Q1 2021 eHealth Inc Earnings Call
Okay.
Good day. Thank you for your finding by and welcome to the Q1 kind of 'twenty one ehealth.
Inc Earnings conference call and 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 the question during the session and we'll need the press star one on the telephone please.
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I would now like to hand, the conference over to your speaker today, and Netscape Czarevitch, Vice President of Investor Relations the floor.
Of course.
Thank you and good afternoon, and thank you all for joining us today, either by phone or by webcast sort of discussion about Ehealth, Inc. 's first quarter 2021 financial results one of the call. This afternoon, we'll have Scott Flanders, Ehealth, Chief Executive Officer, and third the Hume Chief financial officer of to management.
Please his remarks, we'll open the lines for questions and 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 doesn't of course statements regarding future events beliefs and expectations include.
The statements relating to our expectations regarding our Medicare business, including Medicare enrollment growth consumer demand quarter of enrollments and market opportunities and does.
Last month, and operational and technology initiatives and expect the positive impact and all business our ability to grow our internal agent force increase agent productivity and keeping the customer engagement and expectations regarding the online enrollments member acquisition cost of attention and recapture rate.
Our expectations regarding our financial performance the profitability of all the business seasonality churn lifetime day, and just remember estimates and operating expenses and.
And finally, our outlook for the second quarter of 2021, the annual enrollment period and all of full year 2021 financial guidance forward looking statements on this call and represent our views as of today, you should not rely on the statements as representing our views and the future want to take the obligation of Judy channel data information are contained in the forward looking statements.
And what is the result of new information future events or otherwise and forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected and our forward looking statements.
We describe these and other risks and uncertainties and all of 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 Investor Relations section of our website, who is the advice that the company is the directors and certain of its the executive officers of participants in the solicitation of proxies from the company's shareholders in connection of what the two.
<unk> thousand and 21 annual meeting of shareholders. The company intends to file a definitive proxy statement and with the SEC and connection with any of such solicitation of proxies shareholders of shrunk and got the courage to read such proxy statements and lots of available and all other documents filed with the FCC carefully and in the entirety of as they can.
And important information information regarding the identity of the company's participants and the direct or indirect interest by security holdings or otherwise can be found in the company's annual report on form 10-K for the fiscal year ended December 31st 'twenty, and 'twenty and the company's definitive proxy statement for the 2020.
The annual meeting on filed with SEC and updated information will be included and the Companys definitive proxy statement for the 2021 annual meeting and autumn materials to the filed with the SEC. These materials can be obtained free of charge through the SEC website at SEC Gov or from the IR section of our website.
The presenting certain financial measures on this call the debt considered a non-GAAP on the SEC's regulation G for 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 and all SEC filings, which can be found in the about us section of our 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 we.
We had a strong start to 2020, one with first quarter of Medicare enrollment growth significantly exceeding our expectations.
First quarter results benefited from a number of operational and technology enhancements that we introduced over the past several months.
Importantly, these initiatives are expected to have a long term positive impact on our business as we continue to scale and the Medicare and broader health insurance market.
The way people shop for health insurance coverage is changing and we are strongly positioned to deliver choice transparency and the convenient enrollment process. The consumers are increasingly demanding.
Health insurance distribution is evolving towards the consumer centric model supported by robust E Commerce and call center capabilities and that is exactly what ehealth brings to market.
As we continue to drive profitable growth.
One of our key operational priorities. This year is enhancement of our call center operations to make our agents more productive and further increase in for all of my quality and deepen customer engagement.
During the first quarter, we accelerated the shift and our telesales away from third party vendor agents 40 predominantly in the house agent model and we are seeing results. This shift combined with a more robust we get allocation process.
And to a significant increase and our average agent productivity compared to the first quarter of 2020 stronger than initially expected first quarter of Medicare enrollment growth and a reduction and acquisition cost.
The approved Medicare members.
We believe the call center issues that affected our fourth quarter 2020 execution.
Driven primarily by the underperformance of external vendor agents are now behind us.
Our operational improvements contributed to strong financial performance and the first quarter with revenue adjusted EBITDA and earnings all exceeding our expectations total.
Total revenue for the first quarter was $134 $2 million, a 26% year over year increase.
Our first quarter GAAP net loss was $800000 and our adjusted EBITDA was $17 $3 million.
Importantly, we grew our Medicare advantage enrollments and 65% compared to a year ago with total Medicare enrollments growing 45% with.
We generated this growth while the.
Reducing total acquisition costs per approved Medicare member by 12%, but the agent cost per member declined 24% driven by strong agent productivity.
First quarter cash flow from operations also exceeded our expectations and positive $42 8 million compared to $8 $9 million, a year ago, reflecting significant growth and our member base that is generating recurring cash commissions and an increase in cash collections per.
Her Medicare member that we continued to observe through March of this year.
Our per member of cash collections of benefited from a larger percentage of the new to Medicare advantage enrollments, including consumers, who are turning 65 and seniors moving from the traditional fee for service program.
