Q4 2020 Gohealth Inc Earnings Call
[music].
Ladies and gentlemen, thank you for standing by and welcome to the go Health fourth quarter 2020 earnings Conference call. At this time all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session.
I ask a question during the session you will need to press star one on your telephone.
Require any further assistance please press star zero.
I'd now like me on the conference your Speaker today, Jay Koval VP of IR. Please go ahead Sir.
Thank you Joelle and good afternoon, everyone first I want to apologize for the press release getting out a little late we had some issues with PR newswire, but thank you all for taking the time to join us for <unk> Health's fourth quarter and full year 2020 earnings call Joy.
Joining me today I for Clint Jones, co founder and Chief Executive Officer.
Travis.
Chief Financial Officer, Shayne crews, our Chief operating officer, and James Goodman President of Medicare.
This afternoons 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 are beyond 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 closed today, we issued a press release containing our results for the fourth quarter of fiscal 2020. In addition to presentation materials that Clinton Travis will walk through momentarily both the release and the slides can be found on <unk> website under the Investor Relations tab.
In the press release, we have listed a number of the risk factors that you should consider in conjunction with our forward looking statements.
Other significant risk factors are described on our form 10-K, and 10-Q reports filed with the Securities and Exchange Commission.
During this call we 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 company's 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 Glenn.
Thanks, Jay and thanks for joining us to discuss our fourth quarter and full year 2020 results.
As Jay mentioned, we have posted a slide deck for website and we will work through before opening up the call to Q&A.
I'll start with some highlights from the 2020 annual enrollment period.
As well as our focus areas in 2021 that will position us to deliver another year of high quality growth and then Travis can discuss the financials.
But first let me think.
<unk> health colleagues for their hard work and long hours spent educating and enrolling customers during AEP.
This winning team executed well as evidenced by revenue that came in above our own expectations for the quarter driving strong full year revenue growth.
These results were a huge accomplishment during what was anything but a normal year shown on slide four.
Our team worked through the challenges associated with the pandemic.
Entirely remote working environment for AEP not to mention a most unusual election cycle.
We are particularly proud of the quality results, we delivered during the year with exceptional submission growth and growing ltvs.
This is a testament to the strength of our people process and technology.
The pandemic highlighted the need to help seniors carefully choose their health care and our marketplace platform and agent assisted model enables us to do that in a Medicare market that is poised to grow rapidly for many years to come.
Slide five looks at the key metrics that we use to measure our performance.
While our marketplace has been built over 20 years, we only entered the Medicare space in 2016, and quickly became the largest enroll or a Medicare plans by a wide margin, helping over 730000 Medicare consumers enroll in 2020.
A 60% increase in agent counts in the year drove a 71% increase in submissions demonstrating how efficiently we can scale our agent base.
We also jewelry drove a 3% increase in ltvs. Thanks to continued investment in our platform our telecom team and are expanding carrier footprint.
Our team delivered revenue of 877 million the largest in our space with the highest efficiency.
Adjusted EBITDA of $271 million equates to industry, leading 31% margins.
And a two year adjusted EBITDA growth I'm going to astounding, 677%.
So on five short years, our leading technology enabled marketplace is driving the largest and most profitable results with extremely high rates of growth.
We know our size and scale offer a sustainable competitive advantage.
First our machine learning and data driven insights improve with more and more data.
Second as we scale, we will continue to invest behind sustaining this growth in 2021 on beyond.
Slide six looks at how our leading marketplace platform has enabled us to become the largest and most profitable.
Which positions us well to capitalize on a $30 billion addressable market for years to come.
Yeah.
We have a data driven internal omnichannel marketing strategy that efficiently delivers consumers into a wide funnel.
Our proprietary technology platform utilizes data to score our leads and Ralph consumers for specialized agents.
We have built and continue to improve our tech enabled agent force to provide consumers with education transparency and choice as seniors are making an incredibly important health care decision.
And we have cultivated unique carrier relationships net fuel enterprise revenue.
Including our encompass programs.
We believe this high performing platform positions us well to continue delivering rapid growth over the coming years with industry, leading margins and fast cash payback periods.
Let's now look on our recent results from AEP shown on slide seven.
Our Medicare dedicated team of agents delivered excellent results, including 75% growth during the fourth quarter and capping off a year up 110%.
This growth is on top of prior year's triple digit gains demonstrating the scalability of our marketplace.
Total revenue grew 55% during AEP to 446 million, thanks to strong consumer engagement driven by our marketing team solid agent performance and rapidly evolving favorable industry trends.
Full year revenue grew 63% to $877 million, representing on an absolute revenue increase of $338 million during the year.
Adjusted EBITDA grew 31% in the quarter and full year adjusted EBIT for jumped 59% equating to an absolute EBITDA increase of over $100 million.
While our Q4 results came within our range of expectations, Let me share some additional insights.
First our agent spent more time per call. This AEP, helping consumers navigate their plan options in this COVID-19 environment across our expanded carrier footprint, while performing a rigorous needs analysis.
Consumers needed our platform more than ever.
