Q3 2021 SelectQuote Inc Earnings Call
Yes.
In total.
[music].
Welcome to select quotes third quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there'll be a question and answer session.
To ask a question during this time simply press star followed by the number one on your telephone keypad, if you'd like the withdraw your question press the pound key.
Is now my pleasure to introduce Matt Gunther, So I'll quote Investor Relations. Mr. Gunther you may begin the conference.
Thank you and good afternoon, everyone welcome to select gross fiscal third quarter earnings call before we begin our call I would like to mention that on our website. We have provided a slide presentation to help guide our discussion this afternoon.
After today's call a replay will also be available on our website joining me from the company I of our Chief Executive Officer, Tim Baker, and Chief Financial Officer RAF sedan.
Following <unk> comments today, we will have a question and answer session.
Order to allow everyone the opportunity to participate we do ask that you limit yourself to one question and one follow up at a time and then fall back into the queue for additional questions as.
As referenced on slide two during this call we will be discussing some non-GAAP financial measures. The most directly comparable GAAP financial measures and a reconciliation of the differences between the GAAP and non-GAAP financial measures are available on our earnings release and Investor presentation on our website.
And finally, a reminder of that certain statements made today may be forward looking statements. These statements are made based upon management's current expectations and beliefs concerning future events impacting the company and therefore involve the number of uncertainties and risks, including but not limited to those described in our earnings release annual Rip.
Port on form 10-K, and other filings with the SEC. Therefore, the actual results of operations or financial condition of the company could differ materially from those expressed or implied in our forward looking statements.
And with that I'd like to turn the call over to our Chief Executive Officer, Tim Dager Tim.
Thank you, Matt and thank you to our investors and analysts for joining US again, we thank you for your time, especially since we've taken a little more of unusual this quarter with our population health announcement last week, we will highlight that important and exciting initiative again on this call but for those of you that missed it we would encourage you to check out our presentation from last week population health.
And value based care is a large opportunity per slot quote, but we are equally pleased to report that our core business continued to excel on the third quarter.
So let's begin with review of our quarter on slide three.
<unk> generated consolidated revenues of $267 million up 80% year over year, and adjusted EBITDA of $65 million up 48% over the last year, excluding the impact of of positive tail of adjustment from fiscal third quarter 2020, consolidated revenue would have grown 91% and adjusted EBITDA would have.
84% with margins roughly flat year over year.
As you know the third quarter includes the open enrollment period and it's the second largest quarter of the year from a contribution standpoint, similar to last quarter, our senior business led the way with our results, let's start with some of our senior highlights. This quarter, we grew fee revenue of 101% and adjusted EBITDA by 63% over last year.
Adjusting for the onetime sales adjustment I, just mentioned revenue would have grown 119% and adjusted EBITDA would have grown 101%. This marks the fifth straight quarter of revenue growth over 100% and similar to last quarter. This growth comes on the challenging compare we had already around the revenue and EBITDA by 109% and 50%.
4%, respectively. In 2020, we grew both submitted and approved Medicare advantage policies by over 100% and bid so with stability in both of our Ltvs and our Rev. The CAC.
First of all we are generating this growth on a much more cash efficient way than originally anticipated. The key driver here is the consistent gains we've made on agent productivity, which were up again for the quarter as we grew agents, 75%, but also expanded the agent productivity by 17% put very plainly our results continue to serve as proof points.
That we have built the differentiated and complete approach to the business that can scale significantly without sacrificing quality of returns.
Across our model. We also have the highlights beyond senior clearly we're excited about the huge opportunity with value based care and our population health platform as highlighted by our announced acquisition of Express Med Pharmaceuticals, which is now branded select Rx and the creation of <unk> Adventures, which I'll speak more to that in a minute.
And our life Division of our final expense premiums grew 176% on 112% sequentially as we look out over the remainder of the calendar year. We would also note that with AEP and OUP completed our flex agents will return to the life Division, which will help further support. These results lastly, based upon our strong result.
As an attractive capital markets, we were able to further strengthen our liquidity and reduce our overall interest rate by about 20% the 575% with the refinancing of our term debt, which generated an additional $292 million of committed capital to pursue the long tail of significant market opportunity available to the spot quote.
In summary, we are very pleased with these results and continue to build on our conviction that select quote the designed to achieve high quality growth for years to come first of all of those with population health of our addressable market is now bigger and our ability to address that market has never been stronger.