Brokers typically received significantly higher first year commission payments for enrolling these new too and customers compare to commission rates paid for switchers.
New to MA members represented approximately 47% of our total MH policies with an effective date of January one 2021.
During the quarter, we continued to advance our ecommerce leadership.
Online applications, including unassisted and partially agent assistance submissions.
Representing the 35% of our total first quarter applications for Medicare of major medical products up from 24% of a year ago.
The number of fully unassisted online applications for Medicare of major medical products grew 106% year over year, well above our overall Medicare enrollment growth.
While fully unassisted application still contribute the relatively small share of our total Medicare enrollments, we expect them to generate close to $100 million and commission revenue in 2020 one.
These enrollments day to have higher lifetime values due to better retention and lower per member acquisition cost point.
Pointing to significant earnings and cash flow generation potential of our online business.
Our customer center that we launched in October of last year now has over 130000 accounts, which helps us create long term relationships and data driven engagement with customers who enrolled.
These metrics demonstrate the significant traction our E. Commerce platform has been gaining which represents a strong competitive differentiation for ehealth and aligns our business with secular trends and the market.
First quarter estimate of trailing 12 month churn for Medicare advantage plans declined to 42% from 43% of a year ago, driven primarily by better retention of the members that we enrolled during the fourth quarter of 2020.
The biggest positive impact on member retention and this cohort was related to increased contribution from online enrollments compared to 2019 AEP.
Based on preliminary estimates churn trends of our older MAA cohort relative to the last year was mixed what is clear is that we were more successful and recapturing members who switch plants.
As a reminder, we count all plants switching on our platform that requires a new application as chair for.
For the full year 2020 of our recapture rate was 14% compared to 11% for 2019.
And while higher recapture rates do not impact the ltvs, which are measured on a policy basis.
They do translate into higher enrollment volumes and reduced acquisition costs and reflects stronger stickier relationships with our members.
We manage our business to unit economics with LTV to accident acquisition cost ratio being an important metric that reflects the underlying profitability and cash flow generation potential of new members that we enroll.
Due to agent productivity improvements and stronger recapture rates, leading to reduced acquisition cost per enrollment or first quarter LTV to acquisition cost ratio and the Medicare business has improved considerably on a year over year basis.
We accept expect to see a another meaningful improvement and member profitability during the fourth quarter AEP and for the full year 2021 compared to 2020.
As we execute on our operational plans, we continue to engage constructively with our shareholders.
Earlier in the first quarter, we announced an agreement with Hudson Executive capital.
As part of that we added John <unk> to our board of directors and will add another independent director in due course, John is already providing valuable perspectives to the board.
With these appointments the company will have added five new directors over the last three years.
We are also continuing to engage with another one of our shareholders starboard value.
We have held numerous and extensive discussions with them to better understand their views and are working to achieve a constructive resolution to these discussions.
The Ehealth Board is open minded with respect of value creation opportunities and we'll continue to take the actions that it believes are and the best interest of Ehealth and all of its shareholders.
Yeah.
With the successful first quarter behind US we are starting to scale, our telesales organization to prepare for the 2021 and AEP.
We expect this year's agent head count growth to be driven predominantly through hiring of full time career agents, who have historically been significantly more productive and generated higher retention enrollments compared to vendor agents.
In addition to a major shift towards the internal agent model, we are making other changes to make our telesales organization more effective and further enhance the consumer experience.
We leveraged ehealth and industry data to develop a set of criteria and behaviors that make and agent successful and are taking a more scientific and targeted approach to hiring training and career development with our customer care and enrollment specialists.
As we've indicated previously we identified use of screeners as a best in class call Center practice, we introduced our first team of internal screeners during the first quarter.
The screener assist the process allows us to answer more customer calls and convert them at higher rates.
Screeners will be an important element of our enhanced digital lead scoring and routing process that we expect to fully launch ahead of the AEP.
Finally, we have added top call center talent and the areas of sales operations agent training customer experience and compliance we.
We are making important progress, but recognize we still have work to do to prepare for successful annual enrollment period.
The major ramp up and agent hiring is planned for June and July of this year, which is approximately six weeks ahead of our typical schedule, reflecting our enhanced training protocol and a major shift and our telesales model.
We believe that the combination of a longer training period, and an increased percentage of the internal ehealth agents will have a significant positive impact on our tele sales conversion rates and customer experience.
In conclusion, the Medicare market remains large and attractive we are and a strong position to increase our market share and solidify our technology leadership.
Despite significant double digit growth and our enrollments and revenue over the past several years Ehealth Medicare membership still represents less than 2% of total consumers enrolled in Medicare and 2020.
Our approved Medicare advantage members represented only 5% of total annual opportunity and the Medicare advantage market last year, which is comprised of senior switching between MAA plans and new to MAA enrollments.
And it's important to note that our penetration of the new to MAA opportunity, including consumers, turning 65, and those switching from traditional fee for service Medicare has been increasing.
We believe that we have been successfully resolving the call center related issues that negatively impacted our agent productivity and resulting enrollment volume and acquisition costs last AEP and we'll continue building on this momentum as we scale our agent head count.
