Item 1. Financial Statements
ITEM 1. FINANCIAL STATEMENTS
EHEALTH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, unaudited)
September 30, 2024 December 31, 2023
Assets
Current assets:
Cash and cash equivalents $ 64,032 $ 115,722
Short-term marketable securities 53,750 5,930
Accounts receivable 5,864 3,993
Contract assets – commissions receivable – current 197,591 244,663
Prepaid expenses and other current assets 19,630 12,044
Total current assets 340,867 382,352
Contract assets – commissions receivable – non-current 616,445 673,514
Property and equipment, net 4,770 4,864
Operating lease right-of-use assets 12,442 22,767
Restricted cash 3,090 3,090
Other assets 24,377 26,758
Total assets $ 1,001,991 $ 1,113,345
Liabilities, convertible preferred stock and stockholders’ equity
Current liabilities:
Accounts payable $ 5,407 $ 7,197
Accrued compensation and benefits 26,207 40,800
Accrued marketing expenses 9,208 20,340
Lease liabilities – current 7,429 7,070
Other current liabilities 5,597 3,131
Total current liabilities 53,848 78,538
Long-term debt 69,155 67,754
Deferred income taxes – non-current 25,347 29,687
Lease liabilities – non-current 22,349 28,333
Other non-current liabilities 4,821 4,949
Total liabilities 175,520 209,261
Commitments and contingencies (Note 8)
Convertible preferred stock 327,125 298,053
Stockholders’ equity:
Common stock 43 41
Additional paid-in capital 812,538 798,786
Treasury stock, at cost ( 199,998 ) ( 199,998 )
Retained earnings (accumulated deficit) ( 113,363 ) 7,284
Accumulated other comprehensive income (loss) 126 ( 82 )
Total stockholders’ equity 499,346 606,031
Total liabilities, convertible preferred stock and stockholders’ equity $ 1,001,991 $ 1,113,345
The accompanying notes are an integral part of these condensed consolidated financial statements.
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EHEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands, except per share amounts, unaudited)
Three Months Ended
September 30, Nine Months Ended
September 30,
2024 2023 2024 2023
Revenue:
Commission $ 48,222 $ 57,239 $ 185,996 $ 185,428
Other 10,187 7,479 31,233 19,781
Total revenue 58,409 64,718 217,229 205,209
Operating costs and expenses:
Marketing and advertising 29,665 29,035 95,185 85,343
Customer care and enrollment 39,321 38,901 100,773 93,951
Technology and content 12,264 13,241 38,613 42,047
General and administrative 20,297 22,937 62,318 72,310
Impairment, restructuring and other charges 61 — 9,409 —
Total operating costs and expenses 101,608 104,114 306,298 293,651
Loss from operations
( 43,199 ) ( 39,396 ) ( 89,069 ) ( 88,442 )
Interest expense ( 2,859 ) ( 2,822 ) ( 8,517 ) ( 8,122 )
Other income, net 1,699 2,684 6,425 7,500
Loss before income taxes
( 44,359 ) ( 39,534 ) ( 91,161 ) ( 89,064 )
Benefit from income taxes ( 1,886 ) ( 2,509 ) ( 3,736 ) ( 8,660 )
Net loss
( 42,473 ) ( 37,025 ) ( 87,425 ) ( 80,404 )
Preferred stock dividends ( 5,643 ) ( 5,320 ) ( 16,603 ) ( 15,644 )
Change in preferred stock redemption value ( 5,832 ) ( 4,898 ) ( 16,619 ) ( 12,158 )
Net loss attributable to common stockholders
$ ( 53,948 ) $ ( 47,243 ) $ ( 120,647 ) $ ( 108,206 )
Net loss per share attributable to common stockholders:
Basic and diluted $ ( 1.83 ) $ ( 1.68 ) $ ( 4.13 ) $ ( 3.88 )
Weighted-average number of shares used in per share amounts:
Basic and diluted 29,485 28,114 29,211 27,863
Comprehensive loss:
Net loss
$ ( 42,473 ) $ ( 37,025 ) $ ( 87,425 ) $ ( 80,404 )
Unrealized holding gain (loss) on available for sale debt securities, net of tax 99 ( 15 ) 78 5
Foreign currency translation adjustments 118 73 130 ( 65 )
Comprehensive loss
$ ( 42,256 ) $ ( 36,967 ) $ ( 87,217 ) $ ( 80,464 )
The accompanying notes are an integral part of these condensed consolidated financial statements.
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EHEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, unaudited)
Common Stock Additional Paid-in
Capital Treasury Stock Retained Earnings (Accumulated Deficit)
Accumulated Other Comprehensive Income (Loss)
Total Stockholders’ Equity
Shares Amount Shares Amount
Balance as of December 31, 2023 41,457 $ 41 $ 798,786 12,828 $ ( 199,998 ) $ 7,284 $ ( 82 ) $ 606,031
Issuance of common stock in connection with equity incentive plans 545 1 — — — — — 1
Repurchase of shares to satisfy employee tax withholding obligations — — ( 1,256 ) 172 — — — ( 1,256 )
Dividends and accretion related to convertible preferred stock — — — — — ( 10,727 ) — ( 10,727 )
Stock-based compensation — — 5,718 — — — — 5,718
Other comprehensive income, net of tax — — — — — — 22 22
Net loss — — — — — ( 16,984 ) — ( 16,984 )
Balance as of March 31, 2024 42,002 $ 42 $ 803,248 13,000 $ ( 199,998 ) $ ( 20,427 ) $ ( 60 ) $ 582,805
Issuance of common stock in connection with equity incentive plans 333 — — — — — — —
Repurchase of shares to satisfy employee tax withholding obligations — — ( 596 ) 115 — — — ( 596 )
Dividends and accretion related to convertible preferred stock — — — — — ( 11,020 ) — ( 11,020 )
Issuance of common stock for employee stock purchase program 80 — 354 — — — — 354
Stock-based compensation — — 5,308 — — — — 5,308
Other comprehensive loss, net of tax — — — — — — ( 31 ) ( 31 )
Net loss — — — — — ( 27,968 ) — ( 27,968 )
Balance as of June 30, 2024 42,415 $ 42 $ 808,314 13,115 $ ( 199,998 ) $ ( 59,415 ) $ ( 91 ) $ 548,852
Issuance of common stock in connection with equity incentive plans 347 1 — — — — — 1
Repurchase of shares to satisfy employee tax withholding obligations — — ( 451 ) 107 — — — ( 451 )
Dividends and accretion related to convertible preferred stock — — — — — ( 11,475 ) — ( 11,475 )
Stock-based compensation — — 4,675 — — — — 4,675
Other comprehensive income, net of tax
— — — — — — 217 217
Net loss — — — — — ( 42,473 ) — ( 42,473 )
Balance as of September 30, 2024 42,762 $ 43 $ 812,538 13,222 $ ( 199,998 ) $ ( 113,363 ) $ 126 $ 499,346
The accompanying notes are an integral part of these condensed consolidated financial statements.
