Q1 2021 Gohealth Inc Earnings Call
Good day, and thank you for standing by and welcome to go help first quarter 2021 and earnings conference call. At this time all participants are in a listen only mode. After the Speakers' presentation. There was the question and answer session.
The question during the session you will need the press star one on your telephone if you acquire any further assistance. Please press star zero.
I'd now like to hand, the conference over to you speak of today, Jay Koval VP of IR. Please go ahead.
Thank you Joelle and good afternoon, everyone I want to thank each of you for joining go Health's first quarter, 2020 one earnings call.
Joining me today are Clint Jones, co founder and Chief Executive Officer, and Travis Mathijsen, Our Chief Financial Officer.
This afternoons conference call contains forward looking statements based on our current expectations.
Numerous risks and uncertainties may cause actual results to differ materially from those anticipated or projected and these statements. Many of the factors that will determine future results are beyond the company's ability to control or predict.
You should not place undue reliance on any forward looking statements and the company undertakes no obligation to update any of these statements whether due to new information future events or otherwise.
After the market close today, we issued a press release containing our results from the first quarter of fiscal 2021 and additions presentation materials. The Clinton Travis will walk through momentarily both of the release and the slides can be found on <unk> website under the Investor Relations tab.
In the press release, we have listed a number of risk factors that you should consider in conjunction with our forward looking statements.
Other significant risk factors are described on our form 10-K, and 10-Q reports filed with the Securities and Exchange Commission.
During this call we will be discussing certain non-GAAP financial measures. These measures a reconciliation to the most directly comparable GAAP financial measures and the reason management believes they provide useful information to investors regarding the company's financial condition and results of operations are contained in the press release and Investor presentation. So of.
That let me turn the call over to Glenn.
Thanks, Jay and thanks for joining us to discuss our first quarter 2021 results as Jim mentioned, we have posted a slide deck to our website and we will work through before opening up the call for Q&A.
I'll start with some highlights from the 2021 open enrollment period.
And as well and update you on our progress towards what we expect to be another strong year of growth.
<unk> will then dig into the financials before passing the call back to me share more details on two of house and accomplished platform and our evolution is the digital health company.
The quick summary shown on slide four as it were very pleased with our performance during the first quarter as the results were in line with our expectations and position us well to deliver on our full year 2021 outlook.
During the first quarter, we delivered excellent top line growth of 45%, resulting in 204 million of revenue and.
Revenue growth was driven by strong gains and our internal Medicare business of <unk> 65 per cent.
The <unk> power and Medicare advantage and our choice platform remained deeply entrenched in the market.
Medicare advantage carrier proof submissions increased 48% to over 171000, and Ltvs grew 17% and Theyre, telling your investments and carrier expansion continued to drive persistency gains.
These LTV gains were also powered by encompass platform, which leverages, our strong engagement with members to provide value added services beyond enrollment, enabling them to maximize the benefits of their plans and improve health outcomes further solidifying the differentiated relationships, we have with our carriers and partners.
<unk> team positions us well to create value from partners and consumers alike, and we accelerated investments and our encompass platform and infrastructure over the last 12 months.
We're starting to see early returns on these and encompass investments with $9 million of incremental revenue and the first quarter. We believe the proof is and the results and similar to how we scale of our Medicare and marketplace and five short years to become one of the largest and most profitable and roles in our sector. We believe that we are well ahead of the competition on <unk>.
Our income from services, which we have built into the range of expectations for the year.
Moving to slide five adjusted EBITDA was also in line with our expectations, reflecting the significant planned investments we made in the quarter.
You will recall that during the fourth quarter.
Call, we identified certain initiatives, we will be taking during 2021 and order to support our planned growth over the year and position us well for 2022 and beyond.
Let me share and update on our progress towards us and it initiatives.
First is to grow our agent base by over 50% of this year our.
See any growth of 96% and Q1 is due to the planned investments and our infrastructure and agent count, including doubling our telehealth team as well as enhanced training and development.
And we were tracking slightly ahead of plan on increasing our agent capacity. Both in terms of agents hired and early productivity gains as the initial cohorts of agents and graduated from the house training modules.