Retention improvement continues to be one of our top operational priorities and will report on our progress and this area throughout the year.
We expect to benefit from our recent initiatives applying to a greater portion of our book of business, including a larger percentage of our existing members being enrolled on my.
Continuing retention team efforts and stronger recommendation algorithms as well as emphasizing market or channels that generate higher LTV enrollments, such as online advertising and strategic partner channels.
With these operational enhancements and place Ehealth is well positioned to deliver on our goals for 2021.
And now I will turn the call over to Derek.
Thanks, Scott and good afternoon, everyone.
We delivered a strong first quarter driving higher than expected growth and our Medicare and individual family and planned enrollment of <unk>.
First quarter enrollment outperformance was achieved while at the same time, reducing acquisition costs per approved member from Medicare and RFP major medical products.
First quarter Medicare revenue of $121 million grew 26% compared to a year ago, driven primarily by of 45% increase and approved Medicare members, including a 65% increase and approved Medicare advantage members.
The positive impact of strong growth and our Medicare enrollment was partially offset by lower lifetime values and residual revenue compare to Q1 of a year ago.
Residual or tail revenue and the Medicare segment was close to zero in line with our expectations and compare it to approximately $9 million a year ago.
All of Medicare advantage Ltvs declined 4% compared to Q1 of 'twenty 2020. This was favorable to our expectations helped by increased contribution from new to MA members and favorable carrier mix.
Acquisition costs per approved Medicare advantage member, which includes marketing and customer care and enrollment costs declined 12% compared to the first quarter of year ago.
The ratio of Medicare advantage to LTV to Sac total acquisition cost was one five.
A 9% increase compared to Q1, 2020.
On an as adjusted basis by subtracting carrier advertising dollars.
From our total acquisition costs, our LTV to CPA ratio was one seven.
The ratio of LTV to marketing Coa was $2 seven and it was $3 two on an adjusted basis, excluding carrier advertising dollars.
Medicare and non commission revenue grew 5%.
The fully in line with our expectations of flat and on commission revenue this year compared to 2020.
During the first quarter of 2021, we revised the calculation of segment profit and adjusted EBITDA to exclude amortization of capitalized software development costs.
This was done to enhance comparability of our financial metrics with peer public companies.
Total amortization of capitalized software was $2 8 million and the first quarter of 2021 with $2 $5 million allocated to the Medicare segment, and zero point of $3 million to the ISP and small business segment.
And the first quarter of 2020 total amortization of capitalized software was $1 5 million with $1 2 million allocated to the Medicare segment, and zero point of $3 million to the IP and small business segment.
On that basis, the Medicare segment generated a profit of $24 5 million compared with $23 1 million in the first quarter of 2020.
Our estimated number of commissions generating Medicare members was approximately $873 and.
At the end of the first quarter or an increase of 20% with estimated Medicare advantage members, increasing 33% compared to a year ago.
While we continue to manage the policy level of profitability as measured by estimated the policy LTV sort of acquisition cost ratio.
Remember level of profitability will be and increasingly important consideration going forward.
As we built stronger relationships and what all members will emphasize member retention throughout their experience with Medicare advantage, which might involve multiple policies across the various carriers.
Our recapture rates have improved from 11% and 2019% to 14% and 2020 of rather than 20% year over year increase.
As we transact a largest share of our enrollments online and grow the number of members on our customer center platform. We expect the cost of recapture to trend down and providing for increasingly attractive member level of economics.
As Scott described first quarter estimate of trailing 12 month churn from Medicare advantage plans declined to 42% from 43% of a year ago.
This estimate is a preliminary view based on our cash collections to date data from our carrier partners and historical observations.
We also report our ending membership number on an estimate of basis.
Historically, our membership estimates have been on average within 1% of the actual numbers.
However, in Q1 of 2020, when we experienced an increase and in MA member churn with overestimate. It our first quarter ending membership number of by approximately 20000 and had to catch up for this and the second quarter of 2020.
As a result, our Q1 2020 churn was initially reported at 38% was actually 43% on an adjusted basis.
Please consult our earnings slides posted on Investor relation site from membership numbers on an as reported and ask the adjusted basis and they come in and the accompanying commentary.
This year.
Placing a high emphasis on actual cash collections for a more conservative approach to churn and membership estimates.
Turning to our individual family and small business segment first.
First quarter revenue from the segment was $13 2 million, a 29% increase compared to a year ago.
This was primarily driven by a 21% growth and approved ISP and major medical plan members and combined with an increase and lifetime values of qualified health plans, we sell compared to a year ago.
The individual family and small business segment generated segment profit of $8 1 million compared to $2 9 million and the first quarter of 2020.
Our estimated individual and family plan and membership at the end of the first quarter was approximately $103 800 down 8%.
Compared to the estimated membership we reported at the end of the first quarter of year ago.
The estimate of number of members on small business products was approximately 45000, the 2% increase compared to the year ago.
Yes.
