Q3 2021 Gohealth Inc Earnings Call

November 9, 2021

Thank you for standing by and welcome to the go Hofburg water 2021, or any conference call. At this time, all participants on a listen only mode.

After the speaker's presentation that'd be a question you just asked me.

Can I ask a question at that time to start in one on get texts down telephone.

As an amount is based off the call is being recorded I would now like teleconference. If you have Mister Bryant Park.

Date again.

Everyone I wanted to thank each of you for joining go help inks third quarter of 2021 earnings call Joy.

Joining me today or quit Jones, co founder and Chief Executive Officer, and Travis adjacent Chief Financial Officer. This Afternoon's 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 Hunter takes no obligation to update any of these statements whether due to new information future events or otherwise.

After the market closed today, we issued a press release containing our results for the third quarter of fiscal 2021. In addition to presentation materials that Clinton Travis will walk through momentarily both the release and the slides can be found on goal health 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.

During this call we will be discussing certain non-GAAP financial measures. These measures are reconciled to the most directly comparable GAAP financial measures and the reason management believes they provide us useful information to investors regarding the company's financial conditions and results of operations are contained in the press release an investor.

<unk> and with that I'd like to turn the call over to Clinton.

Thank you and thanks, everyone for joining us today to discuss our third quarter and year to date results.

I will start with some highlights from the quarter.

And an update on the investments we made in our business to strategically positioned ourselves going into the annual name a period or AEP.

Travis within cover a detailed review of our financial results before I wrap up with some updates on encompass an early insights on this year's AEP.

We will then open up a call to Q&A.

Slide four provided an update on the strategic investments in our agents technology brands and encompass platform.

We believe the investments we have made and will continue to make will act as a catalyst for go health in 2022 and beyond the.

Enabling us to capitalize on the market opportunity in front of us and position ourselves for the near and long term.

And our last update we told you our investment in each capacity was more expensive than taken us longer than originally planned.

I am pleased to report we've exceeded our goal of increasing our agent base by over 50%. Despite the continued tight labor market.

Most importantly, these new agents have completed 500 plus hours of training to ensure they have the knowledge necessary to educate consumers on their plan options.

The short term investments in our people will provide long term benefits and meaningful upside for years to come.

It is worth noting that included in our increased agent base is in over 100% increase and associates on our <unk> our team.

As a reminder are telling your team is the group of dedicated employees, who onboard new members and help them understand and utilize their plan benefits.

While we do not expect the material margin increase from our <unk> investments. This year. We expect these agents to play a meaningful role in our future success, including customer persistency and the expansion of our encompass platform.

Our technology investments combined with tight integration with carriers and partners continue to differentiate us.

These investments provided specialized agents with decision support technology needed to enroll consumers and the right plan from day one.

Our expanded carrier offering driven by our technology does the differentiator for go health as we continue to be the trusted adviser for seniors.

Lastly are encompass platform and go help brand investments are on track we.

We are investing in our people. So they can serve our customers investing in our technology. So we can accelerate our efficiency and investing in our brand. So because customers know that when you are talking to a go out agent. There is no better partner for their health care journey.

We are happy to announce that were ahead of our encompass platform goals due to the success with various carriers and partners.

This platform combined with increasing scale positions as well for success.

Slide five highlights are strong quarter and year to date topline financial performance with revenue of 30% and 42% respectively.

Additionally commission revenue exceeded our expectations of 73% and 60% for the quarter and year to date.

These results were driven by investments in our expanded agent force and powerful internal marketing engine.

Our growth continues to be driven by our Medicare internal business.

<unk> generated growth of 19% in the third quarter and 51% year to date proving.

Proving our ability to drive gains and the growing Medicare market by standing out of the leading choice platform for seniors.

Medicare advantage enrollments continued to drive growth.

With third quarter, Medicare advantage carrier approve submissions, increasing 100% to roughly 193000.

Our focus continues to be on acquiring members engaging them in improving their health outcomes.

That is why we are and will continue to provide value added services beyond enrollment through our encompass platform.

Our year to date encompass revenue of $32 million is ahead of our expectations.

We are very excited about the progress we have made with encompass and look forward to sharing more about our 2022 strategy around so important initiative on our fourth quarter call.

Moving to slide six.

Given the progress we have made towards our full year strategic investments, we are reaffirming our full year outlook for revenue of 1.2 billion to 1.3 billion propelled by strong Commission growth.

We also expect adjusted EBITDA of $300 million to $330 million.

More importantly, we expect our 2021 investments and agents technology brand and encompass will continue to drive profitable growth into 2022 and beyond as we distance ourselves as a leader in the Medicare market.

With that as a quick intro let.

Let me pack the call over Travis to run through our third quarter results in more detail.

I will come back and provide an update on our encompass platform and our progress during this year's AEP.

<unk>.

Thanks Clinton.

Slide eight looked at our topline results during the third quarter and year to date, which was ahead of expectations.

Little revenue grew 30% compared to the third quarter of 2021, and 42% year to date.

Year to date total revenue of $613 million is ahead of internal expectations.

For both periods, you will notice the outpaced growth and commission revenue compared to our enterprise revenue line items.

This was deliberate as our strategic focus during 2021 has been on commission growth both in absolute dollars and as a percentage of our total revenue composition the.

The commission growth is partially due to encompass one of the strategic investments Clint just mentioned, which saw 32 million a year to date revenue.

As for enterprise that portion of the business had lower revenue than anticipated in Q3, but this is a timing difference driven by carrier campaigns, and it's still pacing towards or 200 million annual target. We shared earlier this year.

Fueling our top line growth is our Medicare advantage carrier approve submission growth of 67% for the year to date period.

This growth in market share speaks to the skill of are licensed agents, the breath of our technology and the secular shift and consumers, preferring our platform.

On slide nine we highlight a revenue breakdown by segment.

Our Medicare internal segment delivered 19% revenue growth during the third quarter compared to the prior period and 51% growth versus the prior year to date period.

We are also pleased with the performance of our Medicare external segment, which grew revenue 52% year to date.

Our Medicare external segment is powered by small and midsize agencies operating under our carrier agreements compliance and technology platforms.

Medicare external contributes to our size and scale and deepens our carrier relationships in fact in many instances carriers are referring these partners to us demonstrating the power of our enrollment platform are encompass strategy and prominence in the Medicare space.

Slide 10 highlights our quarterly Medicare advantage LTV per approve submission.

The decrease compared to last year's third quarter is primarily attributable to three things first.

First a changing mix, both consumer and carrier second the impact of new agents and third macro shopping trends.

To provide more transparency I want to briefly unpack each of these.

First with respect to our changing mix third quarter Ltvs reflect a lower percentage of consumers, who are new to Medicare and an increase in consumers that shop more often the.

The dynamics of these consumers is different and so are their persistency trades.

As it relates to carrier mix, we continue to see our enrollments more closely mirror overall market penetration and these new carriers added have lower modeled ltvs.

Second as Clinton mentioned earlier Q3s main focus was on continuing to expand our agent based ahead of AEP.

While we are encouraged by the number of agents added in the quarter. It did have an expected short term LTV hit as we saw our most recent cohorts of agents driving lower effectuate, <unk> and persistency rates as compared to last year's vintages.

As our agents become more tenured we expect their performance to drive improved ltvs.

