Q2 2020 Gohealth Inc Earnings Call

2020 conference call at this time, all participants I know, there's an all new mode. Following the company's prepared remarks, we'll conduct a question and answer session and instructions will follow at that time, if any wants you to acquire operate assistance during the call. Please press Star then Cherokee and you touched on telephone.

As a reminder, this call will be recorded I would now like to introduce your host for today's conference call Mr., Jay Cobalt Vice President of Investor Relations you may begin.

Thank you Joe and good evening, everyone I want to thank each of you for joining go health second quarter earnings call. Our first as a newly listed company following our IPO a month ago.

Joining me today are Clint Jones, co founder and Chief Executive Officer, Travelsmith, Jason Chief Financial Officer, and chain cruise Chief operating officer.

This afternoon <unk> conference call contains forward looking statements based on our current expectations.

Numerous risks and uncertainties may cause actual results to differ materially from those anticipated or projected in these statements.

Many of the factors that will determine future results.

On the company's ability to control or predict.

You should not place undue reliance on any forward looking statements and the company undertakes no obligation to update any of these statements whether due to new information future events or otherwise.

After the market close today, we issued a press release containing a result for the second quarter fiscal 2020. In addition to presentation materials, both the release and the slides can be found and go health website under the Investor Relations tab.

In the press release, we have listed a number of risk factors that you should consider in conjunction with our forward looking statements.

Other significant risk factors are described in our form 10-K, and 10-Q reports filed with the Securities and Exchange Commission.

During this call will be discussing certain non-GAAP financial measures. These measures a reconciliation to the most directly comparable GAAP financial measures and the reason management believes they provide useful information to investors regarding the companys financial condition and results of operations are contained in the press release and Investor presentation.

So with that I'd like to turn the call over to clip.

Thanks Jay.

Good evening, everyone and thanks for joining us for a second quarter earnings call.

This is our first as a public company and we're excited to announce girls results and share with investors are unique positioning in the marketplace.

As well as our future vision for the company as we focus on our mission to improve access and health care in America.

I've been covering two main topics today.

Including first a quick review of our second quarter results in fiscal 2020 outlook.

And second a summary of how we actively manage our business to achieve the right balance of topline growth profitability and cash reserves.

With that let's start with the second quarter results no surprises here as a results came in largely as expected.

Total net revenue grew 71% mcwhorter.

Powered by a 169% growth and our Medicare internal segment.

This revenue growth was driven by additional agents and increased efficiency, which contributed 206% increase in Medicare advantage conditional approval submissions or Medicare cash.

You broke in the quarter was held back due to covert related state licensing delays that we experience from April to June.

As of August 1st we're on track from a hiring standpoint for this upcoming ATP.

They could have substantial ground on licensing and carrier appointments during July.

Despite these significant investments in our workforce, we delivered EBITDA growth of 56% in the second quarter.

The Medicare advantage market is very large and growing quickly.

Seniors are increasingly interested in evaluating the their plan options meetings expert advice of go held at our agents.

Cobalt has helped to accelerate the secular shift towards our business model as a traditional field force slowdown.

Social discussing concerns.

Be partner closely with carriers help them grow the remember counts and we would track record of exceeding expectations through educating consumers and providing what's the best calls the options to address thrown unique needs.

We also are able to deliver high customer service levels and host enrollment engagement through our telecom getting ramped up dramatically over the last 12 months.

First half revenue increased 87%, thanks to a 242% growth in Medicare internal and a 156% growth in Medicare cast.

Internal Medicare margins increased 300 basis points to 49% TTM basis.

Given the rapid growth we delivered in the first half plus in the middle behind her business initiatives. We believe we're well positioned to the deliver net revenue of 840 890 million in 2020.

We expect efficiency gains and a continued focus on our Medicare administrative meant to help us maintain industry, leading adjusted EBITDA margins well above 30% in 2020.

Despite an aggressive investment posture in people and technology that positions us for future growth.

This will allow us to deliver adjusted EBITDA of 265 290 million.

These high margins are driven our laser focus on LTV to CAC.

As many of you know LTV to CAC represents a lifetime value of commissions divided by the customer acquisition cost and allows us to calculate how much we're willing to spend for particular consumer based on their extracted value effectively de leveraging the market and delivering high quality volume growth.

Similar to GARP investing rephrase that growth at the right price.

I'm proud to say for the team continues to build on prior year momentum with trailing 12 month LTV to CAC.

Up almost one point as of June Thirtyth to 3.6 times and towards the high end of Rothman range of 2.5 to four times.

Thoughtful range allows us to scale growth will shorten our payback period to roughly one year on Medicare policies.

As a correlation of 95% the relationship between TTM LTV to CAC and Medicare internal margins is very high.

Elevating the relevance LTV to CAC is it correct guidepost for delivering quality process. This is further validated validated by our ability to be cash flow positive from a unit economic standpoint at the end of the first year.