Concerning the power of our marketplace and consumer demand for education choice and transparency.
In the short term this resulted in longer than anticipated handle times that limited agent capacity to meet our record customer demand but.
But our increasing ltvs are proving that the additional times time spent with customers is paying dividends and positions go health for long lasting benefits over the coming years far in excess of the short term opportunity cost.
And second we invested in incremental marketing dollars to navigate an unusual election cycle.
The additional marketing spend delivered abundant opportunities and highlighted the need for additional agent capacity in 2021 to address the opportunities our marketing engine can generate in a fast growing industry.
Simply put we had more consumer demand on on our platform than we could serve.
While both of these items dampened our short term profitability they create a clear path to delivering strong growth and efficiency gains in 2021 and beyond shown on slide eight.
With our record growth and insights from 2020, we aimed to over deliver by doubling down on our strength.
Such as our proven tech enabled agent assisted model.
While looking to continuously improve our business through lessons learned such as optimizing the customer journey.
From this we have identified three key areas of focus that we will accelerate investment in 2021 to expand our competitive advantages.
First is to grow our agent base by over 50% earlier in the year to meet continued demand we are seeing in 2021.
Agent investments in telecom and encompass will help power sustained benefits from the higher retention, resulting from customer engagement and additional services.
We are also enhancing training and coaching efforts geared towards a work from home environment, which should result in more higher producing career oriented agents.
Second is to continue to invest thoughtfully in the technology to better support agent efficiency and a period of increased plan options for consumers.
Two examples include our next generation plan fit tool to better help consumers find the right plan and speech analytics to continue to improve our sales results.
This will help us deliver a greater customer experience and a more efficient sales process.
While continuing to generate top tier Medicare margins.
And third is to continue to build out our encompass platform and the go health brand as a trusted advisor amongst seniors through a superior customer journey.
Thanks to our integrated marketing messages <unk> engagement and encompass offerings.
Our goal is to attract and retain members and the consumers we serve need to know that go health will be there to help them utilize their benefits and navigate their evolving needs.
Technology enhancements and the additional training across our expanded agent force will allow us to gross submissions on a fast rate in 2021 with greater efficiency.
Not to mention position us well for compounding growth in 2022 and beyond shown on slide nine.
Our superior business model and industry, leading adjusted EBITDA margins create opportunities to continue to drive market share.
So we are investing ahead of the curve to extend our leading position in a very large and fast growing Medicare market, resulting in commercial revenue growth of 42% to 64% in 2021 more than $100 million higher than our expectations from the IPO.
In total we expect 2021 revenue of 1.15 to $1 3 billion equating to growth of 31% to 48%.
We also expect adjusted EBITDA of $345 million to $385 million, representing an increase of 27% and 42%.
From 2020.
Resulting in EBIT margin of 30% five points higher than our closest competitor.
Our team is 100% committed to delivering these 2021 results as we believe that these ranges for both prudent and highly achievable.
It is very encouraging to see that we're off to a strong start to the year, including top line growth hiring in efficiency gains tracking well towards full year goals.
This should position us well to meet the growing consumer demand from our internal marketing campaigns.
We couldnt be more excited to help on enroll and serve more customers let.
Let me now turn the call over to Travis to review our results and discuss our 2021 operating plan in more detail.
Thanks, Clint and good afternoon, everyone. I also want to start by thanking our teams for their hard work as they delivered record revenue and EBITDA in 2020, including roughly 60% top and bottomline growth demonstrating the scalability of our model.
Turning to slide 11 total revenue in the fourth quarter grew 55% to $446 million fueled by internal Medicare growth of 75% ahead of our expectations and resulting in commission growth of 57% despite declines from our under 65 for ISP.
<unk> offerings.
We delivered 328000 approved Medicare advantage submissions during the quarter industry, leading and one third more than our nearest public competitor.
New carriers contributed over 30% of total submissions in the quarter and we expect the benefits from carrier expansion to continue through 2021, as we fully integrate additional carriers onto our technology platform.
Medicare advantage continues to grow quickly and our marketing teams were able to generate consumer demand in excess of agent capacity during the quarter indicative of abundant market opportunities over the coming years.
Ltvs increased over 5% in the fourth quarter and almost 3% for the full year as we delivered quality submission growth, which manifest in our LTV to CAC ratio of three times and our top tier Medicare margins of 49% in the quarter.
Slide 12 highlights the year over year change in our Ltvs and while there are various puts and takes our investments are driving ltvs higher through improved persistency.
As Clint mentioned, we made meaningful investments in our agents continuing to align them on delivering high quality volume growth through better consumer engagement and more time spent addressing their unique needs as evidenced by the longer handle times in the quarter.
Our agents also drove higher engagement with consumers through the warm handoff to our telecom team to increase consumer conviction at the point of sale.
Leading to improved its actuation and persistency for our two largest carriers.
We believe we are uniquely positioned amongst our competitive set to continue to drive ltvs higher over the coming years, thanks to accelerated <unk> investments broadened carrier footprint as well as additional benefits from expanding our encompass program to our members.
Slide 13 helps compare ltvs to our closest agent assisted competitor.