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EHEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, unaudited)
Common Stock Additional Paid-in
Capital Treasury Stock Retained Earnings (Accumulated Deficit)
Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Equity
Shares Amount Shares Amount
Balance as of December 31, 2022 39,977 $ 40 $ 777,187 12,415 $ ( 199,998 ) $ 73,799 $ ( 73 ) $ 650,955
Issuance of common stock in connection with equity incentive plans 160 — — — — — — —
Repurchase of shares to satisfy employee tax withholding obligations — — ( 428 ) 57 — — — ( 428 )
Dividends and accretion related to convertible preferred stock — — — — — ( 8,170 ) — ( 8,170 )
Stock-based compensation — — 5,306 — — — — 5,306
Other comprehensive income, net of tax — — — — — — 123 123
Net loss — — — — — ( 19,878 ) — ( 19,878 )
Balance as of March 31, 2023 40,137 $ 40 $ 782,065 12,472 $ ( 199,998 ) $ 45,751 $ 50 $ 627,908
Issuance of common stock in connection with equity incentive plans 320 — — — — — — —
Repurchase of shares to satisfy employee tax withholding obligations — — ( 623 ) 70 — — — ( 623 )
Dividends and accretion related to convertible preferred stock — — — — — ( 9,414 ) — ( 9,414 )
Issuance of common stock for employee stock purchase program 76 — 262 — — — — 262
Stock-based compensation — — 6,518 — — — — 6,518
Other comprehensive loss, net of tax — — — — — — ( 241 ) ( 241 )
Net loss — — — — — ( 23,501 ) — ( 23,501 )
Balance as of June 30, 2023 40,533 $ 40 $ 788,222 12,542 $ ( 199,998 ) $ 12,836 $ ( 191 ) $ 600,909
Issuance of common stock in connection with equity incentive plans 343 — — — — — — —
Repurchase of shares to satisfy employee tax withholding obligations — — ( 884 ) 116 — — — ( 884 )
Dividends and accretion related to convertible preferred stock — — — — — ( 10,218 ) — ( 10,218 )
Stock-based compensation — — 6,797 — — — — 6,797
Other comprehensive income, net of tax
— — — — — — 58 58
Net loss — — — — — ( 37,025 ) — ( 37,025 )
Balance as of September 30, 2023 40,876 $ 40 $ 794,135 12,658 $ ( 199,998 ) $ ( 34,407 ) $ ( 133 ) $ 559,637
The accompanying notes are an integral part of these condensed consolidated financial statements.
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EHEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
Nine Months Ended
September 30,
2024 2023
Operating activities:
Net loss $ ( 87,425 ) $ ( 80,404 )
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 1,481 1,908
Amortization of internally developed software 11,030 13,233
Stock-based compensation expense 15,125 17,741
Deferred income taxes ( 4,340 ) ( 9,311 )
Impairment charges 7,413 —
Other non-cash items ( 43 ) 5
Changes in operating assets and liabilities:
Accounts receivable ( 1,871 ) 2,110
Contract assets – commissions receivable 104,582 104,160
Prepaid expenses and other assets ( 9,896 ) ( 12,597 )
Accounts payable ( 1,965 ) 181
Accrued compensation and benefits ( 14,593 ) 6,102
Accrued marketing expenses ( 11,132 ) ( 16,347 )
Deferred revenue 861 1,323
Accrued expenses and other liabilities 69 ( 1,410 )
Net cash provided by operating activities 9,296 26,694
Investing activities:
Capitalized internal-use software and website development costs ( 8,070 ) ( 7,028 )
Purchases of property and equipment and other assets ( 1,463 ) ( 1,759 )
Purchases of marketable securities ( 85,880 ) ( 48,602 )
Proceeds from redemption and maturities of marketable securities 39,000 40,900
Net cash used in investing activities ( 56,413 ) ( 16,489 )
Financing activities:
Net proceeds from exercise of common stock options and employee stock purchases 354 262
Repurchase of shares to satisfy employee tax withholding obligations ( 2,301 ) ( 1,935 )
Principal payments in connection with leases ( 4 ) ( 33 )
Payments of preferred stock dividends ( 2,740 ) ( 873 )
Net cash used in financing activities ( 4,691 ) ( 2,579 )
Effect of exchange rate changes on cash, cash equivalents and restricted cash 118 ( 58 )
Net increase (decrease) in cash, cash equivalents and restricted cash ( 51,690 ) 7,568
Cash, cash equivalents and restricted cash at beginning of period 118,812 147,640
Cash, cash equivalents and restricted cash at end of period $ 67,122 $ 155,208
The accompanying notes are an integral part of these condensed consolidated financial statements.
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EHEALTH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1 – Summary of Business and Significant Accounting Policies
Description of Business – eHealth, Inc., a Delaware corporation, and its consolidated subsidiaries (collectively, “eHealth”) is a leading private online health insurance marketplace with a technology and service platform that provides consumer engagement, education and health insurance enrollment solutions. Our mission is to expertly guide consumers through their health insurance enrollment and related options, when, where and how they prefer. Our platform leverages technology to solve a critical problem in a large and growing market by aiding consumers in what has traditionally been a complex, confusing and opaque health insurance purchasing process. Our omnichannel consumer engagement platform differentiates our offering from other brokers and enables consumers to use our services online, by telephone with a licensed insurance agent, or benefit advisor, or through a hybrid online assisted interaction that includes live agent chat and co-browsing capabilities. We have created a consumer-centric marketplace that offers consumers a broad choice of insurance products that includes thousands of Medicare Advantage, Medicare Supplement, Medicare Part D prescription drug, individual, family, small business and other ancillary health insurance products from over 180 health insurance carriers nationwide. Our plan recommendation tool curates this broad plan selection by analyzing customer health-related information against plan data for insurance coverage fit. This tool is supported by a unified data platform and is available to our ecommerce customers and our benefit advisors. We strive to be the most trusted partner to consumers in their journeys through the health insurance market.
Unless otherwise specified or required by the context, references in this Quarterly Report on Form 10-Q to “eHealth,” “the Company,” “we,” “us” or “our” mean eHealth, Inc. and its consolidated direct and indirect wholly-owned subsidiaries.
Basis of Presentation – The accompanying Condensed Consolidated Balance Sheet as of September 30, 2024 and other condensed consolidated financial statements for the three and nine months ended September 30, 2024 and 2023 are unaudited. The Condensed Consolidated Balance Sheet as of December 31, 2023 was derived from the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the Securities and Exchange Commission on February 29, 2024. The accompanying financial statements and related notes should be read in conjunction with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K.
The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and reflect all normal recurring adjustments that are necessary to present fairly the results for the interim periods presented. The condensed consolidated financial statements include the accounts of eHealth, Inc. and its direct and indirect wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Certain information and disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted in accordance with those rules and regulations. Certain prior period amounts have been reclassified to conform with our current period presentation.
The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2023 and include all adjustments necessary for the fair presentation of our financial position as of September 30, 2024 and December 31, 2023 and our results of operations for the periods presented. The results for the three and nine months ended September 30, 2024 are not necessarily indicative of the results to be expected for any subsequent period or for the year ending December 31, 2024 and therefore, should not be relied upon as an indicator of future results.
Beginning in the first quarter of 2024, primarily as a result of vacating excess office space, we modified our methodology used in allocating certain expenses for the purpose of evaluating financial and segment performance and resource allocation. Specifically, we no longer allocate our facilities-related expenses, and as a result, these costs are now reported within the “General and administrative” line in our Condensed Consolidated Statements of
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EHEALTH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Comprehensive Loss and within Corporate for our segment profit (loss). We have recast the Condensed Consolidated Statements of Comprehensive Loss and our segment profit (loss) for the prior periods presented to conform to our current methodology. This resulted in a classification change of expenses from marketing and advertising, customer care and enrollment, and technology and content into general and administrative. Additionally, our segment profit (loss) no longer includes our facilities allocation to each of our segments and instead, these costs are included within Corporate. There was no impact to total operating costs and expenses, loss from operations, net loss or net loss per share attributable to common stockholders on our Condensed Consolidated Statements of Comprehensive Loss.
Significant Accounting Policies, Estimates and Judgments – The preparation of condensed consolidated financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported and disclosed in the condensed consolidated financial statements and accompanying notes. On an ongoing basis, we evaluate our estimates, including those related to, but not limited to, the fair value of investments, the commissions we expect to collect for each approved member cohort, valuation allowance for deferred income taxes, provision for (benefit from) income taxes and the assumptions used in determining stock-based compensation. We base our estimates of the carrying value of certain assets and liabilities on historical experience and on various other assumptions that we believe to be reasonable. Actual results may differ from these estimates. There have been no material changes for the nine months ended September 30, 2024 to our significant accounting policies discussed in our Annual Report on Form 10-K for the year ended December 31, 2023.
Recently Adopted Accounting Pronouncements
We did not adopt any new accounting pronouncements during the nine months ended September 30, 2024.
Recently Issued Accounting Pronouncements Not Yet Adopted
Segment Reporting (Topic 280) — In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU updates reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of a segment’s profit or loss. The ASU is effective for fiscal years beginning after December 15, 2023 and interim periods beginning after December 15, 2024. Adoption of the ASU should be applied retrospectively to all prior periods presented in the financial statements and early adoption is permitted. We are currently evaluating the impact of adopting this ASU on our consolidated financial statements and related disclosures.
Income Taxes (Topic 740) — In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires public entities, on an annual basis, to provide disclosure of specific categories in the rate reconciliation, as well as additional disclosure on income taxes paid. The ASU is effective on a prospective basis for fiscal years beginning after December 15, 2024 for public entities and early adoption is permitted. We are currently evaluating the impact of adopting of this ASU on our consolidated financial statements and related disclosures.
Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40) — In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This ASU requires more detailed information about specified categories of expenses (purchases of inventory, employee compensation, depreciation, intangible asset amortization and depletion) included in certain expense captions presented on the face of the income statement. The ASU is effective for fiscal years beginning after December 15, 2026 and for interim periods beginning after December 15, 2027. The ASU may be applied either prospectively to financial statements issued for reporting periods after the effective date of this ASU or retrospectively to all prior periods presented in the financial statements and early adoption is permitted. We
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EHEALTH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
are currently evaluating the impact of adopting this ASU on our consolidated financial statements and related disclosures.
Note 2 – Revenue
Disaggregation of Revenue – The table below depicts the disaggregation of revenue by product and is consistent with how we evaluate our financial performance (in thousands):
Three Months Ended
September 30, Nine Months Ended
September 30,
2024 2023 2024 2023
Medicare
Medicare Advantage $ 39,463 $ 43,721 $ 143,627 $ 143,231
Medicare Supplement 2,312 2,630 11,835 7,786
Medicare Part D 843 2,046 6,238 4,686
Total Medicare 42,618 48,397 161,700 155,703
Individual and Family (1)
Non-Qualified Health Plans ( 199 ) 1,560 1,834 6,904
Qualified Health Plans 602 681 3,358 4,084
Total Individual and Family 403 2,241 5,192 10,988
Ancillary
Short-term 544 870 1,975 2,426
Dental 531 649 1,932 2,317
Vision 392 486 1,383 972
Other 569 555 1,989 1,788
Total Ancillary 2,036 2,560 7,279 7,503
Small Business 2,268 3,884 8,447 12,557
Commission Bonus and Other 897 157 3,378 ( 1,323 )
Total Commission Revenue 48,222 57,239 185,996 185,428
Other Revenue
Sponsorship and Advertising Revenue 5,212 6,487 20,879 16,061
Other 4,975 992 10,354 3,720
Total Other Revenue 10,187 7,479 31,233 19,781
Total Revenue $ 58,409 $ 64,718 $ 217,229 $ 205,209
_____________
(1) We define our individual and family plan offerings as major medical individual and family health insurance plans, which do not include Medicare-related, small business or ancillary plans. Individual and family health insurance plans include both qualified and non-qualified plans. Qualified health plans meet the requirements of the Affordable Care Act and are offered through the government-run health insurance exchange in the relevant jurisdiction. Non-qualified health plans do not meet the requirements of the Affordable Care Act and are not offered through the government-run health insurance exchange in the relevant jurisdiction. Individuals that purchase non-qualified health plans cannot receive a subsidy in connection with the purchase of non-qualified plans.
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EHEALTH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Commission revenue by segment is presented in the table below (in thousands):
Three Months Ended
September 30, Nine Months Ended
September 30,
2024 2023 2024 2023
Medicare
Commission revenue from members approved during the period $ 42,324 $ 39,169 $ 152,017 $ 131,792
Net commission revenue from members approved in prior periods (1)
1,090 9,291 12,773 22,746
Total Medicare segment commission revenue $ 43,414 $ 48,460 $ 164,790 $ 154,538
Employer and Individual
Commission revenue from members approved during the period $ 2,848 $ 3,829 $ 11,790 $ 13,835
Commission revenue from renewals of small business members during the period 1,852 2,028 7,022 7,299
Net commission revenue from members approved in prior periods (1)
108 2,922 2,394 9,756
Total Employer and Individual segment commission revenue $ 4,808 $ 8,779 $ 21,206 $ 30,890
Total commission revenue from members approved during the period $ 45,172 $ 42,998 $ 163,807 $ 145,627
Commission revenue from renewals of small business members during the period 1,852 2,028 7,022 7,299
Total net commission revenue from members approved in prior periods (1)(2)
1,198 12,213 15,167 32,502
Total commission revenue $ 48,222 $ 57,239 $ 185,996 $ 185,428
_____________
(1) These amounts reflect our revised estimates of cash collections for certain members approved prior to the relevant reporting period that are recognized as adjustments to revenue within the relevant reporting period. The net commission revenue from members approved in prior periods, or the net adjustment revenue, includes both increases as well as reductions in revenue for certain prior period cohorts.
(2) The after-tax impact of total net commission revenue from members approved in prior periods for the three months ended September 30, 2024 and 2023 was $ 0.03 and $ 0.33 per basic and diluted share, respectively. The after-tax impact of total net commission revenue from members approved in prior periods for the nine months ended September 30, 2024 and 2023 was $ 0.39 and $ 0.89 per basic and diluted share, respectively. The total reductions to revenue from members approved in prior periods were $ 0.9 million and $ 0.8 million for the three months ended September 30, 2024 and 2023, respectively, and $ 4.5 million and $ 3.7 million for the nine months ended September 30, 2024 and 2023, respectively. These reductions to revenue primarily relate to the Medicare segment.
Note 3 – Supplemental Financial Statement Information
Cash, Cash Equivalents and Restricted Cash
We consider all investments with an original maturity of 90 days or less from the date of purchase to be cash equivalents. Cash and cash equivalents are stated at fair value. We also invest in marketable securities that are measured and recorded at fair value. See Note 4 – Fair Value Measurements for further discussion about our marketable securities.
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EHEALTH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Our cash, cash equivalents and restricted cash balances are summarized as follows (in thousands):
September 30, 2024 December 31, 2023
Cash $ 7,446 $ 7,114
Cash equivalents 56,586 108,608
Cash and cash equivalents 64,032 115,722
Restricted cash 3,090 3,090
Total cash, cash equivalents and restricted cash $ 67,122 $ 118,812
As of September 30, 2024 and December 31, 2023, we had $ 3.1 million of restricted cash which was classified as a non-current asset on our Condensed Consolidated Balance Sheets. This amount collateralizes letters of credit related to certain lease commitments.
Contract Assets and Accounts Receivable
We estimate an allowance for credit losses using relevant available information from internal and external sources, related to past events, current conditions and reasonable and supportable forecasts. Specifically, for the purpose of measuring the probability of default parameters, we utilize Capital IQ’s, Standard & Poor’s and Moody’s analytics. Our estimates of loss given default are determined by using our historical collections data as well as historical information obtained through our research and review of other insurance related companies. Our estimated exposure at default is determined by applying these internal and external data sources to our commissions receivable balances. As such, we apply an immediate reversion method and revert to historical loss information when computing our credit loss exposure. Credit loss expenses are assessed quarterly and included in the “General and administrative” line in our Condensed Consolidated Statements of Comprehensive Loss. There wer e no write-offs during the nine months ended September 30, 2024 or for the year ended December 31, 2023.
The change in the allowance for credit losses is summarized as follows (in thousands):
September 30, 2024 December 31, 2023
Beginning balance $ 2,118 $ 2,398
Change in allowance ( 440 ) ( 280 )
Ending balance $ 1,678 $ 2,118
Our contract assets – commissions receivable activities, net of credit loss allowances, are summarized as follows (in thousands):
Medicare Segment E&I Segment
Total
Beginning balance at December 31, 2023
$ 847,332 $ 70,845 $ 918,177
Commission revenue from members approved during the period 152,017 11,790 163,807
Commission revenue from renewals of small business members during the period — 7,022 7,022
Net commission revenue from members approved in prior periods 12,773 2,394 15,167
Cash receipts ( 261,125 ) ( 29,452 ) ( 290,577 )
Net change in credit loss allowance 406 34 440
Ending balance at September 30, 2024
$ 751,403 $ 62,633 $ 814,036
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EHEALTH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Credit Risk
Our financial instruments that are exposed to concentrations of credit risk principally consist of cash, cash equivalents, marketable securities, contract assets – commissions receivable and accounts receivable. We invest our cash and cash equivalents with major banks and financial institutions and, at times, such investments are in excess of federally insured limits. We also have deposits with major banks in China that are denominated in both U.S. dollars and Chinese Yuan Renminbi and are not insured by the U.S. federal government. The deposits in China were $ 3.4 million as of September 30, 2024. See Note 4 – Fair Value Measurements for additional information regarding our marketable securities.
We do not require collateral or other security for either our contract assets or accounts receivable. Carriers that represented 10% or more of our total contract assets – commissions receivable and accounts receivable balances are summarized as follows:
September 30, 2024 December 31, 2023
Humana 30 % 27 %
UnitedHealthcare (1)
27 % 26 %
Aetna (1)
17 % 16 %
_____________
(1) Percentages include the carriers’ subsidiaries.
Prepaid Expenses and Other Current Assets – Our prepaid expenses and other current assets are summarized as follows (in thousands):
September 30, 2024 December 31, 2023
Prepaid expenses $ 9,754 $ 1,808
Prepaid software and maintenance contracts 5,936 5,328
Prepaid licenses 2,474 2,739
Prepaid insurance 646 1,436
Other current assets 820 733
Prepaid expenses and other current assets $ 19,630 $ 12,044
Note 4 – Fair Value Measurements
We define fair value as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques we use to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. We classify the inputs used to measure fair value into the following hierarchy:
Level 1 Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 Unadjusted quoted prices in active markets for similar assets or liabilities; unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability.
Level 3 Unobservable inputs for the asset or liability.
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EHEALTH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Our financial assets measured at fair value on a recurring basis are summarized below by their classification within the fair value hierarchy as follows (in thousands):
September 30, 2024
Carrying Value Level 1 Level 2 Level 3 Total
Assets
Cash equivalents
Money market funds $ 11,661 $ 11,661 $ — $ — $ 11,661
Commercial paper 44,925 — 44,925 — 44,925
Short-term marketable securities
Commercial paper 18,415 — 18,415 — 18,415
Agency bonds 35,335 — 35,335 — 35,335
Total assets measured at fair value $ 110,336 $ 11,661 $ 98,675 $ — $ 110,336
December 31, 2023
Carrying Value Level 1 Level 2 Level 3 Total
Assets
Cash equivalents
Money market funds $ 11,576 $ 11,576 $ — $ — $ 11,576
Commercial paper 86,090 — 86,090 — 86,090
Agency bonds 10,942 — 10,942 — 10,942
Short-term marketable securities
Agency bonds 5,930 — 5,930 — 5,930
Total assets measured at fair value $ 114,538 $ 11,576 $ 102,962 $ — $ 114,538
We endeavor to utilize the best available information in measuring fair value. Our money market funds are measured at fair value based on quoted prices in active markets and are classified as Level 1 within the fair value hierarchy. Our available for sale marketable securities, which include commercial paper and agency bonds with maturities of less than one year, are measured at fair value using quoted market prices to the extent available or alternative pricing sources and models utilizing market observable inputs and are classified as Level 2 within the fair value hierarchy. There were no transfers between the hierarchy levels during either the nine months ended September 30, 2024 or the year ended December 31, 2023.
The following table summarizes our cash equivalents and available for sale debt securities by contractual maturity (in thousands):
As of September 30, 2024 As of December 31, 2023
Amortized Cost Fair Value Amortized Cost Fair Value
Due in 1 year $ 110,299 $ 110,336 $ 114,577 $ 114,538
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EHEALTH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Unrealized gains and losses on available for sale debt securities that are not credit related are included in accumulated other comprehensive loss and summarized as follows (in thousands):
September 30, 2024
Amortized Cost Unrealized Gains Unrealized Losses Fair Value
Cash equivalents
Money market funds $ 11,661 $ — $ — $ 11,661
Commercial paper 44,929 1 ( 5 ) 44,925
Short-term marketable securities
Commercial paper 18,401 15 ( 1 ) 18,415
Agency bonds 35,308 28 ( 1 ) 35,335
Total $ 110,299 $ 44 $ ( 7 ) $ 110,336
December 31, 2023
Amortized Cost Unrealized Gains Unrealized Losses Fair Value
Cash equivalents
Money market funds $ 11,576 $ — $ — $ 11,576
Commercial paper 86,132 — ( 42 ) 86,090
Agency bonds 10,940 2 — 10,942
Short-term marketable securities
Agency bonds 5,929 1 — 5,930
Total $ 114,577 $ 3 $ ( 42 ) $ 114,538
As of September 30, 2024 and December 31, 2023, we had 16 and 20 securities, respectively, in a net unrealized loss position that were immaterial individually and in aggregate. We did not record any credit losses regarding our available for sale debt securities during the nine months ended September 30, 2024 or the year ended December 31, 2023. We do not intend to sell these securities, and it is more likely than not that we will not be required to sell these securities before the recovery of their amortized cost basis. We recognized interest income of $ 1.7 million and $ 2.3 million for the three months ended September 30, 2024 and 2023, respectively, and $ 6.0 million and $ 6.5 million for the nine months ended September 30, 2024 and 2023, respectively.
Note 5 – Equity
2024 Equity Incentive Plan – On June 12, 2024, upon approval at our annual meeting of stockholders, we adopted our 2024 Equity Incentive Plan (the “2024 Equity Plan”), which replaced our 2014 Equity Incentive Plan. Subject to applicable laws, we are permitted to grant awards of stock options, restricted stock units, stock appreciation rights, performance units and performance shares to eligible employees, directors and consultants of ours and any parent, subsidiary or affiliate of ours under the 2024 Equity Plan. We have reserved for issuance under the 2024 Equity Plan a number of shares equal to the sum of (i) 1,350,000 shares, plus (ii) up to an additional 300,000 shares reserved for issuance under the 2014 Equity Incentive Plan that (A) were reserved but not issued or (B) are subject to equity awards that later expire or otherwise terminate without having been exercised or issued in full or are forfeited to or repurchased by the Company due to failure to vest. The 2024 Equity Plan does not include an evergreen provision to automatically increase the number of shares available under the plan, and any increase in the number of shares authorized for issuance under the 2024 Equity Plan requires stockholder approval. Additionally, while shares subject to awards granted under our 2024 Equity Plan which expire or become unexercisable or are forfeited to or repurchased by us due to failure to vest will return to the 2024 Equity Plan share reserve, the following shares will not return to the share reserve for future issuance: (i) shares used in connection
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EHEALTH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
with the exercise of an option and/or stock appreciation right to pay the exercise price or purchase price of such award or satisfy applicable tax withholding obligations; and (ii) the gross number of shares subject to stock appreciation rights that are exercised. As of September 30, 2024, 0.1 million shares were issued pursuant to equity awards under the 2024 Equity Plan.
2021 Inducement Plan – On September 22, 2021, the Company adopted an inducement plan (the “2021 Inducement Plan”), pursuant to which the Company reserved 0.4 million shares of its common stock (subject to customary adjustments in the event of a change in capital structure of the Company) to be used exclusively for grants of awards to individuals who were not previously employees or directors of the Company, other than following a bona fide period of non-employment, as an inducement material to the individual’s entry into employment with the Company within the meaning of Rule 5635(c)(4) of the Nasdaq Listing Rules (“Nasdaq Rules”). In March 2022 and September 2022, the Company amended and restated its 2021 Inducement Plan to reserve an additional 0.5 million and 1.5 million shares of its common stock, respectively (as amended and restated, the “A&R 2021 Inducement Plan”). The 2021 Inducement Plan and its amendments were approved by our Board of Directors without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Rules, and the terms and conditions of the A&R 2021 Inducement Plan and awards to be granted thereunder are substantially similar to our stockholder-approved Amended and Restated 2014 Equity Incentive Plan. As of September 30, 2024, 2.0 million shares were issued under the A&R 2021 Inducement Plan.
Stock Repurchase Programs – We had no stock repurchase activity during the three and nine months ended September 30, 2024 or 2023 except for the repurchase of shares to satisfy employee tax withholding obligations. As of September 30, 2024 and 2023, we had a total o f 13.2 million and 12.7 million shares, respectively, held in treasury. As of September 30, 2024 and 2023, we had 2.5 million and 2.0 million shares, respectively, in treasury that were previously surrendered by employees to satisfy tax withholding due in connection with the vesting of certain restricted stock units as well as 10.7 million shares previously repurchased under our past repurchase programs.
For accounting purposes, common stock repurchased under our stock repurchase programs is recorded based upon the settlement date of the applicable trade. Such repurchased shares are held in treasury and are presented using the cost method.
Stock-Based Compensation Expense – Our stock-based compensation expense is summarized as follows by award types for the periods presented below (in thousands):
Three Months Ended
September 30, Nine Months Ended
September 30,
2024 2023 2024 2023
Restricted stock units
$ 3,809 $ 5,275 $ 12,741 $ 14,283
Performance-based stock units 378 823 1,252 2,276
Common stock options 292 333 1,035 899
Employee stock purchase program — 123 97 283
Total stock-based compensation expense $ 4,479 $ 6,554 $ 15,125 $ 17,741
Related tax benefit recognized $ 1,096 $ 1,543 $ 3,709 $ 4,162
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EHEALTH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The following table summarizes stock-based compensation expense by operating function for the periods presented below (in thousands):
Three Months Ended
September 30, Nine Months Ended
September 30,
2024 2023 2024 2023
Marketing and advertising $ 437 $ 605 $ 1,792 $ 1,598
Customer care and enrollment 452 836 1,487 2,229
Technology and content 845 1,306 2,598 3,384
General and administrative 2,745 3,807 9,248 10,530
Total stock-based compensation expense $ 4,479 $ 6,554 $ 15,125 $ 17,741
Amount capitalized for internal-use software 196 243 576 880
Total stock-based compensation $ 4,675 $ 6,797 $ 15,701 $ 18,621
Note 6 — Convertible Preferred Stock
Pursuant to an investment agreement dated February 17, 2021 with Echelon Health SPV, LP (“H.I.G.”), an investment vehicle of H.I.G. Capital (the “H.I.G. Investment Agreement”), we issued and sold to H.I.G., in a private placement, 2,250,000 shares of Series A convertible preferred stock (the “Series A Preferred Stock”), par value $ 0.001 per share, at an aggregate purchase price of $ 225.0 million on April 30, 2021 (the “Closing Date”). We received $ 214.0 million in net proceeds from the private placement with H.I.G., net of sales commissions and certain transaction fees totaling $ 11.0 million. Our Series A Preferred Stock is considered temporary equity in our Condensed Consolidated Balance Sheets and we have determined there are no material embedded features that require recognition as a derivative asset or liability. The Series A Preferred Stock ranks senior to all other equity securities of the Company with respect to dividend rights and rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company.
Dividends – Dividends initially accrued on the Series A Preferred Stock daily at 8 % per annum on the stated value of $ 100 per share (the “Stated Value”), and were payable in kind (“PIK”) beginning on June 30, 2021 through the second anniversary of the Closing Date. Subsequent to the second anniversary of the Closing Date, dividends continue to accrue at 8 % per annum, with 6 % PIK and 2 % payable in cash in arrears beginning on June 30, 2023. Dividends compound semiannually and are PIK and payable in cash in arrears, as applicable, on June 30 and December 31 of each year (each a “Dividend Payment Date”). PIK dividends are cumulative and are added to the Accrued Value. “Accrued Value” means, as of any date, with respect to any share of Series A Preferred Stock, the sum of the Stated Value per share plus, on each Dividend Payment Date, on a cumulative basis, all PIK dividends that have accrued on such share but that have not previously been added to the Accrued Value. During the second quarter of 2024 we made a cash dividend payment of $ 2.7 million, and as of September 30, 2024 we have accrued $ 1.4 million for cash dividends. T he Series A Preferred Stock participates, on an as-converted basis, in all dividends paid to the holders of our common stock.
Conversion Rights – The Series A Preferred Stock is convertible at any time into common stock at a conversion rate equal to (i) the Accrued Value plus accrued PIK dividends that have not yet been added to the Accrued Value, (ii) divided by the conversion price as of the applicable conversion date (the “Conversion Price”). As of September 30, 2024, the Conversion Price is equal to $ 79.5861 per share. This Conversion Price is subject to further adjustment and the number of shares of common stock issuable upon conversion of the Series A Preferred Stock is subject to certain limitations, each as set forth in the Certificate of Designations of Series A Preferred Stock, as filed with the Secretary of State of the State of Delaware on April 30, 2021 (the “Certificate of Designations”).
Redemption Put Right – At any time on or after the sixth anniversary of the Closing Date, holders of the Series A Preferred Stock will have the right to cause the Company to redeem all or any portion of the Series A
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EHEALTH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Preferred Stock in cash at an amount equal to the greater of (i) 135 % of the Accrued Value per share as of the redemption date, plus accrued PIK dividends that have not yet been added to the Accrued Value and (ii) the amount per share that would be payable on an as-converted basis on such Series A Preferred Stock at the then-current Accrued Value, plus accrued PIK dividends that have not yet been added to the Accrued Value, and in either case of (i) or (ii) plus any unpaid cash dividends that would have otherwise been settled in cash in connection with such conversion (the greater of (i) and (ii), the “Redemption Price”).
Redemption Call Right – At any time on or after the sixth anniversary of the Closing Date, the Company will have the right (but not the obligation) to redeem out of legally available funds and for cash consideration all (but not less than all) of the Series A Preferred Stock upon at least 30 days prior written notice at an amount equal to the Redemption Price.
Board Nomination Rights – H.I.G. is entitled to nominate one individual for election to our Board of Directors so long as it continues to own at least 30 % of the common stock issuable or issued upon conversion of the Series A Preferred Stock originally issued to it in the private placement. Under certain circumstances, H.I.G. also has the right to nominate an additional individual to our Board of Directors if we fail to maintain certain levels of commissions receivable or liquidity as further discussed below.
Voting Rights – The Series A Preferred Stock will vote together with the common stock as a single class on all matters submitted to a vote of the holders of the common stock (subject to certain voting limitations set forth in, and the terms and conditions of, the Certificate of Designations). Each holder of Series A Preferred Stock shall be entitled to the number of votes, rounded down to the nearest whole number, equal to the product of (i) the aggregate Accrued Value of the issued and outstanding shares of Series A Preferred Stock divided by $ 69.684 , which is the “Minimum Price” computed in accordance with the Certificate of Designations (as further described below), multiplied by (ii) a fraction, the numerator of which is the number of shares of Series A Preferred Stock held by such holder and the denominator of which is the aggregate number of issued and outstanding shares of Series A Preferred Stock. “Minimum Price” means the lower of: (i) the Nasdaq Official Closing Price per share of common stock on the Closing Date; or (ii) the average Nasdaq Official Closing Price per share of common stock for the five trading days immediately prior to the Closing Date. Holders of Series A Preferred Stock will have one vote per share on any matter on which the holders of the Series A Preferred Stock are entitled to vote separately as a class (subject to certain voting limitations set forth in the Certificate of Designations).
Mandatory Conversion of the Series A Preferred Stock by the Company – At any time on or after the third anniversary of the Closing Date, if the volume-weighted average price per share of our common stock is greater than 167.5 % of the then-current Conversion Price for 20 consecutive trading days in a 30 -day trading day period, the Company will have the right to convert all, but not less than all, of the Series A Preferred Stock into common stock at a conversion rate with respect to each share of Series A Preferred Stock of (i) the Accrued Value plus accrued PIK dividends that have not yet been added to the Accrued Value, (ii) divided by the then applicable Conversion Price.
Covenants and Liquidity Requirements – As long as H.I.G. continues to own at least 30 % of the Series A Preferred Stock originally issued to it in the private placement, the consent of H.I.G. will be required for the Company to incur certain indebtedness and to take certain other corporate actions as set forth in the H.I.G. Investment Agreement. In addition, the Company is required to maintain an Asset Coverage Ratio (as defined in the H.I.G. Investment Agreement) of at least 2.0 x (the “Minimum Asset Coverage Ratio”), which increased to 2.5 x in August of 2023. The first measurement date of the 2.5 x Minimum Asset Coverage Ratio was September 30, 2023. Additionally, the H.I.G. Investment Agreement requires the Company to maintain a Minimum Liquidity Amount (as defined in the H.I.G. Investment Agreement) for certain periods that ranges from $ 65.0 million to $ 125.0 million. Failure to maintain the Minimum Asset Coverage Ratio or the Minimum Liquidity Amount as of the date or for the time period required by the H.I.G. Investment Agreement, for as long as H.I.G. continues to own at least 30 % of the Series A Preferred Stock originally issued to it in the private placement, entitles H.I.G., subject to conditions and restrictions specified therein, to additional rights, including the right to nominate one additional member to the Company’s Board of Directors, the right to approve the Company’s annual budget, the right to approve hiring or
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EHEALTH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
termination of certain key executives and the right to approve the incurrence of certain indebtedness. As of September 30, 2023, we failed to maintain the Minimum Asset Coverage Ratio, which entitles H.I.G to the additional rights set forth above. On March 13, 2024, the Nominating and Corporate Governance Committee of our Board of Directors approved the appointment of a board observer designated by H.I.G. As of September 30, 2024, we were in compliance with the Minimum Liquidity Amount.
As of September 30, 2024, the estimated Series A Preferred Stock redemption value equals 135 % of the Accrued Value per share as of the redemption date, plus accrued PIK dividends that have not yet been added to the Accrued Value, which is significantly in excess of the fair value of the common stock into which the Series A Preferred Stock is convertible as of September 30, 2024. We have elected to apply the accretion method to adjust the carrying value of the Series A Preferred Stock to its redemption value at the earliest date of redemption, April 30, 2027. Amounts recognized to accrete the Series A Preferred Stock to its estimated redemption value are treated as a deemed dividend and are recorded as a reduction to retained earnings. The estimated redemption value will vary in subsequent periods due to the redemption put right described above and we have elected to recognize such changes prospectively. No shares of Series A Preferred Stock have been converted, and the Series A Preferred Stock was convertible into 3.6 million shares of common stock as of September 30, 2024.
The following table summarizes the proceeds and changes to our Series A Preferred Stock (in thousands):
Gross proceeds $ 225,000
Less: issuance costs ( 10,975 )
Net proceeds $ 214,025
Balance as of December 31, 2023 $ 298,053
Accrued paid-in-kind dividends 12,453
Change in preferred stock redemption value 16,619
Balance as of September 30, 2024
$ 327,125
Note 7 – Net Loss Per Share Attributable to Common Stockholders
Our Series A Preferred Stock is considered a participating security, which requires the use of the two-class method for the computation of basic and diluted per share amounts. Under the two-class method, earnings available to common stockholders for the period are allocated between common stockholders and participating securities according to dividends accumulated and participation rights in undistributed earnings. 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. Basic net loss attributable to common stockholders per share is computed by dividing net loss available to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Diluted net loss attributable to common stockholders per share is computed by dividing the net loss available to common stockholders for the period by the weighted average number of common and common equivalent shares outstanding during the period. Diluted net loss attributable to common stockholders per share reflects all potential dilutive common stock equivalent shares, including conversion of preferred stock, stock options, restricted stock units and shares to be issued under our employee stock purchase program.
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EHEALTH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The following table sets forth the computation of basic and diluted net loss attributable to common stockholders per share (in thousands, except per share amounts):
Three Months Ended
September 30, Nine Months Ended
September 30,
2024 2023 2024 2023
Numerator:
Net loss attributable to common stockholders
$ ( 53,948 ) $ ( 47,243 ) $ ( 120,647 ) $ ( 108,206 )
Denominator:
Shares used in per share calculation – basic 29,485 28,114 29,211 27,863
Dilutive effect of common stock — — — —
Shares used in per share calculation – diluted 29,485 28,114 29,211 27,863
Net loss attributable to common stockholders per share – basic and diluted
$ ( 1.83 ) $ ( 1.68 ) $ ( 4.13 ) $ ( 3.88 )
For each of the three and nine months ended September 30, 2024 and 2023, we had securities outstanding that could potentially dilute net loss per share, but the shares from the assumed conversion or exercise of these securities were excluded in the computation of diluted net loss per share as their effect would have been anti-dilutive. The number of weighted-average outstanding anti-dilutive shares that were excluded from the computation of diluted net loss per share consisted of the following (in thousands):
Three Months Ended
September 30, Nine Months Ended
September 30,
2024 2023 2024 2023
Convertible preferred stock 3,573 3,368 3,521 3,315
Restricted stock units
2,902 2,734 2,051 2,448
Performance-based stock units 110 167 115 126
Common stock options 216 218 217 222
Employee stock purchase program — 67 3 59
Total 6,801 6,554 5,907 6,170
Note 8 – Commitments and Contingencies
Service and Licensing Obligations
We have entered into service and licensing agreements with third party vendors to provide various services, including network access, equipment maintenance and software licensing. As the benefits of these agreements are experienced uniformly over the applicable contractual periods, we record the related service and licensing expenses on a straight-line basis, although actual cash payment obligations under certain of these agreements fluctuate over the terms of the agreements.
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EHEALTH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Our future minimum payments under non-cancellable contractual service and licensing obligations as of September 30, 2024 were as follows (in thousands):
Year ending December 31,
2024 (remainder) $ 2,578
2025 6,101
2026 3,872
2027 117
2028 —
Thereafter —
Total $ 12,668
Operating Leases
Refer to Note 10 – Leases for commitments related to our operating leases.
Self-Insurance
We provide comprehensive major medical benefits to our employees. Effective January 1, 2023, we began maintaining a substantial portion of our U.S. employee health insurance benefits on a self-insured basis with up to $ 0.3 million per individual per year with the current maximum claim liability as of September 30, 2024 of $ 22.5 million. As a result, we record a self-insurance liability based on claims filed and an estimate of claims incurred but not yet reported. As of September 30, 2024 and December 31, 2023, we had a self-insurance liability balance of $ 2.0 million and $ 2.5 million, respectively, in the “Accrued compensation and benefits” line on our Condensed Consolidated Balance Sheets.
Contingencies
From time to time, we receive inquiries from governmental bodies and also may be subject to various legal proceedings and claims arising in the ordinary course of business. We assess contingencies to determine the degree of probability and range of possible loss for potential accrual in our condensed consolidated financial statements. An estimated loss contingency is accrued in the condensed consolidated financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Legal proceedings or other contingencies could result in material costs, even if we ultimately prevail, and we may from time to time enter into settlements to resolve such litigation. Legal costs incurred in connection with the resolution of claims, lawsuits and other contingencies generally are expensed as incurred. There were no material litigation-related accruals recorded during the three and nine months ended September 30, 2024 or 2023.
