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eHealth (EHTH) Revises 2023 Guidance: Here's What We Think

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eHealth, Inc. (EHTH - Free Report) revised its guidance for major metrics upward during the second quarter results announcement, which indicates improving operations. It expects total revenues for 2023 to be within $439-$459 million, up from the year-ago level of $405.4 million. Higher revenues from Individual, Family and Small Business, and Medicare businesses are likely to boost the top line in 2023.

The rising top line, coupled with lower costs, thanks to its transformation initiatives, is expected to reduce losses in 2023. It expects GAAP net loss for the year to be within $26-$46 million, narrowing from the previously guided range of $35-$55 million. Further, EHTH anticipates its adjusted EBITDA for the full year to be within a loss of $3 million and a profit of $17 million, which also shows improvement from the previous guidance.

Now, if we look at its surprise history, eHealth beat earnings estimates in two of the past four quarters and missed twice, with an average surprise of 33.4%.

It reaffirmed its 2023 operating cash outflow guidance range of $30-$15 million. To understand how its business performance is improving and whether it can reach the guidelines, let’s take a look at its results from the last reported quarter.

Q2 Earnings

eHealth reported a second-quarter 2023 adjusted loss of $1.05 per share, missing the Zacks Consensus Estimate by 10.5%. The bottom line, however, narrowed from the prior-year quarter’s loss of $1.15 per share.

Lower Medicare Advantage members, ancillary product members and individual and family plan approved members affected its second-quarter earnings. The negatives were partially offset by increased lifetime value (“LTV”), commissions and its transformation initiatives. Lower operating costs further benefited the bottom line.

The top line increased 32% year over year to $66.8 million. The figure beat the consensus mark by 33.9%.

Operational Update

eHealth reported commissions of $60.2 million for the quarter, up 26% year over year. It beat the Zacks Consensus Estimate by 27.1%. Other revenues jumped 156% from the prior-year period to $6.6 million, beating the consensus mark by 163.3%.

The total operating costs and expenses declined 3% year over year to $92.9 million in the second quarter. Lower marketing and advertising, technology and content expenses and cost of revenues were partially offset by higher customer care and enrollment, and general and administrative costs.

Net loss improved 37% year over year to $23.5 million in the second quarter. Adjusted EBITDA was negative $14.8 million in the quarter under review, showing an improvement of 55% from a year ago.

Segmental Update

Medicare: Revenues from the segment jumped 35% year over year to $55.4 million, beating the consensus mark by 41.7%. Segmental loss narrowed 81% year over year to $4.7 million due to its transformation initiatives. The segment was supported by increased commissions, partially offset by lower Medicare Advantage plan approved members.

Individual, Family and Small Business: Revenues from the segment climbed 21% year over year to $11.3 million, beating the Zacks Consensus Estimate by 5.5%. Segmental profit surged 54% year over year to $6.7 million. The segment benefited from higher LTV, partially offset by decreased ancillary product approved members and individual and family plan approved members.

Financial Update (as of Jun 30, 2023)

eHealth exited the second quarter with cash and cash equivalents of $153.2 million, which rose from the 2022-end level of $144.4 million. Total assets of $1,053.4 million decreased from the figure of $1,112.6 million at 2022 end.

Long-term debt was $66.9 million at the second-quarter end, marginally up from $66.1 million at 2022-end.

Total shareholders’ equity of $600.9 million decreased from the 2022-end level of $651 million.

Operating cash outflow in the second quarter of 2023 was recorded at $9.4 million, down from $25.8 million in the year-ago period. This shows growing strength in operations.

How Did EHTH’s Industry Peers Fare in Q2?

eHealth belongs to the Zacks Insurance Brokerage industry, which also includes bigger market players like Marsh & McLennan Companies, Inc. (MMC - Free Report) , Aon plc (AON - Free Report) and Arthur J. Gallagher & Co. (AJG - Free Report) .

Marsh & McLennan reported second-quarter 2023 adjusted earnings per share of $2.20, which beat the Zacks Consensus Estimate by 3.8% thanks to a strong performance of the Risk and Insurance Services segment, led by the Marsh business' robust international operations. A well-performing Consulting unit also contributed to the upside. However, an elevated expense level partially offset the results.

Aon reported second-quarter 2023 operating earnings of $2.76 per share, which missed the Zacks Consensus Estimate of $2.82 due to increased operating expenses. However, the negatives were partly offset by strong retention, business generation, growth in core P&C, and solid performance in Commercial Risk Solutions’ Asia and Pacific region operations.

Arthur J. Gallagher reported second-quarter 2023 adjusted net earnings of $1.90 per share, which beat the Zacks Consensus Estimate by 2.1% thanks to higher adjusted revenues and margin expansion across the Brokerage and Risk Management segments, partially offset by higher expenses.

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