This leads to my second topic, the how behind delivering high gross margins and superior cash returns.

We distinguish ourselves from the competition through utilizing technology and data to powered our decisions and excellent execution.

As you know the majority of our costs are variable relating to the marketing activities and agent costs.

Our vertically integrated funnel allows us to optimize our results balancing supply and demand in real time.

Put another way.

We work towards certain as our goals and metrics, including LTV to CAC by modulating lovers.

Let me as a few examples are the various levers at our disposal to win in this market.

The first example, I want to shares around volume growth.

We can adjust the volume of lead generation, we produce for agents through de averaging the market and micro targeting.

Because we focus on internally generation, we know a lot about our targeted customers before they even make a call.

This enabled us to be surgical approach.

Spending a predetermine amount for specific consumer because you already have an expected value for them.

Our approach is precisely methodical driving top tier LTV to CAC as you work backwards from our known cost acquire that LTV.

Our anticipated future commission streams can vary due to carrier mix customer segments geographies enrollment time of the year amongst other factors that we incorporate into our ltvs.

Over the last several quarters, we've enjoyed strong high quality growth driven in part by targeting special needs plans known as snips, Although snip plans tend to have a lower ltd. The pulled on our average LTV, we can achieve our target LTV to CAC levels because of our marketing efficiencies and the higher agent conversion rates that we deliver for these policies.

The second lever, we control the investment in our own internal team of agents and how we scheduled or time to match the demand that our marketing to increase.

Given a specific number of lead generation opportunities, we can determine how many agents winning working during various times of the day.

When Kobin first hit we were able to transition to a work from home environment within 72 hours with minimal disruption.

We have now adjusted how we Onboarded train and license new agents and are continuously optimizing through improved lead scoring called running technologies to drive higher conversion rates of consumers into the best fit plans with shorter handle times.

Our data tells told is that agent engagement with consumers is supportive of happier customers.

Better plan usage and ultimately better retention.

In 2019, we more closely allied or agent compensation around the long term dynamics of these can commission streams not just at the point of sale.

Our expanded Telecard team can end takeover post enrollment to educate consumers about their planned benefits and help minimize unexpected surprises during the two highest periods of churn. The first 90 days and during the next enrollment period.

Throughout Telecard data, we've been able to develop save strategies for when members call to cancel their plans.

Whether due to shopping for zero dollar premium plans or some other significant life event like a move or a new health issue.

We have seen this retention strategy help keep over a quarter of those see customers enrolled on the Gulf platform either in their original plan or helping them finding new plan.

In addition to increase increasing persistency the telecom our team also administers innovative offerings, such as health risk assessments and pharmacy benefit management programs for our carrier partners positioning us to generate other revenue streams incremental to commissions for go how to become the go to health insurance marketplace for consumers.

To be clear our agent additions aren't investment in our growth over the coming years.

The third and final example, or levers has been a rifle shot approach to adding new carriers.

From 2016, the 2018, we use our technology and data science to fine tune, our Medicare business model with a few strong carrier partners through deep technology integrations and it consulting like partnership to help them grow their enrollments.

As our Medicare business has grown we've been methodically, adding new carriers for the platform. This approach has enabled us to maintain high margins are integrated marketplace and increased LTV to CAC through more plan choices and better consumer fit.

Our LTV to CAC and retention rates are the highest in markets, where we offer broad coverage of the leading plans first markets with less harrier coverage.

As we look towards 2021, we will have expanded coverage with many of the top carriers, including United Aetna, Kaiser and some other regional blues.

Well, there's an initial ramp up period for new carriers with forecasted lower ltvs as agents learned about new plans, adding policy choices over the long term supports higher ltvs and lower customer acquisition costs.

Clearly there are several macro factors about that are out of our control such as potential impacts from Cobiz 19.

Unemployment and regulatory changes, we believe that most of these are also tilted in our favor right now, which when combined with our proven business strategy positions us very well for future growth.

And we expect our growth will be significant over the coming years, given the size of Medicare advantage market its underlying trajectory as consumers lead traditional fee for service plans not to mention secular shift towards a virtual marketplace.

Additionally, we believe there are meaningful first mover advantage for those that can build scale.

The bigger we get better our model Optimizes.

More consumers provide more data insight, which allows micro targeting allowed us to hire more agents to specialize and better match those agents with prospects.

This flywheel effect supports being more aggressive on the growth side. During this co disruption with a careful eye towards our LTV to CAC ratio.

They should allow us to generate industry, leading EBITDA growth through scale efficiencies as we build a book of business that will generate strong cash flows for shareholders in the future.

As we think about cash management balances the word that comes to mind branded crews and I found a go health two decades ago with our own money and maintain a 30% ownership stake post IPO because of our focus on minimizing unnecessary dilution through cash burn.

So we care a lot about these cash returns that result from our business decisions.

