% decrease in approved members, partially offset by an increase in lifetime values of Medicare Advantage plans for the third quarter of 2021, compared to the same period in 2020. The decrease in total Medicare approved members was primarily attributable to a decline in telesales conversion rate, partially offset by the growth of our online applications. The decrease in Individual, Family and Small Business segment commission revenue was primarily driven by a decrease in net adjustment revenue, partially offset by an 88% increase in approved individual and family plan members due to a favorable market environment and higher lifetime values for individual and family plan and certain ancillary products compared to the same period in 2020.

GAAP - Year-to-Date Results

(1)During the first quarter of 2021, we modified the calculation of segment profit (loss) to exclude the amortization of capitalized software development cost. The amortization of capitalized software development costs were $3.4 million and $2.1 million for the third quarter 2021 and 2020, respectively, and $9.1 million and $5.3 million for the nine months ended September 30, 2021 and 2020, respectively. See Revised Segment Profit Summary for additional information.

Total commission revenue for the nine months ended September 30, 2021 increased 9% compared to the same period in 2020 due to a $12.1 million increase in Individual, Family and Small Business segment commission revenue and a $10.0 million increase in Medicare segment commission revenue. The increase in Individual, Family and Small Business segment commission revenue for the nine months ended September 30, 2021 was primarily driven by a $8.6 million increase in net adjustment revenue and a 52% increase in approved individual and family plan members, compared to the same period in 2020. The increase in Medicare segment commission revenue was driven by an 18% increase in Medicare plan approved members for the nine months ended September 30, 2021, primarily attributable to 30% growth in Medicare Advantage plan approved members, partially offset by a $20.7 million decrease in net adjustment revenue compared to the same period in 2020.

Non-GAAP(1) - Third Quarter of 2021 Results

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

(2)Effective with the first quarter of 2021, we modified our calculation of adjusted EBITDA to exclude the amortization of capitalized software development costs. The amortization of capitalized software development costs were $3.4 million and $2.1 million for the third quarter of 2021 and 2020, respectively, and $9.1 million and $5.3 million for the nine months ended September 30, 2021 and 2020, respectively. The modified calculation is intended to more closely align with how our peer companies calculate this non-GAAP financial measure. See Revised Adjusted EBITDA Reconciliation for additional information.

Non-GAAP net loss for the third quarter of 2021 was $47.7 million, or $1.78 non-GAAP net loss per diluted share, compared to non-GAAP net loss of $9.5 million, or $0.36 non-GAAP net loss per diluted share, for the third quarter of 2020, primarily attributable to a decline in revenue and a 14% increase in non-GAAP operating expense driven by higher marketing and advertising expenses and customer care and enrollment expenses in preparation for the annual enrollment period.

Non-GAAP net loss and non-GAAP net loss per diluted share for the third quarter of 2021 are calculated by excluding $4.6 million in paid-in-kind dividends and $2.4 million change in preferred stock redemption value, both related to the private placement with H.I.G. Capital, $5.2 million of stock-based compensation expense, $0.6 million of restructuring and reorganization charges, $0.1 million of amortization of intangible assets, and $0.6 million of the 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.

Non-GAAP net loss and non-GAAP net loss per diluted share for the third quarter of 2020 are calculated by excluding $6.3 million of stock-based compensation expense, $0.3 million of amortization of intangible assets and $1.6 million of the 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 third quarter of 2021 decreased compared to the third quarter of 2020 primarily due to an increase in non-GAAP operating expense and a decline in revenue.

Non-GAAP(1) - Year-to-Date Results

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

(2)Effective with the first quarter of 2021, we modified our calculation of adjusted EBITDA to exclude the amortization of capitalized software development costs. The amortization of capitalized software development costs were $3.4 million and $2.1 million for the third quarter of 2021 and 2020, respectively, and $9.1 million and $5.3 million for the nine months ended September 30, 2021 and 2020, respectively. The modified calculation is intended to more closely align with how our peer companies calculate this non-GAAP financial measure. See Revised Adjusted EBITDA Reconciliation for additional information.

Non-GAAP net loss for the nine months ended September 30, 2021 was $50.4 million, or $1.89 non-GAAP net loss per diluted share, compared to non-GAAP net income of $2.5 million, or $0.10 non-GAAP net income per diluted share, for the same period in 2020, primarily attributable to a 22% increase in non-GAAP operating expense due to our enrollment quality initiatives and preparation for the annual enrollment period, partially offset by an increase in revenue.