Our total revenue for the first quarter was $134 2 million and increase of 26% compared to the first quarter of 2020.
Our total estimated membership at the end of the quarter for all products combined was approximately $1 million and 260000 members.
Now I would like to review, our operating expenses and profitability metrics.
Non-GAAP customer care enrollment costs grew 13% well below our Medicare enrollment growth range, reflecting increased agent productivity.
Non-GAAP marketing and advertising costs grew 34% also slower than our enrollment growth.
First quarter, non-GAAP Tech and content and G&A expenses combined grew 30% compared to a year ago.
This was driven by continuing investments and our technology platform, including recent upgrades to our call center tools, a small percentage of our quarterly technology spend that was capitalized and tour and lesser extent due to the expenses relate to our shareholder engagement ahead of our 2021 annual meeting.
Non-GAAP operating expenses include the stock based compensation acquisition costs restructuring charges and amortization of intangible assets.
GAAP net loss for the first quarter of 2021, what's the Zip.
<unk> 8 million compared to a net income of $3 5 million for the first quarter 'twenty.
And the first quarter of 2021, we booked a provision for income taxes of zero point of 3 million compared to the tax benefit of 2 million and the first quarter a year ago.
The Q1 2020 tax benefit was due to the stock base compensation adjustment that did not recur in Q1 and 2021.
Adjusted EBITDA for the first quarter of 2021 was $17 3 million compared to $12 6 million for the first quarter of 2020.
As I mentioned before and the first quarter of 2021, we revised the calculation of adjusted EBITDA to exclude the amortization of capitalized software development costs, there were $2 8 million and the first quarter of this year and $1 5 million and the first quarter of year ago.
Please refer to our first quarter of 2021 earnings release for the full description of how we calculate adjusted EBITDA.
Our first quarter cash flow from operations was $42 8 million compared to $8 9 million and for the first quarter of 2020.
Trailing 12 month Commission cash collections in our Medicare business for over $300 million and grew 39% compared to a year ago, driven by membership base expansion and strong new enrollment growth and higher cash collections per Medicare member.
Our trailing 12 month commission cash collections per Medicare equivalent of member grew 11% compared to a year ago.
Driven by commission rate increases on new enrollments and larger percentage of new to it and Medicare advantage enrollees and favorable carrier partner mix.
Yeah.
As of March 31, we had $130 million and cash cash equivalents and marketable securities and we had no debt outstanding under our line of credit.
Our balance sheet also reflects a significant commissions receivable balance of approximately $742 million that is comprised of $180 million I would expect to collect over the next 12 months and $562 million and longer term commissions receivable.
We are reaffirming our 2021 annual guidance aside from increasing our adjusted EBITDA and segment profit ranges to reflect the change in methodology for calculating the east financial metrics to add back amortization of capitalized software costs, which is estimated approximately 10.
For the full year 2021, compared to $7 $8 million and 2020.
We now expect 2021, adjusted EBITDA to be in the range of $110 million to $125 million compared to our previous guidance of $100 million to $115 million.
2021, and Medicare segment profit is now expected to be and the range of $147 million to $164 million compared to our previous guidance of $138 million to $155 million.
And the individual family and small business segment profit is expected to be and a range of $19 million of $20 million compared to our previous guidance of $18 million to $19 million.
And we'd also like to highlight that this guidance excludes the potential impact from the pending with 225 million strategic investment from AIG capital announced on January 29, 2021, which is subject to certain closing conditions.
Finally, I would like to discuss our outlook for the rest of the year.
We expect that our year over year, and Medicare enrollment growth will slow down in Q2 compare growth race, we just posted.
As a reminder, and Q2 of last year CMS introduced a COVID-19 related special enrollment periods for the America Medicare advantage market.
This had a favorable impact of consumer demand and Asia and conversion rates given that more seniors will allow us to transact.
In addition in Q2, we don't expect to recognize any total revenue to compare to approximately $2 4 million debt. We have booked in Q2 of 2020.
Second quarter of Medicare advantage of Ltvs are still expected to decline and low to mid single digits compared to a year ago.
These factors combined the two of roughly flat second quarter revenue forecast relative to Q2 of 2020.
At the same time, we're starting our Medicare agent hiring early in the year.
We expect this will lead to much larger sequential increase and our customer care enrollment expenses from Q1 into <unk> Q2 compares to historical cadence.
As a result, we're currently project second quarter EBITDA loss to be in excess of $20 million.
We expect to see of significant payoff and the fourth quarter stemming from a better trained more productive tell a sales force that is comprised predominantly of full time ehealth agents.
Specifically better conversion rates are expected result, and strong enrollment growth and a significant reduction and total acquisition and cost per approved Medicare members of this AEP compared to the year ago.
I wanted to remind you that these comments and our guidance are based on current indications for our business and our current estimates assumptions and judgments, which may change of anytime.
Actual results may differ as a result of changes in our estimates assumptions and judgments, we undertake no obligations to update our comments for our guidance.
