eHealth, Inc. (EHTH)

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eHealth, Inc. (EHTH)

Q3 2008 Earnings Call Transcript

October 30, 2008, 5:00 pm ET


Kate Sidorovich – Director, IR

Gary Lauer – Chairman, President and CEO

Stuart Huizinga – SVP and CFO


Steve Halper – Thomas Weisel

Robert Coolbrith – ThinkEquity Company

Jim Friedland – Cowen & Company

Carl McDonald – Oppenheimer

Ryan Bergan – Craig-Hallum



Good day, ladies and gentlemen, and welcome to the third quarter 2008 eHealth earnings conference call. My name is Fab, and I'll be your coordinator for today. (Operator instructions) I would now like to turn the presentation over to Kate Sidorovich, Director of Investor Relations. Please proceed.

Kate Sidorovich

Good afternoon, and thank you all for joining us today either by phone or by webcast for a discussion about eHealth Inc.’s third quarter 2008 financial results. On the call this afternoon we will have Gary Lauer, eHealth’s President and Chief Executive Officer, and Stuart Huizinga, eHealth’s Chief Financial Officer. After management completes its remarks we will open the line for questions.

As a reminder, today’s conference call is being recorded and webcast from the Investor Relations section of our website. A replay of the call will be available from the Investor Relations section of our website following the call. We will make forward-looking statements on this call. All statements other than statements of historical fact are forward-looking statements.

Forward-looking statements made on this call will include statements regarding Citigroup’s plans to promote eHealth Insurance, our intention to expand marketing of the HSA platform, CareFirst’s plan to make our e-commerce solution to available to consumers and brokers, IHC's plan to use eApproval to gain competitive advantage and get faster traction, eApproval serving as a competitive advantage, increased carrier recognition over the benefits of eApproval, our intention to work closely with the government on healthcare policy, the likelihood and limitations on the scope of healthcare platform reform, the impact of any healthcare and tax reform, our ability to maximize opportunities in connection with healthcare reform, the duration of the current economic conditions and impact of our investment approach, our plan with respect to marketing messaging, our investment approach positioning us well to weather the market environment, fourth quarter interest income, our effective tax rate for 2008, our projected rate for payment of cash taxes, a data center expansion project and its impact on capital expenditures, guidance for the full year 2008, and guidance relating to stock-based compensation expense.

Forward-looking statements are based on assumptions and assessments made by the company’s management, based on factors they believe to be appropriate. Forward-looking statements are subject to risks and uncertainties that could cause actual results, developments, and business decisions to differ materially from those contemplated by these statements. We describe these and other risks and uncertainties in our annual report on Form 10-K and quarterly reports on Form 10-Q filed with the Securities and Exchange Commission, which you may access through the SEC website or from the Investor Relations section of our website.

Forward-looking statements made on this call represent the company’s views as of today. You should not rely on these statements as representing our views in the future. We undertake no duty to update or revise any forward-looking statements made during this call, whether as a result of new information, future events, or otherwise.

We will be presenting certain financial measures on this call that will be considered non-GAAP under SEC Regulation G. For reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure, please refer to the information included in our press release and in our SEC filings, which can be found on our corporate website under the heading Investor Relations.

And at this point I will turn the call over to Gary Lauer. Gary?

Gary Lauer

Good afternoon and thanks everyone for joining us today. I’d like to begin by highlighting our financial results for the third quarter. Our total revenue of $28.5 million grew 24% over the third quarter a year ago. Earnings per share was $0.12. Non-GAAP operating margin, excluding the effects of stock-based compensation, was 19%. And we generated $8.3 million of operating cash flow during the quarter bringing our overall cash and marketable securities balance to $143 million. We believe that our financial performance posted during a very challenging and uncertain economic environment further illustrates eHealth’s sound business model and company-wide commitment to execution of our plans.

Of particular note during the past quarter is our submitted application and growth of 20% year-over-year. We experienced healthy submitted application growth across all of our member acquisition channels. In addition to our application growth, we also made important progress in a number of key strategic areas, including additional eApproval projects, signing of a large e-commerce on-demand transaction with a significant carrier, and further expansion of our growing marketing partner network.

I’d like to make some more comments about our application growth. Throughout the third quarter, I tried to be very clear both inside the company and out that we were not going to wait passively for the economy to get better. While the economy and consumer spending environment deteriorated during the third calendar quarter, we were developing and implementing a wide range of aggressive marketing initiatives that are specifically tailored to today’s economic realities.

In the traditional media area and through our PR efforts, we are heavily stressing an affordability message and educating consumers that health insurance isn’t a discretionary item, but rather something they need and can afford through eHealth. For example, our marketing campaign, which emphasizes that health insurance can be bought for the cost of a latte a day, has been very effective.

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