Non-GAAP net loss and non-GAAP net loss per diluted share for the nine months ended September 30, 2021 were calculated by excluding $7.6 million in paid-in-kind dividends, $3.8 million change in preferred stock redemption value, $24.9 million of stock-based compensation expense, $3.0 million of restructuring and reorganization charges, $0.4 million of amortization of intangible assets, and $6.5 million of the 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.

Non-GAAP net income and non-GAAP net income per diluted share for the nine months ended September 30, 2020 were calculated by excluding $21.7 million of stock-based compensation expense, $1.2 million of amortization of intangible assets and $6.0 million of the 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 nine months ended September 30, 2021 decreased compared to the same period in 2020 primarily due to an increase in non-GAAP operating expense, partially offset by an increase in revenue.

Selected Metrics Highlights - Third Quarter of 2021 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 22% in the third quarter of 2021 compared to the third quarter of 2020, due primarily to an 18% decrease in Medicare Advantage approved members as a result of lower than expected telephonic conversion rates. Approved members for individual and family plan major medical products increased 88% in the third quarter of 2021 compared to the third quarter of 2020, primarily driven by a 192% increase in qualified health plan approved members.

Medicare new paying members decreased 19% in the third quarter of 2021 compared to the third quarter of 2020, due primarily to a 14% decrease in Medicare Advantage new paying members. Individual and family plan new paying members increased 99% in the third quarter of 2021 compared to the third quarter of 2020, primarily driven by an increase in qualified health plan new paying members.

Online application submission for Major Medicare applications increased to 45% in the third quarter of 2021 as our online business continued to scale driven by strong consumer demand and favorable conversion rates on our ecommerce platform. Our unassisted online application submission for Major Medicare applications grew 58% in the third quarter of 2021 compared to the same quarter in 2020.

Selected Metrics Highlights - Year-to-Date Results

Medicare approved members increased 18% during the nine months ended September 30, 2021 compared to the same period in 2020, primarily driven by a 30% increase in Medicare Advantage approved members, partially offset by declines in Medicare Supplement approved members and Medicare Part D prescription drug plan approved members. Approved members for individual and family plan products increased 52% during the nine months ended September 30, 2021 compared to the same period in 2020, driven by a 83% increase in qualified health plan approved members and a 26% increase in non-qualified health plan approved members.

Medicare new paying members increased 8% during the nine months ended September 30, 2021 compared to the same period in 2020, due primarily to a 37% increase in Medicare Advantage new paying members, partially offset by declines in Medicare Part D prescription drug plan new paying members and Medicare Supplement new paying members. Individual and family major medical plan new paying members increased 32% during the nine months ended September 30, 2021 compared to the same period in 2020, driven by a 53% increase in qualified health plan new paying members and an 18% increase in non-qualified health plan new paying members.

Estimated membership was 1,270,628 at the end of the third quarter of 2021, an increase of 12% compared to estimated membership at the end of the third quarter of 2020, primarily driven by a 19% increase in Medicare estimated membership.

Convertible Preferred Stock

On April 30, 2021, we issued and sold 2.25 million shares of Series A Preferred Stock, par value $0.001 per share, at an aggregate purchase price of $225.0 million to an investment vehicle of H.I.G. Capital in a private placement. This transaction resulted in net proceeds of $214.0 million.

During the third quarter of 2021, we accrued paid-in-kind dividends on the Series A Preferred Stock at 8% per annum equal to $4.6 million and recognized $2.4 million of accretion due to the redemption feature available to H.I.G. Capital at the sixth anniversary of the closing of this transaction. These charges were recorded as a reduction of our retained earnings and had no impact on GAAP net loss, which was $53.0 million, for the third quarter of 2021. However, as the Series A Preferred Stock is considered a participating security, both of these charges impacted net loss attributable to common stockholders and net loss attributable to common stockholders per share. For the third quarter of 2021, GAAP net loss attributable to common stockholders was $59.9 million, or $2.24 per share.

Based on information available as of November 8, 2021, we are revising guidance for the full year ending December 31, 2021 previously provided on July 29, 2021. 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, 2021

Total revenue is expected to be in the range of $535.0 million to $575.0 million compared to our previous guidance of $660.0 million to $700.0 million.

GAAP net loss is expected to be in the range of $(43.0) million to $(63.0) million compared to our previous guidance of GAAP net income of $42.0 million to $57.0 million.

Adjusted EBITDA(1)(2) is expected to be in the range of $(20.0) million to $0.0 million compared to our previous guidance of $110.0 million to $125.0 million.