Before we open the lines of questions I'd like to just remind everyone that we're here today to talk about our first quarter of fiscal year 2021, and the actions, we're taking the drive growth and enhance the consumer and shareholder value.
With that we won't be commenting further on any interactions.
With Hudson executive or starboard today.
We appreciate you keeping your questions focus of our performance and our results.
I would now like to open the call up for questions. Operator, Please open the line.
<unk>.
As a reminder to ask a question you will need to press star one on your telephone keypad.
And that is style of one on your telephone keypad.
Your first question comes from the line of day lenders Zhang from Credit Suisse. Your line is now open.
Yes, Thank you and congratulations on a good quarter here.
Maybe Doug following up on your last few comments there I was wondering if you can double click a little bit more into the reasoning behind keeping full year outlook essentially unchanged. Despite a strong Q1 and I'm pretty favorable terms across the board on LTV and Goldman and productivity.
And I appreciate all the color on Q2, but other than the other puts and takes we should keep in mind are you just.
Wanted to be prudent given the lost you'd experience and we are still early in 2020 one.
And the agile Andrew it's a good question so we.
Outperformed our expectations on many business performance metrics as you saw in Q1, and we continue to see strength and.
And many of those areas.
And we expect to flow through of the rest of the year. There are all of the puts and takes and as you heard we still expect.
The Tvs and Q2 to be down in low to mid single digits and total revenue continues to be.
Conservative.
Still too early.
Obviously Q4 is.
The biggest quarter for us, especially on profitability and.
Youre right that we are looking to be prudent.
And.
Make sure that we see the strength that we've seen in Q1 continue.
And Q2 and Q3 and.
And therefore, keeping our guidance the same.
Okay and the one follow up on your comments around what happened last year, and Q1 and Q2 with respect to some of the membership attrition for Q1 of the.
After the the 40 <unk> just curious if theres any such of risk. This year, just trying to understand what gives you better visibility. It looks like you have taken a conservative view of data and just trying to understand how much of the sequential step up and that the member darnel. The other issue is driven by the fact that you had.
Being candid with you in terms of.
It's Tim the other phenomena that you saw last year phase out of the NBC just help us understand the comfort of deal.
Yes, no absolutely that's a good question so.
Historically the last year.
Use of combination of cash collections.
Historical patterns.
And data from carriers to estimate our ending membership, which turned out to be higher than what it turned out to be right and Q2 of last year, our Q1 last year.
So this year, we are being more conservative and rely more on our cash collections.
And also we've.
The accelerated our reconciliation with carriers on.
The membership status.
Then the compare to last year, and we thought that was prudent obviously given kind of the experience last year and also this is the now the third year of debt. We seen the open enrollment period in Q1 of which has created a different pattern of what we've seen and path in terms of member switching between Q1 and Q2, So we factor that in there and we're more comfortable and <unk>.
Our estimates.
To be in line with what we see and in terms of variance of small variance compared to the actuals.
Okay. Thanks, a lot of guys.
Your next question comes from the line of John <unk> from Citi. Your line is now open.
Hi, guys. Thanks for taking the question and congrats on a strong quarter.
And some new metrics on net new to MA members, what did that look like in the year ago period and.
And what are your expectations on a go forward basis and can you describe the delta and first year commissions for those folks.
Yes, So just a reminder, we.
And for is the January 2021.
The effect of policy of which are predominantly enrollments that came from AEP and the new to Medicare.
Percentage of enrollments was 47% of which is what I heard in the prepared remarks that is better than last year, and we've seen and improvement and that trend for this metric really the back half of the year, that's extended obviously into <unk>.
P.
So the debt.
The delta of need of Medicare too.
Renewal enrollment could be an additional $200 roughly of the administrative fees. So it is fairly significant.
Compared to the obviously a renewal.
And it's something that.
And just as a reminder, the new to Medicare of bucket consists of two populations of people.
One of the agent people, who are turning to.
65, who is enrolled in Medicare advantage and the other folks or folks that are in the original Medicare and fee for service Medicare.
And switching into Medicare advantage from the first time, and our Investor Relations materials and you can see how we size the overall market and the new America of it.
The portion of especially the agent portion is fairly significant.
Perfect and portion of the people, who can qualify for Medicare advantage and therefore be part of this new and Medicare target.
So it is a contributor too.
Our.
Higher rates and better improve the ltvs.
Tim do you actually the comment to add to that business perspective.
No I think you've I think you've summed it up well.
And then on the go forward basis, do you expect that proportion to grow.
Yeah.
We do.
So I'll jump in and take that one Derek so it is something that we are working to address that audience more and more aggressively and we know that that audience engages online at higher rates and then older members do and so as we see more and more adoption of our online enrollment we think it will help us with.
That market segment in particular.
And so we are designing more features on the website marketing materials et cetera to address that market segment. So we don't have a specific forecast for it but it is something we're working on.
Got it okay. Okay. So ltvs that are impacted by higher commissions and higher persistency, because it's coming through the the online channel yes.
Okay, and then a follow up any changes on your internal agent.
Versus external agent.