As mentioned on previous calls, we analyze an update our LTV model quarterly and is embedded into our ltvs the impact of these new agents.

Finally, we continue to refine our LTV model quarterly and have included updated assumptions on our newest vintages to address the macro shopping trends that we and others in our space have experience.

On Slide 11, you will see an update of our Medicare revenue per submission, which is up over 8% year to date compared to last year.

As we have mentioned previously we believe this metric is an important barometer of our performance as it demonstrates our ability to outperform on a combined revenue basis, including commission encompass and enterprise revenue.

As a reminder, as encompass an enterprise grow our payback period shortly.

Another validation of these strategic investments.

Overtime, we believe this view will become more important, especially as we lengthened our lead in the Medicare space through our encompass platform.

Slide 12 shows the progress we delivered towards our full year adjusted EBITDA guidance. The investments we have made and will continue to make during AEP gives us confidence in our ability to deliver on our full year guidance.

As discussed in prior calls our strategic investments an agent capacity technology to go health brand and encompass have had a short term impact on profitability.

Customer care and enrollment costs, including are vitally important <unk>, we're up 112% in the third quarter compared to the prior year, excluding non-recurring accelerated vesting related to the IPO.

In addition to the cost of onboard and trained new agents short term productivity from these newly hired agents was low as expected given new agents entering our comprehensive training program generally have lower productive hours combined with the lower ltvs as.

As these agents gain more experience with our tools and technology, we expect productivity to increase.

You will recall that agent capacity was a limiting factor for us last year, especially during AEP.

As such and and as we have described previously we have built the infrastructure necessary to capitalize on the large and growing Medicare market. During this year's AEP by ensuring we have the right amount of agents ready to serve our customers.

We expect this agent capacity growth to pay dividends over both the near and long term.

Moving down the P&L marketing and advertising costs combined with cost of revenue grew in line with our expectations.

Combined costs were up 44% year to date roughly in line with total revenue growth of 42%.

Our marketing team continues to diversify our marketing mix to optimize the returns on investment.

Turning now to our full year guidance shown on slide 14.

Our full year 2021 revenue and adjusted EBITDA guidance remains unchanged our outlook for full year net revenue is 1.2 billion to $1.3 billion and our adjusted EBITDA outlook is $300 million to $330 million much of which will be driven by this year's AEP.

One key point on the revenue guidance, while revenue guidance remains unchanged, we anticipate that the volume of Medicare advantage submissions to be higher than originally anticipated.

As Clinton mentioned earlier, we've exceeded our goal of increasing our agent based by over 50%.

This combined with the continued outperformance of our Medicare external segment will drive a higher volume of submissions than originally anticipated.

However, we expect ltvs to be down relative to last year, given the current trends, we are experiencing and carrier mix, new agents and macro shopping trends discussed earlier.

Moving now to our cash flow and capital profile on slide 15.

Cash and capital management are a priority for us.

We have built a business and membership base that generate substantial cash flow with the year to date cash receipts on our commission receivables totaling more than $335 million up 74% from the prior year period.

We have a $175 million, an unused revolver capacity and $85 million cash on hand as of September 30th.

While these sources of cash allow us the flexibility and opportunity to reinvest in our business. We continue to evaluate a variety of non equity ways to fund our growth given favorable market conditions, including using our large and growing receivable balance of nearly 1 billion.

We expect that 2022 will not require the same level of investment as 2021.

With that Clinton will now provide some updates on our encompass initiatives and this year's AEP.

Thanks Travis as.

As we've talked about in previous earnings Slide 17, revisits the strategy behind our encompass platform as we build additional ways to monetize a rapidly growing member base and drive long term growth.

We are seeing increased momentum and conviction from carriers and partners around our encompass strategy and will serve as a key growth catalysts for 2022.

Our encompass platform differentiates go house members value proposition and a number of weeks.

First we are uniquely positioned to help go help members better navigate their health care journey and improve outcomes.

Second we enable carriers to improve their key financial and quality metrics by better understanding their customers needs and driving and improved engagement experience.

And third we advocate for consumers and connect them with high quality care partners.

That further support the goals of consumers and carriers.

Our encompass results year to date validate our beliefs that there is a significant market opportunity to expand go downstream capabilities and they are excited about the infrastructure. We are investing in to strengthen our leadership position by creating a great experience for consumers and partners.

Moving to slide 18.

Executing on our encompass strategy will lead to continued revenue growth through persistency gains an additional revenue opportunities as evidenced by our $32 million and encompass revenue year to date.

We expect to drive 18 million to $28 million of encompass revenue in Q4.

Driving roughly 50 million to $60 million for the full year.

<unk> original $40 million 2021 encompass expectations.

We are also encouraged by the number of encompass partners, making up this revenue with six carriers and multiple other non carrier partners leveraging platform.

Being the largest Medicare advantage enrollment platform has enabled this early success and momentum and encompass strengthening our position in the market.

We plan continued investment to rapidly scale are encompass platform into 2022 and expect it to be meaningful driver of sustainable and skilled growth.

While helping our members navigate their healthcare journeys and improve overall outcomes.

Prior to closing I want to provide a brief update on AEP.

First we have the trained agent force in place to serve our customers.

Second we continue to see strong demand from our customers for education.

And choice in this complex space.

And third we have the necessary carrier product offerings and quality standards to ensure we can enroll each consumer and the best plan for them.

All of which validate the investments we've made throughout this year.

Finally.

As we are focused on executing the remainder of AEP.

I think it's important to put 2021 in perspective.

We have invested more than originally planned in this challenging environment to achieve the following strategic objectives.

First we are the biggest Medicare advantage of roller with a very large and growing membership base. This scale is important to our carrier partners and as a launchpad for encompass platform.

Second we have a large base of licensed agents and <unk> representatives that we can further optimised to execute our 2022 growth plans for our core business and encompass platform.

And third we have demonstrated that the encompass platform engages the consumer enhances their health outcomes and provides increased value to our carriers and other partners.

In closing I want to give a special call out and thanks to Travis given we are well into our CFO search and this is likely Travis as last earnings call.

Travis has been a tremendous asset to go health and I am, especially pleased that iron GUL health will continue to benefit from Travis as many talents when he transitions to our chief transformational officer once a new Cfos on board.

Finally, I want to reiterate why golf exists and why and more excited than ever at the opportunity in front of us.

During this time of year. Our colleagues are working early mornings late evenings weekends and holidays to deliver on our mission to improve access to health care in America.

I wanted to extending sincere note of gratitude to all go health employees.

You are the reason go health is the largest Medicare advantage marketplace in the United States and the reason why I'm so excited about our future.

With that I'll turn the call over for questions.

Thank you again later on if you would like to ask a question. Please press Star then one on your touch current telephone again to ask the question. The press start and what we do ask that you. Please limit yourself to one question and a follow up.

Our first question comes from a lower than that and it's kind of Evercore atlantico.

Hi, guys. Thanks, so much for that question. This afternoon I guess.

Okay Christian would just be focused on the A&P and what you've seen sales scything heard comments about log iced tea.

CMS required scripts et cetera, impeding productivity.

And that might have also been a factor in the third quarter as well. So I was wondering if you could talk about how that is specifically impacting you guys that sound. Thank you also have some offsetting strategies that you've been working through so any additional color that would be helpful.