Second is to invest thoughtfully and our proprietary technology to enhance lead scoring and routing to provider of specialized agents with the decision support technology needed to enroll consumers and the right plans and with a high degree of conviction.
As well as investing in tools for our <unk> to execute our encompass initiatives.
We are tracking well towards our full year goals with technology investments and more than double last year's levels supported by efficiency gains.
And third is to expand our encompass platform and invest and the go health brand and we become the trusted adviser for seniors and by helping them seamlessly navigate their health care journey and drive better health outcomes.
Our telecom team.
And that's been powering strong LTV increases through enhanced engagement and education.
And his team positions us to accelerate our value added services through our encompass platform over the coming years, which can drive LTV upside through direct revenue and improved persistency.
Moving to slide six given the strength of our first quarter results and the progress we made towards our full year strategic priorities. We are reaffirming our full year outlook for revenue of 1.15 to $1 3 billion propelled by strong Commission growth.
We also expect adjusted EBITDA of $345 million to $385 million.
Which would result and industry, leading margins of 30% despite our aggressive investment posture in 2021.
More important we expect these 2021 investments will continue to drive high rates of growth into 2022 and beyond.
With that as a quick intro, let me pass the call over to Travis to run through our first quarter results in more detail I'll come back at the end of the share more color on how encompass will help power.
So health and to a highly differentiated digital health company with industry, leading ltvs and diversified revenue streams.
James.
Thanks Clint.
Mid eight looks at our topline results over the first three months of the year, which came in within our range of expectations for the quarter.
Robust growth and Medicare more than offset the declines and ISP as we continue to reallocate resources towards the higher margin Medicare business, resulting in 55% Commission of the growth.
Our internal Medicare team of agents delivered revenue growth of 65%.
Medicare commissions were fueled by the combination of 48% growth and carrier approve submissions and 17% LTV gains, which benefited from $9 million of encompass revenue and the quarter.
Total revenue grew 45% during the <unk> to $204 million, including enterprise revenue of $30 million up 6% and the quarter.
Driving strong submission growth with improving Ltvs is a testament to the quality of our marketplace as our tech enabled agents help consumers find the best policy to meet their needs at the time of enrollment.
Slide nine examines the drivers of the LTV gains that go health has been uniquely delivering for carrier partners consistently over the last four quarters.
These LTV gains are the result of large investments, we made over a year ago, and our telecom team and our encompass platform along with our expanded carrier footprint all of which incrementally improve an already great platform.
Let me explain the two main drivers of our 17% LTV improvement.
The first relates to the continued persistency gains that our telecom team is driving to a consumer engagement strategy.
We have seen steady improvements and persistency over the last 12 months translating this quarter into a large improvement compared to a weak first quarter of 2020, when ltvs were down.
Remember, we increased investment and our telecom team during the spring of last year. So not surprisingly the second quarter of 2020 was when our LTV started to move higher.
The first quarter of 2021 also benefited from a large improvement in <unk> of new 2021 policies on the heels of our carrier expansion into the fourth quarter's annual enrollment period.
We also benefited from enhanced call routing of consumers to agents that are best able to meet their needs. These items combined with the commission rate increases helped power and 11% gain and LTV.
The second driver of LTV gains with the additional revenue from administering services for carrier partners under our encompass platform the $9 million encompass contribution drove an additional six percentage points of LTV growth and the quarter and.
Our accelerated investment and encompass infrastructure and 2021 position positions us for future gains as we expand our services and carrier reach over the coming years.
Slide 10 is an update of our fourth quarter slide to highlight our focus beyond just the ltvs as we look to drive higher Medicare revenue per submission through the combination of Commissioner Bowl and enterprise growth demonstrating the benefits of our unique carrier relationships.
This slide highlights the 15% growth in the first quarter revenue per submission and it includes commissions enterprise revenue as well as our encompass revenue.
As a reminder, we collect cash from enterprise and encompass services on an accelerated basis relative to commissions and these accelerated collections and further improve an already rapid payback period.
