Q4 2020 eHealth Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the fourth quarter of fiscal year earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question during this session.
You will need to press star one on your telephone if you require any further assistance. Please press star zero. Thank you I would now like to hand, the conference over to your speaker today, Mesquite Czarevitch, Vice President of Investor Relations deal flow.
Laura is yours.
Thank you.
Good afternoon, and thank you all for joining us today, either by phone or by webcast for a discussion about Ehealth, Inc. 's fourth quarter and fiscal year 2020 financial results on the call. This afternoon, we'll have Scott Flanders, Ehealth, Chief Executive Officer, and Derek Yung Chief Financial Officer After management completes his remarks.
We will open the lines for questions. As a reminder, today's conference call is being recorded and webcast from the IR section of our website a replay of the call will be available on our website. Following the call we will be making forward looking statements on this call that includes statements regarding future events beliefs and expectations, including statements really.
Moving to our expectations regarding our capabilities and market opportunities on our strategy to drive Medicare enrollment growth and Cui Inc.
<unk> quality of enrollments and achieve higher lifetime values, our expectations regarding on Medicare business, including Medicare enrollment growth and consumer demand on <unk>.
From technology, and our retention initiatives and expenses returns on these investments our ability to grow our internal agent force increased agent productivity and improve customer engagement on our sales and marketing strategy and putting on line strategy and strategic partnership channels on expectations regarding our financial performance the profitability of our business.
Seasonality churn lifetime values blend persistency remember estimates total acquisition cost per member and operating expenses and our outlook for the first quarter of 'twenty, one and our full year 2021 financial guidance forward looking statements on this call represent ehealth views as of today, you should not rely on these statements.
As representing our views in the future we want to take no obligation or duty to update information contained in these forward looking statements whether as a result of new information future events or otherwise forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in our forward looking statements. We describe these.
On the 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's website or from the IR section of our website.
Yeah.
Certain financial measures on this call that are considered non-GAAP on the SEC's regulation G for ex elite 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 in the about us section of our <unk>.
Corporate website under the heading Investor Relations and at this point I will turn the call over to Scott Flanders.
Thank you Kate and welcome all.
As outlined in our preliminary report three weeks ago.
Fourth quarter marked a soft ending to a strategically important year.
Although 2020 presented challenges.
<unk> made notable progress building out our capabilities evolving our strategies and positioning the company to capture significant market opportunities ahead.
With that in mind and as we enter a new fiscal year I want to take a step back and speak to what we have built where we are going and why we are confident that the actions. We are taking will help address the issues that affected our performance last quarter and springboard ehealth into our next phase of growth and success.
Ehealth has a strong foundation that is differentiated from others in our industry.
We are an organization rooted in technology with a best in class consumer facing E Commerce platform.
Over the last four plus years, we have executed a deliberate plan that has enabled us to drive significant growth.
We grew our approved Medicare members at a compound annual growth rate of over 40% between 2017 and 2020, while continuing to rapidly accelerate online penetration.
Our Medicare revenue and segment profit has grown at a compound annual growth rate of 54% and 66% respectively over the same time period.
We ended 2020 with an estimated 876000 Medicare members and over $790 million in commissions receivable.
At this stage of Ehealth evolution, we are enhancing our focus on driving quality of enrollments.
Customer engagement and higher lifetime values, while we continue to scale and profitably grow our share of the important Medicare market.
Part of this strategy in 2020, we launched two strategic initiatives aimed at strengthening our value proposition.
The first was an investment in new technologies to dramatically improve our ability to analyze consumer needs and provide them with superior tools to improve accuracy of plan recommendations.
But the second is a multifaceted program to improve member retention.
Our online strategy as a major element of this program.
Online users have persistency that is significantly higher compared to those that engage with us Telefonica Lee.
As a result, these enrollments have higher ltvs, while also requiring lower per member agent costs, providing for superior member economics.
Our customer center that was launched in October of last year also plays a key role in improved member retention.
Customer center Leverages, our online capabilities and is built around our customers and their data in order to personalized customer experience and deepen our relationships with our members while increasing brand awareness.
We expect to start seeing clear returns on these investments in the form of efficiency.
Customer engagement and retention as early as the first quarter of this year.
We strongly believe our progress can be extended to drive growth and market share expansion through high quality Medicare enrollments.
This belief is further validated by our recent announcement that H I G capital entered into a binding agreement to make a $225 million investment in Ehealth.
H I G as a blue chip investor that shares our view that Medicare distribution is rapidly moving toward a comparison shopping mall.
And that our technology driven platform is uniquely positioned to leverage this trend and achieve market leadership.
This investment is subject to customary closing conditions for this type of transaction.
But we have ample liquidity to execute on our strategy in the near term Aig's investment provides us with flexibility to opportunistically accelerate our growth.
We are also excited about the pending addition of Aig's managing director Erin Polson to our board of directors Erin brings valuable expertise in helping companies leveraged technology to disrupt their industry.
Turning now to our results for the fourth quarter and full year of 2020.
Approved members for our main product Medicare advantage grew 30% in the fourth quarter compared to Q4 of 2019.
While we continue to grow our enrollments at rates above the overall Medicare advantage market. These volumes were below our expectations.
Net into the challenges from the quarter and the actions we are taking to address those in a moment.
But it's important not to lose sight of the progress that we've made.
First we have made significant progress towards improving the quality of our Medicare enrollments, which is critical to long term profitability and cash flow generation.
Our fulfillment mix shifted towards channels, historically characterized by better retention and higher ltvs, 43% of our fourth quarter applications for Medicare major medical products were submitted online, including unassisted and partially agent assisted online enrollments up from 36%.
A year ago. Additionally.
Additionally, 81% of our Telefonica enrollments in the fourth quarter were fulfilled by our internal agents compared to 68% the year before.
In addition to an ongoing shift of fulfillment mix, we have rolled out an enhanced lead segmentation and allocation process introduced a dedicated customer retention team.
And revised compensation structure for our internal agents all in an effort to better align our sales organization with our broader strategic focus on enrollment quality and member retention.
We are already seeing some encouraging early signs out of our retention team based on the number of their interactions with our existing members and relationships preserved whether by keeping a member on the same policy or switching them to another plan on Ehealth platform.
Further our recently launched customer center has already garnered over 100000 accounts to date.
As more customers become a part of our customer center, we believe their satisfaction and confidence in their Medicare plan choice will increase.
