Document eHealth, Inc. Announces Third Quarter 2022 Results

eHealth, Inc. Announces Third Quarter 2022 Results

SANTA CLARA, California - November 7, 2022 - eHealth, Inc. (Nasdaq EHTH), a leading private online health insurance marketplace, today announced its financial results for the third quarter ended September 30, 2022.

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

GAAP - Third Quarter of 2022 Results

Total commission revenue for the three months ended September 30, 2022 decreased 17% compared to the same period in 2021 due to a $1.2 million decrease in commission revenue from the Medicare segment and a $9.0 million decrease in commission revenue from the Individual, Family and Small Business segment.

The decrease in commission revenue from the Medicare segment was driven by a 4% decrease in Medicare plan approved members. This was primarily due to a 39% and 20% decrease in Medicare Supplement and Medicare Part D plan approved members, respectively, partially offset by a 3% increase in Medicare Advantage plan approved members compared to the same period in 2021. The decrease in Medicare Supplement and Medicare Part D plan approved members was driven primarily by a shift in consumer demand which now favors Medicare Advantage as well as our targeted deployment of marketing and advertising costs toward Medicare Advantage. The increase in Medicare Advantage approved members was due to an increase in telephonic conversion rates and growth in online unassisted applications.

The decrease in commission revenue from the Individual, Family and Small Business segment was due primarily to $1.8 million in net adjustment revenue from prior period enrollments for the three months ended September 30, 2022 compared to $10.0 million for the same period in 2021, a 41% decrease in individual and family plan approved members and a 26% decrease in ancillary product approved members, partially offset by an increase in constrained lifetime value of commissions per approved individual and family plan member compared to the same period in 2021.

Net cash used in operating activities for the for the three months ended September 30, 2022 was $29.6 million compared to $71.0 million for the same period in 2021, a $41.4 million improvement year-over-year. This improvement represents the initial results of our cost transformation program and significant operational improvements implemented over the past year.

Other revenue decreased $0.3 million during the three months ended September 30, 2022 compared to the same period in 2021 due to a decrease in advertising revenue.

GAAP - Year-to-Date 2022 Results

Total commission revenue for the nine months ended September 30, 2022 decreased 31% compared to the same period in 2021 due to a $59.5 million decrease in Medicare segment commission revenue and a $25.9 million decrease in Individual, Family and Small Business segment commission revenue.

The decrease in commission revenue from the Medicare segment was due to a 23% decrease in overall Medicare approved members, driven primarily by a decrease in member acquisition spend including marketing and customer care and enrollment, as well as a decline in conversion rates in the first half of 2022 compared to a year ago.

The decrease in commission revenue from the Individual, Family and Small Business segment was primarily due to $4.4 million in net adjustment revenue from prior period enrollments for the nine months ended September 30, 2022 compared to $29.1 million for the same period in 2021, a 34% decrease in individual and family plan approved members, and a 26% decrease in ancillary product approved members.

For the first nine months ended September 30, 2022, net cash used in operating activities was $8.3 million compared to $60.3 million for the same period in 2021, a $52.0 million improvement year-over-year. This improvement represents the initial results of our cost transformation program and significant operational improvements implemented over the past year.

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

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

Non-GAAP net loss for the third quarter of 2022 was $31.9 million, or $1.17 non-GAAP net loss per diluted share, compared to non-GAAP net loss of $47.7 million, or $1.78 non-GAAP net loss per diluted share, for the same period in 2021. The decrease in non-GAAP net loss was primarily attributable to a 26% decline in non-GAAP operating expense as a result of our transformation initiatives, partially offset by a 16% decrease in total revenue.

Non-GAAP net loss and non-GAAP net loss per diluted share for the third quarter of 2022 were calculated by excluding $4.9 million of paid-in-kind dividends, $2.9 million change in preferred stock redemption value, $5.1 million of stock-based compensation expense, $4.5 million of impairment, restructuring and other charges reflecting primarily $3.4 million in lease impairment related to our shift to a remote-first model and $2.4 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 2021 were calculated by excluding $4.6 million of paid-in-kind dividends, $2.4 million change in preferred stock redemption value, $5.2 million of stock-based compensation expense, $0.1 million of amortization of intangible assets, $0.6 million of impairment, restructuring and other charges 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.

Adjusted EBITDA for the third quarter of 2022 increased compared to the same period in 2021 primarily due to a decrease in non-GAAP operating expense as a result of our transformation initiatives, partially offset by a decrease in total revenue.

Non-GAAP(1) - Year-to-Date 2022 Results

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

Non-GAAP net loss for the nine months ended September 30, 2022 was $88.9 million, or $3.25 non-GAAP net loss per diluted share, compared to non-GAAP net loss of $50.4 million, or $1.89 non-GAAP net loss per diluted share, for the same period in 2021. The increase in non-GAAP net loss was primarily attributable to a decrease in total revenue, partially offset by a 12% 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 nine months ended September 30, 2022 were calculated by excluding $14.4 million of paid-in-kind dividends, $8.2 million change in preferred stock redemption value, $15.9 million of stock-based compensation expense, $10.7 million of impairment, restructuring and other charges and $6.2 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 nine months ended September 30, 2021 were calculated by excluding $7.6 million of 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 impairment, restructuring and other 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.