The strength of our platform and the use of data has enabled us to produce strong and growing ltvs, which when combined with <unk> efficiencies has resulted in great margins and high returns.
On this page, we calculate the lifetime value of a policy at the time of submission is the starting point of that policy, where we believe there is the least variability around definitional differences between companies.
So to compare apples to apples, we divided this competitors Medicare advantage revenue by their total submissions to calculate their LTV at the point of submission to compare to our own reported ltvs at the time on submission.
Multi year improvements in LTV have pulled our fourth quarter LTV per submission to within 1% of this peer and our ltvs are growing given our investment posture.
We are also pleased to report that january's persistency and renewals have come in better than the prior year.
Slide 14 is a more holistic view of how we approach our business to create value for carriers and drive higher revenue per submission.
This slide divides total Medicare revenue by our total Medicare submitted policies to calculate the revenue generated from each submission up 19% since 2018.
Improving ltvs and encompass opportunities create additional revenue upside per submission.
Slide 15 looks at that opportunity from our enterprise programs in another way at.
It highlights the long term potential to keep driving revenue per submission higher by increasing the penetration of our encompass offerings across our customer base.
Initial encompass pilots represent a small subset of our total numbers, but their early success implies meaningful upside potential we are well positioned to do this through more effective and efficient delivery of services ranging from member risk assessments to value based care initiatives vastly expanding our total addressable market.
Over the last year, we have ramped up investment in our encompass platform, including building out the team with Dr. Paul <unk>, Our Chief Medical officer during the fourth quarter as well as rolling out additional pilots in 2021 to make seniors healthier in alignment with insurer goals and help carriers drive star ratings.
We will continue to invest behind the strategy to go deeper into health care delivery over the coming years and drive higher revenue per member through encompass.
Over the near term, we can grow ltvs through continued investments in our telecom team, including planned fit checks as we have seen a high correlation between consumer engagement and education around their planned benefits and persistency not to mentioned driving better effectuate <unk> by getting consumers into the best plan through additional cash.
For your expansion.
Slide 16 provides some color on the components of our revenue growth in the quarter.
In addition to the 57% increase in commissions, we delivered 44% enterprise revenue growth by providing carriers with direct programs on technology and on.
And enrollment and marketing services.
These programs create additional value to carriers beyond our choice platform and given great year, one cash characteristics that help fund our commissioner book growth.
External Medicare revenue grew 42% during AEP as a reminder, our external programs are yet another way for us to drive quality membership growth as the small and mid sized agencies write policies under a revenue share arrangement, where they are paid only when we are paid.
These agents are not outsource BPL programs, rather they utilize our technology compliance and carrier contracts to write quality business for carriers.
And finally, we have our ISP business with revenue of 49% as we reallocate towards the faster growing and higher margin Medicare business.
Top line drag from ISP lessens going forward.
<unk> share of total company revenue has diminished from 20% in 2019% to 6% in 2020.
In summary, we are very pleased with our 54% topline performance during the fourth quarter.
Let's now move to slide 17 fourth quarter, adjusted EBITDA of $170 million grew 31% with top tier margins of 38%.
The internal Medicare segment profit grew 40% with excellent margins of 49%.
<unk> consumer response to our marketing, including TV is indicative of a very healthy fast growing market and our agents did an excellent job spending the needed time to help seniors make an important decision across a vastly expanded carrier footprint.
But in the spirit of continuous improvement we have also identified several opportunities for 2021.
For example, our agent focus on Ltvs and retention led to a unique position in the industry, where ltvs are improving.
But we also saw significantly more leads than Asia capacity underscoring additional opportunity for 2021 and directing our investment focus.
So given the strength of our marketing capabilities as well as our integrated business model developed over the last 20 years. It all comes down to agents, including not just absolute numbers, but the opportunity to invest more aggressively in technology and training to enable them to deliver submissions efficiently across broadened carrier off.
So we have the plans in motion to deliver on that in 2021.
I'll come back to that in a minute.
But first let me look at our full year 2020 results shown on slide 18.
Full year revenue of $877 million with an increase of 63% on top of the prior year's 139% growth powering two year growth of 288%.
Full year submissions totaled 730000 powered by outperformance of internal Medicare up 110%.
Commission revenue grew 60% and enterprise revenue grew 71%.
EBITDA of $271 million grew 59% in line with expectations and with a 31% margin.
Our producing licensed agent count in 2020, with 60% higher than the prior year, which drove internal submission growth, 71% higher at the same time ltvs increased over 3% demonstrating the power of our platform scalability among agents.
One quick comment regarding our marketing and advertising expenses as we shift to more internal Medicare This will lead to outsized growth in our internal marketing expenses, while reducing reducing the growth rate for cost of revenue from external Medicare. So it's worth looking at the year over year growth of the combined line items in <unk>.
Line with our revenue growth.
But I think its most powerful about our results is how they stand in Stark contrast to some competitors and validate our superior tech enabled agent strategy.
Over 96% of our full year segment profits were generated by our internal Medicare business with internal customer acquisition and internal career focused agents and.