Cash used in operations is expected to be in the range of $125.0 million to $135.0 million compared to our previous guidance of $85.0 million to $95.0 million, and cash used for capital expenditures is expected to be in the range of $21.0 million to $24.0 million compared to our previous guidance of $24.0 million to $27.0 million.

Non-GAAP net loss per diluted share(1) is expected to be in the range of $(0.45) to $(1.13) compared to our previous guidance of non-GAAP net income per diluted share of $2.77 to $3.26 per share.

Revenue from the Medicare segment is expected to be in the range of $471.0 million to $509.0 million compared to our previous guidance of $601.0 million to $639.0 million. Revenue from the Individual, Family and Small Business segment is expected to be in the range of $64.0 million to $66.0 million compared to our previous guidance of $59.0 million to $61.0 million.

Medicare segment profit (loss)(3) is expected to be in the range of $(5.0) million to $16.0 million compared to our previous guidance of $130.0 million to $146.0 million, and Individual, Family and Small Business segment profit is expected to be in the range of $41.0 million to $43.0 million compared to our previous guidance of $36.0 million to $38.0 million.

Corporate(4) shared service expenses, excluding stock-based compensation, depreciation and amortization expense, and restructuring and reorganization charges, is expected to remain consistent with our previous guidance of $56.0 million to $59.0 million.

GAAP net loss attributable to common stockholders per diluted share is expected to be in the range of $(2.26) to $(2.99) compared to our previous guidance of GAAP net income attributable to common stockholder of $0.84 to $1.39 per share.

Webcast and Conference Call Information

A webcast and conference call will be held today, Monday, November 8, 2021 at 8 30 a.m. Eastern 5 30 a.m. Pacific Time. The live webcast and supporting presentation slides will be available on the Investor Relations section of eHealth's website at http ir.ehealthinsurance.com. 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 2061569. 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 2061569. 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.

eHealth, Inc. (Nasdaq EHTH) operates a leading online health insurance marketplace at eHealth.com and eHealthMedicare.com with technology that provides consumers with health insurance enrollment solutions. Since 1997, we have connected more than 8 million members with quality, affordable health insurance, Medicare options, and ancillary plans. Our proprietary marketplace offers Medicare Advantage, Medicare Supplement, Medicare Part D prescription drug, individual, family, small business and other plans from over 200 health insurance carriers across fifty states and the District of Columbia.

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 trends in our business, opportunities for growth and value creation, our competitive advantage, expectation of our new leadership, our estimates regarding total membership, Medicare membership, individual and family plan membership and ancillary and small business membership, our estimates regarding constrained lifetime values of commissions per approved member by product category, our estimates regarding costs per approved member, and our 2021 annual guidance on total revenue, revenue from our Medicare segment and our Individual, Family and Small Business segment, GAAP net loss, adjusted EBITDA, profit (loss) from our Medicare segment, profit from our Individual, Family and Small Business segment, cash used in operations, cash used for capital expenditures, corporate shared service expenses, GAAP net loss attributable to common stockholders per diluted share and non-GAAP net loss per diluted share.

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 healthcare open enrollment period, the Medicare annual enrollment period and other special enrollment period changes in laws, regulations and guidelines, including in connection with healthcare 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 the continued impact of the COVID-19 pandemic on our operations, business, financial condition and growth prospects, as well as on the general economy 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 customer concentration and consolidation of the health insurance industry 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 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 with 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 email, 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 agreement with H.I.G. Capital compliance with insurance and other laws and regulations the outcome of litigation in which we are involved and 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 and adjusted EBITDA.

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,

restructuring and reorganization 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,

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

restructuring and reorganization 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(1) is calculated by excluding the impact from preferred stock, interest income and expense, income tax expense (benefit), depreciation and amortization, stock-based compensation expense, restructuring and reorganization charges, amortization of intangible assets, other income (expense), net, and other non-recurring charges to 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.

(1)Effective with the first quarter of 2021, we modified our calculation of adjusted EBITDA to exclude the amortization of capitalized software development costs. The modified calculation is intended to more closely align with how our peer companies calculate this non-GAAP financial measure. See Revised Adjusted EBITDA Reconciliation for additional information.

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, and adjusted EBITDA 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, amortization of intangible assets, 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 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, Second Floor

Santa Clara, CA, 95054

kate.sidorovich ehealth.com

http ir.ehealthinsurance.com

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, Unaudited)