Yes, Thanks Elizabeth.

Yeah, I think this year more than ever we've seen a heightened awareness from CMS around quality standards and we've obviously heard that from our carriers as well. So we've since early this summer work really closely with our carrier partners to ensure that we have all the right quality standards and metrics in place, including additional training for our agents.

We have not seen any sort of material impact on.

On our AEP results.

Thus far and ignored and we expect to we think long term.

This is a great thing for the industry right imposing higher quality standards for all players in the market.

And we feel we were already in a really good position.

With the carriers and the partners we serve.

Got it that's very helpful.

And maybe you could if you could talk a little bit more about some of the tech investments. You mean, you said you obviously pointed to that as soon as I can increase in investments over time, but that would help drive growth where are you seeing those pay off in the near term and there might be some of that pay off as we get into 2022 and beyond.

Great question. So this.

This year, primarily a couple of different categories.

The first category really around agent efficiency.

As you think about consumers, calling in in helping our agents to be more successful through improved needs analysis and planned finder tools.

That help agents identify and enroll people in the right plan upfront. Obviously, you can imagine the amount of training. It goes into an agent to give them onboarded and fully understanding everything about the different carrier options that we have and ensuring somebody has the right knowledge to make sure that we get our consumers of the right plan. So that's the first category.

Second category is within our encompass platform.

Obviously this is a newer initiative for us that really started late last year.

So you can imagine anytime you roll out a new platform and strategy, there's going to be meaningful and vessels behind that to ensure the technology can.

Can drive the results were looking for which we're really excited about kind of the year to date results and where we sit in the momentum we have not only going into Q4, but also as we think about our position for 2022 and beyond.

With that can mean and we're still early stages by no means a week declaring a victory here, but just the early momentum and kind of what we see setting up into 2022 that I think that's where you are starting to see a lot of those returns on that investment.

That's helpful. Maybe it's just a quick follow up to that one.

Encompass revenues, where do you see what sort of have we think about it.

The contribution buckle tire for the best revenue in the quarter and maybe any kind of commentary can provide for <unk> is that still predominantly instead of health risk assessment is exciting taction in other areas, how do we think about that.

Yep.

A good question so.

A a menu options and.

Each carrier partner.

Has kind of a unique desire of some of the services that we offer as well as our non carrier partner, So think about health risk assessments preferred provider.

Enrollment preferred pharmacy enrollments benefit navigation preventative.

Preventative care models a lot of success in.

<unk> social in terms of health programs.

And we continue to add and invest in those platforms and channels.

So it's a R goal and over the next several years is to continue to add some products and services that.

Serve our clientele.

And the needs they have as well as a good partnership with our carriers and other partners as well.

Okay. That's super helpful. Thank you very much.

Thank you all right.

Crescent comes from Michael turning a base of amassing a line is open.

Afternoon, and congratulations on the strong progress you made and.

In the quarter.

Type in a little bit about the sales force in that agent base that you talked about hiring.

I think you allude to the fact of on the training side as you think about the position that you have a sales force sailboat also the build.

What does the sales force now going to look like trips positioning at the next year and especially with the encompass platform L. Place. How do you think about the permanent nature of these agents that you've hired and the ability to keep them occupied but should keep the good ones occupied. So you don't have some of the transient nature of that sometimes impacts this industry as a whole.

Yes, Michael back to the question.

We feel really obviously this year was a a very unique year hiring the amount of agents that we did with some of the kind of know labor issues, but our team has done a really good job of getting through that and you are absolutely right. We've got it the the full sales force in place for the day.

But from an investment standpoint, as we think about 2022, retaining and keeping those agents.

What I'm going through a less seasonal way, where not only that command role folks at OUP MTP. What did you think about our ability to accelerate growth in our encompass platform Bill.

They'll play a vital role to that.

As we think about the investments that we've made this year that.

We won't necessarily have to make that same level of investment next year.

That's what really we get really excited about and as you as you know the.

The more time, we have an agent with this and the the greater their tenure there.

Better performance. They have so do you think about that additional return as we get agents Chris AEP.

We will continue to provide additional training programs throughout the dish of different seasons, we have we feel really good about the investments we've made in in the long term payoff will receive as well.

Got it and then you talked about some of the <unk> impact tied to the new carriers that you brought on.

Mrs. I apologize, but can you give us a samsung how lcb's shook out in terms of an apples to apples basis. So same carriers year over year, how those are trending.

Yes, it's all sort of a high level.

Like like we mentioned, we are especially with newer agents newer carries you do see different persistency in effectuate <unk> characteristics for.

If you want to compare apples to apples tenured agent.

With a what I'll call legacy carrier.

No raw material movement, there, where you can imagine the amount of newer agents that we have going into Q3 and selling into Q3 that obviously move the needle a little bit so that's kind of where we saw.

Some LCB come down in Q3, as we think about just the sheer size of newer agents, we have on the platform.

Thanks, It's really helpful.

Thank you.

Our next question comes from Yale Sandra.

Our credit Suisse amount appropriate.

Thank you and thanks for taking my questions here.

So I want to stay on top of Golf Club Ltvs.

Decline in the quarter.

Can you provide a big Donald the three items, you highlighted like which one was most impactful and which one was less impactful and when you talk about it may appear to be Darling four Q are they expecting down similar to the doll decline of sixth whereas some input Q and are you assuming any of these three they should appoint improving <unk>.

<unk> sure.

So <unk>, you're exactly right when we unpack the Ltvs decrease we focused on carrier mix.

Agent mix consumer mix in macro shopping trends think about the agent mix as being the biggest driver of those three and then the carrier mix being sector and then the macro shopping trends being third did you think about waiting them and then as you think about Q4, Ltvs, you're exactly right queue for Ltvs.

Our our largest is icc's analogy seasonality and our ltvs, but when you think Q4 relative to Q4 of last year that mid single digit decrease is where we're currently <unk>.

Shaking out as we think about this years.

Guidance here in performance during AEP.

And if I can just.

I didn't really follow what exactly you meant to buy the ltvs margin make assumptions to address macro shopping trends can you even with more detail what exactly changes youre doing there.

Yeah, So it's really to account for.

The persistency changes we've seen during this most recent SCP and beginning of AEP period.

Got it and then one quick follow up.

Kind of all the challenges you broke because I'm going to Undervaluations dead trading Ed.

I was just cute as that you were going to be talked about in the street consolidation and you know it is kind of a combination people you talk about all the time, but just curious like what do you think about the from industry consolidation point of view.

Yeah, I think that obviously, we're we're still experiencing high rates of growth and we see a large organic opportunity in front of us.

If you think about what we've invested in from.

And our encompass strategy moving forward, that's kind of what we're focused obviously, there's a subset of competitors in the space that are out there as well.

We think that we can continue to focus our encompass strategy and things in the future, that's where we're going to focus our time and energy.

And I think you're right. We've all three public peers have been kind of hit.

This year for different reasons, we think it's still a very robust industry. We think we're doing a lot of good service and helping consumers enroll in the right plan and I think that over time hopefully.

The investor base fully understand that as we get through this.

Great. Thanks, guys.

Okay. Our next question comes from Frank Morgan of Rd retail markets. Your line is open.

Good afternoon, I guess I'll stay on the topic of the decline in LTV.

Specifically the call out around some of the carriers is there anything that you have been able to identify.