Count for for this year I know you mentioned youre hiring earlier, but are you hiring do you still expect it to be kind of a 90 10 split for this year.
Yes, I think that's a fair estimate theres been nothing that we've seen and our early hiring and recruiting that would change our outlook at this point.
Okay, great. Thanks, guys.
Your next question is from the Frank Morgan from RBC Capital markets. Your line is now open.
Good afternoon, I guess staying on the subject of <unk>.
Or I'm, sorry on the subject of customer retention and your efforts there I'm curious it looks like you made some decent progress on the recapture rate up to about 14%.
Is is.
Is there some level of debt, we think you should get to as you sort of kind of target level. There I suppose you could share with us today.
So I'll take that one this is Tim.
There is no target that work that we're trying to get to I think of what we realized a year ago. When we started down this path on.
Retention was that there were definite opportunities for us to better serve our customers.
And we see that recapture rate being one sign of that.
And we're still just basically less than one year into that.
Exploration and so we've learned a lot from the AEP on ways that we can be more effective serving our customers and so we think it will continue to go up but there isn't a level of which we would stop or that we think we are approaching sort of diminishing returns so far the more effort we put in here.
We see clear progress as we do so.
Got you and I am just curious in the in the guidance.
Any changes with regard to cash flow or cash burn.
In light of the fact that you are going to be hiring sooner and.
Youll bring it and bringing these people more people on and bringing them all and sooner.
The change and your outlook with regard to cash use and cash burn.
No change on a four year outlook for cash and cash burn Frank.
Given our pivot to more internal agent staffing and earlier staffing, we do expect operating cash flow to be more adobe and <unk>.
Favorable relative to the year ago, and all of that and likely Q3 as well.
Okay, but no change from what you previously contemplated is it because you think youll just by the fourth quarter.
Well I don't know that that would help you and the by the I was going to say would that help you and the fourth quarter, but it sounds like it's more of the first quarter. The way it would hit the first quarter of next year before it would help.
It will help and the fourth quarter because of the agents will be more type of productive so we wouldn't be staffing.
Agents later than compared to the year ago, So and a four year basis, our cash usage is still kind of.
Consistent with our full year guidance.
Okay.
The asset.
We are at after the first quarter it significantly exceeded our plan.
Cash flow from Q1.
Got you and.
And just one final and this need the new into the Medicare.
Are there any ramification and obviously you get paid of better Commission here any other kind of indirect benefits of that.
Is it a better growth market or is there any impact that it could have on churn or anything like that and I'll hop. Thank you.
And I can jump in and take that one Scott.
And so theres, a number of benefits from acquire and customer sort of knew the Medicare and new to the product the.
The first is they tend to have longer duration with the product.
Theres a variety of reasons for that from just being younger and healthier.
Less familiarity with switching and so they tend to be a more.
They tend to have a longer duration debt on top of that as we enhance our retention techniques and.
Capabilities, whether it be online or telephonic getting a customer earlier gives us the chance to win them again later and so it's helpful on the front and but we think if we can win those customers wants to and that gives us a great chance to win them again and the future.
Your next question comes from the line of George Sutton from Craig Hallum. Your line is now open.
Thank you I was in.
Pressed with the agent cost per member of improvement and I wanted to focus there if I could.
And the first your online submissions, which continued to improve.
Just curious if you could talk to that trend and how that is.
The operating relative to your expectations and any sense on where we could go there and then secondly, the use of screener. So wanted to better understand how you are planning to use screeners honestly and our secret shopping and the past we've assumed there were screeners. So I wanted to just better understand.
How they're being utilized.
Let me take the online piece and I'll pass it off the tend to talk.
But typically on the screen the question George So so we are so our full year guide on the online submission target is 43% last year with 37.
We are tracking ahead of that goal coming out of Q1, given what you heard.
The favorability of that comes from.
And more favorable performance out of our online on the assisted online enrollments.
And which has higher ltvs.
And lower acquisition costs, obviously, given that there is no court interaction so that is the population debt.
It's more important from a financial benefit perspective.
So and when.
That change of the four year target.
Again don't want to be conservative given it's early and obviously online enrollment is really really peak in Q4, but we're feeling good about where that is tracking.
And you want to talk about the screen. The question sure well first on the agent productivity. We saw in Q4 last year the.
Dragging down our performance was these vendor agents.
And the actions we took then.
It really put us in the position for our internal agents to thrive during Q1, and we got off to a very fast start and then that continued through the quarter and we overhauled the leadership of our sales organization and the last three months and.
And those leaders of have really made a big impact and so it's not just the Asia and fix the leadership of the sales organization and.
And the tools that we're giving them the training and that we're giving them theres a real momentum within our sales organization as we look to go forward, which is why we're so optimistic on the on the screener question. In particular, we have periodically you screener. So we used them very and a very limited fashion during AEP and we did see.
And the benefit to doing so.
And the benefit was primarily that we kept our licensed agents off of calls that were customer service calls or low probability prospect calls and so we rolled out the first two classes of our screeners and the last two months and we are seeing that they can help us get more and more levered.