With that summary, let's turn to slide four and review of the open enrollment period.
First we had approximately 860 active senior agents, which is up 75% over last year and as mentioned on these agents were 17% more productive compared to the same period last year.
Turning to our lifetime values are Medicare advantage policies ended the third quarter at $1362, which was basically flat compared to a year ago.
Rev to CAC ratio of three one also continues to be stable and attractive, especially on the type of policy growth we drove in the quarter.
Finally, while so much of our discussion on AEP and <unk> focuses on the initial policy sale, we'd be remiss in not highlighting the contribution of our customer care. Our CCA teams if they connected with policyholders throughout the use of their policies. Our CCA team conducted over 600000 calls of customers during the quarter, representing an increase of 104.
46% over last year.
As we turn to slide five let me provide a brief overview of the exciting population health strategy. The will add another growth driver and significant service differentiator for select quote at the highest level. We all know that health care on the U S is largely inefficient complex and an overly costly system for patients to navigate this is at the core of hops.
<unk> senior business was built.
In terms of the broader landscape in population health, we see three fundamental pillars to improving patient outcomes and reducing health care costs.
Helping the patient select the right low cost and benefit rich Medicare advantage of Medicare supplement plan to meet their unique health care needs of the key first step and our agent and technology driven model at select quote with optimally position as evidenced by the policy growth we've been exhibiting since we've gone public.
But enrolling the customer on the right plan to date is only the first step on that journey of customers may choose to enroll as free members in population health, we will help them fully understand and utilize the great benefits and the MA and med sub plants, our population health customer success agents will periodically contact customers to review of Medicare client benefits.
The population health team will also gathering regularly update our records through health care of literacy assessments health risk assessments and prescription drug assessments, so that we and our partners can better facilitate care for improved patient outcomes.
These regular profile of updates also create new meaningful revenue streams at low incremental customer acquisition costs and feature of attractive cash conversion.
We have realized that we can do more for both our MA EMS members and nonmembers to help with their health care journey with population health. We are partnering with the network of leading value based primary care providers at the request. We will provide population health members of introductions to the best in class of BBC providers available in our area.
We continue to explore relationships with additional providers, our current partners, including such market leaders of churn med can be the IRR of health Oak Street health and others operating 430 clinics in 25 states and a rapidly expanding through our partnership with the leading telehealth provider keel, we can expand the reach of.
The <unk> based care offerings to much of the rest of the United States, including patients in smaller towns and rural areas. In addition to providing patient education about value based primary care. We can offer the service providers valuable data and insights to target the expansion and growth.
Third we are deeply committed to reducing patient complications and worsening chronic conditions brought on by poor drug adherence and by adverse drug events. We feel this pillars. So foundational that we recently acquired expressed <unk> pharmaceuticals, a leading specialized medication management pharmacy.
Express Meds Medicare members average taking over 10 prescription drugs each yet expressed <unk> has been able to achieve drug adherence in excess of 95% compared to a national average for seniors on five plus drugs of around 50% adherence and that has led to high member retention through select Rx, we will provide pace.
<unk> with a personalized home delivery pharmacy solution, featuring customized <unk>, an automatic prescription refills, along with regular population health CSA touch points to improve adherence and patient outcomes. As we noted last week, we will supplement the three foundational pillars with a growing array of complementary.
Services to make select load in population health, a true one stop shop to meet patient needs.
Best of all our flexible and adaptable Tech platform makes the integration of rollout of new service offerings relatively straightforward and immediate our goal is to turn population health into a complete health care ecosystem that can transform the health and wellness of our members all in one place.
As you've heard us say in the past we believe the Tam for <unk> core senior MA business is as largest $30 billion as we consider the possibilities for population health. We believe the combined market for pharmaceutical and value based primary care for Medicare advantage could represent a one trillion market opportunity.
We're really excited about our early progress in about a month's time over 30000 customers have opted in to become population health members, representing the opt in rate of over 80%. We have conducted nearly as many health risk assessments and health literacy assessment over the same period and since launching our initial trial in September 2020.
We have provided around 7000 customers with the introductions the value based care service providers.
On slide six I'd like to drill down a little more about why population health is important on the large market opportunity. We feel of population health creates a compelling opportunity to provide even more value to the customers, we serve and will reinforce our core Medicare distribution business to put it bluntly. The initiative is so exciting.