Rather than steel Travis his thunder on six so six I'll simply say the pain your agent and marketing cost upfront and then waiting for the cash commissions to be collected three some cash challenges.

Well, we have found ways to fund our high rates of growth through a combination of existing cash flow.

Seasonal revolver and longstanding carrier relationships.

Because of the depth of our relationship with carriers, we have been able to treat programs where carriers pay upfront cash to go health to cover agent cost and enrollment fees as well as marketing programs on the front end.

While the margins are lower than the Commissionable business and as health reduced our reliance on external capital.

Now post IPO, we are in a strong position to reevaluate the balance of creating value for the carriers, some commissional growth and generating additional revenue streams from these relationships.

Non commission revenue shown as other revenue on our PNM has been and we'll continue to be an important way to supplement the profitability of commission streams, including the rollout of some of the encompass initiatives to enhance member utilization and drive value based care engagement.

More frequent customer interactions will help ensure member planned satisfaction and better health outcomes, creating a strong connection between provider payer and patient.

I will spend more time running through our accomplished opportunities on future earnings calls, but for now we are encouraged by the favorable response from our carriers.

We can offer programs on behalf of carriers at the time of enrollment was compelling margin.

Leveraging our marketplace until the care team.

In the meantime, we aim to continue our legacy of over delivering on our growth objectives, and we'll do so through controlling what we can control and creating a visible path to value creation.

We will continue to thoughtfully allocate our resources invest ahead of the curve and make sure that go health earns more than our fair share of a very large fast growing Medicare advantage market.

Let me now I'll turn the call over to Travis for some additional color on our financials and key metrics.

Thanks, Clynt into all of you for joining us today for a review of our first half results.

Rather than repeat all the financials in our release I will use this time to hit a few key highlights from the first six months of 2020 as well as share some additional perspective on an issue that in front of mind for investors.

First let me run through some key numbers from the first half.

As Clint mentioned, we delivered strong growth and our Medicare internal segment, our focus area as a company total Medicare submissions jumped 140% in the first half as we continue to onboard and license new agents in advance of Q4's annual enrollment period.

We are driving increased agent efficiency through better conversion and higher sales per day, and remember that our agents variable compensation is not only paid upon submission of an application, but also on long term retention and other aspects from our balanced scorecard, including customer satisfaction.

This is 100% aligned with our focus on the value of a consumer versus the LTV of an individual policy.

Regarding our Medicare external segment, let me remind you that these external agents are not outsourced call center agents, but rather independent virtual agencies that leverage the power of go health technology compliance and data to be able to help enroll new members undergo health carrier contracts.

They are also compensated in a similar manner to our internally and with an eye towards long term retention. So they are only paid when commissions are received for the reasons mentioned above external segment ltvs are not materially different from our internal segment.

The dynamics that have been powering our year to date growth showed no signs of the beating in fact, we believe that cobot has only serve to accelerate the shift to our business model as Clint mentioned, we can acquire members more efficiently than carriers and consumers are increasingly interested and utilizing the expert.

Advice of our internal agents to help them navigate a decision with serious cost ramifications if they enroll in the wrong plan concerns over health care have become front of mind for Medicare eligible consumers and they need education transparency and choice from the safety of their homes.

We focused almost exclusively on our own marketing and advertising efforts generating approximately 80% of our leads internally in the first half because of this because of the superior efficiency that results from the integrated approach during the first half of 2020, our marketing team success.

Fleet grew customer acquisitions by 245% with only a 190% increase in marketing and advertising costs dramatically improving efficiency while scaling.

These leads were generated through a balanced approach to online and offline channels. We continue to benefit from scale through greater breadth of carrier offerings that will create opportunities to build our brand and reach consumers on a nationwide basis.

Scale benefits also drove down gionee as a percentage of revenue from 9.8% to 7.8% over the first six months of the year, despite headcount investments to support our growth objectives.

We delivered meaningful operating leverage during the first half of the year within adjusted EBITDA margin of 23.1% versus the prior years, 17% an increase of over 600 basis points.

Adjusted EBITDA came in at 61.9 million, 154% above the prior year period, as we continue to find ways to generate high quality profit growth beyond the annual enrollment period from an operational perspective, it's equally important to create selling opportunities for our team of Medicare agents.

Throughout the year to be able to maintain a large ongoing agent force that continuously improves over time.

The trajectory of Medicare advantage Ltvs with a modest tailwind for revenue with first half ltvs up 1.3% to $879. While the 879 is an average it's important to note that not all policies are created equal and we utilize our full.

We integrated technology platform to de average the market as we micro target and delivered top tier LTV to CAC for the overall portfolio.

In reference to Clints comments around utilizing our LTV to CAC framework to target high quality growth opportunities, let me point out that our strategy to had several new large carriers with lower initial commission rates and Ltvs is a strategic decision to drive choice and better fit for consumers.