Encompass is fast becoming and meaningful incremental revenue driver for us. We expect the majority of encompass revenue this year to flow through the commissions line and impact on Tvs as the services are tied to the policy.
But over time as we rollout services across a broader group of carriers that are directly tied to our members. The revenue will also impact our enterprise line.
We are moving thoughtfully to lengthen our lead of commercializing on our encompass programs and we have a proven track record of over delivering for our growing network of carrier partners.
We have been encouraged by the carrier and partner response and believe encompass can help drive our next leg of growth over the coming years as we help partners improve the effectiveness of programs beyond enrollment positively impacting our carrier partners long term profitability as we leverage our position and the value chain to deliver results.
Hear more on this from Clinton of minutes.
Slide 11, and walks through the progress we delivered towards our full year investments and resulting EBITDA adjusted.
Adjusted EBITDA of $32 million was consistent with our expectations of short term profitability was offset by our planned strategic investments and the agent capacity technology and the goal health brand and encompass.
Aggregate customer care, and enrollment, including telecom and technology investments doubled up $28 million and the first quarter.
These planned investments include the direct costs of the new agents and training programs along with the opportunity cost as the majority of new agents, we are and we're in our training modules limiting near term revenue upside of positioning our agents to deliver high quality submissions with improving efficiency during the upcoming AEP.
Recall that agent capacity with the material limiting factor for us last year, and we are aggressively building the infrastructure necessary to capitalize on the large and growing Medicare market.
Increased marketing and advertising spend helped us drive the strong topline growth and the quarter as we create internally sourced opportunities for our aegis.
Combined cost of revenue and marketing and advertising grew 51% roughly in line with revenue growth.
Moving on to our 2021 outlook shown on slide 13, we are reaffirming full year 2021 revenue of 1.15 to $1 3 billion and adjusted EBITDA of $345 to $385 million, driven by 40% revenue growth and 35% EBITDA growth at the mid.
Points.
Regarding the seasonal cadence revenue growth and the second quarter could come in towards the high end of the full year growth outlook, given the easy comparison against last year's COVID-19 impact and loss production.
This is the timing issue already incorporated in our full year outlook.
As a reminder, and addition to the majority of our agent investments hitting the second and third quarters, including the short term opportunity cost of keeping cohorts of agents off production to ensure the our highly efficient headed into the AEP, we will have ramped up brand and encompass investments against the relatively late period and the prior year, we anticipate second.
Quarter EBITDA margins will come in at half of last year's level, and then expect of steady build back towards the prior year's absolute level of EBITDA and the third quarter before delivering strong operating leverage during AEP.
Moving down the P&L, the combined costs related to marketing and cost of revenue will be heavily weighted towards marketing costs as our marketing team drives more high quality consumer volume internally, while continuing to develop our go health brand among consumers marketing and advertising expenses should represent two <unk>.
Of the total cost for the full year as the cost of revenue declines year over year.
Investing now to execute well and AEP is of good tradeoff as the EBITDA upside in Q4 as far outweighs the short term carrying costs from our accelerated investment posture.
As we move into the fourth quarter's AEP. Our plan anticipates continued strong revenue gains powered by our agent growth and marketing capabilities as well as improvements and efficiency and capturing opportunities we won't need a big increase and the number of qualified leads to hit our numbers, but rather we are working towards better capitalized.
And delivered opportunities through higher answer rates and increased conversion, which will improve our efficiency.
Moving on to cash flow slide 14 highlights our fast payback periods and strong returns generated for shareholders. We collected a record of $183 million of cash commissions during the quarter and cash collections. During the last 12 months came in over 100% of expectation supporting our confidence and our LTV.
Patients as a proxy for cash flow.
Strong cash collections combined with our highly efficient funnel led to positive operating cash flow of $31 million and the first quarter and TTM operating cash flow of negative $107 million.
We converted this $107 million and negative operating cash flow over the last year into of $309 million increase and net commissions receivable equating to a market leading three times return on investment even before incorporating the potential to further monetize our membership base through the expansion of our encompass services.
In addition to our strong and growing cash collections and of $174 million of cash on hand at quarter, and we recently increased our revolver to $200 million all untapped to ensure ample capacity to manage the seasonal cash flow demands of a rapidly growing business in 2021.