As of the value, we provide to the inpatient so well aligned with each of the stakeholders in the ecosystem.
Patients benefit from improved health care of literacy and through better coordination driven at improved outcomes with less inefficiency and unnecessary cost the.
The service providers that we work with wind through accelerated customer acquisition on the proven platforms. They have built and best of all benefit from a stickier customer base because of the heightened service quality our approach will provide.
Of our carrier partners also one with a more complete picture of the unique health challenges chronic conditions and prescription drug profiles of their patients, which ultimately translates to better retention higher satisfaction rates and lower medical loss ratios and finally, when patients when service providers and carriers Wang from population.
<unk>, and <unk>, which will accrue to earnings growth and value for our shareholders as I noted before it's hard to overstate how exciting the opportunity population health sales as the natural next chapter for select quote again kudos to Bob Grant and his team for leading the charge on this important effort.
Before I turn the call over to Ralph Let me wrap up quickly on slide seven.
First similar to last quarter's most successful AEP the sorts of.
Most successful OAP and cycle of history, and the fifth consecutive quarter of a 100% plus growth in senior revenues, which speaks to the strength of our model.
Second we continue to drive strong growth in productivity with our agents posting 17% higher productivity and the <unk> of 2023.
Third our disciplined quality focused approach to growing the business continues to deliver stable and industry, leading retention on ltvs for.
As we have stated in prior quarters, we continue to grow both revenues and adjusted EBITDA faster, while using less cash than contemplated prior to our IPO.
And finally, it's hard to overstate, our excitement for the population health opportunity and most importantly, the ability to realize that potential is enabled by the way select quote because of uniquely built and connected to our customers with that let me turn the call over to Ralph the detailed results.
Thanks, Tim.
On slide eight with our consolidated results for the third quarter, we generated $267 million of revenue of $65 $9 of adjusted EBITDA revenue grew 80% and adjusted EBITDA grew 48% will discuss the performance of the divisions in more detail on the next few slides, but the revenue growth was.
Driven by the growth in policies during OAP and our senior segment and by our investment in final expense policy within our life segment.
Last year, our third quarter results benefited from a onetime $9 million positive tail adjustment associated with recognizing tail revenue from a med sub carrier with contract with the amended.
The amendment last year allowed us to start recognizing variable consideration for estimated renewal commissions upfront like the rest of our business.
Also required us to recognize a one time catch up of future tail revenue remaining the have not yet been recognized before the amendment for this carrier we could only recognize the first year Commission revenue when the policy was initially sold and then recognize the renewal commission revenue on a cash basis, when the policy where needed in future.
Years.
Excluding the impact of this tale of adjustment from the fiscal third quarter 2020, consolidated revenue would have grown 91% and adjusted EBITDA would have grown 84%.
Turning to slide nine and our senior Division.
As you can see we had a very strong OUP season, generating revenue of $216 million and adjusted EBITDA of $75 million during the third quarter.
This represents year over year revenue growth of 101% and adjusted EBITDA growth of 63% net.
It also represents the fifth quarter in a row that we have grown revenue of over 100%.
Planed earlier normalizing for the onetime tail adjustment revenue would have grown 119% and adjusted EBITDA would have grown 101% with margins down about 300 basis points consistent with our stated strategy of growing faster and producing more absolute revenue and EBITDA and slightly lower.
Sure, but still highly attractive margins.
Moving on to slide 10 for the third quarter, we had approximately 860 total average productive agents.
Roughly 75% year over year average.
Average agent productivity was up 17%, representing the fourth quarter in a row could we have seen year over year improvement in agent productivity.
As an aside we do expect agent productivity to be down year over year in our fourth quarter as we don't anticipate having another special election period. This fourth quarter like we did last year.
This increased agent head count combined with the increase in average age of productivity drove significant growth during the quarter total submitted policies were up 107% and total approved policies of 110% from.
The largest driver of this growth was the MAA policies, where we grew our MAA submitted policies of 110% and the proof policies 112%.
Moving on the Ltvs for the quarter LTV of the NAV policy was down slightly 1% year over year, which was in line with our expectations as in prior quarters. This was driven by lower persistency offset by higher rates.
As we discussed last quarter the percentage of our revenue, which is driven by first year Commission on production bonus versus renewable revenue, but the cash will come on over time was up again year over year.