Similarly, our increasing share of business. This year across the SNET population is also high margin business that results in lower Ltvs. How does this mix shift manifest in our results while strong growth in snips could create a near term drag on our average LTV, our LTV to CAC focused ensures that we are.

Always paying the appropriate amount for these new consumers delivering high quality growth and strong cash returns on the tax deployed.

As Clint mentioned, our payback period is approximately one year and overtime as we increase the carrier options for our consumers you would expect to see better fit drive greater persistency.

Let me share a few more thoughts on our perspective on our current book of business and the topic of churn.

My first point is that we have not observed material changes in churn relative to our expectations.

When we analyze churn it's important to note that we're comparing like for like an apples to apples cohort cohorts and vintages across our book of business.

My second point is that cash collections on LTV is a better business metric as we sit here today and analyze our historic vintages. The cash we have collected has been inline with our expectations validating our ltvs while changes in churn are not having a material impact on ltvs, the changing mix of bids.

This will continue to impact average LTV, whether it's new carriers, new consumer segments or new geographies as they are all underwritten higher LTV to CAC targets.

Third LTV to CAC is our north star because of the high correlation with margins and cash flow trailing 12 months LTV to CAC of 3.6 times is excellent and at the high end of our range and it's driven by efficiencies in our cost to acquire consumers as we drive down marketing costs.

Per opportunity and increase overall agent conversion rates.

Fourth and most importantly, our business model generates strong cash returns significantly faster than our competitors. We included a new slide in our investor deck to help highlight that in 2019. The combination of first year commissions and other revenue was higher than our CAC during that period.

Moving now to some more details on our full year 2020 outlook.

We expect total revenue to come in at a range of 848 on 890 million driven primarily by the growth in Medicare internal cast. This represents a 60% increase at the midpoint significantly faster growth than the competition as we look to lengthen our lead and build the scale that will further improve.

Our ability to utilize our data and technology to create value for consumers and carriers, the like both of which will benefit our shareholders.

As Clint mentioned in his comments 2020 will be a strong year growth and our other revenue while commissionable revenue remains our main area focus. These other revenue streams have been excellent ways to bridge, our cash flow needs and generate incremental profits and they have been an important part of our strategy to monetize the value we create.

Carriers.

And with the early success of our go health encompass platform. We believe we are uncovering new ways to create values for carriers that should result in additional revenue beyond commissions.

In 2020, we expect scale efficiencies to offset the large investments we have made an additional internal agents are teller care team and our technology platform, resulting in adjusted EBITDA growth of 55% to 71% for the full year.

It's worth noting that given our focus on better utilizing agent throughout the year, including during the seasonally low Sep our business model delivers increasingly balanced profit growth in 2020, we expect to generate roughly one third of our EBITDA. During the first nine months of the year and our track.

And well towards achieving our full year range of 265 to 290 million on the heels of large investments in our agent and carrier footprint expansion.

Given the favorable cash characteristics cash characteristics of our business model cash flow from operations. In 2020 is expected to be only negative 60 to 80 million and we are on track to deliver our current growth plan post IPO without needing to raise additional capital for perspective.

We believe we can we can add roughly 325 million in revenue. This year. So this limited cash consumption speaks volumes to the cash efficiency of our business model, our focus on LTV to CAC and our unique carrier relationships.

To help you with your models diluted share count for the full year is roughly 320 million shares and net debt today post IPO is roughly 115 million.

So to summarize we are confident that we have the winning differentiated business model to deliver high quality growth for shareholders powered by multiple levers and financial discipline. Our teams have the plans in place to acquire new customers at the right price generating high rates of returns on those investment dollars.

Measured by LTV to CAC and visible in our industry, leading EBITDA margins and cash returns are fully integrated platform and data driven insights further position us to increase our efficiency overtime as we gain scale and an enormous Medicare advantage market, becoming better in the process.

And we are investing in additional revenue streams, which can augment our top and bottom line growth over the coming years.

And with that operator, we'd like to open up the call acuity.

Thank you ladies and gentlemen, if you had a question at this time. Please press Star then one can you touched on telephone if your question I've been answered you wish to movies from the Q. Please press the pound key.

Yes, please limit yourself to one question and invite you to join the queue quick follow ups. One moment, please probably compiled a roster.

Our first question comes from Elizabeth Anderson with Evercore. Your line is now open.

Hi, guys that congrats on a first quarter I didn't negate.

I had a question regarding your your churn levels not quite back if you gave us some nice high level because I was wondering if you could give us a little bit more detail in terms of what you saw with Covance special enrollment period, and then specifically if you any commentary you have in times of the newest cohort from 29 came to the.

How they that color just kinda, especially as I asked thank you.

Yes. Thank you thanks for the question.

Obviously, there's been a lot of noise in conversations in the market around churn.

Now I want to take a little kind of educate you how we think about this and kind of the key elements and how we run our business.