Critical element of retention.
We expect that our fourth quarter 2020, Medicare enrollments will prove to be of superior quality from a retention perspective compared to our fourth quarter enrollments a year ago driven by the initiatives I just described.
Under our application of the ASC 606 revenue recognition standard we expect that these initiatives will drive actual lifetime commissions from fourth quarter enrollments in excess of lifetime values that we have booked as revenue for the fourth quarter.
This is because our estimated lifetime values are based in large part on historical observations, which do not take into account the expected impact of these initiatives.
That said based on the enrollment cycle on the Medicare business, we will have more visibility into our retention metrics for this new AEP cohort when we report our first quarter results in April.
Our 2021 guidance currently assumes that our Medicare advantage ltvs for the full year will return to 2019 levels are roughly a six 5% year over year increase.
In our individual and family plan business, we reversed several years of major medical plan enrollment declines with a 4% growth driven by a 15% growth in approved members on qualified subsidy eligible major medical plans in 2020 compared to 2019.
The lifetime values of these qualified plans have also increased by over 20% compared to a year ago driven by favorable retention observations for these plans last year.
We support the Biden administration decision to extend the enrollment period and the RFP market through the end of the first quarter of 2021 to allow consumers additional opportunity to get coverage in this unprecedented environment.
We also encourage expansion of subsidies for more Americans, who currently cannot afford an ACA plan.
Same time, our fourth quarter included internal and external setbacks, which we began taking steps to address as soon as they are identified.
The main driver of our fourth quarter enrollment shortfall was the underperformance of our outsourced agent model.
A large portion of our outsourced agents converted consumer demand at rates well below our expectations.
Some of this was due to agent Onboarding, taking place later in the year compared to prior years.
Because of Covid, we were also force to conduct a remote training and supervision model.
We also saw limitations of the outsourced model in terms of access to high quality agents.
This became more obvious as we scaled our tele sales operations.
As soon as we recognize the issues with our external agents, we took bold action by terminating roughly one third of our outsourced agent force.
It is worth noting that during AEP, our internal agents performed above our expectations with their fourth quarter conversion rates, increasing 12% year over year in the aggregate exceeding our projections of a 10% improvement.
On the demand generation side, we observed a significant increase in the combined Directv spend by carriers and competitors during the annual enrollment period compared to a year ago, leading to higher per member acquisition cost in this channel relative to our expectations.
Combined with lower call conversion rates by our vendor agents this significantly reduced our return on investments in the Dr. TV channel.
Two container acquisition cost, we pulled back on our day, our TV spend during the quarter, leading to lower than expected volumes from this channel.
We also believe that external factors, including the pandemic and to a lesser extent the prolonged election cycle impacted consumer demand on our platform going into the 2020 annual enrollment period, we expected a tailwind from more senior shopping for Medicare online or over the phone instead of meeting face to face with <unk>.
Traditional Medicare broker however.
However, we now believe that there was on offsetting impact on demand from seniors postponing non urgent health care, which in our view led to reduced Medicare plan switching.
Given that a sizable portion of our leads come from the strategic partner channel, including hospitals provider networks and pharmacies, we believe the reduced foot traffic and utilization of their services had a negative impact on our enrollment volumes and.
In conclusion, we believe the factors that impacted our fourth quarter performance were isolated and can be corrected in the near term.
We took decisive critical action to fix these issues and submit a strong foundation for our long term performance and continue and continue to work hard towards this goal.
Which leads me to 2021 and beyond.
As you've just heard me describe.
We have an understanding of the issues that impacted our fourth quarter performance.
Also have a clearly defined plan in place to address them.
We are executing on this plan, while continuing to pursue strong Medicare enrollment growth and expansion of our market share.
First we've accelerated the shift in tele sales away from third party vendor agents and toward in house agents historically, our internal agents produced the conversion rates that are on average, 30% better compared to vendor agents and this GAAP further widened in 2020.
Our goal is to have less than 10% external agents in our total telesales head count for this year's AEP.
We plan to grow our internal agent force through a combination of agents at our customer care centers and agents that work remotely.
Both groups performed well in the last day peak.
Notably we have taken the lessons we learned from on boarding during this remote work environment and implemented a new on boarding oversight program that we're confident will also help increase agent productivity and success.
Second we are optimizing our marketing strategy to emphasize channels like our partner and online channels, where we can better differentiate our platform from the competition by leveraging our unique E commerce capabilities and the largest plan selection among broker platforms.
Our partner and online channels also drive enrollments at higher forecasted Ltvs and in the case of strategic partnerships lower acquisition cost per member compared to the more traditional channels.
Importantly, the initiatives that I've just described are already demonstrating results.
First quarter to day, we have seen a 30% increase in agent productivity compared to the same period in 2020.
Combined with strong performance in our online marketing channel. This has contributed to over 50% increase in approved Medicare advantage members quarter today compare to a year ago.
The early success of these initiatives gives us confidence to pursue additional broad reaching changes to our marketing and sales strategy.
We are moving away from transaction driven marketing with a focus on customer lifecycle campaigns that span member acquisition and Onboarding to retention focused activities to cross selling with a broader range of products.
Before I turn it over to Derrick I want to emphasize a few key points and.
In 2020, we grew our Medicare advantage approved members, 39% and made a major shift towards enrollment quality and customer engagement.
We implemented a number of key strategic initiatives and bolstered our sales and marketing organizations, we are aggressively and proactively address the factors that impacted our year end performance ultimately our business is strong and we have the financial firepower to accelerate our growth.
As Ehealth CEO.
A long term member of the board of directors and one of its largest individual shareholders I am very excited about the foundation, we've built and the investments we're making to scale the company into its next phase of growth and innovation.
The initiatives that we have deployed in recent months put us on track to Meaningly meaningfully improved performance in 2021.
I'll now turn it over to our CFO Derek Yung.
Thanks, Scott and good afternoon, everyone.
On today's call I will go over our fourth quarter financial results in greater detail provide our 2021 annual guidance and assess the key drivers behind our 2021 projections.
We expect the impact of the operational enhancements outlined by Scott will translate into meaningful improvements in on Medicare unit economics, this year, allowing us to drive high quality Medicare enrollment growth, while increasing our profitability.
Throughout today's presentation, we'll be making references to our fourth quarter and full year 2020 growth rates relative to 2019.