Last year of 33% of our third quarter senior revenue was from year, one cash items. This year, 48% of our revenue is from year, one cash items. This improved cash flow and reduces the amount of revenue that is at risk from renewals.
From a cost perspective, adjusting from the tail of revenue last year with the improvement in agent productivity, we saw our sales and fulfillment costs as a percentage of revenue and become more efficient and declined about 10%.
On the same basis total marketing spend as a percentage of revenue was up 15%. However lead Gen marketing costs were up only 2% as a percentage of revenue. The increase was driven by an increase in people related costs of screeners as part of the inside response acquisition.
These people related costs roll up to the total sales and marketing line item.
Lastly, during the quarter there was a two week period, where on marketing efficiency. A total production were negatively impacted by a technology challenge with a third party service provider that feeds our sales process. This issue was quickly resolved, but it did temporarily cause our conversion rate to go down and increased marketing costs.
Overall results for the quarter would have been higher without the impact.
Lastly, I'd like to address on items that did not impact third quarter results, but will impact the fourth quarter results as.
As we have previously discussed we've experienced lower second term persistency for the 2019 cohort.
We do anticipate having a negative cohort and tail of adjustment in the fourth quarter, primarily due to this cohort.
This was factored into our guidance that we gave in February and that assumption is consistent with our updated guidance today.
If we turn to slide 11, our life Division grew revenue of 50% to $46 million on adjusted EBITDA declined 9% to $3 million.
Third quarter is seasonally the lowest quarter from a margin perspective as there is an uptick in term life activity that we start the sales process on the third quarter, but it doesn't go effective until the fourth quarter. So the costs are incurred on the third quarter, but some of the revenue comes in during the fourth quarter revenue.
Revenue growth was driven by growth in our final expense revenue as a reminder, we did flex over a significant amount of our LH agents that sell final expense into senior to sell during AEP in WP during.
During the quarter, we hired new LSA agents and some of the flex agents that want to senior started coming back to life.
This allowed us to more than double final expense premiums sequentially and to grow final expense premium of 176% year over year.
The timing of the Onboarding of new agents did impact margins as we incurred expenses to hire and train some of these agents, but didn't fully realize the benefit of revenue within the quarter.
Adjusted EBITDA was also impacted by lower profitability on our term life business, where we continue to see headwinds due to COVID-19 and the delay in consumers getting the blood work done and completing the process to get their policies and force.
We do expect these conversion rates to trend back to normal levels at some point. However, the next several quarters may still be impacted by the lingering effects of COVID-19.
Turning to auto and home on Slide 12 revenue declined 33% to $7 million and adjusted EBITDA decreased 31% to $1 million as discussed on prior quarters. The decision to reallocate agents from our auto and home business to our senior Division and final expense efforts has had an impact on the auto.
On home revenue on adjusted EBITDA.
By the way as an aside the auto and home business represent the good example of what happens to cash flow as we slow growth down.
Increases in proof of that growth is the choice that we make and that we can become cash flow positive immediately if we slow growth down on.
On a year to date basis last year, the auto and home business used around $4 million of cash EBITDA.
This year with lower revenue, we generated $5 million of cash EBITDA as the first year revenue and renewal revenue from policies sold in prior periods was more than enough to offset the cost of writing new business. This year.
Turning to slide 13, we've updated the slides from our February earnings deck that shows how we have been able to grow revenue and adjusted EBITDA faster than our internal expectations since the IPO using significantly less cash normally when we grow faster it requires more capital upfront, but were unable to offer.
Operating more efficiently than our original expectations, driven by operational efficiencies agent productivity and growth in our final expense business for the four quarters since our IPO, we have generated 27% more revenue and 47% more of adjusted EBITDA compared to internal expectations, while using 35.
On the less cash from operations.
Turning to slide 14 for the quarter, specifically, we generated $42 million in cash from operations as we started collecting the cash in the first year commissions associated with AEP activity. In addition, we used about $3 million on cash from general Capex $24 million for the purchase of certain <unk>.
Assets from a lead distribution company and $32 million from the earn out of inside of response.
We ended the quarter with $369 million in cash and cash equivalents $472 million of term loan debt and zero drawn on our $75 million revolver.
We also ended the quarter with $902 million of accounts receivable and short and long term commissions receivable balances.
