UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
____________________________
Filed by the Registrant Filed by a party other than the Registrant
Check the appropriate box:
Preliminary Proxy Statement
Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material under (s) 240.14a-12
EHEALTH, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other than the Registrant)
Payment of Filing Fee (Check all boxes that apply):
No fee required.
Fee paid previously with preliminary materials.
Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11.
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13620 Ranch Road 620 N, Suite A250
Austin, TX 78717
(737) 248-2340
May 23, 2024
Dear Fellow Stockholder:
I am writing to you to seek your support of our proposal to approve the new
2024 Equity Incentive Plan (the "Plan"), which will replace our 2014 Equity
Incentive Plan that is set to expire on June 12, 2024. If the Plan is approved
by our stockholders, an additional 1.35 million shares will be reserved for
issuance under the Plan. The passing of this proposal is critical to our
successful strategy execution as we work towards sustainable profitable growth
and cash flow generation and establishing eHealth as a gold standard in health
insurance distribution.
In April of 2022, with these goals in mind, we launched a business
transformation plan that included overhauling our sales and marketing
organizations, further streamlining the consumer experience on our platform,
and rationalizing our cost structure. During 2022 and 2023, we achieved a $76
million cumulative improvement to our net income (loss), a $37 million
cumulative improvement to our adjusted EBITDA and a $156 million cumulative
improvement to our operating cash flow. In the fourth quarter of 2023, we
resumed revenue and member enrollment growth on this enhanced operational
foundation. On May 7 of this year, we shared another execution update with our
investors as part of our first quarter 2024 earnings report. In the first
quarter of 2024, eHealth continued to demonstrate significant progress across
many of our key financial and operational metrics including revenue and
enrollment growth, profitability, cash flow and business diversification.
As part of our transformation plan, I reconstituted eHealth's senior
leadership team (SLT) with seven of the ten members of our current SLT
recruited in 2022 and 2023. Providing competitive total compensation,
including the equity incentive component, was critical to recruiting and
rewarding this leadership team. It is important to note that given the past
executive turnover and resulting cancellation of unvested equity grants of
departed executives, our net burn rate, which we believe is a truer reflection
of our use of equity compensation in recent years, is well below our gross
burn rate
1
. Specifically, our net burn rates in 2022 and 2023 were 3.6% and 8.4%
compared to gross burn rates of 8.9% and 9.8%, demonstrating the effects of
this transformation period on our granting practices [
E
xhibit
1
]. We expect our equity burn rates to normalize in 2024.
At the end of 2023, we communicated that the major components on the
transformation plan were completed. As part of our investor presentation
published on May 13, 2024, which is available on our investor relations
website, we disclosed our ambitious three-year goals calling for strong
revenue CAGR accompanied by adjusted EBITDA margin expansion and positive free
cash flow growth
2
. I strongly believe that our ability to provide equity grants, including
performance-based equity, is important to retain and attract leadership and
management and to execute on the previously stated goals while maintaining
full alignment of our employee and stockholder interests. Going forward, we
plan to shift a greater percentage of our equity compensation towards
performance-based equity awards to help achieve even greater alignment between
our strategic goals and compensation.
Our focus on "at-risk" equity compensation is not limited to the SLT members
and, in fact, goes deep within our organization. This is in line with best
practices in our industry
-
the healthcare IT and the broader technology
1
Gross burn rate was calculated as the total of equity awards granted during
the fiscal year, divided by the weighted average number of shares outstanding.
Net burn rate was calculated as equity awards granted during the fiscal year
less equity awards cancelled and returned to the plan, divided by the weighted
average number of shares outstanding.
2
The reference to the investor presentation and information contained therein
are intended to be "furnished" and shall not be deemed "filed" for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended. Except as shall
be expressly set forth by specific reference in such filing, the reference to
the investor presentation and information contained therein shall not be
incorporated by reference into any filing with the Securities and Exchange
Commission made by the Company, whether made before or after the date hereof,
regardless of any general incorporation language in such filing.
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sector. eHealth's annual burn rates and overall dilution from equity-based
compensation is in line with that of our Proxy peers. It is important to note
that ISS compares eHealth to the appropriate peer group for the purpose of
evaluating our executive compensation. However, when evaluating our equity
plan, ISS uses a different set of peer group companies consisting of firms in
our GICS industry group
-
typically regional financial services companies that do not compete for the
same talent pool as eHealth and are subject to different compensation
practices.