Presumably it's probably the product of the carrier than just the carrier observe them presume. So is there anything that you are seeing in the product mix from some of these carriers that where this issue is more noticeable that you've been able to call out or parse out.

Yeah, I'll take that one I think the biggest thing to call out there. It's not so much about the product differences of these new carriers. The biggest drivers of the lower ltvs with new carriers and that usually around compensation and then our modeling around those carriers as you can appreciate when you have a new carrier sometimes.

While CMS sets a ceiling for what carriers can pay you don't always you don't always get the highest tier of commission. When you are a new producer for a carrier. So that plays a role and then secondly from a modeling perspective, we have less observed data around new carriers, which drives more conservative assumptions on the front end so over time as we continue to produce.

We would assume that those ltvs across carriers on an apples to apples basis would level out, but that's one of the implications of a new carrier added.

Got Ya, so it's not really necessarily for a bad reason like higher levels of churn. It's just basically you are getting paid less for an exam.

Right.

Okay, and then secondly.

On the I noticed that there was sort of a big drop in the non commercial.

From last year down.

Around 1500 from $64 72 last year, the lowest we seen in awhile anything that you would call out there.

Yeah. We're just we're just continuing to focus on our customer choice platform and on our consumer choice platform, that's where we get paid the commission. So again, that's where our focus is right now we have some timing differences. There there was some unique carrier campaigns in the third quarter of last year is it related to COVID-19, but it's more of just.

Our focus on the consumer choice platform.

Got Ya and when you think about the I noticed too there was a.

Like a little negative tail revenue in the quarter, but.

Is that being driven.

The same factors that are driving LTV or is it sort of the same.

Order of magnitude between those three things or is there something else that that.

That you would call out there.

Yeah, no you're exactly right. The same trends that were that were talking about again or the drivers of the tail revenue adjustment and again, we update and do that every quarter and so all of those findings make its way not just in our new Ltvs, we recognize but we're also on our look back on a quarterly basis as well.

Okay. Thank you.

Thank you I next question Counsel, Toby Farmer choice Securities and minor copay.

Yeah.

Thank you I was hoping you could expand upon your description of.

Needing to invest less next year in the context of is that because of slower growth, which can be a driver spinner other factors.

Yep. Thanks. Good question, so really that's around the context of the number of agents that we've added this year.

You think about the sheer number of agents that we had entering January of 2021 versus the amount of the number of agents that will enter in January 2022 to continue at the growth levels.

We want to kind of maintain so we feel really good about that and I think that that agent force will have a an ADP under their belt and additional training. So that's really the the context around less investment on just the sheer number of.

Increasing our salesforce.

Thanks, that's helpful.

Could you Ah.

Elaborate on how you could utilize your receivable balance.

Two.

Generate spendable cash.

Quicker and what that is.

The market and the variables looked like thanks.

Sure. So we've been looking at a number of non equity financing Ah ways to continue to fund and drive our growth and one opportunity has been looking at different ways to leverage our receivables balance and so given we have a large contract value asset commissions receivable balance sitting on the balance sheet, both short term and long term.

Until we've been looking at unique ways, we might be able to leverage that vehicle to drive financing into the future.

Okay. Thank you Emily.

Our next question Counsel, Greg Peter Raymond James arrives okay.

Hey, guys. This is Alex Bolton Conan for Greg Peters.

Sorry, I'm Gonna have one more question on Ltvs, maybe just between the factors could you talk about.

You know that you're expected persistence of each one of these factors. It sounds like new agents is is more short term, but I guess how.

How much time does it take for them to improve.

New carriers. It sounds like you can get better conditions over time can you kind of talk through how long that my last.

Sure. So you are exactly right when we think about both the agent mix and the carrier mix over time as we continue to have agents more tenured and on our platform, we expect them to improve and the longer we have a carrier on our platform the better the opportunity is for that to improve so that those are definitely levers at our disposal there.

The other thing we're keeping a close eye on those the macro shopping trends as we continue to see consumers shot.

Shop in the space and brokers like us, making it easier for them to do it that's a factor that we continue to to keeping a keep an eye on it which is why we update into our look back quarterly.

Okay are you seen the new and it's starting to improve going into AP.

Yeah, we are we had a a much more robust trained.

Training program throughout this year and as you recall.

Last AEP, we had higher customer demand and we had agents to serve those customers, which is why we made the strategic decision earlier this year and Q1 to start are hiring and ran process. So a lot of those agents throughout the the first couple of quarters have gone through really strenuous training programs and you think about the last classes that we've had before.

Same thing so we've seen continued improvement.

From the all of those cohorts of agents in classes and especially.

Throughout each week of AEP improvement as well.

By that so we will expect that to continue in.

We have a.

Kind of continuing training program for those agents that may take a little longer to get up to speed that we can help them be successful in their careers.

Okay, and then free cash flow.

I guess you had.

A cache of.

<unk>.

$100 million last year in the fourth quarter.

You know you've got $85 $85 million on the balance sheet.

I just can you talk about your need for capital and.

What that might look like.

I know you said it's.

Will be less next year than this year, but maybe just talking about before.

Sure yet we also mentioned we have access to a seasonal revolver.

Of which $175 million is untapped and I think one thing that is a little bit misnomer, sometimes in the spaces that we incur the bulk of our cash burn here right now right, where we're spending the marketing we're paying our agents. We started getting those first commission payments on all the policies that were enrolling as early as mid to late December.

And then the bulk of them start to flow in in January which is why we've leveraged a seasonal revolver historically, you're really talking about just a couple of month timeframe, where that cash is mentioned mismatched, which is why we have that revolver in place.

Okay, great. Thanks for the answers.

Okay. Our next question comes from Lauren Central Morgan Stanley a line is open.

Hi, This is Nathan feather unfurl Orange shenk.

On the Salesforce mutual of add some more color on the steps taken in the quarter to ensure you hit that hiring call.

In any way to size the kind of one time costs incurred to meet those goals that you expect pena should recur in 22, and then lastly, you noted previously that it can continue to have solid consistent retention among existing agents just confirming your kind of continued.

Thank you.

Yes. Thank you.

So yeah, we saw obviously, we we talked on our queue to call.

We're experiencing higher attrition.

We had a robust top of the funnel, but a lot of.

We had challenges getting agents through the training program.

We saw attrition levels normalized.

Kind of in the early part of fall.

And it continued robust top of the funnel.

Recruiting class coming in.

And we made some operational changes around the way we are recruiting were onboarding, where we're training and we kind of saw all of those things come together right before AEP with our ability to still get them through the training program and get them ready for.

The cell.

For the October 15th start so that all of scared as far as.

Investments not really a one time investment I would point too I would just think about the <unk>.

Level of invest when we put it in 2021 that we will necessarily need to put it in 2022 due to the size that we've recruited so far.

And we're still seeing kind of normalized attrition trends throughout AEP.

That we've seen in the past so nothing really alarming. There is now just about executing for the for the remainder of AEP and I'm, putting us in a great position as we think about entering 2022.

Okay, great. Thank you.

Thank you I'm showing no further questions at the time I have to turn the call back over to clamp down for any closing remarks.

Thank you everybody and we are encouraged by the progress so far during AEP and and the momentum we continue to see with encompass we look forward to sharing a full year results during the fourth quarter call.