Lastly, as previously announced on February 24th given the strong performance of our business over the last 18 months, we took advantage of an opportunity to further strengthen our balance sheet, while reducing our cost of capital by refinancing our term debt we secured.
An additional $292 million on committed capital true, an additional $147 million immediately and another $145 million and.
On a committed delayed draw term loan that we can draw on during the next 12 months the <unk>.
Also lowered our overall interest rate by about 20% to 575% unchanged from of our covenants to allow more operating flexibility, we believe that having more capital only puts us on a stronger position to execute on the huge market opportunity, we see in front of us.
Turning to guidance on slide 15, we are not changing the revenue guidance range keeping it at $920 million to $940 million. This would imply consolidated revenue growth of between 73% from 77% year over year.
We are adjusting our adjusted EBITDA guidance for the full fiscal year due to the incremental dollars. We are investing in population health and select Rx as a reminder, during our announcement of population health last week. We said we were investing to ramp up our sales of these incremental services and specifically on the select Rx side.
Banding into 50 states versus 11 currently and the increase in capacity from 25000 members to 75 to 100000 numbers.
Just on the illustrative economics, we shared last week that showed the revenue and EBITDA at a 100000 members. We believe the ROI on these investments are extremely attractive.
Currently expect adjusted EBITDA to be in the range of $225 million.
<unk> hundred $35 million, which would imply consolidated adjusted EBITDA growth of between 46% and 53% year over year.
Lastly, we expect net income to be in the range of the $130 million to $138 million and with that let me now turn the call back to the operator for your questions.
Thank you as a reminder to ask a question you will need of press Star then the number one on your telephone.
And again, please limit yourself to one question and one follow up question.
Your first question comes from the line of Joe <unk> with Credit Suisse.
Yeah, it's a debt investing from credit Suisse of thanks, and Hello, everyone.
I want to follow up on your comments related to the second.
But it does the trending lower.
Impacting your fiscal Q4 expectations, maybe expand on a bit more on that what could be driving that is it because some of the senior notes was signed up during the last year. They are turning more and also provide update on your questions, especially on the seniors who signed up last AEP.
Yes, so I think.
Just for line nine.
People do are.
Sort of cohort tail on the analysis once a year from nap PDP products.
There's one sort of renewal period in January.
So that always happens in the fourth quarter.
<unk> with what we've been saying for the last couple of quarters that specific cohort.
It has been.
The underperforming.
All of those cohorts of the underperforming and so that's basically what we're seeing play through here of some of those cohorts.
We'll probably use the constraint that we have for them.
And as a result of that debt.
The result, instead of the cobalt until the adjustment the fourth quarter in terms of what's driving that I think.
Before we sort of set of the introduction of although we pay on the ability for seniors to change the frequently that was probably impacting that I think we have made some changes.
Since then in terms of our technology on our process of better drug in debt.
Doctor matching.
And we're seeing some of that play through in some of the more recent cohorts.
That cohort specifically.
No.
Some of those cohorts are performing.
Okay, and then my follow up I know youre, not giving of formal fiscal 'twenty two guidance at this point, but I was wondering if you could share some high level thoughts on the greatest puts and takes the should keep in mind for the next fiscal year and maybe just touch upon your thought process with respect to balancing between growing top line and margin trend going forward.
The CNS segment.
Yeah, again, we're not going to provide specific.
Guidance for 'twenty, two yet we'll do that on the next earnings call.
I think as we plan for that.
The balance between.
The growth profile that we're looking at from an it would not expect obviously the growth that we've seen in the field, which is the 100 plus percent.
But the rebalancing of that with the opportunity within the existing senior business, but also of these new initiatives with respect to population health.
And select Rx that we're looking to the scale into next year.
And then obviously moving onto the other side of the law changed in other key driver for next year that we're looking at.
There will be some of the big drivers.
Fiscal 'twenty two.
Okay. Thank you.
Your next question comes from the line of Elizabeth Anderson with Evercore ISI.
Hi, Thanks, so much of the question guys can you tell me how your initial plans in terms of preparing for the next Crs AEP I E December nine line.
I'll answer that how the hiring and planning process is going so far and any changes to how you're thinking about that.
The Bill do you want to start with some of the hiring up the turn it over to Bob for other comments.
Yes, absolutely.
So we feel good about where we are we're in we've already started hiring honestly for for next day AP.
Certainly the market quite different than it was a year ago. So we have had to make the made some.
Some changes but.
