Ehealth Inc : eHealth, Inc. Announces Fourth Quarter and Full Year 2006 Results
02/15/2007| 04:29pm US/Eastern
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eHealth, Inc. (NASDAQ:EHTH), the leading online source of health
insurance for individuals, families and small businesses, today
announced its financial results for the fourth quarter and full year
ended December 31, 2006.
?Our fourth quarter results show the
significant market and financial progress we are making as a company,?
said Gary Lauer, chief executive officer of eHealth. ?In
particular, our fourth quarter revenue growth, operating margin and cash
flow illustrate the power and leverage of our financial model.?
Fourth Quarter Results
For the fourth quarter ended December 31, 2006, revenue totaled $17.4
million, representing a 49% increase over revenue of $11.7 million for
the fourth quarter of 2005. The increase in revenue was driven primarily
by growth in commission revenue received from health insurance carriers.
Operating income increased to $2.8 million for the fourth quarter of
2006, compared to operating income of $0.1 million for the fourth
quarter of 2005. Operating margins improved to 16% in the fourth quarter
of 2006, up from 12% in the third quarter of 2006 computed on a non-GAAP
basis by excluding from the third quarter a $0.7 million revenue item
that had previously been deferred and was recognized in a lump-sum in
the third quarter. This was also up from 1% in the fourth quarter of
2005.
Net income for the fourth quarter of 2006, which included a $7.4 million
income tax benefit from a partial reduction of the valuation allowance
against deferred tax assets, was $11.0 million, or $0.45 per share on a
diluted basis. Excluding the $7.4 million income tax benefit, non-GAAP
net income for the fourth quarter of 2006 was $3.6 million, or $0.15 per
diluted share, compared to net income of $0.2 million, or $0.01 per
diluted share, for the fourth quarter of 2005.
During the fourth quarter of 2006, cash flow from operations increased
to $4.9 million, compared to $1.1 million for the same period in 2005.
The Company ended the fourth quarter of 2006 with $90.3 million of cash
and cash equivalents, compared with $9.4 million as of December 31, 2005.
Full Year Results
For the year ended December 31, 2006, revenue totaled $61.3 million,
representing a 47% increase over revenue of $41.8 million for the year
ended December 31, 2005.
Operating income increased to $8.0 million during the year ended
December 31, 2006, compared to an operating loss of $0.6 million during
the year ended December 31, 2005. Operating margins improved to 13% for
the year ended December 31, 2006, up from an operating deficit of 2% for
the year ended December 31, 2005.
Net income for the year ended December 31, 2006, which included the
income tax benefit of $7.4 million, was $16.5 million, or $0.80 per
share on a diluted basis. Excluding the $7.4 million income tax benefit,
non-GAAP net income for the year ended December 31, 2006 was $9.0
million, or $0.44 per diluted share, compared with a net loss of $0.4
million, or $(0.09) per diluted share, for the year ended December 31,
2005.
During the year ended December 31, 2006, cash flow from operations
totaled $11.4 million, representing a 336% increase compared to cash
flow from operations of $2.6 million for the year ended December 31,
2005.
Initial Public Offering
In October 2006, the Company completed the initial public offering of
5,750,000 shares of common stock at a price of $14 per share, resulting
in cash proceeds of approximately $70.2 million, net of offering
expenses and underwriters' discounts and
commissions.
Guidance
eHealth is providing guidance for its full year ending December 31, 2007
based on information available as of February 15, 2007:
Total revenue expected to be in the range of $81 million to $84 million
Non-GAAP net income, excluding stock-based compensation expense,
expected to be in the range of $10.5 million to $12.0 million. The
effective tax rate, if it were computed based on pre-tax earnings
before stock-based compensation, is expected to range from
approximately 39% to 40%.