You know around this so obviously churn is one element that goes into your Ltvs and why is this important obviously your ltvs or what you're using to predict future cash flow and we are hyper focused on cash flow I think we mentioned several times in our prepared remarks, so thats kind of how we think about why this is so important.

And if you think about Travis had mentioned that our cash collections are right in line with with our expectations have been.

Thats kind of point number one point number two we have not seen material changes in churn.

In the business. So I think those are the two main points are going to talk about the way we look at in running the business. We have kind of two points in the period of our customer journey. Our first 90 days, which has many levers in there that impact churn the marketing source, Egypt performance type of enrollment in listening.

Plant as new to Medicare the carrier the geography.

In many other factors a lot of these factors are in architectural and we see those elements in real time and were able to make modifications and adjustments. If we start seeing negative or positive trends, we don't want to see surprises that we're in a position with our data and insights we don't see surprises so that disenrollment.

Peer that I'm talking about in the first 90 days as we are hyper hyper focused on there and we obviously see different.

Disenrollment numbers by cohorts by different plans mentioned that other things that I've mentioned.

In the next part is post 90 days, we caught more macro area macro churn area and again haven't seen any trends that would lead us in a negative way there.

We have less control there, but we've ramped up in talks about the investment we made in our telecom. Our team is close to 200 people now and we're having over 30000 conversations a month with consumers.

So why they may be interested in looking at another plan how happy are they so we believe as we invest in that and get more data that will be ways. We can actually make positive impacts on that macro area as well, so and I think.

Everybody in this industry defines LTV and churn metrics in unique ways. So I think comparing us against that appear is not the right set the other the last point out as get too is just the the overall cash payback period that we're focused on you know again why assurance on important goes under LTV calculations why is your LTV calculations on imports.

And because that's how you generate your cash flow and predict that.

If I come to that in their Clint really quickly we do look at that early just enrollment and that 90 day turned very differently.

I will continue to build a girlfriend use marketing automation customer outreach through telecard improve the post nine they turned dynamics, we're focusing the majority of our efforts on the on the Disenrollment period.

Not only because it has its impact on our ltvs and our cash payback period, but it's the area, where you can best leverage our data to de average the market. So we talk a lot about how we're going to the average the market and leverage the different dynamics in that every consumer is different to arbitrage the market and get the results that we've seen and we see significant variances.

In attrition across our different data dimensions related customers and agents during that early just enrollment period.

As you mentioned Clint some of these.

Good example, here would be in geography, we see in markets, where we have a really strong product footprint and there's less competition. The 90 de retention of our submissions maybe over 80% and keep in mind that this includes both effectuate run rate of the submission did actually get to the effective date and become a pain policy as well as did last without canceling during that first 90 days put in.

Other markets, where we still are growing our carrier footprint, there's higher competition that 90 day rate, maybe as low as 50% to 60% retention. So those significant variances are things that we can leverage with both our business strategy to add carriers to our platform to ensure that we can get higher retention rates in all areas, but also to ensure that were.

We're paying the right price for every single consumer and again de leveraging the market. So in certain geographies, we're going to pay more to acquire consumers because we know those early trends with disenrollment.

As we mentioned earlier in the calls while another example relates to the types of Medicare beneficiaries that were enrolling so as we target enroll consumers and snip plans, they will exhibit lower fluctuation rates and higher disenrollment rates. During the first 90 days of the policy, but we'll continue to target is consumers do they are attractive acquisition costs.

And the ability for us the leverages population to reduce the seasonality of our of our business and so.

Things are just key examples of how we can leverage our data to de average the market and continue to pay the right price for every consumer so instead of focusing on how are we performing in aggregate from a turn perspective or from a disenrollment perspective, we'll continue to focus on using our data to de average the market. It makes for they're paying the right price for every consumer so it can be laser focused on.

The important metric, which is our LTV to CAC.

That's super helpful. Thank you very much.

Thanks.

Chris.

Sure. Thanks.

Turning Jeff Your line is me please UN mute.

Hey, guys cylinder.

Can you guys going okay.

Yes, yes, yes.

So the cash flow slide I think thats very important differentiation you guys have that.

But to breakeven on gosh less than 12 months, but can you help us reconciled upside that you expect your other revenue to remain strong and decided that we should have the Nobel Commission coming from prior years, but do you still expect cash flow guidance to be negative 600 negative 18, beginning this year just trying to understand like why should we expect positive cash flow trends.

And busy at all even next year, because how much weaker so that.

Yes, so I'll answer the first part of that.

So in our other revenue. These are these are multi year in many cases.

Contracts with partners.

Whether that's around.

Egypt costs enrollment fees marketing development funds and our newly kind of rolled out encompass platform. You know these are long term contracts and we expect that recurring revenue to continue.

And we do leverage that in a way to drive drive the results in our business and we will continue to focus on on that and I think traps can speak from a cash flow standpoint, but at our growth rates.