Note 9 – Segment and Geographic Information
Operating Segments
We report segment information based on how our chief executive officer, who is our CODM, regularly reviews our operating results, allocates resources and makes decisions regarding our business operations. We evaluate our business performance and manage our operations as two distinct operating segments: Medicare, and Employer and Individual. The performance measures of our segments include revenue and segment profit (loss). Please refer to Note 1 – Summary of Business and Significant Accounting Policies in our Notes to Consolidated Financial Statements in Part II, Item 8 of the Annual Report on Form 10-K for the year ended December 31, 2023 for our accounting policies relating to operating segments. Additionally, as indicated in Note 1 of this report, our results below reflect our updated methodology used in allocating certain expenses beginning in the first quarter of
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EHEALTH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
fiscal 2024, and results from the prior period presented have been recast to conform with the current period presentation.
The results of our operating segments are summarized for the periods presented below (in thousands):
Three Months Ended
September 30, Nine Months Ended
September 30,
2024 2023 2024 2023
Revenue:
Medicare $ 53,221 $ 55,523 $ 194,857 $ 172,787
Employer and Individual 5,188 9,195 22,372 32,422
Total revenue $ 58,409 $ 64,718 $ 217,229 $ 205,209
Segment profit (loss):
Medicare $ ( 17,933 ) $ ( 15,331 ) $ ( 8,350 ) $ ( 17,979 )
Employer and Individual ( 799 ) 4,810 4,743 19,372
Segment profit (loss) ( 18,732 ) ( 10,521 ) ( 3,607 ) 1,393
Corporate ( 16,100 ) ( 17,576 ) ( 48,417 ) ( 56,953 )
Stock-based compensation expense ( 4,479 ) ( 6,554 ) ( 15,125 ) ( 17,741 )
Depreciation and amortization ( 3,827 ) ( 4,745 ) ( 12,511 ) ( 15,141 )
Impairment, restructuring and other charges ( 61 ) — ( 9,409 ) —
Interest expense ( 2,859 ) ( 2,822 ) ( 8,517 ) ( 8,122 )
Other income, net 1,699 2,684 6,425 7,500
Loss before income taxes $ ( 44,359 ) $ ( 39,534 ) $ ( 91,161 ) $ ( 89,064 )
There were no inter-segment revenue transactions for the periods presented. With the exception of contract assets – commissions receivable, which is presented by segment in Note 3 – Supplemental Financial Statement Information , our CODM does not separately evaluate assets by segment, and therefore, assets by segment are not presented.
Geographic Information
Our long-lived assets primarily consist of property and equipment, net and internally developed software. Our long-lived assets are attributed to the geographic location in which they are located. Long-lived assets by geographical area are summarized as follows (in thousands):
September 30, 2024 December 31, 2023
United States $ 26,909 $ 29,419
China 316 281
Total $ 27,225 $ 29,700
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EHEALTH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Significant Customers
Substantially all revenue for the three and nine months ended September 30, 2024 and 2023 was generated from customers located in the United States. Carriers representing 10% or more of our total revenue are summarized as follows:
Three Months Ended
September 30, Nine Months Ended
September 30,
2024 2023 2024 2023
Humana 29 % 31 % 28 % 28 %
Aetna (1)
17 % 8 % 20 % 7 %
UnitedHealthcare (1)
19 % 22 % 17 % 22 %
____________
(1) Percentages include the carriers’ subsidiaries.
Note 10 – Leases
Our lease portfolio primarily consists of operating leases for office space and our leases have remaining lease terms of 1 year to 5 years. Certain of these leases have free or escalating rent payment provisions. We recognize lease expense on a straight-line basis over the terms of the leases, although actual cash payment obligations under certain of these agreements fluctuate over the terms of the agreements. Most leases include options to renew, and the exercise of these options is at our discretion.
Subsequent to becoming a remote first workplace in the third quarter of 2022, we executed several subleases of our office space in the United States. The subleases run through the remaining term of the primary leases. As of September 30, 2024, we expect to generate a total of $ 12.9 million in future sublease income through January 31, 2030. Sublease income is recorded on a straight-line basis as a reduction of lease expense in our Condensed Consolidated Statements of Comprehensive Loss.
We test right-of-use assets when impairment indicators are present in accordance with the asset impairment provisions of Accounting Standards Codification 360, Property, Plant and Equipment. As part of our fiscal 2024 cost savings initiatives, we reassessed our occupied leased office space to identify excess space to vacate and potentially sublease. We also reassessed current market conditions in our previously vacated leased office spaces that have not yet been subleased. As a result, we determined impairment indicators were present and we performed impairment testing of our right-of-use assets. We utilized an income approach to value the asset groups by performing a discounted cash flow analysis and determined that the net carrying values exceeded the estimated discounted future cash flows expected to be derived from the properties based on Level 3 inputs, including current sublease market rent, future sublease market conditions and the discount rate. This resulted in $ 7.4 million of impairment charges related to our operating lease right-of-use assets and property, plant and equipment, which was reflected in the “Impairment, restructuring and other charges” line in our Condensed Consolidated Statements of Comprehensive Loss for the nine months ended September 30, 2024. There were no impairment charges related to our operating lease right-of-use assets and property, plant and equipment for the three months ended September 30, 2024. See Note 11 – Impairment, Restructuring and Other Charges for further discussion about our asset impairment charges.
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EHEALTH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The components of operating lease costs for the three and nine months ended September 30, 2024 and 2023 were as follows (in thousands):
Three Months Ended
September 30, Nine Months Ended
September 30,
2024 2023 2024 2023
Operating lease expense $ 1,255 $ 1,705 $ 4,424 $ 5,395
Operating sublease income ( 646 ) ( 518 ) ( 1,860 ) ( 1,675 )
Total operating lease cost $ 609 $ 1,187 $ 2,564 $ 3,720
Supplemental information related to our leases are as follows (dollars in thousands):
Nine Months Ended
September 30,
2024 2023
Cash paid for amounts included in the measurement of operating lease liabilities $ 6,663 $ 6,533
Non-cash investing activities relating to operating lease right-of-use assets $ — $ 1,285
September 30, 2024 December 31, 2023
Weighted-average remaining lease term (in years) of operating leases 4.2 4.8
Weighted-average discount rate used to recognize operating lease right-of-use-assets 5.7 % 5.7 %
As of September 30, 2024, maturities of our operating lease liabilities are as follows (in thousands):
Year ending December 31,
2024 (remainder)
$ 2,204
2025 8,994
2026 7,515
2027 6,773
2028 4,998
Thereafter 3,204
Total lease payments (1)
$ 33,688
Less imputed interest ( 3,910 )
Total $ 29,778
____________
(1) Non-cancellable sublease proceeds for the remainder of 2024 and the years ending December 31, 2025, 2026, 2027, 2028 and thereafter of $ 0.6 million, $ 2.7 million, $ 2.9 million, $ 3.0 million, $ 3.1 million, and $ 1.2 million, respectively, are not included in the table above.
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EHEALTH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 11 — Impairment, Restructuring and Other Charges
The following table details impairment, restructuring and other charges for each of the periods presented (in thousands):
Three Months Ended
September 30, Nine Months Ended
September 30,
2024 2023 2024 2023
Asset impairment charges $ — $ — $ 7,413 $ —
Restructuring and reorganization charges
61 — 1,996 —
Impairment, restructuring and other charges $ 61 $ — $ 9,409 $ —
Asset Impairment
We did not incur any asset impairment charges for the three months ended September 30, 2024. For the nine months ended September 30, 2024, we recognized non-cash, pre-tax asset impairment charges of $ 7.4 million , related to several of our leased office spaces in the “Impairment, restructuring and other charges” line in our Condensed Consolidated Statements of Comprehensive Loss. These charges were comprised of $ 6.9 million of operating lease right-of-use asset impairments and $ 0.5 million of property and equipment impairment for the nine months ended September 30, 2024. Refer to Note 10 – Leases for additional information related to our lease impairment charges.