Without needing to access equity linked financing.
Clint will now walk you through some of the exciting early results, we're seeing with our encompass platform and why we're so encouraged about the future potential Clinton. Thanks, Travis since entering the Medicare market and 2016, we are taking a very targeted approach with select carrier partners to provide unique solutions, including technology marketing and enroll.
On the services our encompass platform.
As a natural extension of these solutions, where we leverage our position and the value chain between carriers and consumers too.
To enhance the customer journey.
As we build our trusted advisor status with the consumers we benefit from the compounding effect of improved retention and expansion of Tam.
Slide 16 highlights our unique positioning as it rapidly scaling membership platform that can connect consumers carriers and other care delivery partners.
Why is this a win win.
First we help golf members better navigate their health care journey and improve their health outcomes.
Second we enable carriers to better understand our customers' needs, while improving the carriers chief financial and quality metrics.
And third we advocate for consumers and connect them with high quality care delivery partners that further support the goals of consumers and carriers.
We believe there is an enormous market opportunity to expand go house downstream capabilities.
And are very excited about the infrastructure, we are building to lengthen our leaders leadership position and taking a thoughtful approach with a few select carriers to ensure that we create a great experience for consumers and partners.
Doing this will lead to continued LTV growth through persistency gains and additional revenue opportunities and very attractive markets.
Let's start with the value proposition for our members our choice platform helps educate consumers on the shop and enroll and the right plan that meets their individual needs, but enrolling and the bright plan is one of the first step to truly improve outcomes consumers need to understand and utilize the benefits of their plan.
By leveraging the <unk> team and the value added services of our encompass platform, we are able to help consumers and maximize their benefits and connecting with the right providers and ultimately improve health outcomes.
Our encompass platform also helps address many of the carriers most important needs on better engaging consumers, we help optimize their medical loss ratio improved star ratings enhanced risk, scoring and drive greater retention.
And we're well aligned to health care delivery partners as we can build relationships with companies that have great products and services, but lack access to member growth and education.
As we continue to scale up of our membership base and become the trusted adviser for consumers. We can connect them to their planned benefits that will help improve the health outcomes.
Slide 17 highlights how one encompass initiative works.
And this example, we demonstrate how go house proprietary member care assessments are empty as a foundational element of our encompass platform collects the necessary data to help provide early insights. The MCA represents the starting point of the consumer's health journey with us providing the data needed to drive specialized care customer experience we can.
And leverage our strategic positioning at the time of enrollment to deliver assessments earlier and with greater efficiency and existing options.
For example.
Consider on a go health member Jin from Rural Tennessee.
We know from the data collected during the enrollment process. The gene is the 72 year old woman that lives alone has hypertension and uses three prescription drugs.
Upon performing and MCA for her and we learned several additional things that allow us to create a unique go health member action plan, Virginia.
First Jane had limited access to transportation for wellness visits and other medical necessities.
This has implications for <unk> ability to visit her primary care physician.
Pick up of medication as well as access healthy food, which we can address by helping the range complementary transportation and a prescription prescriptions and healthy meals delivered to her home all included and her plan.
Second Jane has recently learned that the primary care physician is going to retire.
After the research we found a new value based care provider offers additional benefits on local area. After further education and facilitating and introduction Jane decides is of the right solution for her.
And third Jane lack of social interaction and community support so we can facilitate home community socialization by connecting her to one of our partners the.
These findings further emphasize the importance of having ongoing education and engagement with the golf licensed <unk> to improve health outcomes through our encompass platform.
We also know that there are long lasting benefits to go help from improved persistency of encompass members.
<unk> also benefits from these MCA initiatives as we better identify chronic conditions and social determinants of health earlier, and the member lifecycle, which allow us to connect consumers with the supplemental benefits and programming to help carriers and mitigate health risks of the beneficiaries.
Moreover, and the SMT examples our encompass platform helps carriers and improve their own revenue streams by properly risk, scoring new members closer to the time of enrollment.