And enterprise creates opportunities to further monetize our membership base through our encompass platform driving revenue per submission higher.
Moving on to cash flow on slide 19, where our strong LTV performance has been further validated by strong cash collections.
We collected collected a record $244 million of cash during the year, which we reinvested into building a larger book of future Commission stream cash.
Cash collections came in over 100% of expectations for the year supporting our confidence in our LTV calculations as a proxy for cash flow.
And growing cash flow streams from our high quality book combined with our seasonal revolver positions us well to fund the faster than anticipated commission growth in 2021.
So while we have grown our submission count dramatically over the last few years, we are delivering rapid cash payback periods of roughly one year. Thanks to the strength of our platform delivering strong ltvs and leveraging efficient marketing as well as creating value for carriers through our enterprise programs.
Slide 20 showcases our growing commissions receivables balance.
It simply is the largest absolute and percentage growth in the industry. During fiscal 2020, we grew our commissions receivable balance by 112% to $810 million and we collected $244 million in cash a year over year increase of 61%.
Our 2021 areas for investment are not new to us much of our plan consists on doubling down on areas under our control, where we have already been investing.
First is hiring additional agents with enhanced training.
Is to invest in the technology and tools to enhance agent productivity.
And third is to expand the <unk> brand as the trusted adviser for our seniors.
So with that let me now move on to the 2021 revenue outlook shown on slide 22.
We expect to deliver full year revenue of $1, one 5 billion to $1 3 billion, representing growth of 31% to 48% and well above prior expectations.
This includes 53% Commission able revenue growth at the midpoint fueled by even faster growth for our internal Medicare business, including several points of contribution from our encompass platform.
We expect short term low single digit increases in our Ltvs in line with commission growth upside would result from our efforts to drive higher persistency and increased penetration of encompass members.
Continued care expansion should also drive higher ltvs after the modest one point drag from our 2020 investments while also creating additional enterprise opportunities amongst a broader set of carriers to drive higher revenue per member over the coming years.
Regarding enterprise revenue, we have built and prudent assumptions on enterprise revenue. Despite the encouraging conversations we are having with carriers about expanding our partnerships via marketing services enrollment technology are encompassed programs.
We expect enterprise revenue to be roughly flat. This year are less than 20% of revenue combined to enterprise at 22% to 23% of total revenue over the past two years.
Finally, we expect modest growth from our external Medicare business as carriers increasingly push agencies to work with us on our platform and continued declines in our ISP business.
Moving on to Slide 23, 2021, adjusted EBITDA should come in at $345 to $385 million, representing growth of 27% to 42% and industry, leading margins of 30% as growth in our high margin internal Medicare business offsets the ramped up investment plans.
That we are executing on earlier in the year.
In addition to the direct cost of increasing agents training Tech and.
And other brand building there is a short term opportunity cost as we pull agents off production during the first nine months to invest more in their careers and capabilities.
These additional investments position us to capitalize on the accelerated demand, we are seeing and drive sustained growth and our internal Medicare business over the coming years with great margins.
Help you better model the impact and timing of these 2021 investments, we expect lower absolute EBITDA. During the first nine months of the year, particularly as investments ramp up into the second and third quarter to position us very well for a successful 2021 annual enrollment period and drive momentum as we head into 2022.
Two and beyond.
Combined marketing and cost of revenue will grow less than revenue growth, but the composition is more heavily weighted towards marketing costs as our marketing team drives more high quality consumer volume internally, while continuing to develop our go health brand amongst consumers.
As we move into the annual enrollment period in the fourth quarter. We anticipate continued strong revenue gains powered by our agent growth as well as improvements in efficiency and capturing opportunities and against an unusual election year costs. This past year, we wont need a dramatic increase in qualified leads to hit on.
Numbers, but rather we are working towards better capitalizing on delivered opportunities through hiring answer rates due to our agent hiring plan and increased conversion, which drives down the CPA.
We are off to a strong start in 2021 with topline growth in the first quarter trending in line with full year expectations for 31% to 48% growth. We are ahead of plan from a hiring standpoint with year over year agent growth of 60% and first quarter agent efficiency is also trending up.
What we have built into the full year outlook.
So in summary, we delivered a record 2020 results maintained our leadership position as the largest and most profitable in our space and have identified the investment areas that will position us to hit our 2021 numbers as well as deliver compounding growth over the coming years.
Regarding the compounding point slide 24 highlights the substantial growth since 2018 that we expect to continue to deliver.
The midpoint on our revenue outlook is five times 2000, Eighteen's revenue, while adjusted EBITDA would be 10 times as large as 2018, thanks to our scale efficiencies and 2021 is the first of many years of strong compounding growth, we expect to deliver for shareholders as a public company.
With that let me now turn the call back over to Clint for some closing remarks.
Thanks, Travis our team came together really well throughout the year to deliver record results in 2020.
And we have taken our success stories and lessons learned to identify areas to improve and accelerate our profitable growth trajectory into 2021, as a stronger and better company.