Adjusted EBITDA for the nine months ended September 30, 2022 decreased compared to the same period in 2021 primarily due to a decrease in total revenue, partially offset by a decrease in non-GAAP operating expense due to our transformation initiatives.

Selected Metrics Highlights - Third 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 4% in the third quarter of 2022 compared to the third quarter of 2021, due to a decline in Medicare Supplement and Medicare Part D plan approved members, partially offset by a 3% increase in approved Medicare Advantage members. Approved members for individual and family plan products decreased 41% in the third quarter of 2022 compared to the third quarter of 2021, due to a decrease in enrollments in both qualified and non-qualified individual and family plans.

Medicare new paying members decreased 12% in the third quarter of 2022 compared to the third quarter of 2021, due primarily to an overall decline in Medicare approved members. Individual and family plan new paying members decreased 38% in the third quarter of 2022 compared to the third quarter of 2021, due primarily to a decline in approved members for non-qualified and qualified plans.

As our online business continued to scale, the number of unassisted online Major Medicare applications grew 15% in the third quarter of 2022 compared to the third quarter of 2021 primarily driven by enhanced user experience and favorable conversion rates on our ecommerce platform. Our unassisted online application submissions represented 20% of Major Medicare applications in the third quarter of 2022 compared to 17% in the third quarter of 2021.

Selected Metrics Highlights - Year-to-Date 2022 Results

(1)As of September 30, 2022.

(2)As of September 30, 2021.

Medicare approved members decreased 23% during the nine months ended September 30, 2022 compared to the same period in 2021 due to a decline in approved members across all Medicare products. The decrease in approved Medicare plan members was driven by a decrease in submitted Medicare Advantage applications due to lower telephonic conversion rates and our decision to reduce our investment in telephonic enrollment growth in 2022. Approved members for individual and family plan products decreased 34% during the nine months ended September 30, 2022 compared to the same period in 2021, driven by a 44% decrease in qualified health plan approved members and a 21% decrease in non-qualified health plan approved members.

Medicare total new paying members declined 21% during the nine months ended September 30, 2022 compared to the same period in 2021, primarily due to a decline in approved Medicare plan members. Individual and family plan new paying members declined 25% during the nine months ended September 30, 2022 compared to the same period in 2021 due to a 23% decrease in new paying members for non-qualified plans and a 28% decrease in new paying members for qualified plans.

Estimated membership was 1,272,995 at the end of the third quarter of 2022, flat compared to estimated membership at the end of the third quarter of 2021, primarily driven by a 3% increase in Medicare estimated membership including a 4% increase in Medicare Advantage estimated membership, substantially offset by a decline in ancillary and individual and family plan 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 three and nine months ended September 30, 2022, we accrued paid-in-kind dividends on the Series A Preferred Stock at 8% per annum equal to $4.9 million and $14.4 million, respectively, and recognized $2.9 million and $8.2 million, respectively, 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 $39.1 million and $109.4 million for the three and nine months ended September 30, 2022, respectively. 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 diluted share. For the three and nine months ended September 30, 2022, GAAP net loss attributable to common stockholders was $47.0 million, or $1.72 per diluted share and $132.0 million, or $4.83 per diluted share, respectively.

Based on information available as of November 7, 2022, we are reiterating guidance for the full year ending December 31, 2022. 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, 2022

Total revenue is expected to be in the range of $375.0 million to $395.0 million.

GAAP net loss is expected to be in the range of $115.0 million to $92.0 million.

Adjusted EBITDA(1) is expected to be in the range of $(73.0) million to $(45.0) million.

Total cash outflow, excluding the impact of our $70.0 million term loan and associated costs and net securities activities, is expected to be in the range of $110.0 million to $90.0 million.

Webcast and Conference Call Information

A webcast and conference call will be held today, Monday, November 7, 2022 at 5 00 p.m. Eastern 2 00 p.m. Pacific Time. To participate via telephone, please register in advance using this link, https register.vevent.com register BI38fc67b2917a47be9f3a5a8718d2cc3a. Upon registration, telephone participants will receive a confirmation email detailing how to join the conference call, including a dial-in number and a unique registrant ID. 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 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 eight 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 approximately 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 our expectations regarding cost savings, 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 estimates regarding cost savings, and our 2022 annual guidance on total revenue, GAAP net loss, adjusted EBITDA, and total cash outflow.

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 the impact of the COVID-19 pandemic and other public health crises, illness, epidemics or pandemics 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 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 transformational 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 H.I.G our ability to raise additional capital compliance with insurance, privacy and other laws and regulations the outcome of litigations 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 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,

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.

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 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, 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)

* Stock-based compensation expense for both for the three and nine months ended September 30, 2021 was impacted by a $4.1 million credit related to forfeited equity awards due to our chief executive officer's separation.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS