eHealth, Inc. [EHTH] Filings

10-Q 1 ehth-20240630.htm 10-Q ehth-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-33071

_____________________________________________

EHEALTH, INC.

(Exact name of registrant as specified in its charter)

_____________________________________________


Delaware						56-2357876
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

13620 RANCH ROAD 620 N, SUITE A250

AUSTIN, TX 78717

(Address of principal executive offices)

(737) 248-2340

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.001 per share	EHTH	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of the registrant’s common stock, par value $0.001 per share, outstanding as of August 2, 2024 was 29,405,418 shares.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

In addition to historical information, this Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The words “expect,” “anticipate,” “believe,” “estimate,” “target,” “goal,” “project,” “hope,” “intend,” “plan,” “seek,” “continue,” “may,” “could,” “should,” “might,” “forecast,” “depends,” “predict,” “are positioned” and variations or the negative of such words and similar expressions are intended to identify such forward-looking statements. These statements include, among other things, statements regarding the following:

•our expectations relating to estimated membership and approved members;

•our estimates regarding the constrained lifetime value of commissions and commissions receivable;

•our expectations relating to revenue, operating costs, cash flows and profitability;

•our expectations regarding our strategy and investments;

•our expectations regarding our business and market trends, including market opportunity, consumer demand and our competitive advantage;

•our expectations regarding our individual and family business, Medicare Supplement and other ancillary products, including anticipated trends and our ability to enroll individuals and families into qualified health plans;

•our expectations regarding our operational initiatives, including our Agency and Amplify fulfillment models;

•our expectations regarding our growth strategies and cost-saving initiatives;

•the impact of future and existing laws and regulations on our business;

•the impact of public health crises, pandemics, natural disasters, changing climate conditions and other extreme events;

•the impact of macroeconomic conditions, including adverse events or perceptions affecting the U.S. or international financial systems, inflationary pressures and the political climate on our business;

•our expectations regarding commission rates, conversion rates, plan termination rates and duration, membership retention rates and membership acquisition costs;

•our expectations regarding insurance agent licensing and productivity;

•our expectations regarding beneficiary complaints, customer experience and enrollment quality;

•our expectations relating to the seasonality of our business;

•expected competition, including from government-run health insurance exchanges and other sources;

•our expectations relating to marketing and advertising investments and expected contributions from our marketing and strategic partnership channels;

•the timing of our receipt of commission and other payments;

•our critical accounting policies and related estimates;

•liquidity and capital needs;

•political, legislative, regulatory and legal challenges;

•the merits or potential impact of any lawsuits filed against us; and

•other statements regarding our future operations, financial condition, prospects and business strategies.

We have based these forward-looking statements on our current expectations about future events. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Our actual results may differ materially from those suggested by these forward-looking statements for various reasons, including our ability to retain existing members and enroll new members during the annual healthcare open enrollment period, the Medicare annual enrollment period, the Medicare Advantage open enrollment period and other special enrollment periods; changes in laws, regulations and guidelines, including in connection with healthcare reform or with respect to the marketing and sale of Medicare plans, such as the Policy and Technical Changes to the Medicare Advantage Program for Contract Year 2025, released by CMS on April 4, 2024; 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 changes in our estimated conversion rate of an approved member to a paying member and the resulting impact of each on our commission revenue; the concentration of our revenue with a small number of health insurance carriers; our ability to execute on our growth strategy and other business initiatives; changes in our management and key employees; our ability to recruit, train, retain and ensure the

productivity of licensed insurance agents, or benefit advisors, and other personnel; 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 effectively manage our operations as our business evolves and execute on our 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 our convertible preferred stock investor; our ability to raise additional capital; compliance with insurance, privacy, cybersecurity and other laws and regulations; the outcome of litigation in which we may from time to time be involved; the performance, reliability and availability of our information technology systems, ecommerce platform and underlying network infrastructure, including any new systems we may implement; public health crises, pandemics, natural disasters, changing climate conditions and other extreme events; general economic conditions, including inflation, recession, financial, banking and credit market disruptions; our ability to affectively administer our self-insurance program; and those identified under the heading “Risk Factors” in Part II, Item 1A of this report and those discussed in our other Securities and Exchange Commission filings. Given these risks and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included in this report are made only as of the date hereof. Except as required by applicable law, we do not undertake, and specifically decline, any obligation to update any of these statements or to publicly announce the results of any revisions to any forward-looking statements, whether as a result of new information, future events, changes in assumptions or otherwise.

Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause our actual results to differ materially from those in the forward-looking statements.

SUMMARY OF RISK FACTORS

The following is a summary of the principal risks we face, any of which could adversely affect our business, operating results, financial condition or prospects:

•The markets in which we participate are intensely competitive, and if we cannot compete effectively against current and future competitors, including government-run health insurance exchanges, our business, operating results and financial condition could suffer.

•Our business may be harmed if we lose our relationship with health insurance carriers or our relationship with health insurance carriers is modified.

•We derive a significant portion of our revenue from a small number of health insurance carriers, and any impairment of our relationship with them or impairment of their business could adversely affect our business, operating results and financial condition.

•If we are unable to successfully attract and convert qualified prospects into members for whom we receive commissions, our business, operating results and financial condition would be harmed.

•Our business, operating results and financial condition will be adversely impacted if we are unable to retain our existing members.

•Our business is seasonal in nature, and if we are not successful in responding to changes in the seasonality of our business, our business, operating results and financial condition could be harmed.

•Changes in our management or key employees could affect our business, operating results and financial condition.

•Our business success depends on our ability to timely recruit, train and retain qualified licensed insurance agents, or benefit advisors, and other personnel to provide superior customer service and support our strategic initiatives while also controlling our labor costs.

•Our business may be harmed if we are not successful in executing on our operational and strategic plans, including our growth strategies, cost-saving and enrollment quality initiatives.

•Our failure to effectively manage our operations and maintain our company culture as our business evolves and our work practices change could harm us.

•Our marketing efforts may not be successful or may become more expensive, either of which could adversely affect our business, operating results and financial condition.

•If our carrier advertising and sponsorship program is not successful, our business, operating results and financial condition could be harmed.

•Our commission revenue could be negatively impacted by changes in our estimated conversion rate of an approved member to a paying member, our forecast of average plan duration or our forecast of likely commission amounts.

•If commission reports we receive from carriers are inaccurate or not sent to us in a timely manner, our business and operating results could be harmed, and we may not recognize trends in our membership.

•We do not receive information about membership cancellations from our health insurance carriers directly, which makes it difficult for us to determine the impact of current conditions on our membership retention and to accurately estimate membership as of a specific date.

•Our operations in China involve many risks that could increase expenses, expose us to increased liability and adversely affect our business, operating results and financial condition.

•Our self-insurance programs may expose us to significant and unexpected costs and losses.

•The marketing and sale of health insurance plans, including Medicare plans are subject to numerous, complex and frequently changing laws, regulations and guidelines, and non-compliance with or changes in laws, regulations and guidelines, or changes in their interpretation or the manner in which they are enforced could harm our business, operating results and financial condition.

•Changes and developments in the health insurance industry or system, including changes in laws and regulations, could harm our business, operating results and financial condition.

•From time to time we are subject to various legal proceedings which could adversely affect our business.

•We may be unable to operate our business if we fail to maintain our health insurance licenses and otherwise comply with the numerous laws and regulations applicable to the sale of health insurance.

•Increasing regulatory focus on privacy and data security issues and expanding laws could impact our business and expose us to increased liability.

•Any legal liability, regulatory penalties, complaints or negative publicity related to us or our services could harm our business, operating results and financial condition.

•Our operating results will be impacted by factors that impact our estimate of the constrained lifetime value of commissions per approved member.

•Our agreements with our lender and our convertible preferred stock investor contain restrictions that impact our business and expose us to risks that could materially adversely affect our liquidity and financial condition.

•Operating and growing our business is likely to require additional capital, and if capital is not available to us, our business, operating results and financial condition may suffer.

•If we fail to properly maintain existing or implement new information systems, our business may be materially adversely affected.

•Our business is subject to security risks, and if we experience a successful cyberattack, a security breach or are otherwise unable to safeguard the confidentiality and integrity of the data we hold, including sensitive personal information, our business will be harmed.

•We may not be able to adequately protect our intellectual property, which could harm our business and operating results.

•Our future operating results are likely to fluctuate and could fall short of expectations, which could negatively affect the value of our common stock.

•Our actual operating results may differ significantly from our guidance.

•The price of our common stock has been and may continue to be volatile, and the value of your investment could decline.

•Our convertible preferred stock investor has rights, preferences and privileges that are not held by, and are preferential to, the rights of our common stockholders, which could adversely affect our liquidity and financial condition, result in the interests of our convertible preferred stock investor differing from those of our common stockholders and make an acquisition of us more difficult.

•We are subject to risks associated with public health crises, pandemics, natural disasters, changing climate conditions and other extreme events, including legal, regulatory and social responses thereto, which have and could have an adverse effect on our business.

•We face risks related to heightened inflation, recession, financial and credit market disruptions and other economic conditions.

Our Risk Factors are not guarantees that no such conditions exist as of the date of this report and should not be interpreted as an affirmative statement that such risks or conditions have not materialized, in whole or in part.

EHEALTH, INC.

FORM 10-Q

TABLE OF CONTENTS


PART I	FINANCIAL INFORMATION	PAGE
Item 1.	Financial Statements (Unaudited)	2
	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Comprehensive Loss	3
	Condensed Consolidated Statements of Stockholders’ Equity	4
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	48
Item 4.	Controls and Procedures	49

PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	50
Item 1A.	Risk Factors	50
Item 5.	Other Information	78
Item 6.	Exhibits	79
Signatures		80


Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

EHEALTH, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, unaudited)


	June 30, 2024		December 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	126,344	$	115,722
Short-term marketable securities	24,721		5,930
Accounts receivable	1,183		3,993
Contract assets – commissions receivable – current	194,306		244,663
Prepaid expenses and other current assets	9,298		12,044
Total current assets	355,852		382,352
Contract assets – commissions receivable – non-current	637,568		673,514
Property and equipment, net	4,355		4,864

Operating lease right-of-use assets	13,435		22,767
Restricted cash	3,090		3,090


Other assets	24,315		26,758
Total assets	$	1,038,615	$	1,113,345

Liabilities, convertible preferred stock and stockholders’ equity
Current liabilities:
Accounts payable	$	4,957	$	7,197
Accrued compensation and benefits	20,012		40,800
Accrued marketing expenses	7,842		20,340

Short term debt	68,662		—
Lease liabilities – current	7,360		7,070

Other current liabilities	7,463		3,131
Total current liabilities	116,296		78,538
Long-term debt	—		67,754
Deferred income taxes – non-current	27,057		29,687
Lease liabilities – non-current	24,380		28,333
Other non-current liabilities	4,970		4,949
Total liabilities	172,703		209,261
Commitments and contingencies (Note 8)
Convertible preferred stock	317,060		298,053
Stockholders’ equity:
Common stock	42		41
Additional paid-in capital	808,314		798,786
Treasury stock, at cost	(199,998)		(199,998)
Retained earnings (accumulated deficit)	(59,415)		7,284
Accumulated other comprehensive loss	(91)		(82)
Total stockholders’ equity	548,852		606,031
Total liabilities, convertible preferred stock and stockholders’ equity	$	1,038,615	$	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 June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenue:
Commission	$	56,847	$	60,186	$	137,774	$	128,189
Other	9,009		6,582		21,046		12,302
Total revenue	65,856		66,768		158,820		140,491
Operating costs and expenses:

Marketing and advertising	26,783		23,439		65,520		56,308
Customer care and enrollment	28,551		29,979		61,452		55,050
Technology and content	13,044		14,453		26,349		28,806
General and administrative	22,402		25,049		42,021		49,373


Impairment, restructuring and other charges	3,035		—		9,348		—

Total operating costs and expenses	93,815		92,920		204,690		189,537
Loss from operations	(27,959)		(26,152)		(45,870)		(49,046)
Interest expense	(2,849)		(2,720)		(5,658)		(5,300)
Other income, net	2,335		2,828		4,726		4,816
Loss before income taxes	(28,473)		(26,044)		(46,802)		(49,530)
Benefit from income taxes	(505)		(2,543)		(1,850)		(6,151)
Net loss	(27,968)		(23,501)		(44,952)		(43,379)

Preferred stock dividends	(5,480)		(5,223)		(10,960)		(10,324)
Change in preferred stock redemption value	(5,540)		(4,191)		(10,787)		(7,260)

Net loss attributable to common stockholders	$	(38,988)	$	(32,915)	$	(66,699)	$	(60,963)

Net loss per share attributable to common stockholders:
Basic and diluted	$	(1.33)	$	(1.18)	$	(2.29)	$	(2.20)

Weighted-average number of shares used in per share amounts:
Basic and diluted	29,233		27,822		29,072		27,735

Comprehensive loss:
Net loss	$	(27,968)	$	(23,501)	$	(44,952)	$	(43,379)
Unrealized holding gain (loss) on available for sale debt securities, net of tax	2		7		(21)		20
Foreign currency translation adjustments	(33)		(248)		12		(138)
Comprehensive loss	$	(27,999)	$	(23,742)	$	(44,961)	$	(43,497)

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 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

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 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

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)


	Six Months Ended June 30,
	2024		2023
Operating activities:
Net loss	$	(44,952)	$	(43,379)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	1,008		1,294
Amortization of internally developed software	7,676		9,102

Stock-based compensation expense	10,646		11,187
Deferred income taxes	(2,631)		(6,700)


Impairment charges	7,413		—
Other non-cash items	(117)		(101)
Changes in operating assets and liabilities:
Accounts receivable	2,810		1,989
Contract assets – commissions receivable	86,697		95,012
Prepaid expenses and other assets	1,431		(124)
Accounts payable	(2,474)		(621)
Accrued compensation and benefits	(20,788)		279
Accrued marketing expenses	(12,498)		(17,336)
Deferred revenue	2,034		283
Accrued expenses and other liabilities	2,324		490
Net cash provided by operating activities	38,579		51,375
Investing activities:
Capitalized internal-use software and website development costs	(4,879)		(4,202)
Purchases of property and equipment and other assets	(465)		(373)
Purchases of marketable securities	(37,391)		(48,602)
Proceeds from redemption and maturities of marketable securities	19,000		12,400


Net cash used in investing activities	(23,735)		(40,777)
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	(1,851)		(1,051)




Principal payments in connection with leases	(4)		(25)
Payments of preferred stock dividends	(2,740)		(873)
Net cash used in financing activities	(4,241)		(1,687)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	19		(127)
Net increase in cash, cash equivalents and restricted cash	10,622		8,784
Cash, cash equivalents and restricted cash at beginning of period	118,812		147,640
Cash, cash equivalents and restricted cash at end of period	$	129,434	$	156,424

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 the consumer in their life’s journey 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 June 30, 2024 and other condensed consolidated financial statements for the three and six months ended June 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 June 30, 2024 and December 31, 2023 and our results of operations for the periods presented. The results for the three and six months ended June 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 Comprehensive Loss and within Corporate for our segment profit (loss). We have recast the Condensed


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EHEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

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 six months ended June 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 six months ended June 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.


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EHEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

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 June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Medicare
Medicare Advantage	$	42,168	$	45,389	$	104,164	$	99,510
Medicare Supplement	4,045		1,091		9,523		5,156
Medicare Part D	2,710		1,863		5,395		2,640
Total Medicare	48,923		48,343		119,082		107,306
Individual and Family (1)
Non-Qualified Health Plans	388		2,989		2,033		5,344
Qualified Health Plans	710		1,752		2,756		3,403
Total Individual and Family	1,098		4,741		4,789		8,747
Ancillary
Short-term	1,043		572		1,431		1,556
Dental	524		958		1,401		1,668
Vision	302		276		991		486
Other	686		715		1,420		1,233
Total Ancillary	2,555		2,521		5,243		4,943
Small Business	2,563		3,800		6,179		8,673
Commission Bonus and Other	1,708		781		2,481		(1,480)
Total Commission Revenue	56,847		60,186		137,774		128,189
Other Revenue
Sponsorship and Advertising Revenue	5,478		5,554		15,667		9,574
Other	3,531		1,028		5,379		2,728
Total Other Revenue	9,009		6,582		21,046		12,302
Total Revenue	$	65,856	$	66,768	$	158,820	$	140,491

_____________

(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 June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Medicare
Commission revenue from members approved during the period	$	39,941	$	36,006	$	109,693	$	92,623
Net commission revenue from members approved in prior periods (1)	10,681		13,403		11,683		13,455
Total Medicare segment commission revenue	$	50,622	$	49,409	$	121,376	$	106,078
Employer and Individual
Commission revenue from members approved during the period	$	3,265	$	3,298	$	8,942	$	10,006
Commission revenue from renewals of small business members during the period	2,142		2,158		5,170		5,271
Net commission revenue from members approved in prior periods (1)	818		5,321		2,286		6,834
Total Employer and Individual segment commission revenue	$	6,225	$	10,777	$	16,398	$	22,111

Total commission revenue from members approved during the period	$	43,206	$	39,304	$	118,635	$	102,629
Commission revenue from renewals of small business members during the period	2,142		2,158		5,170		5,271
Total net commission revenue from members approved in prior periods (1)(2)	11,499		18,724		13,969		20,289
Total commission revenue	$	56,847	$	60,186	$	137,774	$	128,189

_____________

(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 June 30, 2024 and 2023 was $0.30 and $0.51 per basic and diluted share, respectively. The after-tax impact of total net commission revenue from members approved in prior periods for the six months ended June 30, 2024 and 2023 was $0.36 and $0.56 per basic and diluted share, respectively. The total reductions to revenue from members approved in prior periods were $3.1 million and $2.9 million for the three months ended June 30, 2024 and 2023, respectively, and $3.6 million and $2.9 million for the six months ended June 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):


	June 30, 2024		December 31, 2023
Cash	$	9,994	$	7,114
Cash equivalents	116,350		108,608
Cash and cash equivalents	126,344		115,722
Restricted cash	3,090		3,090
Total cash, cash equivalents and restricted cash	$	129,434	$	118,812

As of June 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 were no write-offs during the six months ended June 30, 2024 or for the year ended December 31, 2023.

The change in the allowance for credit losses is summarized as follows (in thousands):



	June 30, 2024		December 31, 2023
Beginning balance	$	2,118	$	2,398
Change in allowance	(393)		(280)
Ending balance	$	1,725	$	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	109,693		8,942		118,635
Commission revenue from renewals of small business members during the period	—		5,170		5,170
Net commission revenue from members approved in prior periods	11,683		2,286		13,969
Cash receipts	(204,533)		(19,937)		(224,470)
Net change in credit loss allowance	361		32		393
Ending balance at June 30, 2024	$	764,536	$	67,338	$	831,874


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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 $2.8 million as of June 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:


	June 30, 2024		December 31, 2023
Humana	29	%	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):


	June 30, 2024		December 31, 2023
Prepaid software and maintenance contracts	$	4,251	$	5,328
Prepaid expenses	2,230		1,808
Prepaid licenses	1,609		2,739
Prepaid insurance	415		1,436
Other current assets	793		733

Prepaid expenses and other current assets	$	9,298	$	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):


	June 30, 2024
	Carrying Value		Level 1		Level 2		Level 3		Total
Assets
Cash equivalents
Money market funds	$	10,656	$	10,656	$	—	$	—	$	10,656
Commercial paper	94,706		—		94,706		—		94,706
Agency bonds	10,988		—		10,988		—		10,988
Short-term marketable securities
Commercial paper	12,822		—		12,822		—		12,822
Agency bonds	11,899		—		11,899		—		11,899



Total assets measured at fair value	$	141,071	$	10,656	$	130,415	$	—	$	141,071


	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 of the six months ended June 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 June 30, 2024				As of December 31, 2023
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in 1 year	$	141,132	$	141,071	$	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):


	June 30, 2024
	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Cash equivalents
Money market funds	$	10,656	$	—	$	—	$	10,656
Commercial paper	94,755		—		(49)		94,706
Agency bonds	10,988		—		—		10,988
Short-term marketable securities
Commercial paper	12,834		—		(12)		12,822
Agency bonds	11,899		—		—		11,899



Total	$	141,132	$	—	$	(61)	$	141,071


	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 June 30, 2024 and December 31, 2023, we had 28 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 six months ended June 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 $2.1 million and $2.3 million for the three months ended June 30, 2024 and 2023, respectively, and $4.3 million and $4.2 million for the six months ended June 30, 2024 and 2023, respectively.

Note 5 – Equity

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 June 30, 2024, 2.0 million shares were issued under the A&R 2021 Inducement Plan.


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EHEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Stock Repurchase Programs – We had no stock repurchase activity during the three and six months ended June 30, 2024 or 2023 except for the repurchase of shares to satisfy employee tax withholding obligations. As of June 30, 2024 and 2023, we had a total of 13.1 million and 12.5 million shares, respectively, held in treasury. As of June 30, 2024 and 2023, we had 2.4 million and 1.8 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 June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Restricted stock units	$	4,296	$	4,934	$	8,932	$	9,007
Performance-based stock units	467		850		874		1,454
Common stock options	343		312		743		566
Employee stock purchase program	—		97		97		160
Total stock-based compensation expense	$	5,106	$	6,193	$	10,646	$	11,187
Related tax benefit recognized	$	1,255	$	1,452	$	2,612	$	2,619

The following table summarizes stock-based compensation expense by operating function for the periods presented below (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Marketing and advertising	$	711	$	538	$	1,355	$	993
Customer care and enrollment	511		788		1,035		1,393
Technology and content	779		1,173		1,753		2,078
General and administrative	3,105		3,694		6,503		6,723

Total stock-based compensation expense	$	5,106	$	6,193	$	10,646	$	11,187
Amount capitalized for internal-use software	202		325		380		637
Total stock-based compensation	$	5,308	$	6,518	$	11,026	$	11,824

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


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EHEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

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. The 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 June 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 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


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EHEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

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 – 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 2.0x (the “Minimum Asset Coverage Ratio”), which increased to 2.5x in August of 2023. The first measurement date of the 2.5x 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 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 June 30, 2024, we were in compliance with the Minimum Liquidity Amount.

As of June 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 June 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 3.5 million shares of common stock as of June 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	8,220
Change in preferred stock redemption value	10,787
Balance as of June 30, 2024	$	317,060


Table of Contents

EHEALTH, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

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.

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 June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Numerator:
Net loss attributable to common stockholders	$	(38,988)	$	(32,915)	$	(66,699)	$	(60,963)
Denominator:
Shares used in per share calculation – basic	29,233		27,822		29,072		27,735