Non-GAAP earnings per diluted share, excluding stock-based
compensation expense, expected to be in the range of $0.40 to $0.45
per share
Cash flow from operations expected to be in the range of $19 million
to $21 million
Webcast and Conference Call Information
A Webcast and conference call will be held today, Thursday, February 15,
2007 at 5:00 p.m. (EST) / 2:00 p.m. (PST). The Webcast will be available
live on the Investor Relations section on our website at http://ir.ehealthinsurance.com.
Individuals interested in listening to the conference call may do so by
dialing 866-202-0886 for domestic callers and 617-213-8841 for
international callers. The participant passcode is 54330533. 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 19493974. The archived Webcast will also be available
on our website.
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. The
Company is headquartered in Mountain View, California. Additional
information can be found at the Company's website, www.ehealthinsurance.com.
Forward Looking Statements
This press release contains statements that are forward-looking
statements as defined within the Private Securities Litigation Reform
Act of 1995. These include statements regarding the Company's
market and financial progress, the power and leverage of the Company's
financial model, total revenue, net income, effective tax rate, earnings
per diluted share and cash flow from operations for 2007. These
forward-looking statements are inherently subject to various risks and
uncertainties that could cause actual results to differ materially from
the statements made, including risks associated with acceptance of the
internet as a medium for the purchase of health insurance, the Company's
ability to increase its membership base and expand its relationships
with health insurance carriers and marketing partners, retention of the
Company's members, increased rates of member
turnover, changes in the Company's
relationships with insurance carriers, system failures or capacity
constraints, dependence upon Internet search engines to attract
consumers who visit the Company's website,
the performance, reliability and availability of the Company's
ecommerce platform and underlying network infrastructure, the
effectiveness of the Company's marketing and
public relations efforts, exposure to online commerce security risks,
reliance on marketing partners for the sale of health insurance,
competition, protection of intellectual property and intellectual
property rights claims, regulatory penalties and negative publicity,
compliance with insurance and other laws and regulations, and changes in
laws and regulations. Other factors that could cause operating,
financial and other results to differ are described in the Company's
most recent Quarterly Report on Form 10-Q as filed with the Securities
and Exchange Commission and available on the investor relations page of
the Company's website at www.ehealthinsurance.com
and on the Securities and Exchange Commission's
website at www.sec.gov. Other risks may
be detailed from time to time in reports to be filed with the Securities
and Exchange Commission. eHealth does not undertake any obligation to
update any forward-looking statement to conform the statement to actual
results or changes in expectations.
Non-GAAP Financial Information
This press release includes non-GAAP financial measures, including
non-GAAP net income, non-GAAP diluted earnings per share and non-GAAP
operating margins, to supplement the consolidated financial statements,
which are presented in accordance with accounting principles generally
accepted in the United States (?GAAP?).
These non-GAAP measures are not in accordance with, or an alternative
for, U.S. generally accepted accounting principles and may be different
from non-GAAP measures used by other companies. In addition, these
non-GAAP measures are not based on any comprehensive set of accounting
rules or principles. eHealth believes that non-GAAP measures have
limitations in that they do not reflect all of the amounts associated
with eHealth's results of operations as
determined in accordance with GAAP and that these measures should only
be used to evaluate eHealth's results of
operations in conjunction with the corresponding GAAP measures.
For internal budgeting and resource allocation, eHealth's
management uses non-GAAP financial information that excludes a $7.4
million income tax benefit in the three and twelve month periods ended
December 31, 2006 and excludes $0.7 million of revenue, along with the
related income tax impact, in the three months ended September 30, 2006.
eHealth's management uses these non-GAAP
financial measures in making operating decisions, because it believes
the measures provide meaningful supplemental information regarding
eHealth's operational performance and useful
insight into how its business should be managed. Management also uses
these non-GAAP financial measures to facilitate internal comparisons to
historical operating results.
The accompanying tables provide more details on the GAAP financial
measures that are most directly comparable to the non-GAAP financial
measures and the related reconciliations between these financial
measures.