Slide 18 lets the few of the encompass services, we are ramping today as we move deeper into the health care value chain. We believe that these opportunities dramatically expand our Tam beyond the $30 billion commission on market, including value based care preferred pharmacy engagement health risk assessments and members of your assessments longer term, we see opportunities to expand day.
And of care and benefits navigation and supplemental benefits of engagement.
Let me wrap up on slide 19, and a summary of how our leading marketplace platform positions us well to capitalize on a large and fast growing market with multiple sector two wins.
As a reminder, there will be 80 million potential Medicare advantage of consumers by the year 2030.
And they are increasingly looking for education and choice and transparency as they make this critical health care decision the <unk>.
<unk> accelerated the transition from traditional field agents toward our marketplace platform and our team of licensed agents are better equipped and ever how consumers compare the costs and benefits of policies across our vastly expanded carrier footprint.
The secular growth drivers remain entrenched with the expectations for 10% Medicare advantage growth this year as well as commission rate increases as <unk> continues to deliver superior outcomes and cost dynamics.
What sets us apart from our competitors.
We have a data driven internal omni channel marketing strategy, the efficiently delivers consumers and nor wide funnel.
And our proprietary technology platform utilizes data to the score and raw consumers to the best agent for them, while also providing and a planned fit checks to ensure our agents and rural customers and the right plan for their unique needs.
We have built and continue to improve our tech enabled agent force to be the go to resource for seniors, who are making and incredibly important and difficult health care decision.
And finally, we have cultivated deep carrier and healthcare delivery partner relationships that have allowed us to continue to innovate on our platform and drive additional revenue streams such as encompass.
We believe as high performing platform positions us well to continue driving rapid growth over the coming years with industry, leading margins and fast cash payback periods.
We delivered a great start to the year during the first quarter with strong top line momentum and LTV increases powered by the investments, we made and <unk> encompass and our care expansion in 2020.
We are also executing well towards our 2021 key initiatives that will help.
Improve on an already great business model the.
These investments position us to delivering another year of record results, which we have reaffirmed and more importantly create the foundation for a multiyear period of outsized growth and returns for shareholders.
Well, we'd now like the open up the call to questions.
Thank you as a reminder to ask the question you will need the press star one on your telephone so let the.
Your question because of the turnkey please standby will be compared of the Q&A roster.
The first question comes from Michael Cherny with Bank of America. Your line is now open.
Good afternoon, and thanks for all of the color so far.
So I wanted to dive a little bit more interest some of these enterprise dynamics and and the encompass platform clearly youre starting to see the early returns on the investment as we think out.
Post 2021, maybe and over the next few years.
How should we think about what the growth contribution should be from this business and are there any concerns or questions that you have in terms of the potential for workforce distraction and the event that they are pursuing one area of the business versus the traditional plan selling.
Yes, thanks for the question.
So.
And we identified last year, some opportunities to improve the overall customer experience.
With our members.
We realize that a lot of members had.
Many questions about their plan and how does.
Better leverage it and we saw.
And of a technology and the human capital element to help better educate consumers along the way. So that's what we've done we invested last year, we had some pilots going and the in Q4 and now we've rolled those into the revenue producing programs on which we're really excited about.
We will ramp those up over the next several years as we think about the opportunity that exists in the marketplace.
And travel and any commentary on this year itself.
Yes, I would just reiterate we are obviously pleased with the start we have but again, we talked about when we gave our full year guidance on the last call think about encompass driving a few points of growth for the year and we.
We believe that that is going to continue to persist as we see these early wins.
Got it and then turning back the LTV, even backing out the encompass contribution really nice advancement and other spin of of our comp dynamic, but still the results of the whole very solid how do you think about the persistent and see no pun intended of the LTV trajectory and how it should continue in terms of what's built into the.
And for this year.
Yes, thanks for the question again.
So we are obviously pleased with the results.
We started making.
Making the investments last year, and our telecom team and post sale member engagement programs and throughout Q2, Q3, and Q4 of last year, we started to see those gains.
And thats manifested into this year, even further which we're really excited about so.