As a reminder, in the fourth quarter of 2019, we worked with an external corporate valuation consultants to increase the accuracy of our Medicare advantage lifetime value estimates with an emphasis on improving our member retention forecasting by incorporating statistical tools.
As a result of the enhancements to our LTV model.
In Q4 of 2019, we booked a $42 3 million positive revenue impact from a change in estimate.
<unk> cash commission collections from Medicare advantage plans since we began selling such products and through the third quarter of 2019.
For the purposes of year over year comparisons in my remarks today, I will be excluding debt $42 $3 million on revenue from our 2019 results.
Fourth quarter 2020, Medicare segment revenue was $269 9 million or 12% year over year growth, excluding the $42 3 million in Q4 2019 related to the enhancement of our Medicare advantage lifetime value model.
Full year 2020, Medicare revenue was $516 8 million, an increase of 28% compared to a year ago, excluding the $42 3 million in 2019.
Medicare revenue growth was driven primarily by an increase in approved Medicare advantage members of 30% and 39% for the fourth quarter and full year 2020, respectively.
It also reflects an increase in non commission revenue.
I declare revenue generated from our Medicare plan advertising program.
Total non commission revenue grew 99% in the fourth quarter and 89% for the full year 2020 compared to 2019.
Yeah.
Strong growth in approved and MA members was offset by a decline in our constrained lifetime values or ltvs.
Ltvs in our Medicare advantage business declined 10% in the fourth quarter and 6% from full year 2020, compared to a year ago, which is consistent with our expectations and is reflective primarily of increased churn levels than reported earlier last year.
As a reminder, pursuant to ASC 606 revenue accounting.
Our estimating in period lifetime values based on historical churn observation.
For 2021 guidance discussion later on the call I will share on LTV projections for 2021, which will reflect the positive impact expected from the retention activities.
Put in place as well as an increase in broker commissions rates this year.
Okay.
The number of approved Medicare supplement and prescription drug plan members declined in the fourth quarter and full year 2020 compared to a year ago.
In the Medicare supplement business. This was primarily driven by our decision to shift marketing and call center resources towards the MA product, which continues to gain popularity among seniors quality selection and affordability of these plants have continued to increase.
The decline in our proved PDP members was driven by lower PDP volumes from our pharmacy partner channel compared to a year ago combined with a reduced demand for stand alone PDP plans comparative medical vantage products with built in prescription drug cost coverage no net mvpds.
For the fourth quarter of 2020 day Medicare segment generated a profit of $82 6 million.
This compares to $107 million in the fourth quarter of 2019, excluding the impact of the $42 3 million in Q4 of 2019 related to an enhancement of on Medicare advantage LTV model.
For the full year 2020, Medicare segment profit was $102 million compared to a $112 9 million in 2019, excluding the $42 3 million.
The year over year reduction in Medicare segment profit was driven primarily by the underperformance of our vendor agents and softer than expected consumer demand in certain marketing channels during the AEP.
I will go into more detail during my review of the fourth quarter operating expenses later on the call.
The estimated number of commissions generating Medicare members was approximately 876000 at the end of 2020 on increase of 23% compared with 2019, reflecting growth that was well ahead of the overall Medicare enrollment growth as reported by CMS.
Our estimated Medicare advantage membership.
$533 and grew 32%.
Also significantly ahead of the overall Medicare advantage enrollment growth in the United States.
The trailing 12 month churn rate in our Medicare advantage business that we calculate based on our estimated membership in new paying members was 40% and.
An improvement compared to the 42% we reported in Q3 and in line with our expectations.
Please note that our estimated fourth quarter TTM churn still reflects the elevated churn rates that we observed in previously reported early in 2020.
When we report first quarter results in April we expect to be able to show the initial impact of our retention efforts implemented last year.
We expect debt and MA members that we enrolled during the last AEP in Q4 of 2020.
Churn at the lower rates in their first year compare the AEP cohort from 2019.
Year, one of enrollment is a critical period from a retention standpoint, because it has historically been the highest churn during any annual period in our policy life.
While we'll have some data on churn when we report Q1 results given the time lag of about data about churn will have a more comprehensive view later in the year as we learn more about the impact of the Medicare open enrollment period that takes place during Q1 and offers an MA members another opportunity to switch plans.
Fourth quarter 2020 revenue from our individual family and small business segment was $23 4 million, a 22% increase compared to a year ago.
Full year 2020 revenue in this segment was $66 million, an 11% increase compared to 2019.
Revenue growth was driven primarily by residual or tail revenue from existing members on individual and family and ancillary plans.
We continue to see increased member retention in this business in particular for subsidy eligible plans and short term products.
Commission revenue from our small business group products declined 23% in the fourth quarter and 4% for the full year 2020 compared to a year ago.
We continue to focus our investments in our Medicare business.
The individual family and small business segment remained profitable on a standalone basis generating segment profit of $15 9 million for the fourth quarter and $39 4 million for the full year of 2020.
Our estimated individual and family plan membership at the end of the fourth quarter was approximately 116200 down 10% compared to the estimated membership reported at the end of fourth quarter a year ago.
The estimated number of members on small business products was approximately 45800 and at end of the year.
7% increase compared to a year ago.
Total revenue for the fourth quarter was $293 3 million or 13% year over year growth, excluding the $42 3 million in Q4 of 2019.
Revenue for the full year 2020 was $582 8 million a 20.
6% increase excluding the impact of the $42 3 million in 2019.
Okay.
Now I'll review, our operating expenses and profitability metrics.
Our plan for 2020 was to build on two consecutive years of improving EBITDA profitability achieved in 2018 in 2019.
We targeted EBITDA margin expansion through fixed cost leverage and lower agent costs per approved Medicare member and plan to conduct more of on enrollments online.
While we slow down our fixed cost growth in 2020 relative to 2019 and have successfully increased the percentage of fully unassisted online enrollments.
The positive impact from these factors was offset by underperformance of our vendor agents and overall Medicare enrollments shortfall.
During the fourth quarter, our vendor agents converted demand at lower rates relative to our expectations and two 2019 levels.
Combined with higher lead costs and the direct TV channel that we observed. This AEP. This resulted in unfavorable per member acquisition costs in our Medicare business.
In addition.
We made investments ahead of the AEP to prepare for the larger enrollment volumes that we anticipated, including prepaid marketing campaigns and vendor agent capacity expansion, which involved a meaningful upfront investment.