While 2020 was not without its challenges our solid results continue to validate the need for our marketplace to help consumers in a very strong and growing Medicare market and we are more bullish than ever on our position in this space shown on slide 25.
With very attractive and you're starting to industry dynamics, we see a long runway ahead as the current Medicare advantage market is massive at $30 billion and forecasted to grow by 10% per year with commission rate increases in the low to mid single digits.
We enjoy a leading position as the largest DTC broker in the Medicare market, we have only 1% market share today.
Let me wrap up on slide 26, as the market leader.
<unk> delivered the highest submissions on revenue.
<unk> and profitable growth and the leading Medicare margins and increasing ltvs.
On reflect on 2020.
Our biggest takeaway is the sheer magnitude of the impact Covid has had on consumer behavior, creating a seismic shift in demand towards our marketplace from traditional distribution.
This crystallized during AEP as we generated demand well in excess of agent capacity.
Highlighting the opportunity to pull forward some investments to lengthen our leadership position.
The three areas of accelerated investment include agents technology, and <unk> brand in encompass platform.
We believe these investments will position us well for the 2021 AEP not to mentioned future years, given our focus on delivering sustainable long term growth.
After 20 years of running this business I have never been more excited about <unk> growth prospects, including strong market tailwind.
We will continue to do what we do best and focus our investments, where we get the best returns, including growing our agent based on their efficiencies enhancing our best in class proprietary technology for scalability.
On innovating with our carrier partners to strengthen our position as the industry leader.
After a very memorable 2020.
I'm pleased to see our great start to the year as our team is laser focused on over delivering.
All of our stakeholders consumers carriers and other partners and our shareholders.
Joelle, we'd now like to open up the call to questions.
Thank you as a reminder to ask a question you will need to press star one on your telephone.
So let's say on your question Mr. Qi. Please.
<unk> will be comparable to Q1 day roster.
Our first question comes from Julien, Jeff Zhang with Credit Suisse. Your line is now open.
Yes. Thank you thanks, everyone.
I wanted to follow up on some data points you gave around congrats on rate.
Quarter for agents and needs not on them. So.
Addressed is there any way you can size that opportunity in terms of percentage of calls on them. So it up percentage upbeat on the address and also broke us spending more time with cdos in the quarter can you provide any detail on what that meant for the year over year simple agent productivity in fourth quarter and what are your expectations for 2021.
Yes, great.
Great Great question.
So yes, just take a step back do you think about us entering Q4.
A pandemic and on work from home environment, with a very kind of unpredicted election cycle.
We had pre bought a lot of media in preparation for that.
Really what happened is we got into AEP.
We noticed our consumers.
Asking more questions.
We revamped our needs analysis process with our expanded carrier footprint and we were spending more time with consumers walking them through their individual needs, which has ultimately led to increased ltvs, which we think is the right decision from a long term.
Our conversion rates were within our range of expectations.
I think the one thing here is just that we were surprised by the amount of opportunities we generated from a marketing standpoint.
The election had a factor there.
For some choppiness in supply and demand.
For example, if we had.
Advertisements running at $4 $35 $30, seven and late breaking news bumped to $5 30 on the.
<unk> hundred and the $5 30, and they all had a seven obviously, we didn't have the agent capacity to handle those calls on a lot for on the floor.
So good news is from a Tam standpoint, we're really excited about the kind of the consumer shift.
And the need for our platform.
We've just kind of seeing what we need to do from a 2021 standpoint to capture that opportunity.
Okay.
A quick follow up on your comments around alright.
Agent count by more than 50% with.
With the focus on internal agents now seems like you have a priority across the industry. How do you think about your ability to the higher detail attract more brokers and agents in a market, which is likely to get more and more competitive.
Yes, that's another great question.
So.
With work from home, obviously, there's pros and cons on one of the pros, obviously, expanding our footprint on the markets, we're able to recruit out of so we've taken a much broader approach.
From a recruiting standpoint also a high percentage of our agents, we hire as non licensed.
Folks so we take them through a.
Licensing process sales and trading process to get them really well ramped up for they can perform their duties. So.
We obviously have a very competitive pay package and focus on kind of a long term career for an agent.
And we maintain a high percentage of our top producers so from a retention standpoint, we really focus on.
That kind of career oriented mindset, where agents can build a career here. So we don't see that as a hindrance. If I look at 2020 the challenge we faced in Q2 and Q3.
Some of the states had shut down our licensing platforms that kind of limited our ability to get those agents through the funnel, we do not foresee that as a challenge this year.
As we move forward.
Okay. Thanks, a lot.
Thank you. Our next question comes from Frank Morgan with RBC. Your line is now open.
Good afternoon.
Yes.
Question on the enterprise revenue I think I recall from last quarter. You said, you thought that would be flat again for the third quarter for fourth quarter.
Obviously up very nicely.
I'm curious if youre, saying, you will be flat or up.
All of 2021, so just a little more color on that.
Also the second question was when you think about.
The sort.
Sort of surge of demand relative to your sales capacity.
Other than just having more brokers is there anything else you can do and is there any way you can monetize those excess lead.
And so you really can't Sir thanks.