Restructuring
Our restructuring and reorganization costs and liabilities consist primarily of severance, transition and other related costs. The following table summarizes the cash-based restructuring and reorganization related liabilities (in thousands):
Balance at December 31, 2023 $ —
Restructuring and reorganization charges 1,996
Payments ( 1,986 )
Balance at September 30, 2024 $ 10
During the three and nine months ended September 30, 2024, we recognized $ 0.1 million and $ 2.0 million of pre-tax restructuring charges in the “Impairment, restructuring and other charges” line in our Condensed Consolidated Statements of Comprehensive Loss, primarily related to employee termination benefits as a result of our cost-reduction efforts. Substantially all of the restructuring charges are expected to be settled in cash and no equity awards were modified. As of September 30, 2024, we had an immaterial restructuring accrual on our Condensed Consolidated Balance Sheet.
Note 12 – Debt
On February 28, 2022, we entered into a term loan credit agreement with Blue Torch Finance LLC, as administrative agent and collateral agent, and other lenders party thereto (the “Original Credit Agreement”). On August 16, 2022, we entered into an amendment (the “First Amendment”) to the Original Credit Agreement (as amended by the First Amendment, the “Credit Agreement”). The First Amendment replaced the LIBOR-based Adjusted Euro currency Rate (as defined in the Original Credit Agreement) with Adjusted Term SOFR (as defined in the First Amendment) as a reference rate for loans under the Credit Agreement. The proceeds of the loans under the Credit Agreement may be used for working capital and general corporate purposes, to refinance our credit
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EHEALTH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
agreement with Royal Bank of Canada (“RBC”) and to pay fees and expenses in connection with the entry into the Credit Agreement.
The Credit Agreement provides for a $ 70.0 million secured term loan credit facility. We incurred closing costs totaling $ 5.1 million, which were recorded as a direct deduction from the face amount of the loan on our Condensed Consolidated Balance Sheets. Total amortization of closing costs, or debt issuance costs, was $ 0.5 million and $ 1.4 million for the three and nine months ended September 30, 2024, respectively, and $ 0.4 million and $ 1.2 million for the three and nine months ended September 30, 2023, respectively, and is recorded in the “Interest expense” line in our Condensed Consolidated Statements of Comprehensive Loss. There were $ 0.8 million of unamortized issuance costs as of September 30, 2024. The carrying value of the term loan approximates the fair value, based on Level 2 inputs (observable market prices in less than active markets), as the interest rate is variable over the selected interest period and is similar to current rates at which we can borrow funds. The carrying value of the loan was $ 69.2 million as of September 30, 2024.
The Original Credit Agreement bore interest, at our option, at either a rate based on the LIBOR for the applicable interest period or a base rate, in each case plus a margin. The base rate was the highest of the prime rate, the federal funds rates plus 0.50 % and one month adjusted LIBOR plus 1.00 %. The margin was 7.50 % for LIBOR loans and 6.50 % for base rate loans. After the First Amendment, the loans under the Credit Agreement bear interest, at our option, at either a rate based on the Adjusted Term SOFR or a base rate, in each case plus a margin. The base rate is the highest of the prime rate, the federal funds rate plus 0.50 % and three-month Adjusted Term SOFR plus 1.00 %. The margin is 7.50 % for Adjusted Term SOFR loans and 6.50 % for base rate loans. As of September 30, 2024, the interest rate was 12.82 %. For the three and nine months ended September 30, 2024 we incurred interest expense of $ 2.3 million and $ 6.9 million, respectively. For the three and nine months ended September 30, 2023 we incurred interest expense of $ 2.4 million and $ 6.8 million , respectively.
Furthermore, as part of the Credit Agreement, we incur a $ 0.3 million fee per annum, payable annually. The outstanding obligations under the Credit Agreement are payable in full on the maturity date. Our obligations under the Credit Agreement are guaranteed by certain of our material domestic subsidiaries and substantially all of our assets and the assets of such guarantors, in each case, subject to customary exclusion.
Financial covenants in the Credit Agreement require that we maintain Liquidity (as defined in the Credit Agreement) at or above $ 25.0 million as of the last calendar day of any month. The Credit Agreement also requires that the outstanding amount as of the last calendar day of any month be less than 50 % of our total contract assets - commissions receivable (i.e., both current and non-current commissions receivable). As of September 30, 2024, we were in compliance with our loan covenants.
On November 1, 2024, we entered into a second amendment (the "Second Amendment") to the Credit Agreement. The Second Amendment amends the Credit Agreement to, among other things, (i) extend the maturity date of the Credit Agreement from February 2025 to February 2026, (ii) remove the "exit fee" contemplated by the Credit Agreement and replace it with an “applicable premium” that is payable in the event of any voluntary prepayment or certain mandatory prepayments of the loans under the Credit Agreement in an amount equal to 1.00 % of the loans being prepaid, plus, solely in the case of loans prepaid on or prior to March 1, 2025, an additional “make-whole” amount, and (iii) reduce the margin applicable to SOFR loans from 7.50 % to 7.00 % and the margin applicable to base rate loans from 6.50 % to 6.00 %. Pursuant to the Second Amendment, we paid to the lenders under the Credit Agreement an extension fee in an amount equal to 1.50 % of the $ 70.0 million aggregate principal amount of loans outstanding thereunder. All other material terms remain the same. As a result of the Second Amendment, we have reclassified the carrying value of our short term debt to long term debt on the Condensed Consolidated Balance Sheet as of September 30, 2024, in accordance with ASC 470.
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EHEALTH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 13 – Income Taxes
The following table summarizes our benefit from income taxes and our effective tax rates for the periods presented below (in thousands, except effective tax rate):
Three Months Ended
September 30, Nine Months Ended
September 30,
2024 2023 2024 2023
Loss before income taxes $ ( 44,359 ) $ ( 39,534 ) $ ( 91,161 ) $ ( 89,064 )
Benefit from income taxes ( 1,886 ) ( 2,509 ) ( 3,736 ) ( 8,660 )
Effective tax rate 4.3 % 6.3 % 4.1 % 9.7 %
For the three and nine months ended September 30, 2024 and September 30, 2023, we calculated our provision for income taxes by applying the actual effective tax rate, which reflects the actual taxes attributable to year-to-date losses, as allowed by ASC 740-270 “Income Taxes, Interim Reporting.” We determined that since minor changes in estimated income or loss for fiscal 2024 and 2023 would result in significant changes in the estimated annual effective tax rate, the actual effective tax rate method would provide a more reliable estimate for the three and nine months ended September 30, 2024 and September 30, 2023.
For the three and nine months ended September 30, 2024, we recognized a benefit from income taxes of $ 1.9 million and $ 3.7 million, respectively, representing an effective tax rate of 4.3 % and 4.1 %, respectively, which was lower than the statutory federal tax rate primarily due to changes in our valuation allowance on certain U.S. deferred tax assets, stock-based compensation adjustments and non-deductible lobbying expenses partially offset by research and development credits and state taxes. For the three and nine months ended September 30, 2023, we recognized a benefit from income taxes of $ 2.5 million and $ 8.7 million, respectively, representing an effective tax rate of 6.3 % and 9.7 %, respectively, which was lower than the statutory federal tax rate primarily due to stock-based compensation adjustments, non-deductible lobbying expenses and changes in our valuation allowance, partially offset by research and development credits and state taxes.
Assessing the realizability of our deferred tax assets is dependent upon several factors, including the likelihood and amount, if any, of future taxable income in relevant jurisdictions during the periods in which those temporary differences become deductible. We forecast taxable income by considering available positive and negative evidence, including our history of operating income and losses and our financial plans and estimates that we use to manage the business. These assumptions require significant judgment about future taxable income. As a result, the amount of deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income change. We continue to recognize our deferred tax assets as of September 30, 2024, as we believe it is more likely than not that such deferred tax assets will be realized, with the exception of certain net operating losses and credits for which there is increased uncertainty regarding our future taxable income and a lack of other sources of taxable income, which have a valuation allowance.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.