Obviously, you mentioned, it's kind of of lower comp Q1 over Q1, but we're still extremely pleased with those results and and it really goes back to our entire business strategy of spending the time upfront with the consumer doing a full needs analysis and making sure they're in the right plan and the once theyre in that play and habit and advocate there for them if they do have questions or need help arranging.
Transportation or scheduled on the doctor's appointment, where there form which ultimately is going to continue to lead the deeper relationships and stronger customer engagement, which will lead to continued persistency gains over time.
Cool, thanks, so much and nice job on the quarter.
Thank you.
Thank you and our next question comes from Jason and staying with Credit Suisse. Your line is now open.
Okay. Thank you and Hello, everyone as of July investing on.
Following up on Michael's question on LTV.
Can you and.
Seven percentage points.
The increase you highlighted quarter because of driven by purchases of <unk> activation is it possible for the breakdown on the impact of those individual items and the question of Michael is trying to get to that for the full year.
And last earnings call, you talked about low single digit or better yet and season LTV.
Maintaining the outlook just trying to understand the impact of income per se other drivers for the rest of the year.
Sure.
Yes, I'll talk to the.
There is really no singular.
Piece within that LTV increase that sticks out right. It's the combination of.
Kind of a lot of the investments and things of that we've made over the previous quarters that of manifested into this so.
Better fluctuation rates improved persistency.
Stickier members I think the encompass platform has also given us a I don't want to say it surprised by the means but enhanced opportunity to drive not only direct revenue through encompass what we're seeing and indirect benefits of persistency as well there and.
The drivers.
Commentary one of color.
Yes, I would just say, it's simply the Clinton Pointe, we're seeing more conviction and planned choice with our consumers throughout the first few weeks of the customer journey again, all driven by our investments and carrier footprint, our technology and plan fit as well as telecom as it relates to the kind of full year LTV expectations think about on the full year high <unk>.
<unk> digit LTV improvement driven by the few points of growth coming from encompass initiatives that are right now manifesting themselves and LTV improvement given the incumbent initiatives are tied directly to the policy.
Okay, and then my follow up.
I was wondering if you could provide a bit more dps at all on your comments and the prepared remarks that.
And you are trending ahead of expectations with respect to the agent hiring.
And I'll kind.
Kind of push on and the agent.
And across Europe.
And if we just making hiding many of what market of any comparator, though and also if you can provide any color around the page and Mexico targeting between first and the demo.
Yeah. Thanks. Thanks for the question. So yes, we are like we mentioned on our script. We're slightly ahead of plan on the.
The agent hiring.
We remain encouraged.
As you also recall the majority of our agents could become come and non licensed so we've got a.
Strong and could walk off the top of the funnel recruiting platform now bringing.
And those folks and so we feel really good about the position we're at today and the position that we're in for the remainder of the year of bringing on the agents kind of hit our targeted recruiting goals and hiring goals.
And.
The other thing we invested heavily in and kind of the early parts of Q1, and just the overall infrastructure and enhancement of our training platform to provide kind of deeper.
And more and wrench trading services to ensure that agents exiting that that's true.
Aiding program are very.
Capable of executing on their job when they when they hit the hit the floor.
Okay. Thank you.
Thank you. Our next question comes from Jonathan Young with Barclays. Your line is now open.
Thanks for taking the question just going back to encompass again.
Can you help us understand is the revenue contribution from that the immediate.
Or is it spread out over the lifetime of the member life and are you performing additional services over time and thus that's why it falls into the commission bucket.
Yes, so thanks for the question.
And so we've got over a dozen products and services now within encompass and as you can imagine each carrier we work with kind of has a unique need that we're able to tailor and.
And because of the flexibility of the platform, we're able to charge and different ways.
Most of the revenue today is captured upfront, which helps from a cash flow dynamic standpoint.
And there are opportunities to move more towards a <unk> type model or an annual model.
That we're in discussions with as well so our main goal here was to really just like we kind of kind of ramped up Medicare five years ago with the what I'll call the rifle approach sales.
<unk> strategic approach with our encompass platform choosing a couple of select key carrier partners as.
As we work on these the services and to ensure that its really release of solid experience for the customer for the carrier and for <unk> health and it's a win win win across the board and that's what we've done and we will continue the out throughout this year as we as we scale of the platform.