<unk> out of our licensed agent population and we're investing early there. So that we can test and learn our way into how to use them how to train them.
But I'd say, it's still early days and everything we've seen so far is very encouraging.
Got you and just a quick question on the <unk> timing.
The mentioned closing conditions and is there anything unusual and the closing conditions that we should be aware of.
No nothing.
Nothing unusual we expect the transaction to close George.
Okay, Great and then finally of comment if I could Scott.
It's been a long hard battle, but Isps turned into a sort of under the radar nice little of growth business and its nice to see.
Yes, thanks from debt observation George and the.
The the bite and proposal.
To make permit at the elimination of the 400% of poverty cap on subsidies.
Really makes that a more interesting business for us for the longer term carriers are telling us it's become profitable and they are expecting it to be double digit growing so.
It's not we're not changing our guidance on it but it is the modest upside and our plan for this year.
And.
Thanks, guys.
Your next question comes from the line of Jonathan The young from Barclays. Your line is now open.
On the news.
Excuse me and Jonathan Yap Your line is now open.
We will proceed over the next question comes from the line of Elizabeth Anderson from Evercore. Your line is now open.
Hi, guys. Thanks, so much of the question one.
And <unk> was when you talked of a sort of your increased and recapture rate.
And some of the other metrics that you mentioned, it's sort of the implied that you were sort of maybe keeping in touch with some of the senior has a little bit more sort of forming some sort of like relationship more than just sort of signing them up and then hope it and they come back next time, they want to switch could you talk about sort of what your efforts are there and sort of how.
How you see that progressing over time.
Yeah, absolutely I'll take that one this is Tim so last year, we implemented a number of different thing some of that were more reactive where we set up teams that would take inbound calls from existing customers and.
Serve them better than the.
The regular sales agent, but one of the other things that we did is we basically profiled our book of business with our data science team to identify the customers that we felt we would be.
Best served to reach out to.
And we ran a series of different tests will reach out to them with email with direct mail outbound calling.
We were definitely more proactive and reaching out to our customers and then where they may reach out to us we did a better job serving them. So there was a combination of things that we deployed last year and again like I said before we will.
We're still assessing basically how well different levers work with different populations and we'll iterate on that for this year.
Got it that's helpful and one thing just to.
Just to clarify more of a clarification question.
The HIV capital kind of.
Sorry can you and presuming that closes could you tell us what you think the share count was likely to be and the second quarter.
So.
The answer is not yet because the.
Details of that transaction has the conversion price and not being set until 120 days after the signing of the term sheet.
Okay.
But there is a ceiling and a floor to the.
So there is a range, but we don't know the exact.
Fully diluted count based on the conversion of until the conversion price of site.
Okay.
Update us when you have that number or yeah. That's right. That's right and also it is the convertible. So then.
The debt count will adjust based on our stock price as.
That's why the overtime got.
Got it okay, yes that would be helpful to know when you when you have that and then I think.
So that's about the EBITDA to be clear given debt as a preferred stock and Theres no other P&L impact other than the share count, which way of flow obviously into EPS as well.
Yes.
Makes sense. Thank you.
Okay.
Again, we have the line of Jonathan the young from Barclays. Your line is now open.
Hi can you hear me now.
Yes, yes, okay great.
Just going back to a new M&A again.
You've talked about them being more driven by being online et cetera, better retention and things like that and you're you.
Do you plan on targeting them a bit more but I guess, what's different between what you're already doing because you've obviously been targeting online already so what's different in terms of how youre going to approach the market to get those new MMA members versus getting switches and normally what you've already done.
Yes.
And I'll, let Tim get into the depths of that but I think it's important to note debt. We have 130000 seniors that have registered with.
And with two factor authentication to our customer center.
And we're already seeing a longer retention.
Even though we just launched that site in October. So we are stepping up our engagement with members across the board, but obviously, the cheapest and easiest engagement comes digitally and having the customer centers.
The members enrolled as of big advantage to us the Tim you could elaborate please.
What I would say is.
The way a new the Medicare advantage customer shops is different than the way of switch of shops.
And as we've delved into deeper and deeper and deeper and deeper consumer research. We can see that if you presume that somebody understands all of the different elements of our plan and is just looking to transact.
And then you may confuse them and underserved debt.
And so when we talk about building experiences for them, it's updating the content on the website to make sure things are easily explained it's making sure our agents can educate consumers through the sales process and so I think our <unk>.
Experience historically was more geared for somebody who understood and Medicare advantage, well and could choose the right plan effectively and the.
The bar from a new the Medicare customer noon of Medicare advantage customers are little bit higher.
Great and then just.
It sounds like you've done some clothes and.
Hiring already can you give us the flavor of how those cohorts of doing.
Or are they primarily and training with some of your other tenured agents because the same Cleveland day. Thanks.
Yes.
We are on track with our hiring we focused our earliest classes on the screeners as I mentioned before because we really see that as an opportunity to create leverage and our licensed agent workforce and it's.