From a cash flow overall cash flow positive, we can slow down and become cash flow positive really quickly. We don't think thats right decision for the business that we're in a key.

Kind of expanding and growing in areas that we can match our out LTV to CAC and Travis you want to speak a little bit one no great point, Clint I would just I'll, just reiterate first and foremost obviously the cash.

Consumption. This year is predicated on growth and again continuing to accelerate our growth rate and then second I think the other important pieces again, we gave kind of the full year guidance RASM 12, 31, and again because of the seasonal nature of our business. What's that 60 to 80 represents is again the cash that we will consume.

During the period with while our payback period is within one year a lot of that payback will start coming in in Q1 as we get that first initial commission as well as start to receive renewal commissions from from our book. So again I think that combination of growth combined with the seasonality of the of the 12 31 guidance.

Given our the two biggest drivers there.

Okay. Thanks, a lot.

Thank you.

Our next question comes from Steve adequate with Barclays. Your line is now open.

Thanks, Jonathan Young Steve just in relation to your Ltd outlook through mentioned that the large carrier adds may impact.

LTV a bit because of the mix is there something unique about the products that you're adding where the population.

Targeting.

In terms of wide LTV would be.

Somewhat negatively impacted from that regard and then just quickly Kevin data on just the recapture from numbers that did churned off thanks.

Yes, I could start so from a from a new carrier addition.

You know obviously as we think about adding new carriers, we may come in that.

There are several elements here lower commission rates.

It takes a while to ramp up in agent really are at the agents and the carrier on the platform. So there may be an initial period of time, where we see lower conversions.

Potentially higher churn as our agents become educated and fully understand this plan. So.

Weve taken more of a conservative approach from an LTV, Stan and think about how we plan and scale. This out we obviously will roll out new carriers to the whole business. If you will start we'll test will learn will ramp up will gather data and grow from there, but I think it'd be just prudent for us to take much more of a conservative approach as we roll these out now.

That will shift over time.

As we learn the data gain scale and grow from there such as how we think about.

New carriers and to that point, essentially even new agents.

And then a follow up on the recapture question.

As we think about recapture we think about those consumers that are going to leave us Travis mentioned, the 30000 consumer that we talk to with our telic. Your team on a monthly basis, we're engaging with consumers were using our predictive analytics to figure, which consumers will reach out to based on the likelihood that they will turn based on.

The product they've selected in how we determined that product fits square using our technology as we reach out to those consumers. We find that you do they call also recall them, we end up with about 25% save rate of those consumers that we speak to that are looking to cancel their plans.

Great. Thanks.

Thank you.

Our next question comes from Tobey Sommer with two last.

Your line is now open.

Thanks, I Wonder if you could give us a little bit of color on.

What your experiences an agent productivity.

They are virtual setting and maybe give us the context of how it compares a year ago.

And what your assumptions our truck productivity as we head into the fourth quarter. Thanks.

Yes, so great question.

Thank you. So obviously, yeah managing a remote workforce is is create this unique challenges and I think it's going into covidien and kind of moving everybody to a virtual we really didnt know to fully what's a fully expect and I think the good news is that productivity has stayed the same were actually increase in many cases and if I.

I look at kind of our last several years ATP increases in conversion, we expect a modest increase this year, but it's not all driven.

By just the agent activity last year, we rolled out kind of our our lead lead routing and planned matching capabilities, there really as we understand agents characteristics around what they sell the best.

Whether that's from a marketing source or type of consumer.

That dataset has grown and we've gained more insight we can better match prospects with that those agents. So really excited about that is we get agents onboard and I think you know in years past, we had a lot of hiring right before ATP, where we didnt know a lot around these agents and their their capabilities. Luckily this year, we're able to get people.

Inboard sooner or onboard sooner or we can learn more about that which we're really excited as we get into ATP.

And we were devising ways to ensure.

I would just had roughly kind of two key metrics that we look at when we talk about measuring agent performance. We look at agent conversion rate their abilities to submit applications off of the qualified opportunities they received as well as their sales per agent per day.

You too of 20 over Q2 of 19, we've actually seen increases in both of those metrics. So those are two key leading indicators that we're very excited about as we continue to to operate in this remote and post cobot environment.

Thanks.

If I could ask another question you seem very enthusiastic about the non commission sources of revenue and the new platform if possible could you give us some examples of what the new platform could unlock in terms of those opportunities. Thanks, Yeah, absolutely. Yes, we are extremely excited about it and I think.

But you know, especially now with this more like.

Tele health and virtual capabilities, you think about the senior population, that's much more vulnerable and our ability to make it impact there virtually over the phone that kind of really gives us excited on how we get help help folks out so couple of examples.

That we can we can talk through you think about health risk assessment.

Really understanding when somebody's enrolled we can help our carrier partners at the time of enrollment we take them through a health risk assessment process.

