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  "documentTitle": "eHealth Inc. (EHTH)",
  "authorId": "51_Muddy_Waters",
  "authorName": "Carson Block",
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  "sourceTypeSlug": "short_seller",
  "sourceTypeLabel": "Short seller",
  "presentationDate": "2020-04-08 00:00:00",
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  "notes": "The slide uses a 'villain_critique' tone, specifically targeting EHTH management's credibility and accounting practices.",
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      "text": "EHTH's overstatement of future commissions booked as upfront revenue by approximately $128 million, detailed above, means that sales are exaggerated by 33.8%.",
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      "text": "In March 2018, Dave Francis said that he expected the Medicare business to become cash flow positive “certainly by 2019”. 2019 company operating cash flow was in fact negative.\nIn February 2019, CFO Derek Yung gave 2019 cash used in operations guidance of -$17 million to -$20 million. The operating cash burn turned out to be -$71.5 million.\nIn February 2019, Mr. Yung also said that management was “targeting” positive OCF for 2020. Only one year later, in February 2020, Mr. Yung said that management expects 2020 cash used in operations to be -$52 million to -$55 million.",
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      "text": "Adjusted Operating Profit: -$181.5M",
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      "kind": "paragraph",
      "text": "Apologists for the company might justify this inability to reach OCF breakeven as a sign of growth. Our response is that the company is prodigiously incinerating cash to grow, and member churn has skyrocketed.",
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      "text": "EHTH’s overstatement of future commissions booked as upfront revenue by approximately $128 million, detailed above, means that sales are exaggerated by 33.8%. Meanwhile, after stripping out the inflated commissions and adjusting for ongoing costs of approximately $135 million, the company’s operating profit swings to a deep loss, reflecting a lossmaking underlying business",
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      "text": "This adjustment assumes that EHTH may apply ASC 606 as it does, which is a proposition with which we wholly disagree. Regardless, we start with a lower LTV for 2019 MA enrollees of $728. Multiplying the LTV difference by 404,694 2019 MA Estimated Members yields a revenue haircut of $115 million from MA alone. Overstated receivables computed similarly across the remainder of the business bring total revenue inflation to $128 million.",
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      "kind": "paragraph",
      "text": "EHTH management has repeatedly had move the goalposts regarding when it expects to generate positive operating cash flow:",
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      "kind": "quote",
      "text": "In March 2018, Dave Francis said that he expected the Medicare business to become cash flow positive “certainly by 2019”. — Dave Francis",
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      "text": "eHealth Adjusted 2019 Operating Figures ($millions) Stated Revenue 506.2 Remaining Life Overstatement (127.9) Adjusted Revenue 378.3 Stated Operating Profit 81.4 Remaining Life Overstatement (127.9) Retention & Service Cost Impact (135.0) Adjusted Operating Profit (181.5)",
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      "kind": "title",
      "text": "We Adjust 2019 Revenue Down by 25%",
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      "kind": "title",
      "text": "Table 10: Revenue and Profit Impact of eHealth Misstatements",
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