As mentioned day Veterans' day approaches I also wanted to share a big Thank you to all of our veterans, who help serve our country over the years, including the many that we're going to go health.

Thank you everybody for the time today have a wonderful holiday season, we look forward to catching up soon.

Thank you ladies and gentlemen does that conclude today's conference. Thank you I'll pick a painting you may now disconnect have a great day.

[music].

Thank you for standing by and welcome to the go Health third quarter 2021 earnings Conference call. At this time, all participants are in a listen only mode.

After the Speakers' presentation there'll be a question and answer session to ask a question at that time people Star then one on your Touchstone telephone.

As a reminder, today's conference call is being recorded.

I'd now like turn the conference if you host Mr. Brian Farley, Sir you may begin.

Everyone I want to thank each of you for joining go held inc's third quarter 2021 earnings call.

Joining me today are Clint Jones, co founder and Chief Executive Officer, and Travis adjacent Chief Financial Officer.

This afternoons conference call contains forward looking statements based on our current expectations.

<unk> risks and uncertainties may cause actual results to differ materially from those anticipated or projected in these statements.

Any of the factors that will determine future results are beyond the company's ability to control or predict.

Not place undue reliance on any forward looking statements and the company undertakes no obligation to update any of these statements whether due to new information future events or otherwise after the market closed today, we issued a press release containing our results for the third quarter of fiscal 2021. In addition to presentation materials.

And Travis will walk through momentarily, both the release and the slides can be found on <unk> website under the Investor Relations tab in the press release, we have listed a number of 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.

<unk>.

And with that I'd like to turn the call over to Clint.

Thank you and thanks, everyone for joining us today to discuss our third quarter and year to date results.

I will start with some highlights from the quarter and an update on the investments we made in our business to strategically position ourselves going into the annual enrollment period or AEP.

Travis will then cover a detailed review of our financial results before I wrap up with some updates on encompass and early insights on this year's AEP.

We will then open up the call to Q&A.

Slide four provides an update on our strategic investments in our agents technology brand and encompass platform.

We believe the investments we have made and will continue to make will act as a catalyst for <unk> health in 2022 and beyond <unk>.

Enabling us to capitalize on the market opportunity in front of us and position ourselves for the near and long term.

And our last update we told you our investment in <unk> capacity was more expensive has taken us longer than originally planned.

I am pleased to report we've exceeded our goal of increasing our agent base by over 50%. Despite the continued tight labor market.

Most importantly, these new agents have completed 500 plus hours of training to ensure they have the knowledge necessary to educate consumers on their plan options.

These short term investments in our people will provide long term benefits and meaningful upside for years to come.

It is worth noting that included in our increased agent base is in over 100% increase in associates on our telecom team.

As a reminder, our telecom team is the group of dedicated employees, who onboard new members and help them understand and utilize their plan benefits.

While we do not expect the material margin increase from our telecom investments. This year. We expect these agents to play a meaningful role in our future success, including customer persistency and the expansion of our encompass platform.

Our technology investments combined with tight integrations with carriers and partners continue to differentiate us.

These investments provide our specialized agents with decision support technology needed to enroll consumers and the right plan from day one.

Our expanded carrier offering driven by our technology as a differentiator for <unk> health as we continue to be the trusted adviser for seniors.

Lastly, our encompass platform and go health brand investments are on track.

We are investing in our people. So they can serve our customers investing in our technology. So we can accelerate our efficiency and investing in our brand. So because customers know that when you are talking to a golf agent. There is no better partner for their health care journey.

We are happy to announce that we are ahead of our encompass platform goals due to the success with various carriers and partners.

This platform combined with our increasing scale positions us well for success.

Slide five highlights our strong quarter and year to date top line financial performance with revenue up 30% and 42% respectively.

Additionally commission revenue exceeded our expectations up 73% and 60% for the quarter and year to date.

These results were driven by investments in our expanded agent force and powerful internal marketing engine.

Our growth continues to be driven by our Medicare internal business.

<unk> generated growth of 19% in the third quarter and 51% year to date proving.

Proving our ability to drive gains and the growing Medicare market by standing out as a leading choice platform for seniors.

Medicare advantage enrollments continued to drive growth with third quarter Medicare advantage carrier proved submissions, increasing a 100% to roughly 193000.

Our focus continues to be on acquiring members engaging them and improving their health outcomes.

That is why we are and will continue to provide value added services beyond enrollment through our encompass platform.

Our year to date encompass revenue of $32 million is ahead of our expectations.

We are very excited about the progress we have made with encompass and look forward to sharing more about our 2022 strategy around this important initiative on our fourth quarter call.

Moving to slide six given.

Given the progress we have made towards our full year strategic investments, we are reaffirming our full year outlook for revenue of $1 2 billion to $1 3 billion propelled by strong Commission growth.

We also expect adjusted EBITDA of 300 million to $330 million.

More importantly, we expect our 2021 investments in agents technology brand and encompass will continue to drive profitable growth into 2022 and beyond as we distance ourselves as a leader in the Medicare market.

With that as a quick intro.

Let me pass the call over to Travis to run through our third quarter results in more detail.

I will come back and provide an update on our encompass platform and our progress during this year's AEP.

<unk>.

Thanks, Clint slide.

Slide eight looks at our topline results during the third quarter and year to date, which was ahead of expectations.

Total revenue grew 30% compared to the third quarter of 2021, and 42% year to date.

Year to date total revenue of $613 million is ahead of internal expectations.

For both periods Youll notice the outpaced growth in commission revenue compared to our enterprise revenue line items.

This was deliberate as our strategic focus during 2021 has been on commission growth both in absolute dollars and as a percentage of our total revenue composition of the.

The commission growth is partially due to encompass one of the strategic investments Clint just mentioned, which saw $32 million of year to date revenue.

As for enterprise that portion of the business had lower revenue than anticipated in Q3, but this is a timing difference driven by carrier campaigns and is still pacing towards our $200 million annual target we shared earlier this year.

Fueling our topline growth as our Medicare advantage carrier approved submission growth of 67% for the year to date period.

This growth in market share speaks to the scale of our licensed agents the breadth of our technology and the secular shift in consumers, preferring our platform.

On.

<unk> nine we highlight our revenue breakdown by segment.

Our Medicare internal segment delivered 19% revenue growth during the third quarter compared to the prior period and 51% growth versus the prior year to date period.

We are also pleased with the performance of our Medicare external segment, which grew revenue 52% year to date are.

Our Medicare external segment is powered by small and midsized agencies operating under our carrier agreements compliance and technology platforms.

Medicare external contributes to our size and scale and deepens our carrier relationships in fact in many instances carriers are referring these partners to us demonstrating the power of our enrollment platform, our encompass strategy and prominence in the Medicare space.

Slide 10 highlights our quarterly Medicare advantage LTV per approved submission.

The decrease compared to last year's third quarter is primarily attributable to three things.

First a changing mix, both consumer and carrier.

The impact of new agents and third macro shopping trends.

To provide more transparency I want to briefly unpack each of these.

First with respect to our changing mix third quarter Ltvs reflect a lower percentage of consumers, who are new to Medicare and an increase in consumers that shop more often.

The dynamics of these consumers is different and so are there persistency trends.

As it relates to carrier mix, we continue to see our enrollments more closely mirror overall market penetration and these new carriers added have lower modeled ltvs.