Yeah. Thanks, Frank So I'll take the first part of that question around enterprise.
Again 2020 with Covid was a very.
On a unscripted year, we were able to partner with our carriers and create opportunities there.
They needed us to be good partners with as I think about the outcomes and ultimately in 2021.
We over delivered on our choice platform for carriers, and obviously, we see the ability to scale that up even further so we're going to be kind of conservative on the approach we take within the enterprise programs for <unk> for 2021.
We will give you some additional updates on encompass on our next call in Q1 debt.
Kind of give clarity there.
Jonathan anything to add on that.
Yes, I would just I would just add that as you think about the makeup of the enterprise. While we are keeping well we are keeping it flat and our projections I think about <unk>.
More and more of our enterprise revenue coming from encompass and over 65 programs. While we're sunsetting some of our legacy under 65 campaigns as we mentioned, we're bringing down IOP continuing to bring down.
Some of those programs were enterprise campaigns, and so we're shifting the mix there.
Yes, and then Frank and the second question around the surge in demand.
We're still seeing that most consumers.
On a talk to somebody and want to speak with one of our licensed agents, where they can go through all their different options and the needs. They have and I think this year, we had quite a few consumers that have traditionally bought and maybe more of a face to face environment that this is their first time going through this this experience. So we are we are able to spend more time with them.
We'll focus on not only the kind of agent growth, but the efficiencies per agent a lot of the new technologies, we can deliver around speech analytics and our planned fit score to help navigate consumers and more efficiently through the process, but I think that we're really focused on that debt consumer journey and outcome.
I think that played out well this year with our expanded ltvs.
Thank you. Our next question comes from Michael Cherny with Bank of America. Your line is now open.
Good afternoon.
Just to dive in you.
You mentioned Clinton the LTV question.
Think on a go forward basis.
The LTV has been a bit I would say moving pieces so to speak over the course of the year.
Do you think about the.
For the positioning of Ltvs over time, and and specifically within some of the incremental investments you're making is there anything that you can point to anything that youre tracking to make sure that ltvs stay on this trajectory that you've.
<unk> been able to generate especially over the course for 2020.
Yes for sure. So great question. So you think about.
Taking a step back we started investing in our telecom team and some of the retention activities 18 months ago.
And there we're still in early innings and early early learnings now what you've seen in Q2, Q3, and Q4 and 2020 and increased LTV over the prior year's quarter.
We still think we're kind of early stages of making a pure impact there on.
On what we can do we also kind of.
We mentioned we had some pilots in our encompass platform in Q4 at a small scale, but we saw some really good leading indicators as we as we scale those out and more of a productive standpoint in 2021 some of the upside there as well I think we are from a planning standpoint, we're going to be conservative with Ltvs and in 2021.
With with potential room for upside.
Got it.
As you head into 'twenty, one you mentioned I think rightfully. So some other dynamics from the election skewing some of the advice how do you think though about the reallocation of spend have you noticed anything in terms of the way that.
Some of your returns and hits on some of the marketing you did could be used for further AD campaigns for the marketing spend in terms of where this allocation of dollars for bill.
Yes, I mean, obviously any kind of time you run on a marketing cash.
Campaign across multiple verticals, you're going to have winners and losers.
We saw from the actual cost of the opportunity the raw lead within our range and obviously the cost here was the cost of acquisition standpoint that that's where the higher costs were but we still see.
Kind of on some of the traditional channels like TV and direct mail will be an extremely powerful our digital channel was really strong as well.
One interesting note that we found this year is on our digital channels, especially we had about it with 90% of those consumers started journey on mobile.
What should we think about that new buyer.
On the leveraging on iPhone or a tablet.
So we as we think about kind of moving into 2021, and creating technology engagement solutions for that type of consumer we think we have a big opportunity there as well.
Great. Thanks.
Thank you. Our next question comes from Tobey Sommer with <unk> Securities. Your line is now open.
Thank you.
How would you describe your visibility into enterprise revenue in 2021 in other words, just curious sort of how much of a can you see versus AD hoc projects that may come from your carrier partners throughout the year, but not yet privy to.
Sure, Yes, so most of the enterprise revenue is contracted multiyear revenue so you've got a pretty good line of sight for there.
Now there is some some what ill call variable revenue that we might have carriers come to us in a particular quarter and ask for a special project.
Other part this year, that's a little more variable because it's newer is on some of the encompass activities. We're doing that are ramping up.
Obviously, we've got really good early wins, but as we get those to more scale.
That's going to be a little bit less predictive predictable and this early kind of journey with encompass.
Kind of majority if you could give us a sense for the proportion that you actually do have visibility into.
Yes, Joe So I'll take that yes, I can take that one tobey. So again, we were prudent with our with our modeling here. So as you think about the enterprise revenue being flat that all falls into the bucket that Clinton described at the multiyear.
Multi year contracts and the visibility there. So again, we'll see what happens from carriers, but from where we're at today, we've been conservative with our enterprise forecast for purposes of guidance.
Incremental project that comes due in the spring or summer is kind of greater value at this point.
Exactly right.
Okay.