Total variable acquisition costs per approved Medicare member grew 23% in the fourth quarter of 2020 compared to Q4 of 2019.
With customer care enrollment costs growing 18%, a marketing costs growing 26% over the same time period.
After we terminated the underperforming vendor agents during the quarter overall call center productivity metrics rapidly improved but not enough to fully mitigate the impact of the vendor agent on our performance on a per member acquisition cost.
Okay.
On the fixed cost side, our fourth quarter, non-GAAP technology, and content costs, which exclude stock based compensation acquisition costs restructuring charges and amortization of intangibles increased by 14% compared to Q4 2019.
Non-GAAP general and administrative costs declined by 2% over the same time period.
Okay.
Fourth quarter 2020, adjusted EBITDA was $84 2 million, representing a 29% EBITDA margin compared to $100.3 million or 39% EBITDA margin in the fourth quarter of 2019, excluding the $42 3 million.
Adjusted EBITDA for the full year, 2020 was $83 7 million or 14% margin.
This compares to $99 million or 20% margin, excluding the impact of the $42 3 million positive revenue impact in 2019.
Please refer to our fourth quarter and fiscal year 2020 earnings release for a description of how we calculate adjusted EBITDA.
GAAP net income was $59 9 million for the fourth quarter of 2020, and $45 5 million for the full year 2020.
Our fourth quarter 2020 cash flow from operations was negative $96 9 million compared to a negative $56 8 million for the fourth quarter of 2019.
For the full year cash flow from operations was negative $107 9 million.
Capital expenditures, which include capitalized internally developed software costs were approximately $23 eight moving for the full year.
Our cash cash equivalents and marketable securities were $93 4 million as of December 31, 2020 with no debt.
We ended the year with the commissions receivable balance of $792 million.
And now I will provide our 2021 annual guidance. Please note that this guidance excludes potential impact from that transaction with H I G capital pending its closing.
We are forecasting revenue for 2021 to be in the range of $660 million to $700 million.
With Medicare segment revenue in the range of 621 to 690 $59 million and individual family and small business segment revenue in the range of $39 million to $41 million.
We expect GAAP net income for 2021 to be in the range of 42% to $57 million.
We expect 2021, adjusted EBITDA to be in a range of $100 million to $115 million.
2021, Medicare segment profit is.
As expected to be in the range of 138 to one and $155 million and individual family and small business segment profit is expected to be in a range of eight.
<unk> to $19 million.
Corporate shared service expenses, excluding stock based compensation and depreciation and amortization expense.
<unk> to be in a range of $56 million to $59 million.
GAAP net income per diluted share for 2021 is expected to be on a range of total $1 53.
To $2 eight per share.
Non-GAAP net income per diluted share for 2021 is expected to be in the range of $2 77 to $3.26 per share.
Cash used in operations is expected to be in a range of 85 to 95 million and cash used for capital expenditures, we expect it to be on a range of $24 million to $27 million.
The midpoint of our 2021 guidance implies 17% total revenue growth with roughly 24% Medicare revenue growth compared to 2020.
Medicare enrollment growth is expected to be the main driver of revenue growth. This year with approved members for all Medicare products expected to grow net low twenty's, a Medicare advantage enrollments and the high twenty's compared to last year.
Medicare enrollment growth is expected to be accompanied by an expansion of our Medicare advantage lifetime values, which we forecast to increase approximately six 5% for the full year 2021 compared to 2020.
At the same time, we currently project that our non commission revenue will be roughly flat with 2020 levels after growing close to 90% last year.
In addition, we expect to see a decline in our tail of refrigerant residual revenue in 2021.
After booking around $38 million and net total revenue in the aggregate across on Medicare.
<unk> and ancillary products in 2020, we currently forecast to have little to no tail revenue in these areas in 'twenty one.
Based on the midpoint of our adjusted EBITDA guidance, we expect to generate a margin of roughly 16% compared to our 2020 adjusted EBITDA margin of 14%.
This margin expansion is expected to be a driver primarily by fixed cost leverage and a reduction in per member acquisition costs in our Medicare business. As a result of improved productivity of our agent force and to a lesser extent due to changes on our marketing mix with decrease reliance on <unk> television and increased.
<unk> from fully on assisted online enrollment to our total Medicare applications.
The forecasted reduction in on a per member acquisition cost combined with an increase in Medicare advantage Ltvs is expected to deliver a meaningful expansion and on <unk>.
Medicare member economics.
For the full year of 2021 compared to 2020.
The positive impact of these factors on our EBITDA margins will be partially offset by year over year decline in high margin revenue items, including non commission revenue and residual revenue.
Okay.
I would also like to make some comments with respect to the seasonality that we expect that this year.
The fourth quarter will continue to contribute disproportionately to revenue and earnings driven by the timing of the Medicare annual enrollment period, and ACA open enrollment period selling seasons.
In fact, we expect our fourth quarter will drive the vast majority of our revenue and EBITDA growth in 2021 compare it to 2020.
In terms of quarterly cadence of our Medicare advantage Ltvs were currently forecast for Ltvs fees down year over year in the first and second quarters of 2021, reflecting the impact of churn in the first half of last year prior to the deployment of a retention program.
We project debt Ltvs will start increasing in Q3 compared to Q3 2019 with the largest year over year increase of 10% or better.
Expect it in the fourth quarter, driven primarily by what we believe was a significant increase in quality of MAA enrollments in Q4 of 2020.
So while we expect to see stronger them on growth in the first quarter, it will be offset by lower ltvs and lower tail revenue.
<unk> and total revenue growth in the low single digits compared to Q1 2020.
We also expect first quarter adjusted EBITDA to be down compared to the first quarter of 2020 also due to lower Ltvs and total retail revenue.
Finally, with respect to our online strategy, we expect to online enrollments will represent 43% of our total 2021, Medicare major medical enrollment compared with 37% in 2020.
I want to remind you that these comments and our guidance are based on current indications for our business and on our current estimates assumptions and judgments, which may change at any time, our actual results may differ as a result of changes in our estimates.
<unk> and judgments when entertained no obligation to update our comments or our guidance.
Okay.
And with that I'll turn the call over back to the operator for Q&A.
As a reminder to ask a question you will need to press star one on your telephone again that is star one on your telephone keypad.