We are on track and feel really good about sort of the quality of the applicant that we're getting.
And where we are in that process. So I think all signs of positive on that front.
And feel good about where we are.
Yeah. Thanks, Bill So I think you obviously touched on the we feel really good about our recruiting so far and then operationally.
We are already prepping for the necessary changes that we did it makes the support the gross but we want to put out there and we feel really good about that as well we're actually.
Fairly significantly ahead of schedule on a lot of other things and initiatives that we saw from last AEP to prep for the next ADT.
And the.
We continue to enhance local university, we talked about the results of that came out of that last year.
And we have made continued tweaks as we brought on more core classes throughout this year, which has really helped us kind of refine even more of that training experience in some of our quoting experience.
Feel really strong about some of the things that we'll be able to do there.
Got it and then just out of anything to keep in mind as we think about the ltvs either sequentially or year over year in the fourth quarter.
I think generally speaking the ltvs should be.
Roughly flat, which is kind of what we've been saying historically.
The sequentially it usually declines from.
From our third quarter.
We sort of expect that the year over year.
Roughly flat.
Okay. Thank you.
Your next question comes from the line of Frank Morgan with RBC capital markets.
Good afternoon, I guess my first question is a clarification on I know last quarter. You mentioned when you talked about guidance net debt there was an impact or some of our population health spend in that amount. So I'm just curious the $5 million sort of at the mid point change in guidance is that all exclusively related to population.
The Hill, just incrementally or is there anything else that has changed.
Yes, I think.
This is incremental spend with respect of population health of select Rx and.
Yes, the guidance adjustment is really 100% driven by incremental.
The incremental investments.
As a reminder.
Based on what we discussed last week, we're investing.
Sort of mid to high single digits incrementally with respect of those initiatives.
And the fourth quarter is seasonally our sort of second softest quarter. So there's not a lot of time of $1 to sort of offset items that come up later on on the year.
And those investments.
<unk> are going to have.
Roy of taxes have been going forward as a reminder.
We're expanding select Rx in the 50 states.
We are increasing the capacity of the select Rx.
The facility to be able to handle the 25000 members up to 75 to 100000 members.
And so those are just investments debt.
We think we're going to have great long term actually medium term benefits, but the investments happening now so that we can take advantage of the opportunity next year and certainly of the opportunities sort of coming off of AEP next year I think the to take the opportunity in terms of the <unk>.
So some of those services.
Got you and then the second is.
You called out the productivity improvement of 17%.
That had been tracking like in the third of these over the plus 30% range over the last couple of quarters. So was that just a function of bringing agents on on this quarter or sort.
Sort of deleted that result, and if so is there a way to parse out kind of the the distillate.
The thing the same store same store productivity versus just kind of in aggregate.
Hop back in the queue.
Yes, just the initial comments Frank and then maybe comment on I think.
We're very pleased with the overall growth on agent productivity, 17%, while increasing our agent force by 75% and Thats, just really a function of our end to end model on the work that on the.
The operations team has done to really improve sales process efficiency of our technology.
The investments and training and hiring of Bob mentioned, Bob of additional color.
Yes, I think the other thing frankly, we would comment on is we we have more understanding.
<unk>.
OAP announced so we did keep more seasonal agents around the four OAP this year, which would inherently drive down just a little bit our productivity because we kept around some less tenured folks also to the point that Tim made earlier weaker net I'm, sorry, we had a small third party.
Technology hiccup that caused some pressure on close rates. So it would have been up a little bit more than that had that been had that been avoided again, we kind of fixed relatively quickly, but it is it really.
Heightened kind of period of time, just like AEP. So any little production issue that you have can can hit those numbers.
Okay. Thank you it makes sense.
Your next question comes from the line of Jeff Garro with Piper Sandler.
Good afternoon, and thanks for taking the question, but I wanted to ask more about the investments in population health and select direct and maybe more specifically the timing around those investments I would imagine some of the investment is upfront for from things like expanding capacity on <unk>, but if you.
Goodbye, the NIM, a little more detail on the the level of upfront investment versus the amount that might be more run rate in nature as we look forward.
Yes, I think.
Lot of these.
The investments are.
Upfront.
I think.
And they sort of breakdown of the couple of us from categories right. One is in.
In preparing for population health and select Rx, we have been hiring sort of incremental tech development resources to build out the capabilities there I think.