Second as Clint mentioned earlier Q3's main focus was on continuing to expand our agent base ahead of AEP.

As our agents become more tenured we expect their performance to drive improved ltvs.

As mentioned on previous calls, we analyze and update our LTV model quarterly and is embedded into our ltvs the impact of these new agents.

On Slide 11, you will see an update of our Medicare revenue per submission, which is up over 8% year to date compared to last year.

As a reminder, as encompass an enterprise grow our payback period shortens another validation of the strategic investments.

Overtime, we believe this view will become more important, especially as we lengthen our lead in the Medicare space through our encompass platform.

As discussed in prior calls our strategic investments in agent capacity technology that go health brand and encompass has had a short term impact on profitability.

Customer care and enrollment costs, including are vitally important telecom team, we're up 112% in the third quarter compared to the prior year, excluding non reoccurring accelerated vesting related to the IPO.

In addition to the cost to onboard and train new agents short term productivity from these newly hired agents was low as expected given new agents entering our comprehensive training program generally have lower productive hours combined with the lower ltvs.

As these agents gained more experience with our tools and technology, we expect productivity to increase.

You will recall that agent capacity was a limiting factor for us last year, especially during AEP.

As such and as we have described previously we have built the infrastructure necessary to capitalize on the large and growing Medicare market. During this year's AEP by ensuring we have the right amount of agents ready to serve our customers.

We expect this agent capacity growth to pay dividends over both the near and long term.

Moving down the P&L marketing and advertising costs combined with cost of revenue grew in line with our expectations combined costs were up 44% year to date roughly in line with total revenue growth of 42%.

Our marketing team continues to diversify our marketing mix to optimize the returns on investment.

Turning now to our full year guidance shown on slide 14.

Our full year 2021 revenue and adjusted EBITDA guidance remains unchanged our outlook for full year net revenue is $1 2 billion to $1 3 billion and our adjusted EBIT to outlook is 300 million to $330 million much of which will be driven by this year's AEP.

One key point on the revenue guidance, while revenue guidance remains unchanged, we anticipate that the volume of Medicare advantage submissions to be higher than originally anticipated.

As Clint mentioned earlier, we have exceeded our goal of increasing our agent base by over 50%.

This combined with the continued outperformance of our Medicare external segment will drive a higher volume of MA submissions than originally anticipated.

However, we expect ltvs to be down relative to last year given the current trends we are experiencing in carrier mix, new agents and macro shopping trends discussed earlier.

Moving now to our cash flow and capital profile on slide 15.

Cash and capital management are a priority for us.

We have built a business and membership base that generate substantial cash flow with year to date cash receipts on a commission receivables totaling more than $335 million up 74% from the prior year period.

We have $175 million and unused revolver capacity and $85 million cash on hand as of September 30.

We expect that 2022 will not require the same level of investment as 2021.

With that Clinton will now provide some updates on our encompass initiatives and this year's AEP Clint.

Thanks, Travis as we've talked about in previous earnings Slide 17, revisit the strategy behind our encompass platform as we build additional ways to monetize a rapidly growing member base and drive long term growth.

We are seeing increased momentum and conviction from carriers and partners.

And our encompass strategy and will serve as a key growth catalyst for 2022.

Our encompass platform differentiates go helps members value proposition and a number of weeks.

First we are uniquely positioned to help go health members better navigate their health care journey and improve outcomes.

Second we enable carriers to improve their key financial and quality metrics by better understanding our customers' needs and driving an improved engagement experience.

And third we advocate for consumers and connect them with high quality care partners.

To further support the goals of consumers and carriers.

Our encompass results year to date validate our belief that there is a significant market opportunity to expand <unk> downstream capabilities and are excited about the infrastructure. We are investing in to strengthen our leadership position by creating a great experience for consumers and partners.

Moving to slide 18, executing on our encompass strategy will lead to continued revenue growth through persistency gains and additional revenue opportunities as evidenced by our $32 million and encompass revenue year to date.

We expect to drive 18 million to $28 million of encompass revenue in Q4.

Driving roughly $50 million to $60 million for the full year above our original $40 million 2021 encompass expectations.

We're also encouraged by the number of encompass partners, making up this revenue with six carriers and multiple other non carrier partners leveraging the platform.

Being the largest Medicare advantage enrollment platform has enabled this early success and momentum and encompass strengthening our position in the market.

We plan continued investment to rapidly scale, our encompass platform into 2022 and expect it to be a meaningful driver of sustainable and scaled growth.

Ill, helping our members navigate their health care journeys and improve overall outcomes.

Prior to closing I want to provide a brief update on AEP.

First we have the trained agent force in place to serve our customers.

Second we continued to see strong demand from our customers for education.

And choice in this complex space.

And third we are a necessary carrier product offerings and quality standards to ensure we can enroll each consumer and the best plan for them.

All of which validate the investments we've made throughout this year.

Finally.

As we are focused on executing the remainder of AEP I think it's important to put 2021 and perspective.

We have invested more than originally planned in this challenging environment to achieve the following strategic objectives.

First we are the biggest Medicare advantage enrollment with a very large and growing membership base. This scale is important to our carrier partners and as a launch pad for our encompass platform.

Second we have a large base of licensed agents and <unk> representatives that we can further optimize to execute our 2022 growth plans for our core business that encompass platform.

And third we have demonstrated that the encompass platform engages the consumer enhances their health outcomes and provide increased value to our carriers and other partners.

In closing I want to give a special callout and thanks to Travis given we are well into our CFO search and this is likely travelers his last earnings call Travis.

<unk> has been a tremendous asset to go health and I'm, especially pleased that <unk> health will continue to benefit from travelers as many talents when it transitions to our chief transformational officer once a new CFO on board.

Finally, I want to reiterate why <unk> exists and why I'm more excited than ever at the opportunity in front of us.

During this time of year. Our colleagues are working early mornings late evenings weekends and holidays to deliver on our mission to improve access to health care in America.

I want to extend a sincere note of gratitude to all <unk> employees.

You are the reason go health is the largest Medicare advantage marketplace in the United States and the reason why I'm so excited about our future.

With that I will turn the call over for questions.

Thank you again, ladies and gentlemen, if you'd like to ask a question. Please press Star then one on your Touchstone Telecom again to ask a question.

Let's start in what we do ask that you. Please limit yourself to one question and a follow up.

Our first question comes from Elizabeth Anderson with Evercore. Your line is open.

Hi, guys. Thanks, so much for the question this afternoon.

My question would just be focused on sort of the A&P and what you've seen so far maybe heard comments about longer <unk>.

CMS required scripts et cetera, impeding productivity.

And that might have also been a factor in the third quarter as well. So I was wondering if you could talk about how that is specifically impacting you guys. It sounds like you also have some offsetting strategies that <unk> been working through so any additional color there would be helpful.

Thanks Elizabeth.

Yes, I think this year more than ever we've seen a heightened awareness from CMS around quality standards and we've obviously heard that from our carriers as well. So we've since early this summer worked really closely with our carrier partners to ensure that we have all the right quality standards and metrics in place, including additional training for our agents.

We have not seen any sort of material impact.

On our AEP results.

Thus far and we'd nor did we expect to we think long term.

This is a great thing for the industry right imposing higher quality standards for all players in the market.