Your first question comes from the line of George Sutton from Craig Hallum. Your line is now open.
Thank you I wanted to address what you just said about your online goal for 2021 being 43% you ended Q4 with 43% I'm curious why that number isn't higher given that is clearly a strategic advantage you have in the market.
Well, we hope it proves conservative George.
We did end the year with 43% in Q4, but historically.
So that percentage is weighted.
For the fourth quarter. So we've always started off.
Below our annual target and then made it up in Q4.
Got you.
You mentioned your.
<unk> investment will give you well more cash than you need to operate the business, but you did say it would give you opportunities to ex.
Celebrate your growth or Opportunistically accelerate your growth can you give us a sense of.
What that might pertain to.
Really it's not intended to be opaque.
It's about our ability to grow faster than the conservative guidance that we're establishing.
Got you Okay. That's it from me thanks, guys.
Okay.
Your next.
Next question comes from the line of with Tobey Summer from Trust Securities. Your line is now open.
Thank you.
You talk about pure online enrollments.
Weather.
Those are forecasted to grow sort of as a proportion within that 43% figure in guidance this year.
Right Tobey.
So last.
Full year.
We increased our guidance for Q4, our expectation for online assisted and unassisted to a range between 45 and 50% and we came in just shy of that at 43%.
It was the unassisted.
That hit our number but our assisted which are as agent.
Partially agent and partially E commerce enrollment.
Where we missed and it's because day.
The agents were newer and did not deploy our tools with the same efficacy as seasoned agents.
Okay.
On.
Could you talk about the the customer center.
In.
Maybe catch us up on on how you think the rollout win win.
When this will start to impact the business in house.
Well it was very encouraging certainly on the bright spot of Q4 for US we launched it in October.
We hope between 20 and 25000 seniors would register.
You know you've reviewed it requires two factor authentication.
At least an hour of data entry on both drugs and doctors.
And by coming in at over 100000 registrations, we feel very bullish about it a good number of our enrollments were came through customer center.
It's early for us to predict.
What the benefit will be on retention, but I think if you just think about it logically a senior thats invested that amount of time to enter their information.
We believe we will be less prone to responding to a direct mail piece or a day, our TV AD and switch when they would have to repeat all of that information over the phone where now they have it in a secure format password protected so we feel that this is going to improve our engagement.
The seniors, but also.
We think the persistency will be very long on seniors that have made the effort to enter all of that information.
Okay last question from me have you strategically.
Strategically.
What are your thoughts on the company needing to have some.
Different businesses to keep your internal agents busy productive and well paid during the day non Medicare selling seasons.
Yeah, I'll start, but then I would like turn to weigh in on as we've relied primarily on inbound.
Inbound model.
And we are increasingly deploying outbound efforts.
Empowering all of our agents with a cloud based telephony system that enables them to toggle back and forth between inbound and outbound.
On productivity improvements from that.
But Tim perhaps you could speak to this a bit.
Sure I mean, you've hit an important point, Scott we are pushing with our internal agents for them to be productive in more ways and more versatile than they've been in the past and we piloted having outbound agents, which to inbound as Scott just mentioned and saw them be more productive during the AEP than inbound only.
We are toggling, our agents between retention activities and acquisition activities.
But we are also experimenting with other business lines and as we have success that will provide additional opportunities for our agents to earn in.
In Q2, Q2 and Q3 so.
Workforce is becoming more versatile and is its an internal workforce, we're able to invest in them more aggressively than we could with a vendor workforce.
Thank you.
Your next question comes from the line of Dana Landry from Credit Suisse. Your line is now open.
Hi, Thank you.
Just a quick clarification on your common debt.
Your target of halving, and Bruce and external agents in 'twenty and 'twenty, one versus 43% in 2020, and just curious why not go all in total agents out a bit any contractual obligations with any abuse vendor agent growth just curious about debt 10 person could go.
Yes, I understand the question.
And it's logical.
What we found when we terminated over a third of our external agents and as we came into the year.
The new year.
Typically let go a vast majority of the seasonal agents, but we have over 100 debt are performing at rates higher than our average internal agents. So when you staff up to that magnitude of external agents some of them are going to be outstanding.
And that's why we think it could be as much as 10% of our capacity might be third party agents, we don't have anything against it Jill Andre It's just that it did not that model did not perform for us last year and so we're going to materially reduce our reliance on third party agents.
That's fair.
Give the figure like how many total agents you plan to add this year in 2021.
It's a lot Tim.
Well.
We're not giving a specific number but it will be our ramp is entirely focused on the internal agent side. So we will have flexibility and ongoing relationships with our vendor partners, but the intention is to just keep the high performers and to build our ramp on the internal side and we're starting earlier. This year are first class has already been higher.
So our ramp is already underway for the AEP and we'll probably provide more guidance later on in the year.
Okay, and then one last one can you flesh out a little bit more about your outlook with respect to non commission business, which you expect to be flat year over year in 2021. Some of your peers have talked about expanding these dedicated partnership with helping each of those to drive. These non commission business just curious about your thoughts there and how do how do you think about.
Long term growth prospects in that non commission based on the business.
Tim I'll, let you take that one.
Well I think the non commission piece.
It really in some ways lags the performance and so with us having.
Under performed in Q4, we have modest expectations on how much we can expand the non commission line, but as we're able to.
See the benefits of this shift in strategy and outperform expectations. Then we think that can expand again in the future.
Okay. Thanks.
Your next question comes from the line of.
Style Blue from Jefferies. Your line is now open.
Hello, Good afternoon. Thanks for the question.
Scott or Eric a question for you on just the margin outlook over time, it wasn't too long ago last year that you guys talked about growing the business from a promote almost a mid 20% margin in 2020.
It's something that would that would approach 40% in 2024, and then operating cash flow.
Turning positive in 2022 so.
Can you give us a sense of how you feel about those longer term targets the business changed in a way that that is going to make it much harder to achieve those objectives outlined in such a way that.
The glide path, there will be slower or that those those peaks or just might not be attainable.
Yeah, I'll start and then pass it to Derek.
We are a year behind so the.
The issues that we dealt with last AEP.
P.
Have extended out period by which we will achieve cash flow positive for sure.
Right.
Hey.
The issues that we face, Dave we're really isolated and theyre not industry issues. So we just ran into the natural and of our ability to make the seasonal agent model work and so the the underlying margins are actually.
Our opportunity to improve.