Bob mentioned on our call last week that we were able to ramp that up.
Really quickly. So obviously there is no kind of incremental investments there.
The incremental investments with respect to getting the licensing on the various states.
And then with the incremental investments in terms of increasing the capacity of the <unk>.
And that's both.
The actual facility build out but also.
The day tools to be able to support that type of facility, Bob what would you add to that.
Yes, I think that the.
The operational parts of that would add to that is.
We want to take advantage of the AEP period of time and right after and that puts the heightened sense of investment into this period of time, which kind of gets.
Even looked at our kind of it.
Hence more because this is not our biggest revenue quarter obviously.
So we are spending money today that should allow us to take full advantage of the opportunity in Q2 and Q3 for us.
Which.
Which we see as a bigger opportunity than we originally kind of anticipated.
Specially in regards to select our exited you remember the last time, you talked about the US. The initial investments we were making didn't have those investments contemplated because we hadn't bought that business yet.
After we purchased it and we've been working with our members and partners on demand for that product, we feel pretty strong about it. So we are working hard to get it ready for kind of our busy season.
That's very helpful from.
A follow up with many of the bigger picture question on population health.
Recognizing that you guys work with many well capitalized and strategic thinking carriers.
Really the much of their business is proprietary who it was.
The thing that you could elaborate on the value of that those carriers and partnering with select flow to improve outcomes and retention for your mutual members and customers.
Yes, so they do spend a lot of time and money on who provides the best results and two two.
First the alignments, such as Oak Street, and 10, net and other solutions that provide better adherence rates and kind of future savings on health care by being more proactive.
We are working with them to enable consumers to be better educated them and to get ahead of those things because when we sign someone up right. We get kind of 30 days to onboard that consumer prior to them going effective with the carrier. We are working with folks to help educate on how to best utilize the benefit and the carriers have been extremely supportive of that so far.
Because it's more working in concert with what they do not.
I'm not trying to go against what they do at all so we work closely with the carriers to find our partners and who they would prefer and thats different a little bit carrier by carrier, but the one.
One thing we want to do there is provide choice because we don't feel like today. There is a ton of choice within the health care market on the education side.
A little bit different from kind of the health care marketplace. We can we believe we can create Kim.
Tim.
Yes, I would just the well side, Bob I would just add of the misses just the.
Natural evolution for us in terms of.
Adding value to our carrier partners on to consumers, but how we got here.
It really was Bob and his team of Bill working hand in hand, with our carriers to try to be even more than a distributor but of true strategic partner and so this is really the effort in population health and certainly our ear to the ground with consumers to really understand their needs and we really think again big picture debt.
Can really be an important enabler to these more proactive.
<unk> forms of health care, and we believe certainly I just want to underscore.
Bob and Rob's comments, we think this investment with 100% of the right decision. We think it will have benefits that you'll be able to see when we provide guidance in fiscal 'twenty, two and beyond and we're very confident we made the right decision around this investment.
Great. Thanks again.
Your next question comes from the line of Daniel gross line with Citi.
Hi, guys. Thanks for taking the question.
Too much out from the 2020 a VP.
The class coming on board.
Can you talk about the persistence of you've seen in the 2020 price vis vis the 2018 AEP glass realizing that 2019, it was a bit of anomalies and then given your <unk> youre at 36 months LTV waiting when can we expect that persistency the flow through to MAA on television.
Yes.
Zinc.
It's you really asked most of the first term persistency on that AEP from sort of a year plus ago, yes.
So basically consistent with what we've said historically in the last couple of quarters.
I think as of the end of March.
That first term persistency was higher than last year's second term was down and then.
The chairman that was sort of flat to up now.
Now we do have an auto lapses that we'd do at the end of March.
The reconcile from policy that we still haven't gotten paydowns of historically.
We ended up around the same place at the end of March but that does take some backup both of the carriers, but the.
Of those trends of basically being consistent with what we've talked about.
Before.
In terms of was the second part of that question sorry.
So given the waiting.
And Oh.
Yes, yes, the flow of when will that be.
The apparent LTV for M&A.
So basically some of those trends start getting into the LTV as of the first quarter of fiscal 'twenty, two but again it will just based on on the waiting of the 36 month weighted average.
We won't see that immediately it will take several quarters of sort of.
In there.
So that's.
That's kind of how it is going to come in.
Okay got it.