Okay, Great and is there any.
The way at the size of the overall contribution that you're expecting from comps I know you said a few points coming some of the way.
Wait the pro.
<unk> is the absolute size there. Thanks.
And so I'd say the only other way to think about it other than the few points of growth as Clint mentioned the majority of our encompass revenue is being driven at the point of enrollment and which is why it's tied to the policy. So as you think about the cadence throughout the year of that few points of growth think about encompass.
Growing as the policy and submissions growth happens with obviously the bulk of that occurring in Q4.
Okay. Thanks.
Yes.
Thank you. Our next question comes from Greg Peters with Raymond James Your line is now open.
Good afternoon.
The first question I wanted to talk about or have you give us some feedback on what we've been hearing from.
And the traditional field model agents are working and that the <unk>.
Last year really worked against them because of COVID-19 force seniors on two platforms, such as yourself and.
And they believe that as we come out of the pandemic and and.
Everything opens up the the traditional field mechanism has some confidence they think theyre going to win some share back.
This year and.
And just curious about what your impressions are of that that rhetoric in the marketplace because clearly you've you've noted your success.
Yes, youre, absolutely right that obviously the.
The acceleration into our model with.
And with COVID-19 did happen, obviously, you were seeing a trend over the last several years prior to COVID-19 of more and more consumers leveraging platforms like us.
And we don't think consumers that.
We have gone through our experience and understand how efficient and easy. It is to leverage will go back to a few of our face to face type of enrollment you think about the old kind of of the travel analogy.
And it's not like we're going to travel agents on the corner of main Street America to buy our tickets anymore. Once that evolution of this happen people continue to buy online and I think that that's how we view it.
And we're starting to we still seek a very very strong and and continued demand and as we add services like encompass we think of it just sets us up even further apart I think the other thing of notice with our technology platform and our ability to provide a lot of choice.
And that gives consumers.
And easier way to shop for a lot of plans most field agents may represent one two maybe three carriers.
And you can just the imagine the value add that we deliver to.
To the market.
Great. Thank you for that answer the second the second.
And it's going to be based on the information Youre, providing on slide 14, which is good.
And your cash flow.
Yes.
You talk about the the the.
The free cash flow being negative I think you said $107 million on a trailing 12 month basis.
I have got number of of Smith, if I'm misquoting that debt.
Just Joe Correct me I'm sure.
And that's correct.
So I guess to be candid there there is concerned and the marketplace about.
Your business model and others like yours getting to that free cash flow.
Holy Grail, if you will on an annualized basis and one of the one of the.
One of the issues that popped up as if you're continuing to grow sales and an increasing rate and other was the rate of growth is accelerating.
Such as in your business model, it's going to be very hard for you to get to a cash flow breakeven where and.
And ultimately what we need to get you the cash flow breakeven and positive would be for the rates of growth to stabilize some level or start to shrink a little bit and so on.
That's a lot of words and around cash flow, but maybe you can give you some thoughts on your cash flow. Please.
Yes, I mean, youre, absolutely right I mean.
The rates of growth are an indicator of cash flow and this business model I think it was a lot of high growth business models themselves, we could easily slow down and generate cash pretty quickly.
We see a tremendous market opportunity here to continue to invest in our agents, our technology and our platform to scale out and then.
And you look at other services around our enterprise or on encompassed strategies that ultimately drive quicker cash payback periods that and combination sets us apart and a very unique position as we think about scaling up this platform.
So we believe we're on the position to continue driving growth and driving membership while looking for adjacent products and services that could benefit us from a cash position standpoint.
Got it thank you for the answers.
Thank you. Our next question comes from Tobey Sommer with two of Securities. Your line is now open.
Thanks.
Could you give us a sense for what youre seeing in terms of.
The marketing right.
And as you look into the fourth quarter of the extent to which you have.
Visibility into pricing and district channels, and maybe how that compares to the elevated pricing around the election period.
Yes.
Thanks for the question.
Yes, Youre absolutely right. If you remember last year there were some challenges.