We commented on the formal script.
Notwithstanding our Miss in Q4, our internal agents improve productivity by 12% over 2019, we had projected that they would improve productivity by 10%. So we had a 20% over performance and their productivity compared to what we expected. So we see plenty of margin.
Rome.
Will we get to the <unk> and the out year, maybe not but will it be high thirties I have no doubt that we will achieve those levels.
Derek.
Yes, so Dave Scott It is right that we are roughly a year behind in terms of the.
Cost cash flow expectations relative to what we have previously stated in terms of the way we were cash flow breakeven on operating side.
On the margin, which ties closely to the unit economics.
Implied in our guidance is an improvement in unit economics.
To levels that we saw in 2019.
So again.
A year behind on where we've been tracking at that now with that said, we did succeed in or unassisted online enrollments targa.
Targets for 2020, which is an area of Vegas cost leverage as we expand online. So that is still an item that will give us a favorable traction in terms of ability to leverage online to get more financial leverage.
Okay got it and then.
On the.
The guidance you guys talked about the EMEA ltvs, increasing six 5% and that's embedded in the outlook can you give us a sense of how much of that is rates versus the improved retention and in a follow up question on the retention area there.
No you guys are encouraged by some of the signs that that youre seeing.
I guess, one concern I would have is in the fourth quarter.
Can you tell me about the productivity and the quality of that business with those external agents produced.
Obviously.
You decided to eliminate a third of them bite.
Is there any risk that those those folks there would be just not having duration as long as you'd expect and how do we just get comfortable that you're going to really capture that retention improvement that you're expecting too.
So why.
Okay go ahead go ahead Derek.
I think the LTV piece and I'll pass it back to you Scott and Tim as well on the expectations relative to improvements on retention.
So on the LTV fees, Dave It is important to keep in mind.
Seasonality of the LTE and food improvements, which I commented on in the prepared remarks. So the important benchmark is.
Six 5% that we talked about a full year basis, but behind that is the 10% improvement or more in Q4 given that that is.
The biggest impact that we expect given the retention efforts and also obviously.
Quarter, where AEP happens.
Within that 10%.
At least 5.5% so more on half of that will.
We will come through US a rate increase given what CMS has determined in terms of maximum rate increase for this year.
If you recall when we outlined our full set of retention and churn initiatives churn improvement initiatives.
Earlier last year.
The aggregate of the potential improvements all of those initiatives plus day rate change would actually drive us to be better than what we've implied in our guidance. So we are actually hoping that that will come through but obviously our guidance is below that level.
Right, what I would add to that is we had a 68%.
Of our enrollments in 2019 fulfilled by internal agents, which have of course higher persistency than the external agents and this year was 81% of our enrollment. So we had a significant mix shift toward internal agents, which should.
In addition to all of our other initiatives the retention team to changes to sales compensation on the lead segmentation being.
Being revised from just focused on conversion to focused on total LTV and profitability all of those factors, Dave really should contribute to significant LTV upside for us.
Your next question comes from the line of from Greg Peters from Raymond James Your line is now open.
Good afternoon. This is Martin who is calling in for Greg can you guys hear me okay.
Sure Yep. Thanks.
My first question is on churn.
And congratulations on getting that number down in the fourth quarter.
And if I heard correctly, Scott you mentioned.
Approved membership here so far in the first quarters about 50% better than last year I think that.
In the fourth quarter of last year, you reported from the first quarter of last year I apologize you reported some similar growth rates and that would churn that's what insurance spike.
I guess the question is you guys are sitting here now over the first quarter being done how should we be thinking about churn this first quarter.
As it relates to what happened last year.
Yes, so we believe that the churn that we experienced last year when we learned that we had elevated churn.
It related to the 100% MA growth that we generated in the 2019 AEP.
So the the churn was happening in Q1, but it was related to enrollments in Q4.
So bottom line is we're expecting to show.
Hey.
On a healthy decrease in churn when we reported at the end of Q1, but we.
We don't have a read on exactly what that number will be both Derek and I have tried to point out that there is a lag.
Reporting on these churn statistics.
So we don't want to go out on a limb today and speculate on what that number is but all indicators are that churn is continuing to track favorably.
It was slightly favorable in Q4 down from 42% TTM to 40, but we're expecting a more significant decline after Q1.
Excellent.
Really helpful.
The follow up is on slide nine of your presentation and on.
I'm looking here at the Green line debt Commission cash collections and last year, it dipped down but this year it remained stable.
In a pretty pretty healthy clip is there something.
Different there can you guys give us some more color on that number.
Was there any pull forwards anything you could add there would be helpful.
There was not any.
Pull forward impact.
Operationally as we've improved our data and analytics.
On monitoring churn. It does also have a corollary effect on our ability to collect cash so thats on a coincidence since cash collections as an indicator of whether someone is still on a policy for us or not.
So we've been making improvements from that perspective.
There has been some operational improvements also along the lines of reconciling our data to whether we are retaining broker of record status with our carriers, which will allow us to continue to collect commissions.
That's also reflected an improvement.
Got it if I can just squeeze one more in.
So the outlook does not include the impact with the agreement for the special dividend does it include.
The dividends will be paid on the preferred shares and go that would be taken out of <unk>.
Operating EPS.
Yes, that's a good question so you're right it does not impact.
The impact of the investment in the.
The impact on investment would not affect our guidance as it is today on the revenue EBITDA and below EBITDA.
It's a complicated security so.
There could be a range of.
Impact in terms of line items below EBITDA.
I expect that we will see the impact on <unk>.
Dividend payout, which will be below net income.
In terms of what would be between the EBITDA and net income and then I would expect the impact on diluted shares because it is a convertible debt as has the ability to convert into common which will fluctuate depending on the strike price and also the stock price.
Given the current valuation.
Excellent. Thank you for your answers guys.
Your next question comes from the line of Elizabeth Anderson from Evercore. Your line is now open.
Hi, guys.
A question on.
I know last year in <unk>.
<unk> in Q2, you did have some shift in terms of some of the churn numbers I just wanted to make sure that we understood those numbers so that when we get to one <unk> debt.
We're sort of comparing on an apples to apples basis.
Yes.
A good reminder.
We had reported in Q1.
Last year, a TTM churn rate from Medicare advantage of 38%.
And then in subsequent disclosures. We had commented that we had 20000 additional churn that was observed post reporting that hasn't really happened in Q1, so on an adjusted basis the Q1.