EHEALTH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31, 2005
December 31, 2006
Assets
(1)
(unaudited)
Current assets:
Cash and cash equivalents
$ 9,415
$ 90,316
Short-term investments
-
158
Accounts receivable
128
717
Deferred income taxes
-
2,303
Prepaid expenses and other current assets
908
1,926
Total current assets
10,451
95,420
Restricted investments
153
-
Property and equipment, net
2,761
3,936
Deferred initial public offering costs
1,391
-
Deferred income taxes
-
5,119
Other assets
409
453
Total assets
$ 15,165
$ 104,928
Liabilities, convertible preferred stock and stockholders'
equity (deficit)
Current liabilities:
Accounts payable
$ 1,077
$ 1,440
Accrued compensation and benefits
3,009
3,743
Accrued marketing expenses
1,027
1,647
Deferred revenue
523
62
Other current liabilities
1,179
1,979
Total current liabilities
6,815
8,871
Other non-current liabilities
212
317
Convertible preferred stock
86,319
-
Stockholders' equity (deficit):
Common stock
5
22
Additional paid-in capital
1,983
159,576
Deferred stock-based compensation
(62)
(254)
Accumulated deficit
(80,132)
(63,655)
Accumulated other comprehensive income
25
51
Total stockholders' equity (deficit)
(78,181)
95,740
Total liabilities, convertible preferred stock and stockholders'
equity (deficit)
$ 15,165
$ 104,928
(1) The condensed consolidated balance sheet at December 31, 2005
has been derived from the audited consolidated financial statements
at that date.
EHEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Three Months Ended
Year Ended
December 31,
December 31,
2005
2006
2005
2006
(unaudited)
(unaudited)
(2)
(unaudited)
Revenue:
Commission
$11,471
$16,520
$41,237
$58,943
Sponsorship, licensing and other
236
896
515
2,367
Total revenue
11,707
17,416
41,752
61,310
Operating costs and expenses:
Cost of revenue-sharing
173
411
614
1,305
Marketing and advertising (1)
4,808
5,601
17,786
21,405
Customer care and enrollment (1)
2,421
2,947
8,822
10,991
Technology and content (1)
2,138
2,816
8,054
10,137
General and administrative (1)
2,020
2,880
7,108
9,482
Total operating costs and expenses
11,560
14,655
42,384
53,320
Income (loss) from operations
147
2,761
(632)
7,990
Other income, net
97
969
239
1,326
Income (loss) before income taxes
244
3,730
(393)
9,316
Provision (benefit) for income taxes
21
(7,315)
21
(7,161)
Net income (loss)
$223
$11,045
$(414)
$16,477
Net income (loss) per share:
Basic ? common stock
$0.05
$0.57
$(0.09)
$1.91
Basic ? Class A nonvoting common stock
$0.05
$0.57
$(0.09)
$1.91
Diluted ? common stock
$0.01
$0.45
$(0.09)
$0.80
Diluted ? Class A nonvoting common stock
$0.01
$0.45
$(0.09)
$0.80
Net income (loss):
Allocated to common stock
$222
$11,039
$(414)
$16,391
Allocated to Class A nonvoting common stock
1
6
-
86
Net income (loss)
$223
$11,045
$(414)
$16,477
Weighted-average number of shares used in per share amounts:
Basic ? common stock
4,781
19,535
4,661
8,590
Basic ? Class A nonvoting common stock
12
10
3
45
Diluted ? common stock
18,797
24,771
4,661
20,572
Diluted ? Class A nonvoting common stock
12
10
3
45
(1) Includes stock-based compensation as follows:
Marketing and advertising
$1
$15
$97
$47
Customer care and enrollment
1
16
6
42
Technology and content
18
77
62
226
General and administrative
8
50
26
139
Total
$28
$158
$191
$454
(2) The condensed consolidated statement of operations for the year
ended December 31, 2005 has been derived from the audited
consolidated financial statements for that year.
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