And we feel we were already in a really good position.

With the carriers and the partners we serve.

Got it that's very helpful.

And maybe you could if you could talk a little bit more about some of the tech investments. I mean, you said you obviously pointed to that as sort of like an increase in investments over time, but that would help drive growth where are you seeing those pay off in the near term and where might we see some of that pay off as we get into 2022 and beyond.

Great question so.

This year, primarily a couple of different categories.

The first category really around agent efficiency.

As you think about consumers, calling in and helping our agents be more successful through improved needs analysis and planned finder tools.

That help agents identify and enroll people and the right plan upfront. Obviously, you can imagine the amount of training and it goes into an agent to get them on boarded and fully understanding everything about the different carrier options that we have and ensuring somebody has the right knowledge to make sure that we get our consumers and the rate plans. So that's the first category.

Second category is within our encompass platform.

Obviously this is a newer initiative for us that really started late last year.

So you can imagine anytime you rollout a new platform and strategy, there is going to be meaningful and vessels behind that to ensure the technology.

Can drive the results, we're looking for which we're really excited about kind of a year to date results and where we sit and the momentum we have not only going into Q4, but also as we think about our position for 2022 and beyond.

What that can mean and we're still early stages by no means are we declaring victory here, but just the early momentum and kind of what we see setting up into 2022, but I think thats, where youre starting to see a lot of those returns on that investment.

That's helpful. Maybe just a quick follow up to that one.

Encompass revenues, where you see sort of how can we think about what the contribution buckets are for the best revenue in the quarter and maybe any kind of commentary you can provide for <unk> is that still predominantly sort of health risk assessments as exciting traction in other areas. How do we think about that yes.

Yes.

Good question.

A menu options.

Each carrier partner.

It's kind of a unique desire of some of the services that we offer as well as our non carrier partners. So think about health risk assessments preferred provider.

Enrollment preferred pharmacy enrollment benefit navigation.

<unk> of care models, a lot of success in <unk>, social determinant of health programs.

And we continue to add and invest in those platforms and channels.

I would say our goal over the next several years is to continue to add products and services that.

Serve our clientele.

And the needs they have as well as a good partnership with our carriers and other partners as well.

Alright, that's super helpful. Thank you very much.

Thank you. Our next question comes from Michael Cherny of Bank of America. Your line is open.

Afternoon, and congratulations on the strong progress you've made in.

In the quarter.

I want to dive in a little bit about that salesforce and that agent base that you talked about hiring.

I think you alluded to the fact that on the training side as you think about the position that you have for the Salesforce think about also the build.

What is the sales force now going to look like trips positioning at the next year and especially with the encompass platform now in place how do you think about the permanent nature of these agents that you've hired in the ability to keep them occupied especially keep the good ones occupied so that you don't have some of the transient nature of the sometimes impacts this industry as a whole.

Yes, Michael Thanks for the question.

We feel really obviously this year was a very unique year hiring them the amount of agents that we did with some of the kind of no labor issues, but our team has done a really good job of getting through that and you're absolutely right. We've got the.

Full sales force in place for this AEP, but from an investment standpoint, as we think about 2020 to retaining and keeping those agents.

What ill consider less seasonal way, where not only they can they enroll folks in OAP and MVP, but as you think about our ability to accelerate growth in our encompass platform globally.

He will play a vital role to that.

As we think about the investments that we've made this year.

So we won't necessarily have to make that same level of investment next year.

That's what we get really excited about.

As you know.

The more time, we have an agent with us and that the greater their tenure the better performance. They have so when you think about that additional return as we get agents through this AEP.

We will continue to provide additional training programs throughout the different seasons, we have we feel really good about the investments we've made in the long term payoff will receive as well.

Got it and then you talked about some of the LTV impact tied to the new carriers that you brought on.

I missed this I apologize, but can you give us a sense on how ltvs shook out in terms of on an apples to apples basis. So same carriers year over year, how those are trending.

Yes, so I'll start at a high level.

Like we mentioned, we are especially with newer agents newer carriers, you do see different persistency and effectuate than characteristics for.

<unk>.

You want to compare apples to apples on a tenured agents.

A what I'll call legacy carrier no real material movement, there, but you can imagine the amount of newer agents that we have going into Q3 and selling into Q3 that obviously moves the needle a little bit so that's kind of where we saw.

Some ltvs come down in Q3, as we think about just the sheer size of newer agents we have in the platform.

Thanks, that's really helpful.

Yeah.

Thank you.

Our next question comes from Andrew.

Our credit Suisse. Your line is open.

Thank you Ed and thanks for taking my questions here.

So I wanted to stay on top of the Gulf Coast and the LTV declined in the quarter.

Can you provide a breakdown of the three items you highlighted like which one was most impactful less impactful and when you talk about MLP maybe to be down in Q are they expecting down similar to the dollar decline of 6% in Q and are you assuming any of these three basis points improving four gigawatts of thank you.

Hey, Travis.

Sure.

Jillian are youre exactly right.

When we unpack the LTV decrease we focused on carrier mix.

Agent mix consumer mix and macro shopping trends think about the agent mix as being the biggest driver of those three and then the carrier mix being sector and then the macro shopping trends being third as you think about weighting them and then as you think about Q4, Ltvs, you're exactly right Q4 ltvs.

Our largest is obviously seasonality seasonality and our ltvs, but when you think Q4 relative to Q4 of last year that mid single digit decrease is where we're currently <unk>.

Shaking out as we think about this year's.

Guidance here in performance during AEP.

And if I can just.

I didn't really follow what exactly you meant by the Ltvs modeling assumptions to address macro shopping trends can you begin with more detail what exactly changes youre doing there.

Yes, so it's really to account for.

The persistency changes we've seen during this most recent SCP in beginning of AEP period.

Got it and then one quick follow up.

Ed.

Kind of all the challenges the E brokers are going to Undervaluations debt trading at I was just curious that you guys talked about.

Industry consolidation in.

The rate is kind of a combination of people who can talk about all the time, but just curious like what do you think about from industry consolidation point of view.

Yes, I mean, I think that obviously, we're we're still experiencing high rates of growth and we see a large organic opportunity in front of us.

You think about what we've invested in from.

And our encompass strategy moving forward, that's kind of where we're focused obviously there is a subset of competitors in the space that are out there as well.

We think that as we can continue to focus our encompass strategy and things in the future, that's where we're going to focus our time and energy.

<unk>.

And I think you are right. We have all three public peers have been kind of hit.

This year for different reasons, we think it's still a very robust industry. We think we're doing a lot of good service and helping consumers enrolling the right plan and I think that over time hopefully.

The investor base fully understands that as we get through this.

Great. Thanks, guys.

Thank you. Our next question comes from Frank Morgan of RBC Capital markets. Your line is open.

Good afternoon, I guess I'll stay on the topic of the decline in LTV.

This specifically to call out around some of the carriers is there anything that you have been able to identify.

Presumably it's probably the product at the carrier than just the carrier themselves in Brasilia. So is there anything that youre seeing in the product mix from some of these carriers that where this issue is more noticeable that you've been able to call out or parse out.

Yes, I'll take that one I think the biggest thing to call out there. It's not so much about the product differences of these new carriers and the biggest drivers of the lower ltvs with new carriers is usually around compensation and then our modeling around those carriers as you can appreciate when you have a new carrier sometimes.