TTM number in 2020.
Should have been closer to 43%.
And that is the right comparison for this year as we get into Q1 2021.
Got it.
Super helpful and can you just clarify maybe one more thing on that.
The sign ups in terms of the persistency.
And then you were talking about online versus telephonic does the online purchase didn't see.
That ahead of both the internal and external agents.
In the quarter.
Scott I'll take that one yes.
Yes, historically online enrollments have had higher persistency than any telephonic method.
Okay I just wasn't sure whether it was just external or internal and external adjusted or should it points to the emphasis of the growth ex though.
Yes.
Perfect. Thank you.
Next question is from Euro on Qunar from Goldman Sachs. Your line is now open.
Thank you and good evening or good afternoon.
I guess my most of my questions have been answered, but one thing I wanted to ask about was the on boarding pressures that you called out on the external agency.
Why wouldn't those pressure points impact the internal agency as well as you were on boarding new agents internally as well.
Tim.
So we think the primary reason is that the hands on management that are subject matter experts to deliver to the vendor agents in season.
Wasn't able to be done in the same way or with the same effectiveness as it has in previous years and so we did not expect to see such a divergence because our internal remote agents were actually on par with the rest of our workforce.
So it was that we werent able to be on site with them coaching them in the same way that.
That we have in years past that we feel like they were less effective.
Okay.
So if you were to measure the productivity of.
First your internal agents this year compared to prior years.
How would you compare the productivity.
Measurement of six months.
They were they were higher than previous years, because they were a large portion of our overall internal mix our internal workforce.
We saw the internal work force in total be more productive than we expected it to be and so those first years were ahead of expectations as well.
Got it Okay. That's helpful and then maybe I'm thinking about it incorrectly.
Any help there would be appreciated.
Derek I think you had mentioned that you expected ltvs to really kind of lapping sort of improving in the second half from this year.
<unk>.
Me.
Where I'm confused a little bit as you.
You have churn improving I think you have the 2018 cohort lap lapsing, we're coming off the the LTV measurement why wouldn't we see the LTV improve earlier than the second half.
Yeah. So.
Our.
Prediction model works, which is.
By looking at actual observations.
So until we see data coming out of AEP 2020.
Which are people, who just have policy that became effective in January 2021.
That will not get picked up on the LTV protection, So wood ex expectations that churn for that group will be lower that will drive ltvs being improving.
In the quarter that those enrollments will come into the following year, which would be Q4 this year.
Right, but do you have the data around the churn and the observations by the second quarter.
Okay.
We will but those that data reflects cohorts that are enrolled in Q4. So the prediction is also on a monthly cohort, although you're on so when we predict we say hey, how do we expect persistence would be different for someone who enrolled.
On October four January effective and based on off of what we've seen historically, so you're right. We will have seen historical observations, but it will have to be against a month that those cohorts are measured against.
Okay. Thank you.
Next is from Jonathan <unk> from Barclays. Your line is now open.
Thanks for taking my question, you mentioned shifting away from direct TV channel, but can you provide any color on and generally and then more normal year, how much pull through that channel had on your approved member count and if youre a shift to other channels will kind of make up for pulling out of that channel.
Tim.
Sure so that channel used to be a much larger portion of our our mix up to a third in some of our previous AEP seasons.
And when we pulled down that TV spend this year due to the challenges. We saw there was demand available in other channels. We we just werent able to convert it because of the poor performance of the vendor agents the ones that we cut so as we're into Q1, we're seeing.
We mix shifted away from Dr television.
We're seeing healthy growth rates and strong performance of our agents on these other lead sources. So we feel like there's plenty of available offsets.
As we take down Dr television and.
Lessen our dependence on it.
Okay, and then I know, you're not giving a specific agent count or higher on count for the year, but I mean is the goal at least to get back to where you ended the year on considering youre cutting.
Fairly significant amount on.
External agents.
Yes, I'll take that I mean, we'll be in the vicinity of where we finished the year.
But it will be much more heavily shifted towards internal people, who have joined earlier and who are using and more versatile ways.
Okay. Thanks.
Yeah.
Next question is from George Hill from Deutsche Bank. Your line is now open.
Hey, good evening, guys and thanks for taking the question I guess, Scott or Derrick I'll start off with one on the financing with H I G. I suspect I know the answer to this but can you talk about how you guys came to the route that that was the right kind of way to go raise capital, 8% seems pretty ex it seems a pretty expensive cost of capital in this market.
So I guess I'd love to ask about that and then I have a follow up as well.
Alright, yes from my perspective, George It was really about getting the right partner.
And wanting someone who had an equity stake in Ehealth, who was aligned with both.
Our investor base institutional as well as management.
On <unk> this was a competitive process.
There are other alternatives.
We went with them because they invested in understanding the business. They had a tremendous excitement that they expressed for it that was contagious with us.
They see a very substantial opportunity as we do and.
We thought debt, bringing them on board would accelerate our operating improvements, but also give us the capital.
To act on those opportunities.
Okay. That's helpful. And then I guess, Derek I know it sounds like you guys have the capital to meet the growth targets in the near term, but if I look at my model.
Probably if the business grows the way it should you guys probably might be in a position again to need capital on let's call. It 18 months I guess I would ask is that how you guys think about the business as well and does the agreement with HIV do you kind of give them the right of first refusal on subsequent capital raises.
Sure.
Yes, it's a good question George So you are right that this year was not the year that we would expect.
And our need for capital to pursue the growth that we had outlined.
When we look out another year and a half material. So so.
The capital we raised from age IAG is.
Important to drive growth, but we would of course only do that if we.
Make the improvements that we're seeing and then we're expecting right now in terms of both LTV improvements and also unit cost improvement. So I don't want to get too far ahead of ourselves in terms of just thinking about where growth rates will land until we kind of have more discussions around where we're heading and where.
Are we seeing in terms of LTV to CAC improvement.
Okay, but I guess the question is do day to day kind of have the right to buy to put the next dollar in before public market investors, though.
No. The answer is now so.
There are provisions in the agreement allowed tests to raise debt capital.
Yeah.
Without their consent and Theres No force horizon refusal within that price okay.
Provision.