Could you give us a sense for the arc of your retention experience here in the first quarter.
To date at least in your fourth quarter sales.
Yes, So we mentioned in the script the hurt here in January as you think about the renewal rates. So these are the legacy policies that were up for renewal. This past AEP. The renewal rate we experienced here in January was higher than our expectations and higher than the prior year. So again the investments we've made over the last 18 months.
In our telecom team reminding individuals of all of their benefits and why their plans are the best we're continuing to see the fruits not just in higher <unk> of new vintages, but better better overall persistency of legacy vintages as well as Shane anything you want to add to that.
I think Travis covered it pretty well, but as you know with our retention curves.
Pretty exponential so we see early on we call on micro churn period, we see the fluctuation rates in those early retention rate and we're really pleased with the results that we're seeing significant improvements year over year.
Okay. Thank you very much.
Thank you. Our next question comes from you on Qunar with Goldman Sachs. Your line is now open.
Thank you very much good evening everybody.
My first question goes to EBITDA for 2021 margin specifically, so I think you have it flat.
I think in the script you had talked about.
Into the internal channel being offset by maybe.
Moving to some investments.
Sure.
Can you maybe talk about the.
The decision to move these investments Ford and how you think about maybe structurally the EBITDA margin over the long run.
What can it get to.
Yes, great question, So I think that is.
We think about kind of exiting 2020 and understanding what we learned over the over the fourth quarter and just the opportunity in front of us.
We're still on a fairly new market when it comes to the business. We're in and we think it's prudent to look at this from a revenue on a cash.
Market share gain process here, so as we think about making investments earlier and agents and technology and the encompass platform.
That will obviously bring down kind of EBITDA in the first nine months of the year as we think about et cetera, accelerating our growth in the AEP next year in 2022 as well.
With that said, we will still maintain a 30% overall EBIT margin.
On which we're happy with and we think it just that positioning to Kent.
Continue to capture market share does multiple things, obviously as we build a leading platform because I think about our carrier partners and things. We can do that are more strategic from an integration standpoint, and new types of products and services to consumers, that's really exciting as well and travelers anything to add to it yes, I would just reiterate that we are investing ahead of the curve.
On the consumer demand, we saw here in Q4 of more and more consumers moving to our platform and so if you think about what we're doing investing in our agents investing in our technology focusing more on Medicare internal we talked about even during a volatile election year, we still experienced 50% margins on Medicare internal so to the extent, we're allocating those resources.
As to that channel it creates the opportunity to expand margins in 'twenty, two and beyond but again, we'll be thoughtful, thereby balancing the growth of the continued consumer demand that we're seeing.
Okay Alright.
To follow up on that so.
What was the growth in was the consumer demand greater than you expected, let's say a year ago.
As you were thinking of.
This year's AEP to the extent that you would move.
Move investments for that you had previously not thought you would need to do.
This is a growing market and a nascent market.
Relatively speaking on <unk>, so a year ago as well I'm just trying to understand.
What caused the acceleration of investment now specifically, yes.
Yes, so great question so.
Yes.
Prior to Covid, we thought like there would be.
The movement from traditional distribution to this telephonic or ecommerce model over a period of years and.
And what we experienced this year is just a massive shift from that movements on the demand we saw.
It was nothing like we've seen in the past and I think our ability to kind of accelerate investments to capture that market share and scale. The platform is what we're focused on.
So I think that's where we made the decision like theres. So much opportunity here, let's go after it and we are at a kind of early market I think there's going to be a couple of clear winners here at the end of the day and we're going to make sure that we're well positioned to be there.
Okay.
My second question was.
On the MAA and journal.
Submissions, so I think last quarter, you talked about 83% growth.
The amount of October.
First two weeks of AEP.
Flow down a bit for the overall AEP period is that because the election cycle turned out to be more demanding than you expected is it because.
On the time spent.
On the phone with clients.
Increased over the course of the period I'm just trying to understand why that 83 ended up being a little lower than that for the full period.
Another really good question. So if we think about the first two weeks of AEP.
We had the positives of a lot of follow up.
Meetings that our agents have debt during the time frame where consumers weren't.
Eligible to enroll during S&P. So a lot of those kind of calls happened during the first couple of weeks of AEP, which gave us a very high but those calls tend to close a lot faster because our agents have already made.
The relationship with our consumers so that was kind of one factor. The second factor you are right.
For the election was not over on election day.
And those trends continue on and I think.
That also was a little bit hard to forecast as we thought about that kind of go on into AEP.
Thank you.
Thank you. Our next question comes from Jonathan Young with Barclays. Your line is now open.
Thanks for taking my question just on the agent count on marketing comments, it sounds like you're going to be increasing marketing spend a pretty good clip for agents up 50%.
Understand the election component.
Drill up rates, maybe a little more difficult for agents, but given one of your competitors.
Moving savings TV channel in terms of generating more leads.
You didn't your marketing dollars go further in 2021 and <unk>.
Given your higher 50% agents will that be enough to cover all the other marketing dollars that you're putting into the market.