Which as we deliver that now member to the carriers. They know exactly who that consumer is did it didn't do they need immediate follow up Claire do they need to get into a chronic care programs, we need given a prevention program. So really dials in a much faster connection with that customer around that carrier that plans needs. So thats and Thats. An example enrollment.

Value based care models, obviously is a big industry shift into value based care.

We can help these consumers understand and enrolling value based care models.

We screening for social determinants of health, obviously with isolation during coven.

Theres a bit theres, a big risk there for a minute mental health standpoint that we can we get help identify and go from there other things around I understand their transportation needs to get to a provider and back somebody can't make it to a doctor's appointment from of preventive care standpoint, how do we impact that.

Meal delivery right if somebody is in a situation where they.

Can't get to the grocery or they don't have the means, especially during cope with his or an opportunity set that up right. These are all potential revenue triggers for us and where we can.

Not only help the carriers, but all the consumers as well so it's a great ecosystem that we get really excited about and we've got lift of unique services that we'll be adding to this platform as we move forward.

Okay.

Thank you.

And our next question comes from line Castle and Morgan Stanley.

Your line is now open.

Flooring, you might be on mute.

Our next monster Okay.

Our next question comes from Michael Channel with Bank of America. Your line is now open.

Good evening and thanks for all the color so far I hate to go back to this churn question, but just because I know it's been the dominant topic you talked about no real material changes relative to expectations. I guess just on a more straightforward question can you tell us those up or down.

I would like for like basis.

Yes, again, our churn rates have been relative to our expectations and again when we talk about our expectation our expectation those are the LTV is that we recognized in book and again, we have not seen a material change and I would just again point back to what Clint mentioned earlier is that churn is not the only driver of LTV, it's carrier mix.

Its consumer mix and geography, and again based off of all of those factors are ltvs have been inline with our expectations as evidenced by our cash collections to date.

Yeah. Thanks, I appreciate all the color and education on that front. One other question I want to dive into I like your used the term rifle approach on.

Carrier relationships, adding carriers as you think out, especially in a post election world. How do you think about the future development of carrier relationships, especially with any that are any significant once they don't have relationships with currently.

Yes, that's a great question I think it to take a step back here, we've been operating a health insurance marketplace for nearly 20 years, but Medicare is relatively new for us right actually only five year. So.

We had a lot of the technology capabilities from enrollment in sales capabilities, but when we added Medicare. We said you know what is the it's a product that we don't don't fully understand yet we want to be thoughtful methodical and how we do this we want to partner with a few select key partnerships.

And then learn that business and becoming very valuable partner.

Delivering highly skilled efficient memberships and that's what we did so now that we kind of fast forward. A few years later, we see the data around the country, where we can afford to add other other carriers rather products in that to better serve customers.

Which which we have begun doing.

So I think that that that'll play out over years to come I think that.

As we scale, it's it'll be a very important factor for us to ensure that from an LTV to CAC and this is something we drive down to the to the leading metric.

We're operating and the best areas. So if we see and are either LTV you know maybe low in some areas are CAC high in some areas that probably means we could add you know a carrier in there are different plan there to impact that change that and we've proven that over the years and I think was your your second question around the election.

Just in general we might be looking at different environment and likely a more optimistic environment pension for Medicare I guess, how do you think about positioning the business new relationships in the event that there is a a broader tam to go after.

Yes, no absolutely I think that we had been operating the under 65 market and we still are to it and to an extent but for years. So.

We don't expect in the Big healthcare debate right now sits in the U.S 65, especially around the FDA.

Not a lot of discussion around changing Medicare advantage, others, and potentially the biden side, bringing the Medicare eligibility age down, which obviously would be.

Big factor for us and something that we would be well positioned to help those consumers understand and enroll and the products that are available there.

Got it thank you.

Thank you.

Our next question comes from Steve how kind of Cantor Fitzgerald Your line is that.

Yes, hi, if I'm doing the back of the envelope math it looks like Medicare was around 93% of the commission revenue line is that correct and then just generally can you.

Just talk about what your expectations are around non Medicare Commission revenue going forward.

Yes, so you're right our focus has been on Medicare.

Thats, where weve continued to see the opportunity in Europe, you rise above 90% at this point.

And we will continue to drive and invest in that strategy and around other revenue it will grow but what are expected to grow as a percentage overall revenue.

Just because our revenue stream from commission will will outpace that pretty dramatically, but it's still a very important metric and part of our business and I think about our future opportunity.

With additional enrollment fees or agent payback periods.

Around.

The encompass strategy we see.

Obviously, not a meaningful amount of revenue this year per se, we're actually well ahead of where we thought we'd be.

As we get into 2021 and beyond we get really excited about what that can deliver.

But I was I was just focused on in the Commission line you know the IMF P.

Business, the non Medicare Commission revenue in that line.

What's what sort of the outlook for for that specific part of the business.

Yes, I mean, we made the strategic decision.

Last year to not necessarily get out of IP.