And then my last one I guess would be as debt you guys talked about the new enrollments. The new applications that were completed in the fourth quarter drive LTV increases in the back half of next year on retention should be higher I guess I would ask I know that more than came in on line seems to have a better persistence, but I guess can you talk about what gives you confidence in that assumption.
I understand there is kind of the back testing on the model are you able to put any more color around kind of what has been the persistence.
The online enrollee versus the over the phone enrollee.
And given that the underlying market tends to be pretty fluid just would love to hear what what gives you the confidence that those numbers are going to go up.
I'll, let Tim take it.
Sure. So there are the sort of mix factors that you called out that gives us confidence. So the fact that more of our enrollments came from internal agents more online growth better channel mix all of those things.
Based on past experience should be helpful to churn, but what's probably even more impactful and exciting is the retention teams and the efforts that they've been going to to connect with our consumers.
And there was a clear GAAP and our customer experience were existing customers would call back and not get the experience day needed the questions answered that they had.
And we're doing a much better job proactively following up with customers on an outbound basis, whether it be by phone or by E mail to understand if they still have questions and there's ways that we can help them. So we have a better read of what's going on in our book than we've ever had before.
And the early signs from July onwards are things like the compensation plan and some of these teams indicated they should be meaningful movers of churn and so.
We will be.
We're sort of cautiously watching the numbers in but every signs suggest that debt it should be getting better.
Okay, and then just to add from I'm going to ask you. A quick follow up are we differentiating between churn and retention here because I know that while we've talked a lot about churn.
<unk> tend to think of churn is something that happens as a result of the MA market and retention is something that should be in your control. So I guess, if you would just kind of if you could differentiate from me targets to reduce churn versus targets to improve retention.
Sure, Yes, I mean, we use them a little bit interchangeably in our context, because it's all done on a policy basis.
But you are right that the difference between losing a customer and losing a policy or are very different and that's where again the development of our retention team to take inbound calls from existing customers and give them a different experience than someone we've never seen before.
On the use of things like the customer center to hold onto data and proactively reach out to customers to say Hey, Your plan may not be the right plan for you anymore or the play on your end looks pretty good nothing to do for this season are things that we just started to do this year and we will continue to build on as we go through 'twenty.
One and beyond.
So.
We expect to do better at retaining customers and we also expect to do better on retaining policies with the changes we've made.
Next question is from Frank Morgan from RBC capital markets. Your line is now open.
Good afternoon, one follow up there in terms of the.
The changes in the agent compensation have you seen any fallout as a result of that from.
From <unk>.
Losing the attrition from from more predictive sales net.
Sales members.
No I mean, we're really encouraged by what we're seeing because we built the plan in a way where.
Experienced agents, who know how to sell and know how to put people in the right plan have an opportunity to earn more in this system. We score them higher we route from calls more aggressively so high performing agents do better in this system.
Then they would have on the old system.
Yeah.
Got you and there was also some discussion on.
A competitor call about some changes in commission structures to improve the upfront cash collection or where that goes.
Cash.
Receipts, just curious if you've had similar thoughts or what where are you on that issue.
Yes, I can take that one so Frank we also have are having similar discussions with our top carrier partners.
I cant say they are exactly the same.
Fairly vague also what I've heard on.
On.
The other calls but in terms of moving to a structure that more closely align with.
Performance and.
No.
Payments more upfront to help us with kind of managing cash flow given.
How are you.
Lifecycle works with upfront cash invest in sales and marketing on the commissions calculator that is something that we're actively.
Engagement with the top carriers.
Okay. Most amount have been answered, but just one as a reiteration I just wanted to make.
Make sure I understood correctly your guidance for 2021.
Does not is.
He is not predicated on that on the <unk>.
<unk>.
<unk> investment and I'll hop on thanks.
No.
Absolutely not.
Yes.
Okay.
Okay. Thanks.
Your last question comes from the line of Donyell gross slide from Citi. Your line is now open.
Hi, guys. Thanks for taking the question here I'd like to focus back on on the lead Gen strategy.
It does sound like there was a bit of an over reliance on that direct response TV. So curious if there are any investments on the technology side of the business that you need to make to better shift among various marketing channels. When one channel is underperforming.
Tim.
Yes, I think we've I think we've made a number of improvements on that side, where we have a better understanding of where a good lead comes from and how to generate at the issue. We had in Q4 was really that we had spent a lot and invested a lot upfront in tea.
Even that even though we could move nimbly.
Nimbly to other demand sources, we had already incurred a lot of that expense and then we didn't have high quality agents to send that additional demand too. So there was opportunity for us to acquire demand in other places.
Didn't have the workforce to send it to.
Yes.
Got you okay.
And then on the partnership channel.
It's really historically been one of the things you've called out in terms of.
Strength, but it seems like this quarter it was a little bit weaker than expected due to lower foot traffic, particularly on the PDP side.
But just curious on on what the.
Our strategy on the partnership channel is going forward and I had thought that most of the benefits you get from partnerships on the provider side is through email addresses and physical addresses so a reduction in foot traffic wouldn't be that harmful, but it appears that that wasn't the case just just.
What.
What the strategy is there going forward.
Yes, let me start and Tim will add and I remain very bullish on the partnership channel we signed.
New hospital systems.
Absolute top 10 Blue chip are these are three year exclusive agreements and yes, we did suffer because of the foot traffic the lack of signage and brochures that can be handed out physically.
We believe hurt us in terms of our response in that channel. We also in the pharmacy channel Master partnership through an M&A transaction that had been driving a lot of PDP growth for us I don't think we called it out specifically, but it was one of the headwinds that we faced.
In Q4 that we won't have to lap in 2021.
Tim speak to your view of the partnership channel.
I would echo your bullish sentiment I mean, it wasn't we mentioned that it didn't quite get to our expectations, but it was our fastest growing channel.
And our partners are engaging with us every year more and more our marketing gets better and more targeted every year and more and more.
Providers are engaging in conversations on on how we can help them. So.
There's a lot of momentum in that channel that will build on this year and remain very bullish for how it differentiates us in the future.
Yeah.
Thank you and there are no more questions at this time presenters I will now turn the call over to Scott Flanders for closing remarks.
Thank you everyone I know, we ran long, but I appreciate the quality of the questions and we look forward to having a much more positive update after Q1 see it soon.
Ladies and gentlemen that concludes today's conference call. Thank you for participating you may now all disconnect.
Goodbye.
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Yes.
Okay.
Okay.
Okay.
Yes.
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