Yes, I can take that one so first and foremost youre exactly right. We are ramping up the agents and in order to feed those agents were focusing more directly on our own marketing and advertising, but when you think about our marketing and advertising. If you think about our P&L. There's two there's two different items that drive customer acquisition as our cost of.
Revenue, where we pay via revenue share as well as our marketing and advertising do you think about those in aggregate the actual growth in 2021 compared to expectations is actually right in line. It's just more over skewing on marketing and advertising and then we are ensuring that we have additional agents to handle all of the over demand that we.
So we won't need as many leads either on absolute level here in 2021, we'll have more agents that will be able to handle the capacity in a fewer opportunities hit the floor and so that's how we're thinking about the balance of the growth there, but incrementally between cost of revenue in marketing and advertising, it's really just shifting more into our internal marketing and less.
Cost of revenue, but those still going up from an absolute standpoint at the same level.
Okay and then.
You, obviously added new towers in 2020 on Buck 20, Taiwan are you have you contemplated any new carrier adds or geographies, where you're going to focus a little bit more on or is it pretty much segregated.
Just 2020, where we would see that's helpful on platforms.
Great question. So I think obviously 2020 was when we made the major.
Carrier additions for the platform and we're honestly still go through on a great integrations with some of those carriers as well, which we think will drive additional gains in 2021, as we think about new carriers. We're constantly evaluating we have identified a few smaller regional players that will probably add this year.
Just to give us some coverage of plans that we don't currently have but its not.
And that kind of a major initiative of ours.
Great. Thanks.
Thank you. Our next question comes from Lin Shen with Morgan Stanley. Your line is now open.
Hi, This is Nathan center on for Lauren.
In terms of those new carriers, you've on boarded this year.
Where are you relatively in terms of scaling I know theres still ramping but how far left do you expect for a lot of this integration and then can you touch on the impact if any the new carriers have on LTV is persistence and conversion rate for the quarter.
Yes, so as far as.
Kind of a new carriers.
For the carriers are kind of different levels, along the way from an integration standpoint, but I would say.
Still first or second quarter.
Auto for if you if you play that just we've got a lot of technology, we're still investing in to get the right integration is a lot of datasets for capturing.
Roll them out to all of our sales floor.
It takes time to get there the early wins, we're seeing from from Ltvs and conversion rates are really really strong, though so we get excited about what kind of opportunity that can lead to in 2021, as we think about growth there and Travis you will take the second one.
Yes, so specifically to the impact of new carriers on Ltvs as we mentioned on our Q2 and Q3 earnings call. So, adding a new carrier to the platform can at times create a short term drag on ltvs, depending on the the override or the overall commission rate that we have with that carrier based off of the volume that we've done here in Q4, we mentioned 30% of our <unk>.
Admissions were from new carriers, we've on boarded.
See that as an opportunity to LTV here in 2021, as we've moved up to higher tiers of contracts with our carriers and obviously with new carriers, we have less data on so we've been conservative with our assumptions with the ltvs, but as we aggregate more and more data around these new carriers that also creates upside as we see more.
More fulsome datasets around the persistency issue you want to add to it yes. The only thing that I'd add to that as you think about the power of our end to end marketplace. A lot of our investment. This year is going into enhancing the decision support platform and so as you think about new current curious coming on the platform. It's not just about helping somebody is buying a plant, but theres been a proliferation of Medicare advantage products that are available for a consumer.
So we're leveraging the data we have our consumers planned data retention data to let our marketplace recommend not only the best plan for consumer to optimize the retention, but even services the optional supplemental benefits within these product helping people find the right doctors to meet their needs the pharmacies to optimize their prescription costs and then other options.
Transportation benefits and other things. So all of these things will plan to not only be helping build the golf brand as a trusted adviser, but also help improve our retention and ltvs over time.
Great. Thank you.
Thank you.
And on our last question comes from Elizabeth Anderson with Evercore. Your line is now open.
Hey, guys. Thanks, so much for that question.
On the ask if there was anything to pointed out on the cash flow next given the factors that you talked about.
Yeah.
The pace of collections that you guys have seen so far with your prior.
Our sales thanks.
Yes, it's a good question. So as you think about cash here in 2021, clearly a pivot towards more commissions more internal Medicare and more marketing and advertising is going to create more short term cash burn as opposed to leveraging revenue share related or external relationships, but because of.
The power of the commissions receivable balance we've built we have $810 million.
We have $202 million through both our current cash balance as well as our seasonal revolver. So we're still on a really strong place to continue to drive this growth, but just based off of the mix of where this growth is coming from the investments there.
There will be some more cash burn here in 2021 than originally contemplated.
Got it thanks, so much.
Okay.
Thank you all for your interest and continued support of go health I wanted to take the time to thank all of our employees and partners, who helped make 2020 a record year for us it couldnt be more excited about what the future holds and the opportunity in front of in front of us.
We will remain focused on delivering high quality results and find ways to continue to innovate with our carrier partners. So we look forward to speaking to you and giving you more updates as we get further into 2021. Thanks for grant again and have a great week.
Thanks, everybody for Sanofi.
Any additional questions.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
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