But to not really invest in IP until we fully understand what's going to happen in the election.

That's kind of where there is such a kind of a turbulent.

You know issue around that that market today that we wanted to keep it going so we still get a lot of Collins and lead flow around helping people get enrollment in 88 plan.

As we depending on what happens in the election and the opportunities that would come out of that we'd be in a very good position to again reinvest and grow that if it made sense.

Thank you.

Thank you and our next question comes from online casual Morgan Stanley. Your line is now open.

Great. Thank guys you may now.

Yes, okay.

Okay, Great I just wanted to ask about the new partners that you added you know is there anyway to sort of quantify or help us think about your full year revenue guidance in terms of growth from new versus existing partners and then you mentioned Kaiser and some other smaller.

Carriers at either you're adding over the next I guess several quarters. I guess is is that a 2020 story is that more 2021 at that my follow up is just on that on the Aegion side are there any stats that you can get around around agent retention.

Yes, so I think the carry one first so.

We added United.

You know and kind of run the beginning of Q2, and we're really focused on the snit population and where that is so thats obviously grown.

As we kind of gone throughout the year some of the other carriers were not going to add until later on in the years, we're going to ATP. We don't believe it will be a meaningful part of this year as we think about you know.

Adding a new carrier you really have close to a year.

To get fully integrated build all the technology capabilities all the reporting all the data trainee agents get them up to speed and go from there. So we don't think theres going to be kind of a meaningful change necip necessary. This year.

But as we think about future years, and with that kind of carrier concentration looks like we think it'll be a much more diversified.

And then the the question on.

Agent churn.

So in our top without a breakdown of the cohorts.

And obviously are theres, a good churn and badger, so our top I'm kind of cohorts of agents that are strong performers, we see very little churn by design.

They have strong.

You know kind of commission model set up that are really around retaining not only the consumer but retaining the agent through future future opportunities with the with the business. They right for US now on the flip side. It the at the lower end of that there will be forced churn and that's really driven around performance that we're constantly evaluate.

Adding how as agents perform and there are certain expectations in standards, we need to hit and I think that would go go as any other sales organization out there how they would manage that population.

Around performance and just just to add to that when we think about LTV to CAC, we look at LTV to CAC even of our agents. So we look at our agents are performing and declines point, our top performers or continue to be rewarded have really great careers with us and we sell them lose those agents, but we do aggressively managed or bottom performers.

And I talked earlier about some examples of different 90 day retention characteristics for different data dimensions, a big one that I didn't get into the agents and we see significant variances in retention. So we look at obviously conversion rates sales volume, but even on the retention rates a 90 day active rates of the business. Those those agents are writing.

We will manage out those agents that are not kind of fulfilling the balance scorecard that we've laid out because we want to make sure that their incentives are aligned with us and what the agents that fit the Gulf culture and are helping consumers and the way that we want to help them.

Yes, I would just add as we think about again the back half of the year and the forecast we gave.

We have a plan of having to tap a little north of 2000 licensed agents.

Enrolling consumers into plan I'm happy to announce that where we sit here today, 96% of that workforce has been hired and so again as we think about you know the seasonal nature of our business, we've been very successful and onboarding, adding and training our agents early in the process that we're really excited about the opportunity. It can drive this upcoming annual enrolled.

The period.

Great. Thanks much.

Thank you and the last question comes from your on Kanye with Goldman Sachs. Your line is how open.

Hey, guys here, Rob Cox filling in for your around.

But I just wanted to ask we got some updated views on online enrollments from some of your peers I just wanted to know.

What percent of your policies are enrolling online in this new environment and to what extent are you focusing on or investing in this capability going forward.

Yeah, Great Great question, and you know, we really focus and believe that connecting consumers to a license in train expert is the right way to go now.

Thats, what the majority of our enrollments occur we obviously have the technology.

That is a consumer can enroll on their own and we do get some but it's a very small.

Part of our business now we we do have the ability that will deploy kind of a more aggressive strategy of kind of an agent assisted or.

You know kind of emailed enrollment packet.

During peak times, especially during ATP around deadline days or deadline week. So if we have a huge call Q, we can enable our agents to talk to the consumer help them choose a plan.

But as opposed to enrolling them over the phone we can incented on electronic capability, where they can do it themselves, which it's been enables our agents to get back on the phone into next consumer as our call queues are higher we can bring them down. So there are periods of time during a if you will deploy that technology. That's very successful. We we believe overtime, we'll see more and more piece.

You know enrolling online.

We don't think that trend has occurred yet.

But we have the capable of doing it and we'll continue to watch it but in our best characteristics around our LTV to CAC still remains strongest when talking to one of our experts.

Okay Thats helpful. Thanks.

Great well hey, Thank you very much to all of you for joining us for our second quarter earnings call and please feel free to reach out to us with any additional questions you might have take care.

Ladies and gentlemen that concludes today's program you may now disconnect everyone have a great there.

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