And then my follow up just on select direct to mention basically quadrupling. The capacity. There do you expect the high end do you expect of that too.
To be complete in 2000 in fiscal year, 'twenty, two or is that going to.
Also being the 23.
Well I think the capacity will be available.
In fiscal 2002, whether whether we're at that capacity there or not I think we'll wait for the next couple of quarters to update you on.
Okay got it alright, thanks, guys.
Your next question comes from the line of Jonathan Young with Barclays.
Thanks, just on the enrollment trend one of your peers talk about more new to Medicare enrollment just curious if you saw similar trends in your enrollment this past quarter and then along those lines are you looking to take a more targeted approach towards that particular segment of the market, particularly as we think of the education aspect of it.
The pop health, we've talked about here.
Sorry, I'm not sure I heard the first part of the question.
Yes, just on the enrollment turns on one of your peers talked about more new enrollment.
Enrollment similar trends.
I think our switch on index.
The has been increasing over the last several years.
And so we're not necessarily seeing an increase in new per se.
I think.
What we're seeing is probably similar to what the overall market.
I think as we get bigger than.
On that probably.
It's going to be the trend so yes.
Yes, I think Thats thats basically what we've seen.
Rob anything you would add to that or.
No I think that's consistent Ralph.
And I think a lot of it has to do with just general growth rates and trying to.
Satisfy all members needs and naturally as Medicare gets bigger there's going to be more switchers and if you choose to not grow as fast you may be able to target.
Lot of the more new to Medicare people, but we want to be able to satisfy everyone and give everybody. The opportunity. If they are dissatisfied with something to participate on the exchange and then ultimately participate in.
<unk> health as well.
Yes, I think our strategy is going to because of kind of our approach of how we can take marketing from all different channels and make those work and still have positive economics, we're going to trend more with the the broader market. We still do a tactic that obviously target new customers, but I think we're going to trend a little bit of more globally.
We're also really excited about.
Population health the due to those switchers and some of those things because the more value. We can add to those consumers. One would think that we can have a bigger effect kind of on those consumers healthcare outcomes, which ultimately leads to just the better experience on that plan. So I think overall share we have different channels. The target those again I think we're going to trend.
More towards the broader market just because of the kind of our omnichannel approach and the fact that we can make channels work that a lot of others can't.
And I think that we're even more excited about some of those channels and what we can do with population health on how we treat those customers.
Great and just curious if you could give us an update on the recapture rate how does the trend in the quarter.
Color there thanks.
Yes, our recapture rate is up year.
Year over year.
Currently around 27% or so non.
It was around 25% so.
And that continues to increase and really I think it's.
A function of the strong CCA organization that we've that we've built on the conversations with that group is happening.
That could continue to go up.
Thank you.
And your last question comes from the line of Marichal with K B W.
Thanks, good evening, rather than the way of.
Maybe ballpark the impact of I don't know, let's call. It the 10-K Cup and whether any of that revenue will show up in the current quarter.
So.
It was probably mid single digit is our estimate and that would really would have been sort of revenue and EBITDA.
The drop straight to the bottom line.
There is no catch up.
It sort of impacted certain certain lease during the third quarter and some of the opportunities.
Is gone.
Based on nothing relative to close during those during that period.
Yes, the there's no there's no catching up on debt.
Okay. Thanks on it seems all senior.
Yes, yes.
Okay, and then maybe a trivial question, but the tax rate came in lower than expenses anything unusual on that.
No I don't think so.
This quarter, we had.
So the incremental.
Interest expense.
The system with the the incremental term loan debt.
There is nothing that was sort of out of the ordinary debt.
The impact of the quarter.
Okay perfect. Thanks, so much.
Yeah.
And there are no further questions at this time I will now turn the call back over to Tim banker.
Thank you again, everyone for your support and interest in select quote or just will briefly close by re emphasizing how excited we are.
At the present these results as we described earlier each quarter since our IPO has really reinforced our belief that slight growth.
The built to capitalize on the long tailed opportunity across our core insurance markets as you've heard today, we couldnt be more excited about population health as well as select Rx, It's really our unique combination of our high customer touch on technology.
Allow us really to add value across even larger markets and most importantly improve outcomes for our customers. Some of that we want to thank you. All again, we look forward to sharing with you more soon of a.
A great evening.
And this concludes today's conference call. Thank you for participating and you may now disconnect.
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Yes.
Yeah.