Without additional shares available for issuance under an equity incentive
plan, we would likely be compelled to increase the cash component of employee
compensation to remain competitive, which runs directly counter to our core
objective of maximizing cash flow generation. Further, our ability to maintain
a stable and committed team of management becomes challenging without the
benefits of sufficient equity that vests over multiple years. Our Board of
Directors unanimously recommends that you vote "
FOR
" the approval of Proposal 4
-
the adoption of the proposed Plan. Thank you for your consideration and
anticipated support.
Sincerely yours,
Francis S. Soistman
Chief Executive Officer and Director
Forward-Looking Statements
This letter to our stockholders from our Chief Executive Officer contains
statements that are forward-looking statements as defined within the Private
Securities Litigation Reform Act of 1995. These include statements regarding
our expectations regarding our business, operations and strategy; the impact
of our business transformation plan on our business and our future cost
reduction efforts; the effect of our marketing and branding efforts on our
business; our financial prospects and outlook; future stockholder value;
expected growth and value creation; the expected impact of a new equity plan
on our ability to hire and retain our workforce; our expected equity burn rate
in 2024; cost reductions and efficiencies; priorities and performance; and
other statements regarding our future operations, financial condition,
prospects and business strategies.
These forward-looking statements are inherently subject to various risks and
uncertainties that could cause actual results to differ materially from the
statements made, including the risks and uncertainties described in our most
recent Quarterly Report on Form 10-Q or Annual Report on Form 10-K filed with
the Securities and Exchange Commission (SEC) and available on the Investor
Relations page of our website at https://ir.ehealthinsurance.com and on the
Securities and Exchange Commission's website at www.sec.gov. In particular, we
are required by Accounting Standards Codification 606 -
Revenue from Contracts with Customers
to make numerous assumptions that are based on historical trends and our
management's judgment. These assumptions may change over time and have a
material impact on our revenue recognition, guidance, and results of
operations. Please review the assumptions stated in this communication
carefully. All forward-looking statements in this letter are based on
information available to us as of the date hereof, and we do not assume any
obligation to update the forward-looking statements provided to reflect events
that occur or circumstances that exist after the date on which they were made,
except as required by law.
Non-GAAP Information
This letter to our stockholders from our Chief Executive Officer includes
adjusted EBITDA, a non-GAAP financial measure. Adjusted EBITDA is calculated
by excluding dividends for preferred stock and change in preferred stock
redemption value, provision for (benefit from) income taxes, depreciation and
amortization, stock-based compensation expense, amortization of intangible
assets, impairment, restructuring and other charges, interest expense, other
income (expense), net, and other non-recurring charges from GAAP net income
(loss) attributable to common stockholders. Other non-recurring charges to
GAAP net income (loss) attributable to common stockholders may include
transaction expenses in connection with capital raising transactions (whether
debt, equity or equity-linked) and acquisitions, whether or not consummated,
purchase price adjustments and the cumulative effect of a change in accounting
principles.
The presentation of non-GAAP financial information is not intended to be
considered in isolation or as a substitute for results prepared in accordance
with GAAP. A reconciliation of adjusted EBITDA to GAAP net income (loss)
attributable to common stockholders, the most directly comparable GAAP
financial measure, is available in the Appendix to this letter. Management
uses both GAAP and non-GAAP information in evaluating and operating its
business internally and as such has determined that it is important to provide
this information to investors.
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Additional Information and Where to Find It
eHealth has filed with the SEC a definitive proxy statement on Schedule 14A,
with respect to its solicitation of proxies for eHealth's 2024 Annual Meeting
of Stockholders. Investors and stockholders are urged to read the proxy
statement (including any amendments or supplements thereto) filed with the SEC
carefully and in their entirety because they contain or will contain important
information about any solicitation. Investors and stockholders may obtain
copies of these documents and other documents filed with the SEC by eHealth
free of charge at www.proxyvote.com/EHTH. Copies of the documents filed by
eHealth are also available on the Investor Relations page of our website at
ir.ehealthinsurance.com and on the Securities and Exchange Commission's
website at www.sec.gov.
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Exhibit 1
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