And some unknowns with the election and that election, ultimately last of beyond election day, which caused some kind of rate challenges and some unknowns and the buying standpoint, which we don't expect this year.
We expect a much more kind of normalized year, obviously year over year.
<unk> continued growth and the and the market you may see some CPO increases and certain channels, but with the efficiency gains and other things we're targeting think.
And think about our overall CPA.
That's really how we run the business and operate.
And if I could do a follow up on the cash flow.
Sort of self sufficiency.
And where to your models tell you that.
Sort of steady state how quickly could you grow and at steady state fashion, and then kind of get to that.
Positive cash flow generation.
Yes, so we're focused on continuing to grow our membership efficiently and we've got the cash on hand, the access to the revolver to execute on our.
Of our multiyear plan to continue to grow our membership base and as we think about that growth and membership base. It's not just the opportunity to monetize them from a commission standpoint from from an incumbent standpoint, as well and so that is where we're focused today and we'll continue to be.
I guess I understand the focus of more curious about the rate of growth.
And I know you have an offset and a positive.
Feature and this encompass you are clearly having some success on it but is there a.
And even a range of growth that we can think about.
Yes, I don't think that that's we're going to.
And this industry is still kind of we believe new enough from a from a platform standpoint that setting us and a range of growth right now with the opportunity that we see as the I think the wrong way to look at the business.
Year over year, the opportunity is going to continue to grow you think about the overall Medicare population you think about the agent population do you think about the people, leaving the original Medicare and in Medicare advantage and those change frequently so and our carriers needs change as well and new opportunities come to the market. So.
I think of any.
High growth business, and I kind of of newer market, we're going to be opportunistic and tackling the market share and going after the opportunity.
And that's kind of how we think about the business.
Okay. Thank you very much.
Thank you and the.
The last question and the queue comes from.
Beth Anderson with Evercore. Your line is now open.
Thanks, So much further question.
The question is about.
The.
Does that encompass business.
And can you quantify how many of the carrier and Youre working with now and.
Obviously some of your peers are also and train the space.
Can you say anything about like any comment.
Comments that differentiation or I assume given the size of the market and the relative revenue day.
Guys don't encounter.
Each other in terms of the competitive situation, but any clarity there would also be helpful.
Yeah. Thanks Elizabeth.
And so yes, so we started and we saw an opportunity about this time last year to start.
And of working with our carrier partners and developing some incumbent strategies and we purposely of cabinet to a very small number of carrier partners as we think about ramping up and proven the model out obviously, we think $9 million and Q1 of the pretty good start to that.
Obviously, our competitors all were doing and.
It took took a look at that and which were flattered by it and we think there's an opportunity here and we think that.
They see that as well and.
As we think about setting up services to help both the carriers and the consumers.
Better understand that the the health care journey, it's a massive market.
We don't believe Theres any time soon we'll step on each other's toes and we think that we have a unique opportunity here in front of us to really make impact.
In fact on moves and the space.
And number of applicable or do you think like the learnings are in terms of the product and to develop let's sort of one carrier to the next like does it kind of standard and they can basically do the same thing again and are you sort of totally customizing it from one to the next.
Yes. Good question. So the way the platform is built and you think about of traditional SaaS type model and some of the services or software with the service.
So it is replicable, we could take it a different carriers and we may have two dozen modules that carriers can kind of choose from and.
And we May start with two and of particular carriers example, with the goal of expanding that the 10.
And other carrier might take I will take these five but that's the goal here as we think about.
Services and offerings, it's something that we don't customize necessarily for each carrier, but we can we can take it to market and expand that way.
So that you guys could give me some opex leverage and that business continues to scale.
Youre exactly right.
Okay.
Thank you I would now like to turn the call back over to Clint Jones for closing remarks.
Thank you Joelle and thank you to all of the shareholders and analysts of tenants today's call. We're very pleased with the results that we've seen so far and Q1 and on and are positioned to execute in 2021 I'd like to again, thank all of our <unk> team members from the work and effort. They put on every single day and we look forward to speaking to you soon thank you and have a good.
Right.
This concludes today's conference call. Thank you for participating you may now disconnect.
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