Not something we've we've.
Used a lot of before so a lot of the early classes, where we have more performance data is focused on the screeners.
The license agents who are.
Coming on to the floor, we are seeing them come on at a higher level of productivity than maybe some of the classes and previous years very early we're encouraged that we're doing a better job and how were recruiting and targeting.
But the large classes are still to come so we're not sort of.
And for us too much from that.
Great. Thanks.
Your next question comes from the line of George Hill from Deutsche Bank. Your line is now open.
Good afternoon, guys and thanks for taking the questions I guess kind of first and accounting question, a little bit you talked about kind of how much of the increase in revenue that the new to Medicare beneficiaries can contribute.
To the result, I guess did they have a meaningful impact on the ltvs and the quarter and if that segment continues to grow like how big would it have to be before we would expect it to drive ltvs up.
So George it did have a positive impact to ltvs for the quarter.
Because you are expecting.
<unk> for Q1 was a Medicare advantage of LTV could still be down up to 10% year over year, and we end up being down only 4% and the new Medicare.
The increase and our enrollments from AEP did contribute at the.
The biggest driver of that.
And as we continue to make more progress obviously that will also further.
Potentially drive our Ltvs.
Okay. That's helpful. And then Scott I guess, you kind of preempted My question on this one a little earlier, but the kind of the outlook for the ISP business and the bite and plan you talked a little bit about the combos with the carriers I don't know if you can like if you could look out a year or two if the if the proposed changes become permanent as a part of the bite and infrastructure plan I don't know if youre willing to put any kind of.
The goalposts around how big that segment of the business could be and maybe talk a little bit of bad how you execute the business differently from the MA business will be helpful.
Yes.
We are thinking about it and.
It could definitely be a 100 plus million revenue business and is highly profitable one of the reasons it merits additional attention.
Medicare.
By far the biggest business for us is because of the cash flow dynamics are very attractive we have faster than a one year payback on the customer acquisition costs. So.
It does merit additional attention and.
It will get it.
It's helpful. Thank you.
Your last question comes from the line of from Tobey Sommer of Suntrust. Your line is now open.
Thank you I was wondering if you could elaborate a little bit on the strategies you have to drive more growth and the customer care Center.
Also touch on your partnership strategies to <unk>.
Tried to increase exposure to agency, which would kind of really be the kind of the crem in terms of.
Remember characteristics I think.
Yes.
So on the first question.
The growth and.
The customers of our customer care, sorry, you're talking about how we're how we're scaling up our agents.
And how you plan to drive more members participating in it.
Oh, and the customer center of the online customer center, yes. So for the online customer center. There is a number of different ways that we can drive greater engagement and I think we are very encouraged that the enrollment to this point have far exceeded our expectations.
We have plans to enhance the enrollment in the online experience will make it easier and more prominent and easier for people to get through in terms of enrollment and the customer center, but then greater integration with.
The telephonic sales process and helping people understand that this is the place. They can go and check on the status of the RAF or get additional details.
No.
What we've seen so far was we put it out there with limited sort of integration and saw a great uptake with consumers and now we're looking for the sort of specific on ramps, where we can accelerate that growth.
And then your second question on agent through partners, I mean, Youre absolutely right. Our partner traffic is our tends to be our best traffic.
We work very closely with our partners because how we serve their customers is incredibly important to them.
<unk> debt.
Have unbiased agents that will work with their consumers makes a big difference and so we are we've really established a cadence of how we can.
Market to their customers effectively reach out to them serve them well and I think the growing track record we have of those being our longest tenured customers really speaks to the quality of the handoff that we have with those partners. So we see growth with our existing partners, we see plenty of opportunities and the pipeline and.
And.
It's been a small portion of the membership historically, but it's really growing and we have high hopes for the outperformance in Q4.
Okay. Thanks, My last question, how would the addition of 200 million and cash.
Available resources impact your growth and strategy implementation.
Well look we.
You had said that we would need and infusion of cash to get us to cash flow positive.
And by the end of 2022, and having that and place takes the timing of when we might have to raise that money off the table and also if this growth continues while we are experiencing stronger cash flows than we anticipated.
And stronger per member cash.
Cash flow.
Obviously, all of the positive and the new to Medicare.
Higher administrative fees help as well, but still if we grow through.
Through the balance of the year at these higher rates.
We will be eating more cash this year than our original plan because as you know we don't break even and the first 12 months and cash on Medicare advantage enrollment.
And what will be great about getting the <unk> deal closed is we will be unconstrained and driving growth this year and.
And with the momentum that we had.
We could be using some of that cash.
All right that concludes our question and answer session I will turn the call over that from Mr. Scott Flanders.
Thank you everyone terrific questions this quarter in particular of late.
Great to have finished Q1 on a strong note we're starting out Q2.
Equally strong and we look forward to having calls with our analysts and major shareholders over.
The balance of this week at the end of next week. Thank you everyone for all of your support by now.
This concludes today's conference call. Thank you participating you may now all disconnect.
Okay.
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