While CMS sets a ceiling for what carriers can pay you don't always you don't always get the highest tier of commission when you're a new producer for a carrier. So that plays a role and then secondly from a modeling perspective, we have less observed data around new carriers, which drives more conservative assumptions on the front end so over time as we continue to produce.

We would assume that those ltvs across carriers on an apples to apples basis would level out, but thats one of the implications of a new carrier added.

Got you so it's not really necessarily for a bad reason like higher levels of churn is just basically youre getting paid less upfront.

Yes exactly right.

And then secondly.

On the I noticed that there was sort of a big drop in the non commercial.

Last year.

Down around $564 72 last year, the lowest we've seen in a while and anything that you would call out there.

Yes, we're just we're just continuing to focus on our customer choice platform and on our consumer choice platform, that's where we get paid the commission. So again, that's where our focus is right now we have some timing differences. There there were some unique carrier campaigns in the third quarter of last year as it related to Covid, but it's more of just our <unk>.

On the consumer choice platform.

Got you and when you think about the.

There is two there was a.

It looks like a little negative tail revenue in the quarter, but.

Is that being driven.

The same factors that are driving LTV or is it sort of the same.

Order of magnitude between those three things or is there something else that.

That you would call out there.

Yeah, no you're exactly right. The same trends that we're talking about again are the drivers of the tail revenue adjustment and again, we update and do that every quarter and so all of those findings make its way not just in our new Ltvs. We recognized but were also on our look back on a quarterly basis as well.

Okay. Thank you.

Thank you. Our next question comes from Tobey Sommer short Securities. Your line is open.

Yes.

Thank you.

Expand upon your description of <unk>.

Needing to invest less next year in the context of is that because of slower growth, which can be a driver in boston or other factors.

Yes.

Good question, so really it's around the context of a number of agents that we've added this year.

You think about the sheer number of agents that we had entering January of 2021.

The amount of the number of agents that will enter in January 2022 to continue the growth levels.

Do we want to kind of maintain so we feel really good about that and I think that that agent force will have a an AEP.

Under their belt and additional training. So that's really the context around less investment on just that sheer number of.

Increasing our sales force.

Thanks, that's helpful.

Could you.

Elaborate on.

How you could utilize your receivable balance too.

Two.

Generate spendable cash sort.

Sort of quicker and what that.

The market in the variables look like thanks.

Sure. So we've been looking at a number of non equity financing are ways to continue to fund and drive our growth and one opportunity has been looking at different ways to leverage our receivables balance and so given we have a large contract value asset commissions receivable balance sitting on the balance sheet, both short term and long term.

And so we've been looking at unique ways, we might be able to leverage that vehicle to drive financing into the future.

Okay. Thank you very much.

Our next question comes from Greg Peters at Raymond James Your line is open.

Hey, guys. This is Alex Bolton, calling in for Greg Peters.

Sorry, I'm going to ask one more question on Ltvs, maybe just between the factors could you talk about.

Expected persistence of each one of these factors you know it sounds like new agents is more short term, but you know I guess, how much time does it take for them to improve.

New carriers. It sounds like you can get better commissions over time can you kind of talk through how long that might last.

Sure. So yes, youre exactly right when we think about both the agent mix and the carrier mix over time as we continue to have agents more tenured and on our platform, we expect them to improve and the longer we have a carrier on our platform the better the opportunity is for that to improve so that those are definitely levers at our disposal there the other.

Thing, we're keeping a close eye on though is the macro shopping trends as we continue to see consumers.

Shop in the space and brokers like us, making it easier for them to do it that's a factor that we continue to keep them and keep an eye on and which is why we update into our look back quarterly.

Okay are you seeing the new agents starting to improve going into AEP.

Yes, we are we had a much more robust.

Training program throughout this year and as you recall.

Last AEP, we had higher customer demand and we had agents to serve those customers, which is why we made the strategic decision earlier. This year in Q1 to start our hiring and ramp process. So a lot of those agents throughout the first couple of quarters have gone through really strenuous training programs. When you think about the last classes that we've had before AEP.

Same thing so we've seen continued improvement.

From the all of those cohorts of agents in classes and especially.

Throughout each week of AEP improvement as well bye.

By that so we will expect that to continue and we have a.

Kind of continuing training program for those agents that may take a little longer to get up to speed that we can help them be successful in their careers.

Okay, and then on free cash flow.

I guess you had.

Use of cash.

<unk>.

$100 million last year in the fourth quarter.

You got to $85 $85 million on the balance sheet.

I guess can you talk about.

Need for capital.

<unk>.

You know what that might look like.

Got it.

It will be less next year than this year, but maybe you just talked about before.

Sure. Yes, we also mentioned we have access to our seasonal revolver.

Of which a $175 million is untapped and I think one thing that is a little bit misnomer, sometimes in the spaces that we incur the bulk of our cash burn here right now right, where we're spending the marketing we're paying our agents we start getting those first commission payments on all the policies that were enrolling as early as mid to late December and.

The bulk of them start to flow in in January which is why we've leveraged as seasonal revolver. Historically youre really talking about just a couple of month timeframe, where that cash is mentioned mismatch, which is why we have that revolver in place.

Okay, great. Thanks for the answers.

Our next question comes from Laurence <unk> from Morgan Stanley. Your line is open.

Hi, This is Nathan <unk> Laurin Schenck.

On the sales force can you just provide some more color on the steps taken in the quarter to ensure you hit that hiring goal.

And then any way to size that kind of one time cost incurred to meet those goals that you expect maybe shouldn't recur in 'twenty two and then lastly, you noted previously that you continue to have solid consistent retention among existing agents just confirming you kind of continued.

Thank you.

Yes. Thank you.

So yeah, we saw.

Honestly, we talked to you on our Q2 call.

We are experiencing higher attrition.

Our robust top of the funnel, but a lot of it.

We had challenges getting agents through the training program we.

We saw attrition levels normalized.

Kind of in the early part of fall.

And a continued robust top of the funnel.

Our recruiting class coming in.

And we made some operational changes around the way, we're recruiting lower Onboarding, where we're training and we kind of saw all of those things come together right before AEP with our ability to still get them through the training program and getting ready for.

To sell.

For the October 15th start so that all looks good as far as.

Investments not really a one time investment I would point to I would just think about the.

Level of investment we put in in 2021 that we wont necessary need to put in in 2022 due to the size that we've recruited so far.

And we're still seeing kind of normalize attrition trends throughout AEP.

So we've seen in the past so nothing really alarming there.

Now, it's just about executing for the for the remainder of AEP in and putting us in a great position as we think about entering 2022.

Okay, great. Thank you.

Thank you I'm showing no further questions at this time I'd like to turn the call back over to Clint gentlemen for any closing remarks.

Thank you everybody and we are encouraged by the progress so far during AEP and the momentum we continue to see with encompass we look forward to sharing our full year results during the fourth quarter call.

As mentioned a veterans day approaches I also wanted to share a big Thank you to all of our veterans, who help serve our country over the years, including the many that we could go health.

Thank you everybody for the time today and have a wonderful holiday season, we look forward to catching up soon.

Thank you ladies and gentlemen, this does conclude today's conference. Thank you all for participating.

You may now disconnect have a great day.

Q3 2021 Gohealth Inc Earnings Call

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